UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Capital Pacific Holdings, Inc. (CPH)
(Name of Issuer)
Common Stock, par value $0.10
(Title of Class of Securities)
CUSIP No. 14040M104
(CUSIP Number)
Thomas F. Steyer
Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, California 94111
(415) 421-2132
(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 .
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 purpose of
Section 18 of the Securities Exchange Act of 1934 ("Act")
or otherwise subject to the liabilities of that section
of that Act but shall be subject to all other provisions
of the Act (however, see the Notes).
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
California Housing Finance, L.P.
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
WC, AF, OO
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
Delaware
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each Report-
ing Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
California Housing Finance, L.L.C.
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
WC, AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
Delaware
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each Report-
ing Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
00
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Farallon Capital Management, L.L.C.
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
Delaware
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each
Reporting Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IA, 00
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Enrique H. Boilini
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
Argentina
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each
Reporting Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
David I. Cohen
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
South Africa
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each
Reporting Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Joseph F. Downes
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
United States
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each
Reporting Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Jason M. Fish
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
United States
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each
Reporting Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Andrew B. Fremder
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
United States
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each
Reporting Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
William F. Mellin
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
United States
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each
Reporting Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Stephen L. Millham
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
United States
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each
Reporting Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Meridee A. Moore
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
United States
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each
Reporting Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 14040M104
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Thomas F. Steyer
2 Check the Appropriate Box if a Member of a Group*
(a)
(b) /x/
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
6 Citizenship or Place of Organization
United States
Number of Shares Beneficially Owned By Each
Reporting Person With
7 Sole Voting Power
-0-
8 Shared Voting Power
2,484,340
9 Sole Dispositive Power
-0-
10 Shared Dispositive Power
2,484,340
11 Aggregate Amount Beneficially Owned By Each Report-
ing Person
2,484,340 (See Preliminary Note to Item 5)
12 Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares*
13 Percent of Class Represented by Amount in Row (11)
16.6%
14 Type of Reporting Person*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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Item 1. Security and Issuer.
This statement relates to shares of Common Stock,
par value $0.10 per share (the "Shares") of Capital Pacific
Holdings, Inc. (the "Company"). The Company's
principal offices are located at 4100 Macarthur Blvd.,
Suite 200, Newport Beach, California 92660.
Item 2. Identity and Background.
(a) This statement is filed by: (i) California
Housing Finance, L.P., a Delaware limited
partnership ("CHF"), with respect to the Shares
held by it; (ii) California Housing Finance, L.L.C.,
a Delaware limited liability company ("CHFLLC"),
with respect to the Shares held by CHF; (iii)
Farallon Capital Management, L.L.C., a Delaware
limited liability company ("FCMLLC"), with respect
to the Shares held by CHF; and (iv) each of Enrique
H. Boilini ("Boilini"), David I. Cohen ("Cohen"),
Joseph F. Downes ("Downes"), Jason M. Fish ("Fish"),
Andrew B. Fremder ("Fremder"), William F. Mellin ("Mellin"),
Stephen L. Millham ("Millham"), Meridee A. Moore ("Moore") and
Thomas F. Steyer ("Steyer"), with respect to the Shares
held by CHF (CHF, CHFLLC, FCMLLC, Boilini, Cohen, Downes,
Fish, Fremder, Mellin, Millham, Moore and Steyer shall
collectively be referred to hereafter as the "Reporting
Persons").
As stated above, CHF is a Delaware limited partnership.
Its general partner is CHFLLC and its limited partners are
Farallon Capital Partners, L.P., a California limited partnership
("FCP"), a discretionary account managed by FCMLLC (the
"Managed Account"), RR Capital Partners, L.P., a Delaware
limited partnership ("RR") and Farallon Special Situation
Partners,
L.P., a Delaware limited partnership ("FSSP").
As stated above, CHFLLC is a Delaware limited liability
company. Its manager is FCMLLC. The members of CHFLLC
are FCP, the Managed Account, RR and FSSP.
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Subject to the conditions described in the Preliminary Note
to Item 5, the Shares reported hereby for CHF are owned directly
by it. CHFLLC, as general partner of CHF, may be deemed to be
the beneficial owner of all Shares owned by CHF. FCMLLC, as
manager of CHFLLC, may be deemed to be the beneficial owner
of all Shares owned by CHF. Each of Boilini, Cohen, Downes,
Fish, Fremder, Mellin, Millham, Moore and Steyer may be
deemed, as managing members of FCMLLC, to be the beneficial
owner of all Shares owned by CHF. Each of CHFLLC, FCMLLC,
Boilini, Cohen, Downes, Fish, Fremder, Mellin, Millham, Moore
and Steyer hereby disclaim any beneficial ownership of any such
Shares.
The name, address, principal business, state of
organization, executive officers, directors and
controlling persons of CHF, CHFLLC, FCMLLC are set forth on
Annex 1 hereto.
(a) The address of the principal business and
principal office of CHF, CHFLLC and FCMLLC
is One Maritime Plaza, Suite 1325, San Francisco,
California 94111.
(b) The principal business of CHF is to invest in
and engage in certain financial transactions with the
Company and its affilialtes. The principal business
of CHFLLC is to act as the general partner of CHF.
The principal business of FCMLLC is that of a registered
investment adviser. FCMLLC also acts as the manager
of CHFLLC.
(c) None of CHF, CHFLLC, FCMLLC
or any of the persons listed on Annex 1 hereto
has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or
similar misdemeanors).
(d) None of CHF, CHFLLC, FCMLLC
or any of the persons listed on Annex 1 hereto
has, during the last five years, been party to a civil
proceeding of a judicial or
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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.
Item 3. Source and Amount of Funds and Other
Consideration.
The net investment cost (including commissions)
is $10,000,000 for the 2,484,340 Shares held by CHF.
The consideration for such acquisition was obtained
by CHF from working capital contributed by the partners
of CHF and from borrowings pursuant to agreements entered
into with the following three CHF affiliates (collectively, the
"Lenders"): Farallon Capital Institutional Partners, a California
limited partnership ("FCIP"), Farallon Capital Institutional
Partners II, L.P., a California limited partnership ("FCIP II")
and Farallon Capital Institutional Partners III, L.P., a Delaware
limited partnership ("FCIP III"). The Lenders obtain their funds
from working capital. The partners of CHF obtain their funds as
follows: with respect to FCP, from working capital, from
borrowings pursuant to a margin account maintained by FCP at
Goldman Sachs & Co. and/or from borrowings pursuant to a
revolving credit agreement entered into by FCP with ING Baring
(U.S.) Capital Corporation; with respect to RR, from working
capital and from borrowings pursuant to a margin account
maintained by RR at Goldman Sachs & Co.; with respect to FSSP,
from working capital; with respect to the Managed Account, from
working capital and from borrowings pursuant to a margin account
maintained by such account at Goldman Sachs & Co. and with
respect to CHFLLC, from working capital contributed by the
members of CHFLLC. FCP, RR, FSSP and the Managed Account may
hold certain
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securities in their respective
margin accounts at Goldman Sachs & Co., and the accounts may from
time to time have debit balances.
Item 4. Purpose of the Transaction.
Preliminary Note: On September 29, 1997, CHF was informed
that the Board of Directors of the Company approved the
restructuring of the Company and its subsidiaries as described
below (the "Transaction") and CHF and the Stockholders (as
defined below) executed the Investment and Stockholder Agreement
(the "Investment and Stockholder Agreement")substantially in the
form attached as Exhibit B hereto (as described below).
The consummation of the Transaction is subject to agreement
on the final form of the applicable exhibits to the Investment
and Stockholder Agreement and exhibits to the related documents.
In addition, the acquisition of the 2,484,340 Shares by CHF as
reported in this Schedule 13D, is conditioned upon, among other
conditions, the consummation of the Transaction, the receipt of
all necessary third party consents, and other customary
conditions. If all of the conditions are not satisfied (or
waived), CHF will not acquire any of such Shares and will not be
a beneficial owner of any of the 16.6% of the Company's Shares as
reported herein.
To the extent the Shares are deemed to have been acquired
based on the foregoing Preliminary Note, the Shares were acquired
as an investment in the Company made in conjunction with the
Transaction. Each Reporting Person at any time and from time to
time may acquire additional Shares or dispose of any or all of
its Shares depending upon an ongoing evaluation of the investment
in the Shares, prevailing market conditions, other investment
opportunities, liquidity requirements of the Reporting Person
and/or other
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investment considerations. No Reporting Person has
made a determination regarding a maximum or minimum number of
Shares which it may hold at any point in time. In addition, no
Reporting Person has made a determination whether or how it may
exercise its rights under the "tag-along" or "buy-sell"
provisions discussed below.
The Transaction consists of the following: (i) the Company
and its subsidiaries will contribute substantially all of their
assets and liabilities to a newly-formed limited liability
company (the "New LLC") which is wholly-owned by the Company and
its subsidiaries and (ii) immediately after such contribution,
and simultaneously with the acquisition of the Shares by CHF, CHF
will contribute $30 million to the New LLC in exchange for 32.07%
of the equity interests in the New LLC. The Company and its
subsidiaries will retain the remaining 67.93% of the equity
interests of the New LLC and the Company will be the sole manager
of the New LLC. In addition, as part of the Transaction, the
operations of the Company will be restructured such that the
present business of the Company will be conducted through the New
LLC and future business of the Company will, unless CHF otherwise
consents, be conducted through one or more separate limited
liability companies or limited partnerships which will be
established for such purpose.
In connection with the Transaction, CHF, the Company, the
New LLC and two of the Company's stockholders (namely, CPH2, LLC
and CPH3, LLC) (the "Stockholders") will enter into several
agreements relating to the Shares in addition to the Investment
and Stockholder Agreement, which agreements are detailed below
and attached hereto.
CHF, the Company, the New LLC and the Stockholders have
entered into the Investment and Stockholder Agreement. Pursuant
to Section 6.05 of the Investment and Stockholder Agreement, CHF
is granted several minority protections with respect to
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the Company which gives CHF the right to prevent certain
transactions and actions by the Company, including the ability to
veto the annual business plan of the Company. For a complete
description of such protections see Section 6.05 of Exhibit B.
(Section 6.05(2)). These minority protections are intended to
protect CHF's investment in the Company and the New
LLC. CHF intends to use such minority protections to maximize
and protect the value ofCHF's investment in the Company and the
New LLC.
The Investment and Stockholder Agreement also contains in
Section 7.03 a "buy-sell" arrangement pursuant to which, from and
after the date which is 36 months after the date of consummation
of the Transaction, either CHF or the Stockholders may make an
offer to buy all of the other party's shares of Company stock and
interests in the New LLC, or sell all of their shares of Company
stock and interests in the New LLC to the other party, at an
offer price. The party receiving such offer has the right either
to buy the other party's shares of Company stock and interests
in the New LLC, or to sell their shares of Company stock and
interests in the New LLC to the offering party, at the offer
price. If CHF were to buy the Stockholders' shares of Company
stock pursuant to such arrangement, it would own more than 50% of
the outstanding shares of the Company at that time.
Section 7.01 of the Investment and Stockholder Agreement
provides a "tag-along" right of CHF and the Stockholders. This
provision provides that if CHF or the Stockholders wish to sell
any of their shares of Company stock to a third party, the non-
selling party has the right to sell a pro rata portion of their
shares of Company stock to such third party on the same terms and
conditions.
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Section 7.02 of the Investment and Stockholder Agreement
provides that if at any time either (a) CHF or any of its
affiliates acquires any shares of Company stock, CHF will offer
to purchase twice as many shares from the Stockholders for the
same price, or (b) any of the Stockholders acquires any shares of
Company stock, the Stockholders will offer to purchase twice as
many shares from CHF for the same price.
CHF and the Company will also enter into a Registration
Rights Agreement substantially in the form attached hereto as
Exhibit C (the "Registration Rights Agreement") pursuant to which
the Company has agreed, upon the request of CHF, to publicly
register the Shares held by CHF under the Securities Act of 1933,
as amended.
In order to maximize and protect the value of CHF's
investment in the Company and the New LLC and to exercise its
minority protections and other rights, the Reporting Persons
intend to engage in communications with one or more shareholders
of the Company, one or more officers of the Company and/or one or
more members of the board of directors of the Company regarding
the Company and its affiliates and subsidiaries, including but
not limited to their operations.
Except to the extent any of the foregoing may be deemed a
plan or proposal, none of the Reporting Persons has any plans or
proposals which relate to, or could result in, any of the matters
referred to in paragraphs (a) through (j), inclusive, of the
instructions to Item 4 of Schedule 13D. The Reporting Persons
may, at any time and from time to time, review or reconsider
their position and/or change their purpose and/or formulate plans
or proposals with respect thereto.
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Item 5. Interest in Securities of the Issuer.
Preliminary Note: On September 29, 1997, CHF was informed
that the Board of Directors of the Company approved the
Transaction and CHF and the Stockholders executed the Investment
and Stockholder Agreement substantially in the form attached as
Exhibit B hereto (as described in Item 4).
The consummation of the Transaction is subject to agreement
on the final form of the applicable exhibits to the Investment
and Stockholder Agreement and exhibits to the related documents.
In addition, the acquisition of the 2,484,340 Shares by CHF as
reported in this Schedule 13D, is conditioned upon, among other
conditions, the consummation of the Transaction, the receipt of
all necessary third party consents, and other customary
conditions. If all of the conditions are not satisfied (or
waived), CHF will not acquire any of such Shares
and will not be a beneficial owner of any of the 16.6% of the
Company's Shares as reported herein.
A. California Housing Finance, L.P.
(a), (b) The information set forth in
Rows 7, 8, 9, 10, 11 and 13 of the cover page hereto for
CHF is incorporated herein by reference. The percentage
amount set forth in Row 13 of such cover page and of each
other cover page filed herewith is calculated based upon the
14,995,000 Shares outstanding as of July 15, 1997 as reported
by the Company in its Form 10Q for the period ended May 31, 1997.
(c) The trading dates, number of Shares
purchased or sold and the price per Share for all
purchases and sales of the Shares in the past 60 days
are set forth on Schedule A hereto and are incorporated
herein by reference. All of such transactions were
privately-negotiated transactions.
(d) CHFLLC, as general partner of CHF, has the
power to direct the affairs of CHF, including the disposition of
the proceeds of the sale of the Shares owned by CHF. FCMLLC,
as manager of CHFLLC,
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<PAGE>
has the power to direct the affairs
of CHFLLC, including the disposition of the proceeds of the sale
of the Shares. Steyer is the senior managing member of FCMLLC,
and Boilini, Cohen, Downes, Fish, Fremder, Mellin, Millham and
Moore are managing members of FPLLC.
(e) Not applicable.
B. California Housing Finance, L.L.C.
(a), (b) The information set forth in Rows 7, 8, 9, 10,
11 and 13 of the cover page hereto for CHFLLC is incorporated
herein by reference.
(c) None.
(d) FCMLLC, as manager of CHFLLC, has the power
to direct the affairs of CHFLLC, including the disposition of the
proceeds of the sale of the Shares. Steyer is the senior
managing member of FCMLLC, and Boilini, Cohen, Downes, Fish,
Fremder, Mellin, Millham and Moore are managing members of
FCMLLC.
(e) Not applicable.
C. Farallon Capital Management, L.L.C.
(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for
FCMLLC is incorporated herein by reference.
(c) None.
(d) Steyer is the senior managing member of
FCMLLC and Boilini, Cohen, Downes, Fish, Fremder,
Mellin, Millham and Moore are managing members of FCMLLC.
(e) Not applicable.
D. Enrique H. Boilini
(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for
Boilini is incorporated herein by reference.
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(c) None.
(d) Boilini is a managing member of FCMLLC.
(e) Not applicable.
E. David I. Cohen
(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for Cohen
is incorporated herein by reference.
(c) None.
(d) Cohen is a managing member of FCMLLC.
(e) Not applicable.
F. Joseph F. Downes
(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for
Downes is incorporated herein by reference.
(c) None.
(d) Downes is a managing member of FCMLLC.
(e) Not applicable.
G. Jason M. Fish
(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for Fish
is incorporated herein by reference.
(c) None.
(d) Fish is a managing member of FCMLLC.
(e) Not applicable.
H. Andrew B. Fremder
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(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for
Fremder is incorporated herein by reference.
(c) None.
(d) Fremder is a managing member of FCMLLC.
(e) Not applicable.
I. William F. Mellin
(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for
Mellin is incorporated herein by reference.
(c) None.
(d) Mellin is a managing member of FCMLLC.
(e) Not applicable.
J. Stephen L. Millham
(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for
Millham is incorporated herein by reference.
(c) None.
(d) Millham is a managing member of FCMLLC.
(e) Not applicable.
K. Meridee A. Moore
(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for Moore
is incorporated herein by reference.
(c) None.
(d) Moore is a managing member of FCMLLC.
(e) Not applicable.
PAGE
<PAGE>
L. Thomas F. Steyer
(a), (b) The information set forth in Rows
7, 8, 9, 10, 11 and 13 of the cover page hereto for
Steyer is incorporated herein by reference.
(c) None.
(d) Steyer is the senior managing member of
FCMLLC.
(e) Not applicable.
Subject to the conditions described in the Preliminary
Note to Item 5, the Shares reported hereby for
CHF are owned directly by it. CHFLLC, as general
partner of CHF, may be deemed to be the beneficial
owner of all Shares owned by CHF. FMCLLC, as
manager of CHFLLC, may be deemed to be the
beneficial owner of all Shares owned by CHF.
Each of Boilini, Cohen, Downes, Fish, Fremder,
Mellin, Millham, Moore and Steyer may be deemed,
as managing members of FCMLLC, to be the beneficial
owner of all Shares owned by CHF. Each of CHFLLC,
FCMLLC, Boilini, Cohen, Downes, Fish, Fremder,
Mellin, Millham, Moore and Steyer hereby disclaim
any beneficial ownership of any such Shares.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
In connection with the Transaction, CHF and the
Stockholders have entered into an Investment and Stockholder
Agreement and will enter into a Registration Rights Agreement.
The terms of such agreements are described in Item 4 of this
Schedule 13D, and such agreements are attached as exhibits to
the Schedule 13D pursuant to Item 7.
In addition, CHF and the Stockholders will enter into
a Stock Purchase Agreement substantially in the form
attached hereto as Exhibit D (the "Stock Purchase
Agreement")
PAGE
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containing customary representations,
warranties, covenants and indemnities. CHF and the manager
of the Stockholders will also enter into an agreement
substantially in the form attached hereto as Exhibit E (the
"Agreement") pursuant to which such manager made certain
representations and warranties with respect to the Shares. CHF,
the Stockholders and NationsBank, N.A. (the "Escrow Agent") will
also enter into an Escrow Agreement substantially in the form
attached as Exhibit F hereto (the "Escrow Agreement") pursuant to
which CHF will deposit the purchase price for the Shares, and the
Stockholders will deposit the Shares, with the Escrow Agent. If
the Transaction is consummated prior to November 18, 1997, the
Shares will be delivered to CHF and the purchase price to the
Stockholders. If the transaction is not consummated by November
18, 1997, the Shares will be returned to the Stockholders and the
purchase price will be returned to CHF.
Except as described above, there are no contracts,
arrangements, understandings or relationships (legal or
otherwise) among the Reporting Persons or between such persons
and any other person with respect to any securities of the
Company, including but not limited to transfer or voting of any
securities of the Company, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits,
divisions of profits or loss, or the giving or withholding of
proxies.
Item 7. Materials to be Filed as Exhibits.
There is filed herewith as Exhibit A a written agreement
relating to the filing of joint acquisition statements as
required by Rule 13d-1(f)(1) under the Securities Exchange Act of
1934, as amended. There is filed herewith as Exhibits B-F,
respectively, the Investment
PAGE
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and Stockholder Agreement,
the Registration Rights Agreement, the Stock Purchase
Agreement, the Agreement and the Escrow Agreement, as
described in Items 4 and 6 above.
PAGE
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of our
knowledge and belief, the undersigned certify that the
information set forth in this statement is true, complete
and correct.
Dated: September 30, 1997
CALIFORNIA HOUSING FINANCE, L.P.
By: California Housing Finance, L.L.C.,
its General Partner
By: Farallon Capital Management, L.L.C.
its Manager
/s/ Thomas F. Steyer
by: Thomas F. Steyer,
Senior Managing Member
CALIFORNIA HOUSING FINANCE, L.L.C.
By: Farallon Capital Management, L.L.C.
its Manager
/s/Thomas F. Steyer
by: Thomas F. Steyer,
Senior Managing Member
FARALLON CAPITAL MANAGEMENT, L.L.C.
/s/Thomas F. Steyer
by: Thomas F. Steyer
Senior Managing Member
PAGE
<PAGE>
(Continued from previous page)
/s/ Thomas F. Steyer
Thomas F. Steyer,
individually and as
attorney-in-fact for each
of Enrique H. Boilini, David I.
Cohen, Joseph F. Downes,
Jason M. Fish, Andrew B. Fremder,
William F. Mellin, Stephen L.
Millham, and Meridee A. Moore.
The Powers of Attorney each executed by Boilini, Cohen,
Fish, Fremder, Mellin, Millham and Moore authorizing Steyer
to sign and file this Schedule 13D on each such person's behalf
was filed with Amendment No. 1 to the Schedule 13D filed with
the SEC on September 26, 1997 by such Reporting Persons with
respect to the Common Stock of Sphere Drake Holdings Limited
is hereby incorporated by reference.
PAGE
<PAGE>
ANNEX 1
Set forth below with respect to CHF, CHFLLC and
FCMLLC is the following: (a) name; (b) address; (c) principal
business; (d) state of organization; and (e) controlling
persons. Set forth below with respect to each managing
member of FCMLLC is the following: (a) name;
(b) business address; (c) principal occupation; and
(d) citizenship.
1. (a) California Housing Finance, L.P.
(b) c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Invests and engages in certain financial
transactions with the Company and its affiliates
(d) Delaware limited partnership
(e) General Partner: CHFLLC
2. (a) California Housing Finance, L.L.C.
(b) c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Acts as General Partner of CHF
(d) Delaware limited liability company
(e) Manager: FCMLLC
3. (a) Farallon Capital Management, L.L.C.
(b) One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Serves as investment adviser to various
managed accounts. Also acts as manager of
CHFLLC
(d) Delaware limited liability company
(e) Managing Members: Thomas F. Steyer, Se-
nior Managing Member; Enrique H. Boilini,
David I. Cohen, Joseph H. Downes, Jason M.
Fish, Andrew B. Fremder, William F. Mellin, Stephen L.
Millham and Meridee A. Moore, Managing
Members.
4. (a) Enrique H. Boilini
(b) c/o Farallon Capital Management, L.L.C.
75 Holly Hill Lane
Greenwich, CT 06830
(c) Managing Member of Farallon
Partners, L.L.C.; Managing Member of
Farallon Capital Management, L.L.C.
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<PAGE>
(d) Argentinean Citizen
5. (a) David I. Cohen
(b) c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Managing Member of Farallon
Partners, L.L.C.; Managing Member of
Farallon Capital Management, L.L.C.
(d) South African Citizen
6. (a) Joseph F. Downes
(b) c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Managing Member of Farallon Partners,
L.L.C.; Managing Member of Farallon Capi-
tal Management, L.L.C.
(d) United States Citizen
7. (a) Jason M. Fish
(b) c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Managing Member of Farallon Partners,
L.L.C.; Managing Member of Farallon Capi-
tal Management, L.L.C.
(d) United States Citizen
8. (a) Andrew B. Fremder
(b) c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Managing Member of Farallon
Partners, L.L.C.; Managing Member of
Farallon Capital Management, L.L.C.
(d) United States Citizen
9. (a) William F. Mellin
(b) c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Managing Member of Farallon Partners,
L.L.C.; Managing Member of Farallon Capi-
tal Management, L.L.C.
(d) United States Citizen
10. (a) Stephen L. Millham
(b) c/o Farallon Capital Management, L.L.C.
PAGE
<PAGE>
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Managing Member of Farallon Partners,
L.L.C.; Managing Member of Farallon Capi-
tal Management, L.L.C.
(d) United States Citizen
11. (a) Meridee A. Moore
(b) c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Managing Member of Farallon Partners,
L.L.C.; Managing Member of Farallon Capi-
tal Management, L.L.C.
(d) United States Citizen
12. (a) Thomas F. Steyer
(b) c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
(c) Managing Member of Farallon Part-
ners, L.L.C.; Senior Managing Member of
Farallon Capital Management, L.L.C.
(d) United States Citizen
PAGE
<PAGE>
SCHEDULE A
CALIFORNIA HOUSING FINANCE, L.P.
NO. OF SHARES PRICE
TRADE DATE PURCHASED PER SHARE
(Including
commission)
9/29/97 2,484,340 <1> $4.03
<1> Such Shares are held subject to the conditions
set forth in the Preliminary Note to Item 5.
PAGE
<PAGE>
EXHIBIT INDEX
EXHIBIT A Joint Acquisition Statement
Pursuant to Rule 13D-(f) (1)
EXHIBIT B Investment and Stockholder
Agreement
EXHIBIT C Registration Rights Agreement
EXHIBIT D Stock Purchase Agreement
EXHIBIT E Agreement
EXHIBIT F Escrow Agreement
PAGE
<PAGE>
EXHIBIT A
PAGE
<PAGE>
EXHIBIT A
to SCHEDULE 13D
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-(f)(1)
The undersigned acknowledge and agree that the
foregoing statement on Schedule 13D is filed on behalf of
each of the undersigned and that all subsequent amend-
ments to this statement on Schedule 13D shall be filed on
behalf of each of the undersigned without the necessity
of filing additional joint acquisition statements. The
undersigned acknowledge that each shall be responsible
for the timely filing of such amendments, and for the
completeness and accuracy of the information concerning
him, her or it contained therein, but shall not be
responsible for the completeness and accuracy of the
information concerning the other entities or persons,
except to the extent that he, she or it knows or has
reason to believe that such information is inaccurate.
Dated: September 30, 1997
CALIFORNIA HOUSING FINANCE, L.P.
By: California Housing Finance, L.L.C.,
its General Partner
By: Farallon Capital Management, L.L.C.
its Manager
/s/ Thomas F. Steyer
by: Thomas F. Steyer,
Senior Managing Member
CALIFORNIA HOUSING FINANCE, L.L.C.
By: Farallon Capital Management, L.L.C.
its Manager
/s/ Thomas F. Steyer
by: Thomas F. Steyer,
Senior Managing Member
PAGE
<PAGE>
(Continued from previous page)
FARALLON CAPITAL MANAGEMENT, L.L.C.
/s/ Thomas F. Steyer
by: Thomas F. Steyer
Senior Managing Member
/s/ Thomas F. Steyer
Thomas F. Steyer,
individually and as
attorney-in-fact for each
of Enrique H. Boilini, David I.
Cohen, Joseph F. Downes,
Jason M. Fish, Andrew B. Fremder,
William F. Mellin, Stephen L.
Millham, and Meridee A. Moore.
<PAGE>
<PAGE>
EXHIBIT B
PAGE
<PAGE>
- --------------------------------------------------------------
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
<PAGE>
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
<PAGE>
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.
-2-
PAGE
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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
<PAGE>
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 material 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%).
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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).
(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
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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
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.
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(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.
(c) In the event (i) Purchaser declines or does not
accept any such Financing Opportunity within ten (10) 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 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.
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(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 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
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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;
(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.
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(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.
(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
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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, (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
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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.
(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")
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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 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
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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.
(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.
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(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 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
-25-
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<PAGE>
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.
(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.
-26-
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<PAGE>
(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
-27-
PAGE
<PAGE>
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.
-28-
PAGE
<PAGE>
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>
-29-
PAGE
<PAGE>
<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>
-30-
PAGE
<PAGE>
<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
-31-
PAGE
<PAGE>
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 Millham
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
-32-
PAGE
<PAGE>
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
-33-
PAGE
<PAGE>
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
-34-
PAGE
<PAGE>
Exhibits
Exhibit A Amended and Restated Limited Liability Company
Agreement of the New L.L.C.
Exhibit B Registration Rights Agreement
Exhibit C Mirror Company Operating Agreement
Exhibit D Future Affiliate Operating Agreement (CHF as Partner)
Schedules
Schedule 2.02 Equity Holders of New L.L.C. and Company
Schedule 2.08 Approvals
PAGE
<PAGE>
EXHIBIT C
PAGE
<PAGE>
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
PAGE
<PAGE>
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.
(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.
-2-
PAGE
<PAGE>
(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 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;
-3-
PAGE
<PAGE>
(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;
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(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.
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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 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
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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, andeach 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 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
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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 holderor 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
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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 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.
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(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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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.
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(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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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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EXHIBIT D
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[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 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,
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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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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.
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(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,
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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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"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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(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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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 theClosing 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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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
statementscontained 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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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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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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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 Millham
Steve Millham
Managing Member
516994
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EXHIBIT A
(ESCROW AGREEMENT)
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SCHEDULE A
(SHAREHOLDINGS)
Shares of
Common Stock
Name Beneficially Owned
CPH2, LLC 4,638,657
CPH3, LLC 6,600,034
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EXHIBIT E
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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 theStock and the Purchase Price are escrowed
pending the consummation of the transactions contemplated by
thisAgreement;
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
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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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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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(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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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 CPH2, L.L.C. or CPH3, L.L.C.
Stockholders: 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
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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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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
By:---------------------------------
Hadi Makarechian,
personally
524200v6
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<PAGE>
EXHIBIT F
PAGE
<PAGE>
[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").
(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.
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(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 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,
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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 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
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<PAGE>
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.
(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
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<PAGE>
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
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
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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
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.
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(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]
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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 Millham
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 Hufman
Title: V.P.
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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
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SCHEDULE I
to
ESCROW AGREEMENT
Escrow Account Wire Instructions
[To be provided prior to Closing]
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SCHEDULE II
to
ESCROW AGREEMENT
Address and Wire Instructions for Purchaser
[To be provided prior to Closing]
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SCHEDULE III
to
ESCROW AGREEMENT
Address and Wire Instructions for Selling
Stockholder
[To be provided prior to Closing]
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