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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*
CAPITAL PACIFIC HOLDINGS, INC. (formerly J.M. PETERS COMPANY, INC.)
----------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $.10 PAR VALUE
----------------------------------------------------------------------------
(Title of Class of Securities)
14040M/10/4 (formerly 716035/10/0)
-----------------------------------------------------------
(CUSIP Number)
Hadi Makarechian
4100 MacArthur Boulevard
Newport Beach, California 92660 (714) 622-8400
----------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 29, 1997
-----------------------------------------------------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement / /.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.)(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provision of the Act (however, see
the Notes).
Page 1 of 11
<PAGE> 2
SCHEDULE 13D
-------------------------------------------- ------------------
CUSIP No. 14040M/10/4 (formerly 716035/10/0) Page 2 of 11 Pages
-------------------------------------------- ------------------
- -------------------------------------------------------------------------------
Name of Reporting Person
1 S.S. or I.R.S. Identification No.
of Above Person
CPH 2, L.L.C.
- -------------------------------------------------------------------------------
Check the Appropriate Box if a Member of a Group*
2 (a)/x/
(b)/ /
- -------------------------------------------------------------------------------
SEC Use Only
3
- -------------------------------------------------------------------------------
Source of Funds*
4
00
- -------------------------------------------------------------------------------
Check Box if Disclosure of Legal / /
5 Proceedings Is Required Pursuant
to Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
Citizenship or Place of Organization
6
DELAWARE
- -------------------------------------------------------------------------------
Sole Voting Power
NUMBER 7
4,638,656.4
OF --------------------------------------------------
SHARES Shared Voting Power
8
BENEFICIALLY
--------------------------------------------------
OWNED BY
Sole Dispositive Power
EACH 9
4,638,656.4
REPORTING --------------------------------------------------
PERSON Shared Dispositive Power
10
WITH
- -------------------------------------------------------------------------------
Aggregate Amount Benefically Owned by Each Reporting Person
11
4,638,656.4
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* / /
- -------------------------------------------------------------------------------
Percent of Class Represented by Amount in Row (11)
13
30.93%
- -------------------------------------------------------------------------------
Type of Reporting Person*
14
00
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 3
SCHEDULE 13D
-------------------------------------------- ------------------
CUSIP No. 14040M/10/4 (formerly 716035/10/0) Page 3 of 11 Pages
-------------------------------------------- ------------------
- -------------------------------------------------------------------------------
Name of Reporting Person
1 S.S. or I.R.S. Identification No.
of Above Person
CPH3, L.L.C.
- -------------------------------------------------------------------------------
Check the Appropriate Box if a Member of a Group*
2 (a)/x/
(b)/ /
- -------------------------------------------------------------------------------
SEC Use Only
3
- -------------------------------------------------------------------------------
Source of Funds*
4
00
- -------------------------------------------------------------------------------
Check Box if Disclosure of Legal / /
5 Proceedings Is Required Pursuant
to Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
Citizenship or Place of Organization
6
DELAWARE
- -------------------------------------------------------------------------------
Sole Voting Power
NUMBER 7
6,600,033.6
OF --------------------------------------------------
SHARES Shared Voting Power
8
BENEFICIALLY
--------------------------------------------------
OWNED BY
Sole Dispositive Power
EACH 9
6,600,033.6
REPORTING --------------------------------------------------
PERSON Shared Dispositive Power
10
WITH
- -------------------------------------------------------------------------------
Aggregate Amount Benefically Owned by Each Reporting Person
11
6,600,033.6
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* / /
- -------------------------------------------------------------------------------
Percent of Class Represented by Amount in Row (11)
13
44.01%
- -------------------------------------------------------------------------------
Type of Reporting Person*
14
00
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 4
SCHEDULE 13D
-------------------------------------------- ------------------
CUSIP No. 14040M/10/4 (formerly 716035/10/0) Page 4 of 11 Pages
-------------------------------------------- ------------------
- -------------------------------------------------------------------------------
Name of Reporting Person
1 S.S. or I.R.S. Identification No.
of Above Person
Hadi Makarechian
- -------------------------------------------------------------------------------
Check the Appropriate Box if a Member of a Group*
2 (a)/x/
(b)/ /
- -------------------------------------------------------------------------------
SEC Use Only
3
- -------------------------------------------------------------------------------
Source of Funds*
4
00
- -------------------------------------------------------------------------------
Check Box if Disclosure of Legal / /
5 Proceedings Is Required Pursuant
to Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
Citizenship or Place of Organization
6
United States
- -------------------------------------------------------------------------------
Sole Voting Power
NUMBER 7
6,600,033.6
OF --------------------------------------------------
SHARES Shared Voting Power
8
BENEFICIALLY 4,638,656.4
--------------------------------------------------
OWNED BY
Sole Dispositive Power
EACH 9
6,600,033.6
REPORTING --------------------------------------------------
PERSON Shared Dispositive Power
10
WITH
4,638,656.4
- -------------------------------------------------------------------------------
Aggregate Amount Benefically Owned by Each Reporting Person
11
11,238,690
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* / /
- -------------------------------------------------------------------------------
Percent of Class Represented by Amount in Row (11)
13
74.95%
- -------------------------------------------------------------------------------
Type of Reporting Person*
14
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 5
SCHEDULE 13D
-------------------------------------------- ------------------
CUSIP No. 14040M/10/4 (formerly 716035/10/0) Page 5 of 11 Pages
-------------------------------------------- ------------------
- -------------------------------------------------------------------------------
Name of Reporting Person
1 S.S. or I.R.S. Identification No.
of Above Person
Dale Dowers
- -------------------------------------------------------------------------------
Check the Appropriate Box if a Member of a Group*
2 (a)/x/
(b)/ /
- -------------------------------------------------------------------------------
SEC Use Only
3
- -------------------------------------------------------------------------------
Source of Funds*
4
00
- -------------------------------------------------------------------------------
Check Box if Disclosure of Legal / /
5 Proceedings Is Required Pursuant
to Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
Citizenship or Place of Organization
6
United States
- -------------------------------------------------------------------------------
Sole Voting Power
NUMBER 7
OF --------------------------------------------------
SHARES Shared Voting Power
8
BENEFICIALLY 4,638,656.4
--------------------------------------------------
OWNED BY
Sole Dispositive Power
EACH 9
REPORTING --------------------------------------------------
PERSON Shared Dispositive Power
10
WITH
4,638,656.4
- -------------------------------------------------------------------------------
Aggregate Amount Benefically Owned by Each Reporting Person
11
4,638,656.4
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* / /
- -------------------------------------------------------------------------------
Percent of Class Represented by Amount in Row (11)
13
30.93%
- -------------------------------------------------------------------------------
Type of Reporting Person*
14
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 6
SCHEDULE 13D
-------------------------------------------- ------------------
CUSIP No. 14040M/10/4 (formerly 716035/10/0) Page 6 of 11 Pages
-------------------------------------------- ------------------
- -------------------------------------------------------------------------------
Name of Reporting Person
1 S.S. or I.R.S. Identification No.
of Above Person
Barbara Makarechian
- -------------------------------------------------------------------------------
Check the Appropriate Box if a Member of a Group*
2 (a)/x/
(b)/ /
- -------------------------------------------------------------------------------
SEC Use Only
3
- -------------------------------------------------------------------------------
Source of Funds*
4
00
- -------------------------------------------------------------------------------
Check Box if Disclosure of Legal / /
5 Proceedings Is Required Pursuant
to Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
Citizenship or Place of Organization
6
United States
- -------------------------------------------------------------------------------
Sole Voting Power
NUMBER 7
OF --------------------------------------------------
SHARES Shared Voting Power
8
BENEFICIALLY 4,638,656.4
--------------------------------------------------
OWNED BY
Sole Dispositive Power
EACH 9
REPORTING --------------------------------------------------
PERSON Shared Dispositive Power
10
WITH
4,638,656.4
- -------------------------------------------------------------------------------
Aggregate Amount Benefically Owned by Each Reporting Person
11
4,638,656.4
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* / /
- -------------------------------------------------------------------------------
Percent of Class Represented by Amount in Row (11)
13
30.93%
- -------------------------------------------------------------------------------
Type of Reporting Person*
14
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 7
STATEMENT ON SCHEDULE 13D/A
Item 1. Security and Issuer
The title of the class of equity securities to which this Amendment to
Schedule 13D (the "Schedule 13D/A") relates is Common Stock, $0.10 par value
(the "Common Stock"), of Capital Pacific Holdings, Inc. (formerly known as J.M.
Peters Company, Inc.), a Delaware corporation (the "Company" or "CPH"). The
address of the Company's principal executive offices is 4100 MacArthur
Boulevard, Suite 200, Newport Beach, California 92660.
Item 2. Identify and Background
(a) CPH 2, L.L.C. ("LLC") and CPH3, L.L.C. ("CPH3"), each a Delaware
limited liability company, hereby file this Schedule 13D/A pursuant to
Regulation 13D promulgated under the Securities Exchange Act of 1934, as
amended (the "Act"). LLC originally filed a Schedule 13D (the "Original
Schedule 13D") on January 10, 1995. Pursuant to Rule 13d-2(c) of the Act, this
Schedule 13D/A restates the complete text of the Original Schedule 13D. Hadi
Makarechian, Dale Dowers and Barbara A. Makarechian are members of LLC. Hadi
Makarechian is the sole member of CPH3.
(b) The business address of LLC and CPH3 is 1776 K Street, N.W.,
Washington, D.C. 20006. As of the filing of this Schedule 13D/A, the business
address of Hadi Makarechian, Dale Dowers and Barbara A. Makarechian is 4100
MacArthur Boulevard, Suite 200, Newport Beach, California 92660. At the time
of the filing of the Original Schedule 13D, the business address of Hadi
Makarechian, Dale Dowers, and Barbara A. Makarechian was 3501 Jamboree Road,
Suite 200, Newport Beach, California 92660.
(c) The principal business of each of LLC and CPH3 is to act as a
holding company through which its members hold their shares of Common Stock of
CPH. Hadi Makarechian is the Chairman of the Board of CPH, the Presiding
Member of LLC and the sole member of CPH3. Dale Dowers is the Chief Executive
Officer, President and a director of CPH, and the Executive Officer of LLC.
Barbara A. Makarechian is a member of LLC and a housewife. At the time of
filing the Original Schedule 13D, Hadi Makarechian was the Chairman of the
Board and Chief Executive Officer of CPH and Dale Dowers was the President,
Chief Operating Officer and a director of CPH.
(d)-(e) During the five year period prior to the filing of the
Original Schedule 13D and during the last five years, none of LLC, CPH3, Hadi
Makarechian, Dale Dowers or Barbara A. Makarechian has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), or
has been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
Page 7 of 11
<PAGE> 8
(f) Each of Hadi Makarechian, Dale Dowers and Barbara A.
Makarechian is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration
As set forth in the Original Schedule 13D:
LLC acquired 4,638,656.4 shares of the Common Stock of CPH pursuant to
the Merger described in Item 4 below. Prior to the Merger, LLC owned 206.37
shares of Capital Pacific Homes, Inc., a Delaware corporation ("Homes"), which
shares were contributed to LLC as the initial capital contributions of Hadi
Makarechian and Dale Dowers upon the formation of LLC. Prior to the Merger,
Homes held 12,000,000 shares of the Common Stock of CPH.
The formation of LLC and the Merger, both described in Item 4, did not
require any financing.
Pursuant to the Merger Agreement giving rise to the Merger, each
stockholder of Homes received a number of shares of the Common Stock equal to
the quotient of 12,000,000 and the total number of shares of the Common Stock
of Homes multiplied by the number of shares of Homes owned by such shareholder
prior to the Merger.
As of the date of this Schedule 13D/A, Hadi Makarechian has transferred
6,600,033.6 shares of the Common Stock of CPH to CPH3, a limited liability
company in which Mr. Makarechian is the sole member. The formation of CPH3 and
the transfer of such shares to CPH3 did not require any financing. The
Certificate of Formation and Limited Liability Company Agreement of CPH3 are
filed herewith as Exhibit 7-1 and 7-2, respectively.
Item 4. Purpose of Transactions
As set forth in the Original Schedule 13D:
LLC was formed on December 27, 1994 as a holding company through which
Hadi Makarechian, Barbara A. Makarechian and Dale Dowers agreed to hold their
shares in CPH following the Merger of Homes with and into CPH, as described
hereinbelow.
Effective December 30, 1994, Homes merged with and into CPH (the
"Merger") pursuant to an Agreement and Plan of Merger, dated November 21, 1994
(the "Merger Agreement"), with CPH surviving the Merger. The Board of
Directors and stockholders of Homes approved the Merger and the Merger
Agreement as of November 21, 1994. On November 15, 1994, the Board of
Directors of CPH delivered to the stockholders of CPH a Proxy Statement For
Solicitation of Written Consent with respect to the Merger Agreement. By
written consent, the holders of a majority of the issued and outstanding shares
of stock of the Company voted to adopt the Merger Agreement. Accordingly, the
separate legal existence of Homes was terminated. The parties to the Merger
expected that the Merger would further their business objectives, including
public image, reducing administrative burdens and facilitating equity
investment.
The Merger did not result in any change in the capitalization,
dividend policy, corporate structure or Board of Directors of CPH. In
addition, there was no modification of or amendment to the Certificate of
Incorporation and Bylaws, as amended, of CPH as a result
Page 8 of 11
<PAGE> 9
of the Merger. The Merger Agreement provided for the cancellation of each
share of Common Stock of CPH held by Homes and the issuance of shares of Common
Stock of CPH to the shareholders of Homes, as described in Item 3 above. The
Common Stock of CPH is listed on the American Stock Exchange.
As of the date of this Schedule 13D/A, CPH3 was formed on September 15,
1997 as a holding company through which Hadi Makarechian will hold the
6,600,033.6 shares of CPH previously held by him individually.
Item 5. Interest in Securities of the Issuer
As set forth in the Original Schedule 13D:
LLC is the beneficial owner of 4,638,656.4 shares of Common Stock
representing approximately 30.93 per cent of the 14,995,000 shares of Common
Stock issued and outstanding. LLC has the sole power to vote or direct the
vote, and to dispose or direct the disposition of all such shares.
Hadi Makarechian, as the owner of 58.54 per cent of the membership
interest of LLC, beneficially owns, has shared power to vote or direct the
vote, and to dispose or direct the disposition of, the 4,638,656.4 shares of
Common Stock of CPH held by LLC. As of the date of the Original Schedule 13D,
Mr. Makarechian also individually owned 6,600,033.6 shares of the Common Stock
of CPH and had sole power to vote or direct the vote, and to dispose or direct
the disposition of such shares. As of the date of this Schedule 13D/A, all of
the shares owned by Mr. Makarechian individually have been transferred to
CPH3, a limited liability company in which Mr. Makarechian is the
sole member. As the owner of 100 per cent of the membership interest of CPH3,
Mr. Makarechian continues to have sole power to vote or direct the vote, and
to dispose or direct the disposition of such shares.
Dale Dowers, as the owner of 41.45 per cent of the membership interest
of LLC, beneficially owns, has shared power to vote or direct the vote, and to
dispose or direct the disposition of, the 4,638,656.4 shares held by LLC.
Barbara Makarechian, as the owner of 0.01 per cent of the membership
interest of LLC, beneficially owns, has shared power to vote or direct the
vote, and to dispose or direct the disposition of, the 4,638,656.4 shares held
by LLC.
All of the shares beneficially owned by LLC, Hadi Makarechian, Dale
Dowers and Barbara A. Makarechian were acquired on August 12, 1992, as
disclosed in an original Schedule 13D filed by Homes on or about August 21,
1992.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
As set forth in the Original Schedule 13D, LLC was formed, pursuant to
the Certificate of Formation of LLC filed as Exhibit 1 to the Original Schedule
13D, as a holding company through which Hadi Makarechian, Dale Dowers and
Barbara A. Makarechian agreed to hold their shares in CPH following the Merger,
pursuant to the LLC Agreement, filed as Exhibit 2 to the Original Schedule 13D.
As of the date of this Schedule 13D/A, CPH3 has been formed, pursuant
to the Certificate of Formation filed as Exhibit 7-1 hereto, as a holding
company through which Hadi Makarechian will hold the 6,600,033.6 shares of CPH
previously held by him individually, pursuant to the Limited liability Company
Agreement, filed as Exhibit 7-2 hereto.
As of the date of this Schedule 13D/A, CPH3 and LLC (collectively the
"Selling Stockholders") and California Housing Finance, L.P., a Delaware
limited partnership (the "Purchaser") have entered into a Stock Purchase
Agreement (the "Purchase Agreement") pursuant to which, subject to the terms
and conditions thereof, among other things, the Selling Stockholders will sell
to the Purchaser a total of 2,484,340 shares (the "Shares") of the issued and
outstanding Common Stock of the Company owned by the Selling Stockholders for
an aggregate purchase price of $10,000,000 (the "Purchase Price").
Simultaneous with the execution of the Purchase Agreement, the Selling
Stockholders, the Purchaser and NationsBank, N.A., a national banking
association (the "Escrow Agent"), have entered into an Escrow Agreement (the
"Escrow Agreement"), pursuant to which, subject to the terms and conditions
thereof, among other things, the Shares and the Purchase Price will be
deposited into escrow with the Escrow Agent to be held during the period
pending the consummation of the sale of the Shares. Upon satisfaction of
certain conditions set forth in the Escrow Agreement, namely, the consummation
of the transactions contemplated by the Investment Agreement (described below),
the Escrow Agent will be obligated to release the Shares and the Purchase Price
and the sale of the Shares will be consummated. In the event such conditions
are not satisfied on or by the close of business on November 18, 1997, the
Purchase Agreement, Escrow Agreement and Investment Agreement shall (unless the
parties to the Investment Agreement otherwise agree in writing) automatically
terminate and be of no further force or effect. Pending the consummation of
the sale of the Shares, the Selling Stockholders will retain all voting rights
with respect to the Shares. The Purchase Agreement and Escrow Agreement are
filed herewith as Exhibit 2 and 3, respectively.
Simultaneous with the execution of the Purchase Agreement, the Selling
Stockholders, the Purchaser, the Company and certain subsidiaries thereof, and
Capital Pacific Holdings, LLC (the "New LLC") have entered into an Investment
and Stockholder Agreement (the "Investment Agreement") pursuant to which,
subject to the terms and conditions thereof, among other things, the Company
and certain subsidiaries thereof will transfer substantially all of their
respective assets to the New LLC, the New LLC will assume all of the
liabilities of the Company and such subsidiaries and the Purchaser will
contribute to the capital of the New LLC the sum of $30,000,000. The
respective membership interests in the New LLC will be 67.93% for the Company
and the subsidiaries collectively and 32.07% for the Purchaser.
The Investment Agreement includes certain voting and transfer
restrictions on the Shares as well as on the remainder of the shares of the
Company held by the Selling Stockholders. Specifically, transfer restrictions
are placed on the Selling Stockholders' and the Purchaser's ability to transfer
to third parties any portion of the common stock of the Company held by them
without first providing the other with the opportunity to sell to such third
parties a pro rata portion of its stock. In addition, certain restrictions are
placed on the Selling Stockholders' and Purchaser's right to acquire additional
stock of the Company. Specifically, among other things, upon an acquisition by
the Selling Stockholder or the Purchaser of additional stock of the Company,
the acquiring party must offer to purchase from the other party, on the same
terms and conditions, two times the number of additional shares purchased.
Finally, buy-sell provisions provide that any time after thirty-six (36) months
following the date of the Investment Agreement, either the Selling Stockholders
or the Purchaser may elect to cause the other to, at the offeree's option,
either (i) sell, to the electing party, the offeree's interests in the Company
and, in the event the Purchaser is the offeree, the New LLC, or (ii) purchase,
from the electing party, the electing party's interests in the Company and, in
the event the Purchaser is the offeree, the New LLC. The Investment Agreement
also contains certain voting agreement and preemptive rights pursuant to which
the Purchaser has the right to approve various matters, including the
issuance of Common Stock except on terms which have been offered to and not
accepted by Purchaser, affiliate transactions and transactions outside the
ordinary course of the business of the Company and the LLC. The Investment
Agreement is filed herewith as Exhibit 4.
At the closing of the transactions contemplated by the Investment
Agreement, the Company and the Purchaser shall be obligated to enter into a
Registration Rights Agreement pursuant to which the Purchaser may, at any time
after the date one year from the date of such Agreement, request that the
Company register under the Securities Act of 1933, as amended, any Common Stock
of the Company then owned by the Purchaser and the Company will upon such
request be obligated to use its best efforts to effect such a registration.
The Company's obligations and the Purchaser's rights with respect to such a
demand registration are subject to certain limitations as set forth in the
Registration Rights Agreement. In addition, if at any time the Company
proposes to register Common Stock for sale, it will be obligated to so notify
Purchaser which shall have the right to include in such offering shares of
Common Stock owned by the Purchaser. The Purchaser's rights and the Company's
obligations with respect to such incidential registrations are subject to
certain limitations as set forth in the Registration Rights Agreement. The
form of the Registration Rights Agreement is filed herewith as Exhibit 5.
The Investment Agreement includes as a condition to the obligations of
the parties at the Closing that Mr. Makarechian execute and deliver an
Agreement (the "Indirect Stockholder Agreement") pursuant to which, among other
things, Mr. Makarechian makes certain limited representations regarding the
shareholdings in the Company of the Selling Stockholders and the capitalizaiton
of the Company. The Indirect Stockholder Agreement also contains
non-competition and non-solicitation obligations of Mr. Makarechian. The form
of the Indirect Stockholder Agreement is filed herewith as Exhibit 6.
Item 7. Material to be Filed as Exhibits
Exhibits which were previously filed as paper exhibits to the Original
Schedule 13D are not included herewith in accordance with Rule 13d-2(c) of the
Act.
Exhibit 1: Written agreement pursuant to Rule 13d-1(f)(1)(iii).
Exhibit 2: Stock Purchase Agreement.
Exhibit 3: Escrow Agreement.
Exhibit 4: Investment and Stockholder Agreement.
Exhibit 5: Form of Registration Rights Agreements.
Exhibit 6: Form of Indirect Stockholder Agreement.
Exhibit 7: Certificate of Formation and Limited Liability Company
Agreement of CPH3, L.L.C.
[SIGNATURES ON FOLLOWING PAGE]
Page 10 of 11
<PAGE> 10
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
we certify that the information set forth in this statement is true, complete
and correct.
Dated as of the 30th day of September, 1997.
CPH 2, L.L.C.
By: /s/ Hadi Makarechian
Hadi Makarechian, Member
CPH 3, L.L.C.
By: /s/ Hadi Makarechian
Hadi Makarechian
/s/ Hadi Makarechian
Hadi Makarechian
/s/ Dale Dowers
Dale Dowers
/s/ Barbara A. Makarechian
Barbara A. Makarechian
Page 11 of 11
<PAGE> 1
EXHIBIT 1
Written Agreement Pursuant to Rule 13d-1(f)(1)(iii)
Pursuant to Rule 13d-1(f)(1)(iii) of the Securities Exchange Act of
1934, as amended, the undersigned hereby agree that the preceding Schedule
13D/A of CPH 2, L.L.C., Hadi Makarechian, Dale Dowers, and Barbara A.
Makarechian is filed with the Securities and Exchange Commission on behalf of
each of them.
CPH 2, L.L.C.
By: /s/ Hadi Makarechian
Hadi Makarechian, Member
CPH 3, L.L.C.
By: /s/ Hadi Makarechian
Hadi Makarechian
/s/ Hadi Makarechian
Hadi Makarechian
/s/ Dale Dowers
Dale Dowers
/s/ Barbara A. Makarechian
Barbara A. Makarechian
<PAGE> 1
Exhibit 2
[EXECUTION COPY]
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (as amended or otherwise modified from
time to time pursuant to the terms hereof, the "Agreement"), dated September 29,
1997, is among California Housing Finance L.P., a Delaware limited partnership,
(the "Purchaser"), and CPH2, LLC, a Delaware limited liability company ("CPH2,
LLC") and CPH3, LLC, a Delaware limited liability company ("CPH3, LLC")
(collectively with CPH2, LLC the "Selling Stockholder"), and collectively the
beneficial and record owner of 11,238,691 shares (or 74.9%) of the issued and
outstanding shares of common stock, par value $.10 per share (the "Common
Stock") of Capital Pacific Holdings, Inc. (the "Company").
WHEREAS, the Selling Stockholder agrees to sell and the Purchaser
agrees to purchase 2,484,340 shares (the "Shares") of the issued and outstanding
Common Stock of the Company ("Common Stock") owned by the Selling Stockholder
for an aggregate purchase price of $10,000,000 (the "Purchase Price").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE I
THE PURCHASE AND SALE
SECTION 1.01 Purchase and Sale of Common Stock. Subject to the terms
and conditions set forth in this Agreement, at the Closing, the Selling
Stockholder (in respective amounts to be designated and disclosed to Purchaser
prior to the Closing) hereby agrees to sell, convey, transfer and deliver to the
Purchaser, and the Purchaser will purchase from the Selling Stockholder, the
Shares for the Purchase Price.
SECTION 1.02 The Closing. The closing of the purchase and sale of the
Shares hereunder (the "Closing") shall take place at the offices of Wiley, Rein
& Fielding, 1776 K Street, N.W., Washington, D.C. 20006, at 10:00 a.m.,
Washington Time, on the latter of October 1, 1997 and the date of satisfaction
or waiver of the conditions set forth in Article IV, unless another date and
time is agreed upon by the Purchaser and the Selling Stockholder. The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date."
SECTION 1.03 Delivery and Payment. Within five (5) Business Days of the
date of this Agreement, the Selling Stockholder shall deliver to NationsBank,
N.A. (the "Escrow Agent") stock certificates in definitive form, together with
stock powers duly endorsed in blank representing the Shares. As against payment
in full for the Shares, and against delivery of the stock certificates and stock
powers to the Escrow Agent therefor as aforesaid, the
<PAGE> 2
Purchaser shall deliver, within five (5) Business Days of the date hereof, to
the Escrow Agent, by wire transfer to the account designated by the Escrow Agent
in writing to the Purchaser or, at the option of the Escrow Agent, by delivery
of a certified or bank cashier's check payable to the order of the Escrow Agent,
the amount of the full Purchase Price.
SECTION 1.04 Escrow.
(a) Simultaneously with the execution and delivery of this Agreement,
the Selling Stockholder, the Purchaser and the Escrow Agent have entered into an
escrow agreement, substantially in the form attached hereto as Exhibit A (the
"Escrow Agreement"). Upon receipt in accordance with the terms of this
Agreement, the Escrow Agent shall hold the certificates representing the Shares
and the Purchase Price in accordance with the terms and provisions of the Escrow
Agreement.
(b) At the Closing, subject to the satisfaction of the conditions set
forth in this Agreement and in the Escrow Agreement, the Escrow Agent shall
deliver (i) the certificates representing the Shares together with stock powers
duly endorsed in blank, to the Purchaser, and (ii) the Purchase Price, by wire
transfer of immediately available funds, to the Selling Stockholder.
(c) At all times prior to the Closing, the Selling Stockholder shall
have the sole power to vote the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLING STOCKHOLDER
CPH2, LLC and CPH3, LLC, jointly and severally, represent and warrant
to the Purchaser as of the date hereof and as of the Closing Date:
SECTION 2.01 Organization, Qualifications and Corporate Power. Each of
CPH2, LLC and CPH3, LLC is a limited liability company, duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly licensed or qualified to transact business as a foreign Company and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification, except where the failure to be so
licensed or qualified and in good standing would not, individually or in the
aggregate, have a material adverse effect on the business, financial condition,
results of operations, prospects, properties, assets or affairs of CPH2, LLC or
CPH3, LLC, respectively, or the ability of CPH2, LLC or CPH3, LLC, to perform
and comply in all material respects with all of its respective covenants and
agreements contained in this Agreement (a "Material Adverse Effect"). The
Selling Stockholder has full power and authority (i) to own and hold its
properties and to carry on its business as now conducted, and (ii) to execute,
deliver and perform its obligations under this Agreement.
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<PAGE> 3
SECTION 2.02 Common Stock Ownership. The Selling Stockholder is the
beneficial and record owner of the Shares in the respective amounts set forth on
Schedule A, free and clear of any lien, claim encumbrance or security interest
of any kind (each a "Lien"), and will transfer to the Purchaser good and
marketable title to such Shares, free and clear of any Lien.
SECTION 2.03 Authorization of Agreement, Etc. The execution and
delivery by the Selling Stockholder and the performance by the Selling
Stockholder of its obligations hereunder, and the sale and delivery of the
Shares by the Selling Stockholder, have been duly authorized by the relevant
proceedings of each Selling Stockholder and will not (i) violate any provision
of law or regulatory agency (including any stock exchange rules or
requirements), or any order of any court or other agency of government, (ii)
conflict with or result in a breach of any provision of the limited liability
company agreement of either Selling Stockholder, (iii) conflict with, result in
a violation or breach of or constitute (with due notice or lapse of time or
both) a default under, any note, bond, mortgage, indenture, deed of trust,
license, lease, joint venture agreement, collaborative arrangement or
relationship or other contract, commitment or agreement or other instrument or
obligation to which the Selling Stockholder or any of its properties or assets
may be bound or (iv) result in the creation or imposition of any lien, claim,
encumbrance or security interest of any kind upon any of the properties or
assets of the Selling Stockholder.
SECTION 2.04 Validity. This Agreement has been duly executed and
delivered by the Selling Stockholder and constitutes the legal, valid and
binding obligations of the Selling Stockholder, enforceable against the Selling
Stockholder in accordance with its terms, except as the enforceability hereof
may be limited (i) by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and (ii) by
general equitable principles regardless of whether considered in a proceeding in
equity or at law.
SECTION 2.05 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Section 3.04, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality or regulatory
body is or will be necessary for the valid execution, delivery and performance
by the Selling Stockholder of this Agreement, or the delivery, sale and transfer
of the Shares to the Purchaser other than any filings necessary pursuant to
Sections 13 and 16 of the Securities Exchange Act of 1934 and the associated
regulations.
SECTION 2.06 Capitalization.
(a) The authorized capital stock of the Company consists of (1)
30,000,000 shares of Common Stock, and (2) 5,000,000 shares of Preferred Stock.
As of the date of this Agreement, 14,995,000 shares of Common Stock and no
shares of Preferred Stock (together with the Common Stock, the "Company Stock")
are outstanding. All of the Shares have been duly authorized, validly issued and
are fully paid and nonassessable. Except for the Company Stock, there are no
shares of capital stock or other equity securities of the Company outstanding.
-3-
<PAGE> 4
(b) Except for the warrants to purchase 790,000 shares of Common Stock
and as contemplated by the Related Agreements, (i) there are no preemptive or
similar rights on the part of any holder of any class of securities of the
Company, and (ii) no options, warrants, conversion or other rights, agreements
or commitments of any kind are outstanding that obligate the Company,
contingently or otherwise, to issue, sell, purchase, return or redeem any shares
of its capital stock of any class or any securities convertible into or
exchangeable for any such shares, and no authorization therefor has been given.
No shares of capital stock of the Company are held in the Company's treasury and
except in respect of the warrants described above no shares of capital stock of
the Company are reserved for issuance. There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the Shares.
SECTION 2.07 Misstatements. No representation or warranty contained in
this Agreement, contain or will contain, as the case may be, any material
misstatement of fact or omits or will omit, as the case may be, to state a
material fact or any fact necessary to make the statement contained therein not
materially misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Selling Stockholder that:
SECTION 3.01 Organization and Corporate Power.
(a) The Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Purchaser has the partnership power and authority to execute, deliver and
perform this Agreement.
(b) California Housing Finance L.L.C. is the sole general partner of
the Purchaser and is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the company power and authority to execute and deliver this Agreement on behalf
of the Purchaser.
SECTION 3.02 Authorization of Agreement, Etc. The execution and
delivery by the Purchaser of this Agreement and by its general partner on behalf
of the Purchaser and the performance by Purchaser of its obligations hereunder,
have been duly authorized by all requisite limited partnership and limited
liability company action and will not (i) violate any provision of law or any
order of any court or other agency of government, (ii) conflict with or result
in a breach of any provisions of the limited liability company agreement of the
Purchaser or (iii) conflict with, result in a violation or breach of or
constitute (with due notice or lapse of time or both) a default under, any
material note, bond, mortgage, indenture,
-4-
<PAGE> 5
license, lease, contract, agreement or other instrument or obligation to which
the Purchaser or any of its assets is bound.
SECTION 3.03 Validity. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms except as
the enforceability thereof may be limited (i) by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and (ii) by general equitable principles regardless of whether
considered in a proceeding in equity or at law.
SECTION 3.04 Investment Representations.
(a) The Purchaser is an "accredited investor" within the meaning of
Rule 501(a) under the Securities Act and has, together with its Affiliates,
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment in
the Company and it is able financially to bear the risks thereof;
(b) The Purchaser has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management to its
satisfaction and except for reliance on the representations and warranties
contained in the Related Agreements and the Information Documents, has
conducted, and relied solely upon, its own diligence with respect to the
business and properties of the Company;
(c) The Shares are being acquired by the Purchaser for its own account
for the purpose of investment and not with a view to or for sale in connection
with any distribution thereof in violation of the Securities Act;
(d) The Purchaser understands that (i) the Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act, (ii) the Shares
must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration and (iii) the
Company will make a notation on its transfer books to such effect.
(e) Until (i) the Shares have been effectively registered under the
Securities Act, or (ii) in the opinion of counsel satisfactory to the Company
(it being agreed that Richards Spears et al. shall be satisfactory for such
purposes) such securities may be publicly sold without registration under the
Securities Act, each certificate representing the Shares shall, except as
otherwise provided in this Section 3.04(e), bear a legend stating substantially
as follows:
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<PAGE> 6
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY'S COUNSEL
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT."
In the event of a transfer of the Shares, the certificate issued to the
transferee of such Shares shall bear such legend, except that such certificate
shall not bear such legend if (i) such transfer is in accordance with the
provisions of Rule 144 of the Securities Act ("Rule 144") (or any other rule
permitting public sale without registration under the Securities Act) or (ii)
the Company receives an opinion of counsel to the effect that the transferee and
any subsequent transferee (other than an affiliate of the Company) would be
entitled to transfer such securities in a public sale without registration under
the Securities Act.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS
OF THE PARTIES
SECTION 4.01 Conditions to the Obligations of the Purchaser. The
obligation of the Purchaser to purchase and pay for the Shares being purchased
by it on the Closing Date is subject to the satisfaction or waiver in writing,
on or before the Closing Date, of all of the following conditions:
(a) Representations and Warranties of the Selling Stockholder to be
True and Correct. The representations and warranties of the Selling Stockholder
contained in Article II shall be true, complete and correct in all respects on
and as of the Closing Date, with the same effect as though such representations
and warranties had been made on and as of such date, and a member of each
Selling Stockholder (with respect to their respective representations) shall
have certified in writing to the Purchaser to such effect.
(b) The Selling Stockholder's Performance. The Selling Stockholder
shall have performed and complied in all material respects with all covenants
and agreements contained in this Agreement, and a member of each Selling
Stockholder (with respect to their respective covenants and agreements) shall
have certified to the Purchaser in writing to such effect and to the further
effect that the conditions set forth in subparagraphs (a) and (b) of this
Section 4.01 have been satisfied.
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<PAGE> 7
(c) Stock Certificates. The Selling Stockholder shall have delivered to
the Escrow Agent a certificate or certificates evidencing the Shares, free and
clear of all liens, claims, encumbrances or security interests of any kind of
any nature whatsoever, in each case together with stock powers duly endorsed in
blank with all requisite documentary or stock transfer tax stamps affixed, as
applicable.
(d) Supporting Documents. The Purchaser shall have received copies of
the following documents:
(i) (A) the Certification of Formation and the Limited
Liability Company Agreement of each Selling Stockholder, both certified as of a
recent date by a member of CPH2, LLC and CPH3, LLC, respectively, and (B) a
certificate of the Secretary of State of the State of Delaware dated as of a
recent date as to the due organization and good standing of each Selling
Stockholder.
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and certifying: (A) that
attached thereto is a true and complete copy of all resolutions adopted by the
Board of Directors of the Company, as required, authorizing the approval of the
Purchaser becoming an "interested stockholder" (within the meaning of Section
203 of the Delaware General Corporation Law) of the Company upon the
consummation of this Agreement, and, if applicable, a "related party
transaction," as contemplated by Article VII of the Company's By-Laws; and (B)
that all such resolutions are in full force and effect.
(iii) such additional supporting documents and other
information with respect to the operations and affairs of the Selling
Stockholder as the Purchaser or its counsel may reasonably request.
(e) Litigation. As of the Closing Date, there shall not (i) be in
effect any judgment, order, injunction or decree of any court of competent
jurisdiction, the effect of which is to prohibit or restrain the consummation of
the transactions contemplated by this Agreement or award any material damages
(after taking into account any damages for which full insurance coverage is not
in dispute) with respect to the transactions contemplated by this Agreement or
(ii) be pending any action or proceeding by a governmental authority which seeks
any of the foregoing.
(f) No Change in Law. There shall not have been any action, or any
statute enacted, by any government or agency thereof which would in any material
respect prohibit or render the parties unable to consummate the transactions
contemplated hereby or make the transactions contemplated hereby illegal.
(g) Escrow Agreement Conditions. The conditions to the release of the
Purchase Price to the Selling Stockholder and the certificates representing the
Shares to the Purchaser contained in the Escrow Agreement shall have been
satisfied.
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<PAGE> 8
SECTION 4.02 Conditions to the Obligations of the Selling Stockholder.
The obligation of the Selling Stockholder to sell the Common Stock on the
Closing Date is subject to the satisfaction or waiver, on or before the Closing
Date of the following conditions:
(a) Representations and Warranties of the Purchaser to be True and
Correct. The representations and warranties of the Purchaser contained in
Article III shall be true, complete and correct in all material respects on and
as of the Closing Date, with the same effect as though such representations and
warranties had been made on and as of such date, and a senior officer of the
Purchaser shall have certified in writing to the Company to such effect.
(b) The Purchaser's Performance. The Purchaser shall have performed and
complied in all material respects with all covenants and agreements contained
herein required to be performed or complied with by it prior to or at the
Closing Date and a senior officer of the Purchaser shall have certified to the
Company in writing to such effect and to the further effect that the conditions
set forth in subparagraphs (a) and (b) of this Section 4.02 have been satisfied.
(c) Litigation. As of such Closing Date, there shall not (i) be in
effect any judgment, order, injunction or decree of any court of competent
jurisdiction, the effect of which is to prohibit or restrain the consummation of
the transactions contemplated by this Agreement or award any material damages
(after taking into account any damages for which full insurance coverage is not
in dispute) with respect to the transactions contemplated by this Agreement or
(ii) be pending any action or proceeding by a governmental authority which seeks
any of the foregoing.
(d) No Change in Law. There shall not have been any action, or any
statute enacted, by any government or agency thereof which would in any material
respect prohibit or render the parties unable to consummate the transactions
contemplated hereby or make the transactions contemplated hereby illegal.
(e) Escrow Agreement Conditions. The conditions to the release of the
Purchase Price to the Selling Stockholder and the certificates representing the
Shares to the Purchaser contained in the Escrow Agreement shall have been
satisfied.
(f) Board Approval. The Board of Directors of the Company shall have
approved the transaction pursuant to which the Purchaser become an "interested
stockholder" (within the meaning of Section 203 of the Delaware General
Corporation Law).
ARTICLE V
MISCELLANEOUS
SECTION 5.01 Expenses. Each party hereto shall pay its own expenses in
connection with the transactions contemplated by this Agreement, whether or not
such transactions shall be consummated.
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<PAGE> 9
SECTION 5.02 Survival of Representations and Warranties. Any
representation and warranty made herein, or in any certificate or instrument
delivered to the Purchaser pursuant to or in connection with this Agreement,
shall survive the execution and delivery of this Agreement, and the sale,
transfer and delivery of the Shares for a period of one year and any statements
contained in any certificate or other instrument delivered by the Selling
Stockholder pursuant to Article IV shall be deemed to constitute a
representation and warranty made by the Selling Stockholder for all purposes of
this Agreement.
SECTION 5.03 Parties in Interest: Assignment. All representations,
warranties, covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. No party may assign its rights hereunder without the prior written consent
of the other parties hereto, except (i) as provided herein, (ii) the Purchaser
may assign all of such rights to a single Affiliate. Without limiting the
generality of the foregoing, all representations, warranties, covenants, and
agreements benefiting the Purchaser shall inure to the benefit of a single
Affiliate of the Purchaser designated to purchase the Shares.
SECTION 5.04 Waiver. Any of the terms or conditions of this Agreement
may be waived at any time and from time to time in writing by the party entitled
to the benefits thereof without affecting any other terms or conditions of this
Agreement.
SECTION 5.05 Notices, Etc. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given, if delivered in person or by courier, telegraphed, telexed or by
facsimile transmission or mailed by certified or registered mail, postage
prepaid:
If to the Selling Stockholder: CPH2, LLC
CPH3, LLC
Attention: Hadi Makarechian
c/o Capital Pacific Holdings, Inc.
4100 MacArthur Blvd., Suite 200
Newport Beach, California 92660
Telecopy No.: (714) 622-8410
with a copy to: Dag Wilkinson, Esq.
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, DC 20006
Telecopy No.: (202) 429-7049
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<PAGE> 10
If to the Purchaser: c/o Farallon Capital Management, L.L.C.
One Maritime Plaza
Suite 1325
San Francisco, California 94111
Attention: Steve Millham
Telecopy No.: (415) 421-2133
with a copy to: Richards Spears Kibbe & Orbe
One Chase Manhattan Plaza
57th Floor
New York, New York 10005
Attention: William Q. Orbe, Esq.
Telecopy No.: (212) 530-1801
Any party may, by written notice to the other parties, change the address or
telecopy number to which notices to such party are to be delivered or mailed or
sent by facsimile transmission. All such notices or other communications shall
be effective and be deemed to have been given as of the date on which so
hand-delivered or on the third business day following the date on which so
mailed, or if delivered by facsimile transmission, when sent and the sender
receives evidence of complete transmission without error.
SECTION 5.06 Entire Agreement: Amendment. This Agreement, the Escrow
Agreement and the Investment and Stockholder Agreement set forth the entire
agreement and understanding of the parties in respect of the transactions
contemplated hereby and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof, both oral and written. No
representation, promise, inducement or statement of intention has been made by
either of the parties hereto which is not embodied in this Agreement, or the
written statements, certificates or other documents delivered pursuant hereto or
the other agreements referred to above, and neither of the parties hereto shall
be bound by or liable for any alleged representation, promise, inducement or
statement of intention not so set forth. This Agreement may be amended or
modified only by a written instrument executed by the parties hereto or by their
successors and assigns.
SECTION 5.07 Press Releases. None of the parties hereto shall issue any
press releases or make any public announcements of any of the transactions
contemplated by this Agreement except as may be mutually agreed to in writing by
the parties hereto; provided, however, that notwithstanding the foregoing, each
of the parties hereto shall be permitted and will cooperate with the other
party, to make such disclosures to the public or governmental authorities as
their respective counsel shall deem necessary to maintain compliance with, or to
prevent violation of, applicable laws.
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<PAGE> 11
SECTION 5.08 General. This Agreement (i) shall be construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the choice of law principles thereof; and (ii) may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The Section and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
SECTION 5.09 Severability. To the extent that any provision of this
Agreement which does not materially affect the intent of the parties hereto
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.
SECTION 5.10 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Person" shall means an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency or
any agency or political subdivision thereof, or other entity.
(b) an "Affiliate" of a person shall mean someone that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such person.
(c) "Business Day" means any day on which commercial banks are not
authorized or required to close in New York, New York.
SECTION 5.11 Confidential Information. All information acquired by any
party hereto or their respective agents, representatives or Affiliates with
respect to the business of the other parties hereto ("confidential information")
in connection with the transactions contemplated hereby shall be held in strict
confidence by such party if such information is not in the public domain or was
not independently obtained or developed by such party and, if in writing, such
confidential information shall be returned by such party to the other party if
so requested in writing upon termination of this Agreement; provided however
that each party may retain one copy thereof in confidential, restricted access
files for use only in the event a dispute arises between the parties hereunder
and only in connection with that dispute. None of the parties shall use any
confidential information to the disadvantage of the other party.
SECTION 5.12 Termination. This Agreement may be terminated by either
party hereto if the Closing shall not have occurred on or before November 18,
1997, or such later date as may have been agreed upon by the parties hereto.
Upon termination, no party shall have any liability or obligation under this
Agreement except to observe the confidentiality provisions hereof and except to
the extent a party has breached its representations, warranties, covenants or
agreements hereunder.
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<PAGE> 12
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the Selling Stockholder and the Purchaser have
executed this Agreement as of the day and year first above written.
CPH2, LLC
By: /s/ Hadi Makarechian
-------------------------
Name: Hadi Makarechian
Title: Member
CPH3, LLC
By: /s/ Hadi Makarechian
-------------------------
Name: Hadi Makarechian
Title: Member
CALIFORNIA HOUSING FINANCE, L.P.
By: California Housing Finance L.L.C.
Its Manager
By: Farallon Capital Management, L.L.C.
Its Manager
By: /s/ Steve Millhan
--------------------------
Steve Millham
Managing Member
516994
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<PAGE> 13
SCHEDULE A
(SHAREHOLDINGS)
<TABLE>
<CAPTION>
Shares of
Common Stock
Name Beneficially Owned
---- ------------------
<S> <C>
CPH2, LLC 4,638,657
CPH3, LLC 6,600,034
</TABLE>
13
<PAGE> 1
Exhibit 3
[EXECUTION COPY]
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of September 29, 1997, among California
Housing Finance, L.P. (the "Purchaser"), CPH2, LLC and CPH3, LLC (collectively,
the "Selling Stockholder") and NationsBank, N.A., as escrow agent (the "Escrow
Agent").
RECITALS
A. Purchaser and the Selling Stockholder have entered into a Stock
Purchase Agreement (the "Purchase Agreement"), dated as of the date hereof.
Capitalized terms used but not defined herein have the meanings assigned to them
in the Purchase Agreement.
B. In accordance with the provisions of Section 1.04 of the Purchase
Agreement, (i) Purchaser has agreed, as of the date hereof, to deliver to the
Escrow Agent the Purchase Price, and (ii) the Selling Stockholder has agreed, as
of the date hereof, to deliver to the Escrow Agent the certificates representing
the Shares and one or more stock powers duly endorsed in blank, in each case to
be held by the Escrow Agent in accordance with the terms and provisions of this
Agreement.
AGREEMENT
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Escrow Agent. The Purchaser and the Selling Stockholder
hereby appoint and designate NationsBank, N.A., as Escrow Agent for the purposes
set forth in this Agreement. All references to the "Escrow Agent", as that term
is used in this Agreement, shall refer to the Escrow Agent solely in its
capacity as an escrow agent under the terms of this Agreement, and not to it in
any other capacity whatsoever whether as individual, agent, attorney, fiduciary,
trustee or otherwise.
Section 2. Deposits.
(a) Purchase Price. Within five Business Days of the execution and
delivery of this Agreement, the Purchaser shall deliver to the Escrow Agent the
Purchase Price by wire transfer of immediately available funds to the escrow
account (the "Escrow Account") set forth on Schedule I hereto (such deposit
being the "Escrow Amount").
<PAGE> 2
(b) Shares. Within five Business Days of the execution and delivery of
this Agreement, the Selling Stockholder shall deliver to the Escrow Agent the
certificates representing the Shares with stock powers duly endorsed in blank to
the Escrow Agent's address set forth on Schedule I hereto.
(c) Acknowledgment of Receipt. Upon receipt by the Escrow Agent of the
Escrow Amount and the Shares, as contemplated by clauses (a) and (b) above,
respectively, the Escrow Agent shall send written notice of such receipt to the
Selling Stockholder and the Purchaser.
(d) Investment of Purchase Price. The Escrow Agent shall invest all
funds received under this Agreement in a money market fund account maintained by
the Escrow Agent at NationsBank, N.A. The Escrow Agent shall have no duty to
invest in any other obligations except as provided in this Section.
Section 3. Distribution of Interest and Other Income; Notices of
Selling Stockholder. At the time of the distribution of the Escrow Amount in
accordance with the terms of this Agreement, the Escrow Agent shall pay to the
party receiving such Escrow Amount all interest or other income received in
respect of the Escrow Amount since the date of the deposit of the Escrow Amount.
The Escrow Agent shall be entitled to rely on any notice from CPH3, LLC as a
notice from both Selling Stockholders.
Section 4. Distributions.
(a) Failure of Deposit. In the event either of the deposits described
in paragraphs 2(a) or 2(b) above have not taken place in full within five
Business Days of the date hereof, any of the Shares or the Purchase Price which
have been deposited shall be forthwith returned to the depositing party.
(b) Conditions Satisfied. On the date on which the Purchaser and the
Selling Stockholder deliver to the Escrow Agent a joint written notice in the
form of Exhibit A hereto (the "Notice") certifying that the restructuring of
Capital Pacific Holdings, Inc. (the "Company") has been consummated in
accordance with the terms and provisions set forth in the Investment and
Stockholder Agreement of even date between, inter alia, the Selling Stockholders
and the Purchaser (the "Condition"), the Escrow Agent shall, promptly upon
receipt of the Notice, deliver (i) the Escrow Amount to the Selling Stockholder
by wire transfer of immediately funds in accordance with the wire transfer
instructions set forth on Schedule II, and (ii) the certificates representing
the Shares together with stock powers duly endorsed in blank to the Purchaser at
the address set forth for the Purchaser on Schedule III.
(c) Conditions Not Satisfied. In the event that the Escrow Agent shall
not have received a Notice from the Purchaser and the Selling Stockholder on or
prior to 5:00 p.m. New York City time on November 18, 1997 (the "Trigger Time"),
the Escrow Agent shall, promptly after the Trigger Time, deliver (i) the Escrow
Amount to the Purchaser by wire transfer of immediately funds in accordance with
the wire transfer instructions set forth on
2
<PAGE> 3
Schedule III, and (ii) the certificates representing the Shares together with
stock powers duly endorsed in blank to the Selling Stockholder at the address
set forth for the Selling Stockholder on Schedule II.
(d) Mutual Agreement. Notwithstanding any of the provisions herein to
the contrary, the Escrow Agent shall disburse the Escrow Amount (or portions
thereof) and the certificates representing the Shares and the stock powers from
time to time as the Purchaser and the Selling Stockholder shall jointly notify
the Escrow Agent in writing, promptly after receipt by the Escrow Agent of a
joint written notice from the Purchaser and the Selling Stockholder. In the
event that a written notice given pursuant to the previous sentence directs the
Escrow Agent to distribute all or a portion of the Escrow Amount to the Selling
Stockholder, the Selling Stockholder shall notify the Escrow Agent in what
proportion each is to receive of such distribution.
Section 5. Rights, Obligations and Indemnification of Escrow Agent.
(a) In performing any of its duties under this Escrow Agreement, or
upon the claimed failure to perform its duties hereunder, the Escrow Agent shall
not be liable to the Purchaser, the Selling Stockholder, or other third parties
for any damages, losses, or expenses which such party may incur as a result of
the Escrow Agent so acting, or failing to act; provided, however, that the
Escrow Agent shall be liable for damages arising out of its fraud or willful
default under this Escrow Agreement. Accordingly, the Escrow Agent shall not
incur any liability with respect to (1) any action taken or omitted to be taken
in good faith, whether or not acting upon advice of its counsel given with
respect to any questions relating to the duties and responsibilities of the
Escrow Agent under this Agreement, nor (2) any action taken or omitted to be
taken in reliance upon any document, including any written notice or
instructions provided for in this Agreement, not only as to the document's due
execution and to the validity and effectiveness of its provisions, but also as
to the truth and accuracy of any information contained in the document, which
the Escrow Agent shall in good faith believe to be genuine, to have been signed
or presented by a proper person or persons and to conform with the provisions of
this Agreement. Furthermore, the Escrow Agent shall have no liability for loss
arising from any cause beyond its control, including (but not limited to) the
following: (1) the act, failure or neglect of any agent or correspondent
selected by the Purchaser or Selling Stockholder or either of them, for the
remittance of funds, (2) any delay, error, omission or default of any mail,
telegraph, cable or wireless agency or operator or (3) the acts or edicts of any
government or governmental agency or other group or entity exercising
governmental powers.
(b) The Purchaser and the Selling Stockholder hereby jointly and
severally agree to indemnify and hold harmless the Escrow Agent against any and
all fees, losses, claims, damages, liabilities and expenses, including, without
limitation, reasonable costs of investigation and counsel fees and disbursements
which may be imposed by the Escrow Agent or incurred by it in connection with
its acceptance of this appointment as Escrow Agent under this Agreement, or the
performance of its duties under this Agreement, including without limitation,
any litigation arising from this Escrow Agreement or involving the subject
matter
3
<PAGE> 4
of this Agreement; except, that if the Escrow Agent shall be found guilty of
fraud or willful default under this Agreement then, in that event, the Escrow
Agent shall bear all such losses, claims, damages and expenses.
(c) The Escrow Agent shall be bound only by the terms of this Escrow
Agreement and shall not be bound by, or be deemed to have knowledge of any of
the terms of, or incur any liability with respect to the Purchase and Sale
Agreement or any other agreement or understanding to which the Escrow Agent is
not a party. The Escrow Agent shall not have any duties under this Agreement
except those specifically set forth in this Agreement.
(d) If any part of the funds deposited under this Agreement is at any
time attached, garnished or levied upon under any court order, or if the payment
or transfer of any of the funds shall be stayed or enjoined by any court order,
or any order, judgment or decree shall be made or entered by any court affecting
such funds or any portion thereof, then in any of those events the Escrow Agent
is authorized, in its sole discretion, to rely upon and comply with any order,
writ, judgment or decree which it is advised by legal counsel is binding upon
it. The Purchaser and the Selling Stockholder hereby jointly and severally agree
to indemnify the Escrow Agent and hold it harmless against any loss, liability
or expense of any kind which may result, in whole or in part, from any delay in
acting with respect to any binding order, writ, judgment or decree. If the
Escrow Agent complies with any binding order, writ, judgment or decree, it shall
not be liable to the Selling Stockholder, the Purchaser or any other person,
firm or corporation by reason of the Escrow Agent's compliance, even though the
order, writ, judgment or decree may subsequently be reversed, modified,
annulled, set aside or vacated.
(e) The Purchaser and Selling Stockholder agree that in addition to any
further rights the Escrow Agent may have under this Agreement or otherwise,
should any dispute arise with respect to the payment or ownership or right of
possession of any of the funds or properties held by the Escrow Agent as
contemplated herein, the Escrow Agent is authorized to retain in its possession
all or part of the funds or properties until the dispute has been settled either
by mutual agreement of all the parties concerned or by a final judicial
determination, or the Escrow Agent may in its sole discretion terminate this
Escrow Agreement as set forth in Section 5(i).
(f) The Escrow Agent's activities under this Agreement shall be only
those of, or incidental to, a passive ministerial depository and disbursing
payer under the terms of this Agreement. In the event of any disagreements or
conflicting instructions resulting in adverse claims or demands being made upon
the Escrow Agent in connection with this Agreement, or in the event that the
Escrow Agent in good faith is in doubt as to what action should be taken under
this Agreement, it may, at its option, refuse to comply with any claims or
demands on it, or terminate this Escrow Agreement, or refuse to take any other
action hereunder, and in any such event, the Escrow Agent shall not be or become
liable in any way or to any party for its failure or refusal from acting until
all differences shall have been settled and all doubt resolved.
4
<PAGE> 5
(g) The Escrow Agent (1) except as otherwise expressly provided in this
Agreement, shall have no obligation to make any payment under this Agreement
unless all the necessary funds and/or documents have been actually received by
the Escrow Agent, (2) shall be regarded as making no representations and having
no responsibilities as to the validity, sufficiency, value or genuineness of the
underlying transactions contemplated in this Agreement or the Assignment
Agreement, (3) may rely on and shall be protected in acting upon any
certificate, instrument, notice, letter, telegram, telecopy or other document
delivered to the Escrow Agent and reasonably believed by the Escrow Agent to be
genuine and to have been sent by the proper party or parties and (4) may consult
its counsel regarding questions which may arise and the advice or opinion of its
counsel shall be conclusive evidence of good faith in respect of any action
taken, suffered or omitted by the Escrow Agent under this Agreement in
accordance with the advice or opinion of its counsel. However, the Escrow Agent
shall be under no obligation to consult with counsel, and failure to do so shall
not be evidence of a lack of good faith on the part of the Escrow Agent.
(h) Except as specifically provided in Section 2, the Escrow Agent
shall have no responsibility for the investment of any funds held under this
Agreement. The Escrow Agent shall not be liable to the Purchaser or the Selling
Stockholder and hereby disclaims any responsibility for any losses or penalties
incurred with respect to any investments made under this Agreement. In the event
of any loss on any investments made under this Agreement, the Purchaser shall be
obligated to pay into escrow under this Agreement an amount equal to the amount
of the loss, which amount shall become a part of the Escrow Amount. It is the
intention of the parties that, except as otherwise expressly provided in this
Agreement, the Escrow Agent shall never be required to use or advance its own
funds or otherwise incur financial liability in the performance of its duties or
the exercise of any of its rights and powers under this Agreement.
(i) The Escrow Agent may resign without obtaining the order of any
court, by giving at least thirty (30) days prior written notice (unless waived
by Purchaser and Selling Stockholder) to the Purchaser and the Selling
Stockholder and upon the taking of all actions as described in this Section by
the Escrow Agent, the Escrow Agent shall have no further obligations or
responsibilities under this Agreement to the Purchaser and the Selling
Stockholder or to any other person or persons in connection with this Escrow
Agreement. The resignation of the Escrow Agent shall be effective upon the
appointment by the Purchaser and the Selling Stockholder of a successor escrow
agent; provided, that if the appointment of any successor agent is not made
within thirty (30) days of the Escrow Agent's prior written notice of
resignation, the Escrow Agent may file an action for interpleader and deposit
all funds with a court of competent jurisdiction, all as provided for in Section
5(k). Any successor agent shall be appointed by a written instrument mutually
satisfactory to and executed by the Purchaser, the Selling Stockholder, the
Escrow Agent and the successor agent. Any successor agent appointed under the
provisions of this Escrow Agreement shall have all of the same rights, powers,
privileges, immunities and authority with respect to the matters contemplated in
this Agreement as are granted in this Agreement to the original Escrow Agent.
(j) It is not the intention of the parties to this Agreement to create,
nor shall this
5
<PAGE> 6
Escrow Agreement be construed as creating, a partnership or association, or to
render the parties to this Agreement liable as partners.
(k) Notwithstanding any provision in this Agreement to the contrary, in
the event of any disagreement or controversy arising under this Agreement or if
conflicting demands or notices are made upon the Escrow Agent growing out of or
relating to this Agreement or in the event the Escrow Agent in good faith is in
doubt as to what action it should take under this Agreement, the Escrow Agent
shall have the right, at its election, to withhold and stop all further
proceedings in, and performance of, this Agreement and all instructions received
under this Agreement and file a suit in interpleader and obtain an order from a
court of competent jurisdiction requiring all parties involved to interplead and
litigate in that court their claim and rights among themselves and with the
Escrow Agent. The foregoing remedy shall be cumulative of any other remedies
available to the Escrow Agent provided under this Agreement or in law or at
equity. Should any suit or legal proceeding be instituted growing out of or
related to this Agreement, whether the suit be initiated by the Escrow Agent or
others, the Escrow Agent shall have the right, at its option, to stop all
further proceedings under and performance of this Agreement and of all
instruction received under this Agreement until all differences shall have been
rectified and all doubts resolved by agreement or until the rights of all
parties shall have been fully and finally adjudicated.
Section 6. Fees, Expenses and Charges. The Purchaser and the Selling
Stockholder shall be jointly and severally liable for the fees, expenses and
charges of the Escrow Agent, including reasonable fees, expenses and charges of
counsel engaged by it in connection with the execution of this Agreement and its
services under this Agreement, which fees, expenses and charges shall be payable
on demand. The Escrow Agent may deduct unpaid fees, expenses and charges from
the Escrow Amount. The Purchaser and the Selling Stockholder agree between
themselves to bear equally all those fees, expenses and charges.
Section 7. Miscellaneous.
(a) Notices. All other notices, requests and other communications to
any party or under this Agreement shall be in writing (including facsimile or
similar writing). Each communication shall be given to the party at its address
stated on the signature pages of this Agreement or at any other address as the
party may specify for this purpose by notice to each other party. Each
communication shall be effective when actually received.
(b) No Waivers; Remedies. No failure or delay by the any party in
exercising any right, power or privilege under this Agreement shall operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege shall not preclude any other or further exercise of
the right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement shall be
cumulative and not exclusive of any rights or remedies provided by law.
(c) Amendments, Etc. No amendment, modification, termination, or waiver
of any provision of this Agreement and no consent to any departure by a party
from any provision of
6
<PAGE> 7
this Agreement, shall be effective unless it shall be in writing and signed and
delivered by the other party, and then it shall be effective only in the
specific instance and for the specific purpose for which it is given.
(d) Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties to this Agreement and their
respective successors and assigns. This Agreement shall not be assignable by any
of the parties to this Agreement without the prior written consent of each other
party.
(e) Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware. All rights and
obligations of the parties shall be in addition to and not in limitation of
those provided by applicable law.
(f) Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if all signatures were on the same instrument.
(g) Severability of Provisions. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of the prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of the provision in any other jurisdiction.
(h) Headings and References. Section headings in this Agreement are
included for the convenience of reference only and do not constitute a part of
this Agreement for any other purpose.
[SIGNATURE PAGE FOLLOWS]
7
<PAGE> 8
SIGNATURE PAGE TO ESCROW AGREEMENT
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
CALIFORNIA HOUSING FINANCE, L.P.
By: California Housing Finance L.L.C.
Its General Partner
By: Farallon Capital Management, L.L.C.
Its Manager
By: /s/ Steve Millhan
-----------------------------
Steve Millham
Managing Member
CPH3, LLC
By: /s/ Hadi Makarechian
------------------------------------------
Hadi Makarechian
Member
CPH2, LLC
By: /s/ Hadi Makarechian
------------------------------------------
Hadi Makarechian
Member
NATIONSBANK, N.A.
By: /s/ David Huffman
------------------------------------------
Name: David Huffman
Title: Vice President
8
<PAGE> 9
EXHIBIT A
to
ESCROW AGREEMENT
Notice
NationsBank, N.A.
730 15th Street, N.W.
Washington, DC 20005
In accordance with the provisions of Section 4(b) of that certain
Escrow Agreement (the "Escrow Agreement", capitalized terms used but not defined
in this certificate have the meanings ascribed to them in the Escrow Agreement),
dated as of September 29, 1997, among California Housing Finance, L.P. (the
"Purchaser"), CPH2, LLC and CPH3, LLC (collectively, the "Selling Stockholder")
and NationsBank, N.A., as escrow agent (the "Escrow Agent"), the Purchaser and
the Selling Stockholder hereby certify that the Condition set forth in Section
4(b) has been satisfied and that the Escrow Agent shall deliver (a) the Escrow
Amount to each Selling Stockholder in such proportions as the Selling
Stockholder shall state in writing to the Escrow Agent, and (b) the certificates
representing the Shares to the Purchaser, all as set forth in Section 4(b) of
the Escrow Agreement.
CALIFORNIA HOUSING FINANCE, L.P.
By: California Housing Finance L.L.C.,
Its General Partner
By: Farallon Capital Management, L.L.C.,
Its Manager
By:
------------------------------------------
Steve Millham
Managing Member
CPH3, LLC
By:
------------------------------------------
Hadi Makarechian
Member
CPH2, LLC
By:
------------------------------------------
Hadi Makarechian
Member
9
<PAGE> 10
SCHEDULE I
to
ESCROW AGREEMENT
Escrow Account Wire Instructions
[To be provided prior to Closing]
10
<PAGE> 11
SCHEDULE II
to
ESCROW AGREEMENT
Address and Wire Instructions for Purchaser
[To be provided prior to Closing]
11
<PAGE> 12
SCHEDULE III
to
ESCROW AGREEMENT
Address and Wire Instructions for Selling Stockholde
[To be provided prior to Closing]
12
<PAGE> 1
Exhibit 4
- --------------------------------------------------------------------------------
INVESTMENT AND STOCKHOLDER AGREEMENT
BY AND AMONG
CALIFORNIA HOUSING FINANCE, L.P.
CAPITAL PACIFIC HOLDINGS, INC.
CAPITAL PACIFIC HOLDINGS, L.L.C.,
THE SUBSIDIARIES OF CAPITAL PACIFIC HOLDINGS, INC.
SET FORTH ON THE SIGNATURE PAGES HERETO,
AND
THE STOCKHOLDERS OF
CAPITAL PACIFIC HOLDINGS, INC. NAMED HEREIN
DATED SEPTEMBER 29, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
THIS INVESTMENT AND STOCKHOLDER AGREEMENT (this "Agreement"), dated
September 29, 1997, is by and among CAPITAL PACIFIC HOLDINGS, INC., a Delaware
corporation (the "Company"), CAPITAL PACIFIC HOLDINGS, L.L.C., a Delaware
limited liability company, THE SUBSIDIARIES OF THE COMPANY SET FORTH ON THE
SIGNATURE PAGES HERETO (the "Subsidiaries"), CALIFORNIA HOUSING FINANCE, L.P.,
a Delaware limited partnership (the "Purchaser") and CPH2, L.L.C. and CPH3,
L.L.C., each a Delaware limited liability company (CPH2, L.L.C. and CPH3,
L.L.C. are herein sometimes individually referred to as a "Stockholder" and
collectively as the "Stockholders.)"
WHEREAS, simultaneously with the execution of this Agreement, the
Stockholders and the Purchaser have entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement"), pursuant to which the Stockholders shall
sell, and the Purchaser shall buy, 2,484,340 shares (the "Shares") of Common
Stock, $.10 par value, of the Company (the "Common Stock") for $10,000,000 (the
"Purchase Price") and the Purchasers, the Stockholders and Nationsbank, N.A. as
escrow agent have entered into an Escrow Agreement (the "Escrow Agreement")
pursuant to which the Stock and the Purchase Price are escrowed pending the
consummation of the transactions contemplated by this Agreement;
WHEREAS, the Company, the Subsidiaries and the Purchaser have agreed
that on the terms and conditions contained herein the Company and the
Subsidiaries shall transfer substantially all of their respective assets to
Capital Pacific Holdings L.L.C., a newly organized Delaware limited liability
company (the "New L.L.C.") and the Purchaser shall contribute $30,000,000 to
the capital of the New L.L.C. and execute a counterpart of the Amended and
Restated Limited Liability Company Agreement of the New L.L.C. in the form of
Exhibit A (the "New L.L.C. Agreement") in return for a 32.07% membership
interest in the New L.L.C.;
WHEREAS, simultaneously with the execution of this Agreement the
Purchaser and the Company have entered into a Registration Rights Agreement in
the form of Exhibit B with respect to the Shares (the "Registration Rights
Agreement" and together with the Stock Purchase Agreement, the New L.L.C.
Agreement, this Agreement, and all other documents pursuant to which the
Company and the Subsidiaries contribute their assets to the New L.L.C. and the
Escrow Agreement, the "Related Agreements");
WHEREAS, the Company, the Subsidiaries and the Stockholders have
agreed to conduct all of the Company's and the Subsidiaries' future and
existing business activities in the New L.L.C. or in future limited liability
companies or limited partnerships in which Purchaser shall have a 42.76%
interest (32.07% directly through its ownership of such future interests and
10.69% indirectly through its ownership of the Shares (subject to adjustment as
provided herein)) as the result of its capital investment in the New L.L.C. and
the purchase of the Shares;
WHEREAS, the Company, the Subsidiaries and the Stockholders have
agreed to grant Purchaser the opportunity to provide equity, construction and
development financing for future
<PAGE> 3
projects of the Company and its future affiliates for which outside financing
in excess of $1 million is required;
WHEREAS, the Company, the Purchaser and the Stockholders desire to
impose certain restrictions on the disposition and transfer of all of the
shares of Common Stock owned by the Purchaser and the Stockholders, and the
limited liability company interests in the New L.L.C. and each future limited
liability company or limited partnership owned by the Company, the Subsidiaries
and the Purchaser, and the purchase of further Common Stock in the Company and
to set forth certain voting agreements with respect to such Common Stock and
limited liability company and partnership interests and to create certain
purchase and sale rights and options with respect to such Common Stock and
limited liability interests.
NOW, THEREFORE, in consideration of the premises, and the
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE I
THE TRANSACTION
SECTION 1.01 THE TRANSACTION. On the terms and subject to the
conditions set forth in this Agreement:
(a) on or prior to the Closing Date (defined below), the Company
and each of the Subsidiaries shall transfer all of their respective properties,
contracts, rights and other assets of every kind, both tangible and intangible,
excluding only the Excluded Assets (as defined in Section 5.1 of the New L.L.C.
Agreement) (the assets to be so transferred are referred to herein as the
"Transferred Assets") to the New L.L.C. in exchange for 100% of the membership
interests in the New L.L.C., and the New L.L.C. will assume all of the
liabilities of the Company and the Subsidiaries (whether known or unknown)
provided that liabilities arising with respect to the period after the Closing
Date shall be allocated among the New L.L.C., the Mirror Companies and the
Future Affiliate in accordance with Section 6.05(c) below;
(b) after completion of the transfers set forth in paragraph (a),
on the Closing Date the Purchaser shall contribute to the capital of the New
L.L.C. the sum of $30,000,000 in exchange for newly issued membership interests
in the New L.L.C. equal to 32.07% of the outstanding membership interests in
the New L.L.C. after taking into account such issuance (and the membership
interests of the Company and the Subsidiaries shall be diluted accordingly to
67.93%);
(c) immediately after completion of the contribution described in
clause (b) above, the Purchaser shall consummate the purchase from the
Stockholders of the Shares for the Purchase Price pursuant to the Stock
Purchase Agreement and the Escrow Agreement;
(d) on the Closing Date, the parties hereto shall execute and
deliver the documents and consummate the transactions described in Section 5.02
of this Agreement.
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<PAGE> 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
THE SUBSIDIARIES AND THE NEW L.L.C.
Each of the Company, the Subsidiaries, the New L.L.C., jointly and
severally represents and warrants to the Purchaser as of the date hereof and as
of the Closing Date:
SECTION 2.01 ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER. Each of the
Company, the New L.L.C. and each Subsidiary is a corporation or limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization. Each of the Company, the
Subsidiaries and the New L.L.C. (a) has or will have all on the Closing Date
necessary power and authority and all governmental licenses, authorizations and
consents and approvals required to own its properties now owned or proposed to
be owned immediately after the Closing Date and to carry on its business as now
conducted, (b) is or will be on the Closing Date duly qualified under the laws
of each jurisdiction in which qualification is required to own, lease or
license its properties so owned, leased or licensed or proposed to be owned,
leased or licensed immediately after the Closing Date or to carry on its
business as now conducted or so proposed to be conducted immediately after the
Closing Date except where the failure to so qualify will not have a Material
Adverse Effect and (c) has all necessary power and authority to execute and
deliver each of the Related Agreements to which it is or may become a party and
to consummate the transactions contemplated thereby.
SECTION 2.02 INTEREST OWNERSHIP. Immediately before the consummation of
the transactions contemplated to take place on the Closing Date, the Company
and one or more of its wholly-owned subsidiaries will be collectively the
beneficial and record owner of all of the outstanding membership interests of
the New L.L.C. Immediately after the consummation of the transactions
contemplated by this Agreement to take place on the Closing Date, the persons
and entities listed on Schedule 2.02 will be the sole legal, record and
beneficial owners of the number and percentage of issued and outstanding shares
of each class of the Company's Common Stock and membership interests in the New
L.L.C. set forth opposite its name on Schedule 2.02. The Subsidiaries and
Bayhill Escrow shall immediately before the Closing Date constitute all of the
direct and indirect subsidiaries of the Company.
SECTION 2.03 AUTHORIZATION OF AGREEMENTS. The execution and delivery by
each of the Company, the Subsidiaries and the New L.L.C. of the Related
Agreements to which they are party and the performance of their respective
obligations under the Related Agreements to which they are party have been duly
authorized by all necessary corporate or limited liability company action on
the part of the Company, the Subsidiaries and the New L.L.C.
SECTION 2.04 VALIDITY. This Agreement has been, and each other Related
Agreement to which they are party upon its execution and delivery as provided
herein will be, duly executed and delivered by the Company, the Subsidiaries,
and the New L.L.C. and this Agreement constitutes and each other Related
Agreement upon its execution and delivery as provided herein will be, the
legal, valid and binding obligation of such entity, enforceable against such
entity in
-3-
<PAGE> 5
accordance with its terms, except as the enforceability hereof may be limited
(i) by bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and (ii) by general equitable
principles regardless of whether considered in a proceeding in equity or at
law.
SECTION 2.05 GOVERNMENTAL APPROVALS. Subject to the continued accuracy of
the representations and warranties of the Purchaser set forth in Section 3.04
of the Stock Purchase Agreement, no registration or filing with, or consent or
approval of, or other action by, any Federal, state or other governmental
agency or instrumentality or regulatory body is necessary for the valid
execution, delivery and performance by the Company, the Subsidiaries, or the
New L.L.C. of the Related Agreements, other than (i) satisfaction by the
Company of its future periodic reporting obligations under the Securities
Exchange Act of 1934 and the associated regulations and (ii) revisions to the
Subdivision Approvals as defined in Schedule 2.08 to reflect the transactions
contemplated by this Agreement which will be obtained prior to or following the
Closing in the ordinary course of business the failure to obtain which prior to
Closing will not (except in the case of any Subdivision Approval marked with an
asterisk in Schedule 2.08, if any) have a Material Adverse Effect.
SECTION 2.06 ASSET TRANSFER AND ASSUMPTION OF LIABILITIES. At or prior to
the Closing, the Company and the Subsidiaries will have transferred all of
their respective assets to the New L.L.C. and the New L.L.C. shall have assumed
all of the Company's and such Subsidiaries' liabilities, provided, however,
that the Excluded Assets will not be transferred to the New L.L.C.
SECTION 2.07 CONTRAVENTION. Neither the execution, delivery and
performance of any Related Agreement by the Company, any Subsidiary, or the New
L.L.C. nor the consummation of the transactions contemplated hereby or thereby
will (with or without notice or lapse of time or both) conflict with, violate
or breach (a) any provision of the Company's, any Subsidiaries', or the New
L.L.C.'s organizational documents, (b) any law, rule, regulation or order by
which the Company, any Subsidiary, or the New L.L.C. or any of the Transferred
Assets or any of their properties may be bound or affected, or (c) subject to
obtaining the Approvals, any material agreement to which the Company, any
Subsidiary, or the New L.L.C. is a party or by which the Company, the New
L.L.C., any Subsidiary, or the Transferred Assets or any of their other
properties may be bound or affected.
SECTION 2.08 THIRD-PARTY APPROVALS. Other than as set forth in Schedule
2.08, no authorization, consent, order or approval of, notice to or
registration or filing with, or any other action by any person or entity (each
an "Approval") is required in connection with the valid execution, delivery and
performance by the Company, the Subsidiaries, or the New L.L.C. of this
Agreement or any of the Related Agreements. All Approvals will be obtained on
or prior to the Closing Date other than Approvals the failure to obtain which
will not have a Material Adverse Effect. Schedule 2.08 sets forth a list of
all material Approvals.
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SECTION 2.09 FINANCIAL INFORMATION.
(a) The audited consolidated balance sheets of the Company and the
Subsidiaries dated as of February 28, 1997, February 29, 1996 and February 28,
1995 and the unaudited consolidated balance sheet of the Company and the
Subsidiaries dated May 31, 1997 were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis in
accordance with the past practice of the Company and fairly present the
consolidated financial position of the Company and the Subsidiaries as of their
respective dates.
(b) The audited consolidated statements of operations, statements
of changes in shareholder's equity and statements of cash flows of the Company
and the Subsidiaries for the 12-month periods ended February 28, 1997, February
29, 1996 and February 28, 1995, and the unaudited consolidated statement of
operations, statement of changes in shareholders equity and statement of cash
flows of the Company and the Subsidiaries for the three (3) month period ended
May 31, 1997 were prepared in accordance with GAAP applied on a consistent
basis in accordance with the past practice of the Company and fairly present
the consolidated results of operations, changes in shareholder's equity and
cash flows of the Company and the Subsidiaries for such period.
SECTION 2.10 LITIGATION. There is no pending or threatened litigation,
suit, action or proceeding that (a) questions the validity of any of the
Related Agreements or that seeks to prohibit or restrain the consummation of
the transactions contemplated by this Agreement or any of the Related
Agreements or (b) could reasonably be expected to have a Material Adverse
Effect.
SECTION 2.11 LICENSES. The Company, each Subsidiary and the New L.L.C.
owns, holds or possess all material permits, licenses, franchises,
registrations, qualifications or other authorizations ("Licenses") necessary to
in all material respects entitle the Company, each Subsidiary and the New
L.L.C. to use its respective name, to own or lease, operate and use its
respective assets and properties and to carry on and conduct its business, as
contemplated by the provisions of the New L.L.C. Agreement, including without
limitation the delegations of functions by the Company to the Subsidiaries
contemplated thereby, and all such Licenses are validly held and in full force
and effect. Subject to obtaining the Subdivision Approvals, no such License
will under its current terms be subject to suspension, modification,
revocation, cancellation or non-renewal as a result of the execution, delivery
or performance of any of the Related Agreements.
SECTION 2.12 COMPLIANCE WITH LAWS. Each of the Company, the Subsidiaries,
and the New L.L.C. are in compliance with each law, rule or regulation
applicable to their respective business, properties or operations except where
non-compliance will not have a Material Adverse Effect.
SECTION 2.13 NO MATERIAL ADVERSE EFFECT. Since February 28, 1997, there
has not occurred any event, act, condition or occurrence, which has (a) had a
material adverse effect upon the business, results of operations, contracts,
assets (whether tangible or intangible),
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liabilities, obligations, condition (financial or otherwise), or prospects of
the Company, the Subsidiaries or the New L.L.C. taken as a whole or (b)
impaired, hindered or adversely affected in any material respect the ability of
the Company, any Subsidiary or the New L.L.C. to perform any of their
obligations under the Related Agreements (each of (a) and (b), a "Material
Adverse Effect").
SECTION 2.14 THE TRANSFERRED ASSETS.
(a) As of the Closing Date, the New L.L.C. will have good and
marketable title to each of the Transferred Assets, subject only to liens and
encumbrances of record and other customary liens and encumbrances.
(b) The transactions contemplated to take place on the Closing
Date shall not create any liens or encumbrances on any of the Transferred
Assets other than amendments and substitutions for existing liens and
encumbrances to reflect the transfer of Transferred Assets to, and assumption
of liabilities by, the New L.L.C.
(c) The Transferred Assets together with the Excluded Assets
comprise all real property and personal property, tangible or intangible, owned
or used by the Company and the Subsidiaries (i) used or useful in the business
of the Company and the Subsidiaries as conducted immediately prior to the
Closing Date and (ii) reflected in the financial statements referred to in
Section 2.09, and immediately after the Closing the New L.L.C. shall have the
right to utilize such Transferred Assets subject to no material restrictions
(other than those to which the Company and its Subsidiaries are subject
immediately prior to the Closing).
SECTION 2.15 RESTRICTED PAYMENTS. Since February 28, 1997, neither the
Company nor the New L.L.C. has made (a) any dividend or other distribution on
(i) any shares of the Company's capital stock or (ii) any of the New L.L.C.'s
membership interests or (b) any payments in cash or otherwise, on account of
the purchase, redemption, retirement or acquisition of (i)(x) any shares of the
Company's capital stock or (y) any of the New L.L.C.'s membership interests or
(ii) any option, warrant or other right to acquire (x) shares of the Company's
capital stock or (y) any of the New L.L.C.'s membership interests.
SECTION 2.16 MISSTATEMENTS. No representation or warranty of the Company,
the Subsidiaries or the New L.L.C. contained in any Related Agreement contains
any material misstatement of fact or omits to state a material fact necessary
to make the statement contained therein not materially misleading. None of the
information regarding the actual assets, operations or liabilities of the
Company, the Subsidiaries or the New L.L.C. provided by the Company to the
Purchaser in writing prior to the date hereof, including without limitation,
the business plan set forth as Exhibit A to the New L.L.C. Agreement and
related documents (the "Information Documents") contains a material
misrepresentation of fact or omitted to state a material fact necessary to make
the information set forth in such writing at the level of detail there set
forth not materially misleading at the time of such delivery, provided,
however, that (a) the Company makes no representation whatsoever regarding any
projection of future activity of the Company other than that at the time of
such projection it represented the good faith
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expectations of the Company based upon assumptions the Company believed
reasonable at the time, (b) the Company has made available to the Purchaser
full access to all Company records in its possession or in the possession of
its consultants which records include information which provides an additional
level of detail (but does not contradict) the Information Documents.
SECTION 2.17 TAXES. Each of the Company and the Subsidiaries has filed all
material federal, state, local and foreign tax returns that are required to be
filed by it and have paid all taxes due pursuant to those returns or pursuant
to any assessment received by it.
SECTION 2.18 ENVIRONMENTAL VIOLATIONS. The Company and the Subsidiaries
have no knowledge that the Company or the Subsidiaries or their business or
properties are in violation of any applicable federal, state or local
environmental law, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Resource Conservation and Recovery Act of 1976, as amended and the Toxic
Substances Control Act (collectively "Environmental Laws"), except violations
which will not have a Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company, the
Subsidiaries, and the New L.L.C. that:
SECTION 3.01 ORGANIZATION AND CORPORATE POWER.
(a) The Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Purchaser has the partnership power and authority to execute, deliver and
perform all of the Related Agreements to which it is a party.
(b) California Housing Finance L.L.C. is the sole general partner
of the Purchaser and is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the company power and authority to execute and deliver the Related Agreements
on behalf of the Purchaser.
SECTION 3.02 AUTHORIZATION OF AGREEMENTS, ETC. The execution and delivery
by the Purchaser of the Related Agreements and by its general partner on behalf
of the Purchaser and the performance by the Purchaser of its obligations
thereunder have been duly authorized by all requisite limited partnership and
limited liability company action.
SECTION 3.03 VALIDITY. This Agreement has been and each other Related
Agreement upon its execution and delivery as provided herein will be duly
executed and delivered by the Purchaser and constitutes and each other Related
Agreement upon its execution and delivery as provided herein will be, the
legal, valid and binding obligation of the Purchaser, enforceable in accordance
with its terms except as the enforceability thereof may be limited (i) by
bankruptcy,
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insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and (ii) by general equitable principles regardless
of whether considered in a proceeding in equity or at law.
SECTION 3.04 INVESTMENT REPRESENTATIONS.
(a) The Purchaser is an "accredited investor" within the meaning
of Rule 501(a) under the Securities Act and has, together with its Affiliates,
sufficient knowledge and experience in investing in companies similar to the
New L.L.C. so as to be able to evaluate the risks and merits of its investment
in the New L.L.C. and it is able financially to bear the risks thereof;
(b) The Purchaser has had an opportunity to discuss the Company's
and the New L.L.C.'s business, management and financial affairs with the
Company's management to its satisfaction and, except for reliance on the
representations and warranties contained in the Related Agreements and the
Information Documents, has relied solely upon its own diligence with respect to
the business and properties of the Company and the New L.L.C.; and
(c) The Purchaser has had full access to records of the Company in
the possession of the Company and its consultants and accountants and the
Purchaser has availed itself of such access to the extent it believed necessary
in connection with determining to effect the transactions contemplated by the
Related Agreements.
SECTION 3.05 CONTRAVENTION. Neither the execution, delivery or performance
of any Related Agreement nor the consummation of the transactions contemplated
hereby or thereby will (with or without notice or lapse of time or both)
conflict with, violate or breach (a) any provision of the Purchaser's
organizational documents, (b) any law, rule regulation or order by which the
Purchaser or any of its properties may be bound or affected, or (c) any
material agreement to which the Purchaser is a party or by which the Purchaser
or any of its properties may be bound or affected.
SECTION 3.06 THIRD-PARTY APPROVALS. No authorization, consent, order or
approval of, notice to or registration or filing with, or any other action by
any person or entity is required in connection with the valid execution,
delivery and performance by the Purchaser of any of the Related Agreements
other than any filings necessary pursuant to Sections 13 and 16 of the
Securities Exchange Act of 1934 and associated regulations.
SECTION 3.07 FINANCIAL CAPACITY. The Purchaser will on the Closing Date
have the financial capacity to carry out its obligations under the Related
Agreements.
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SECTION 3.08 LITIGATION. There is no litigation, suit, action or
proceeding arising out of any action or inaction of Purchaser (a) that
questions the validity of any of the Related Agreements or that involves or
relates to any of the transactions contemplated by any of the Related
Agreements, (b) that could reasonably be expected to adversely affect the
Purchaser's ability to perform its obligations under the Related Agreements to
which it is a party.
SECTION 3.09 MISSTATEMENTS. No representation or warranty of Purchaser
contained in any Related Agreement contains any material misstatement of fact
or omits to state a material fact necessary to make the statement contained
therein not materially misleading.
ARTICLE IV
THE CONDITIONS TO THE CLOSING
SECTION 4.01 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY, THE NEW L.L.C.
AND THE SUBSIDIARIES. The obligations of the Company, the New L.L.C. and the
Subsidiaries to perform their respective obligations set forth below to be
performed on the Closing Date are subject to the satisfaction or waiver on or
before the Closing Date of the following conditions:
(a) Representations and Warranties of the Purchaser to be True and
Correct. The representations and warranties of the Purchaser contained in the
Related Agreements shall be true, complete and correct in all material respects
on and as of the Closing Date, with the same effect as though such
representations and warranties had been made on and as of such date, and the
general partner of the Purchaser shall have certified in writing to the Company
to such effect.
(b) The Purchaser's Performance. The Purchaser shall have
performed and complied in all material respects with all covenants and
agreements contained in the Related Agreements required to be performed or
complied with by it prior to or at the Closing Date and the general partner of
the Purchaser shall have certified to the Company in writing to such effect and
to the further effect that the conditions set forth in clauses (a) and (b) of
this Section 4.01 have been satisfied.
(c) Supporting Documents. The Company shall have received copies
of the following documents:
(i) (A) the Certificates of Limited Partnership and the
Limited Partnership Agreement, both certified as of a recent date by a member
of the Purchaser and (B) certificates of the Secretary of State of the State of
Delaware dated as of a recent date as to the due organization and good standing
of the Purchaser and its general partner.
(ii) such additional supporting documents and other
information with respect to the operations and affairs of Purchaser as the
Company or its counsel may reasonably request.
(d) Litigation. As of such Closing Date, there shall not (i) be
in effect any judgment, order, injunction or decree of any court of competent
jurisdiction, the effect of which is to
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prohibit or restrain the consummation of the transactions contemplated by this
Agreement or award any material damages (after taking into account any damages
for which full insurance coverage is not in dispute) with respect to the
transactions contemplated by this Agreement or (ii) be pending any action or
proceeding by a governmental authority which seeks any of the foregoing.
(e) No Change in Law. There shall not have been any action, or
any statute enacted, by any government or agency thereof which would in any
material respect prohibit or render the parties unable to consummate the
transactions contemplated hereby or make the transactions contemplated hereby
illegal.
(f) Approvals. All of the Approvals set forth in Schedule 2.08
hereto and bearing an asterisk shall have been received.
(g) Stock Purchase Agreement Conditions. The conditions to the
obligations of the Stockholders to be performed at the Closing of the
transactions contemplated by the Stock Purchase Agreement shall have been
satisfied.
(h) Related Agreements. The Company, the Subsidiaries, the New
L.L.C. and the Stockholders party thereto shall have received each of the
Related Agreements, duly executed, to which the Purchaser is party.
(i) Deliveries. The Purchaser shall have made, or stand willing
to make all of the deliveries required by Section 5.02(a) below.
SECTION 4.02 CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS. The
obligations of the Stockholders to perform their obligations set forth below on
the Closing Date are subject to the satisfaction or waiver in writing, on or
before the Closing Date, of the conditions to the obligations of the
Stockholders to be performed at the closing of the transactions contemplated by
the Stock Purchase Agreement.
SECTION 4.03 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The
obligation of the Purchaser to perform its obligations set forth below on the
Closing Date is subject to the satisfaction or waiver in writing, on or before
the Closing Date, of all of the following conditions:
(a) Representations and Warranties of the Company, the
Subsidiaries, and the New L.L.C. to be True and Correct. The representations
and warranties of the Company, the Subsidiaries, the Stockholders and the New
L.L.C. contained in the Related Agreements shall be true, complete and correct
in all respects on and as of the Closing Date, with the same effect as though
such representations and warranties had been made on and as of such date, and
an officer of the Company, the Subsidiaries, the Stockholders and the New
L.L.C. shall have respectively certified in writing to the Purchaser to such
effect.
(b) The Company's, the Subsidiaries', and the New L.L.C.'s
Performance. The Company, the Subsidiaries, the Stockholders and the New
L.L.C. shall have performed and
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complied in all material respects with all covenants and agreements contained
in this Agreement and Related Agreements to be performed prior to the Closing
Date, and an officer of the Company, the Subsidiaries and the Stockholders
shall have respectively certified to the Purchaser in writing to such effect
and to the further effect that the conditions set forth in clauses (a) and (b)
of this Section 4.03 have been satisfied.
(c) Supporting Documents. The Purchaser shall have received
copies of the following documents:
(i) (A) the Second Restated Articles of Incorporation (as
amended) and Second Amended and Restated Bylaws of the Company, both certified
as of a recent date by an officer of the Company and (B) certificates of the
Secretary of State of the State of Delaware and of the State of California
dated as of a recent date respectively certifying as to the due organization
and good standing in Delaware and qualification in California of the Company.
(ii) (A) the Certificate of Formation and the Limited
Liability Company Agreement of the New L.L.C., both certified as of a recent
date by a member of the New L.L.C. and (B) certificates of the Secretary of
State of the State of Delaware and of the State of California dated as of a
recent date respectively certifying as to the due organization and good
standing in Delaware and qualification in California of the New L.L.C.
(iii) a certificate of the Secretary or an Assistant
Secretary of the Company and the Subsidiaries dated the Closing Date and
certifying: (A) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors of the Company and the
Subsidiaries, as required, authorizing the execution, delivery and performance
by the Company and the Subsidiaries of this Agreement and (B) that such
resolutions are in full force and effect.
(iv) such additional supporting documents and other
information with respect to the operations and affairs of the Company and the
Subsidiaries or the New L.L.C. as the Purchaser or its counsel may reasonably
request.
(d) Litigation. As of the Closing Date, there shall not (i) be in
effect any judgment, order, injunction or decree of any court of competent
jurisdiction, the effect of which is to prohibit or restrain the consummation
of the transactions contemplated by this Agreement or award any material
damages (after taking into account any damages for which full insurance
coverage is not in dispute) with respect to the transactions contemplated by
this Agreement or (ii) be pending any action or proceeding by a governmental
authority which seeks any of the foregoing.
(e) No Change in Law. There shall not have been any action, or
any statute enacted, by any government or agency thereof which would in any
material respect prohibit or render the parties unable to consummate the
transactions contemplated hereby or make the transactions contemplated hereby
illegal.
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(f) No Material Adverse Change. There shall have occurred since
February 28, 1997 (the "Balance Sheet Date") no Material Adverse Effect
provided, however, that a writeoff of up to Eight Million Dollars ($8,000,000)
of the book value of the Company shall not be considered in determining whether
there has been a Material Adverse Effect.
(g) Stock Purchase Agreement Conditions. The conditions to the
obligations of the Purchaser to be performed at the Closing of the transactions
contemplated by the Stock Purchase Agreement shall have been satisfied.
(h) Related Agreements. The Purchaser shall have received each of
the Related Agreements, duly executed and delivered by the Company, the
Subsidiaries, the New L.L.C. and the Stockholders party thereto.
(i) Asset Transfer. The New L.L.C. shall have received good and
marketable title to each of the Transferred Assets subject only to liens and
encumbrances of record and other customary liens and encumbrances and free of
any additional liens resulting from the transactions contemplated to take place
at the Closing other than those described in Section 2.14(b) above.
(j) Approvals. The Purchaser shall have received certified copies
of all Approvals set forth on Schedule 2.08 and bearing an asterisk.
(k) Deliveries. The Company and the Stockholders shall have made,
or stand willing to make, all of the deliveries required by Sections 5.02(b)
and (c) below.
(l) Makarechian Agreement. Hadi Makarechian ("Makarechian") shall
have executed and delivered the side letter agreement (the "Makarechian
Agreement") between Makarechian and the Purchaser in the form previously
negotiated. The representations and warranties of Makarechian contained in the
Makarechian Agreement shall be true, complete and correct in all respects on
and as of the Closing Date, with the same effect as though such representations
and warranties had been made on and as of such date. Makarechian shall have
performed and complied in all material respects with all covenants and
agreements contained in the Makarechian Agreement to be performed prior to the
Closing Date.
ARTICLE V
THE CLOSING
SECTION 5.01 CLOSING DATE.
The Closing Date shall be the later of (i) October 1, 1997 and (ii)
the date upon which the conditions to the respective obligations of the Company
and the Purchaser have been satisfied or waived in writing.
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SECTION 5.02 DELIVERIES AT CLOSING. On the Closing Date on the terms and
subject to the conditions of this Agreement:
(a) The Purchaser shall:
(i) contribute, by wire transfer of immediately available
funds, the sum of Thirty Million Dollars ($30,000,000) to an account of the New
L.L.C. specified in writing by the Company;
(ii) deliver to the Escrow Agent a signed counterpart of
the joint escrow instructions in the form of Exhibit A to the Escrow Agreement
(the "Joint Escrow Instructions");
(iii) execute and deliver a signed counterpart of the New
L.L.C. Agreement in the form of Exhibit A, provided however, that Exhibit D to
such New L.L.C. Agreement is subject to change in the discretion of the Company
to reflect the writeoff described in Section 2.13 hereof (or any portion
thereof) provided that there shall be no change in the aggregate Percentage
Interest (as defined therein) of the Company and the Subsidiaries;
(iv) execute and deliver a signed counterpart of the
Registration Rights Agreement;
(v) execute and deliver such other documents, agreements
and certificates as are reasonably necessary to document the transactions
contemplated by this Agreement.
(b) The Stockholders shall deliver to the Escrow Agent an executed
counterpart of the Joint Escrow Instructions.
(c) The Company shall:
(i) deliver an executed counterpart of the New L.L.C.
Agreement in the form of Exhibit A (with any change contemplated by Section
5.02(a)(iii) above);
(ii) execute and deliver a signed counterpart of the
Registration Rights Agreement;
(iii) cause Hadi Makarechian to execute and deliver the
Makarechian Agreement; and
(iv) execute and deliver such other documents, agreements
and certificates as are reasonably necessary to document the transactions
contemplated by this Agreement.
(d) The New L.L.C. shall execute and deliver to the Company such
documents, agreements and certificates including assumptions of liabilities as
are reasonably necessary to document the transactions contemplated by this
Agreement.
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ARTICLE VI
CERTAIN AGREEMENTS BETWEEN THE COMPANY
AND THE PURCHASER AND FARALLON
SECTION 6.01 NON-COMPETE AND NON-SOLICITATION.
In consideration of the access to confidential and proprietary information
regarding the business operations of the Company to which Purchaser shall have
access as the result of the transactions contemplated by the Related
Agreements, the Purchaser agrees that during the Restrictions Period (as
defined below) (i) it shall not, directly or indirectly, conduct or invest in
any tract homebuilding or production homebuilding activity (but excepting any
land development activity even if for the ultimate purpose of homebuilding)
within a 100 mile radius of any current or future project of the Company, the
New L.L.C. or any Future Affiliate or Mirror Company or of any real property
which is the subject of any purchase agreement or option contract to which the
Company or any of the Subsidiaries or the New L.L.C. or any Future Affiliate or
Mirror Company is at any time a party provided however, that in the event any
such activity by the Purchaser was commenced prior to the acquisition of any
such project or the entering into of such purchase agreement or option contract
of the Company, the New L.L.C., any Future Affiliate or any Mirror Company, the
continuation of such activity of the Purchaser shall not be a breach of this
Section 6.01; and (ii) it shall not directly or indirectly hire or solicit the
hiring of any current or future employee of the Company, the New L.L.C. or any
Future Affiliate or Mirror Company. The Purchaser shall cause all of its
affiliates directly or indirectly controlled by Farallon Capital Management,
L.L.C. ("Farallon Controlled Affiliate") to comply with the foregoing
restrictions. The Purchaser acknowledges that the breach of this Section 6.01
shall cause irreparable harm to the Company, the New L.L.C. or a Future
Affiliate or Mirror Company as the case may be, which harm cannot be
reasonably, adequately or fully redressed by the payment of damages.
Accordingly, the Company shall be entitled, in addition to any other right it
may have in law or in equity, to an injunction enjoining the Purchaser and the
Farallon Controlled Affiliates from any breach or threatened breach of this
Agreement. Purchaser hereby waives the defense in any equitable proceeding
that there is an adequate remedy at law for any such breach and Purchaser shall
cause the Farallon Controlled Affiliates described above to waive such defense.
The "Restrictions Period" shall mean the period from the Closing Date until one
year from the date on which the Purchaser is entitled to a direct and indirect
interest in any Mirror Company as the result of Section 6.02(d) below which is
less than ten percent (10%).
SECTION 6.02 CONDUCT OF COMPANY BUSINESS.
(a) Existing Business. The Company and the Subsidiaries agree
that they will, and the Stockholders will cause the Company and the
Subsidiaries to, conduct all of the business of the Company and the
Subsidiaries and all other subsidiaries of the Company existing as of the
Closing Date (the "Existing Business") exclusively through the New L.L.C.
(which conduct of business shall for the purposes of this Section 6.02 include
the delegations of functions to certain Subsidiaries of the Company
contemplated by Section 3.4(a) of the New L.L.C. Agreement).
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(b) Future Business. The Company and the Subsidiaries agree that
they will, and the Stockholders will cause the Company and the Subsidiaries and
all other subsidiaries of the Company and the Subsidiaries to, conduct all
business (for avoidance of doubt, this shall include all future business
activities of the Company and the Subsidiaries) other than the Existing
Business ("New Business") exclusively through the New L.L.C. or through one or
more Mirror Companies as further set forth in Section 6.02(c) below. The
Company, the Subsidiaries and the Stockholders agree that a "Mirror Company"
shall mean a limited liability company (or limited partnership for projects in
Texas or other states in which a substantial tax or other benefit to the
Purchaser or the Company makes use of a limited partnership more reasonable)
formed by the Purchaser and the Company and the Subsidiaries. The Company, the
Subsidiaries and the Stockholders agree that (1) each Mirror Company operating
agreement shall be in the form of the operating agreement attached hereto as
Exhibit C (appropriately conformed if the entity is a limited partnership) and
that the Company, the Subsidiaries and the Purchaser shall enter into each such
operating agreement, and (2) each Mirror Company will be structured so as to be
a pass-through entity for federal and state tax purposes. The Company, the
Subsidiaries and the Stockholders acknowledge and agree the Purchaser's right
to an interest in each Mirror Company as set forth in Exhibit C and Section
6.02(d) in consideration of the capital contribution of $30,000,000 by the
Purchaser to the New L.L.C.
(c) Structure of New Business. The parties agree that:
(i) New Business which consists of a new project requiring $1
million or less in New Capital (as defined below) shall be (x) subject to the
approval of the Purchaser, which approval shall not be unreasonably withheld
or delayed (provided, however, that in the event that the New L.L.C. is in a
25% Net Cash Flow Deficit Position as defined in the New L.L.C. Agreement, then
such consent may be withheld by Purchaser in its sole discretion) and (y), if
the Purchaser consents as provided in clause (x), conducted in the New L.L.C.
or, where it is commercially reasonable to do so (taking into account without
limitation the acquisition, development and construction financing needs of the
New L.L.C. and such project), in a Mirror Company or a wholly-owned limited
liability company or limited partnership subsidiary of the New L.L.C.;
(ii) New Business not approved by the Purchaser as provided in
clause (i)(x) and New Business in each case which consists of a new project
which requires New Capital in excess of $1 million which the Purchaser declines
to provide pursuant to Section 6.03 below shall be (x) conducted through a
limited liability company or limited partnership (a "Future Affiliate") in
which a Mirror Company and the source of such New Capital shall be the members
or partners, and (y) the form of limited liability company or partnership
agreement of the Future Affiliate and the terms on which such New Capital is
obtained shall be as agreed between the Company and the source of such New
Capital; and
(iii) which consists of a new project which requires Outside
Capital in excess of $1 million which the Purchaser elects to provide shall be
conducted through a Future Affiliate (x) in which a Mirror Company and the
Purchaser shall be the members or partners, and (y) which is governed by an
operating agreement substantially in the form of Exhibit D hereto
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and on economic terms determined in accordance with Section 6.03 below. For
purposes of this Agreement, the term "New Capital" means any and all financing,
whether debt or equity, including borrowings by the Company, guaranties and
other recourse financial obligations, other than credit lines available from
time to time (other than any credit lines or amendments obtained with respect
to such specific New Business).
(d) Ownership. The percentage membership or partnership interest
of the Purchaser and the Company and the Subsidiaries in any Mirror Company
shall be identical at all times to such entity's membership interest in the New
L.L.C., i.e., immediately upon the consummation of the transactions
contemplated to take place on the Closing Date, 32.07% for the Purchaser and
67.93% for the Company and the Subsidiaries collectively. In the event of any
transaction in which any Company Interests of either the Company and the
Subsidiaries, on the one hand, or the Purchaser on the other are transferred or
any new membership or partnership interests in the New LLC or any Mirror
Company are issued or redeemed, the Company and the Purchaser shall agree in
writing on the effect of such transaction on (x) the foregoing percentages, and
(y) the percentages set forth in Sections 7.02(a) and 7.03 hereof. In the
event of any transaction in which any Common Stock owned by the Purchaser or
the Stockholders is transferred, or any Common Stock is issued or redeemed, the
Company Percentage described in Section 7.03 shall be adjusted accordingly. In
addition to the foregoing direct ownership of any Mirror Company, the Purchaser
shall indirectly participate in any Mirror Company through its then ownership
of Common Stock (immediately upon the consummation of the transactions
contemplated to take place on the Closing Date, the indirect participation
shall equal 10.69%).
(e) The "Company Interests." The membership and partnership
interests of either the Company and the Subsidiaries or the Purchaser in the
New L.L.C. and any Mirror Company shall collectively be referred to herein as
their respective "Company Interests."
SECTION 6.03 RIGHT OF FIRST OPPORTUNITY ON FINANCING.
(a) In the event the Company wishes to pursue any New Business
opportunity requiring New Capital in excess of $1 million (a "Financing
Opportunity") it shall give Purchaser a reasonable opportunity to furnish such
financing provided the Company shall have no obligation to Purchaser whatsoever
in connection with any Financing Opportunity which was brought to the Company's
attention by a third party willing, and in the Company's reasonable judgment,
such third party is financially able to provide all of such financing.
(b) With respect to such Financing Opportunities, the Company
shall advise the Purchaser promptly thereof and shall provide Purchaser such
reasonably available information in respect of the Financing Opportunity as is
reasonably requested by Purchaser. Purchaser shall have a fifteen (15)
Business Day period from the receipt of such information in which to make an
offer with respect to any Financing Opportunity. If Purchaser makes an offer
in respect of an Financing Opportunity and if such offer is acceptable to the
Company in its sole discretion, then Purchaser shall be granted such Financing
Opportunity.
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(c) In the event (i) Purchaser declines or does not accept any such
Financing Opportunity within fifteen (15) Business Days of Purchaser's having
received all information available to the Company as is reasonably necessary to
Purchaser's determination whether to express or decline interest in such
Financing Opportunity; or (ii) the Company declines the offer which Purchaser
makes to accept such Financing Opportunity, the Company shall be free to
pursue such Financing Opportunity within sixty (60) days of the events
described in subparagraphs (i) or (ii), as the case may be, on such terms and
with such financing as it shall determine in its sole discretion, provided,
however, that the Company may not without complying again with the terms of
this Section 6.03 accept terms which are on balance less favorable to the
Company than any terms offered by the Purchaser within such fifteen (15)
Business Day period.
(d) This Section 6.03 shall have no further force or effect after the
end of the Restrictions Period.
SECTION 6.04 POTENTIAL TAX RESTRUCTURING.
The Stockholders, the New L.L.C. and the Company agree to consider in
good faith any reasonable proposal which may be made by Purchaser to
restructure its ownership interest in the Company into an equity interest in a
pass-through entity for federal and state tax purposes provided that any such
restructuring shall be at Purchaser's expense and shall not adversely affect
the interests of the shareholders of the Company (including the Stockholders)
or the respective rights of the Stockholders and the Company under the Related
Agreements.
SECTION 6.05 MINORITY CONTROLS.
(a) Business Plan. The Company shall conduct its operations through
the New L.L.C. pursuant to the New L.L.C.'s Business Plan as described in the
New L.L.C. Agreement. The "Business Plan" as referred to herein shall be the
New L.L.C.'s Business Plan as defined in the New L.L.C. Agreement and the
respective business plans of the Mirror Companies and Future Affiliates as
described in their respective operating or partnership agreements.
(b) LLC Vetoes. The Company shall not, and shall cause the New L.L.C.
and each Mirror Company not to, take any action for which consent of the
Purchaser is required under the terms of the New L.L.C. Agreement or under the
similar terms of any Mirror Company's operating or partnership agreement
without the consent of the Purchaser, which consent shall not, except as
otherwise expressly provided in any such agreement, be unreasonably withheld or
delayed.
(c) Overhead Allocation. It is contemplated in the New L.L.C.
Agreement that the Company and the Subsidiaries shall perform certain
management and construction services for the New L.L.C. and the Company and the
Purchaser contemplate that such services shall also be provided by the Company
and the Subsidiaries (or by the New L.L.C.) to Mirror Companies and Future
Affiliates under the corresponding provisions of each such entity's operating
or partnership agreement. All such services to the New L.L.C. and any Mirror
Company are to be provided at the Company's, such Subsidiaries' and, if
applicable, the New L.L.C.'s respective
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costs plus a nominal fee. The Company and the Subsidiaries agree that they
shall allocate or cause to be allocated such costs and nominal fees among such
entities and the Future Affiliates on a commercially reasonable basis.
(d) Minority Provisions with Respect to the Company. The Company, the
New L.L.C., the Stockholders, the Subsidiaries and the Purchaser agree that the
Company shall not, nor shall the Stockholders permit the Company to, do any of
the following without the consent of the Purchaser:
(i) financing or encumbering any material assets of the
Company other than in the course of the business of any New L.L.C., any Future
Affiliate or any Mirror Company;
(ii) acquiring or disposing of any material assets, licenses
or other property other than in the course of the business of any New L.L.C.,
any Future Affiliate or any Mirror Company, and other than the acquisition or
disposal of membership interests in the New L.L.C. or Mirror Company or any
Future Affiliate or Mirror Company (the transfer of which is subject to
separate restrictions in the New L.L.C. Agreement and Section 6.06 above);
(iii) making, executing or delivering any guarantee, indemnity
bond, or surety bond, or obligating the Company as surety, guarantor or
accommodation party financing or encumbering any material assets of the Company
other than in the course of the business of any New L.L.C., any Future
Affiliate or any Mirror Company;
(iv) extending any credit on behalf of the Company to any
person, firm or corporation other than in the ordinary course of business of
the New L.L.C., any Future Affiliate or any Mirror Company;
(v) entering into any transaction with any affiliate of the
Company, the Subsidiaries, the Stockholders or the New L.L.C. except which are
separately addressed in this Section 6.05(d), (x) as contemplated by any of the
Related Agreements, (y) transactions in the ordinary course of the business of
the Company reasonably consistent with its past practices, or (z) transactions
which are not material to the Company;
(vi) making any distribution or dividend of any property
(other than cash) or allow any shareholder to possess any Company assets for a
legitimate Company purpose;
(vii) issue any shares of capital stock or other rights to
acquire any capital stock of the Company or repurchase or redeem any shares of
the Company's capital stock or other securities of the Company other than
issuances of Common Stock on terms which have been offered to and not accepted
by the Purchaser;
(viii) permit the Company to merge or consolidate with any
other entity except for any such transaction in which the Company is the
surviving entity or which does not materially adverse affect the shareholders
of the Company;
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(ix) increase the base salary paid by the Company to any
person employed by the Company, or by the New L.L.C., by any Mirror Company or
by any Future Affiliate, who owns or controls in excess of three percent (3%)
of the total equity of the Company by a factor in excess of five percent (5%)
of the amount paid to such person in the immediately preceding fiscal year of
the Company or change the basis on which any bonus or similar compensation is
paid to any such person in a manner which would increase such bonus or similar
compensation in any material respect.
(e) Limitations. Section 6.05(d) shall have no further force or
effect after the end of the Restrictions Period. Nothing in any of the Related
Agreements is intended to in any way restrict the Company's discretion over any
cash of the Company (or the proceeds thereof) which is available for
dividending to its shareholders (including available cash which has been
distributed from the New L.L.C., or any Mirror Company) or to create in
Purchaser any interest in any such cash (or the proceeds thereof) other than
its interest as a shareholder of the Company.
SECTION 6.06 L.L.C. INTEREST TAG-ALONG.
(a) The definitions set forth in this Section 6.06 shall apply only to
this Section and not generally in this Agreement.
(b) Subject to the limitations set forth below, in the event the
Purchaser, on the one hand, or the Company and the Subsidiaries, on the other
hand, (the Company and the Subsidiaries collectively, or the Purchaser, being
the "Prospective L.L.C. Seller") shall receive a bona fide offer (an "Offer")
from a third party (a "Third Party") to purchase all or a portion of the
Company Interests (the "Owned Interests") owned by such Prospective L.L.C.
Seller and such Prospective L.L.C. Seller shall be willing to accept such
Offer, such Prospective L.L.C. Seller shall give notice thereof (the "Third
Party Notice") to the Purchaser or the Company, as the case may be (the
"Offeree"), describing the price and all other material terms and conditions of
the Offer. Each Offeree shall have the right and option, for a period of
twenty (20) business days after the Third Party Notice is deemed given as
herein provided, by giving the Prospective L.L.C. Seller written notice (the
"Notice of Election"), to sell to the Third Party a pro rata portion of its
Owned Interests based on the Owned Interests owned respectively by the
Prospective L.L.C. Seller and the Offeree for the same consideration and
otherwise on the same terms and conditions as contained in the Offer. The
amount of Owned Interests to be sold by any Prospective L.L.C. Seller shall be
reduced to the extent necessary to provide for such sales of Owned Interests by
the Offeree. The Prospective Seller may not sell any Owned Interests unless
any Offeree electing to be included in the sale in accordance with the terms
hereof sells at the same time and on the same terms as the Prospective Seller.
(c) At the closing of any proposed transfer pursuant to the Offer, the
Prospective L.L.C. Seller, together with the Offeree if it has elected to sell
Owned Interests pursuant to such Offer, shall deliver to the Third Party
certificates and/or other instruments representing the Interests to be sold,
free and clear of all liens and encumbrances and shall receive in exchange
therefor the consideration to be paid or delivered by the Third Party in
respect of such Owned Interests as described in the Third Party Notice.
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(d) The Prospective L.L.C. Seller and the Offeree electing to
participate in the Offer each shall bear their respective expenses (including,
without limitation, legal expenses) incurred in connection with such sale.
(e) If an Offeree shall not have given as provided herein a Notice of
Election pursuant to this Section 6.06 with respect to any Offer Notice, such
Offeree will be deemed to have waived all its rights under this Section 6.06
with respect to the transaction specified in such Third Party Notice.
(f) This Section 6.06 shall have no application to any transfer of
Interests to an entity controlled by or under common control with the
transferor provided that such affiliate transferee agrees to be bound by this
Section 6.06 to the same extent as was the transferor as evidenced by a written
adoption of the relevant provision of this Agreement in a form satisfactory to
the Purchaser or the Company, as the case may be.
(g) Any sales subject to this Section 6.06 shall be subject to the
receipt of any consents required under the Related Agreements or under any
limited partnership, limited liability company or operating agreement governing
such entity whose interests are to be transferred.
ARTICLE VII
CERTAIN AGREEMENTS AMONG THE STOCKHOLDERS
AND THE PURCHASER
The following agreements shall have effect from and after the Closing
Date until the date on which either the Stockholders, on the one hand, or the
Purchaser, on the other, is no longer the owner of any Common Stock or Company
Interests.
SECTION 7.01 TAG-ALONG.
(a) Subject to the limitations set forth below, in the event the
Purchaser, on the one hand, or any of the Stockholders, on the other hand,
(each a "Prospective Seller") shall receive a bona fide offer (an "Offer")
from a third party (a "Third Party") to purchase all or a portion of the
Common Stock of the Company (the "Owned Stock") owned by such Prospective
Seller and such Prospective Seller shall be willing to accept such Offer, such
Prospective Seller shall give notice thereof (the "Third Party Notice") to the
Purchaser or the Stockholders, as the case may be (the "Offeree"), describing
the price and all other material terms and conditions of the Offer. Each
Offeree shall have the right and option, for a period of twenty (20) business
days after the Third Party Notice is deemed given as herein provided, by giving
the Prospective Seller written notice (the "Notice of Election"), to sell to
the Third Party a pro rata portion of its Owned Stock based on the number of
shares of Owned Stock owned respectively by the Prospective Seller and the
Offeree for the same consideration and otherwise on the same terms and
conditions as contained in the Offer or, in case the Purchaser is the Offeree,
the Purchaser shall be entitled to sell to the Third Party a pro rata portion
of (x) its Owned Stock for the same consideration and otherwise on the same
terms and conditions as set forth in the Offer, or, at the Purchaser's option,
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(y) its Company Interests (the "Owned Interests") for substantially equivalent
consideration and otherwise on the same terms and conditions as set forth in
the Offer; provided, however, that in the event the Third Party is unwilling or
unable to purchase the Owned Interests, the Stockholders, the Company, the New
L.L.C. and the Purchaser agree to use their respective best efforts to cause
the Company and the New L.L.C. to exchange the Owned Interests for 32.07% (as
reduced to take into account that Purchaser would be selling only its pro rata
portion of such transaction with the Third Party and adjusted pursuant to the
terms of this Agreement and to take into account any future issuance of Common
Stock by the Company) of the outstanding Common Stock in a commercially
reasonable tax-efficient manner at the Purchaser's expense, in which case the
Purchaser shall be entitled to sell such shares of Common Stock to the Third
Party Offeree for the same consideration and otherwise on the same terms and
conditions as set forth in the Offer. The amount of Owned Stock to be
transferred by the prospective Seller shall be reduced to the extent necessary
to provide for such sales by the Offeree. The Prospective Seller may not sell
any Owned Stock or Owned Interests unless any Offeree electing to be included
in the sale in accordance with the terms hereof sells at the same time.
(b) At the closing of any proposed transfer pursuant to the Offer, the
Prospective Seller, together with the Offeree if it has elected to sell Owned
Stock or Owned Interests pursuant to such Offer, shall deliver to the Third
Party certificates and/or other instruments representing the Stock or Owned
Interests to be sold, free and clear of all liens and encumbrances, together
with stock or other appropriate powers duly endorsed therefor, and shall
receive in exchange therefor the consideration to be paid or delivered by the
Third Party in respect of such Stock or Owned Interests as described in the
Third Party Notice.
(c) The provisions of this Section 7.01 shall not apply to any
transfer of Owned Stock to any person pursuant to (i) a public offering by the
Company which includes a secondary offering by a Prospective Seller or a
secondary offering by the Purchaser in accordance with its registration rights
pursuant to the Registration Rights Agreement; (ii) a transaction effected
pursuant to Rule 144 promulgated under the Securities Act of 1933; (iii) a
transaction involving a gift or for estate or personal financial planning
purposes not involving any cash or other financial consideration provided that
any transferee agrees to be bound by this Agreement to the same extent as was
the transferor as evidenced by a written adoption of the relevant provisions of
this Agreement by such transferee in a form reasonably satisfactory to the
Purchaser if the Stockholder is transferring, or the Stockholder if the
Purchaser is transferring, as the case may be (a "Transferee Adoption"); (iv) a
transaction involving a transfer to an entity controlled by or under common
control with the Prospective Seller (other than the Company, the Subsidiaries,
the New L.L.C. or any Future Affiliate) or (v) a transaction which results in
proceeds which in the aggregate with all other transfers after the Closing Date
by such Prospective Seller are not in excess of Three Million Dollars
($3,000,000). The Prospective Seller and the Offeree electing to participate
in the Offer each shall bear their respective expenses (including, without
limitation, legal expenses) incurred in connection with such sale.
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(d) If an Offeree shall not have given as provided herein a Notice of
Election pursuant to this Section 7.01 with respect to any Offer Notice, such
Offeree will be deemed to have waived all its rights under this Section 7.01
with respect to the transaction specified in such Third Party Notice.
(e) Except as expressly provided in this Section 7.01, the Prospective
Seller shall not have any obligation to any Offeree with respect to the sale of
any Owned Stock owned by such Prospective Seller in connection with this
Section 7.01. Anything herein to the contrary notwithstanding and irrespective
of whether any Notice of Election shall have been given as herein provided, the
Prospective Seller shall not have any obligation to any Offeree to sell any
Owned Stock or Owned Interests pursuant to this Section 7.01 if such
Prospective Seller decides not to accept or consummate any Offer with respect
to its Owned Stock (it being understood that any and all such decisions shall
be made by such Prospective Seller in its sole discretion).
SECTION 7.02 RIGHT OF FIRST NEGOTIATION.
(a) If at any time the Purchaser or any Farallon Controlled Affiliate
purchases from any Third Party or on an exchange or the over-the-counter market
shares of Common Stock, the Purchaser shall, simultaneously with the
consummation of such purchase, give written notice to the Stockholders
specifying the total number of shares the Purchaser or such Farallon Controlled
Affiliate purchased and the purchase price for such number of shares. Such
written notice shall constitute an offer to purchase (the "Offer to Purchase")
two times the amount of such shares from the Stockholders at the same prices
paid by Purchaser or such Farallon Controlled Affiliate for such shares, who
shall have ten Business Days to accept or decline such Offer to Purchase. If
the Stockholders accept such Offer to Purchase, the transaction shall be
consummated within ten Business Days of such acceptance and allocated between
the Stockholders as specified by CPH3, L.L.C. If the Stockholders decline or
fail to accept such Offer to Purchase such shares, then the Purchaser shall be
free for a ninety (90) day period to purchase the number of shares of Common
Stock as were the subject of the Offer to Purchase from any Third Party or on
an exchange or the over-the counter market or otherwise, but in each case, on
terms no less favorable to the Purchaser as the terms of such Offer to
Purchase, provided, however, that in the event of any such purchases on an
exchange or the over-the counter market, such purchases may be at a price of up
to 120% of the price specified in the Offer to Purchase. Any purchases by
Purchaser not completed within such ninety (90) day period or on such terms
shall be completed only through compliance again with the provisions of this
Section 7.02(a).
(b) If at any time the Stockholders or any affiliate controlled by or
under common control with any Stockholder shall have purchased any additional
shares of Common Stock, the Stockholders shall give written notice to the
Purchaser of such purchase specifying the total number of shares the
Stockholders have purchased and the purchase price for such number of shares.
Such notice shall constitute an offer to purchase (the "Stockholder Offer to
Purchase") two times the amount of such shares from the Purchaser at the same
prices as for the shares so purchased, who shall have ten Business Days to
accept or decline such Stockholder Offer to Purchase. If the Purchaser accepts
such Stockholder Offer to Purchase, the transaction shall be consummated within
ten Business Days of such acceptance. If the Purchaser declines or fails to
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accept such Stockholder Offer to Purchase, then the Stockholders shall be free
for a ninety (90) day period to sell such shares of Common Stock to any Third
Party or on an exchange or the over-the-counter market on terms no less
favorable to the Stockholder as the terms of such Stockholder Offer to
Purchase, provided, however, that in the event of any such purchases on an
exchange, such purchases may be at a price of up to 120% of the price specified
in the Stockholder Offer to Purchase. Any purchases by Stockholders not
completed within such ninety (90) day period or on such terms shall be
completed only through compliance again with the provisions of this Section
7.02(b).
SECTION 7.03 BUY-SELL AGREEMENT.
(a) Defined Terms. For the purposes of this Section 7.03, the
Purchaser and the Stockholders are referred to collectively as the "Parties"
and individually as a "Party," the Company, the New LLC and each Mirror Company
and Future Affiliate and any entity in which the New LLC or any Mirror Company
or Future Affiliate may own stock, membership interests, partnership interests
or other ownership interests as of the date that an Election Notice (as defined
below) is given are referred to collectively as the "Entities" and individually
as an "Entity," and all right, title and interest in the Company, the New LLC,
each Future Affiliate and each Mirror Company owned by the Stockholders and
their affiliates (other than the Company or any of the Subsidiaries or any
Mirror Company or Future Affiliate) on one hand, and by the Purchaser and its
affiliates (other than the Company or any of the Subsidiaries or any Mirror
Company or Future Affiliate) on the other hand, as of the date that an Election
Notice is given are referred to collectively as the "Entity Interests."
(b) Buy-Sell Election. Either the Stockholders or the Purchaser may
elect to resort to the buy-sell procedure set forth in this Section 7.03 at any
time after the expiration of thirty-six (36) months following the date of this
Agreement (the "Buy-Sell Date"). At any time from and after the Buy-Sell Date,
either the Stockholders or the Purchaser (the "Offering Party") may elect to
trigger the provisions of this Section 7.03 by delivering a written notice of
its election (the "Election Notice") to the other Party (the "Non-Offering
Party"). The Election Notice shall set forth the aggregate value of the
Entities (the "Value") determined in the Offering Party's sole discretion. The
date on which the Election Notice is received by the Non-Offering Party is the
"Election Date."
(c) Non-Offering Party's Election. Within 30 days after the Election
Date, the Non-Offering Party shall elect by written notice to the Offering
Party either to (i) purchase the Entity Interests of the Offering Party and its
affiliates (other than the Company or any of the Subsidiaries or any Mirror
Company or Future Affiliate) for a cash purchase price equal to the Purchase
Price, or (ii) sell the Entity Interests of the Non-Offering Party and its
affiliates (other than the Company or any of the Subsidiaries or any Mirror
Company or Future Affiliate) to the Offering Party for a cash purchase price
equal to the product of (A) the Purchase Price, multiplied by (B) 110%. If the
Non-Offering Party shall not respond within such 30-day period, the
Non-Offering Party shall be deemed to have elected to sell its Entity Interests
to the Offering Party. The Election Notice and the Non-Offering Party's
election (or deemed election) shall constitute each such Party's waiver of any
right it may otherwise have under the Related Agreements to consent or object
to any transfer of Entity Interests which is contemplated by such notice and
election.
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(d) Purchase Price. For purposes of this Section 7.03, the "Purchase
Price" shall mean an amount equal to the sum of:
(i) the product of (A) the Applicable Percentage, multiplied by
(B) the excess of (I) the Value, over (II) the amount of non-distributed cash
held by the Company on the Buy-Sell Transfer Date (the "Non-Distributed Cash"),
plus
(ii) the product of (A) the Company Percentage, multiplied
by (B) the amount of the Non-Distributed Cash.
(e) Percentage Definition.
(i) For purposes of this Section 7.03, the term "Applicable
Percentage" shall initially mean (A) 42.76% if the Purchaser is the seller of
its Entity Interests and (B) 37.67% if the Stockholders are the sellers of
their Entity Interests; provided, however, that the Applicable Percentages
shall be subject to change from time to time in accordance with Section
6.02(d).
(ii) For purposes of this Section 7.03, the term "Company
Percentage" initially shall mean (A) 16.57% if the Purchaser is the seller of
its Entity Interests and (B) 58.38% if the Stockholders are the sellers of
their Entity Interests; provided, however, that the Company Percentage shall be
subject to adjustment as provided above in Section 6.02(d) above including,
without limitation, as the result of exercise of the warrants described in
Section 2.06(b) of the Stock Purchase Agreement.
(f) Buy-Sell Purchase Agreement; Defaults. Immediately upon the
Non-Offering Party's election or deemed election to buy or sell pursuant to
Section 7.03(c), the selling Party(ies) and the purchasing Party shall enter
into a purchase agreement in reasonable form to carry out the provisions of
this Section 7.03 (the "Buy-Sell Purchase Agreement"). The Buy-Sell Purchase
Agreement shall contain representations and warranties as to such transactions
by each of the selling Party(ies) and the purchasing Party substantially the
same (i.e., revised to reflect the parties involved, their names, respective
type of entity and interests owned and the like) as the representations and
warranties set forth in the Stock Purchase Agreement. In the event of a
default in any material respect by the purchasing Party, the selling Party(ies)
may (i) elect, by written notice to the defaulting purchasing Party to purchase
the interest of the purchasing Party, within thirty (30) days after such
notice, for a purchase price equal to ninety percent (90%) of the Purchase
Price the purchasing Party would have received were the purchasing Party
instead the selling Party pursuant to the election made by the Non-Offering
Party pursuant to Section 7.03(c), or (ii) pursue any other remedy available
under applicable law including, without limitation, injunctive relief. In the
event of a default in any material respect by the selling Party(ies), the
purchasing Party may pursue any remedy available under applicable law
including, without limitation, injunctive relief.
(g) Closing Matters. The closing of the purchase and sale pursuant to
Section 7.03 shall be held at such place as is agreed upon by the selling
Party(ies) and purchasing Party (or, failing such agreement, at the principal
place of business of the Company) within sixty (60) days after the
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Non-Offering Party's election or deemed election to sell or ninety (90) days
after the Non-Offering Party's election to purchase (the date of such closing
being herein called the "Buy-Sell Transfer Date"). At the closing, the selling
Party(ies) shall deliver to the purchasing Party assignments which shall be
sufficient to transfer good title to the Entity Interests being transferred,
free and clear of all liens, encumbrances, claims, rights and options of any
kind or character whatsoever and otherwise in form reasonably satisfactory to
both the selling Party(ies) and purchasing Party; the purchasing Party shall
deliver to the selling Party(ies) by certified or cashier's check or wire
transfer of immediately available federal funds the purchase price, determined
as set forth above, as adjusted by the prorations and credits set forth below,
and increased by an interest factor equal to interest on the purchase price at
the rate of 10% per annum, compounded quarterly, from the Election Date until
the Buy-Sell Transfer Date; and the parties shall split closing costs
(including any transfer taxes) in the manner prescribed by the Election Notice.
Upon the Buy-Sell Transfer Date, the purchasing Party shall release the selling
Party(ies) from all obligations of the selling Party(ies) under the applicable
agreements governing each Entity and all claims, obligations and liabilities of
the Entities as to which and to the extent recourse against the selling
Party(ies) could be had, in each case whether accruing or arising before or
after the date of the Buy-Sell Transfer Date. Notwithstanding the foregoing,
in no event shall the purchasing Party be obligated to release the selling
Party(ies) from (i) any claims, obligations and liabilities resulting from any
matter which has not been disclosed in writing by the selling Party(ies) to the
purchasing Party prior to the Election Date, or (ii) any matter the release of
which by the purchasing Party would constitute a breach of its fiduciary duty
to the other shareholders of the Company or its affiliates (provided that the
purchasing Party nevertheless shall waive any right to directly or indirectly
share in or benefit from any recovery in connection with the matters excepted
under this clause (ii) from the purchasing Party's release). The purchasing
Party may, at any time prior to such closing, assign to any person,
partnership, limited liability company, corporation or entity its right to
receive the assignment under this Section 7.03 provided such assignee can and
does make the same representations and warranties required of the purchasing
Party under the Buy-Sell Purchase Agreement, but such assignment shall not
relieve purchasing Party of its obligations and liabilities hereunder. It
shall be a condition to closing for the benefit of the purchasing Party that
the selling Party(ies) shall have continued to in all material respects
discharge their respective duties as required under the applicable agreements
governing each Entity until the Closing.
(h) Cooperation and Further Assurances. The Parties agree to
reasonably cooperate and take such actions and cause to be executed such
documents as may be reasonably necessary or appropriate in connection with
carrying out the provisions of this Section 7.03.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 EXPENSES. The Company, on the one hand, and the Purchaser, on
the other, shall each pay its own expenses in connection with the transactions
contemplated by this Agreement, whether or not such transactions shall be
consummated.
SECTION 8.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
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<PAGE> 27
(a) Any representation and warranty made herein, or in any certificate
or instrument delivered to the Purchaser pursuant to or in connection with this
Agreement, shall survive the execution and delivery of this Agreement, and the
sale, transfer and delivery of the Shares pursuant to the Stock Purchase
Agreement for a period of eighteen (18) months.
(b) Indemnification for Breaches.
(i) Indemnification by the Company, the Subsidiaries, and
the New L.L.C. Each of the Company, the Subsidiaries, and the New L.L.C.,
jointly and severally, will indemnify the Purchaser and its affiliates and each
of their respective shareholders, partners, members, directors, officers,
employees, agents and Affiliates (collectively, the "Purchaser Indemnified
Persons") against and hold each Purchaser Indemnified Person harmless from any
and all liabilities, losses, damages, costs, expenses (including without
limitation, reasonable attorneys' fees and expenses) (collectively "Losses")
that the Purchaser Indemnified Persons may incur or become subject to arising
out of or due to:
(x) any breach of any of the representations and
warranties of the Company, the Subsidiaries, or the New L.L.C. contained in any
Related Agreement; or
(y) the nonfulfillment of any covenant,
undertaking, agreement or other obligation of the Company, any Subsidiary, or
the New L.LC. contained in any Related Agreement.
(ii) Indemnification by the Purchaser. The Purchaser will
indemnify the Company, the Subsidiaries, and the New L.L.C. and each of their
respective shareholders, partners, members, directors, officers, employees,
agents and Affiliates (collectively, the "Company Indemnified Persons") against
and hold each Company Indemnified Person harmless from any and all Losses that
the Company Indemnified Persons may incur or become subject to arising out of
or due to:
(x) any breach of any of the representations and
warranties of the Purchaser contained in any Related Agreement; or
(y) the nonfulfillment of any covenant,
undertaking, agreement or other obligation of the Purchaser in any Related
Agreement.
(iii) Period for Claims. Notwithstanding anything to the
contrary set forth in this Agreement, any claim for indemnification under this
Section 8.02(b) must be made in a writing delivered by the Indemnified Person
to the indemnifying party within the period of 18 months from the Closing Date.
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<PAGE> 28
(c) Indemnification by the Stockholders. The Stockholders will
indemnify the Purchaser Indemnified Persons against and hold each Purchaser
Indemnified Person harmless from any and all Losses that the Purchaser
Indemnified Persons may incur or become subject to arising out of or due to:
(x) any inaccuracy or breach of any of the
representations and warranties of the Stockholders contained in any Related
Agreement; or
(y) the nonfulfillment of any covenant,
undertaking, agreement or other obligation of the Stockholders contained in any
Related Agreement.
(d) Indemnification by the New L.L.C. The New L.L.C. will indemnify
the Company and the Subsidiaries and each of their respective shareholders,
partners, members, directors, officers, employees, agents and Affiliates
(collectively, the "Assumed Liability Indemnified Persons") against and hold
each Assumed Liability Indemnified Person harmless from any and all Losses that
the Assumed Liability Indemnified Persons may incur or become subject to
arising out of or due to any of the liabilities of the Company and the
Subsidiaries assumed by the New L.L.C. as the result of the transactions
contemplated by the Related Agreements. SECTION 8.03 PARTIES IN INTEREST:
ASSIGNMENT. All representations, warranties, covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. No party may assign its rights
hereunder without the prior written consent of the other parties hereto, except
(i) as provided in Section 7.01(c)(iii) and (iv) hereof, and (ii) the Purchaser
and any Stockholder may assign all of such rights, each to a single Affiliate.
Except as set forth in Section 7.01(c)(iii) and (iv) above, notwithstanding
anything to the contrary set forth herein, none of the representations,
warranties, covenants or agreements contained in this Agreement shall benefit
any transferee of any of the Stock or the Company Interests other than such a
single Affiliate or the parties hereto.
SECTION 8.04 WAIVER. Any of the terms or conditions of this Agreement may
be waived at any time and from time to time in writing by the party entitled to
the benefits thereof without affecting any other terms or conditions of this
Agreement.
SECTION 8.05 NOTICES, ETC. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given, if delivered in person or by courier, telegraphed, telexed or by
facsimile transmission or mailed by certified or registered mail, postage
prepaid:
If to the Stockholders: CPH2, L.L.C. or CPH3, L.L.C.
Attention: Hadi Makarechian
c/o Capital Pacific Holdings, Inc.
4100 MacArthur Blvd., Suite 200
Newport Beach, California 92660
Telecopy No.: (714) 622-8410
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<PAGE> 29
If to the Company Hadi Makarechian
or any of the Subsidiaries: Chairman of the Board
Capital Pacific Holdings, Inc.
4100 MacArthur Blvd., Suite 200
Newport Beach, California 92660
Telecopy No.: (714) 622-8410
with a copy to: Dag Wilkinson, Esq.
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, DC 20006
Telecopy No.: (202) 429-7049
If to the Purchaser: c/o Farallon Capital Management, L.L.C.
One Maritime Plaza
Suite 1325
San Francisco, California 94111
Attention: Steve Millham
Telecopy No.: (415) 421-2133
with a copy to: Richards Spears Kibbe & Orbe
One Chase Manhattan Plaza
57th Floor
New York, New York 10005
Attention: William Q. Orbe, Esq.
Telecopy No.: (212) 530-1801
Any party may, by written notice to the other parties, change the address or
telecopy number to which notices to such party are to be delivered or mailed or
sent by facsimile transmission. All such notices or other communications shall
be effective and be deemed to have been given as of the date on which such
notices are actually received.
SECTION 8.06 ENTIRE AGREEMENT: AMENDMENT. This Agreement and the
Related Agreements set forth the entire agreement and understanding of the
parties in respect of the transactions contemplated hereby and supersede all
other agreements, arrangements and understandings relating to the subject
matter hereof, both oral and written. No representation, promise, inducement
or statement of intention has been made by either of the parties hereto which
is not embodied in this Agreement, or the written statements, certificates or
other documents delivered pursuant hereto or the Related Agreements referred to
above, and neither of the parties hereto shall be bound by or liable for any
alleged representation, promise, inducement or statement of intention not so
set forth. This Agreement and the Related Agreements may be amended or
modified only by a written instrument executed by the parties hereto or by
their successors and assigns.
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<PAGE> 30
SECTION 8.07 PRESS RELEASES. None of the parties hereto shall
issue any press releases or make any public announcements of any of the
transactions contemplated by this Agreement except as may be mutually agreed to
in writing by the parties hereto; provided, however, that notwithstanding the
foregoing, each of the parties hereto shall be permitted and will cooperate
with the other party, to make such disclosures to the public or governmental
authorities as they shall deem necessary to maintain compliance with, or to
prevent violation of, applicable laws.
SECTION 8.08 GENERAL. This Agreement (i) shall be construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the choice of law principles thereof; and (ii) may be executed in two
or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. The Section and
other headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 8.09 SEVERABILITY. To the extent that any provision of
this Agreement which does not materially affect the intent of the parties
hereto shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect.
SECTION 8.10 CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
(a) "Person" shall means an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency or
any agency or political subdivision thereof, or other entity.
(b) an "Affiliate" of a person shall mean someone that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such person.
(c) "Business Day" means any day on which commercial banks are open
for business in California.
(d) The following terms shall have their respective meaning as set
forth in the referenced sections of this Agreement:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
"Accredited investor" Section 3.04(a)
"Agreement" Recitals
"Applicable Percentage" Section 7.03(e)(i)
"Approval" Section 2.08
"Assumed Liability Indemnified Persons" Section 8.02(d)
</TABLE>
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<PAGE> 31
<TABLE>
<S> <C>
"Balance Sheet Date" Section 4.03(f)
"Business Plan" Section 6.05(a)
"Buy-Sell Date" Section 7.03(b)
"Buy-Sell Purchase Agreement" Section 7.03(f)
"Buy-Sell Transfer Date" Section 7.03(g)
"Common Stock" Recitals
"Company" Recitals
"Company Indemnified Persons" Section 8.02(b)(ii)
"Company Interests" Section 6.02(e)
"Company Percentage" Section 7.03(e)(ii)
"Election Date" Section 7.03(b)
"Election Notice" Section 7.03(b)
"Entity" Section 7.03(a)
"Entities" Section 7.03(a)
"Entity Interests" Section 7.03(a)
"Environmental Laws" Section 2.18
"Escrow Agreement" Recitals
"Existing Business" Section 6.02(a)
"Farallon Controlled Affiliate" Section 6.01
"Financing Opportunity" Section 6.03(a)
"Future Affiliate" Section 6.02(c)(ii)
"GAAP" Section 2.09(a)
"Information Documents" Section 2.16
"Joint Escrow Instructions" Section 5.02(a)(ii)
"Licenses" Section 2.11
"Losses" Section 8.02(b)(i)
"Makarechian" Section 4.03(l)
"Makarechian Agreement" Section 4.03(l)
"Material Adverse Effect" Section 2.13
"Mirror Company" Section 6.02(b)
"New Business" Section 6.02(b)
"New Capital" Section 6.02(c)(ii)
"New L.L.C." Recitals
"New L.L.C. Agreement" Recitals
"Non-Distributed Cash" Section 7.03(d)(i)
"Non-Offering Party" Section 7.03(b)
"Notice of Election" Section 6.06(b)
"Offer" Section 6.06(b)
"Offeree" Section 6.06(b)
"Offer to Purchase" Section 7.02(a)
"Offering Party" Section 7.03(b)
"Owned Interests" Section 7.01(a)
"Owned Stock" Section 7.01(a)
"Party" Section 7.03(a)
"Parties" Section 7.03(a)
</TABLE>
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<PAGE> 32
<TABLE>
<S> <C>
"Prospective L.L.C. Seller" Section 6.06(b)
"Prospective Seller" Section 7.01(a)
"Purchase Price" Recitals
"Purchaser" Recitals
"Purchaser Indemnified Persons" Section 8.02(b)(i)
"Registration Rights Agreement" Recitals
"Restrictions Period" Section 6.01
"Related Agreements" Recitals
"Shares" Recitals
"Subdivision Approvals" Section 2.05
"Subsidiaries" Recitals
"Stockholder(s)" Recitals
"Stockholder Offer to Purchase" Section 7.02(b)
"Stock Purchase Agreement" Recitals
"Third Party" Section 6.06(b) and 7.01
"Third Party Notice" Section 6.06(b) and 7.01
"Transferred Assets" Section 1.01(a)
"Transferee Adoption" Section 7.01(c)
"Value" Section 7.03(b)
</TABLE>
SECTION 8.11 TERMINATION. This Agreement may be terminated by either party
hereto if the Closing shall not have occurred on or before November 18, 1997,
or such later date as may have been agreed upon by the parties hereto. Upon
termination, no party shall have any liability or obligation under this
Agreement except to observe the confidentiality provisions hereof and except to
the extent a party has breached its representations, warranties, covenants or
agreements hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CAPITAL PACIFIC HOLDINGS, INC,
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman
CPH2, L.L.C.
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Member
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<PAGE> 33
CPH3, L.L.C.
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Member
CALIFORNIA HOUSING FINANCE, L.P.
By: California Housing Finance L.L.C.
Its General Partner
By: Farallon Capital Management, L.L.C.
Its Manager
By:/s/ Steve Millhan
------------------------------
Steve Millham
Managing Member
CAPITAL PACIFIC HOLDINGS, L.L.C.
By: Capital Pacific Holdings, Inc.
Member
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
CAPITAL PACIFIC HOMES, INC.,
a Nevada corporation (formerly Durable Homes,
Inc.)
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
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<PAGE> 34
CLARK WILSON HOMES, INC., a Texas corporation
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
J.M. PETERS ARIZONA, INC.,
a Delaware corporation
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
J.M. PETERS CALIFORNIA, INC.,
a Delaware corporation
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
J.M. PETERS HOMES OF ARIZONA, INC.,
a Delaware corporation
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
J.M. PETERS NEVADA, INC.,
a Delaware corporation
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
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<PAGE> 35
PARKLAND ESTATES COMPANY, INC.,
a Delaware corporation
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
NEWPORT DESIGN CENTER,
a California corporation
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
PETERS RANCHLAND COMPANY, INC.,
a Delaware corporation
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
CAPITAL PACIFIC HOMES, INC.,
a Delaware corporation (formerly Durable Homes
of California, Inc.)
By:/s/ Hadi Makarechian
------------------------------
Hadi Makarechian
Chairman of the Board
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<PAGE> 1
Exhibit 5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT dated as of _________, 1997, is
among CALIFORNIA HOUSING FINANCE L.P., a Delaware limited partnership, (the
"Purchaser"), and CAPITAL PACIFIC HOLDINGS, INC. (the "Company").
WHEREAS, the Purchaser is the beneficial owner of 2,484,340 shares of
common stock, per value $0.10 per share (the "Common Stock") of the Company (the
"Securities").
NOW THEREFORE, the parties hereto do hereby agree as follows:
SECTION 1. DEMAND REGISTRATION.
(a) The Purchaser may at any time after the date one year from the date
hereof request in writing that the Company register under the Securities Act of
1933, as amended (the "Securities Act") all or any portion of the Registrable
Stock (as defined below) for sale in the manner specified in such notice; and
provided, that the aggregate purchase price to the public of such public
offering of the shares of Registrable Stock for which registration has been
requested shall reasonably be anticipated to exceed $1 million; and provided,
further that (i) the Company shall not be obligated to register Purchaser's
Registrable Stock pursuant to this paragraph (a) on more than one occasion, and
(ii) the Company shall not be obligated to effect a shelf registration as such
is defined in Rule 415 under the Securities Act.
(b) Following receipt of any notice delivered in compliance with
paragraph (a) of this Section 1 (a "Demand"), the Company shall use its best
efforts to register under the Securities Act, for public sale in accordance with
the method of disposition specified in such Demand, the number of shares of
Registrable Stock specified in such Demand. Purchaser may request a specific
managing underwriter or underwriters, which shall be of national standing,
subject to the approval of the Company, which approval shall not unreasonably be
withheld or unreasonably delayed. The Company shall be deemed to have satisfied
an obligation to register Registrable Stock pursuant to a Demand when a
registration statement covering at least 90% of the shares of Registrable Stock
specified in the Demand for sale in accordance with the method of disposition
specified in the Demand shall have become effective and the period of
distribution of the registration contemplated thereby has been completed
(determined as hereinafter provided).
(c) The Company shall be entitled to include in any registration
statement filed in response to a Demand made in accordance with this Section 1,
for sale in accordance with the method of disposition specified by the Purchaser
in such Demand, shares of Common Stock to be sold by the Company for its own
account or that of other security holders, except as and to the extent that, in
the opinion of the managing underwriters, such inclusion would adversely affect
the marketing of the Registrable Stock, or the price thereof or the number of
shares to be included for which registration has been requested in connection
with such Demand. Except for registration statements on From S-4, S-8 or any
successor forms thereto, the Company will not file with the Securities and
Exchange Commission (the "Commission") any other registration statement with
respect to its Common Stock, whether for its own account or that of other
security holders, from the date of receipt of a Demand pursuant to this Section
1 until 45 days following the completion of the period of distribution of the
registration contemplated thereby (determined as hereinafter provided).
(d) The Company may at its option elect that any requested registration
pursuant to Section 1(a) be delayed for a period not in excess of 90 days from
the date of such Demand but only if, at the time of such request, the Company is
engaged in a transaction which is material to the Company and the disclosure of
which would have a material adverse effect on the Company.
<PAGE> 2
(e) Notwithstanding anything to the contrary contained in Section 1, no
Demand may be made within 90 days after the effective date of a registration
statement filed by the Company covering a firm commitment underwritten public
offering in which the Purchaser shall have been entitled to join pursuant to
Section 2 hereof and in which there shall have been effectively registered at
least 50% of the shares of Registrable Stock as to which registration shall, if
any, have been requested.
SECTION 2. INCIDENTAL REGISTRATION.
(a) If the Company at any time proposes to register any of its Common
Stock under the Securities Act for sale to the public, whether for its own
account or for the account of security holders or both, (excluding any
registration statement on Form S-4, S-8 or another form not available for
registering the Registrable Stock for sale to the public), it will each such
time give written notice to the Purchaser. Upon the written request received by
the Company within 20 days after the giving of any such notice by the Company,
to register any of the Registrable Stock, the Company will use its best efforts
to cause the Registrable Stock as to which registration shall have been so
requested to be included in the registration statement proposed to be filed by
the Company, all to the extent requisite to permit the sale or other disposition
(in accordance with its written request) of such Registrable Stock.
Alternatively, the Company may include the Registrable Stock as to which
registration shall have been requested by the Purchaser under this paragraph
2(a) in a separate registration statement to be filed concurrently with the
registration statement proposed to be filed by the Company. In the event any
registration statement filed pursuant to this Section 2 shall be, in whole or in
part, in connection with any underwritten public offering, the number of shares
of Registrable Stock to be included in such registration statement may be
reduced or may be excluded from such registration, to the extent that the
managing underwriter(s)shall give their written opinion that such inclusion
would adversely affect the number of shares to be included or the marketing or
price of the securities to be sold thereby the Company or by any security holder
other than Purchaser but for whose account such securities are to be sold
pursuant to the exercise of demand registration rights granted in accordance
with any separate agreement with the Company not in violation of this Agreement.
Such reduction or exclusion shall be pro rata among those security holders
"piggybacking" on such registration period. Notwithstanding the foregoing
provisions of this Section 2, the Company may withdraw any registration
statement referred to in this Section 2 without thereby incurring any liability
to the holders of Registrable Stock. Except as set forth above, there shall be
no limit to the number of registrations that may be requested pursuant to this
Section 2.
(b) In the event that a distribution of Registrable Stock covered by a
registration statement referred to in paragraph (a) above is to be underwritten,
then the distribution of Registrable Stock for the account of the Purchase shall
be underwritten by the same underwriters who are underwriting the distribution
of the securities for the account of the Company and/or any other persons whose
securities are covered by such registration statement, and the holders of
Registrable Stock that are selling shares of Registrable Stock pursuant to such
registration statement shall enter into the agreement with such underwriters
contemplated under Section 3.
(c) Purchaser agrees, if reasonably requested by the managing
underwriters in an underwritten offering to which the provision of this Section
2 apply, not to effect any public sale or distribution of securities of the
Company of the same class as the securities included in the registration
statement relating to such underwritten offering, including a sale pursuant to
Rule 144 under the Securities Act (except as part of such underwritten
offering), during the 10 day period prior to the filing of such registration
statement, and during the period required by such underwriters, not to exceed
the 180 day period beginning on the closing date of each underwritten offering
made pursuant to such registration statement, to the extent timely notified in
writing by the Company or the managing underwriters.
SECTION 3. REGISTRATION PROCEDURES.
If and whenever the Company is required by the provisions of this
Agreement to use its best efforts to effect the registration of any shares of
Registrable Stock under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration statement
(which (i) in the case of an underwritten public offering pursuant to Section 1,
shall be on Form S-1 or other form of general applicability reasonably
-2-
<PAGE> 3
satisfactory to the managing underwriter selected as therein provided and (ii)
shall be filed within 75 days after receipt of requisite requests from holders
of Registrable Stock for registration) with respect to the Registrable Stock and
use its best efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby (determined as
hereinafter provided);
(b) prepare and file with the 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
the period of distribution (determined as hereafter provided) and comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Stock covered by such registration statement in accordance with the
requesting holders' intended method of disposition set forth in such
registration statement for such period;
(c) furnish to each seller of Registrable Stock and to each underwriter
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Registrable Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Registrable Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as each seller of Registrable Stock or, in the case of an
underwritten public offering, the managing underwriter shall reasonably request
to the extent required by applicable law, 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 distribution in such
jurisdiction to be sold by such seller, except that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation or qualify as a dealer in securities in any jurisdiction
where it is not so qualified or to consent to general service of process or
subject itself to taxation in any such jurisdiction;
(e) use its best efforts to list the Registrable Stock covered by such
registration statement with any securities exchange or automated quotation
system on which any security of the Company is then listed;
(f) immediately notify each seller of Registrable Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(g) enter into such reasonable agreements (including an underwriting
agreement, if applicable) which shall be customary in form, substance and scope
for such an arrangement between such underwriter and companies of the Company's
size and investment stature and take all such other reasonable actions in
connection therewith in order to expedite and facilitate the disposition of the
Registrable Stock to be registered;
(h) whether or not the offering is underwritten and at the request of
any seller of Registrable Stock, (i) furnish such reasonable representations and
warranties to such seller and the underwriters, if any, as are customary in
primary underwritten offerings and (ii) use best efforts to obtain (A) an
opinion of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to such seller in form
and substance as is customarily given to underwriters in an underwritten public
offering and to such other effects as reasonably may be requested by counsel for
the underwriters or by such seller or its counsel and (B) a letter dated such
date from the independent public accountants retained by the Company, addressed
to the underwriters, if any, and to such seller, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, and such letter to additionally cover such
other financial matters (including information as to the period ending no more
than five business days prior to the date of such letter) with respect to such
registration as such underwriters reasonably may request;
-3-
<PAGE> 4
(i) make available upon reasonable notice for inspection at a
reasonable time and in a reasonable manner by each seller of Registrable Stock,
any underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or agent retained by such seller of
Registrable Stock or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company reasonably requested by such
Seller, underwriter, attorney, accountant or agent, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent for use solely in
connection with such registration statement and its due diligence efforts
relating thereto; provided, however, that any records, information or documents
that are designated by the Company in writing as confidential shall be kept
confidential by such seller and such seller shall inform such other persons of
the confidential nature of such information or documents unless disclosure of
such records, information or documents is required by court or administrative
order or such information or document becomes generally available to the public
through no breach of this provision; provided, further, if such seller,
underwriter, attorney, accountant or agent is ordered to disclosure any of such
records, documents or information, such seller will and request such
underwriter, attorney, accountant or agent to provide the Company with prompt
written notice of such requirement so that the Company at its expense may seek a
protective order or other appropriate remedy and/or waive compliance with this
provision; and in the event that such protective order or other remedy is not
obtained, or that the Company waives compliance with this proviso, such seller
agrees and will request such underwriter, attorney, accountant or agent to agree
to furnish only that portion of such records, documents or information which
such seller, underwriter, attorney, accountant or agent is legally required to
disclose in the opinion of the special counsel or counsel representing such
seller, underwriter, accountant or agent; provided, further, the Company shall
have no obligation to provide or make available information to the extent such
disclosure shall materially interfere with the business or operations of the
Company; and
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practical, but not later than 18 months after the
effective date of the registration statement, an earning statement covering the
period of at least 12 months beginning with the first full fiscal quarter after
the effective date of such registration statement, which earning statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of
the Commission's regulations thereunder.
For purposes of Sections 1 and 2, the period of distribution of
Registrable Stock in a firm commitment underwritten public offering shall be
deemed to extend until such underwriter has completed the distribution of all
securities purchased by it but in no event in excess of 120 days, and the period
of distribution of Registrable Stock in any other registration shall be deemed
to extend until the earlier of the sale of all Registrable Stock covered thereby
or 120 days after the effective date thereof.
In connection with each registration pursuant to this Agreement, the
sellers of Registrable Stock will furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as
shall be reasonably requested by the Company in order to assure compliance with
federal and applicable state securities laws.
In connection with each registration pursuant to Section 1 or 2
covering an underwritten public offering, the Company and each seller of
Registrable Stock agree to enter into an underwriting agreement as contemplated
by paragraph (g) above. Without limiting the generality of the foregoing, if
such underwriting agreement contains restrictions upon the sale of securities of
the Company, other than the securities which are to be included in the proposed
distribution, then such restrictions shall be binding upon the sellers of
Registrable Stock, but not for a period exceeding 180 days from the effective
date of the registration statement and, if requested by the Company, such
sellers shall enter into a written agreement to that effect.
SECTION 4. EXPENSES.
(a) All expenses incurred by the Company in complying with Sections 1
through 3, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection
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<PAGE> 5
with complying with state securities or "blue sky" laws, fees of the National
Association of Securities Dealers, Inc., fees of a national securities exchange,
transfer taxes, fees of transfer agents and registrars, costs of insurance of
Registrable Stock and all other secondary shares, but excluding any Selling
Expenses, are called "Registration Expenses." "Selling Expenses" as used herein
means all underwriting discounts and selling commissions applicable to the sale
of Registrable Stock.
(b) Except as set forth in the next sentence, all Registration Expenses
and Selling Expenses in connection with each registration statement prepared or
filed under Section 1 shall be borne by Purchaser. All Registration Expenses and
Selling Expenses incurred in connection with each registration statement
prepared or filed under Sections 1 (only in the event the Company elects to
include other Common Stock pursuant to Section 1(c)) and 2 shall be borne by the
Purchaser and the Company (and any other participating sellers) as they are
incurred (including their proportionate share of the reasonable fees and
expenses of counsel to the Company) in proportion to the number of shares to be
sold by each.
SECTION 5. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any of the Registrable Stock
under the Securities Act pursuant to Section 1 or 2, the Purchaser shall
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, each officer of the Company
who signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer, director, underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Registrable Stock was registered under the Securities Act pursuant to
Sections 1 or 2, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall pay or reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that Purchaser shall be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to Purchaser, furnished to the
Company by Purchaser in writing and stated specifically for use in such
registration statement or prospectus, amendment or supplement; provided,
however, that the obligation of the Purchaser hereunder shall be limited to an
amount equal to the net proceeds received by the Purchaser from such securities
sold in such registration.
(b) In the event of a registration of any of the Registrable Stock
under the Securities Act pursuant to Section 1 or 2, the Company shall indemnify
and hold harmless, to the full extent permitted by law, Purchaser, each member,
partner, officer, trustee or director of the Purchaser, each underwriter of such
Registrable Stock thereunder and each other person, if any, who controls such
Purchaser or underwriter within the meaning of the Securities Act or the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), against
any losses, claims, damages, liabilities or expenses, joint or several, to which
such Purchaser, person, underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such Registrable Stock was registered
under the Securities Act pursuant to Sections 1 or 2, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall pay or reimburse Purchaser, and
each member, partner, officer, trustee or director thereof, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
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<PAGE> 6
conformity with information furnished in writing by Purchaser, any such
underwriter or any such controlling person, as the case may be, and stated to be
specifically for use in such registration statement, prospectus, amendment or
supplement.
(c) Promptly after receipt of an indemnified party hereunder or written
notice of any claim or the commencement of any action or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to such indemnified party other than under this
Section 5 and shall only relieve it from any liability which it may have to such
indemnified party under this Section 5 if an to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 5 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that if the defendants in such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be reasonable defenses available
to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to materially conflict with the interests of the indemnified party,
the indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred. No indemnifying party, in the defense of any such claim or
litigation against an indemnified party, shall consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation, unless such
indemnified party shall otherwise consent in writing. An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless any
indemnified party reasonably concludes that there may be legal defenses
reasonably available to such indemnified party with respect to such claim which
are different from or additional to those available to any other such
indemnified parties or that a material conflict of interest may exist between
such indemnified party and any other such indemnified parties with respect to
such claim, in which event the indemnifying party shall be obligated to pay the
reasonable fees and expenses of such additional counsel or counsels.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Stock exercising registration rights under Sections 1 or 2, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 5 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 5; then, and in each such case, the Company and such
holder shall contribute to the aggregate losses, claims, damages or liabilities
including legal fees and expenses incurred by such party to which they may be
subject (after contribution from others) in such proportion as is appropriate to
reflect both the relative benefit received by such holder and the relative fault
of the Company and each holder; provided, however, that, in any such case, no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation. For
purposes of the preceding sentence, the relative benefit received by such holder
shall be deemed to be in the same proportion as the public offering price of
such holder's Registrable Stock offered by the registration statement bears to
the public offering price of all securities offered by such registration
statement; and the relative fault of the Company and such holder shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a
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<PAGE> 7
material fact or omission of a material fact relates to information supplied by
the Company, by such holder or by any controlling person of any such holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(e) The indemnity obligations herein shall survive the transfer of the
Registrable Stock by the Purchaser.
SECTION 6. DEFINITIONS.
"Person" shall mean an individual, corporation, trust, partnership,
joint venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
an "Affiliate" of a person shall mean someone that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such person.
"Registrable Stock" means (a) any of the Securities and any other
securities of the Company of the same class, and (b) any securities (of the
Company or any other Person) issued or issuable with respect to any of the
Securities by way of stock dividend or stock split, a dividend or other
distribution, in connection with a combination of shares, recapitalization,
reclassification, merger, consolidation or other reorganization or otherwise.
Any Registrable Stock will cease to be Registrable Stock when (i) a registration
statement covering such Registrable Stock has been declared effective by the SEC
and the Registrable Stock has been disposed of pursuant to such effective
registration statement, or (ii) the Registrable Stock is sold under
circumstances in which all of the applicable conditions of Rule 144 (or any
similar provisions then in force) under the Securities Act are met if, as a
result of or following any sale referred to in this clause (ii), such securities
are freely transferable without restriction under the Securities Act.
SECTION 7. MISCELLANEOUS.
(a) Parties in Interest: Assignment. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether expressed or not. No party may assign its rights
hereunder without the prior written consent of the other parties hereto, except
the Purchaser may assign all of such rights to a single Affiliate.
(b) Waiver. Any of the terms or conditions of this Agreement may be
waived at any time and from time to time in writing by the party entitled to the
benefits thereof without affecting any other terms or conditions of this
Agreement.
(c) Notices, Etc. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given, if delivered in person or by courier, telegraphed, telexed or by
facsimile transmission or mailed by certified or registered mail, postage
prepaid:
If to the Company: Capital Pacific Holdings, Inc.
4100 MacArthur Blvd., Suite 200
Newport Beach, California 92660
Telecopy No. (714) 622-8410
Attention: Hadi Makarechian
with a copy to:
Dag Wilkinson, Esq.
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Telecopy No. (202) 429-7049
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<PAGE> 8
If to the Purchaser:
c/o Farallon Capital Management, L.L.C.
One Maritime Plaza
Suite 1325
San Francisco, California 94111
Telecopy No.: (415) 421-2133
Attention: Steve Millham
with a copy to:
Richards Spears Kibbe & Orbe
One Chase Manhattan Plaza
57th Floor
New York, New York 10005
Attention: William Q. Orbe, Esq.
Telecopy No. (212) 530-1801
Any party may, by written notice to the other parties, change the address or
telecopy number to which notices to such party are to be delivered or mailed or
sent by facsimile transmission.
All such notices or other communications shall be effective and be deemed to
have been given as of the date on which so hand-delivered or on the third
business day following the date on which so mailed, or if delivered by facsimile
transmission, when sent and the sender receives evidence of complete
transmission without error.
(d) Entire Agreement: Amendment. This Agreement sets forth the entire
agreement and understanding of the parties in respect of the subject matter
hereof and supersedes all prior agreements, arrangements and understandings
relating to the subject matter hereof, both oral and written. No representation,
promise, inducement or statement of intention has been made by either of the
parties hereto which is not embodied in this Agreement, or in the written
statements, certificates or other documents delivered pursuant hereto and
neither of the parties hereto shall be bound by or liable for any alleged
representation, promise, inducement or statement of intention not to set forth.
This Agreement may be amended or modified only by a written instrument executed
by the parties hereto or by their successors and assigns.
(e) General. This Agreement (i) shall be construed and enforced in
accordance with the laws of the State of Delaware without giving effect to the
choice of law principles thereof; and (ii) may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The Section and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
(f) Severability. To the extent that any provision of this Agreement
which does not materially affect the intent of the parties hereto shall be
invalid or unenforceable, it shall be considered deleted therefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 9
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the Company and the Purchaser have executed this Agreement
as of the day and year first above written.
CAPITAL PACIFIC HOLDINGS, INC.
By:
------------------------------
Name: Hadi Makarechian
Title: Chairman
CALIFORNIA HOUSING FINANCE, L.P.
By: CALIFORNIA HOUSING FINANCE L.L.C.,
its General Partner
By: FARALLON CAPITAL MANAGEMENT L.L.C.,
its Managing Member
By:
-----------------------------
Name: Steve Millham
Title: Managing Member
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<PAGE> 1
Exhibit 6
AGREEMENT
THIS AGREEMENT (as amended or otherwise modified from time to time
pursuant to the terms hereof, the "Agreement"), dated _________, 1997, is among
California Housing Finance L.P., a Delaware limited partnership, (the
"Purchaser"), Capital Pacific Holdings, Inc., a Delaware corporation (the
"Company"), Capital Pacific Holdings L.L.C., a Delaware limited liability
company (the "New L.L.C."), and Hadi Makarechian, a natural person ("the
Indirect Stockholder").
WHEREAS, CPH2, L.L.C. and CPH3, L.L.C., each a Delaware limited
liability company (collectively, the "Stockholders"), and the Purchaser have
entered into a Stock Purchase Agreement dated as of September 29, 1997 (the
"Stock Purchase Agreement"), pursuant to which the Stockholders shall sell, and
the Purchaser shall buy, 2,484,340 shares (the "Shares") of Common Stock, $.10
par value, of the Company (the "Common Stock") for $10,000,000 (the "Purchase
Price") and the Purchasers, the Stockholders and Nationsbank, N.A. as escrow
agent have entered into an Escrow Agreement dated as of September 29, 1997
(the "Escrow Agreement") pursuant to which the Stock and the Purchase Price are
escrowed pending the consummation of the transactions contemplated by this
Agreement;
WHEREAS, the Indirect Stockholder owns a majority of the membership
interests in CPH2, L.L.C. and CPH3, L.L.C.;
WHEREAS, simultaneously with the execution of this Agreement, the
Company, the Subsidiaries and the Purchaser have entered into an Investment and
Stockholder Agreement (the "Investment Agreement"), pursuant to which the
Company and the Subsidiaries shall transfer substantially all of their
respective assets to the New L.L.C. and the Purchaser shall contribute
$30,000,000 to the capital of the New L.L.C. and execute a counterpart of the
Amended and Restated Limited Liability Company Agreement of the New L.L.C. in
return for a 32.07% membership interest in the New L.L.C. and other rights.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
SECTION 1. RESTRICTIVE COVENANTS.
(a) The Indirect Stockholder hereby agrees that he will from and after
the Closing Date during the Restrictions Period (as defined in the Investment
Agreement):
(i) not directly or indirectly (whether through an affiliate or
otherwise) conduct or invest in tract homebuilding or
production homebuilding activity (provided any land
development activity (x) undertaken by the Indirect
Stockholder at a time when he is not the beneficial owner of
more than ten percent (10%) of
<PAGE> 2
the common equity of the Company or (y) which the
Company is unable to undertake or which the Company and the
Purchaser shall have declined to undertake shall not be
restricted hereby even if the ultimate purpose is
homebuilding) within a 100 mile radius of any current or
future project of the Company, the New L.L.C. or any Future
Affiliate or Mirror Company or of any real property which is
the subject of any purchase agreement or option agreement to
which any such entity is a party, provided however, that in
the event any land development activity by the Indirect
Stockholder was commenced prior to the acquisition of any
such project or the entering into of such purchase agreement
or option contract by the Company, the New L.L.C. or any
Mirror Company or Future Affiliate, the continuation of such
activity of the Indirect Stockholder shall not be in breach
of this Agreement;
(ii) not directly or indirectly hire or solicit the hiring of any
current or future employee (other than any person related by
blood or marriage to the Indirect Stockholder) of the
Company, the Subsidiaries, the new L.L.C. or any Future
Affiliate or Mirror Company; and
(b) The Indirect Stockholder acknowledges that the breach of this
Section 1 shall cause irreparable harm to the Purchaser, which harm cannot be
reasonably, adequately or fully redressed by the payment of damages.
Accordingly, the Purchaser shall be entitled, in addition to any other right it
may have in law or in equity, to an injunction enjoining the Indirect
Stockholder from any breach or threatened breach of this Agreement. The Indirect
Stockholder hereby waives the defense in any equitable proceeding that there is
an adequate remedy at law for any such breach.
SECTION 2. REPRESENTATIONS. The Indirect Stockholder hereby represents and
warrants to the Purchaser as of the date hereof and as of the Closing Date that:
SECTION 2.01 Legal Capacity. He has full power, legal capacity and
authority to execute, deliver and perform this Agreement and this Agreement (i)
has been duly executed and delivered, (ii) is legal, valid and binding and
enforceable against the Indirect Stockholder, and (iii) is not in contravention
of any law, order or agreement by which the Indirect Stockholder is bound.
SECTION 2.02 Organization, Qualifications and Corporate Power. Each of
CPH2, LLC and CPH3, LLC is a limited liability company, duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly licensed or qualified to transact business as a foreign company and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification, except where the failure to be so
licensed or qualified and in good standing would not, individually or in the
aggregate, have a material adverse effect on the business, financial condition,
results of operations, prospects, properties, assets or affairs of CPH2, LLC or
CPH3, LLC, respectively, or the ability of CPH2, LLC or CPH3, LLC, to perform
and comply in all material respects with all of its respective covenants and
agreements
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<PAGE> 3
contained in the Stock Purchase Agreement (a "Material Adverse Effect"). Each of
the Stockholders has full power and authority (i) to own and hold its properties
and to carry on its business as now conducted, and (ii) to execute, deliver and
perform its obligations under the Stock Purchase Agreement.
SECTION 2.03 Common Stock Ownership. The Stockholders are the beneficial
and record owner of the Shares in the respective amounts set forth on Schedule A
to the Stock Purchase Agreement, free and clear of any lien, claim, encumbrance
or security interest of any kind (each a "Lien"), and at the Closing under the
Stock Purchase Agreement will transfer to the Purchaser good and marketable
title to such Shares, free and clear of any Lien.
SECTION 2.04 Authorization of Agreement, Etc. The execution and delivery
by the Stockholders and the performance by the Stockholders of their respective
obligations under the Stock Purchase Agreement, and the sale and delivery of the
Shares by the Stockholders, have been duly authorized by the relevant
proceedings of each Stockholder and will not (i) violate any provision of law or
regulatory agency (including any stock exchange rules or requirements), or any
order of any court or other agency of government, (ii) conflict with or result
in a breach of any provision of the limited liability company agreement of
either Stockholder, (iii) conflict with, result in a violation or breach of or
constitute (with due notice or lapse of time or both) a default under, any note,
bond, mortgage, indenture, deed of trust, license, lease, joint venture
agreement, collaborative arrangement or relationship or other contract,
commitment or agreement or other instrument or obligation to which either
Stockholder or any of its properties or assets may be bound or (iv) result in
the creation or imposition of any lien, claim, encumbrance or security interest
of any kind upon any of the properties or assets of either Stockholder.
SECTION 2.05 Validity. The Stock Purchase Agreement has been duly
executed and delivered by the Stockholders and constitutes the legal, valid and
binding obligations of the Stockholders, enforceable against the Stockholders in
accordance with its terms, except as the enforceability hereof may be limited
(i) by bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and (ii) by general equitable
principles regardless of whether considered in a proceeding in equity or at law.
SECTION 2.06 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Section 3.04 of the
Stock Purchase Agreement, no registration or filing with, or consent or approval
of or other action by, any Federal, state or other governmental agency or
instrumentality or regulatory body is or will be necessary for the valid
execution, delivery and performance by the Stockholders of the Stock Purchase
Agreement, or the delivery, sale and transfer of the Shares to the Purchaser
thereunder other than any filings necessary pursuant to Sections 13 and 16 of
the Securities Exchange Act of 1934 and the associated regulations.
SECTION 2.07 Capitalization.
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<PAGE> 4
(a) The authorized capital stock of the Company consists of (1)
30,000,000 shares of Common Stock, and (2) 5,000,000 shares of Preferred Stock.
As of the date of this Agreement, 14,995,000 shares of Common Stock and no
shares of Preferred Stock (together with the Common Stock, the "Company Stock")
are outstanding. All of the Shares have been duly authorized, validly issued and
are fully paid and nonassessable. Except for the Company Stock, there are no
shares of capital stock or other equity securities of the Company outstanding.
(b) Except for the warrants to purchase 790,000 shares of Common Stock
and as contemplated by the Related Agreements, (i) there are no preemptive or
similar rights on the part of any holder of any class of securities of the
Company, and (ii) no options, warrants, conversion or other rights, agreements
or commitments of any kind are outstanding that obligate the Company,
contingently or otherwise, to issue, sell, purchase, return or redeem any shares
of its capital stock of any class or any securities convertible into or
exchangeable for any such shares, and no authorization therefor has been given.
No shares of capital stock of the Company are held in the Company's treasury and
except in respect of the warrants described above no shares of capital stock of
the Company are reserved for issuance. There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the Shares.
(c) Notwithstanding anything to the contrary set forth herein, the sole
remedy for any breach of the representations and warranties set forth in
subparagraph (b) above shall be a purchase price adjustment (the "Purchase Price
Adjustment") on a retrospective basis so that either (i) the number of Shares
transferred to the Purchaser is increased or (ii) the Purchase Price is
decreased so that, in either such event, the Purchaser shall have as of the
Closing Date the economic equivalent of 15.74% of the capital stock of the
Company (on a fully diluted basis) in consideration of the Purchase Price. The
Indirect Stockholder shall cause the Stockholders to effect the Purchase Price
Adjustment in any such event, and the parties agree that an interest factor of
ten percent (10%) from the Closing Date until the effective date of any such
Purchase Price Adjustment shall be included in the Purchase Price Adjustment to
compensate the Purchaser for the delay in obtaining such economic equivalent.
SECTION 3. MISCELLANEOUS.
SECTION 3.01 Definitions. Capitalized terms not otherwise defined herein
shall have their respective meanings set forth in the Investment Agreement.
SECTION 3.02 Survival. Any representation and warranty made herein shall
survive the execution and delivery of this Agreement, and the sale, transfer and
delivery of the Shares pursuant to the Stock Purchase Agreement for a period of
eighteen (18) months.
SECTION 3.03 Parties in Interest; Assignment. All representations,
warranties, covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties
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<PAGE> 5
hereto whether so expressed or not. No party may assign its rights hereunder
without the prior written consent of the other parties hereto.
SECTION 3.04 Waiver. Any of the terms or conditions of this Agreement
may be waived at any time and from time to time in writing by the party entitled
to the benefits thereof without affecting any other terms or conditions of this
Agreement.
SECTION 3.05 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given, if delivered in person or by courier, telegraphed, telexed or by
facsimile transmission or mailed by certified or registered mail, postage
prepaid:
If to the Indirect Stockholder: Hadi Makarechian
c/o Capital Pacific Holdings, Inc.
4100 MacArthur Blvd., Suite 200
Newport Beach, California 92660
Telecopy No.: (714) 622-8410
If to the Stockholders: CPH2, L.L.C. or CPH3, L.L.C.
Attention: Hadi Makarechian
c/o Capital Pacific Holdings, Inc.
4100 MacArthur Blvd., Suite 200
Newport Beach, California 92660
Telecopy No.: (714) 622-8410
If to the Company: Hadi Makarechian
Chairman of the Board
Capital Pacific Holdings, Inc.
4100 MacArthur Blvd., Suite 200
Newport Beach, California 92660
Telecopy No.: (714) 622-8410
with a copy to: Dag Wilkinson, Esq.
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, DC 20006
Telecopy No.: (202) 429-7049
If to the Purchaser: c/o Farallon Capital Management, L.L.C.
One Maritime Plaza
Suite 1325
San Francisco, California 94111
Attention: Steve Millham
Telecopy No.: (415) 421-2133
-5-
<PAGE> 6
with a copy to: Richards Spears Kibbe & Orbe
One Chase Manhattan Plaza
57th Floor
New York, New York 10005
Attention: William Q. Orbe, Esq.
Telecopy No.: (212) 530-1801
Any party may, by written notice to the other parties, change the address or
telecopy number to which notices to such party are to be delivered or mailed or
sent by facsimile transmission. All such notices or other communications shall
be effective and be deemed to have been given as of the date on which such
notices are actually received.
SECTION 3.06 Entire Agreement; Amendment. This Agreement and the Related
Agreements set forth the entire agreement and understanding of the parties in
respect of the transactions contemplated hereby and supersede all other
agreements, arrangements and understandings relating to the subject matter
hereof, both oral and written. No representation, promise, inducement or
statement of intention has been made by any of the parties hereto which is not
embodied in this Agreement, or the written statements, certificates or other
documents delivered pursuant hereto or the Related Agreements referred to above,
and none of the parties hereto shall be bound by or liable for any alleged
representation, promise, inducement or statement of intention not so set forth.
This Agreement and the Related Agreements may be amended or modified only by a
written instrument executed by the parties hereto or by their successors and
assigns.
SECTION 3.07 General. This Agreement (i) shall be construed and enforced
in accordance with the laws of the State of Delaware without giving effect to
the choice of law principles thereof; and (ii) may be executed in counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The Section and other headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 3.08 Severability. To the extent that any provision of this
Agreement which does not materially affect the intent of the parties hereto
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 7
SIGNATURE PAGE TO AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CAPITAL PACIFIC HOLDINGS, INC.,
By:
------------------------------
Hadi Makarechian
Chairman
CALIFORNIA HOUSING FINANCE, L.P.
By: California Housing Finance L.L.C.
Its Manager
By: Farallon Capital Management, L.L.C.
Its Manager
By:
------------------------------
Steve Millham
Managing Member
CAPITAL PACIFIC HOLDINGS, L.L.C.
By: Capital Pacific Holdings, Inc.
Managing Member
By:
------------------------------
Hadi Makarechian
Chairman
---------------------------------
Hadi Makarechian, personally
524200v6
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<PAGE> 1
EXHIBIT 7-1
CERTIFICATE OF FORMATION
OF
CPH3, L.L.C.
The undersigned, for the purpose of forming a limited liability
company pursuant to Section 18-201 of the Delaware Limited Liability Company
Act (the "Act"), do hereby certify as follows:
ARTICLE ONE
Name
The name of the limited liability company is CPH3, L.L.C. (the "Company").
ARTICLE TWO
Registered Agent and Office
The address of the registered office of the Company in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle 19805.
The registered agent at this office is Corporation Service Company.
ARTICLE THREE
Duration
The term of the Company's duration shall be thirty (30) years from the
date of filing of this Certificate of Formation with the Secretary of State of
the State of Delaware.
ARTICLE FOUR
Purpose
The purpose of the Company is to engage in any lawful act or activity
for which limited liability companies may be organized under the Act, including
all powers and purposes now and hereafter permitted by law to a limited
liability company.
<PAGE> 2
ARTICLE FIVE
Management
The business and affairs of the Company shall be managed by the member
or members, and the voting power of each member shall be directly proportionate
to such member's interest in the profits and losses of the Company (a
"Membership Interest").
ARTICLE SIX
Admission of Additional Members
Additional members may be admitted at such times and on such terms and
conditions as provided in the Limited Liability Company Agreement of the
Company.
ARTICLE SEVEN
Transfers of Interest
No member may sell, assign, or otherwise transfer any part of its
interest in the Company to any non-member unless the sale, assignment or
transfer has been approved by the prior written consent of members holding more
than a majority of the Membership Interests in the Company and by a majority in
number of the members other than the transferring member, and as otherwise
provided in the Limited Liability Company Agreement of the Company.
ARTICLE EIGHT
Continuation of Business
Following the resignation, withdrawal, bankruptcy, or dissolution of a
member or the occurrence of any other event that terminates the continued
membership of a member in the Company, the business of the Company may continue
only upon the agreement of members holding more than a majority of the
Membership Interests of the remaining members and a majority in number of the
remaining members.
ARTICLE NINE
Limited Liability Company Agreement
The manner in which the Company conducts its business and affairs, and
the rights and obligations of its members, to the extent not expressly required
by and provided for in the Act, shall be set forth in a Limited Liability
Company Agreement executed by all of the initial members of the Company. The
regulations contained in the Limited Liability Company Agreement may, from time
to time, be amended by the members in accordance with the provisions thereof.
- 2 -
<PAGE> 3
ARTICLE TEN
Indemnification and Liability
The Company shall indemnify and advance expenses to a member, employee
or agent of the Company for any claim and in connection with any proceeding, to
the fullest extent permitted by and in accordance with the Act, all other
applicable laws and statutes, and the Limited Liability Company Agreement of
the Company.
DATED this 15th of September, 1997.
/s/ DAY WILKINSON
---------------------------------
Dag Wilkinson
Authorized Agent
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<PAGE> 4
EXHIBIT 7-2
LIMITED LIABILITY COMPANY AGREEMENT
OF
CPH3, L.L.C.
As of September 15, 1997
ARTICLE I
ORGANIZATION
Section 1. Name. The name of the Company is CPH3, L.L.C., and all
Company business shall be conducted in that name or any other name designated
by the Members, the use of which complies with applicable law.
Section 2. Formation. The Company has been organized as a Delaware
limited liability company by the filing of a Certificate of Formation pursuant
to the Delaware Limited Liability Company Act (the "Act") and the certification
of the Certificate of Formation for the Company by the Secretary of State of
the State of Delaware.
Section 3. Offices and Registered Agent. The principal office of the
Company in the State of Delaware shall be located at 1013 Centre Road, in the
City of Wilmington, County of New Castle, Delaware 19805, or at such other
place as the Members may designate from time to time. The Company may have
such other offices, either within or without the State of Delaware as the
Members may designate or as the business of the Company may require. The
registered office of the Company required by the Act to be maintained in the
State of Delaware shall be located at 1013 Centre Road, in the City of
Wilmington, County of New Castle, Delaware 19805 and the registered agent at
that office shall be the Corporation Service Company. The registered office
and the registered agent may be changed from time to time by action of the
Members and by filing the prescribed form with the Delaware Secretary of State.
The registered office may be, but need not be, identical with the principal
office, and may be changed from time to time by the Members.
Section 4. Purpose. The Company is organized for the purpose of
engaging in any lawful business or activity for which limited liability
companies may be organized under the Act.
Section 5. Term. The term of the Company's duration (the "Term")
shall be thirty (30) years from the date of filing of the Certificate of
Formation with the Secretary of State of the State of Delaware.
<PAGE> 5
ARTICLE II
MEMBERSHIP
Section 1. Initial Member. The initial Member of the Company shall be
HADI MAKARECHIAN, an individual. The initial Capital Contributions (as defined
in Article III, Section 1) and the Membership Interest (as defined in Article
III, Section 3) of the initial Member as of the date hereof is set forth on
Exhibit A attached hereto.
Section 2. No Liability to Third Parties. In accordance with Section
18-303 of the Act, no Member shall be liable personally for the debts,
obligations or liabilities of the Company solely by reason of being a Member of
the Company.
Section 3. Admission of Additional Members. The initial Member shall
have the right to admit a new Member or Members to the Company, provided
Members holding more than a majority of the aggregate Membership Interests of
all Members and a majority of members voting per capita consent to the
admission of the new Member or Members, and provided any such new Member signs
this Agreement, as amended as of the date of such new Member's admission, or
otherwise evidences his ratification hereof. No new Member shall have the
right to participate in the management of the business of the Company unless
such Member is admitted in accordance with this Section. In accordance with
Section 18-301(c) of the Act, a person may be admitted as a Member of the
Company and may receive a Membership Interest without making a contribution or
being obligated to make a contribution to the Company.
Section 4. Resignation. A Member does not have the right to resign
from the Company except upon the provision of 120 days' written notice to the
Company and the other Members. The previous sentence notwithstanding, no
Member shall have the right to resign from the Company at such times as the
Company has only one Member.
Section 5. Termination of Membership. Unless otherwise provided in a
written consent signed by all remaining Members, a Member's membership in the
Company shall terminate upon the occurrence of any event of bankruptcy
described in Section 18-304 of the Act.
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<PAGE> 6
Section 6. Certificates. The Company may issue Membership
Certificates representing the Membership Interest (as defined in Section 3 of
Article III) of each Member. The Membership Certificates shall be in such form
as may be determined by the Members. Such Membership Certificates shall be
signed by all the Members. All Membership Certificates shall be consecutively
numbered or otherwise identified. The name and address of the person to whom
the Membership Certificates are issued, with the Capital Contribution and the
date of issue, shall be entered in the Certificate Register of the Company. In
case of a lost, destroyed or mutilated Membership Certificate, a new one may be
issued upon such terms and indemnity to the Company as the Members may
prescribe.
Section 7. Restrictions on Transfer. No Member may sell, assign, or
otherwise transfer any part of its Membership Interest to any non-Member
unless:
(a) the sale, assignment or transfer has been approved by the
prior written consent of Members holding more than a majority of the aggregate
Membership Interests of all Members; and
(b) in the opinion of the Members, the transfer will not (i)
impair the ability of the Company to continue to be classified as a sole
proprietorship or partnership under the Internal Revenue Code of 1986, (ii)
result in a "termination" of the Company under section 708 of the Code, (iii)
will not cause the Company to be in breach or default of any instrument or
agreement to which it is bound, (iv) violate or cause a violation of any
applicable federal or state laws (including securities laws), or (v) cause the
Company to become subject to registration under the Investment Company Act of
1940.
Section 8. Rights of an Assignee or Transferee. In addition to the
restrictions set forth in Section 7 of this Article, an assignee or transferee
of the Membership Interest of a Member shall have the right to participate in
the management of the business of the Company provided such assignee or
transferee signs this Agreement, as amended as of the date of the assignment or
transfer of such Membership Interest, or such assignee or transferee otherwise
evidences his ratification hereof.
ARTICLE III
CAPITAL CONTRIBUTIONS
Section 1. Initial Capital Contributions. Contemporaneously with the
execution of this Limited Liability Company Agreement (the "Agreement"), the
initial Member shall make the initial capital contributions specified in
Exhibit A attached hereto.
Section 2. Additional Capital Contributions. Additional contributions
shall be made at such times and in such amounts as may be agreed upon by the
Members or the
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<PAGE> 7
Members. Each Member's contribution (a "Capital Contribution") shall consist
of the aggregate of the following items contributed by a Member, or a Member's
predecessor in interest, to or on behalf of the Company: (a) cash and (b) the
fair market value of other property (net of liabilities secured by the
property).
Section 3. Membership Interest. At all times, the interest of each
Member in the profits, losses, and distributions of the Company (a "Membership
Interest") shall be directly proportional to the aggregate Capital
Contributions of the corresponding Member.
Section 4. Return of Contributions. A Member is not entitled to the
return of any part of its Capital Contributions or to be paid interest in
respect thereof. An unrepaid Capital Contribution is not a liability of the
Company or of any Member. A Member is not required to contribute or lend cash
or property to the Company to enable the Company to return any Member's Capital
Contributions and no Member shall have any recourse against any other Member
for this purpose. No provision of this Agreement shall be construed as
obligating a Member to contribute additional capital to the Company for the
benefit of any third party.
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
Section 1. Incorporation of Treasury Regulations. Applicable
income tax regulations promulgated under the Internal Revenue Code of 1986, as
amended, including proposed, temporary, and final regulations (the "Treasury
Regulations") relating to allocations of income, gain, loss, deduction, and
credit are hereby incorporated into this Agreement by reference and shall
control over any conflicting provision of this Agreement. To the extent that
any allocation of income, gain, loss, deduction or credit (i) is required by
this Agreement but not permitted by the Treasury Regulations, or (ii) is
required by the Treasury Regulations but not provided for in this Agreement,
the amount thereof shall be allocated or reallocated to the Members in the
manner provided in the Treasury Regulations.
Section 2. Distributions. Subject to the provisions of Section 1 of
this Article, the Company shall make such distributions of cash and property as
the Members may determine from time to time. Without limiting the generality
of the preceding sentence, the Members shall from time to time declare, and the
Company shall distribute, accumulated profits agreed not necessary for the cash
needs of the Company's business. Unless otherwise provided, any retained
profits shall be deemed an increase in each Member's Capital Contribution in
proportion to each Member's respective Membership Interest prior to the fiscal
year in which such profits were earned. The provisions of this Section
notwithstanding, the Members shall have no authority to declare, and the
Company shall have no authority to make, any distribution of cash, property, or
profits
- 4 -
<PAGE> 8
in violation of Section 18-607 of the Act.
Section 3. Allocation of Distributions. Subject to the provisions of
Sections 1 and 2 of this Article, and after giving effect to any special
allocations required by the Treasury Regulations, profits and other
distributions made by the Company shall be allocated in the following order:
(1) To repay any loan or loans to the Company made by a Member or
Members, if any, together with interest accrued thereon from
the date such loan or loans were made until the date of
repayment, provided that no loan need be repaid in its
entirety and all loans shall be repaid in direct proportion to
the aggregate outstanding loan balance of each Member at the
time of such repayment, with repayments credited in the order
the loans were made to or on behalf of the Company, including
loans made prior to the date hereof;
(2) To repay any additional Capital Contributions of the Members
in excess of the initial Capital Contributions made by the
Members contemporaneously with the execution of this
Agreement, provided that such repayments to Members of
additional Capital Contributions shall be pro rata to their
respective additional Capital Contributions;
(3) Then, in direct proportion to the Membership Interest of each
Member.
ARTICLE V
MEETINGS OF MEMBERS
Section 1. Time and Place. The Members shall hold meetings on such
date or dates as shall be fixed from time to time by the Members. Any meeting
of Members may be held at such place within or without the State of Delaware as
the Members of the Company may from time to time fix. In the event the Members
shall fail to fix such place or time, or in the event members are entitled to
call or convene a meeting in accordance with law, then, in such event, such
meeting shall be held at the law offices Wiley, Rein & Fielding, 1776 K Street,
N.W., Washington, D.C. 20006.
Section 2. Telephonic Meetings. Unless otherwise restricted by
applicable law, the Members may participate in any meeting by telephone
conference or other similar means of communication provided all persons
participating in such meeting can hear one another for the entire discussion of
the matter or matters to be voted upon. Participating in a meeting by
telephone conference or other similar means shall constitute presence in person
at such meeting.
Section 3. Notice of Meetings. Written notice stating the place, day
and hour of
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<PAGE> 9
the meeting shall be given for all meetings of the Members. Such notice shall
state the person or person calling the meeting. Notice of a meeting shall be
given personally or by first class mail, overnight courier, or facsimile, not
less than 10 days nor more than 50 days before the date of the meeting, to each
member at his address listed in the records of the Company. Notice shall be
deemed to have been given when deposited with postage prepaid in a post office
or other official depository under the exclusive jurisdiction of the United
States Post Office. The date on which notice of a meeting of Members is mailed
or the date on which a the resolution of the Members declaring a distribution
is adopted, as the case may be, shall be the record date for the determination
of the Members entitled to notice of or to vote at such meeting, including any
adjournment thereof, or of Members entitled to receive such distribution. The
attendance of a Member in person or by proxy at the meeting without protesting
the lack of notice of a meeting, shall constitute a waiver of notice by such
Member.
Section 4. Quorum; voting. Members holding a majority of the
aggregate Membership Interests of all Members entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of Members. Except
as indicated otherwise herein, on all issues brought to a vote at a meeting of
the Members, including, without limitation, the election of officers, the
voting power of each Member entitled to vote shall be proportional to its
respective Membership Interest. Unless otherwise provided herein or required
under the Act, a vote of the Members holding at least a majority of the
aggregate Membership Interests of all Members entitled to vote is necessary and
sufficient to conduct business.
Section 5. Proxy Voting. Every Member may authorize another person to
act for him by proxy in all matters in which a Member may participate,
including waiving notice of any meeting, voting or participating in a meeting,
or expressing consent or dissent without a meeting. Every proxy shall be
signed by the Member or his attorney in fact, and shall be revocable at the
pleasure of the Member executing it, except as otherwise provided by law.
Section 6. Action by Written Consent. Action required or permitted to
be taken at a meeting of the Members may be taken may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by all Members of
the Company.
ARTICLE VI
MANAGEMENT
Section 1. Management by the Members. The business of the Company
shall be conducted under the exclusive management of its Members, who shall
have exclusive authority to act for the Company in all matters. The Members
may, from time to time, designate certain Members to act for the Company in
certain matters as herein specified.
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<PAGE> 10
Section 2. No Officers. The Company shall have no officers unless
otherwise determined by a vote of the Members.
ARTICLE VII
FISCAL MATTERS
Section 1. Fiscal Year. The fiscal year of the Company shall begin
on the first day of January and end on the last day of December.
Section 2. Contracts. The Members may authorize, in writing, any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the Company, and
such authority may be general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders
for payment of money, notes or other evidences of indebtedness issued in the
name of the Company shall be signed by such Members or Members, officer or
officers, agent or agents, of the Company and in such manner as shall from time
to time be determined by resolution of the Members.
Section 4. Deposits. All funds of the Company not otherwise employed
shall be deposited from time to time to the credit of the Company in such
banks, trust companies or other depositories as the Members may select.
ARTICLE VIII
BOOKS AND RECORDS
Section 1. Books and Records. The books and records of the Company
shall be kept at the principal office of the Company or at such other places,
within or without the State of Delaware as the Members shall from time to time
determine.
Section 2. Right of Inspection. Any Member of record shall have the
right to examine, at any reasonable time or times for all purposes, the books
and records of account, minutes and records of Members and to make copies
thereof. Such inspection may be made by any agent or attorney of the Member.
Upon the written request of any Member, the Company shall mail to such Member
its most recent financial statements, showing in reasonable detail its assets
and liabilities and the results of its operations.
Section 3. Financial Records. All financial records shall be
maintained and reported based on generally acceptable accounting practices.
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<PAGE> 11
ARTICLE IX
INDEMNIFICATION
Section 1. Right of Indemnification. To the maximum extent
permitted by the Act and the law of the State of Delaware, the Company shall
indemnify any current or former Member or officer against expenses actually and
necessarily incurred in connection with any action, suit or proceeding in which
such person is a party, by reason of having been a Member or officer of the
Company, except in relation to any matter in which a person may be held liable
for an unlawful distribution in violation of Section 18-607 of the Act.
The right of indemnification provided in this Section shall be solely
the obligation of the Company. At no time shall any Member or Members be
obligated or expected to provide indemnification for any other Member or any
officer of the Company.
Section 2. Expenses. Expenses, including attorneys' fees, incurred
in defending any action, suit or proceeding referred to in Section 1 of this
Article may be paid by the Company in advance of the final disposition
of such action, suit, or proceeding as authorized by the Members in the
specific case upon receipt of an undertaking by or on behalf of the Member,
officer, employee, or agent to repay such amount unless it shall ultimately be
determined that such person is entitled to be indemnified by the Company as
authorized in this Article.
Section 3. Non-Exclusivity. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under the law or any agreement, or
otherwise, both as to action in such person's official capacity and as to
action in another capacity while holding such office, and shall continue as to
a person who has ceased to be a Member, officer, employee or agent and shall
inure to the benefit of the heirs, executors, and administrator of such a
person. The Certificate of Formation of the Company shall not be interpreted
to limit in any manner the indemnification or right to advancement for expenses
of an individual who would otherwise be entitled thereto. This Agreement shall
be interpreted as mandating indemnification and advancement of expenses to the
fullest extent permitted by law.
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<PAGE> 12
ARTICLE X
INSURANCE
To the extent permitted by applicable law, the Company may arrange
for, purchase and maintain insurance on behalf of the Company and any person
who is or was a Member or Officer of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation (domestic or foreign, non-profit or for profit) partnership, joint
venture, limited liability company, trust or other enterprise.
ARTICLE XI
DISSOLUTION, LIQUIDATION, AND TERMINATION
Section 1. Dissolution. The Company shall be dissolved upon the
first to occur of the following events:
(a) the affirmative consent of all Members;
(b) the expiration of the Term of this Agreement, which
coincides with the period fixed in the Certificate
of Formation for the duration of the Company;
(c) the death, disability, resignation, bankruptcy or
dissolution of a Member or the occurrence of any
other event that terminates the continued membership
of a Member in the Company, unless (i) there are
at least two remaining Members or at least one
remaining Member and a new Member is admitted in
accordance with the provisions of Section 3 of
Article II, and (ii) the Members with more than a
majority of the Membership Interest of the remaining
Members and a majority of the Members voting per
capita consent to the continuation of the business
of the Company;
(d) the entry of a decree of judicial
dissolution under Section 18-802 of the Act.
Section 2. Liquidation. Upon the dissolution of the Company, its
affairs shall be promptly wound up and its assets liquidated as promptly as is
consistent with obtaining the fair market value thereof. The Members shall
select one Member to serve as liquidator of the Company, with such
compensation, if any, as the Members shall approve. The liquidator shall
proceed diligently to wind up the affairs of the Company in accordance with the
provisions of this Agreement and the Act. The costs and expenses of
liquidation shall be borne by the Company. Until final distribution, the
- 9 -
<PAGE> 13
liquidator shall continue to manage the Company and its assets and shall have
all of the power and authority of the Members and shall be entitled to
indemnification and advancement and payment of expenses in accordance with the
provisions of this Agreement. The liquidator is authorized and directed to
take, execute, file, and deliver all notices, actions and filings required by
the provisions of Subchapter VIII of the Act.
Section 3. Winding Up. In the event of the occurrence of any event
described in Section 1 above giving rise to the dissolution of the Company, the
affairs of the Company shall be wound up as follows:
(a) the Company shall not incur any expense or liability other than
expenses and liabilities necessary for the completion of the winding up and
dissolution of the Company;
(b) the assets of the Company shall be gathered in and sold or
delivered in kind in satisfaction of the liabilities of the Company;
(c) all liabilities of the Company, including loans by any Member to
the Company but excluding any liabilities in dispute, shall be paid. In the
event that the assets of the Company are insufficient to pay such liabilities
in whole, loans by the Members shall be repaid in proportion to the
outstanding loan balances of each Member. Other liabilities of the Company
shall be paid in part in accordance with a negotiated settlement or in
accordance with the priorities set forth in the Bankruptcy Code, whether
or not an insolvency proceeding is commenced by or against the Company;
(d) any additional Capital Contributions of each Member shall be
repaid in full or distributed in kind;
(e) all remaining cash or other assets on hand after the steps set
forth above have been taken shall be distributed to the Members in direct
proportion to the Membership Interest of each Member; and
(f) any remaining unsold assets which are not distributed in kind in
satisfaction of the liabilities of the Company as set forth above shall be
distributed to the Members in proportion to their Membership Interest.
On completion of the above steps, the liquidator shall file a
Certificate of Cancellation in accordance with Section 18-203 of the Act and
take any other steps required under the Act or other applicable law to dissolve
the Company.
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<PAGE> 14
ARTICLE XII
GENERAL PROVISIONS
Section 1. Seal. The Members may provide a company seal which
shall be circular in form and shall have inscribed thereon the name of the
Company, the phrase "State of Delaware," and the words, "Company Seal".
Section 2. Notice. Any notice required or permitted to be given
pursuant to the provisions of the Act, the Certificate of Formation of the
Company, or this Agreement shall be effective as of the date personally
delivered, or, if sent by mail, overnight courier or facsimile, on the date
sent and addressed to the intended recipient at his address indicated on
Exhibit A hereto, provided that, to be effective, any notice sent by mail shall
be sent through first-class mail, postage prepaid.
Section 3. Waiver of Notice. Whenever any notice is required to be
given to any Member or member of the Members of the Company under the
provisions of the Certificate of Formation, this Agreement, or the provisions
of the Act, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated herein, shall
be deemed equivalent to the giving of such notice.
Section 4. Gender and Number. Whenever the context requires, the
gender of all words used herein shall include the masculine, feminine and
neuter, and the number of all words shall include the singular and plural
thereof.
Section 5. Severability; Construction. Each article, paragraph,
subparagraph, term and condition of this Agreement, and any portions thereof,
will be considered severable. If, for any reason, any portion of this
Agreement is determined to be invalid, contrary to, or in conflict with, any
applicable present or future law, rule or regulation in a final, unappealable
ruling issued by any court, agency, or tribunal with valid jurisdiction in a
proceeding to which the Company or a Member is a party, that ruling will not
impair the operation of, or have any other effect upon, any other portions of
this Agreement, all of which will remain binding on the parties and continue to
be given full force and effect. No provision of this Agreement shall be
interpreted in favor of or against any party because of the party that drafted
this Agreement.
Section 6. Binding Effect. Except as otherwise specifically
provided herein, this Agreement is binding on and shall inure solely to the
benefit of the Members and their respective legal representatives, successors,
and permitted assigns.
Section 7. Governing Law. The Certificate of Formation the
provisions of this Limited Liability Company Agreement, and the relationship
between the Company and the Members shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflict-of-laws principles thereof, and
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<PAGE> 15
excluding any principle that might refer such governance or construction to the
law of another jurisdiction.
Section 8. Further Assurances. In connection with this Agreement
and the transactions contemplated hereby, each Member agrees to execute and
deliver any additional documents and instruments, and to perform any additional
acts required or appropriate to effectuate the provisions of this Agreement and
those transactions.
ARTICLE XIII
AMENDMENTS
This Agreement may be altered, amended or repealed and a new Limited
Liability Company Agreement may be adopted by a vote of Members holding more
than a majority of the aggregate Membership Interests of all Members.
Notwithstanding the foregoing, it is the express intention of the Members that
the Company shall, at all times, be classified as a partnership for tax
purposes by both the federal and state governmental authorities. The Members
agree that they shall amend this Agreement as necessary to make it consistent
with that intention, and they further agree that there shall not be any
amendment to this Agreement that would jeopardize the classification of the
Company as a partnership for tax purposes.
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<PAGE> 16
CERTIFICATION
THE UNDERSIGNED, being all of the Members of the Company, hereby
evidence their adoption and ratification of the foregoing Limited Liability
Company Agreement of the Company, as of the 15th day of September, 1997.
HADI MAKARECHIAN,
an individual
/s/ HADI MAKARECHIAN
---------------------------------
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<PAGE> 17
EXHIBIT A
LIMITED LIABILITY COMPANY AGREEMENT
OF
CPH3, L.L.C.
<TABLE>
<CAPTION>
Member Initial Capital Membership
and Address Contribution Interest
- ----------- ------------ --------
<S> <C> <C>
Hadi Makarechian 6,600,034 shares of 100%
4100 MacArthur Blvd. Common Stock
Suite 200 par value $.10, of
Newport Beach, CA 92660 Capital Pacific Holdings, Inc.,
a Delaware corporation
</TABLE>
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