SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 22, 1998
Stratus Properties Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-19989 72-1211572
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation or Number)
organization)
98 San Jacinto Blvd., Suite 220
Austin, Texas 78701
(Address of principal executive offices)
(512) 478-5788
(Registrant's telephone number, including area code)
FM Properties Inc.
98 San Jacinto Blvd. Suite 220
Austin, Texas 78701
(Former name or former address, if changes since last report)
Item 5. Other Events.
On May 22, 1998, Stratus Properties Inc. (STRS) and
Olympus Real Estate Corporation (Olympus), an affiliate of Hicks,
Muse, Tate & Furst Incorporated, formed their previously announced
strategic alliance to develop certain of STRS' existing properties and
to pursue new real estate acquisition and development opportunities.
Under the terms of the agreements, Olympus made an approximately $10
million investment in a STRS mandatory redeemable preferred stock,
provided a $10 million convertible debt financing facility to a
wholly owned subsidiary of STRS and made available up to $50 million
of capital for direct investment in joint STRS/Olympus projects.
Pursuant to a Securities Purchase Agreement, a copy of
which is filed as Exhibit 99.2 to this report, STRS issued to
Olympus 1,712,328 shares of Series B Participating Preferred
Stock (the Preferred Stock) at a stated value of $5.84 per share,
the average closing price of a share of STRS common stock on the
Nasdaq Stock Market during the 30 trading days ending March 2,
1998, the date of STRS/Olympus letter of intent for the
transaction. The designations, preferences and rights of the
Preferred Stock are set forth in a Certificate of Designations, a
copy of which is filed as Exhibit 4.1 to this report. In
addition, Olympus has certain rights with respect to the
Preferred Stock and certain other rights, including the right to
designate for nomination 20 percent of STRS' board membership,
as set forth in an Investors Rights Agreement, a copy of which is
filed as Exhibit 4.2 to this report.
The shares of Preferred Stock are redeemable (i) at the
option of Olympus at any time after May 22, 2001 for an amount
per share approximating the economic benefit that would have
accrued had the shares been converted into common stock on a
one-to-one basis and sold (the "common stock equivalent value")
or (ii) at the option of STRS after May 22, 2003 (and in no event
later than May 22, 2004 at which time the Preferred Stock is
required to be redeemed) for the greater of their common stock
equivalent value or their par value per share, plus accrued and
unpaid dividends, if any. STRS has an option to satisfy the
redemption with shares of its common stock, subject to certain
limitations. The Preferred Stock will share any dividends or
distributions ratably with the STRS common stock, which currently
pays no dividend. STRS used the proceeds from the sale of the
Preferred Stock to repay debt.
The $10 million convertible debt facility is available to
a wholly owned subsidiary of STRS in whole or in part through May
22, 2004, to finance STRS' equity investment in new STRS/Olympus
joint venture opportunities in properties not currently owned by
STRS. A copy of the Loan Agreement is filed as Exhibit 4.3 to
this report. The interest rate on the convertible debt will be
12 percent per year, with interest payable quarterly or accrued.
Outstanding principal under the facility will be convertible at
any time into STRS common stock at a conversion price of $7.31,
which is 125 percent of the average closing price of STRS common
stock on the Nasdaq Stock Market during the 30 trading days
ending March 2, 1998. If not converted into common stock, the
convertible debt will be repaid by May 22, 2004. If the
combination of interest at 12 percent and the value of the
conversion right does not provide Olympus with at least a 15
percent annual return on the convertible debt, STRS will pay
Olympus additional interest upon retirement of the convertible
debt in an amount necessary to yield a 15 percent annual return.
The convertible debt is secured by a pledge of STRS' interests
in investments in new STRS/Olympus joint venture opportunities
financed with the proceeds of the convertible debt and is
non-recourse to STRS.
Pursuant to a Master Agreement, a copy of which is filed
as Exhibit 99.1 to this report, Olympus has made available
through May 22, 2001, up to $50 million for its share of capital
for direct investments in STRS/Olympus joint acquisition and
development activities. Through May 22, 2001, STRS has provided
Olympus a right of first refusal to participate for no less than
a 50 percent interest in all new acquisition and development
projects on properties not presently owned by STRS, as well as
development opportunities on existing properties in which STRS
seeks third-party equity participation.
Item 7. Financial Statements and Exhibits.
(c) Exhibit 4.1 Certificate of Designations of the Series B
Participating Preferred Stock of Stratus
Properties Inc.
Exhibit 4.2 Investors Rights Agreement, dated as of May
22, 1998, by and between Stratus Properties Inc.
and Oly/Stratus Equities, L.P.
Exhibit 4.3 Loan Agreement, dated as of May 22, 1998, by
and among Stratus Ventures I Borrower L.L.C., Oly
Lender Stratus, L.P. and Stratus Properties Inc.
Exhibit 99.1 Master Agreement, dated as of May 22, 1998,
by and among Oly Fund II GP Investments, L.P., Oly
Lender Stratus, L.P., Oly/Stratus Equities, L.P.,
Stratus Properties Inc. and Stratus Ventures I
Borrower L.L.C.
Exhibit 99.2 Securities Purchase Agreement, dated as of
May 22, 1998, by and between Oly/Stratus Equities,
L.P. and Stratus Properties Inc.
Exhibit 99.3 Press Release issued jointly by STRS and
Olympus on May 26, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Stratus Properties Inc.
By: /s/ C. Donald Whitmire
-----------------------
C. Donald Whitmire
Controller-Financial Reporting
(Authorized signatory)
Date: June 03, 1998
Stratus Properties Inc.
EXHIBIT INDEX
Exhibit
Number
4.1 Certificate of Designations of the Series B
Participating Preferred Stock of Stratus Properties
Inc.
4.2 Investors Rights Agreement, dated as of May 22, 1998,
by and between Stratus Properties Inc. and Oly/Stratus
Equities, L.P.
4.3 Loan Agreement, dated as of May 22, 1998, by and among
Stratus Ventures I Borrower L.L.C., Oly Lender Stratus,
L.P. and Stratus Properties Inc.
99.1 Master Agreement, dated as of May 22, 1998, by and
among Oly Fund II GP Investments, L.P., Oly Lender
Stratus, L.P., Oly/Stratus Equities, L.P., Stratus
Properties Inc. and Stratus Ventures I Borrower L.L.C.
99.2 Securities Purchase Agreement, dated as of May 22,
1998, by and between Oly/Stratus Equities, L.P. and
Stratus Properties Inc.
99.3 Press Release issued jointly by STRS and Olympus on May
26, 1998.
Exhibit 4.1
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF
SERIES B PARTICIPATING PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Stratus Properties Inc. (formerly known as FM
Properties Inc.) (the "Corporation"), a corporation
organized and existing under the General Corporation Law of
the State of Delaware, does hereby certify that, pursuant to
authority conferred upon the board of directors of the
Corporation (the "Board of Directors") by its Amended and
Restated Certificate of Incorporation, as amended
(hereinafter referred to as the "Certificate of
Incorporation"), and pursuant to the provisions of
Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors, by unanimous vote at a
meeting duly called and held on May 14, 1998, duly approved
and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority
vested in the Board of Directors by its
Certificate of Incorporation, the Board of
Directors does hereby create, authorize and
provide for the issuance of Series B Participating
Preferred Stock, par value $0.01 per share, with a
stated value of $5.84 per share, consisting
initially of 1,712,328 shares, having the
designations, preferences, relative,
participating, optional and other special rights
and the qualifications, limitations and
restrictions thereof that are set forth in the
Certificate of Incorporation and in this
Resolution as follows:
(a) Designation. There is hereby created out of
the authorized and unissued shares of Preferred Stock of the
Corporation a class of Preferred Stock designated as the
"Series B Participating Preferred Stock." The number of
shares constituting such class shall be 1,712,328, and are
referred to as the "Series B Participating Preferred Stock."
The liquidation preference of the Series B Participating
Preferred Stock shall be $5.84 per share (the "Stated
Value").
(b) Rank. The Series B Participating Preferred
Stock shall, with respect to dividends and distributions
upon liquidation, winding-up and dissolution of the
Corporation, rank (i) on parity with respect to dividends
and senior with respect to liquidation, winding-up and
dissolution of the Corporation with the common stock, $0.01
par value ("Common Stock") of the Corporation; (ii) senior
to all other classes of Capital Stock of the Corporation
(other than the Common Stock) or series of Preferred Stock
of the Corporation hereafter created the terms of which
expressly provide that it ranks junior to the Series B
Participating Preferred Stock as to dividends and
distributions upon liquidation, winding-up and dissolution
of the Corporation (collectively referred to as "Junior
Stock"); (iii) on a parity with any class of Capital Stock
of the Corporation or series of Preferred Stock of the
Corporation hereafter created the terms of which expressly
provide that such class or series will rank on a parity with
the Series B Participating Preferred Stock as to dividends
and distributions upon liquidation, winding-up and
dissolution (collectively referred to as "Parity Stock");
(iv) junior with respect to dividends and on parity with
respect to distributions upon liquidation, winding-up and
dissolution of the Corporation with any class of Capital
Stock of the Corporation or series of Preferred Stock of the
Corporation hereafter created the terms of which expressly
provide that such class or series will rank senior to the
Series B Participating Preferred Stock as to dividends and
on parity with the Series B Participating Preferred Stock as
to distributions upon liquidation, winding-up and
dissolution of the Corporation (collectively referred to as
"Senior Dividend Stock"); and (v) junior to each class of
Capital Stock of the Corporation or series of Preferred
Stock of the Corporation hereafter created that has been
approved by the Holders in accordance with paragraph
(f)(ii)(a) hereof and the terms of which do not expressly
provide that such class or series will rank junior to, or on
a parity with, the Series B Participating Preferred Stock as
to both dividends and distributions upon liquidation,
winding-up and dissolution of the Company (collectively
referred to as "Senior Stock").
(c) Dividends.
i) Beginning on the Issue Date, the Holders of
the outstanding shares of Series B Participating
Preferred Stock shall be entitled to participate
ratably with the outstanding shares of Common Stock as
if all shares were of a single class, in all
distributions in the form of dividends in cash, stock
or other property, when, as and if declared by the
Board of Directors out of funds legally available
therefor, with each share of Series B Participating
Preferred Stock entitling the Holder thereof to receive
a distribution amount equal to (A) the distribution
amount per share on the Common Stock, multiplied by (B)
a fraction, the numerator of which is the Stated Value
and the denominator of which is the Conversion Price
(as it may be adjusted and in effect from time to time
as provided in paragraph (h) hereof); provided, that
the Series B Participating Preferred Stock shall not be
entitled to participate in any dividend reinvestment
plan that the Corporation may from time to time adopt
for the benefit of the holders of the Common Stock.
Any such dividend shall be payable to Holders of record
of the Series B Participating Preferred Stock as they
appear on the stock books of the Corporation on the
record date of such dividend when, as and if declared
by the Board of Directors.
ii) All dividends paid with respect to shares of
the Series B Participating Preferred Stock pursuant to
paragraph (c)(i) shall be paid pro rata to the Holders
entitled thereto.
iii) Nothing herein contained shall in any way or
under any circumstances be construed or deemed to
require the Board of Directors to declare, or the
Corporation to pay or set apart for payment, any
dividends on shares of the Series B Participating
Preferred Stock at any time.
iv) No dividends shall be declared, paid or set
apart for payment by the Corporation on the Common
Stock, any Parity Stock or any Junior Stock unless such
dividends have been or contemporaneously are declared
and paid in full, or, if payable in cash, a sum in cash
has been set apart sufficient for such payment, on the
Series B Participating Preferred Stock. If any
dividends are not so paid, all dividends declared upon
shares of the Series B Participating Preferred Stock
and the Common Stock and any Parity Stock shall be
declared pro rata so that the amount of dividends
declared per share on the Series B Participating
Preferred Stock and such Common Stock and Parity Stock
shall in all cases bear to each other the same ratio
that accrued and unpaid dividends per share on the
Series B Participating Preferred Stock and such Common
Stock and Parity Stock bear to each other. Accrued and
unpaid dividends shall not bear interest.
v) a) Holders of shares of the Series B
Participating Preferred Stock shall be entitled to
receive the dividends provided for in paragraph (c)(i)
hereof in preference to and in priority over any such
dividends upon any of the Junior Stock.
b) So long as any share of the Series B
Participating Preferred Stock is outstanding, the
Corporation shall not make any payment on account of,
or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other
retirement of, any of the Common Stock or Junior Stock
or any warrants, rights, calls or options exercisable
for or convertible into any of the Common Stock or
Junior Stock whether in cash, obligations or shares of
the Corporation or other property, and shall not permit
any corporation or other entity directly or indirectly
controlled by the Corporation to purchase or redeem any
of the Common Stock or Junior Stock or any such
warrants, rights, calls or options; provided, however,
that this paragraph (c)(v)(b) shall not prohibit the
Corporation from purchasing, redeeming, or making any
payment on account of shares of Common Stock or
warrants, rights, calls or options exercisable for or
convertible into shares of Common Stock in an aggregate
amount not to exceed 20% of the fully-diluted number of
shares of Common Stock (including shares of Common
Stock issuable upon exercise or conversion of any
outstanding warrants, rights, calls or options
exercisable for or convertible into shares of Common
Stock) of the Corporation as of the Issue Date.
(d) Liquidation Preference.
i) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs
of the Corporation, the Holders of shares of Series B
Participating Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the
Corporation available for distribution to its
stockholders an amount in cash equal to the Stated
Value for each share outstanding, plus an amount in
cash equal to accrued and unpaid dividends thereon to
the date fixed for liquidation, dissolution or winding
up before any payment shall be made or any assets
distributed to the holders of any of the Common Stock
or Junior Stock of the Corporation. After (i) the
payment in full of the liquidation payments payable to
the Holders of outstanding shares of Series B
Participating Preferred Stock any Parity Stock and any
Senior Dividend Stock, and (ii) the payment in full to
the holders of the shares of Common Stock of an amount
equal to (A) the liquidation payment per share to the
Holders of Series B Participating Preferred Stock,
multiplied by (B) a fraction, the numerator of which is
the Stated Value and the denominator of which is the
Conversion Price (as it may be adjusted and in effect
from time to time as provided in paragraph (h) hereof)
for each share of Common Stock, then the Series B
Participating Preferred Stock and any Parity Stock
shall be entitled to participate ratably in an amount
per share equal to (A) the Stated Value, divided by,
(B) the Conversion Price, the result of which is
multiplied by (C) the amount per share of any
additional distributions on the Common Stock, in any
such distribution of cash, property or other assets of
the Corporation then remaining for distribution to the
stockholders of the Corporation. If the assets of the
Corporation are not sufficient to pay in full the
liquidation payments payable to the Holders of
outstanding shares of the Series B Participating
Preferred Stock, all Parity Stock and all Senior
Dividend Stock, then the holders of all such shares
shall share equally and ratably in such distribution of
assets in proportion to the full liquidation
preference, including, with respect to the Series B
Participating Preferred Stock and any Parity Stock, all
accrued and unpaid dividends to which each is entitled.
ii) For the purposes of this paragraph (d), the
sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of
all or substantially all of the property or assets of
the Corporation, the recapitalization or change in the
outstanding shares of Common Stock, or the
consolidation or merger of the Corporation with or into
one or more entities shall not be deemed to be a
liquidation, dissolution or winding up of the affairs
of the Corporation.
(e) Redemption.
i) Optional Redemption. a) The Corporation may,
at its option, redeem at any time on or after May 22,
2003, subject to contractual and other restrictions
with respect thereto and to the extent of funds legally
available therefor, in whole or in part, in the manner
provided for in paragraph (e)(iii) hereof, any or all
of the shares of the Series B Participating Preferred
Stock, at a Redemption Price per share equal to the
greater of (i) the Stated Value plus, without
duplication, an amount equal to all accumulated and
unpaid dividends per share, or (ii) the Participation
Price.
b) In the event of a redemption pursuant to
paragraph (e)(i)(a) hereof of only a portion of the
then outstanding shares of the Series B Participating
Preferred Stock, the Corporation shall effect such
redemption on a pro rata basis according to the number
of shares held by each Holder of the Series B
Participating Preferred Stock.
ii) Mandatory Redemption. On May 22, 2004, the
Corporation shall redeem, to the extent of funds
legally available therefor, in the manner provided for
in paragraph (e)(iii) hereof, and each Holder shall
surrender or redemption, all of the shares of the
Series B Participating Preferred Stock then outstanding
at a Redemption Price per share equal to the greater of
(i) the Stated Value, plus, without duplication, an
amount equal to all accumulated and unpaid dividends
per share, or (ii) the Participation Price.
iii) Procedures for Redemption. a) At least
thirty (30) days and not more than sixty (60) days
prior to the date fixed for any redemption of the
Series B Participating Preferred Stock, written notice
(the "Redemption Notice") shall be given by first class
mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Series B
Participating Preferred Stock at such Holder's address
as it appears on the stock books of the Corporation,
provided that no failure to give such notice nor any
deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Series B
Participating Preferred Stock to be redeemed except as
to the Holder or Holders to whom the Corporation has
failed to give said notice or except as to the Holder
or Holders whose notice was defective. The Redemption
Notice shall state:
(1) whether the redemption is pursuant to
paragraph (e)(i)(a) or (e)(ii) hereof;
(2) the Redemption Price (or method of
calculation thereof, if not then fixed);
(3) whether all or less than all the
outstanding shares of the Series B Participating
Preferred Stock are to be redeemed and the total
number of shares of the Series B Participating
Preferred Stock being redeemed;
(4) the Redemption Date; and
(5) that the Holder is to surrender to the
Corporation, in the manner, at the place or places
and at the price designated, his or its
certificate or certificates representing the
shares of Series B Participating Preferred Stock
to be redeemed.
b) Each Holder of Series B Participating
Preferred Stock called for redemption shall surrender
the certificate or certificates representing such
shares of Series B Participating Preferred Stock to the
Corporation, duly endorsed (or otherwise in proper form
for transfer, as determined by the Corporation), in the
manner and at the place designated in the Redemption
Notice, and on the Redemption Date, against delivery of
such certificate or certificates to the Corporation,
the full Redemption Price for such shares shall, except
as provided in paragraphs (iv)(b) or (c) below, be
payable in cash to the Person whose name appears on
such certificate or certificates as the owner thereof,
and each surrendered certificate shall be canceled and
retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed
shares.
c) On and after the Redemption Date, unless the
Corporation defaults in the payment in full of the
applicable Redemption Price, all rights of the Holders
of redeemed shares shall terminate with respect thereto
on the Redemption Date, other than the right to receive
the redemption price thereon without interest.
iv) Payment of Redemption Price. a) Except as
otherwise set forth in paragraphs (b) or (c) of this
paragraph (iv), the Redemption Price for the shares of
Series B Participating Preferred Stock shall be paid in
cash to the Holders of record of the shares of Series B
Participating Preferred Stock shown on the records of
the Corporation as of the Redemption Date.
b) Notwithstanding the foregoing paragraph
(iv)(a) or anything in this Certificate of Designations
to the contrary, the Corporation may, upon written
notice to the Holders of record of the Series B
Participating Preferred Stock at least three Business
Days prior to the Redemption Date, elect to pay all or
a portion of the Redemption Price for the Series B
Participating Preferred Stock pursuant to paragraphs
(i) or (ii) above in Common Stock of the Corporation,
by delivering that number of whole shares of Common
Stock of the Corporation to each Holder of the Series B
Participating Preferred Stock equal to (x) the
Redemption Price per share, divided by (y) the average
Common Stock Price for the ten trading days immediately
preceding the Redemption Date, the result of which is
then multiplied by (z) the number of shares of Series B
Participating Preferred Stock to be so redeemed from
such Holder by payment in shares of Common Stock, and,
in the case of any fractional share of Common Stock,
rounded to the nearest number of whole shares;
provided, however, that the Corporation may only pay
any Redemption Price in shares of Common Stock if, as
of the Redemption Date, the Common Stock is then
registered under Section 12(b) or 12(g) under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and listed on the New York Stock
Exchange or the American Stock Exchange, or approved
for quotation on the Nasdaq Stock Market's National
Market System.
c) In the event of a redemption of any or all of
the outstanding shares of Series B Participating
Preferred Stock for which the Corporation has elected
to pay the Redemption Price in whole or in part in
cash, the Corporation may, by written notice to the
Holders of record of the Series B Participating
Preferred Stock at least three Business Days prior to
the Redemption Date, elect to defer the Redemption
Date, solely with respect to the portion of shares of
Series B Participating Preferred Stock that the
Corporation elects to redeem in cash, for a period of
no longer than 180 days from the date of such written
notice for the purpose of effecting a public offering
(the "Offering") by the Corporation of shares of Common
Stock; provided that (i) the Corporation shall file
with the Securities and Exchange Commission within 45
days of the date of such Redemption Notice a
registration statement (the "Registration Statement")
under the Securities Act of 1933, as amended (the
"Securities Act") with respect to such Offering, (ii)
the Corporation shall designate the use of proceeds to
the Corporation from such Offering in the prospectus
forming a part of such Registration Statement for the
redemption in cash of the Series B Participating
Preferred Stock in accordance with this Certificate of
Designations, and (iii) the Offering shall be
consummated and the Redemption Date fixed on or prior
to 180 days following the date of such Redemption
Notice. In the event that (x) the Registration
Statement is not filed within 45 days following the
date of such Redemption Notice or (y) the Offering is
not consummated within 180 days following the date of
such Redemption Notice (each of (x) and (y) being
referred to herein as a "Deferral Default"), the
Corporation shall, within ten Business Days after such
Deferral Default, pay the Redemption Price on all
shares of Series B Participating Preferred Stock called
for redemption in accordance with paragraph (iv)(a)
above.
d) The obligation of the Corporation to pay the
Redemption Price in cash pursuant to paragraph
(e)(i)(a) or (e)(ii) shall be fully subordinated to the
Corporation's Senior Debt in accordance with the
provisions of this paragraph (e)(iv)(d). The
Corporation may not make any cash payments on account
of the Series B Participating Preferred Stock if there
shall have occurred and be continuing a default in the
payment of principal of (or premium, if any) or
interest on any Specified Senior Debt, the payment of
commitment or facility fees, letter of credit fees or
agency fees under any Specified Senior Debt, or
payments with respect to letter of credit reimbursement
arrangements with one or more lenders under the credit
or other agreement evidencing any Specified Senior Debt
when due (a "Senior Payment Default"). Following the
occurrence of an event of default (other than a Senior
Payment Default) under any Specified Senior Debt
permitting the holders of such Specified Senior Debt
(or a trustee or agent on behalf thereof) to accelerate
the maturity thereof, or the occurrence of an event
which with the passage of time or the giving of notice,
or both, could become such an event of default (a
"Senior Nonmonetary Default") and, in each case,
following the giving of notice thereof to Parent in
accordance with the terms governing the relevant
Specified Senior Debt (a "Blockage Notice"), Parent may
not make any payments on account of the Payment
Obligations for a period (a "Blockage Period")
commencing on the date the Corporation receives the
Blockage Notice, and ending on the earliest of (i) 179
days after such date, (ii) the date, if any, on which
such Senior Nonmonetary Default is waived or otherwise
cured and (iii) the date, if any, on which such
Blockage Period shall have been terminated by written
notice to the Corporation from the holders of the
relevant Specified Senior Debt (or a trustee or agent
on behalf thereof).
Upon any payment or distribution of assets of any
kind or character, whether in cash, property or
securities, to creditors upon any dissolution or
winding up or total or partial liquidation or
reorganization of the Corporation, whether voluntary or
involuntary, or upon bankruptcy, insolvency,
receivership or other proceedings, then and in such
event, all principal, premium (if any) and interest and
all other amounts due or to become due upon all the
Corporation's Senior Debt shall first be paid in full
before the Holders of the Series B Participating
Preferred Stock shall be entitled to receive or retain
any assets so paid or distributed in respect of the
Series B Participating Preferred Stock; and, upon any
such dissolution or winding up or liquidation or
reorganization, any payment or distribution of assets
of any kind or character, whether in cash, property or
securities, that the Holders of the Series B
Participating Preferred Stock would be entitled to,
except as otherwise provided herein, shall be paid by
the Corporation or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person
making such payment or distributions, or by the Holders
of the Series B Participating Preferred Stock if
received by them, directly and ratably to the holders
of the Corporation's Senior Debt, to the extent
necessary to pay in full all the Corporation's Senior
Debt, after giving effect to any concurrent payment or
distribution to or for the holders of the Corporation's
Senior Debt, before any payment or distribution is made
to the Holders of the Series B Participating Preferred
Stock.
Each Holder of shares of Series B Participating
Preferred Stock hereby irrevocably authorizes and
empowers (without imposing any obligation on) the
holders of the Corporation's Senior Debt (or any
trustee or agent on behalf thereof), under the
circumstances set forth in the immediately preceding
paragraph, to demand, sue for, collect and receive
every such payment or distribution described therein
and give acquittance therefor, to file claims and
proofs of claims in any statutory or nonstatutory
proceeding, to vote such the Corporation's Senior Debt
holder's ratable share of the full amount of the
Redemption Price on the Series B Participating
Preferred Stock in its sole discretion in connection
with any resolution, arrangement, plan of
reorganization, compromise, settlement or extension and
to take all such other action (including, without
limitation, the right to participate in any composition
of creditors and the right to vote such the
Corporation's Senior Debt holders' ratable share of the
Redemption Price at creditors' meetings for the
election of trustees, acceptances of plans and
otherwise), in the name of the Holder of the Series B
Participating Preferred Stock, as such the
Corporation's Senior Debt holder or its representative
may deem necessary or desirable for the enforcement of
these subordination provisions.
If any payment or distribution of assets of any
kind or character, whether in cash, property or
securities, shall be collected or received by any
Holder of the Series B Participating Preferred Stock
and such holder shall not be permitted under the terms
of this instrument to receive or retain such payment or
distribution, such holder shall forthwith turn over the
same to the Corporation's Senior Debt holders for their
ratable benefit in the form received (except for the
endorsement or the assignment of such holder when
necessary) and, until so turned over, the same shall be
held in trust by such holder as the property and for
the ratable benefit of the Corporation's Senior Debt
holders.
(f) Voting Rights.
i) The Holders of Series B Participating
Preferred Stock, except as otherwise required under
Delaware law or as set forth in paragraph (ii) below,
shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the
stockholders of the Corporation.
ii) a) So long as any shares of the Series B
Participating Preferred Stock are outstanding, the
Corporation shall not authorize any class of Senior
Stock without the affirmative vote or consent of
Holders of at least two-thirds of the outstanding
shares of Series B Participating Preferred Stock,
voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
b) So long as any shares of the Series B
Participating Preferred Stock are outstanding, the
Corporation shall not amend its Certificate of
Incorporation or this Certificate of Designations so as
to affect adversely the specified rights, preferences,
privileges or voting rights of the Series B
Participating Preferred Stock without the affirmative
vote or consent of Holders of at least two-thirds of
the issued and outstanding shares of Series B
Participating Preferred Stock, voting or consenting, as
the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an
annual or special meeting.
iii) In any case in which the Holders of Series B
Participating Preferred Stock shall be entitled to vote
pursuant to this paragraph (f) or pursuant to Delaware
law, each Holder of Series B Participating Preferred
Stock entitled to vote with respect to such matter
shall be entitled to one vote for each share of Series
B Participating Preferred Stock held.
(g) Recapitalization, Merger, Consolidation or
Transfer of Assets.
i) In the event that the Corporation shall, in a
single transaction or series of related transactions,
recapitalize, reclassify or change the outstanding
shares of Common Stock (other than a change in par
value or from par value to no par value or from no par
value to par value, or as a result of a subdivision or
combination provided for in paragraph (h) hereof),
consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another Person or
adopt a plan of liquidation, the Holders of shares of
Series B Participating Preferred Stock shall be
entitled, upon written notice to the Corporation within
15 Business Days of the public announcement of such
transaction, to require the Corporation to exchange or
cause to be exchanged all or a portion of the shares of
Series B Participating Preferred Stock held by such
Holder for such securities, cash and other property
receivable upon the consummation of such transaction by
the holders of shares of Common Stock, as if each share
of Series B Participating Preferred Stock so exchanged
was that number of shares of Common Stock (rounded to
the nearest whole share) equal to (x) the Stated Value,
divided by (y) the Conversion Price, and outstanding
immediately prior to the consummation of the
recapitalization, reclassification, merger,
consolidation, asset transfer or liquidation.
ii) In the event that the Corporation shall, in a
single transaction or series of related transactions,
recapitalize, reclassify or change the outstanding
shares of Common Stock (other than a change in par
value or from par value to no par value or from no par
value to par value, or as a result of a subdivision or
combination provided for in paragraph (h) hereof),
consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another Person or
adopt a plan of liquidation, and any Holder of shares
of Series B Participating Preferred Stock shall not
have elected to exchange all shares of Series B
Participating Preferred Stock in accordance with
paragraph (g)(i) above, then the Corporation shall not
consummate such recapitalization, reclassification,
merger, consolidation, asset sale or liquidation
unless: (A) either (1) the Corporation is the
surviving or continuing Person or (2) the Person (if
other than the Corporation) formed by such
recapitalization, consolidation or into which the
Corporation is merged or the Person that acquires by
conveyance, transfer or lease the properties and assets
of the Corporation substantially as an entirety or in
the case of a plan of liquidation, the Person to which
assets of the Corporation have been transferred, shall
be a corporation, partnership, limited liability
company or trust organized and existing under the laws
of the United States or any State thereof or the
District of Columbia; (B) the Series B Participating
Preferred Stock shall be converted into or exchanged
for and shall become shares of such successor,
transferee or resulting Person, having in respect of
such successor, transferee or resulting Person the same
powers, preferences and relative, participating,
optional or other special rights and the
qualifications, limitations or restrictions thereon,
that the Series B Participating Preferred Stock had
immediately prior to such transaction; and (C) the
Corporation has delivered to the Holders of the Series
B Participating Preferred Stock prior to the
consummation of the proposed transaction an Officers'
Certificate and an Opinion of Counsel, each stating
that such recapitalization, reclassification, merger,
consolidation, asset transfer or liquidation complies
with the terms hereof and that all conditions precedent
herein relating to such transaction have been
satisfied.
iii) For purposes of the foregoing provisions of
this paragraph (g), the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of
related transactions) of all or substantially all of
the properties or assets of one or more Subsidiaries of
the Corporation, the Capital Stock of which constitutes
all or substantially all of the properties and assets
of the Corporation shall be deemed to be the transfer
of all or substantially all of the properties and
assets of the Corporation.
(h) Adjustment of Common Stock and Conversion
Price. In case the Corporation shall (i) pay a dividend or
make a distribution solely in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock, or (iii) combine
its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, then concurrently with the
effectiveness of each such event, the Conversion Price in
effect immediately prior thereto shall be adjusted by
multiplying the Conversion Price in effect immediately prior
to such adjustment by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding
immediately prior to such adjustment and the denominator
shall be the number of shares of Common Stock outstanding
immediately following such adjustment. Such adjustment to
the Conversion Price shall be made each time any such action
described in this paragraph (h) shall occur.
(i) Reissuance of Series B Participating
Preferred Stock. Shares of Series B Participating Preferred
Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall
(upon compliance with any applicable provisions of the laws
of Delaware) have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may
be redesignated and reissued as part of any series of
Preferred Stock, provided that any issuance of such shares
as Series B Participating Preferred Stock must be in
compliance with the terms hereof.
(j) Business Day. If any payment, redemption or
exchange shall be required by the terms hereof to be made on
a day that is not a Business Day, such payment, redemption
or exchange shall be made on the immediately succeeding
Business Day.
(k) Definitions. As used in this Certificate of
Designations, the following terms shall have the following
meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Blockage Notice" shall have the meaning ascribed
to it in paragraph (e)(iv)(d) hereof.
"Blockage Period" shall have the meaning ascribed
to it in paragraph (e)(iv)(d) hereof.
"Board of Directors" shall have the meaning
ascribed to it in the first paragraph of this
Resolution.
"Business Day" means any day except a Saturday, a
Sunday, or any day on which banking institutions in New
York, New York are required or authorized by law or
other governmental action to be closed.
"Capital Stock" means (i) with respect to any
Person that is a corporation, any and all shares,
interests, participations or other equivalents (however
designated) of capital stock of such Person and
(ii) with respect to any Person that is not a
corporation, any and all partnership or other equity
interests of such Person.
"Common Stock" shall mean the common stock, $0.01
par value, of the Corporation, and any other security
into which such shares of Common Stock may be
hereinafter converted or exchanged.
"Common Stock Price" shall mean the last per share
sale price of the Common Stock of the Corporation as
reported by the Nasdaq National Market (or any national
stock exchange or interdealer quotation system on which
the Common Stock is then listed or quoted).
"Conversion Price" shall mean initially $5.84,
subject to adjustment as set forth in paragraph (h)
hereof.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for
borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to
pay the deferred purchase price of property or
services, except accounts payable arising in the
ordinary course of business, (iv) all obligations of
such person as lessee under capital leases, (v) all
Debt of others secured by any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind on
any asset of such Person and (vi) all Debt of others
guaranteed by such Person.
"Holder" means a holder of shares of Series B
Participating Preferred Stock as reflected in the stock
books of the Corporation.
"Issue Date" means the date of original issuance
of the Series B Participating Preferred Stock.
"Junior Stock" shall have the meaning ascribed to
it in paragraph (b) hereof.
"Officers' Certificate" means a certificate signed
by two officers or by an officer and either an
Assistant Treasurer or an Assistant Secretary of the
Corporation which certificate shall include a statement
that, in the opinion of such signers all conditions
precedent to be performed by the Corporation prior to
the taking of any proposed action have been taken. In
addition, such certificate shall include (i) a
statement that the signatories have read the relevant
covenant or condition, (ii) a brief statement of the
nature and scope of such examination or investigation
upon which the statements are based, (iii) a statement
that, in the opinion of such signatories, they have
made such examination or investigation as is reasonably
necessary to express an informed opinion and (iv) a
statement as to whether or not, in the opinion of the
signatories, such relevant conditions or covenants have
been complied with.
"Opinion of Counsel" means an opinion of counsel
that, in such counsel's opinion, all conditions
precedent to be performed by the Corporation prior to
the taking of any proposed action have been taken.
Such opinion shall also include the statements called
for in the second sentence under "Officers'
Certificate".
"Parity Stock" shall have the meaning ascribed to
it in paragraph (b) hereof.
"Participation Price" shall mean, as of any
Redemption Date, an amount per share of the Series B
Participating Preferred Stock equal to (i) the Stated
Value, divided by (ii) the Conversion Price, the result
of which is then multiplied by (iii) the average of the
Common Stock Price for the ten trading days immediately
prior to the Redemption Date; provided, however, that
if all or any portion of the Participation Price is
paid by the Corporation in cash, the amount of the
Participation Price to be paid to the Holders in cash
shall be an amount equal to the Participation Price
multiplied by 0.95.
"Person" means an individual, partnership,
corporation, limited liability company, unincorporated
organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital
Stock of such Person that has preferential rights to
any other Capital Stock of such Person with respect to
dividends or redemptions or upon liquidation.
"Redemption Date", with respect to any shares of
Series B Participating Preferred Stock, means the date
on which such shares of Series B Participating
Preferred Stock are redeemed by the Corporation.
"Redemption Notice" shall have the meaning
ascribed to it in paragraph (e) hereof.
"Redemption Price" shall mean, as of any
Redemption Date, the redemption price required to be
paid on shares the Series B Participating Preferred
Stock as calculated in accordance with paragraphs
(e)(i)(a) or (e)(ii) hereof, as applicable.
"Senior Debt" means all Debt of the Corporation,
including principal, premium, if any, and interest on
(including interest accruing after the filing of a
petition initiating any proceeding pursuant to any
bankruptcy law, whether or not allowed) or other
amounts payable in connection with any Debt of the
Corporation, whether presently outstanding or
subsequently created, incurred or assumed (other than
any other Debt of the Corporation which expressly
provides by its terms or the terms of the instrument
creating or evidencing it that it is subordinate in
right of payment in any respect to any other Debt of
the Corporation). Notwithstanding the foregoing, the
Corporation's Senior Debt shall not include any Debt of
the Corporation to any subsidiary of the Corporation or
any liability for federal, state or local taxes owed by
the Corporation.
"Senior Dividend Stock" shall have the meaning
ascribed to it in paragraph (b) hereof.
"Senior Nonmonetary Default" shall have the
meaning ascribed to it in paragraph (e)(iv)(d) hereof.
"Senior Payment Default" shall have the meaning
ascribed to it in paragraph (e)(iv)(d) hereof.
"Senior Stock" shall have the meaning ascribed to
it in paragraph (b) hereof.
"Specified Senior Debt" means (i) all Senior Debt
under the Corporation's primary bank credit facility
existing from time to time and (ii) any other issue of
Senior Debt having a principal amount of at least
$10,000,000.
"Stated Value" shall have the meaning ascribed to
it in paragraph (a) hereof.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, Stratus Properties Inc., has
caused this Certificate to be signed on its behalf by a duly
authorized officer this 22nd day of May, 1998.
STRATUS PROPERTIES INC.
(formerly known as FM Properties Inc.)
By: /s/ William H. Armstrong,III
------------------------------
Name: William H. Armstrong,III
Title: President and Chief Executive
Officer
Exhibit 4.2
INVESTORS RIGHTS AGREEMENT
THIS INVESTORS RIGHTS AGREEMENT (this "Agreement") dated as
of May 22, 1998, is entered into by and among Stratus Properties
Inc., a Delaware corporation (including its successors, the
"Company"), and Oly/Stratus Equities, L.P., a Texas limited
partnership ("Olympus").
NOW, THEREFORE, for and in consideration of the premises,
mutual covenants, and agreements contained herein and for other
good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
I.1 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Advice" shall have the meaning set forth in
Section 3.6.
"Affiliate" shall mean, with respect to any Person, any
Person who, directly or indirectly, controls, is controlled
by, or is under common control with that Person. For
purposes of this definition, "control" and "controlled by"
and when used with respect to any Person shall mean the
power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of
voting securities, by contract, or otherwise, but shall not
be deemed to include, solely because of the ownership of the
voting securities of such Person, any Person who owns not
more than 25% of the ordinary voting power for the election
of directors or other governing body of such Person.
"Agreement" shall mean this Agreement, as may be
amended from time to time.
"Blockage Notice" shall have the meaning set forth in
Section 2.2.2(e).
"Blockage Period" shall have the meaning set forth in
Section 2.2.2(e).
"Board Designee" shall have the meaning set forth in
Section 2.1.1.
"Board of Directors" shall mean the board of directors
of the Company.
"Business Day" shall mean a day that is not a Legal
Holiday.
"Change of Control" shall mean the occurrence of one or
more of the following events: a majority of the Board of
Directors shall consist of persons who are not Continuing
Directors, or the acquisition by any person or group, of
related persons for
<Page 1>
purposes of Section 13(d) of the
Exchange Act (other than Olympus, any of its Affiliates, or
any of their respective officers or directors), of the
power, directly or indirectly, to vote or direct the voting
of securities having more than 30% of the ordinary voting
power for the election of directors of the Company.
"Common Stock" shall mean shares of the Common Stock,
$0.01 par value per share, of the Company, and any capital
stock into which such Common Stock thereafter may be
changed.
"Common Stock Equivalents" shall mean, without
duplication with any other Common Stock or Common Stock
Equivalents, any rights, warrants, options, convertible
securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or
convertible or exchangeable into, directly or indirectly,
Common Stock and securities convertible or exchangeable into
Common Stock, whether at the time of issuance or upon the
passage of time or the occurrence of some future event.
"Company" shall have the meaning set forth in the
introductory paragraph hereof.
"Continuing Director" shall mean, as of the date of
determination, any person who (i) was a member of the Board
of Directors on the date hereof, (ii) was nominated for
election or elected to the Board of Directors with the
affirmative vote of a majority of the Continuing Directors
who were members of the Board of Directors at the time of
such nomination or election, or (iii) is a Board Designee.
"Deferral Default" shall have the meaning set forth in
Section 2.2.2(d).
"Deferral Offering" shall have the meaning set forth in
Section 2.2.2(d).
"Deferral Registration Statement" shall have the
meaning set forth in Section 2.2.2(d).
"Demand Registration" shall have the meaning set forth
in Section 3.1.1.
"Demand Request" shall have the meaning set forth in
Section 3.1.1.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations
promulgated by the SEC thereunder.
"Excluded Registration" shall mean a registration under
the Securities Act of (i) securities pursuant to one or more
Demand Registrations pursuant to Section 3.1,
(ii) securities registered on Form S-8 or any similar
successor form, (iii) securities registered to effect the
acquisition of or combination with another Person, and (iv)
securities registered on Form S-4 or any similar successor
form solely to effect any exchange of outstanding
securities.
"Holder" shall mean (i) Oly/Stratus Equities, L.P.
(ii) any direct or indirect transferee of any such
securityholder who shall become a party to this Agreement
and
<Page 2>
entitled to the benefits of Articles III, IV, and V
pursuant to Section 7.4 hereof.
"Inspectors" shall have the meaning set forth in
Section 3.5(ix).
"Legal Holiday" shall have the meaning set forth in
Section 7.2.
"Material Adverse Effect" shall have the meaning set
forth in Section 3.1.4.
"NASD" shall mean the National Association of
Securities Dealers, Inc.
"Observer Designee" shall have the meaning set forth in
Section 2.1.2.
"Olympus" shall mean Oly/Stratus Equities, L.P., a
Texas limited partnership, and its permitted successors and
assigns.
"Optional Repurchase Event" shall have the meaning set
forth in Section 2.2.2(a).
"Person" or "person" shall mean any individual,
corporation, partnership, limited liability company, joint
venture, association, joint-stock company, trust,
unincorporated organization, or government or other agency
or political subdivision thereof.
"Preferred Stock" shall mean shares of the Series B
Participating Preferred Stock, $0.01 par value per share, of
the Company, and any capital stock (other than Common Stock
of the Company) into which such Preferred Stock thereafter
may be changed.
"Records" shall have the meaning set forth in
Section 3.5(ix).
"Redemption Notice" shall have the meaning set forth in
Section 2.2.2.
"Redemption Price" shall have the meaning set forth in
Section 2.2.2.
"Registrable Shares" shall mean at any time (a) the
Preferred Stock and (b) any shares of Common Stock issued or
issuable pursuant to (i) the redemption of the Preferred
Stock or (ii) the conversion of the obligations outstanding
under that certain Loan Agreement (as it may be amended and
in effect from time to time, the "Loan Agreement"), dated on
or about the date hereof, among the Company, Stratus
Ventures I Borrower L.L.C., and Oly Lender Stratus, L.P., in
each case owned by the Holders, whether owned on the date
hereof or acquired hereafter; provided, however, that
Registrable Shares shall not include any shares (x) the sale
of which has been registered pursuant to the Securities Act
and which shares have been sold pursuant to such
registration or (y) which have been sold pursuant to Rule
144 of the SEC under the Securities Act.
"Registration Expenses" shall have the meaning set
forth in Section 3.6.
<Page 3>
"Regulation D" shall mean Regulation D promulgated
under the Securities Act by the SEC.
"Repurchase Notice" shall have the meaning set forth in
Section 2.2.2(b).
"Repurchase Price" shall have the meaning set forth in
Section 2.2.2(a).
"Requesting Holder" shall have the meaning set forth in
Section 3.1.1(a).
"Required Filing Date" shall have the meaning set forth
in Section 3.1.1(b).
"Required Holders" shall mean Holders who then own
beneficially more than 50% of the aggregate number of shares
of Preferred Stock subject to this Agreement.
"SEC" shall mean the Securities and Exchange
Commission.
"Securities" shall mean the Preferred Stock and Common
Stock issued or issuable pursuant to (i) the redemption of
the Preferred Stock or (ii) the conversion of the
obligations outstanding under the Loan Agreement.
"Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated by the
SEC thereunder.
"Seller Affiliates" shall have the meaning set forth in
Section 3.8.1.
"Senior Dividend Stock" shall mean each class of
capital stock of the Company or series of preferred stock of
the Company created on or after the date hereof the terms of
which expressly provide that such class or series will rank
senior to the Preferred Stock as to dividends and on parity
with the Preferred Stock as to distributions upon
liquidation, winding-up and dissolution of the Company.
"Senior Nonmonetary Default" shall have the meaning set
forth in Section 2.2.2(e).
"Senior Payment Default" shall have the meaning set
forth in Section 2.2.2(e).
"Subsidiary" of any Person shall mean any Person a
majority of whose outstanding shares of capital stock or
other equity interests with voting power, under ordinary
circumstances, to elect directors or other governing body of
such Person, is at the time, directly or indirectly, owned
by such Person, by one or more subsidiaries of such Person
or by such Person and one or more subsidiaries of such
Person.
"Suspension Notice" shall have the meaning set forth in
Section 3.6.
"Transfer" shall mean any disposition of any Security
or any interest therein that would constitute a "sale"
thereof within the meaning of the Securities Act.
<Page 4>
"Transfer Notice" shall have the meaning set forth in
Section 5.3.
I.2 Rules of Construction. Unless the context otherwise
requires, all references to "Articles" and "Sections" contained
in this Agreement are, unless specifically indicated otherwise,
references to articles, sections, subsections and paragraphs of
this Agreement. Whenever in this Agreement the singular number
is used, the same shall include the plural where appropriate (and
vice versa), and words of any gender shall include each other
gender where appropriate. As used in this Agreement, the
following words or phrases shall have the meanings indicated:
(i) "or" shall mean "and/or"; (ii) "day" shall mean a calendar
day; (iii) "including" or "include" shall mean "including without
limitation"; and (iv) "law" or "laws" shall mean statutes,
regulations, rules, judicial orders and other legal
pronouncements having the effect of law. Whenever any provision
of this Agreement requires or permits a party to take or omit to
take any action, or make or omit to make any decision, unless the
context clearly requires otherwise, such provision shall be
interpreted to authorize an action taken or omitted, or a
decision made or omitted, by the party acting alone and in good
faith.
1.3 Other Definitions. Certain capitalized terms used in
this Agreement, but not defined in this Article I, shall have the
meanings set forth elsewhere in this Agreement.
ARTICLE II
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
II.1 Board of Directors.
II.1.1 Board Representation. Subject to Section
2.1.4, for so long as at least 50.1% of the shares of the
Preferred Stock outstanding on the date hereof remain
outstanding and beneficially owned by Olympus, Olympus shall
have the exclusive right to appoint the greater of one
director or 20% of the members of the Board of Directors.
Subject to Sections 2.1.3 and 2.1.4, on or promptly after
the date Olympus provides the Company with written notice of
Olympus' election to designate Board Designees pursuant to
this Section 2.1.1, the Company agrees to take all action
required to cause the Board of Directors to at all times
include those Board Designees elected by Olympus.
II.1.2 Observer Rights. For so long as at least
50.1% of the shares of Preferred Stock outstanding on the
date hereof remain outstanding and beneficially owned by
Olympus, if Olympus fails to designate directors or
terminates its right to designate directors pursuant to
Section 2.1.1, Olympus shall be entitled to, in lieu of
designating such Board Designees, have two designees attend
all meetings of the Board of Directors and each committee
thereof (each, an "Observer Designee"). In the event that
Olympus has designated any Observer Designee pursuant to
this Section 2.1.2, Olympus and each such Observer Designee
shall enter into a confidentiality agreement with the
Company in form and substance reasonably satisfactory to
each of Olympus and the Company. No Observer Designee shall
be entitled to vote on any matters presented to the Board of
Directors or to such committees. The Company shall give
written notice, including any proposed agenda to Olympus, of
each such meeting at the same time and in the same manner as
the members of the Board of Directors (or any committee
thereof) receive notice of such meetings. Olympus shall be
entitled to receive all written materials and
<Page 5>
other
information given to the directors of the Company in
connection with such meetings at the same time such
materials are given to such directors. If the Company
proposes to take action by written consent in lieu of a
meeting of the Board of Directors, the Company shall (i)
orally notify Olympus 72 hours in advance of the date such
consent is first proposed to be executed by the directors of
the Company, and (ii) give a copy of such consent to Olympus
at the same time as such materials are given to the members
of the Board of Directors, which in any case shall be at
least 24 hours prior to the date such consent is first
proposed to be executed by the directors of the Company.
Notwithstanding the foregoing provisions of this
Section 2.1.2, the Company reserves the right not to provide
information or to exclude Observer Designees from portions
of any meeting of the Board of Directors (or committee
thereof) if (i) delivery of such information or attendance
at such portion of any such meeting by the Observer
Designees would, in the opinion of counsel to the Company,
cause the Company to lose or waive the attorney-client
privilege between the Company and its counsel, or (ii) the
subject matter of such information or agenda of such portion
of any meeting is reasonably related to consideration of the
Company's relationship with Olympus or any of its Affiliates
or any transaction between the Company or any of its
Affiliates on the one hand, and Olympus or any of its
Affiliates on the other hand, and the delivery of such
information or attendance at any such portion of such
meeting would, in the opinion of counsel of the Company,
adversely affect the ability of the Company or its Affiliate
to negotiate in good-faith and on an arms-length basis with
Olympus or its Affiliate. In the event the Company
withholds information or excludes an Observer Designee from
a portion of any meeting of the Board of Directors pursuant
to the preceding sentence, the Company shall provide Olympus
with a written statement identifying the subject matter of
the information withheld or discussion from which the
Observer Designee was excluded (which notice need not
include any description of the legal advice rendered during
such meeting).
II.1.3 Vacancies. If, prior to his election to the
Board of Directors pursuant to Section 2.1.1, any Board
Designee shall be unable or unwilling to serve as a director
of the Company, Olympus shall be entitled to nominate a
replacement who shall then be a Board Designee for purposes
of this Section 2.1. If, following an election to the Board
of Directors pursuant to Section 2.1.1, any Board Designee
shall resign, be removed at the request of Olympus or be
unable to serve for any reason prior to the expiration of
his term as a director of the Company, Olympus shall, within
30 days of such event, notify the Board of Directors in
writing of a replacement Board Designee, and the Company
shall take all such actions as it is legally empowered to
take at the earlier of the next regularly scheduled regular
meeting of the Board of Directors or a special meeting
thereof to be called not later than 30 days after receipt of
notice of the replacement Board Designee for the purpose of
filling positions on the Board of Directors or in any
written consent executed in lieu of such a meeting to cause
the replacement Board Designee to be elected to the Board of
Directors. If Olympus requests that any Board Designee
designated by Olympus be removed as a director (with or
without cause) by written notice thereof to the Company,
then the Company shall take all actions permitted by its
certificate of incorporation and the General Corporation Law
of the State of Delaware that are necessary to effect such
removal upon such request.
II.1.4 Termination of Rights. The right of Olympus
to designate directors under
<Page 6>
Section 2.1.1 shall terminate
upon the first to occur of (i) the termination or expiration
of this Agreement or this Article II, (ii) such time as
Olympus elects in writing to terminate its rights under this
Article II, or (iii) such time as Olympus ceases to
beneficially own at least 50.1% of the shares of the
Preferred Stock outstanding on the date of this Agreement.
II.1.5 Costs and Expenses. The Company shall
reimburse any Board Designee or Observer Designee for all
reasonable out-of-pocket expenses incurred in connection
with his participation in meetings of the Board of Directors
(and committees thereof) of the Company on the same basis as
it reimburses its other directors.
II.2 Transactions Permitting Optional Redemption.
II.2.1 The Company agrees that, if the Company takes
any of the following actions, directly or indirectly,
without the prior written consent of Olympus, then Olympus
shall have the repurchase option described in Section 2.2.2:
(a) redeem, purchase, or otherwise acquire in one
transaction or in a series of related transactions an
amount of Common Stock greater than 10% of the
outstanding Common Stock;
(b) voluntarily liquidate or dissolve;
(c) grant or issue any capital stock, stock
option, or stock purchase right (other than those
granted to all holders of Common Stock on a pro rata
basis) to any officer, director, or employee of the
Company or any of its Subsidiaries, other than (i) for
compensation in amounts reasonably consistent with past
practice, (ii) Common Stock issued upon exercise or
conversion of any stock options outstanding on the date
of this Agreement, or (iii) Common Stock or stock
options granted in compliance with this clause (c);
(d) file a petition under any bankruptcy or
insolvency law, fail to contest the filing of any
involuntary petition under any bankruptcy or insolvency
law, or admit in writing its bankruptcy, insolvency, or
general inability to pay its debts;
(e) merge or consolidate with or into any person;
(f) sell, lease, exchange, or otherwise transfer,
in one transaction or in a series of related
transactions, assets of the Company having a book value
equal to or greater than 25% of the Company's total
assets as of the date of the most recently prepared
audited balance sheet of the Company other than in the
ordinary course of business;
(g) permit the occurrence of a Change of Control;
(h) issue any shares of Senior Dividend Stock in
excess of $10,000,000 aggregate liquidation preference;
or
<Page 7>
(i) agree to do any transaction prohibited by
subsections (a) through (h) of this Section 2.2.1
without such prior written consent.
II.2.2 (a) So long as any shares of Preferred Stock
remain outstanding and at least one owned by Olympus, upon
the occurrence of the occurrence of any of the following
actions or events (each, an "Optional Repurchase Event"),
Olympus shall be entitled, at its option, by written notice
to the Company in accordance with paragraph (b) of this
Section 2.2.2, to require the Company to repurchase all or a
portion of the shares of Preferred Stock held by Olympus, as
follows:
i) at any time following the date of this
Agreement, in the case of an occurrence of any of the
events or actions specified in subsections (a), (c),
(e), (f), (g) or (i) of Section 2.2.1 without the prior
written consent of Olympus, Olympus shall have the
right to require the Company to repurchase all or a
portion of the shares of Preferred Stock then held by
Olympus in an amount equal to $5.84 per share, plus an
amount equal to accrued and unpaid dividends thereon,
if any, to the date of repurchase;
ii) at any time on or after May 22, 2001,
Olympus shall have the right to require the Company to
repurchase all or a portion of the shares of Preferred
Stock then held by Olympus in an amount equal to the
Participation Price (as defined in the Certificate of
Designations governing the Preferred Stock) per share;
and
iii) at any time following the date of this
Agreement, in the case of an occurrence of any of the
events or actions specified in subsections (b), (d) or
(h) of Section 2.2.1 without the prior written consent
of Olympus, Olympus shall have the right to require the
Company to repurchase all or a portion of the shares of
Preferred Stock then held by Olympus in an amount equal
to the greater of (A) $5.84 per share, plus an amount
equal to accrued and unpaid dividends thereon, if any,
to the date of repurchase, and (B) the Participation
Price per share (the amount to be paid to Olympus to
repurchase the Preferred Stock described in subsections
i), ii) and iii) of this Section 2.2.2(a) is referred
to collectively herein as the "Repurchase Price").
(b) To exercise the optional repurchase right
described in this Section 2.2.2, Olympus shall deliver to
the Company (if an Optional Repurchase Event described in
subsections i) or iii) of Section 2.2.2(a) above, not later
than 30 days after Olympus receives notice of such
occurrence) a notice of repurchase ("Repurchase Notice"),
accompanied by the certificate for the shares of Preferred
Stock to be repurchased. Any Repurchase Notice shall state
(1) that Olympus is requiring the Company to repurchase
shares of Preferred Stock pursuant to this Section 2.2.2,
(2) the Optional Repurchase Event giving rise to such
repurchase, and (3) the number of shares of Preferred Stock
held by Olympus which are to be repurchased. In no event
later than 20 Business Days following receipt of such
Repurchase Notice by the Company, the Company shall, except
as provided in Section 2.2.2(c) and (d) below, make payment
in immediately available funds of the Repurchase Price to
Olympus as specified in the Repurchase Notice. Upon
<Page 8>
repurchase of less than all of the shares of Preferred Stock
evidenced by a particular certificate, promptly but in no
event later than ten Business Days after surrender of such
certificate to the Company, the Company shall issue a
replacement certificate for the shares of Preferred Stock
that have not been repurchased.
(c) Notwithstanding anything in this Agreement to
the contrary, the Company may, upon written notice to
Olympus within seventeen Business Days of the date of the
Repurchase Notice, elect to pay all or a portion of the
Repurchase Price for the Preferred Stock in Common Stock, by
delivering that number of whole shares of Common Stock to
Olympus equal to (x) the Repurchase Price per share, divided
by (y) the average Common Stock Price for the ten trading
days immediately preceding the Repurchase Notice, the result
of which is then multiplied by (z) the number of shares of
Preferred Stock to be so repurchased from Olympus by payment
in shares of Common Stock, and, in the case of any
fractional share of Common Stock, rounded to the nearest
number of whole shares; provided, however, that the Company
may only pay any Repurchase Price in shares of Common Stock
if, as of the date of delivery of such shares of Common
Stock, the Common Stock is then registered under Section
12(b) or 12(g) under the Exchange Act and listed on the New
York Stock Exchange or the American Stock Exchange, or
approved for quotation on the Nasdaq Stock Market's National
Market System.
(d) In the event of a repurchase of any or all of
the outstanding shares of Preferred Stock for which the
Company has elected to pay the Repurchase Price in whole or
in part in cash, the Company may, by written notice to
Olympus within eight Business Days of the Repurchase Notice,
elect to defer the repurchase of the Preferred Stock set
forth in the Repurchase Notice, solely with respect to the
portion of shares of Preferred Stock that the Company elects
to redeem in cash, for a period of no longer than 180 days
from the date of such written notice for the purpose of
effecting a public offering (the "Deferral Offering") by the
Company of shares of Common Stock; provided that (i) the
Company shall file with the SEC within 45 days of the date
of such Repurchase Notice a registration statement (the
"Deferral Registration Statement") under the Securities Act
with respect to such Deferral Offering, (ii) the Company
shall designate the use of proceeds to the Company from such
Deferral Offering in the prospectus forming a part of such
Deferral Registration Statement for the repurchase in cash
of the Preferred Stock in accordance with this Agreement,
and (iii) the Deferral Offering shall be consummated and the
date fixed for repurchase on or prior to 180 days following
the date of such Repurchase Notice. In the event that (x)
the Deferral Registration Statement is not filed within 45
days following the date of such Repurchase Notice or (y) the
Deferral Offering is not consummated within 180 days
following the date of such Repurchase Notice (each of (x)
and (y) being referred to herein as a "Deferral Default"),
the Company shall, within ten Business Days after such
Deferral Default, pay the Repurchase Price on all shares of
Preferred Stock called for repurchase in accordance with
this Section 2.2.2.
(e) The obligation of the Company to pay the
Repurchase Price in cash pursuant to an Optional Repurchase
Event shall be fully subordinated to the Company's Senior
Debt (as such term is defined in the Loan Agreement) in
accordance with the provisions of this Section 2.2.2(e).
The Company may not make any cash payments on
<Page 9>
account of the
Preferred Stock if there shall have occurred and be
continuing a default in the payment of principal of (or
premium, if any) or interest on any Specified Senior Debt
(as such term is defined in the Loan Agreement), the payment
of commitment or facility fees, letter of credit fees or
agency fees under any Specified Senior Debt, or payments
with respect to letter of credit reimbursement arrangements
with one or more lenders under the credit or other agreement
evidencing any Specified Senior Debt when due (a "Senior
Payment Default"). Following the occurrence of an event of
default (other than a Senior Payment Default) under any
Specified Senior Debt permitting the holders of such
Specified Senior Debt (or a trustee or agent on behalf
thereof) to accelerate the maturity thereof, or the
occurrence of an event which with the passage of time or the
giving of notice, or both, could become such an event of
default (a "Senior Nonmonetary Default") and, in each case,
following the giving of notice thereof to Parent in
accordance with the terms governing the relevant Specified
Senior Debt (a "Blockage Notice"), Parent may not make any
payments on account of the Payment Obligations for a period
(a "Blockage Period") commencing on the date the Company
receives the Blockage Notice, and ending on the earliest of
(i) 179 days after such date, (ii) the date, if any, on
which such Senior Nonmonetary Default is waived or otherwise
cured and (iii) the date, if any, on which such Blockage
Period shall have been terminated by written notice to the
Company from the holders of the relevant Specified Senior
Debt (or a trustee or agent on behalf thereof).
Upon any payment or distribution of assets of any kind
or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or total or
partial liquidation or reorganization of the Company,
whether voluntary or involuntary, or upon bankruptcy,
insolvency, receivership or other proceedings, then and in
such event, all principal, premium (if any) and interest and
all other amounts due or to become due upon all the
Company's Senior Debt shall first be paid in full before the
holders of the Preferred Stock shall be entitled to receive
or retain any assets so paid or distributed in respect of
the Preferred Stock; and, upon any such dissolution or
winding up or liquidation or reorganization, any payment or
distribution of assets of any kind or character, whether in
cash, property or securities, that the holders of the
Preferred Stock would be entitled to, except as otherwise
provided herein, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distributions, or by
the holders of the Preferred Stock if received by them,
directly and ratably to the holders of the Company's Senior
Debt, to the extent necessary to pay in full all the
Company's Senior Debt, after giving effect to any concurrent
payment or distribution to or for the holders of the
Company's Senior Debt, before any payment or distribution is
made to the holders of the Preferred Stock.
Each holder of shares of Preferred Stock hereby
irrevocably authorizes and empowers (without imposing any
obligation on) the holders of the Company's Senior Debt (or
any trustee or agent on behalf thereof), under the
circumstances set forth in the immediately preceding
paragraph, to demand, sue for, collect and receive every
such payment or distribution described therein and give
acquittance therefor, to file claims and proofs of claims in
any statutory or nonstatutory proceeding, to vote such the
Company's Senior Debt holder's ratable share of the full
amount of the Redemption Price on the Preferred Stock in its
sole discretion in connection with any resolution,
arrangement, plan of reorganization, compromise, settlement
or extension and to take all such other action
<Page 10>
(including,
without limitation, the right to participate in any
composition of creditors and the right to vote such the
Company's Senior Debt holders' ratable share of the
Redemption Price at creditors' meetings for the election of
trustees, acceptances of plans and otherwise), in the name
of the holder of the Preferred Stock, as such the Company's
Senior Debt holder or its representative may deem necessary
or desirable for the enforcement of these subordination
provisions.
If any payment or distribution of assets of any kind or
character, whether in cash, property or securities, shall be
collected or received by any holder of the Preferred Stock
and such holder shall not be permitted under the terms of
this instrument to receive or retain such payment or
distribution, such holder shall forthwith turn over the same
to the Company's Senior Debt holders for their ratable
benefit in the form received (except for the endorsement or
the assignment of such holder when necessary) and, until so
turned over, the same shall be held in trust by such holder
as the property and for the ratable benefit of the Company's
Senior Debt holders.
II.3 Other Activities of Olympus; Fiduciary Duties. It is
understood and accepted that Olympus and its Affiliates have
interests in other business ventures which may be in conflict
with the activities of the Company and its Subsidiaries and that,
subject to applicable law, nothing in this Agreement shall limit
the current or future business activities of Olympus whether or
not such activities are competitive with those of the Company or
its Subsidiaries. Nothing in this Agreement, express or implied,
shall relieve any officer or director of the Company, any of its
Subsidiaries, or Olympus, of any fiduciary or other duties or
obligations they may have to the Company or the stockholders of
the Company.
ARTICLE III
REGISTRATION RIGHTS
III.1 Demand Registration.
III.1.1 Request for Registration.
(a) Holders of an aggregate of at least twenty
percent (20%) of the total number of Registrable Shares
held by all Holders (the "Requesting Holders") may
request the Company, in writing (a "Demand Request"),
to effect the registration under the Securities Act of
all or part of its Registrable Shares (a "Demand
Registration"), provided, that the anticipated
aggregate gross proceeds to the Requesting Holders
therefrom would be at least $5,000,000.
(b) Each Demand Request shall specify the number
of Registrable Shares proposed to be sold. Subject to
Section 3.1.6, the Company shall file the Demand
Registration within 90 days after receiving a Demand
Request (the "Required Filing Date") and shall use its
best efforts to cause the same to be declared effective
by the SEC as promptly as practicable after such
filing; provided, however, that the Company need effect
only two Demand Registrations pursuant to Demand
Requests made under Section 3.1.1(a); provided,
further, that if any Registrable Shares requested to be
registered pursuant to a Demand Request
<Page 11>
made under
Section 3.1.1(a) are excluded from the applicable
Demand Registration pursuant to Section 3.1.4, and such
Demand Registration would otherwise be the last Demand
Registration permitted under this Section 3.1, the
Requesting Holders shall have the right, with respect
to each such exclusion, to request one additional
Demand Registration under Section 3.1.1(a).
III.1.2 Effective Registration and Expenses. A
registration will not count as a Demand Registration until
it has become effective (unless the Requesting Holders
withdraw all their Registrable Shares and the Company has
performed its obligations hereunder in all material
respects, in which case such demand will count as a Demand
Registration unless the Requesting Holders pay all
Registration Expenses in connection with such withdrawn
registration); provided, however, that if, after it has
become effective, an offering of Registrable Shares pursuant
to a registration is interfered with by any stop order,
injunction, or other order or requirement of the SEC or
other governmental agency or court, such registration will
be deemed not to have been effected and will not count as a
Demand Registration.
III.1.3 Selection of Underwriters. If the offering
of Registrable Shares pursuant to a Demand Registration is
to be in the form of a "firm commitment" underwritten
offering, the Requesting Holders shall select a nationally
recognized investment banking firm or firms to manage the
underwritten offering and provide timely notice to the
Company of such selection; provided, however, that such
selection shall be subject to the prior written consent of
the Company, which shall not be unreasonably withheld or
delayed.
III.1.4 Priority on Demand Registrations. If a
Demand Registration is to be accomplished through an
underwritten sale, no securities to be sold for the account
of any Person (including the Company) other than a
Requesting Holder shall be included in the Demand
Registration unless the managing underwriter shall advise
the Company and the Requesting Holders in writing that, in
its opinion, the inclusion of such securities will not
materially and adversely affect the price or success of the
offering (a "Material Adverse Effect"). In the event the
managing underwriter shall advise the Company and the
Requesting Holders that even after exclusion of all
securities of other Persons pursuant to the immediately
preceding sentence, the amount of Registrable Shares
proposed to be included in such Demand Registration by
Requesting Holders is sufficiently large to cause a Material
Adverse Effect, the Registrable Shares to be included in
such Demand Registration shall equal the number of shares
which the Requesting Holders are so advised can be sold in
such offering without a Material Adverse Effect and such
shares shall be allocated among the Requesting Holders pro
rata based upon the number of Registrable Shares requested
to be included in such registration by each such Requesting
Holder. In the event, however, the managing underwriter
advises the Company and such other Persons entitled to
participate therein that a portion of their securities may
be included in the Demand Registration without a Material
Adverse Effect, those securities shall be included in such
proportions as the Company and such other Persons may agree
among themselves.
III.1.5 Rights of Nonrequesting Holders. Upon
receipt of any Demand Request, the Company shall promptly
(but in any event within 10 days) give written notice of
such
<Page 12>
proposed Demand Registration to all other Holders, who
shall have the right, exercisable by written notice to the
Company within 20 days of their receipt of the Company's
notice, to elect to include in such Demand Registration such
portion of their Registrable Shares as they may request.
All Holders requesting to have their Registrable Shares
included in a Demand Registration in accordance with the
preceding sentence shall be deemed to be "Requesting
Holders" for purposes of this Section 3.1.
III.1.6 Deferral of Filing. Subject to Section 3.3,
the Company may defer the filing (but not the preparation)
of a registration statement required by Section 3.1 until a
date not later than 75 days after the Required Filing Date
(or, if longer, 75 days after the effective date of the
registration statement contemplated by clause (ii) of this
Section 3.1.6) if (i) at the time the Company receives the
Demand Request, the Company or any of its Subsidiaries are
engaged in confidential negotiations or other confidential
business activities, disclosure of which would be required
in such registration statement (but would not be required if
such registration statement were not filed), and the Board
of Directors determines in good faith that such disclosure
would be materially detrimental to the Company and its
stockholders, or (ii) prior to receiving the Demand Request,
the Board of Directors had determined to effect a registered
underwritten public offering of the Company's securities for
the Company's account and the Company had taken substantial
steps (including selecting a managing underwriter for such
offering) and is proceeding with reasonable diligence to
effect such offering. A deferral of the filing of a
registration statement pursuant to this Section 3.1.6 shall
be lifted, and the requested registration statement shall be
filed forthwith, if, in the case of a deferral pursuant to
clause (i) of the preceding sentence, the negotiations or
other activities are disclosed or terminated, or, in the
case of a deferral pursuant to clause (ii) of the preceding
sentence, the proposed registration for the Company's
account is abandoned. In order to defer the filing of a
registration statement pursuant to this Section 3.1.6, the
Company shall promptly (but in any event within 15 days),
upon determining to seek such deferral, deliver to each
Requesting Holder a certificate signed by an executive
officer of the Company stating that the Company is deferring
such filing pursuant to this Section 3.1.6 and a general
statement of the reason for such deferral and an
approximation of the anticipated delay. After receiving
such certificate and (x), until 20 days after notification
from the Company that the deferral has been lifted or (y)
the end of the deferral period, whichever is earlier, the
holders of a majority of the Registrable Shares held by the
Requesting Holders may withdraw such Demand Request by
giving notice to the Company. If withdrawn, the Demand
Request shall be deemed not to have been made for all
purposes of this Agreement. The Company may defer the
filing of a particular registration statement pursuant to
this Section 3.1.6 only once.
<Page 13>
III.2 Piggyback Registrations.
III.2.1 Right to Piggyback. Each time the Company
proposes to register any of its equity securities (other
than pursuant to an Excluded Registration) under the
Securities Act for sale to the public (whether for the
account of the Company or the account of any securityholder
of the Company) and the form of registration statement to be
used permits the registration of Registrable Shares, the
Company shall give prompt written notice to each Holder of
Registrable Shares (which notice shall be given not less
than 30 days prior to the effective date of the Company's
registration statement), which notice shall offer each such
Holder the opportunity to include any or all of its
Registrable Shares in such registration statement, subject
to the limitations contained in Section 3.2.2. Each Holder
who desires to have its Registrable Shares included in such
registration statement shall so advise the Company in
writing (stating the number of shares desired to be
registered) within 20 days after the date of such notice
from the Company. Any Holder shall have the right to
withdraw such Holder's request for inclusion of such
Holder's Registrable Shares in any registration statement
pursuant to this Section 3.2.1 by giving written notice to
the Company of such withdrawal not less than five days prior
to the effective date of such registration statement.
Subject to Section 3.2.2, the Company shall include in such
registration statement all such Registrable Shares so
requested to be included therein; provided, however, that
the Company may at any time withdraw or cease proceeding
with any such registration if it shall at the same time
withdraw or cease proceeding with the registration of all
other equity securities originally proposed to be
registered.
III.2.2 Priority on Registrations.
(a) If the registration subject to this Section
3.2 is to be accomplished through an underwritten sale,
the Registrable Shares requested to be included in the
registration statement by any Holder differ from the
type of securities proposed to be registered by the
Company, and the managing underwriter advises the
Company in writing that, in its reasonable opinion, due
to such differences the inclusion of such Registrable
Shares would cause a Material Adverse Effect, then (i)
the number of such Holder's or Holders' Registrable
Shares to be included in the registration statement
shall be reduced to an amount which, in the reasonable
judgment of the managing underwriter, would eliminate
such Material Adverse Effect or (ii) if no such
reduction would, in the reasonable judgment of the
managing underwriter, eliminate such Material Adverse
Effect, then the Company shall have the right to
exclude all such Registrable Shares from such
registration statement provided no other securities of
such type are included and offered for the account of
any other Person in such registration statement. Any
partial reduction in the number of Registrable Shares
to be included in the registration statement pursuant
to clause (i) of the immediately preceding sentence
shall be effected pro rata based on the ratio which
such Holder's requested shares bears to the total
number of shares requested to be included in such
registration statement by all Persons (including
Requesting Holders) who have requested (pursuant to
contractual registration rights) to include, or who
otherwise have been permitted to include, their shares
in such registration statement.
<Page 14>
(b) If the registration subject to this Section
3.2 is to be accomplished through an underwritten sale,
the Registrable Shares requested to be included in the
registration statement are of the same type as the
securities being registered by the Company, and the
managing underwriter advises the Company in writing
that, in its reasonable opinion, the inclusion of such
Registrable Shares would cause a Material Adverse
Effect, the Company will be obligated to include in
such registration statement, as to each Requesting
Holder, only a portion of the shares such Holder has
requested be registered equal to the ratio which such
Holder's requested shares bears to the total number of
shares requested to be included in such registration
statement by all Persons (including Requesting Holders
but excluding the Company) who have requested (pursuant
to contractual registration rights) to include, or who
have been permitted to include their shares, in such
registration statement.
(c) If as a result of the provisions of this
Section 3.2.2 any Holder shall not be entitled to
include all Registrable Shares in a registration that
such Holder has requested to be so included, such
Holder may withdraw such Holder's request to include
Registrable Shares in such registration statement.
III.3 Information by Requesting Holders.
(a) No Person may participate in any registration
statement hereunder unless such Person (x) agrees to
sell such Person's Registrable Shares on the basis
provided in any underwriting arrangements approved by
the Company and, if a Demand Registration, a majority
of Registrable Shares held by the Requesting Holders
and (y) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting
agreements, and other documents, each in customary
form, reasonably required under the terms of such
underwriting arrangements; provided, however, that no
such Person shall be required to make any
representations or warranties in connection with any
such registration other than representations and
warranties as to (i) such Person's ownership of its
Registrable Shares to be sold or transferred free and
clear of all liens, claims, and encumbrances, (ii) such
Person's power and authority to effect such transfer,
and (iii) such matters pertaining to compliance with
securities laws as may be reasonably requested; further
provided, however, that the obligation of such Person
to indemnify pursuant to any such underwriting
arrangements shall be several, not joint and several,
among such Persons selling Registrable Shares, and the
liability of each such Person will be in proportion to,
and provided further that such liability will be
limited to, the net amount received by such Person from
the sale of its Registrable Shares pursuant to such
registration.
<Page 15>
III.4 Holdback Agreement. Unless the managing
underwriter otherwise agrees, each of the Company and the Holders
agrees (and the Company agrees to use its best efforts to cause
its Affiliates and other stockholders to agree) not to effect any
public sale (except, if applicable, as part of such underwritten
registration) or private offer or distribution of any Common
Stock or Common Stock Equivalents during the 10 Business Days
prior to the effectiveness under the Securities Act of any
underwritten registration and during such period after the
effectiveness under the Securities Act of any underwritten
registration (not to exceed 120 days) as the managing underwriter
may require.
III.5 Registration Procedures. Whenever any Holder has
requested that any Registrable Shares be registered pursuant to
this Agreement, the Company will use its best efforts to effect
the registration and the sale of such Registrable Shares in
accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
(i) prepare and file with the SEC a registration
statement on any appropriate form under the Securities Act
with respect to such Registrable Shares and use its best
efforts to cause such registration statement to become
effective;
(ii) prepare and file with the SEC such amendments,
post-effective amendments, and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration
statement effective for a period of not less than 60 days
(or such lesser period as is necessary for the underwriters
in an underwritten offering to sell unsold allotments) and
comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement during such period in accordance with
the intended methods of disposition by the sellers thereof
set forth in such registration statement;
(iii) furnish to each seller of Registrable Shares
and the underwriters of the securities being registered such
number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary
prospectus), any documents incorporated by reference
therein, and such other documents as such seller or
underwriters may reasonably request in order to facilitate
the disposition of the Registrable Shares owned by such
seller or the sale of such securities by such underwriters
(it being understood that, subject to Section 3.6, the
requirements of the Securities Act and applicable state
securities laws, the Company consents to the use of the
prospectus and any amendment or supplement thereto by each
seller and the underwriters in connection with the offering
and sale of the Registrable Shares covered by the
registration statement of which such prospectus, amendment,
or supplement is a part);
(iv) use its best efforts to register or qualify such
Registrable Shares under the securities or blue sky laws of
such jurisdictions as the managing underwriter reasonably
requests (or, in the event the registration statement does
not relate to an underwritten offering, as the holders of a
majority of such Registrable Shares may reasonably request);
use its best efforts to keep each such registration or
qualification (or exemption therefrom) effective during the
period in which such registration statement is required to
be kept effective; and do any and all other acts and things
which may be reasonably necessary or
<Page 16>
advisable to enable
each seller to consummate the disposition of the Registrable
Shares owned by such seller in such jurisdictions (provided,
however, that the Company will not be required to (A)
qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this
subparagraph (iv) or (B) consent to general service of
process in any such jurisdiction);
(v) promptly notify each seller and each underwriter
and (if requested by any such Person) confirm such notice in
writing (A) when a prospectus or any prospectus supplement
or post-effective amendment has been filed and, with respect
to a registration statement or any post-effective amendment,
when the same has become effective, (B) of the issuance by
any state securities or other regulatory authority of any
order suspending the qualification or exemption from
qualification of any of the Registrable Shares under state
securities or "blue sky" laws or the initiation of any
proceedings for that purpose, and (C) of the happening of
any event which makes any statement made in an effective
registration statement or related prospectus untrue or which
requires the making of any changes in such registration
statement, prospectus, or documents so that they will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading,
and, as promptly as practicable thereafter, prepare and file
with the SEC and furnish a supplement or amendment to such
prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Shares, such prospectus will
not contain any untrue statement of a material fact or omit
a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading;
(vi) make generally available to the Company's
securityholders an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later
than 30 days after the end of the 12-month period beginning
with the first day of the Company's first fiscal quarter
commencing after the effective date of a registration
statement, which earnings statement shall cover such 12-
month period, and which requirement will be deemed to be
satisfied if the Company timely files complete and accurate
information on Forms 10-Q, 10-K, and 8-K under the Exchange
Act and otherwise complies with Rule 158 under the
Securities Act;
(vii) if requested by the managing underwriter or
any seller promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing
underwriter or any seller reasonably requests to be included
therein, including with respect to the Registrable Shares
being sold by such seller, the purchase price being paid
therefor by the underwriters and with respect to any other
terms of the underwritten offering of the Registrable Shares
to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective
amendment;
(viii) cooperate with the sellers and the managing
underwriter to facilitate the timely preparation and
delivery of certificates (which shall not bear any
restrictive legends unless required under applicable law)
representing securities sold under any registration
statement, and enable such securities to be in such
denominations and registered in such names as the managing
underwriter or such sellers may request and keep available
and make available to the Company's transfer agent prior to
the effectiveness of such registration statement a supply of
such certificates;
<Page 17>
(ix) promptly make available for inspection by any
seller, any underwriter participating in any disposition
pursuant to any registration statement, and any attorney,
accountant, or other agent or representative retained by any
such seller or underwriter (collectively, the "Inspectors"),
all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the
"Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause
the Company's officers, directors, and employees to supply
all information requested by any such Inspector in
connection with such registration statement; provided,
however, that, unless the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in
the registration statement or the release of such Records is
ordered pursuant to a subpoena or other order from a court
of competent jurisdiction, the Company shall not be required
to provide any information under this subparagraph (ix) if
(A) the Company believes, after consultation with counsel
for the Company, that to do so would cause the Company to
forfeit an attorney-client privilege that was applicable to
such information or (B) if either (1) the Company has
requested and been granted from the SEC confidential
treatment of such information contained in any filing with
the SEC or documents provided supplementally or otherwise or
(2) the Company reasonably determines in good faith that
such Records are confidential and so notifies the Inspectors
in writing unless prior to furnishing any such information
with respect to clause (A) or (B) of this subparagraph (ix)
such Holder of Registrable Shares requesting such
information agrees to enter into a confidentiality agreement
in customary form and subject to customary exceptions; and
further provided, however, that each Holder of Registrable
Shares agrees that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at its
expense, to undertake appropriate action and to prevent
disclosure of the Records deemed confidential;
(x) furnish to each seller and underwriter a signed
counterpart of (A) an opinion or opinions of counsel to the
Company, and (B) a comfort letter or comfort letters from
the Company's independent public accountants, each in
customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the
case may be, as the sellers or managing underwriter
reasonably requests;
(xi) cause the Registrable Shares included in any
registration statement to be (A) listed on each securities
exchange, if any, on which similar securities issued by the
Company are then listed, or if none are then listed, on
which the managing underwriter for such offering shall
request, or (B) authorized to be quoted and/or listed (to
the extent applicable) on the NASD Automated Quotation
System or The Nasdaq Stock Market's National Market if the
Registrable Shares so qualify;
(xii) provide a CUSIP number for the Registrable
Shares included in any registration statement not later than
the effective date of such registration statement;
(xiii) cooperate with each seller and each
underwriter participating in the disposition of such
Registrable Shares and their respective counsel in
connection with any filings required to be made with the
NASD;
(xiv) during the period when the prospectus is
required to be delivered under the
<Page 18>
Securities Act, promptly
file all documents required to be filed with the SEC
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act;
(xv) notify each underwriter and seller of Registrable
Shares promptly of any request by the SEC for the amending
or supplementing of such registration statement or
prospectus or for additional information;
(xvi) prepare and file with the SEC promptly any
amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Company
or the managing underwriter, is required in connection with
the distribution of the Registrable Shares;
(xvii) enter into such agreements (including
underwriting agreements in the managing underwriter's
customary form) as are customary in connection with an
underwritten registration; and
(xviii) advise each seller of such Registrable
Shares, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding
for such purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop
order should be issued.
III.6 Suspension of Dispositions. Each Holder agrees by
acquisition of any Registrable Shares that, upon receipt of any
notice (a "Suspension Notice") from the Company of the happening
of any event of the kind described in Section 3.5(v)(C) such
Holder will forthwith discontinue disposition of Registrable
Shares until such Holder's receipt of the copies of the
supplemented or amended prospectus, or until it is advised in
writing (the "Advice") by the Company that the use of the
prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by
reference in the prospectus, and, if so directed by the Company,
such Holder will deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Shares current at the time
of receipt of such notice. In the event the Company shall give
any such notice, the period regarding the effectiveness of
registration statements set forth in Section 3.5(ii) shall be
extended by the number of days during the period from and
including the date of the giving of the Suspension Notice to and
including the date when each seller of Registrable Shares covered
by such registration statement shall have received the copies of
the supplemented or amended prospectus or the Advice. The
Company shall use its best efforts and take all such actions as
are reasonably necessary to render the Advice as promptly as
practicable.
III.7 Registration Expenses. All expenses incident to
the Company's performance of or compliance with this Article III,
including all registration and filing fees, all fees and expenses
associated with filings required to be made with the NASD
(including, if applicable, the fees and expenses of any
"qualified independent underwriter" as such term is defined in
Schedule E of the By-Laws of the NASD), as may be required by the
rules and regulations of the NASD, fees and expenses of
compliance with securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with
"blue sky" qualifications of the Registrable Shares), rating
agency fees, printing expenses (including expenses of printing
certificates for the
<Page 19>
Registrable Shares in a form eligible for
deposit with Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by a
holder of Registrable Shares), messenger and delivery expenses,
the Company's internal expenses (including, all salaries and
expenses of its officers and employees performing legal or
accounting duties), the fees and expenses incurred in connection
with any listing of the Registrable Shares, fees and expenses of
counsel for the Company and its independent certified public
accountants (including the expenses of any special audit or "cold
comfort" letters required by or incident to such performance),
securities acts liability insurance (if the Company elects to
obtain such insurance), the fees and expenses of any special
experts retained by the Company in connection with such
registration, and the fees and expenses of other persons retained
by the Company and reasonable fees and expenses of one firm of
counsel for the sellers (which shall be selected by the holders
of a majority of the Registrable Shares being included in any
particular registration statement) (all such expenses being
herein called "Registration Expenses") will be borne by the
Company whether or not any registration statement becomes
effective; provided, however, that in no event shall Registration
Expenses include any underwriting discounts, commissions, or fees
or any broker-dealer charges attributable to the sale of the
Registrable Shares or any counsel (except as provided above),
accountants, or other persons retained or employed by the
Holders.
<Page 20>
III.8 Indemnification.
III.8.1 In the event of any registration of any
Registrable Shares under the Securities Act pursuant to this
Article III, the Company shall indemnify and reimburse, to
the fullest extent permitted by law, each seller of
Registrable Shares, and each of its employees, advisors,
agents, representatives, partners, officers, and directors
and each Person who controls such seller (within the meaning
of the Securities Act or the Exchange Act) and any agent or
investment advisor thereof (collectively, the "Seller
Affiliates") (A) against any and all losses, claims,
damages, liabilities, and expenses, joint or several
(including, attorneys' fees and disbursements except as
limited by Section 3.8.3) based upon, arising out of,
related to, or resulting from any untrue or alleged untrue
statement of a material fact contained in any registration
statement, prospectus (if used within the period during
which the Company is required to keep the registration
statement in which such prospectus is contained current
pursuant to the terms of this Agreement or the Securities
Act), or preliminary prospectus (if used prior to the
effective date of the registration statement) or any
amendment thereof or supplement thereto, or any omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, (B) against any and all loss, liability, claim,
damage, and expense whatsoever, as incurred, to the extent
of the aggregate amount paid in settlement of any litigation
or investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon, arising out of, related to, or resulting from
any such untrue statement or omission or alleged untrue
statement or omission, and (C) against any and all costs and
expenses (including reasonable fees and disbursements of
counsel) as may be reasonably incurred in investigating,
preparing, or defending against any litigation,
investigation, or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based
upon, arising out of, related to, or resulting from any such
untrue statement or omission or alleged untrue statement or
omission, to the extent that any such expense or cost is not
paid under clause (A) or (B) of this Section 3.8.1; except
insofar as the same are made in reliance upon and in strict
conformity with information furnished in writing to the
Company by such seller or any Seller Affiliate for use
therein or arise from such seller's or any Seller
Affiliate's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements
thereto after the Company has furnished such seller or
Seller Affiliate with a sufficient number of copies of the
same. The reimbursements required by this Section 3.8.1
will be made by periodic payments during the course of the
investigation or defense, as and when bills are received or
expenses incurred.
III.8.2 In connection with any registration statement
in which a seller of Registrable Shares is participating,
each such seller will furnish to the Company in writing such
information and affidavits as the Company reasonably
requests for use in connection with any such registration
statement or prospectus and, to the fullest extent permitted
by law, each such seller will indemnify the Company and its
directors and officers and each Person who controls the
Company (within the meaning of the Securities Act or the
Exchange Act) against any and all losses, claims, damages,
liabilities, and expenses (including, reasonable attorneys'
fees and disbursements except as limited by Section 3.8.3)
resulting from any untrue statement or alleged untrue
statement of a
<Page 21>
material fact contained in the registration
statement, prospectus, or any preliminary prospectus or any
amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged
omission is contained in any information or affidavit so
furnished in writing by such seller or any of its Seller
Affiliates specifically for inclusion in the registration
statement; provided, however, that the obligation to
indemnify will be several, not joint and several, among such
sellers of Registrable Shares, and the liability of each
such seller of Registrable Shares will be in proportion to,
and provided further that such liability will be limited to,
the net amount received by such seller from the sale of
Registrable Shares pursuant to such registration statement;
further provided, however, that such seller of Registrable
Shares shall not be liable in any such case to the extent
that prior to the filing of any such registration statement
or prospectus or amendment thereof or supplement thereto,
such seller has furnished in writing to the Company
information expressly for use in such registration statement
or prospectus or any amendment thereof or supplement thereto
which corrected or made not misleading information
previously furnished to the Company.
III.8.3 Any Person entitled to indemnification
hereunder will (A) give prompt written notice to the
indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give
such notice shall not limit the rights of such Person) and
(B) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the
indemnified party; provided, however, that any person
entitled to indemnification hereunder shall have the right
to employ separate counsel and to participate in the defense
of such claim, but the fees and expenses of such counsel
shall be at the expense of such person unless (X) the
indemnifying party has agreed to pay such fees or expenses,
(Y) the indemnifying party shall have failed to assume the
defense of such claim and employ counsel reasonably
satisfactory to such person or (Z) in the indemnified
party's reasonable judgment a conflict of interest between
the indemnified party and the indemnifying party may exist
into respect to such claims. If such defense is not assumed
by the indemnifying party as permitted hereunder, the
indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably
conditioned, delayed, or withheld). If such defense is
assumed by the indemnifying party pursuant to the provisions
hereof, such indemnifying party shall not settle or
otherwise compromise the applicable claim unless (1) such
settlement or compromise contains a full and unconditional
release of the indemnified party or (2) the indemnified
party otherwise consents in writing. An indemnifying party
who is not entitled to, or elects not to, assume the defense
of a claim will 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 in the reasonable judgment of any indemnified
party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties
with respect to such claim, in which event the indemnifying
party shall be obligated to pay the reasonable fees and
disbursements of such additional counsel or counsels.
<Page 22>
III.8.4 Each party hereto agrees that, if for any
reason the indemnification provisions contemplated by
Section 3.8.1 or 3.8.2 are unavailable to or insufficient to
hold harmless an indemnified party in respect of any losses,
claims, damages, liabilities, or expenses (or actions in
respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims,
liabilities, or expenses (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative
fault of the indemnifying party and the indemnified party in
connection with the actions which resulted in the losses,
claims, damages, liabilities, or expenses as well as any
other relevant equitable considerations. The relative fault
of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party
or indemnified party, and the parties' relative intent,
knowledge, access to information, and opportunity to correct
or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if
contribution pursuant to this Section 3.8.4 were determined
by pro rata allocation (even if the Holders or any
underwriters or all of them were treated as one person for
such purpose) or by any other method of allocation which
does not take account of the equitable considerations
referred to in this Section 3.8.4. The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages, liabilities, or expenses (or actions in
respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with
investigating or, except as provided in Section 3.8.3,
defending any such action or claim. Notwithstanding the
provisions of this Section 3.8.4, no Holder shall be
required to contribute an amount greater than the dollar
amount by which the net proceeds received by such Holder
with respect to the sale of any Registrable Shares exceeds
the amount of damages which such Holder has otherwise been
required to pay by reason of any and all untrue or alleged
untrue statements of material fact or omissions or alleged
omissions of material fact made in any registration
statement, prospectus, or preliminary prospectus or any
amendment thereof or supplement thereto related to such sale
of Registrable Shares. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations in this Section
3.8.4 to contribute shall be several in proportion to the
amount of Registrable Shares registered by them and not
joint. If indemnification is available under this Section
3.7, the indemnifying parties shall indemnify each
indemnified party to the full extent provided in Sections
3.8.1 and 3.8.2 without regard to the relative fault of such
indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 3.8.4
subject, in the case of the Holders, to the limited dollar
amounts set forth in Section 3.8.2.
III.8.5 The indemnification and contribution provided
for under this Agreement will remain in full force and
effect regardless of any investigation made by or on behalf
of the indemnified party or any officer, director, or
controlling Person of such indemnified party and will
survive the transfer of securities.
<Page 23>
III.9 Limitations on Future Registration Rights. The
Company shall not in the future grant any Person registration
rights in respect of Preferred Stock, Common Stock, or Common
Stock Equivalents more favorable than, or materially inconsistent
with, those granted to the Holders herein unless the Company
shall concurrently modify and amend this Agreement to provide to
the Holders the benefits of any such more favorable provisions.
III.10 Rule 144 Reporting. With a view to making
available to the Holders the benefits of certain rules and
regulations of the SEC that permit the sale of the shares of any
class or series of capital stock to the public without
registration, after the completion of any registration pursuant
to this Article III, the Company shall: (i) use its best efforts
to make and keep public information available, as those terms are
understood and defined in SEC Rule 144, or any successor
provision thereto, at all times, (ii) use its best efforts to
file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and
the Exchange Act, and (iii) so long as a Holder owns any shares
of any class or series of capital stock, to furnish to such
Holder forthwith upon its request a written statement by the
Company as to the Company's compliance with the reporting
requirements of Rule 144, the Securities Act, and the Exchange
Act.
ARTICLE IV
TRANSFERS OF SECURITIES
IV.1 Transfer and Exchange. Subject to the limitations
described in Article V hereof, when Securities are presented to
the Company with a request to register the transfer of such
Securities or to exchange such Securities for Securities of other
authorized denominations, the Company shall register the transfer
or make the exchange as requested if the requirements of this
Agreement for such transaction are met; provided, however, that
the Securities surrendered for transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company, duly executed by the Holder
thereof or its attorney and duly authorized in writing. No
service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable
in connection therewith.
IV.2 Replacement of Securities. If a mutilated Security is
surrendered to the Company or if the Holder of a Security claims
and submits an affidavit or other evidence, satisfactory to the
Company, to the effect that the Security has been lost,
destroyed, or wrongfully taken, the Company shall issue a
replacement Security if the Company's requirements are met. If
required by the Company, such securityholder must provide a lost
security affidavit and an indemnity bond, or other form of
indemnity, sufficient in the judgment of the Company to protect
the Company against any loss which may be suffered. The Company
may charge such securityholder for its reasonable out-of-pocket
expenses in replacing a Security which has been mutilated, lost,
destroyed, or wrongfully taken.
ARTICLE V
LIMITATION ON TRANSFERS
V.1 Restrictions on Transfer. The Securities shall not be
Transferred or otherwise conveyed, assigned, or hypothecated
before satisfaction of (i) the conditions specified in
<Page 24>
Sections 5.1, 5.2, and 5.3, which conditions are intended to
ensure compliance with the provisions of the Securities Act with
respect to the Transfer of any Security, and (ii) Article IV.
Any purported Transfer in violation of this Article V, and/or, if
applicable, Article IV shall be void ab initio and of no force or
effect. Other than Transfers to the public pursuant to an
effective registration statement or sales to the public pursuant
to Rule 144 under the Securities Act otherwise permitted
hereunder, each Holder will cause any proposed transferee of any
Security or any interest therein held by it to agree to take and
hold such securities subject to the provisions and upon the
conditions specified in this Agreement.
V.2 Restrictive Legends.
V.2.1 Securities Act Legend. Except as otherwise
provided in Section 5.4, each Security held by a Holder, and
each Security issued to any subsequent transferee of such
Holder, shall be stamped or otherwise imprinted with a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE SKY"
LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE
ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT,
OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT.
V.2.2 Other Legends. Except as otherwise permitted
by the last sentence of Section 5.1, each Security issued to
each Holder or a subsequent transferee shall include a
legend in substantially the following form:
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER
AND OTHER TERMS AND CONDITIONS AS SET FORTH IN THE
INVESTORS RIGHTS AGREEMENT DATED AS OF MAY 22, 1998, A
COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES.
V.3 Notice of Proposed Transfers. Prior to any Transfer or
attempted Transfer of any Security, the Holder of such Security
shall (i) give five Business Days' prior written notice (a
"Transfer Notice") to the Company of such Holder's intention to
effect such Transfer, describing the manner and circumstances of
the proposed Transfer, and (ii) either (A) provide to the Company
an opinion reasonably satisfactory to the Company from counsel
who shall be reasonably satisfactory to the Company (or supply
such other evidence reasonably satisfactory to the Company) that
the proposed Transfer of such Security may be effected without
registration under the Securities Act, or (B) certify in writing
to the Company that the Holder reasonably believes the proposed
transferee is a "qualified institutional buyer" and that such
Holder has taken reasonable steps to make the proposed transferee
aware that such Holder may rely on Rule 144A under the Securities
Act in effecting such Transfer. After receipt of the Transfer
Notice and opinion (if required), the Company shall have five
Business Days to object to the transfer by
<Page 25>
written notice to such
Holder describing in reasonably detail the basis for the
objection, and in the absence of such notice, such Holder shall
thereupon be entitled to Transfer such Security in accordance
with the terms of the Transfer Notice. Each Security issued upon
such Transfer shall bear the restrictive legend set forth in
Section 5.2, unless in the opinion of such counsel such legend is
not required in order to ensure compliance with the Securities
Act.
V.4 Termination of Certain Restrictions. Notwithstanding
the foregoing provisions of this Article V, the restrictions
imposed by Section 5.2.1 upon the transferability of the
Securities and the legend requirements of Section 5.2.1 shall
terminate as to any Security (i) when and so long as such
Security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) when the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such Security may be transferred without
registration thereof under the Securities Act and that such
legend may be removed. Whenever the restrictions imposed by
Section 5.2 shall terminate as to any Security, the Holder
thereof shall be entitled to receive from the Company, at the
Company's expense, a new Security not bearing the restrictive
legend set forth in Section 5.2.
ARTICLE VI
TERMINATION
VI.1 Termination. The provisions of this Agreement shall
terminate on the earlier of (i) May 22, 2004, (ii) the first date
on which there ceases to be any Registrable Shares outstanding,
and (iii) the date upon which the Company and each Holder
mutually agree in writing to terminate this Agreement.
ARTICLE VII
MISCELLANEOUS
VII.1 Notices. Any notices or other communications
required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, overnight courier,
by telecopier, or first class or certified mail, postage prepaid,
return receipt requested, addressed as follows (or at such other
address as may be substituted by notice given as herein provided
in accordance with this Section 7.1):
If to the Company:
Stratus Properties Inc.
98 San Jacinto Boulevard, Suite 2200
Austin, Texas 78701
Facsimile No.: (512) 478-5788
Attention: William H. Armstrong, III
With a copy to:
Stratus Properties Inc.
1615 Poydras
New Orleans, LA 70112
Facsimile No.: (504) 585-3513
Attention: John G. Amato
<Page 26>
If to any Holder, at its address listed on the signature
pages hereof.
Any notice or communication hereunder shall be deemed to
have been given or made as of the date so delivered, if
personally delivered or delivered by overnight courier; when
receipt is electronically confirmed, if telecopied; and three
calendar days after mailing if sent by registered or certified
mail (except that a notice of change of address shall not be
deemed to have been given until actually received by the
addressee). Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with
respect to other Holders. If a notice or communication is mailed
in the manner provided above, it is duly given, whether or not
the addressee receives it.
VII.2 Legal Holidays. A "Legal Holiday" used with
respect to a particular place of payment is a Saturday, a Sunday,
or a day on which banking institutions at such place are not
required to be open. If a payment date is a Legal Holiday at
such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest on
the amount of such payment shall accrue for the intervening
period.
VII.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF.
VII.4 Successors and Assigns. This Agreement and the
rights and obligations hereunder shall not be assigned by the
Company or Olympus without the other party's prior written
consent; provided, however, that whether or not an express
assignment has been made pursuant to the provisions of this
Agreement, the provisions of Articles III, IV and V of this
Agreement that are applicable to the Holders as the holders of
any Securities are also for the benefit of, and enforceable by
and against, all subsequent holders of Securities, except as
otherwise expressly provided herein. This Agreement shall be
binding upon the Company, each Holder, and their respective
successors and assigns.
VII.5 Duplicate Originals. All parties may sign any
number of copies of this Agreement. Each signed copy shall be an
original, but all of them together shall represent the same
agreement.
VII.6 Severability. If any provision of this Agreement,
or the application of such provision to any person or
circumstance, shall be held invalid under the applicable law of
any jurisdiction, the remainder of this Agreement or the
application of such provision to other persons or circumstances
or in other jurisdictions shall not be affected thereby. Also,
if any provision of this Agreement is invalid or unenforceable
under any applicable law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such law. Any provision
hereof that may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other
provision hereof.
VII.7 No Waivers; Amendments.
<Page 27>
VII.7.1 No failure or delay on the part of the
Company or any Holder in exercising any right, power, or
remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right,
power, or remedy preclude any other or further exercise
thereof or the exercise of any other right, power, or
remedy. The remedies provided for herein are cumulative and
are not exclusive of any remedies that may be available to
the Company or any Holder at law, in equity, or otherwise.
VII.7.2 Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Company and the Required
Holders.
<Page 28>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
STRATUS PROPERTIES INC.
By: /s/ William H. Armstrong III
----------------------------
Name: William H. Armstrong III
Title: President
<Page 29>
[SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT]
OLY/STRATUS EQUITIES, L.P.
By: Oly Fund II GP Investments, L.P.,
its General Partner
By: Oly Real Estate Partners II,
L.P., its General Partner
By: Oly REP II, L.P., its
General Partner
By: Oly Fund II, LLC,
its General Partner
By: /s/ Hal R. Hall
---------------
Name: Hal R. Hall
Title: Vice President
Address: 200 Crescent Court, Suite 1650
Dallas, Texas 75201
Facsimile: (214) 740-7340
Attention: David D. Deniger
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Facsimile: (214) 746-7777
Attention: Robert C. Feldman
<Page 30>
INVESTORS RIGHTS AGREEMENT
STRATUS PROPERTIES INC.
____________________
Dated as of May 22, 1998
____________________
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions ....................................... 1
1.2 Rules of Construction ............................. 5
1.3 Other Definitions ................................. 6
ARTICLE II
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
2.1 Board of Directors ............................ 6
2.1.1 .......................... Board Representation 6
2.1.2 .................................Observer Rights 6
2.1.3 .......................................Vacancies 7
2.1.4 ...........................Termination of Rights 8
2.1.5 ..............................Costs and Expenses 8
2.2 Transactions Permitting Optional Redemption ....... 8
2.3 Other Activities of Olympus; Fiduciary Duties ..... 13
ARTICLE III
REGISTRATION RIGHTS
3.1 Demand Registration ............................... 13
3.1.1 ........................Request for Registration 13
3.1.2 .............Effective Registration and Expenses 14
3.1.3 .......................Selection of Underwriters 14
3.1.4 ................Priority on Demand Registrations 14
3.1.5 .................Rights of Nonrequesting Holders 15
3.1.6 ..............................Deferral of Filing 15
i
3.2 Piggyback Registrations ........................... 16
3.2.1 ..............................Right to Piggyback 16
3.2.2 .......................Priority on Registrations 17
3.3 Information by Requesting Holders ................. 18
3.4 Holdback Agreement ................................ 18
3.5 Registration Procedures ........................... 19
3.6 Suspension of Dispositions ........................ 23
3.7 Registration Expenses ............................. 23
3.8 Indemnification ................................... 24
3.9 Limitations on Future Registration Rights ......... 27
3.10 Rule 144 Reporting ................................ 27
ARTICLE IV
TRANSFERS OF SECURITIES
4.1 Transfer and Exchange ............................. 28
4.2 Replacement of Securities ......................... 28
ARTICLE V
LIMITATION ON TRANSFERS
5.1 Restrictions on Transfer .......................... 28
5.2 Restrictive Legends ............................... 29
5.2.1 ...........................Securities Act Legend 29
5.2.2 ...................................Other Legends 29
5.3 Notice of Proposed Transfers ...................... 29
5.4 Termination of Certain Restrictions ............... 30
ARTICLE VI
TERMINATION
6.1 Termination ....................................... 30
ii
ARTICLE VII
MISCELLANEOUS
7.1 Notices ........................................... 30
7.2 Legal Holidays .................................... 31
7.3 Governing Law ..................................... 31
7.4 Successors and Assigns ............................ 31
7.5 Duplicate Originals ............................... 32
7.6 Severability ...................................... 32
7.7 No Waivers; Amendments ............................ 32
iii
Exhibit 4.3
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is executed
effective as of the 22nd day of May, 1998 (the "Effective Date"),
by and between STRATUS VENTURES I BORROWER L.L.C., a Delaware
limited liability company ("Borrower"), and OLY LENDER STRATUS,
L.P., a Texas limited partnership ("Lender"), and, solely for the
purposes of acknowledging the provisions of Article XIV hereof
relating to the conversion of the Obligations (as hereinafter
defined) hereunder into Parent Common Stock (as hereinafter
defined), STRATUS PROPERTIES INC., a Delaware corporation
("Parent").
R E C I T A L S
WHEREAS, Borrower is a special purpose entity wholly-
owned by Parent, formed exclusively for the purpose of investing
in joint ventures for new land acquisitions and real estate
development projects for which borrowings can be made hereunder;
and
WHEREAS, Borrower has requested that Lender make a loan
to Borrower, available in multiple draws, in the maximum
principal amount of up to Ten Million Dollars ($10,000,000) (the
"Loan") strictly for the purposes set forth in this Agreement;
and
WHEREAS, Parent, as the sole owner of equity interests
in Borrower, will derive significant direct and indirect economic
benefit from the Loans and other financial accommodations made by
Lender to Borrower pursuant to this Agreement, and it is a
condition to the making of the Loans pursuant to this Agreement
that Parent shall enter into certain agreements and
acknowledgments contained herein, including without limitation,
those contained in Article XIV hereof; and
WHEREAS, Lender has agreed to make such Loan upon the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the
foregoing premises, the mutual covenants contained herein and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
A G R E E M E N T S
Article I
DEFINITIONS AND DETERMINATIONS
Section I.1 Definitions. As used in this Agreement
and in the other Loan Documents, unless otherwise expressly
indicated herein or therein, the following terms shall have the
following meanings (such meanings to be applicable equally both
to the singular and plural terms defined):
"Accountants" shall have the meaning given to such
term in Section 9.3(a).
"Advance" shall have the meaning given to such
term in Section 2.1.
"Affiliate" shall mean any Person that directly or
indirectly, through one or more intermediaries, controls or
is controlled by or is under common control with another
Person. The term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
For the purpose hereof, any Person which owns or controls,
directly or indirectly, thirty percent (30%) or more of the
equity securities, voting or otherwise, of another Person
shall be deemed to "control" such Person. Notwithstanding
the foregoing, under no circumstances shall Lender be
considered an Affiliate of Borrower.
"Agreement" means this Loan Agreement as the same
may be amended, restated, supplemented or otherwise modified
from time to time.
"Blockage Notice" shall have the meaning given to
such term in Section 14.4.
"Blockage Period" shall have the meaning given to
such term in Section 14.4.
"Board" means the Board of Governors of the
Federal Reserve System of the United States.
"Book Value of Assets" shall mean, as of any time,
the cost of any assets and properties as reflected on the
books and records of Parent and its Restricted Subsidiaries.
If the cost of such assets or property was included in the
balance sheet contained in the most recent Form 10-Q or Form
10-K filed with the SEC, the cost as so reflected, shall be
the "Book Value", as such amount is adjusted for the cost of
subsequent improvements and investments.
"Borrower" has the meaning set forth in the
preamble to this Agreement.
"Borrower Capital Stock" shall mean all of the
capital stock of Borrower, a description and the owners of
the outstanding shares of which is set forth in Exhibit 1.
"Business Day" shall mean any day other than a
Saturday, Sunday or holiday under the laws of the States of
Texas or New York, or a day on which banking institutions
located in the States of Texas or New York are authorized or
required by law or other governmental action to close.
"Capitalized Lease" shall mean any lease of
Property, the obligations for rental of which are required
to be capitalized in accordance with GAAP.
"Cash Collateral Account" shall have the meaning
given to such term in Section 2.3(d).
"Cash Collateral Agreement" shall have the meaning
given to such term in Section 2.3(d).
"CERCLA" means, collectively, the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. SS 9601 et seq.
"Closing Date" shall mean the date occurring on or
after the Effective Date on which the first borrowing under
the Loan occurs.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean the Property in which
Lender is granted the Security Interests pursuant to the
Loan Documents.
"Contingent Obligation" as applied to any Person,
means any direct or indirect liability, contingent or
otherwise, of that Person: (a) with respect to any
indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is
to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that
the holders of such liability will be protected (in whole or
in part) against loss with respect thereto; (b) with respect
to any letter of credit issued for the account of that
Person or as to which that Person is otherwise liable for
reimbursement of drawings; (c) under any foreign exchange
contract, currency swap agreement or other similar agreement
or arrangement designed to protect that Person against
fluctuations in currency values; or (d) under any commodity
futures contract. Contingent Obligations shall include
(i) the direct or indirect guaranty, endorsement (otherwise
than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another,
(ii) the obligation to make take-or-pay or similar payments
if required regardless of nonperformance by any other party
or parties to an agreement, and (iii) any liability of such
Person for the obligations of another through any agreement
to purchase, repurchase or otherwise acquire such obligation
or any property constituting security therefor, to provide
funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance
sheet item or level of income of another. The amount of any
Contingent Obligation shall be equal to the amount of the
obligation so guarantied or otherwise supported or, if a
fixed and determined amount, the maximum amount so
guaranteed.
"Conversion" shall have the meaning given to such
term in Section 14.1.
"Conversion Limitations" shall mean the
limitations on the issuance of Parent Common Stock
identified in Section 14.2.
"Coverage Ratio" shall mean, as of any time, the
ratio of (A) the Book Value of Assets to (B) (i) the
aggregate amount of outstanding Debt of Parent and its
Restricted Subsidiaries, plus (ii) any outstanding Preferred
Obligations.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase
price of property or services, except accounts payable
arising in the ordinary course of business, (iv) all
obligations of such person as lessee under capital leases,
(v) all Debt of others secured by any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind
on any asset of such Person and (vi) all Debt of others
Guaranteed by such Person.
"Default Rate" shall mean the lesser of fifteen
percent (15%) per annum and the Maximum Lawful Rate.
"Default Rate Period" shall mean a period of time
commencing on the date that an Event of Default has occurred
and ending on the date that such Event of Default is cured
or waived in writing by Lender.
"Dollars" and the sign "$" shall mean freely
transferable lawful money of the United States.
"Effective Date" shall have the meaning set forth
in the preamble to this Agreement.
"Environmental Claim" means any written notice of
violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any
Governmental Body or any Person for damages, injunctive or
equitable relief, personal injury (including sickness,
disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages,
nuisance, pollution, any adverse effect on the environment
caused by any Hazardous Material, or for fines, penalties or
restrictions resulting from or based upon: (a) the threat
or existence, or the continuation of the existence, of a
Release (including sudden or non-sudden, accidental or
nonaccidental Releases); (b) exposure to any Hazardous
material; (c) the presence, use, handling, transportation,
storage, treatment or disposal of any Hazardous Material; or
(d) the violation of any Environmental Law or Environmental
Permit.
"Environmental Law" shall mean any and all
applicable treaties, laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices
or binding agreements issued, promulgated or entered into by
any Governmental Body, relating in any way to the
environment, preservation or reclamation of natural
resources, the management, Release or threatened Release of
any Hazardous Material or to health and safety matters,
including CERCLA, the Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act of 1976 and
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
SS 6901 et seq., the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, 33 U.S.C. SS 1251 et
seq., the Clean Air Act of 1970, as amended, 42 U.S.C.
SS 7401 et seq., the Toxic Substances Control Act of 1976,
15 U.S.C. SS 2601 et seq., the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. SS 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. SS 11001 et seq., the Safe Drinking Water
Act of 1974, as amended, 42 U.S.C. SS 300(f) et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. SS 1801 et
seq., and any similar or implementing state or local law,
and all amendments or regulations promulgated thereunder.
"Environmental Permit" means any permit,
approval, authorization, certificate, license, variance,
filing or permission required by or from any Governmental
Body pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rules and
regulations issued thereunder, as in effect from time to
time.
"ERISA Affiliate" means any trade or business
(whether or not incorporated), that together with Parent, is
treated as a single employer under Section 414(b) or (c) of
the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer
under Section 414 of the Code.
"ERISA Event" means (i) any "reportable event", as
defined in Section 4043 of ERISA or the regulations issued
thereunder, with respect to a Plan; (ii) the adoption of
any amendment to a Plan that would require the provision of
security pursuant to Section 401 (a)(29) of the Code; (iii)
the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Code),
whether or not waived; (iv) the incurrence of any liability
under Title IV of ERISA with respect to any Plan or
Multiemployer Plan, other than any liability for
contributions not yet due or payment of premiums not yet
due; (v) the receipt by Parent or any ERISA Affiliate
thereof from the PBGC of any notice relating to the
intention of the PBGC to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (vi) the receipt
by Parent or any ERISA Affiliate thereof of any notice
concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected
to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA; and (vii) any other similar event or
condition with respect to a Plan or Multiemployer Plan that
could reasonably result in liability of Parent.
"Event of Default" shall mean any of the Events of
Default set forth in Section 11.1.
"Exit Fee" shall mean an amount, which shall
constitute additional interest payable hereunder, necessary
to permit Lender to realize the Guaranteed Yield.
"Final Payment Date" shall mean the date on which
(a) all outstanding Obligations for principal and interest
under the Loan have been satisfied and extinguished, whether
by way of cash payment or Conversion, and (b) the Lender's
commitment to make Advances under the Loan has terminated.
"GAAP" shall mean generally accepted accounting
principles as in effect from time to time, which shall
include the official interpretations thereof by the
Financial Accounting Standards Board, consistently applied.
"Governmental Body" shall mean any foreign,
federal, state, municipal or other government, or any
department, commission, board, bureau, agency, public
authority or instrumentality thereof or any court or
arbitrator.
"Governmental Rule" shall mean any statute, law,
treaty, rule, code, ordinance, regulation, permit,
certificate or order of any Governmental Body or any
judgment, decree, injunction, writ, order or like action of
any court, arbitration or other judicial or quasi judicial
tribunal.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt of any other Person and,
without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, (i)
to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-
pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring
in any other manner the obligee of such Debt of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part); and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings
correlative to the foregoing); provided, however, that the
Guarantee by any Person shall not include endorsements by
such Person for collection or deposit, in either case in the
ordinary course of business.
"Guaranteed Yield" shall mean the aggregate amount
of money determined as of the Final Payment Date equal to
fifteen percent (15%) per annum, calculated daily, on the
principal Obligations outstanding from time to time.
"Guaranty Agreement" shall mean the Guaranty
Agreement dated as of the Closing Date, executed by
Borrower.
"Hazardous Materials" means all explosive or
radioactive materials, substances or wastes, hazardous or
toxic materials, substances or wastes, pollutants, solid,
liquid or gaseous wastes, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, ("PCBs") or PCB-containing
materials or equipment, radon gas, infectious or medical
wastes and all other substances or wastes of any nature
regulated pursuant to any Environmental Law.
"Indebtedness" shall mean all liabilities,
obligations and reserves, contingent or otherwise, which, in
accordance with GAAP, would be reflected as a liability on a
balance sheet or would be required to be disclosed in a
financial statement, including, without duplication:
(i) all Indebtedness for Borrowed Money, (ii) all
obligations secured by any Lien upon Property, (iii) all
guaranties and other contingent obligations, including,
without limitation, letters of credit, and (iv) all
liabilities in respect of unfunded vested benefits under any
retirement plan and in respect of withdrawal liabilities
incurred under ERISA by Borrower.
"Indebtedness for Borrowed Money" shall mean,
without duplication, all Indebtedness which is owing with
respect to any of the following: (i) money borrowed,
(ii) obligations evidenced by a note, debenture or other
like written obligation to pay money (including, without
limitation, all of the Obligations, and the Loan),
(iii) obligations under Capitalized Leases or for the
deferred purchase price of Property, (iv) obligations under
conditional sales or other title retention agreements,
(v) any guaranty of any or all of the foregoing, or (vi)
trade payables.
"Joint Venture" shall mean any joint venture
entered into between Borrower or a Subsidiary and Olympus
for new land acquisition and development of such land, if
Borrower's contribution to such joint venture will be funded
with proceeds from the Loan, specifically excluding any land
owned or controlled by Parent or an Affiliate of Parent as
of the Effective Date and any projects involving the
development thereof.
"Joint Venture Distribution" shall mean, for any
period, any and all cash distributable to Borrower from the
Joint Ventures.
"Joint Venture Distribution Date" shall mean the
date occurring fifteen (15) days after any Joint Venture
Distribution.
"Lender" shall have the meaning set forth in the
preamble to this Agreement.
"Lien" shall mean any mortgage, pledge,
assignment, lien, charge, encumbrance or security interest
of any kind, or the interest of a vendor or lessor under any
conditional sale agreement or Capitalized Lease or other
title retention agreement.
"Loan" shall have the meaning set forth in the
recitals to this Agreement.
"Loan Documents" shall mean this Agreement, the
Note and the Security Documents and all certificates,
instruments, documents and other agreements executed
pursuant to any of the foregoing or otherwise in connection
with the Loan, and any and all renewals, extensions and
modifications of any of the foregoing described documents
and instruments and any and all replacements and
substitutions therefor.
"Margin Stock" has the meaning assigned to such
term in Regulation U.
"Market Value" means the last per share sale price
of the Parent Common Stock as reported by the Nasdaq
National Market (or any national stock exchange or
interdealer quotation system on which the Parent Common
Stock is then listed or quoted).
"Material Adverse Effect" shall have the meaning
given to such term in Section 6.3.
"Maturity Date" shall mean the date which is six
(6) years after the Closing Date, unless earlier accelerated
pursuant to the terms hereof.
"Maximum Lawful Rate" shall mean the maximum
nonusurious rate of interest permitted by the laws of the
United States or applicable state law, whichever laws allow
the greater rate of interest, as such laws now exist or may
be changed or amended or come into effect in the future.
"Nonrestricted Subsidiaries" shall have the
meaning attributed to such term in the Parent Credit
Agreement. If such agreement is terminated or no longer
includes the concept of Nonrestricted Subsidiaries and it is
not replaced by a successor agreement containing such
concept in connection with a refinancing, then the
definition of such term at the time of such termination
shall be the definition of such term hereunder.
"Note" shall mean that certain Convertible
Promissory Note dated as of the Closing Date, executed by
Borrower, payable to the order of Lender, in the original
principal amount of Ten Million Dollars ($10,000,000) and
any and all renewals, extensions and modifications thereof
and substitutions and replacements therefor.
"Obligations" shall mean (i) any and all
Indebtedness, due or to become due, now existing or
hereafter or howsoever arising from Borrower and/or any
other Obligor to Lender pursuant to the terms of the Loan
Documents, including, without limitation, the Loan, and
(ii) the performance of the covenants of Borrower contained
in the Loan Documents.
"Obligor" shall mean, as the context may require,
Borrower, each Subsidiary and any other Person (other than
Lender) to the extent such Person is obligated under this
Agreement or any other Loan Document.
"Olympus" shall mean Olympus Real Estate
Corporation, a Texas corporation, and any Affiliates
thereof.
"Parent" shall have the meaning set forth in the
recitals of this Agreement.
"Parent Common Stock" shall mean the common stock
of Parent, $0.01 par value, and any securities into which
the Parent Common Stock may hereafter be exchanged or
converted pursuant to any merger, consolidation,
recapitalization or reclassification effected by Parent.
"Parent Credit Agreement" shall mean the Amended,
Restated and Consolidated Credit Agreement dated as of
December 15, 1997 among FM Properties Operating Co., Circle
C Land Corp., the financial institutions party thereto and
The Chase Manhattan Bank, as agent, with respect to which
Parent is a guarantor, as the same may be amended,
supplemented, replaced, refinanced or otherwise modified
from time to time.
"Parent's Permitted Liens " shall have the meaning
given to such term in Section 7.9.
"Parent's Senior Debt" means all Debt of Parent
including principal, premium, if any, and interest on
(including interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law,
whether or not allowed) or other amounts payable in
connection with any Debt of Parent, whether presently
outstanding or subsequently created, incurred or assumed
(other than any other Debt of Parent which expressly
provides by its terms or the terms of the instrument
creating or evidencing it that it is subordinate in right of
payment in any respect to any other Debt of Parent).
Notwithstanding the foregoing, Parent's Senior Debt shall
not include any Debt of Parent to any subsidiary of Parent
or any liability for federal, state or local taxes owed by
Parent.
"Payment Amount" shall mean the aggregate of all
payments received by Lender in connection with the
satisfaction of principal and interest Obligations, valued
as follows:
(a) any cash payment made to Lender or otherwise
received by Lender in respect of principal and interest
Obligations shall be valued at the face value of such
cash payment; and
(b) any Parent Common Stock that is delivered to
Lender in connection with the satisfaction of principal
Obligations pursuant to a Conversion shall be valued at
the average of the Market Value for the ten (10)
trading days immediately prior to the date of
Conversion, but not less than the Stock Price;
LESS the aggregate amount of all Advances made by Lender to
Borrower.
"Payment Obligations" shall have the meaning given
to such term in Section 14.4.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation referred to and defined in ERISA.
"Permits" shall have the meaning given to such
term in Section 6.11.
"Permitted Liens" shall mean any of the following
Liens:
(i) the Security Interests;
(ii) Liens for taxes or assessments and
similar charges, which either are (A) not delinquent or
(B) being contested diligently and in good faith by
appropriate proceedings, and as to which Borrower or any
Subsidiary has set aside adequate reserves on its books;
(iii) statutory Liens, such as
mechanic's, materialman's, warehouseman's, carrier's or
other like Liens, incurred in good faith in the ordinary
course of business, which are paid in the ordinary course of
business or which are bonded in order to remove such Lien of
record within 30 days after the moneys become due and owing;
(iv) Liens in respect of judgments or
awards, the existence of which would not constitute an Event
of Default or Potential Default pursuant to Section 7.1.6;
(v) pledges or deposits made in the
ordinary course of business to secure payment of worker's
compensation, or to participate in any fund in connection
with worker's compensation, unemployment insurance, old-age
pensions or other social security programs;
(vi) Liens upon Property of Borrower or
any Subsidiary to secure Indebtedness of any Joint Venture,
which Liens may be senior to the Liens of Lender; and
(vii) Liens upon the interest of Borrower
or any Subsidiary in a Joint Venture granted in favor of
other holders of interests in such Joint Venture.
"Person" shall mean any individual, firm,
corporation, limited liability company, business enterprise,
trust, association, joint venture, partnership, Governmental
Body or other entity, whether acting in an individual,
fiduciary or other capacity.
"Plan" means any employee pension benefit plan
(other than a Multiemployer Plan) which is subject to the
provisions of Title IV of ERISA or Section 412 of the Code
and in respect of which Parent, or any ERISA Affiliate is
(or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement
dated as of the Closing Date, executed by Borrower.
"Potential Default" shall mean any event or
condition which, with the giving of notice or the lapse of
time, or both, would become an Event of Default.
"Preferred Obligation" shall mean any obligation
for the payment of money that has matured in connection with
a decision by Parent to pay cash to the holders of any
Preferred Stock in connection with a Conversion of Preferred
Stock.
"Primary Bank Facility" shall mean the credit
facility evidenced by the Parent Credit Agreement.
"Property" shall mean all types of real, personal
or mixed property and all types of tangible or intangible
property owned by Borrower or a Subsidiary.
"Pursuit Costs" shall mean costs and expenses
incurred by Parent in connection with a Development
Opportunity (as such term is defined in that certain Master
Agreement (the "Master Agreement") among Oly Fund II GP
Investments, L.P., Oly/Stratus Equities, L.P., Lender,
Parent and Stratus Oly L.L.C. dated the date hereof that was
pursued for the purposes set forth in the Master Agreement
but did not close.
"Quarterly Payment Date" shall mean the last day
of each calendar quarter occurring after the Closing Date.
"Regulation U" means Regulation U of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, disposing, depositing,
dispersing, emanating or migrating of any Hazardous
Materials in, into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action"
as such term is defined in CERCLA, 42 U.S.C. S 9601(24), and
(b) all other actions required by any Governmental Body or
voluntarily undertaken to (i) cleanup, remove, treat, abate
or in any other way address any Hazardous Material in the
environment, (ii) prevent the Release or threat of Release,
or minimize the further Release of any Hazardous Material so
it does not migrate or endanger or threaten to endanger
public health, welfare or the environment or (iii) perform
studies and investigations in connection with, or as a
precondition to, (i) or (ii) above.
"Restricted Junior Payment" shall mean (a) any
dividend or other distribution, direct or indirect, on
account of any shares of any class of stock of, or any
partnership interest of, Borrower or any of its Subsidiaries
now or hereafter outstanding, other than dividends or other
distributions from a Subsidiary to Borrower; (b) any
redemption, conversion, exchange, retirement, sinking fund
or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock of,
or of any partnership interest of, Borrower now or hereafter
outstanding; (c) any payment or prepayment of principal of,
premium, if any, or interest on, redemption, conversion,
exchange, purchase, retirement, defeasance, sinking fund or
similar payment with respect to, any Indebtedness other than
the Obligations; and (d) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of stock of
Borrower now or hereafter outstanding.
"Restricted Subsidiaries" shall have the meaning
attributed to such term in the Parent Credit Agreement. If
such agreement is terminated or no longer includes the
concept of Restricted Subsidiaries and it is not replaced by
a successor agreement containing such concept in connection
with a refinancing, then the definition of such term at the
time of such termination shall be the definition of such
term hereunder.
"SEC" shall have the meaning given to such term in
Section 8.2.
"Securities" shall have the meaning given to such
term in Section 6.3.
"Securities Act" shall have the meaning given to
such term in Section 8.2.
"Security Documents" shall mean, collectively, the
Pledge Agreement, the Guaranty Agreement and all other
agreements and documents executed and delivered pursuant to
the foregoing and any and all renewals, extensions and
modifications of any of the foregoing and any and all
substitutions therefor.
"Security Interests" shall mean the Liens granted
to Lender pursuant to the Loan Documents.
"Senior Nonmonetary Default" shall have the
meaning given to such term in Section 14.4.
"Senior Payment Default" shall have the meaning
given to such term in Section 14.4.
"Specified Senior Debt" means (i) all Parent's
Senior Debt under Parent's primary bank credit facility
existing from time to time and (ii) other issue of Parent's
Senior Debt having a principal amount of at least
$10,000,000.
"Stated Rate" shall mean the lesser of (i) twelve
percent (12%) per annum or (ii) the Maximum Lawful Rate.
"Stock Price" shall mean a per share price for
Parent Common Stock equal to $7.31, as such price may be
adjusted from time to time pursuant to Section 14.5.
"Subsidiary" shall mean any Person in which
Borrower directly or indirectly owns one hundred percent
(100%) of the stock or other equity interest therein,
expressly excluding Joint Ventures.
"Withdrawal Liability" shall mean liability to a
Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
Section I.2 Lender's Discretion. Whenever the terms
"satisfactory to," "determined by," "acceptable to," "shall
elect," "shall request," "consented to", "approved by" or similar
terms are used in this Agreement or any of the other Loan
Documents to apply to Lender, except as otherwise specifically
provided herein or therein, such terms shall mean satisfactory
to, determined by, acceptable to, at the election of, requested
by, consented to, or approved by as applicable, Lender, in its
sole discretion.
Section I.3 Approval in Writing. Any consent or
approval to be given by Lender hereunder shall not be effective
and shall not be deemed given unless in writing, duly executed
and delivered by Lender.
Article II
LOAN AND TERMS OF PAYMENT
Section II.1 Loan. Subject to the terms and
conditions set forth in the Loan Documents and in reliance upon
the representations and warranties of Borrower contained herein,
Lender agrees to make one or more advances to Borrower (each, an
"Advance" and collectively, the "Advances") in an aggregate
amount not to exceed Ten Million Dollars ($10,000,000), which
together shall constitute the Loan. Borrower's obligation to pay
the principal of, and interest on, the Loan shall be evidenced by
the Note. Borrower shall not be entitled to reborrow any portion
of the Loan which is repaid or prepaid.
Section II.2 Interest.
(a) Borrower agrees to pay interest in respect of
the unpaid principal amount of the Loan from the date of a
cash Advance until such Advance is repaid (whether by
acceleration, optional or mandatory prepayment, Conversion
or otherwise), at a rate per annum equal to the Stated Rate.
(b) During a Default Rate Period, the Obligations
shall bear interest at the Default Rate.
(c) Accrued (and theretofore unpaid) interest
shall be payable (i) quarterly in arrears on each Quarterly
Payment Date, (ii) upon any repayment or prepayment (on the
amount repaid or prepaid), (iii) at maturity (whether by
acceleration or otherwise) and, (iv) after maturity, upon
demand. Notwithstanding the foregoing, Lender may at any
time elect, in its sole discretion, to defer the payment of
such interest (or any portion thereof) by accruing and
compounding interest quarterly.
(d) Interest shall be computed on the basis of a
year consisting of 365 days and charged for the actual
number of days during the period for which the interest
accrues on the Loan.
(e) At least fifteen (15) Business Days prior to
each day on which a payment of interest would be required to
be made in accordance with this Section 2.2, Lender shall
deliver to Borrower a written notice indicating whether
Lender elects to receive the interest payment in cash or to
defer the payment of interest. In the event that Borrower
fails to receive such notice fifteen (15) Business Days
prior to any such interest payment date, Lender shall be
deemed to have elected to defer the payment of interest.
Section II.3 Prepayments; Payments.
(a) Borrower shall have the right to prepay the
Loans, without premium or penalty, in whole or in part at
any time and from time to time.
(b) In addition to other mandatory repayments,
and subject to Section 11.4 hereof, Borrower shall be
required to repay the entire outstanding principal balance
and all accrued but unpaid interest on the Loan on the
Maturity Date.
(c) Except as provided in Section 2.3(d) and (e)
hereinbelow, on each Joint Venture Distribution Date,
Borrower shall pay to Lender an amount equal to one hundred
percent (100%) of any Joint Venture Distributions as a
mandatory repayment of principal and accrued interest on the
outstanding Loan until such principal and accrued interest
is repaid in full.
(d) Upon written request of Borrower and the
approval of Lender, Borrower may retain Joint Venture
Distributions which it may use for the purposes permitted in
the Cash Collateral Agreement; provided, that Olympus shall
make a reasonable determination of the net collateralization
of the Loan relative to all of Borrower's Joint Venture
interests and may condition its approval of such retention
by Borrower on the establishment of a cash collateral
reserve in a reasonable amount (the "Cash Collateral
Account"), which shall serve as additional security for the
Loan, pursuant to a cash collateral agreement with Lender
(the "Cash Collateral Agreement") to allow Lender adequate
protection for repayment of the Loan. Withdrawal rights for
Borrower from the Cash Collateral Account will be specified
in the Cash Collateral Agreement.
(e) Borrower may upon written notice to Lender,
retain an amount of Joint Venture Distributions equal to any
cash interest required to be paid by Borrower pursuant to
this Agreement and for any taxes for which Borrower is
liable, provided that any such amounts shall be retained by
Borrower with recourse and such written notice shall specify
in reasonable detail the relevant terms of request to retain
such amounts.
(f) To the extent that, at any time, there is no
outstanding Indebtedness owed under the Loan, all Joint
Venture Distributions shall be made to Borrower and Borrower
shall be permitted to pay such amounts to Parent either to
repay Indebtedness owed by Borrower to Parent or as a
dividend.
(g) Any reserve accounts established pursuant to
this Section 2.3 shall be invested in money market accounts
pursuant to instructions from the Borrower and shall accrue
interest thereon.
Section II.4 Conversion into Parent Common Stock.
Lender may elect, at any time and from time to time, in its sole
and absolute discretion, to convert all or any portion of the
principal amount of the Loan into Parent Common Stock, pursuant
to Article XIV of this Agreement.
Section II.5 Payments After Event of Default. Any
provision of the Loan Documents to the contrary notwithstanding,
all payments received by Lender during the existence of an Event
of Default may be applied to the Obligations in such manner as
Lender may elect.
Section II.6 Method of Payment; Good Funds; Net
Payments.
(a) All payments to be made by Borrower to Lender
pursuant to the Loan Documents shall be made in Dollars in
immediately available funds by wire transfer to an account
of Lender, as designated by Lender.
(b) Whenever any payments to be made hereunder or
under any other Loan Document shall be stated to be due on a
day which is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable
at the applicable rate during such extension.
(c) All payments made by Borrower hereunder or
under any Loan Document will be made without set-off
counterclaim or other defense.
Section II.7 Maximum Interest. Notwithstanding any
provision to the contrary herein contained, Lender shall not
collect a rate of interest on any obligation or liability due and
owing by Borrower to Lender in excess of the maximum contract
rate of interest permitted by applicable law. Lender and
Borrower have agreed that the interest laws of the State of Texas
shall govern the relationship among them, but in the event of a
final adjudication to the contrary, nunc pro tunc, Borrower shall
be obligated to pay to Lender only such interest as then shall be
permitted by the laws of the state found to govern the contract
relationship among Lender and Borrower. It is the intent of
Borrower and Lender in the execution of the Loan Documents and
all other agreements among them to contract in strict compliance
with applicable usury laws. In furtherance thereof, Borrower and
Lender stipulate and agree that none of the terms and provisions
contained in or pertaining to any of the Loan Documents or any
other agreements among the parties hereto or any of them shall
ever constitute or be construed to create (a) a contract to pay,
for the use, forbearance or detention of money, interest at a
rate or in an amount in excess of the maximum rate of interest
permitted by applicable law or (b) a charging of interest at a
rate or in an amount in excess of the maximum rate of interest
permitted by applicable law. Neither Borrower nor any other
obligor under the Loan Documents or any other agreements among
the parties hereto or any of them shall ever be required to pay
interest with respect to the Note or any of the other Obligations
at a rate in excess of the maximum interest rate that may be
lawfully charged under applicable law, and the provisions of this
paragraph shall control over all other provisions of the Loan
Documents or any other agreements among the parties hereto or any
of them which may be in apparent conflict herewith. Lender and
each other holder of the Note or any of the other Obligations
expressly disavows any intention to charge or collect excessive
unearned interest or finance charges in the event the maturity of
the Note or any of the other Obligations are accelerated. If the
maturity of the Note or any of the other Obligations shall be
accelerated for any reason or if the principal of the Note or any
of the other Obligations is paid prior to the end of the term of
such Obligations and as a result thereof the interest received
for the actual period of existence of such Obligations exceeds
the applicable maximum lawful rate, Lender shall, at its option,
either refund the amount of such excess or credit the amount of
such excess against the principal balance of the Obligations
outstanding and thereby shall render inapplicable any and all
penalties of any kind provided by applicable law as a result of
such excess interest. If due to any circumstance whatsoever,
fulfillment of any of the provisions of the Loan Documents or any
other agreement among the parties hereto or any of them at the
time performance of such provision shall be due shall exceed the
maximum amount of interest permitted by applicable law, then,
automatically, the obligation to be fulfilled shall be modified,
reduced or eliminated to the extent necessary to limit such
interest to the maximum amount permitted by applicable law, and
if from any such circumstance Lender or any other holder of the
Note or other Obligations should ever receive anything of value
deemed interest by applicable law which would exceed the Maximum
Lawful Rate, such excessive interest shall be applied to the
reduction of the principal amount then outstanding on the Loan or
on account of the principal amount of any other indebtedness
secured by the Loan Documents and not to the payment of interest,
or if such excessive interest exceeds the unpaid principal
balance then outstanding thereunder and such other indebtedness,
such excess shall be refunded to Borrower or the agreement
creating such excess interest shall be cancelled, in which event
any and all penalties of any kind under applicable law as a
result of such excess interest shall be inapplicable. By
execution of this Loan Agreement, Borrower acknowledges that it
believes the Note and the other Obligations to be non-usurious
and agree that if, at any time, Borrower should have reason to
believe that the Note or any such other Obligation is in fact
usurious, Borrower shall give Lender notice of such condition and
Borrower agrees that Lender shall have ninety (90) days after
such notice in which to make appropriate refund or other
adjustment in order to correct such condition if in fact such
exists. All amounts paid or agreed to be paid in connection with
the Obligations which would under any law in effect and
applicable to Lender be deemed "interest" shall, to the extent
permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the full term of the Obligations
and the Loan Documents. Any and all notices, pleadings or other
communications (whether oral or written) from Lender and/or any
agent, attorney or Affiliate of Lender to Borrower or any agent,
attorney or Affiliate of Borrower shall be conclusively deemed,
without the necessity of referencing this Loan Agreement and/or
this Paragraph, to incorporate, for all purposes, the terms and
provisions of this Paragraph. The term "applicable law" as used
in Paragraph shall mean the laws of the United States or
applicable state law, whichever laws allow the greater rate of
interest, as such laws now exist or may be changed or amended or
come into effect in the future.
Section II.8 Advances. Borrower shall notify Lender
not later than 10:30 a.m. ten (10) Business Days in advance of a
requested Advance, which notice shall specify the date on which
the Advance should be made and the payment instructions with
respect thereto. Lender agrees to make the requested Advance on
the date requested pursuant to the instructions provided to the
extent Borrower has provided Lender with reasonable assurances
that the Advance is permitted under Section 6.20. Each Advance
shall begin to accrue interest from and including the date of
funding.
Article III
CONDITIONS FOR CLOSING AND FUNDING OF LOAN
AND INITIAL ADVANCE
The obligation of Lender to make the initial Advance
shall be subject to the satisfaction on or before the Closing
Date of all of the conditions and the delivery of the documents
set forth below in this Article III, the form and substance of
each such document and the manner of the satisfaction of each
such condition to be satisfactory to Lender:
Section III.1 Representations and Warranties. On the
Closing Date and after giving effect to the initial Advance the
representations and warranties of the Borrower set forth in this
Loan Agreement and in any other of the Loan Documents shall be
true and correct in all material respects when made and at and as
of the time of the Closing, except to the extent that such
representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall
continue to be true and correct as of such earlier date.
Section III.2 Delivery of Documents. The following
shall have been delivered to Lender, each duly authorized and
executed:
(a) all of the Loan Documents, which shall be in
form and content acceptable to Lender.
(b) certificates representing all of the equity
interests of Borrower in any Joint Ventures and a signed,
undated stock power duly executed in blank for each such
certificate, or UCC-1 financing statements in connection
with the pledge of any such equity interests that are
uncertificated;
(c) a certificate of incumbency for Borrower;
(d) a certificate of existence and good standing
for Borrower and any initial Subsidiaries in the states in
which Borrower or any such Subsidiary is organized and
qualified to do business;
(e) certified copies of the articles of
incorporation and bylaws, and all amendments thereto, of
Borrower and any initial Subsidiary;
(f) certified copies of resolutions adopted by
the board of directors of Borrower and any initial
Subsidiary authorizing the execution by Borrower and such
Subsidiary of the Loan Documents to which each is a party
and the consummation of the transactions contemplated
therein; and
(g) such other documents, certificates, consents
and waivers as Lender may request and evidence that all
other actions necessary or, in the opinion of Lender,
desirable have been taken.
Section III.3 Security Interests. All filings and
actions necessary or, in the opinion of Lender, desirable to
perfect and maintain the Security Interests purported to be
created by the Loan Documents as valid and perfected Liens in the
Property covered thereby, subject only to Permitted Liens, shall
have been filed or taken and confirmation thereof received by
Lender.
Section III.4 Performance; No Default. Each of the
Borrower and any initial Subsidiaries shall have performed and
complied with all agreements and conditions contained in the Loan
Documents to be performed or complied with by Borrower or such
Subsidiary prior to or at the Closing.
Section III.5 Approval of Loan Documents and Security
Interests. The approval and/or consent shall have been obtained
(and shall remain in effect) from each Governmental Body and all
other Persons whose approval or consent is necessary or required
to enable Borrower or any initial Subsidiary to (i) enter into
and perform their respective obligations under the Loan
Documents, (ii) grant to Lender the Security Interests and
(iii) consummate the Loan.
Section III.6 Additional Items.
(a) No litigation, inquiry, judgement, injunction
or restraining order shall be pending, entered or threatened
(including any proposed statute, rule or regulation) which
has a reasonable likelihood of being adversely determined
and, if adversely determined, would reasonably be expected
to have a Material Adverse Effect on (i) the business,
assets, operations, condition (financial or otherwise) or
prospects of Borrower, (ii) Borrower's ability to perform
its obligations under the financing agreements or (iii) the
rights and remedies of Lender.
(b) There shall not have occurred any change, or
development or event involving a prospective change, which
in either case in the reasonable opinion of Lender could
have a Material Adverse Effect on (i) the business,
operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of Borrower, or
(ii) the rights and remedies of Lender.
(c) Lender shall not have become aware of any
material adverse information with respect to (i) the
business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of Borrower,
(ii) Borrower's ability to perform its obligations under the
financing agreements or (iii) the rights and remedies of
Lender.
(d) There shall exist no event of default (or
condition which would constitute an event of default with
the giving of notice or the passage of time) under any
capital stock, financing agreements, lease agreements or
other contracts of Borrower.
(e) All filings and other actions required to
create and perfect a first priority security interest with
respect to assets owned by Borrower shall have been duly
made or taken, and all Collateral shall be free and clear of
other Liens, subject to Permitted Liens.
(f) Lender shall have determined that the
transactions contemplated hereby or entered into in
connection herewith, including without limitation, the
making of the Loan, do not violate and conflict with any
applicable law or regulation in any material respect.
The acceptance of the initial Advance shall constitute
a representation and warranty by Borrower and any initial
Subsidiary to the Lender that all conditions specified in this
Article III have been satisfied as of that time.
Article IV
CONDITIONS FOR FUTURE FUNDING COMMITMENTS
The obligations of Lender to make Advances subsequent
to the initial Advance hereunder in connection with contributions
by Borrower to each new Joint Venture shall be subject to the
satisfaction on or before the date of such Advance of all the
conditions and delivery of all the documents set forth in this
Article IV, the form and substance of each such document and the
manner of satisfaction of each such condition to be reasonably
satisfactory to Lender:
Section IV.1 Representations Bringdown. The
representations and warranties contained in Article VI of this
Agreement are true and correct in all material respects on and as
of the date of such Advance with the same effect as if made on
and as of such date, except to the extent such representation and
warranty expressly relates to a specific date, in which event it
shall be true and correct as of such specific date. The
representations and warranties contained in Article VII of this
Agreement are true and correct as of the date of such Advance
with the same effect as if made on and as of such date where any
untrue or incorrect representation and warranty could have a
Material Adverse Effect on the business, assets, operations or
condition, financial or otherwise of Parent.
Section IV.2 No Default; Compliance With Terms.
Borrower shall be in compliance with all other terms and
provisions set forth herein and in each other Loan Document on
its part to be observed or performed, and at the time of and
immediately after such Advance no Potential Default or Event of
Default shall have occurred and be continuing.
Section IV.3 Delivery of Documents.
(a) All filings and actions that are necessary, or in
the opinion of Lender, desirable to perfect and maintain a
Security Interest in Borrower's interest in the Joint Venture
with respect to which the Advance relates, as a valid and
perfected Lien in the Property covered thereby, subject only to
Permitted Liens, shall have been filed or taken, and Lender shall
have received confirmation thereof;
(b) Lender shall have received a certificate of
incumbency for Borrower; and
(c) Lender shall have received such legal opinions
(including opinions (i) from counsel to Borrower and its
Subsidiaries, and (ii) from such special and local counsel as may
be reasonably required by Lender, in each case reasonably
acceptable to Lender) dated the date of the Advance, addressed to
Lender addressing issues relating to the Security Interest
created in the Borrower's Joint Venture interest and any other
matters incident to the transactions contemplated hereby as
Lender may reasonably require.
Section IV.4 Additional Items. Each of the items set
forth in Section 3.6 shall be true and correct.
Article V
CONDITIONS FOR OTHER ADVANCES
The obligations of Lender to make Advances other than
those identified in Article III and Article IV hereunder shall be
subject to the satisfaction on or before the date of such Advance
of all the conditions and delivery of all the documents set forth
in this Article V, the form and substance of each such document
and the manner of satisfaction of each such condition to be
reasonably satisfactory to Lender:
Section V.1 Representations Bringdown. The
representations and warranties contained in Article VI of this
Agreement are true and correct in all material respects on and as
of the date of such Advance with the same effect as if made on
and as of such date, except to the extent such representation and
warranty expressly relates to a specific date, in which event it
shall be true and correct as of such specific date. The
representations and warranties contained in Article VII of this
Agreement are true and correct as of the date of such Advance
with the same effect as if made on and as of such date where any
untrue or incorrect representation and warranty could have a
Material Adverse Effect on the business, assets, operations or
condition, financial or otherwise of Parent.
Section V.2 No Default; Compliance With Terms.
Borrower shall be in compliance with all other terms and
provisions set forth herein and in each other Loan Document on
its part to be observed or performed, and at the time of and
immediately after such Advance no Potential Default or Event of
Default shall have occurred and be continuing.
Article VI
REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to induce Lender to make the Loan, Borrower
makes the following representations, warranties and agreements,
in each case after giving effect to the making of the Loan, all
of which shall survive the execution and delivery of this
Agreement and the Note and the making of the Loan; provided,
however, none of the representations and warranties contained in
this Article V shall be deemed to relate to any matters or
affairs derived from or based upon any activities, operations or
occurrences relating to any Joint Venture.
Section VI.1 Organization and Good Standing.
Borrower and each Subsidiary is duly organized, validly existing
and in good standing under the laws of the state of its
organization. Borrower and each Subsidiary has the requisite
power and authority to own, lease or otherwise hold the assets
owned, leased or otherwise held by it and to carry on its
business as presently conducted by it. Borrower and each
Subsidiary is in good standing and duly qualified to conduct
business as a foreign corporation, partnership or limited
liability company, as applicable, in every state of the United
States in which its ownership or lease of property or conduct of
business makes such qualification necessary.
Section VI.2 Authorization of Agreement; Binding
Obligation. Borrower has the requisite corporate power to
execute and to deliver this Agreement and the other Loan
Documents and to perform the transactions contemplated hereby and
thereby to be performed by it. The execution and delivery by
Borrower of this Agreement and the other Loan Documents and the
performance by it of the transactions contemplated hereby and
thereby to be performed by it have been duly authorized by all
necessary corporate action on the part of Borrower. This
Agreement and the other Loan Documents have been duly executed
and delivered by duly authorized officers of Borrower and
constitute valid and binding obligations of Borrower and each
Subsidiary that owns a Joint Venture interest that is a party
thereto, enforceable against such Person in accordance with the
terms hereof or thereof, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
Section VI.3 Required Consents. The execution and
delivery of this Agreement and the other Loan Documents by
Borrower does not, and the performance by Borrower of the
transactions contemplated hereby or thereby to be performed by it
will not (a) conflict with the certificate of incorporation or
bylaws, partnership agreement, operating agreement, or other
organizational documents, as applicable, of Borrower or any
Subsidiary, (b) conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation
or acceleration of any material obligation or to loss of a
benefit under, any material contract, permit, order, judgment or
decree to which Borrower or any Subsidiary is a party or by which
any of their properties are bound, (c) constitute a violation of
any law or regulation applicable to Borrower or any Subsidiary,
or (d) result in the creation of any lien, charge or encumbrance
upon any of Borrower's or any Subsidiary's assets except, in the
case of (a) through (d) hereof, for those that, individually or
in the aggregate, could not reasonably be expected to have a
material adverse effect (i) on the business, assets, financial
condition, prospects, financial projections, or results of
operations of Borrower and any Subsidiary taken as a whole or
(ii) on the ability of Borrower to perform on a timely basis any
material obligation under this Agreement or the other Loan
Documents or to consummate the transactions contemplated hereby
or thereby (each, a "Material Adverse Effect"). No consent,
approval, order or authorization of, or registration, declaration
or filing with, any Governmental Body is required to be obtained
or made by or with respect to Borrower in connection with the
execution and delivery of this Agreement or any of the other Loan
Documents by Borrower or the performance by Borrower of the
transactions contemplated hereby or thereby to be performed by
it.
Section VI.4 Financial Statements. The financial
statements to be delivered to Lender on or before ninety (90)
days from the Closing Date by or on behalf of Borrower present
fairly the financial condition and results of the operations of
Borrower as of the dates and for the periods indicated therein.
No material adverse change in the business, operations, property,
assets, liabilities, condition (financial or otherwise ) or
prospects of Borrower has occurred since the date of the last
financial statements delivered to Lender by or on behalf of
Borrower. All of the foregoing financial statements and balance
sheets, except as otherwise indicated therein, have been prepared
in accordance with GAAP.
Section VI.5 Absence of Undisclosed Liabilities.
Neither Borrower nor any Subsidiary has any Indebtedness for
Borrowed Money or Contingent Obligations except for those
permitted pursuant to Sections 10.1 and 10.4.
Section VI.6 Books of Account. The books, records
and accounts of Borrower accurately and fairly reflect, in
reasonable detail, the transactions and the assets and
liabilities of Borrower and each Subsidiary and do not contain
any material inaccurate information or omit any material
information necessary in order to make such books, records and
accounts, in light of the circumstances under which they were
prepared, not misleading. Neither Borrower nor any Subsidiary
has engaged in any transaction, maintained any bank account or
used any of the funds of Borrower or any Subsidiary except for
transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of
Borrower.
Section VI.7 Title to Property; Liens. Borrower and
each Subsidiary has good, valid and indefeasible title to all of
its material Property free and clear of all Liens, except
Permitted Liens. The Security Instruments create valid and
perfected Liens on the Property described therein, subject only
to Permitted Liens.
Section VI.8 Condition of Assets. All of the assets
of Borrower and each Subsidiary, if any, are in good operating
condition and repair, subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and
materially conform to all applicable laws, ordinances, codes,
rules and regulations, and permits relating to their
construction, use and operation.
Section VI.9 Insurance. Borrower and each Subsidiary
has insurance policies in full force and effect for such amounts
as are sufficient for material compliance with all requirements
of law and of all material agreements to which Borrower or any
Subsidiary is a party or by which any of them is bound. No event
relating to Borrower or any Subsidiary has occurred that can
reasonably be expected to result in a material retroactive upward
adjustment in premiums under any such insurance policies or that
is likely to result in a material prospective upward adjustment
in such premiums. Excluding insurance policies that have expired
and been replaced in the ordinary course of business, no
insurance policy has been cancelled within the last two years
and, to Borrower's knowledge, no threat has been made to cancel
any insurance policy of Borrower or any Subsidiary during such
period. No event has occurred, including, without limitation,
the failure by Borrower or any Subsidiary to give any notice or
information or Borrower or any Subsidiary giving any inaccurate
or erroneous notice or information, which limits or impairs the
rights of Borrower or any Subsidiary under any such insurance
policies. Borrower has provided Lender with true and complete
copies of all regularly prepared loss run reports as of the date
hereof.
Section VI.10 Conduct of the Business. Except as
permitted under Article X and except for the transactions
contemplated by the Loan Documents and the other documents
entered into between Borrower, Lender and Affiliates of Lender,
from its date of formation through the Closing Date for the
initial Advance or the date of any future Advance, as applicable,
neither Borrower nor any Subsidiary has entered into any material
transactions or conducted any material business.
Section VI.11 Litigation. There are no actions,
suits, arbitration proceedings or claims (whether or not
purportedly on behalf of Borrower or any Subsidiary) pending or,
to the best knowledge of Borrower, threatened, against Borrower
or any Subsidiary maintained by Borrower or any Subsidiary, at
law or in equity (i) with respect to any Loan Document or (ii)
which have a reasonable likelihood of being adversely determined
and which, if adversely determined, could have a material adverse
effect on the business, operations, Property, assets,
liabilities, condition (financial or otherwise) or prospects of
Borrower or any Subsidiary.
Section VI.12 Compliance With Law; Permits. Borrower
and each Subsidiary has complied with each law, judgment, order
and decree, including ERISA and environmental laws, of any
Governmental Body to which Borrower or any Subsidiary or their
business, operations, assets or properties is subject and is not
currently in violation of any of the foregoing, except where the
failure to so comply with or violation of any of the foregoing
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Borrower and each
Subsidiary owns, holds, possesses or lawfully uses in the
operation of its business all material licenses, permits,
authorizations and approvals (collectively, "Permits") which are
necessary to conduct the business of Borrower and each Subsidiary
as now conducted or for the ownership and use of its assets, free
and clear of all Liens and in compliance with all laws. Neither
Borrower nor any Subsidiary is in default, nor has Borrower or
any Subsidiary received any notice of any claim of default, with
respect to any such Permits. All such Permits are renewable by
their terms or in the ordinary course of business without the
need to comply with any special qualification procedures or to
pay any amounts other than routine filing fees. None of such
Permits will be adversely affected by consummation of the
transactions contemplated hereby. No shareholder, director,
officer, employee or former employee of Borrower or any
affiliates of Borrower, or any other person, firm or corporation
owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits which Borrower or any Subsidiary
owns, possesses or uses in the operation of the business of
Borrower or any Subsidiary as now conducted.
Section VI.13 Taxes. (a) All Tax Returns (as defined
in paragraph (e) below) that are required to be filed on or
before the Closing Date by Borrower or any Subsidiary have been
duly filed on a timely basis under the statutes, rules or
regulations of each applicable jurisdiction. To the best
knowledge of Borrower, all such Tax Returns were complete and
accurate in all material respects. All Taxes reflected on such
returns as owed by Borrower or any Subsidiary have been paid,
whether or not such Taxes are disputed. Neither Borrower nor any
Subsidiary has executed or filed with the Internal Revenue
Service or any other taxing authority any agreement extending the
period for filing any Tax Return.
(b) No claim for assessment or collection of Taxes has
been asserted against Borrower or any Subsidiary. Neither
Borrower nor any Subsidiary is a party to any pending action,
proceeding or investigation by any Governmental Body for the
assessment or collection of Taxes nor does Borrower have
knowledge of any such threatened action, proceeding or
investigation.
(c) No waivers of statutes of limitation in respect of
any Tax Returns have been given or requested by Borrower or any
Subsidiary nor has Borrower or any Subsidiary agreed to any
extension of time with respect to a Tax assessment or deficiency.
No claim has ever been made by a Governmental Body in a
jurisdiction where Borrower or any Subsidiary does not currently
file Tax Returns that it is or may be subject to taxation by that
jurisdiction nor is Borrower aware that any such assertion of
jurisdiction is threatened. No security interests have been
imposed upon or asserted against any of the assets of Borrower or
any Subsidiary as a result of or in connection with any failure,
or alleged failure, to pay any Tax.
(d) Borrower and each Subsidiary has withheld and paid
all Taxes required to be withheld in connection with any amounts
paid or owing to any employee, creditor, consultant, independent
contractor or other third party.
(e) For purposes of this Agreement, the terms "Tax"
and "Taxes" shall mean all federal, state, local, or foreign
income, payroll, employee withholding, unemployment insurance,
social security, sales, use, service, service use, leasing,
leasing use, excise, franchise, gross receipts, value added,
alternative or add-on minimum, estimated, occupation, real and
personal property, stamp, transfer, workers' compensation,
severance, windfall profits, environmental (including taxes under
Section 59A of the Code), or other tax of the same or of a
similar nature, including any interest, penalty, or addition
thereto, whether disputed or not. The term "Tax Return" means
any return, declaration, report, claim for refund, or information
return or statement relating to Taxes or any amendment thereto,
and including any schedule or attachment thereto.
Section VI.14 Conflicting Agreements. Borrower is not
in default under any agreement to which Borrower is a party or by
which Borrower or any of its Property is bound, the effect of
which default might have a material adverse effect on the
business operations, Property, assets, liabilities, condition
(financial or otherwise) or prospects of Borrower.
Section VI.15 Patents, Trademarks, Franchises, Etc.
Borrower owns or possesses all patents, trademarks, service
marks, trade names, copyrights, franchises and licenses, and
rights with respect thereto, necessary for the conduct of its
business as now conducted and as presently proposed to be
conducted, without any known conflict with the rights of others
and, in each case, free of any Lien other than Permitted Liens.
Section VI.16 Full Disclosure. No representation or
warranty contained herein and no certificate, information or
report furnished or to be furnished by Borrower in connection
with any of the Loan Documents or any of the transactions
contemplated thereby, contains or will contain a misstatement of
material fact, or omits or will omit a material fact required to
be stated in order to make the statements contained herein or
therein not misleading in the light of the circumstances under
which such statements were made. There is no fact known to
Borrower, or so far as Borrower presently reasonably can foresee,
which has not been expressly disclosed to Lender in writing, that
will materially adversely affect Borrower or its business,
operations, Property, assets, liabilities, condition (financial
or otherwise) or prospects or the ability of Borrower to
consummate the transactions and perform its obligations pursuant
to the Loan Documents, other than facts which generally are known
to the public and relating to Borrower's business generally.
Section VI.17 Employee Matters. None of the employees
of Borrower or any Subsidiary is subject to any collective
bargaining agreement and there are no strikes, work stoppages or
material controversies pending, or to the best knowledge of
Borrower, threatened between Borrower or any Subsidiary and any
of its respective employees, other than employee grievances
arising in the ordinary course of business which would not in the
aggregate be expected to have a material adverse effect on the
business, operations, Property, assets, liabilities, condition
(financial or otherwise) or prospects of Borrower and the
Subsidiaries taken as a whole.
Section VI.18 Other Indebtedness. Borrower has not
incurred and as of the Closing Date will not have incurred any
Indebtedness for Borrowed Money or any Contingent Obligations
other than the Indebtedness and Contingent Obligations permitted
by Sections 10.1 and 10.4.
Section VI.19 Possession of Franchises, Licenses, Etc.
Borrower and each Subsidiary possesses all franchises,
certificates, licenses, permits, and other authorizations from
each Governmental Body, free from unduly burdensome restrictions,
that are necessary or advisable for the leasing, ownership,
maintenance and operation of its respective properties and
assets, and neither Borrower nor any Subsidiary is in violation
of any thereof in any respect.
Section VI.20 Use of Proceeds. Proceeds of the Loan
shall be used by Borrower solely for investment in the Joint
Ventures, for payment of interest on the Loan, if required to be
paid in cash, for investment in one or more Subsidiaries that
invest in Joint Ventures, and for Pursuit Costs.
Article VII
REPRESENTATIONS AND WARRANTIES OF PARENT
In order to induce Lender to make the Loan, Parent
makes the following representations, warranties and agreements,
in each case after giving effect to the making of the Loan, all
of which shall survive the execution and delivery of this
Agreement and the Note and the making of the Loan; provided,
however, none of the representations and warranties contained in
this Article VII shall be deemed to relate to any matters or
affairs derived from or based upon any activities, operations or
occurrences relating to any Joint Venture.
Section VII.1 Organization; Powers. Parent (i) is
duly organized, validly existing and in good standing under the
laws of the state of its organization, (ii) has the requisite
power and authority to own its property and assets and to carry
on its business as now conducted and as proposed to be conducted
and (iii) is qualified to do business in every jurisdiction where
such qualification is required, except where the failure so to
qualify would not have a Material Adverse Effect on its
condition, financial or otherwise. Parent has the corporate or
other equivalent power to execute, deliver and perform its
obligations under this Agreement and the other Loan Documents to
which it is or is to be a party. Parent has all requisite
corporate or other equivalent power, and has all material
governmental licenses, authorizations, consents and approvals
necessary to own its own assets and carry on its business as now
being or as proposed to be conducted.
Section VII.2 Authorization. The execution, delivery
and performance of this Agreement and the other Loan Documents to
which Parent is or is to be a party (i) have been duly authorized
by all requisite corporate or partnership, as applicable, and, if
required, stockholder or partner, as applicable, action on the
part of Parent and (ii) will not (A) violate (x) any Governmental
Rule or Parent's Certificate of Incorporation and By-laws or (y)
any provisions of any indenture, agreement or other instrument to
which Parent is a party, or by which Parent or any of its
properties or assets are or may be bound, (B) be in conflict
with, result in a breach of or constitute (alone or with notice
or lapse of time or both) a default under any indenture,
agreement or other instrument referred to in (ii) (A) (y) above
or (C) result in the creation or imposition of any Lien, charge
or encumbrance of any nature whatsoever upon any property or
assets of Parent.
Section VII.3 Governmental Approvals. No registration
with or consent or approval of, or other action by, any
Governmental Body is or will be required in connection with the
execution, delivery and performance by Parent of this Agreement
or any other Loan Document to which it is, or is to be, a party
except such as have been made or obtained and are in full force
and effect. Other than routine authorizations, permissions or
consents which are of a minor nature and which are customarily
granted in due course after application or the denial of which
would not materially adversely affect the business, financial
condition or operations of Parent, Parent has all franchises,
licenses, certificates, authorizations, approvals or consents
from all national, state and local governmental and regulatory
authorities required to carry on its business as now conducted
and as proposed to be conducted.
Section VII.4 Enforceability. This Agreement and each
of the other Loan Documents to which Parent is a party
constitutes a legal, valid and binding obligation of Parent,
enforceable in accordance with their respective terms (subject,
as to the enforcement of remedies against Parent, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar
laws affecting creditors' rights against Parent, generally in
connection with the bankruptcy, reorganization or insolvency of
Parent or a moratorium or similar event relating to Parent.
Section VII.5 Financial Statements. Parent has
heretofore furnished to Lender an audited consolidated balance
sheet and statement of operations and changes in retained
earnings and cash flow as of and for the fiscal year ended
December 31, 1996 and 1997, and an unaudited consolidated balance
sheet and statement of operations and cash flow as of and for the
fiscal quarter ended March 31, 1998. All such balance sheets and
statements of operations and cash flow present fairly the
financial condition and results of operations of Parent and its
subsidiaries as of the dates and for the periods indicated. Such
financial statements and the notes thereto disclose all material
liabilities, direct or contingent, of Parent and its subsidiaries
as of the dates thereof which are required to be disclosed in the
footnotes to financial statements prepared in accordance with
GAAP. The financial statements referred to in this Section 7.5
have been prepared in accordance with GAAP. There has been no
material adverse change since March 31, 1998, in the businesses,
assets, operations, prospects or condition, financial or
otherwise, of Parent and its subsidiaries taken as a whole.
Section VII.6 Litigation; Compliance with Laws; etc.
(i) Except as disclosed in the Parent Annual
Report on Form 10-K for the fiscal year ended December 31,
1997, and any subsequent filings made by Parent pursuant to
the periodic reporting requirements of the SEC, there are no
actions, suits or proceedings at law or in equity or by or
before any Governmental Body now pending or, to the
knowledge of Parent, threatened against or affecting Parent,
or any of its subsidiaries or the businesses, assets or
rights of Parent, or any of its subsidiaries (x) which
involve this Agreement or any of the other Loan Documents or
any of the transactions contemplated hereby or thereby or
(y) as to which there is a reasonable possibility of an
adverse determination and which, if adversely determined,
could, individually or in the aggregate, materially impair
the ability of Parent to conduct its business substantially
as now conducted, or materially and adversely affect the
businesses, assets, operations, prospects or condition,
financial or otherwise, of Parent, or impair the validity or
enforceability of, or the ability of Parent to perform its
obligations under, this Agreement or any of the other Loan
Documents to which it is a party.
(ii) Neither Parent nor any of its subsidiaries is
in violation of any Governmental Rule, or in default with
respect to any judgment, write, injunction, decree, rule or
regulation of any Governmental Body, where such violation or
default could result in a Material Adverse Effect. Without
limitation of the foregoing, Parent and each of its
subsidiaries have complied with all Environmental Laws where
any such noncompliance could have a Material Adverse Effect
on the business, assets, operations or condition, financial
or otherwise, of Parent or its subsidiaries. Neither Parent
nor any of its subsidiaries has received notice of any
material failure so to comply. Neither Parent's nor its
Subsidiaries' plants handle any Hazardous Materials in
violation of any Environmental Law where any such violation
could have a Material Adverse Effect on the business,
assets, operations or condition, financial or otherwise of
Parent. Parent is aware of no events, conditions or
circumstances involving contaminants or employee health or
safety that could reasonably be expected to result in
material liability on the part of Parent or any of its
subsidiaries.
Section VII.7 Title, etc. Parent and its subsidiaries
have good and valid title to its material properties, assets and
revenues (exclusive of oil, gas and other mineral properties on
which no development or production activities are being conducted
and commercially exploitable reserves have not been discovered),
free and clear of all Liens (as such term is defined in Parent's
Credit Agreement) except for the Permitted Liens (as such term is
defined in Parent's Credit Agreement).
Section VII.8 Federal Reserve Regulations; Use of
Proceeds. Neither Parent nor any of its subsidiaries is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying Margin Stock.
Section VII.9 Taxes. Parent and its subsidiaries have
filed or caused to be filed all material federal, state, local
and foreign tax returns which are required to be filed by them,
and have paid or caused to paid all taxes shown to be due and
payable on such returns or on any assessments received by any of
them, other than any taxes or assessments the validity of which
Parent or any of its subsidiaries is contesting in good faith by
appropriate proceedings, and with respect to which Parent or any
of its subsidiaries shall, to the extent required by GAAP, have
set aside on its books adequate reserves.
Section VII.10 Employee Benefit Plans. Parent and its
ERISA Affiliates are in compliance in all material respects with
the applicable provisions of ERISA and the Code and the
regulations and published interpretations thereunder. No ERISA
Event has occurred or is reasonably expected to occur that, when
taken together with all other such ERISA Events, could materially
and adversely affect the financial condition and operations of
Parent and its ERISA Affiliates, taken as a whole. The present
value of all benefit liabilities under each Plan, determined on a
plan termination basis (based on those assumptions used for
financial disclosure purposes in accordance with Statement of
Financial Accounting Standards No. 87 of the Financial Accounting
Standards Board ("SFAS 87")), did not, as of the last annual
valuation date applicable thereto, exceed by more than $5,000,000
the value of the assets of such Plan, and the present value of
all benefit liabilities of all underfunded Plans, determined on a
plan termination basis (based on those assumptions used for
financial disclosure purposes in accordance with SFAS 87), did
not, as of the last annual valuation dates applicable thereto,
exceed by more than $5,000,000 the value of the assets of all
such underfunded Plans.
Section VII.11 Investment Company Act. Neither Parent
nor any of its subsidiaries is an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of
1940, as amended from time to time.
Section VII.12 Public Utility Holding Company Act.
Neither Parent nor any of its subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company", or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended from time to time.
Section VII.13 Environmental Matters.
(i) The properties of Parent and its subsidiaries
are in compliance, and in the last three years have been in
compliance, with all Environmental Laws, and all necessary
Environmental Permits have been obtained and are in effect,
and are not the subject of any pending or threatened
challenge by any Governmental Body or Person, except to the
extent that such noncompliance, challenge or failure to
obtain any necessary permits, in the aggregate, could not
reasonably be expected to result in a Material Adverse
Effect.
(ii) There have been no Releases or threatened
Releases at, from, under or proximate to its properties or
otherwise in connection with the operations of Parent or its
subsidiaries, which Releases or threatened Releases, in the
aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(iii) Neither Parent nor any of its subsidiaries
has received any notice of an Environmental Claim in
connection with its properties or the operations of Parent
or its subsidiaries or with regard to any Person whose
liabilities for environmental matters Parent or its
subsidiaries has retained or assumed, in whole or in part,
contractually, by operation of law or otherwise, which, in
the aggregate, could reasonably be expected to result in
Material Adverse Effect, nor does Parent nor its
subsidiaries have reason to believe that any such notice
will be received or is being threatened.
(iv) Hazardous Materials have not been transported
from the properties of Parent or its subsidiaries, nor have
Hazardous Materials been generated, treated, stored or
disposed of at, on or under any of such properties in a
manner that could give rise to liability under any
Environmental Law, nor has Parent nor any of its
subsidiaries retained or assumed any liability,
contractually, by operation of law or otherwise, with
respect to the generation, treatment, storage or disposal of
Hazardous Materials, which transportation, generation,
treatment, storage or disposal, or retained or assumed
liabilities, in the aggregate, could reasonably be expected
to result in a Material Adverse Effect.
Section VII.14 No Material Misstatements. No
information, report (including any exhibit, schedule or other
attachment thereto or other document delivered in connection
therewith), financial statement, exhibit or schedule prepared or
furnished by Parent to Lender in connection with this Agreement
or any of the other Loan Documents or included therein contained
or contains any material misstatement of fact or omitted or omits
to state any material fact necessary to make the statements
therein, taken as a whole in the light of the circumstances under
which they were made, not misleading.
Article VIII
REPRESENTATIONS AND WARRANTIES OF LENDER
Lender makes the following representations, warranties
and agreements, all of which survive the execution and delivery
of this Agreement and the Note and the making of the Loan.
Section VIII.1 Investment Intent, etc. Lender is
acquiring the Note for its own account for investment and not
with a view to, or for sale or other disposition in connection
with any distribution thereof, not with any present intention of
selling or otherwise disposing of the same.
Section VIII.2 Sophistication; Financial Strength, etc.
Lender is an Accredited Investor (as that term is defined in
Rule 501 promulgated by the Securities Exchange Commission (the
"SEC")) under the Securities Act of 1933, as amended (the
"Securities Act"), with such knowledge and experience in business
and financial matters as to be capable of evaluting the merits
and risks of the investment contemplated to be made hereunder.
Lender has sufficient financial strength to hold the Note as an
investment and to bear the economic risks of such investment
(including possible loss of such investment) for an indefinite
period of time.
Section VIII.3 Restrictions on Transfer. Lender
understands that neither the Note nor the Parent Common Stock
into which the Note is convertible has been registered under the
Securities Act or the securities laws of any jurisdiction and
that neither the Note nor such Parent Common Stock may be offered
for sale, sold, transferred or otherwise disposed of unless
registered under the Securities Act and any applicable state
securities laws or Lender delivers to Borrower an opinion of
counsel reasonably acceptable to Borrower to the effect that the
proposed offer, sale, transfer or other disposition is exempt
from registration. Lender understands that Borrower has no
obligation to register the Note for distribution under the
Securities Act or the securities laws of any jurisdiction and
that Borrower has not agreed to comply with any exemption under
the Securities Act or the securities laws of any jurisdiction
respecting the resale or other transfer of the Note.
Article IX
AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that until all of
the Obligations are paid and performed in full:
Section IX.1 Legal Existence. Borrower and each
Subsidiary then holding a Joint Venture interest will maintain
its corporate or other legal existence and good standing in the
jurisdiction of its incorporation or organization and maintain
its good standing and authorization to do business in each
jurisdiction in which the failure so to qualify would have a
material adverse effect on the business, operations, Property,
assets, liabilities, condition (financial or otherwise) or
prospects of such Obligor.
Section IX.2 Inspection; Audit.
(a) Borrower will, upon forty eight (48) hours
notice, permit representatives of Lender to visit its
offices to (i) examine the books and records thereof
(including, without limitation, all accounts payable and
accounts receivable detail ledgers, all payroll records, all
bank statements and other documents, ledgers, statements or
instruments Lender may deem necessary or desirable) and
accountants' reports relating thereto, (ii) make copies or
extracts therefrom, (iii) discuss the affairs of Borrower
with the employees thereof, (iv) examine and inspect the
Property of Borrower, and (v) meet and discuss the affairs
of Borrower with its principal outside accountants.
(b) Upon forty eight (48) hours notice,
representatives of Lender shall have the right to conduct an
audit of the books of Borrower.
Section IX.3 Financial Statements and Other
Information. Borrower shall maintain a standard system of
accounting in accordance with GAAP and furnish to Lender:
(a) Financial Statements. As soon as available
and in any event within ninety (90) days after the close of
each year, a copy of each of the following for Borrower:
(1) the balance sheet as of the end of such year, and
(2) the statements of operations, cash flow, and
shareholder's equity for such year setting forth in each
case in comparative form the corresponding figures for the
preceding year (the balance sheet and the statements of
operations, cash flow and shareholder's equity hereinafter
are referred to as the "Basic Financial Statements"), all in
reasonable detail, and in each case, prepared by or on
behalf of Borrower and accompanied by an opinion of the
accountants (which accountants shall be an accounting firm
of nationally recognized standing, (hereinafter, the
"Accountants")), together with a certificate of the
accountants which shall state that (A) the examination by
the accountants in connection with such Basic Financial
Statements has been made in accordance with generally
accepted auditing standards and, accordingly, included such
tests of the accounting records and such other auditing
procedures as were considered necessary in the
circumstances, (B) such Basic Financial Statements have been
prepared in accordance with GAAP and that such GAAP in
accordance with which such Basic Financial Statements were
prepared are consistent with those applied in prior fiscal
periods, and (C) such Basic Financial Statements fairly
present, in all material respects, the financial position of
Borrower and its Subsidiaries (on a consolidated basis).
(b) Audit Reports. Promptly upon receipt
thereof, a copy of each report, other than the reports
referred to in subsection (a) above, including any so-called
"Management Letter" or similar report, submitted to Borrower
by the Accountants in connection with any annual, interim or
special audit made by the Accountants of the books of the
Company.
(c) Notice of Defaults. Immediate written notice
if: (i) any Indebtedness of Borrower or any Subsidiary is
declared or shall become due and payable prior to its
declared or stated maturity, or called and not paid when
due, (ii) the holder of any note, or other evidence of
Indebtedness, certificate or security evidencing any such
Indebtedness of Borrower or any Subsidiary has the right to
declare such Indebtedness due and payable prior to its
stated maturity, or (iii) there shall occur and be
continuing a Potential Default or Event of Default,
accompanied by a statement of the Chief Financial Officer
setting forth what action Borrower proposes to take in
respect thereof.
(d) Notice of Suits, Adverse Events. Prompt
written notice of: (i) any citation, summons, subpoena,
order to show cause or other order naming Borrower or any
Subsidiary as a party to any proceeding before any
Governmental Body which may have a material adverse effect
on the business, operations, Property, assets, liabilities,
condition (financial or otherwise) or prospects of Borrower
or any Subsidiary, and include with such notice a copy of
such citation, summons, subpoena, order to show cause or
other order, (ii) any lapse or other termination of any
license, permit, franchise or other authorization issued to
Borrower or any Subsidiary by any Governmental Body,
(iii) any refusal by any Governmental Body to renew or
extend any license, permit, franchise or other authorization
of Borrower or any Subsidiary, and (iv) any dispute between
Borrower or any Subsidiary and any Governmental Body, which
lapse, termination, refusal or dispute, referred to in
clauses (ii), (iii) or (iv) above, has a reasonable
likelihood of being adversely determined and, if adversely
determined, could have a material adverse effect on the
business, operations, Property, assets, liabilities,
condition (financial or otherwise) or prospects of Borrower,
in each case excluding matters (A) relating solely to the
Joint Ventures and (B) with respect to which Borrower is
made aware by Lender.
(e) Other Information. Promptly upon request
therefor by Lender, such other information and reports
relating to the past, present or future financial condition,
operations, plans and projections of Borrower and the
Subsidiaries as Lender from time to time reasonably may
request.
Section IX.4 Insurance. Maintain or cause to be
maintained insurance against such other risks of the kinds and
amounts customarily insured against by similarly situated
companies and such other insurance as is required to conform with
the requirements of this Agreement. Such insurance shall, where
applicable, include but not be limited to, (a) workers'
compensation and employer's liability insurance and (b)
comprehensive general liability insurance. Lender shall be
provided a waiver of subrogation with respect to the insurance
described in the foregoing clause (a).
Section IX.5 Maintenance of Patents and Licenses.
Maintain in force at all times, all patents, trademarks, trade
names, licenses, approvals, permits and agreements necessary or
desirable for the continuation the businesses of Borrower and the
Subsidiaries.
Section IX.6 Payment of Taxes. Timely file all tax
returns required to be filed by or with respect to Borrower and
the Subsidiaries; timely pay all taxes that are due, or claimed
or asserted by any taxing authority to be due from or with
respect to Borrower and the Subsidiaries (other than taxes which
are contested in good faith and as to which adequate reserves
have been established in Borrower's and the Subsidiaries'
financial statements in accordance with GAAP); make all estimated
tax payments sufficient to avoid underpayment penalties; and
withhold and timely pay to the applicable taxing authority all
taxes required by all applicable laws to be withheld or paid in
connection with any amounts paid or owing to any employee,
creditor, independent contractor or other third party.
Section IX.7 Advances. Borrower and each Subsidiary
shall use any and all amounts received as an Advance solely for
the purposes of investing in a Joint Venture, except as otherwise
expressly permitted in this Loan Agreement.
Article X
NEGATIVE COVENANTS
Until all of the Obligations are paid and performed in
full Borrower will not:
Section X.1 Borrowing. Following the Closing Date,
create, incur or assume any liability for Indebtedness for
Borrowed Money owed by Borrower or any Subsidiary, except (a) the
Note, (b) trade debt incurred in the ordinary course of business,
(c) any guarantee of Indebtedness for Borrower Money of a Joint
Venture (which Indebtedness for Borrowed Money may be senior to
the Loan), and (d) any Indebtedness owed by Borrower to Parent
relating to (i) advances made by Parent to Borrower for the
payment by Borrower of taxes or interest on the Loan or in
connection with the making of a contribution by Borrower to a
Joint Venture following the drawdown by Borrower of all amounts
permitted or required to be drawn under the Loan and (ii)
reimbursement obligations owed by Borrower to Parent in
connection with letters of credit, surety bonds and other credit
enhancements provided by Parent on behalf of Borrower or any
Joint Venture; provided, that any such Indebtedness for Borrower
Money owed by Borrower to Parent shall be subordinated to the
Loan in a manner reasonably acceptable to Lender.
Section X.2 Liens. Create, incur, assume or suffer
to exist any Lien upon any of the Property of Borrower or any
Subsidiary, whether now owned or hereafter acquired, except
Permitted Liens.
Section X.3 Merger and Acquisition. Consolidate
with or merge into any Person, or acquire all or substantially
all of the capital stock or Property of any Person, other than
(a) any such activity relating to an acquisition of or investment
in a Joint Venture, and (b) the creation or acquisition of a
Subsidiary to the extent that either (i) the Borrower is not
liable for any Indebtedness for Borrowed Money of such
Subsidiary, except as permitted pursuant to Section 10.1 hereof,
or (ii) such Subsidiary is or is intended to be involved as a
partner, member or other equity interest owner in a Joint
Venture.
Section X.4 Contingent Liabilities. Assume,
guarantee, endorse, contingently agree to purchase, become liable
in respect of any letter of credit, or otherwise become liable
upon the obligation of any Person, except (i) liabilities arising
from the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business, (ii) any liability permitted under Section 10.1 and
(iii) any such liabilities in connection with or in support of
the activities of a Joint Venture, which such obligations may be
senior to the Loan.
Section X.5 Dividends and Other Distributions .
Declare or pay any dividends or apply any of its Property to the
purchase, redemption or other retirement of, or set apart any sum
for the payment of any dividends on, or make any other
distribution by reduction of capital or otherwise in respect of,
any shares of its capital stock, or pay or transfer to any
Affiliate any money or Property of Borrower, other than (a)
payments or transfers of money or Property to Joint Ventures
and/or to Subsidiaries in connection with Joint Ventures, and (b)
any amounts paid to Parent as a dividend or as a repayment on a
loan from Parent to Borrower to the extent and only to the extent
permitted by Sections 2.3(d), (e), or (f). Furthermore, Borrower
shall not declare, order, make, pay or set apart any sum for any
Restricted Junior Payment, except as permitted by the previous
sentence.
Section X.6 Scope of Borrower's Business. Borrower
shall not, and shall cause its Subsidiaries not to, engage in any
business activities other than the investment in Joint Ventures
and activities reasonably related to the Joint Ventures, except
to the extent that (i) Borrower or its Subsidiaries have made
other investments that are either funded entirely with capital
from Borrower, any Subsidiary, Parent or another affiliate of
Parent or (ii) Borrower and Parent have complied with the process
set forth in Article II of the Master Agreement.
Section X.7 Payments on Certain Indebtedness. Make
any voluntary or optional prepayment of any Indebtedness for
Borrowed Money permitted to exist under the terms of this Loan
Agreement except the Note and except as otherwise permitted by
Section 2.3(d), (e) or (f).
Section X.8 Amendment of Certificate of
Incorporation, etc. Amend, modify or waive any term or provision
of its certificate of incorporation or bylaws, unless required by
law.
Section X.9 Issuance, Conversion and Sale of Stock.
Issue or sell any shares of its capital stock or securities of
Borrower or any Subsidiary convertible into or exercisable for
any shares of its capital stock, or permit the conversion of any
shares of any class of its capital stock to shares of any other
class of its capital stock, except to the extent that following
any such transaction Parent directly or indirectly owns one
hundred percent (100%) of the outstanding shares or other equity
interests in Borrower and Borrower directly or indirectly owns
one hundred percent (100%) of the outstanding shares or other
equity interests in all Subsidiaries.
Section X.10 Transactions with Affiliates. Sell,
lease, assign, transfer or otherwise dispose of any Property of
Borrower or any Subsidiary to any Affiliate of Borrower or such
Subsidiary, or lease such Property, render or receive services or
purchase assets from any Affiliate, except for administrative
services in the ordinary course of business and on terms and
conditions substantially as favorable to Borrower or such
Subsidiary as would reasonably be obtained by Borrower or such
Subsidiary at that time in a comparable arm's-length transaction
with a Person other than an Affiliate.
Article XI
DEFAULT AND REMEDIES
Section XI.1 Events of Default. The occurrence of
any of the following shall constitute an Event of Default under
the Loan Documents:
(a) Default in Payment. If Borrower shall fail
to pay all or any portion of the Obligations within three
(3) Business Days after receipt by Borrower of written
notice from Lender that the same has become due and payable.
(b) Pledge. Borrower shall default in the due
performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to the
Security Documents.
(c) Breach of Covenants.
(i) If Borrower shall fail to observe or
perform any covenant or agreement made by Borrower
contained in Article IX or in Article X, and such
failure shall continue for a period of twenty (20) days
after notice thereof is given by Lender; or
(ii) If Borrower shall fail to observe or
perform any covenant or agreement made by Borrower in
any of the Loan Documents to which Borrower is a party,
and such failure shall continue for a period of thirty
(30) days after notice thereof is given by Lender.
(d) Breach of Representation and Warranty. Any
representation or warranty made by Borrower in or pursuant
to any of the Loan Documents to which Borrower is a party or
in any instrument or document furnished in compliance with
the Loan Documents shall prove to be false or misleading in
any material respect on the date as of which made, except to
the extent that such breach of representation or warranty
could reasonably be expected to have a material adverse
effect on the business, operations, Property, assets,
liabilities, conditions (financial or otherwise) or
prospects of Borrower and the Subsidiaries, taken as a
whole.
(e) Bankruptcy, Etc.
(i) If following the Closing Date, Borrower
shall (1) generally not be paying its debts as they
become due, (2) file, or consent by answer or otherwise
to the filing against it, of a petition for relief or
reorganization or arrangement or any other petition in
bankruptcy or insolvency under the laws of any
jurisdiction, (3) make an assignment for the benefit of
its creditors, (4) consent to the appointment of a
custodian, receiver, trustee or other officer with
similar powers for itself or for any substantial part
of its Property, (5) be adjudicated insolvent or
(6) take corporate action for the purpose of any of the
foregoing.
(ii) If any Governmental Body of competent
jurisdiction shall enter an order appointing, without
consent of Borrower, a custodian, receiver, trustee or
other officer with similar powers with respect to
Borrower or with respect to any substantial part of the
Property belonging to Borrower, or if an order for
relief shall be entered in any case or proceeding for
liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up
or liquidation of Borrower, or if any petition for any
such relief shall be filed against Borrower, and such
petition shall not be dismissed within thirty (30)
days.
(f) Judgments. If there shall exist final
judgments against Borrower which shall have been outstanding
for any period of thirty (30) days or more from the date of
the entry thereof and shall not have been discharged in full
or stayed pending appeal.
(g) Pledge or Encumbrance. If any of the
Property of Borrower shall be transferred, assigned, pledge
or encumbered in any respect except as expressly permitted
by the Loan Documents.
Section XI.2 Acceleration of the Obligations. Upon
the occurrence and during the continuance of any Event of
Default, Lender, at any time at its option, may declare all of
the Obligations due and payable, whereupon, the Obligations
immediately shall mature and become due and payable, all without
presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or any other notice, all of which hereby
are waived.
Section XI.3 Remedies on Default. If any of the
Obligations have been accelerated pursuant to Section 11.2,
Lender, at its option, may:
(a) Enforcement of Security Interests. Enforce
the rights and remedies under the Security Instruments in
accordance with their respective terms.
(b) Other Remedies. Enforce any of the rights or
remedies granted to Lender under any other Loan Document and
any other rights or remedies accorded to Lender at equity or
law, by virtue of statute or otherwise.
Section XI.4 Application of Funds. Any funds
received by Lender pursuant to the exercise of any rights
accorded to Lender pursuant to, or by the operation of any of the
terms of, any of, the Loan Documents after the acceleration of
the Obligations, including, without limitation, proceeds from the
sale of Collateral, shall be applied by the Lender first, to the
payment of the Obligations, in such order and manner as Lender
shall elect, and the balance, if any, shall be distributed to
Borrower.
Section XI.5 Reinstatement Following Event of
Default. To the extent that, following the occurrence of an
Event of Default, whether or not the Obligations have been
accelerated by Lender, Borrower cures and/or Lender waives all
Events of Default such that no Event of Default is in effect at
such time, then the acceleration of the Obligations shall be
reversed and all rights and obligations of Lender and Borrower
under this Agreement and all of the Loan Documents shall be
reinstated as of the time immediately preceding the occurrence of
the original Event of Default.
Section XI.6 Nonrecourse as to Borrower .
Notwithstanding anything to the contrary contained herein, Lender
agrees that the sole recourse of Lender against Borrower for the
payment or performance of the Obligations shall be to the
Collateral, and no other property or assets of Borrower shall be
subject to levy, execution, or other enforcement procedure for
the payment or performance of the Obligations; provided, however,
that the foregoing provisions shall not (a) constitute a release,
reduction, discharge, or waiver of any of the Obligations, (b)
limit the right of Lender to name Borrower as a party defendant
in any action or suit for judicial foreclosure and sale under
this Agreement, so long as no judgment in the nature of a
deficiency judgment shall be enforced again Borrower, except to
the extent of the Collateral, or (c) in any way be construed to
release, reduce, discharge, terminate, limit, or otherwise affect
or impair the Security Interests created under this Agreement or
any of the other Loan Documents. Notwithstanding the foregoing,
Borrower shall be fully liable to Lender for damages suffered by
Lender as a result of (x) the intentional or willful fraud or
misrepresentation by or on behalf of Borrower in connection with
the performance of its obligations under this Agreement and (y)
the intentional misapplication of any proceeds of the Collateral,
including, without limitation, the retention or application of
dividends, distributions, or interest in violation of Section
10.5 hereof. Lennder covenants not to sue Borrower with respect
to this Loan Agreement or any provisions hereof except as
provided in this Section 11.6.
Section XI.7 Nonrecourse as to Parent.
Notwithstanding anything to the contrary contained herein, Lender
agrees that: (a) Parent has appeared as a party to this Agreement
solely for the purpose of acknowledging the provisions of Article
XIV of this Agreement, (b) Lender shall have no recourse to
Parent for the payment or performance of any of the Obligations
identified herein, excluding any of Parent's obligations pursuant
to Article XIV and (c) Lender shall not sue Parent with respect
to this Loan Agreement or any provisions hereof, except for a
breach of Parent's obligations pursuant to Article XIV.
Section XI.8 Subordination. Lender acknowledges that
the lenders to certain of the Joint Ventures may require
guarantees or other similar commitments on the part of the
Borrower or the Subsidiaries and/or Liens upon certain assets of
the Borrower or the Subsidiaries, including the Borrower's direct
or indirect interest in the Joint Venture. Lender acknowledges
that such lenders may require that such guarantees and Liens be
senior to the Obligations and the Security Interests.
Section XI.9 Termination and Release. At any time
after the aggregate of all Advances hereunder exceeds $7,500,000,
Borrower may notify Lender in writing of its desire to terminate
Lender's commitment to make further Advances hereunder, at which
time such commitment will automatically terminate. Upon the
satisfaction of all Obligations hereunder and the termination of
Lender's commitment to make Advances, Lender, upon written
request for Borrower, shall release all Security Interests in the
Collateral.
Section XI.10 Restrictive Legends. The Note and the
certificates representing the Parent Common Stock into which the
Note is convertible shall be stamped or otherwise imprinted with
a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW, AND THUS MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND QUALIFIED FOR OFFERING AND
SALE UNDER APPROPRIATE STATE BLUE SKY OR SECURITIES
LAWS, OR UNLESS THE HOLDER HAS DELIVERED TO THE COMPANY
AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE
NOT REQUIRED.
Article XII
GENERAL PROVISIONS
Section XII.1 Role of Lender. Any term or condition
of any of the Loan Documents to the contrary notwithstanding,
Lender shall not have, and by Lender's execution and acceptance
of this Loan Agreement hereby expressly disclaims, any
obligation, liability or responsibility for the management,
conduct or operation of the business and affairs of Borrower or
any of the Collateral. Furthermore, Borrower acknowledges and
agrees that in no event shall Lender be deemed a mortgagee in
possession with regard to any of the Collateral by virtue of the
exercise of Lender's rights and remedies under this Loan
Agreement. Lender shall not have, has not assumed and, by
Lender's execution and acceptance of this Loan Agreement, hereby
expressly disclaims any liability or responsibility for the
payment or performance of any indebtedness or obligations of
Borrower or any owner of the Collateral, and no term or condition
of any of the Loan Documents shall be construed otherwise.
Borrower hereby expressly acknowledges that no term or condition
of any of the Loan Documents shall be construed so as to render
the relationship between Borrower and Lender other than that of
borrower, pledgor and lender. Borrower shall at all times
represent that the relationship between Borrower and Lender is
solely that of borrower and lender. Borrower hereby indemnifies
and agrees to hold Lender harmless from and against any cost,
expense or liability incurred or suffered by Lender as a result
of any assertion or claim of any obligation or responsibility of
Lender for the management, operation or conduct of the business
and affairs of Borrower or as a result of any assertion or claim
of any liability or responsibility of Lender for the payment or
performance of any indebtedness or obligation of Borrower.
Section XII.2 Defense of Actions. Lender may (but
shall not be obligated to) commence, appear in, or defend any
action or proceeding purporting to affect the Loan, the
Collateral, or the respective rights and obligations of Lender,
Borrower pursuant to the Loan Documents. Lender may (but shall
not be obligated to) pay all necessary expenses, including
reasonable attorneys' fees and expenses, incurred in connection
with such proceedings or actions, for which Borrower agree to
reimburse Lender upon demand and which amount shall be a part of
the Obligations.
Section XII.3 Indemnification; Subrogation. If Lender
is made a party to any litigation concerning the Note, any of the
other Loan Documents, any of the Collateral or any interest
therein, or the occupancy or use of any of the Collateral by
Borrower, then Borrower shall indemnify, defend and hold Lender
harmless from all liability by reason of said litigation
including reasonable attorneys' fees and expenses incurred by
Lender as a result of any such litigation, whether or not any
such litigation is prosecuted to judgment. Lender may employ an
attorney or attorneys to protect its rights hereunder, and in the
event of such employment following any breach by Borrower
hereunder, Borrower shall pay Lender reasonable attorneys' fees
and expenses incurred by Lender, whether or not an action is
actually commenced against Borrower by reason of its breach.
Section XII.4 Waiver of Offset. All sums payable
pursuant to the Loan Documents shall be paid without notice,
demand, counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and
the obligations and liabilities under the Loan Documents shall in
no way be released, discharged or otherwise affected (except as
expressly provided therein) by reason of: (i) any damage to or
destruction of or any condemnation or similar taking of the
Collateral, or any part thereof; (ii) any restriction or
prevention of or interference by any third party with any use of
the Collateral or any part thereof; (iii) any title defect or
encumbrance or any eviction from the Collateral any part thereof
by superior title or otherwise; (iv) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation
or other like proceeding relating to Lender, or any action taken
with respect to the Obligations or the liens, mortgages, security
interests or assignments securing the Obligations by any trustee
or receiver of Lender, or by any court, in any such proceeding;
(v) any claim which Borrower has or might have against Lender; or
(vi) any default or failure on the part of Lender to perform or
comply with any of the terms hereof or of any other Loan
Document.
Section XII.5 Sole Benefit. This Loan Agreement is
intended solely for the benefit of the parties hereto, and no
tenants, shareholders, warrantholders, employees, vendors,
contractors, mechanic's lien claimants, purchasers or any other
third parties shall have any rights under this Loan Agreement,
nor be entitled to insist upon performance of the obligations
arising hereunder.
Section XII.6 Conflicts and Construction. The parties
acknowledge and agree that (a) each party and its counsel have
reviewed and revised this Loan Agreement and the other Loan
Documents and negotiated the terms and provisions thereof, and
this Loan Agreement and the other Loan Documents shall be
construed without the aid of any canon or rule of law requiring
interpretation against the party drafting or causing the drafting
of an agreement or portions of an agreement in question,
(b) Borrower have not received from Lender, and Lender has not
received from Borrower, any accounting, tax, legal, financial or
other advice, and (c) each party has relied solely upon the
advice of its own accounting, tax, legal, financial and other
advisors. The benefits, rights and remedies of Lender and the
security contained in or provided for in the Loan Documents are
cumulative; provided, however, that to the extent of any
conflict, inconsistency or ambiguity, if any, between the terms
and provisions of this Loan Agreement and the other Loan
Documents, the terms and provisions of this Loan Agreement shall
control unless the applicable provisions of the other Loan
Documents increase the rights of Lender, in which event, to the
maximum extent permitted by applicable law, the terms and
provisions of the other Loan Documents shall control.
Article XIII
EXPENSES AND INDEMNITIES
Section XIII.1 Attorney's Fees and Other Expenses.
Borrower agrees to pay to Lender on demand all reasonable fees
and expenses or other cost or expenses incurred by Lender in
connection with the enforcement or collection against Borrower of
any provision of any of the Loan Documents, whether or not suit
is instituted, including, but not limited to, such costs or
expenses arising from the enforcement or collection against
Borrower of any provision of any of the Loan Documents in any
state or Federal bankruptcy or reorganization proceeding.
Section XIII.2 Indemnity. Subject to the provisions of
Section 11.6 hereof, Borrower hereby agrees to indemnify and save
Lender harmless of and from the following, except to the extent
that any of the actions described below are found by a court of
competent jurisdiction in a final decision which no longer is
subject to appeal to be the result of the gross negligence or
willful or wanton misconduct of Lender:
(a) Brokerage Fees. The fees, if any, of brokers
and finders retained by Borrower or any Subsidiary.
(b) Securities Violations. Any loss, cost,
liability, damage or expense (including attorneys' fees and
expenses) incurred by Lender in investigating, preparing
for, defending against, or providing evidence, producing
documents or taking other action in respect of any commenced
or threatened litigation, administrative proceeding or
investigation under any Federal securities law or any other
securities law of any jurisdiction, or any regulation, or at
common law or otherwise, relating, either directly or
indirectly, to the transactions contemplated by the Loan
Documents.
(c) Operation of Collateral; Joint Venturers.
Any loss, cost, liability, damage or expense (including
attorneys' fees and expenses) incurred in connection with
the ownership, operation or maintenance of the Collateral,
the construction of Lender and Borrower as having the
relationship of joint venturers, or partners or the
determination that any of Lender or Borrower has acted as
agent for the others.
(d) Representations. Any loss, cost, liability,
damage or expense (including attorneys' fees and expenses)
suffered and/or incurred at any time by Lender as a result
of or in connection with any failure of the representations
and warranties made by Borrower in the Loan Documents to be
true and correct.
Article XIV
CONVERSION RIGHTS; EXIT FEE
Section XIV.1 Conversion.
(a) Obligation to Convert Debt. Lender may, in
its sole and absolute discretion, elect to convert all
outstanding Obligations, or any portion thereof, from debt
into Parent Common Stock. Parent and Lender each agree, in
the event Lender notifies Parent of its election to effect a
conversion in accordance with Section 2.4 and this Article
XIV (a "Conversion"), to take all corporate actions
necessary to cause such a Conversion subject to the
Conversion Limitations set forth in Section 14.2.
(b) Conversion Price. In connection with any
Conversion, Lender will receive the number of shares of
Parent Common Stock derived in accordance with the following
formula:
Shares of Parent Common Stock = Obligations being
converted in accordance with Section 2.4, divided
by the Stock Price, subject to the Conversion
Limitations set forth in Section 14.2.
Any Obligations of Borrower that are converted to Parent
Common Stock by Lender pursuant to Section 2.4 and this
Article XIV shall immediately be deemed to have been
satisfied and extinguished and shall thereafter cease to
accrue interest.
Section XIV.2 Conversion Limitations. If at the time
of any Conversion the number of shares of Parent Common Stock to
be issued upon such Conversion, when added to the number of
shares of Parent Common Stock issued in any prior Conversion
would exceed Nineteen and Nine-Tenths Percent (19.9%) of the
aggregate number of shares of Parent Common Stock issued and
outstanding as of the Effective Date (the "19.9% Threshold"), the
number of shares of Parent Common Stock in excess of the 19.9%
Threshold shall not be issued. Instead, Parent shall pay to
Lender cash in an amount equal to the average of the Market Value
on the ten (10) trading days immediately prior to the date of
Conversion multiplied by 0.95 for each share of Parent Common
Stock in excess of the 19.9% Threshold.
Section XIV.3 Guaranteed Yield. No later than thirty
(30) days after the Final Payment Date, Borrower shall calculate
the Guaranteed Yield and the Payment Amount and pay to Lender the
amount by which the Guaranteed Yield exceeds the Payment Amount,
if any. Borrower shall deliver to Lender Borrower's
calculations, and Lender shall have the right to challenge any
such calculations.
Section XIV.4 Subordination. The obligation of Parent
to make any cash payment in connection with a conversion of the
Obligations pursuant to Section 2.4 and Article XIV (the "Payment
Obligations") shall be fully subordinated to Parent's Senior Debt
in accordance with the provisions of this Section 14.4. Parent
may not make any payments on account of the Payment Obligations
if there shall have occurred and be continuing a default in the
payment of principal of (or premium, if any) or interest on any
Specified Senior Debt, the payment of commitment or facility
fees, letter of credit fees or agency fees under any Specified
Senior Debt, or payments with respect to letter of credit
reimbursement arrangements with one or more lenders under the
credit or other agreement evidencing any Specified Senior Debt
when due (a "Senior Payment Default"). Following the occurrence
of an event of default (other than a Senior Payment Default)
under any Specified Senior Debt permitting the holders of such
Specified Senior Debt (or a trustee or agent on behalf thereof)
to accelerate the maturity thereof, or the occurrence of an event
which with the passage of time or the giving of notice, or both,
could become such an event of default (a "Senior Nonmonetary
Default") and, in each case, following the giving of notice
thereof to Parent in accordance with the terms governing the
relevant Specified Senior Debt (a "Blockage Notice"), Parent may
not make any payments on account of the Payment Obligations for a
period (a "Blockage Period") commencing on the date Parent
receives the Blockage Notice, and ending on the earliest of (i)
179 days after such date, (ii) the date, if any, on which such
Senior Nonmonetary Default is waived or otherwise cured and (iii)
the date, if any, on which such Blockage Period shall have been
terminated by written notice to Parent from the holders of the
relevant Specified Senior Debt (or a trustee or agent on behalf
thereof).
Upon any payment or distribution of assets of any kind
or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or total or partial
liquidation or reorganization of Parent, whether voluntary or
involuntary, or upon bankruptcy, insolvency, receivership or
other proceedings, then and in such event, all principal, premium
(if any) and interest and all other amounts due or to become due
upon all Parent's Senior Debt shall first be paid in full before
the holders of the Payment Obligations shall be entitled to
receive or retain any assets so paid or distributed in respect of
the Payment Obligations (for principal, premium (if any),
interest or otherwise); and, upon any such dissolution or winding
up or liquidation or reorganization, any payment or distribution
of assets of any kind or character, whether in cash, property or
securities, that the holders of the Payment Obligations would be
entitled to, except as otherwise provided herein, shall be paid
by Parent or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or
distributions, or by the holders of the Payment Obligations if
received by them, directly and ratably to the holders of Parent's
Senior Debt, to the extent necessary to pay in full all Parent's
Senior Debt, after giving effect to any concurrent payment or
distribution to or for the holders of Parent's Senior Debt,
before any payment or distribution is made to the holders of the
Payment Obligations.
Each holder of Payment Obligations hereby irrevocably
authorizes and empowers (without imposing any obligation on) the
holders of Parent's Senior Debt (or any trustee or agent on
behalf thereof), under the circumstances set forth in the
immediately preceding paragraph, to demand, sue for, collect and
receive every such payment or distribution described therein and
give acquittance therefor, to file claims and proofs of claims in
any statutory or nonstatutory proceeding, to vote such Parent's
Senior Debt holder's ratable share of the full amount of the
Payment Obligations in its sole discretion in connection with any
resolution, arrangement, plan of reorganization, compromise,
settlement or extension and to take all such other action
(including, without limitation, the right to participate in any
composition of creditors and the right to vote such Parent's
Senior Debt holders' ratable share of the Payment Obligations at
creditors' meetings for the election of trustees, acceptances of
plans and otherwise), in the name of the holder of the Payment
Obligations, as such Parent's Senior Debt holder or its
representative may deem necessary or desirable for the
enforcement of these subordination provisions.
If any payment or distribution of assets of any kind or
character, whether in cash, property or securities, shall be
collected or received by any holder of the Payment Obligations
and such holder shall not be permitted under the terms of this
instrument to receive or retain such payment or distribution,
such holder shall forthwith turn over the same to Parent's Senior
Debt holders for their ratable benefit in the form received
(except for the endorsement or the assignment of such holder when
necessary) and, until so turned over, the same shall be held in
trust by such holder as the property and for the ratable benefit
of the Parent's Senior Debt holders.
Nothing contained in this Section 14.4, shall affect
any security interest which Lender may have in any subsidiary of
Parent.
Section XIV.5 Adjustment of Parent Common Stock and
Stock Price.
(a) In case Parent shall (i) pay a dividend or
make a distribution solely in shares of Parent Common Stock,
(ii) subdivide its outstanding shares of Parent Common Stock
into a greater number of shares of Parent Common Stock or
(iii) combine its outstanding shares of Parent Common Stock
into a smaller number of shares of Parent Common Stock, then
concurrently with the effectiveness of each such event, the
Stock Price in effect immediately prior thereto shall be
adjusted by multiplying the Stock Price in effect
immediately prior to such adjustment by a fraction of which
the numerator shall be the number of shares of Parent Common
Stock outstanding immediately prior to such adjustment and
the denominator shall be the number of shares of Parent
Common Stock outstanding immediately following such
adjustment. Such adjustment to the Stock Price shall be
made each time any such action described in this Section
14.5(a) shall occur.
(b) In case Parent issues rights or warrants to
all holders of Parent Common Stock entitling them to
subscribe for or purchase shares of Parent Common Stock at a
price per share less than Market Value the Business Day
immediately prior to the record date therefor, or in case
Parent shall issue to all holders of Parent Common Stock
other securities convertible into or exchangeable for Parent
Common Stock for a consideration per share of Parent Common
Stock deliverable upon conversion or exchange thereof less
than the Market Value on the Business Day immediately prior
to the record date therefor, the Stock Price in effect
immediately prior thereto shall be adjusted as provided
below so that the Stock Price therefor shall be equal to the
price determined by multiplying (A) the Stock Price in
effect immediately prior to such issuance by (B) a fraction
of which the denominator shall be the sum of (1) the number
of shares of Parent Common Stock outstanding on the date of
issuance of the convertible or exchangeable securities,
rights or warrants and (2) the number of additional shares
of Parent Common Stock offered for subscription or purchase,
or issuable upon such conversion or exchange, and of which
the numerator shall be the sum of (1) the number of shares
of Parent Common Stock outstanding on the date of issuance
of such convertible or exchangeable securities, rights or
warrants and (2) the number of additional shares of Parent
Common Stock which the aggregate offering price of the
number of shares of Parent Common Stock so offered would
purchase at the Market Value on the Business Day immediately
prior to the record date therefor. Such adjustment shall be
made whenever such convertible or exchangeable securities,
rights or warrants are issued, and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such securities. However,
upon the expiration of any right or warrant to purchase
Parent Common Stock, the issuance of which resulted in an
adjustment in the Stock Price pursuant to this Section
14.5(b), if any such right or warrant shall expire and not
have been exercised, the Stock Price shall be recomputed
immediately upon such expiration and effective immediately
upon such expiration shall be increased to the price it
would have been (but reflecting any other adjustments to the
Stock Price made pursuant to the provisions of this Section
14.5(b) after the issuance of such rights or warrants) had
the adjustment of the Stock Price made upon the issuance of
such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of
Parent Common Stock actually purchased upon the exercise of
any rights or warrants. No further adjustment to the Stock
Price shall be made upon exercise of any right, warrant,
convertible security or exchangeable security if any
adjustment shall have been made upon issuance of such
security.
Article XV
MISCELLANEOUS
Section XV.1 Notices. All notices and communications
under this Agreement shall be in writing and shall be
(i) delivered in person, (ii) sent by telecopy or telegraph, or
(iii) mailed, postage prepaid, either by registered or certified
mail, return receipt requested, or (iv) delivered by nationally
recognized overnight express carrier, addressed in each case as
follows:
If to Borrower: Stratus Ventures I Borrower L.L.C.
98 San Jacinto Blvd., Suite 2200
Austin, Texas 78701
Attn: William H. Armstrong, III
Telecopy: (512) 478-6340
with a copy to: John G. Amato
Freeport-McMoRan Inc.
1615 Poydras
New Orleans, Louisiana 70112
Telecopy: (504) 582-3513
If to Lender: Oly Lender Stratus, L.P.
c/o Olympus Real Estate Corporation
200 Crescent Court, Suite 1650
Dallas, Texas 75201
Attn: Hal R. Hall
Telecopy Number: (214) 740-7340
with a copy to: Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attn: Robert C. Feldman
Telecopy Number: (214) 746-7777
or to such other address or telecopy number, as to any of the
parties hereto, as such party shall designate in a written notice
to the other parties hereto. All notices sent pursuant to the
terms of this Section 15.1 shall be deemed received (i) if sent
by telecopy or telegraph, on the day sent if a Business Day, or
if such day is not a Business Day, then on the next Business Day,
(ii) if sent by overnight, express carrier, on the next Business
Day immediately following the day sent, or (iii) if sent by
registered or certified mail, on the third Business Day following
the day sent.
Section XV.2 Survival of Indemnity. The obligations
of Borrower to indemnify Lender with respect to the expenses,
damages, losses, costs and liabilities described in Section 13.2
shall survive the repayment of all amounts due under the Loan
Documents, the cancellation of the Note and the release and/or
cancellation of any and all of the Loan Documents, or the
foreclosure of any Liens on the Collateral.
Section XV.3 Further Assurances. From time to time,
Borrower shall execute and deliver to Lender such additional
documents as Lender may require to carry out the purposes of the
Loan Documents and to protect Lender's rights thereunder.
Section XV.4 Severability. In the event that any
provision of this Loan Agreement is deemed to be invalid by
reason of the operation of any law, this Loan Agreement shall be
construed as not containing such provision and the invalidity of
such provision shall not affect the validity of any other
provisions hereof, and any and all other provisions hereof which
otherwise are lawful and valid shall remain in full force and
effect.
Section XV.5 Waiver. No delay on the part of Lender
in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, and no single or partial exercise of
any right, power or privilege hereunder shall preclude other or
further exercise thereof, or be deemed to establish a custom or
course of dealing or performance among the parties hereto, or
preclude the exercise of any other right, power or privilege.
Any failure of Lender to insist upon strict compliance with any
of the terms or conditions of this Loan Agreement or any of the
other Loan Documents shall not be deemed a waiver of the same or
any other term or condition of this Loan Agreement or the other
Loan Documents, and Lender may at any time thereafter insist upon
compliance with any and all such terms and conditions. No delay
or omission in the exercise of any right or remedy of Lender as a
result of a default by Borrower under this Loan Agreement or any
of the other Loan Documents shall be deemed a waiver of any such
right or remedy as a result of the same default or subsequent
defaults, nor shall any single or partial exercise thereof
preclude any other further exercise thereof or the exercise of
any other right or be deemed to establish a custom or course of
dealing or performance among the parties hereto, or preclude the
exercise of any other right, power or privilege. Any waiver of
rights and remedies of Lender or duties and obligations of
Borrower under this Loan Agreement or any of the other Loan
Documents shall be effective only if made in writing and duly
executed and delivered by Lender. No notice or demand given in
any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such
notice or demand.
Section XV.6 Entire Agreement; Modification. This
Loan Agreement and the other Loan Documents constitute the entire
agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements with respect to such
subject matter, written or oral. No modification or waiver of
any provision of any of the Loan Documents, or consent to any
departure by Borrower therefrom, shall be effective unless the
same shall be in writing, and then such waiver or consent shall
be effective only in the specific instance and for the purpose
for which given. No notice to or demand on Borrower in any case
shall entitle Borrower to any other or further notice or demand
in the same, similar or other circumstances.
Section XV.7 Captions. The headings in this Loan
Agreement are for purposes of reference only and shall not limit
or otherwise affect the meaning hereof.
Section XV.8 Counterparts. This Loan Agreement may
be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one
instrument.
Section XV.9 Successors and Assigns. This Loan
Agreement shall be binding upon and inure to the benefit of and
be enforceable by the respective successors and assigns of the
parties hereto.
Section XV.10 Remedies Cumulative. All rights and
remedies of Lender pursuant to this Loan Agreement, any other
Loan Documents or otherwise, shall be cumulative and non-
exclusive, and may be exercised singularly or concurrently.
Lender shall not be required to prosecute collection, enforcement
or other remedies against Borrower before proceeding against
Borrower, or to enforce or resort to any security, liens,
collateral or other rights of Borrower before proceeding against
any security, liens, collateral or other rights of any other
Obligor. One or more successive actions may be brought against
Borrower, either in the same action or in separate actions, as
often as Lender deems advisable, until all of the Obligations are
paid and performed in full.
Section XV.11 Time is of the Essence. Time is of the
essence of this Loan Agreement and the other Loan Documents.
Section XV.12 Survival of Representations and
Warranties. The representations and warranties contained in this
Loan Agreement and the other Loan Documents shall survive
termination, cancellation, expiration and completion of this Loan
Agreement and shall survive any transfer or assignment hereof.
Section XV.13 Arbitration.
(a) Borrower and Lender specifically agree that any
controversy, claim, or dispute arising out of this Agreement or
any of the other Loan Documents, or any alleged breach thereof,
shall be resolved exclusively by arbitration. Any arbitration
shall take place in Houston, Texas and be administered by the
Houston, Texas office of the American Arbitration Association
(the "AAA") in accordance with its Commercial Arbitration Rules
in effect at the time the arbitration is initiated (collectively,
the "Rules").
(b) As soon as a demand for arbitration shall be made
by either party, the AAA shall proceed to provide a list of
arbitrators from the Commercial Panel from which the parties
shall select a panel of three neutral arbitrators in accordance
with the Rules and normal procedures of the Houston, Texas office
of the AAA. If necessary, the AAA shall select some or all of
the arbitrators when it is authorized to do so under the Rules.
(c) The arbitration panel shall render a full,
complete, conclusive, and binding resolution of the dispute. The
arbitration award shall assess all reasonable attorneys' fees and
costs, including the costs of the arbitration and the
arbitrators' compensation, against the losing party. Judgment on
the award may be entered in any court having jurisdiction
thereof.
Section XV.14 APPLICABLE LAW. THE LOAN DOCUMENTS SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS AND
DECISIONS OF THE STATE OF TEXAS.
Section XV.15 VENUE. BORROWER HEREBY AGREES THAT ANY
STATE OR FEDERAL COURT LOCATED IN HARRIS COUNTY, TEXAS SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
LENDER AND BORROWER PERTAINING DIRECTLY OR INDIRECTLY TO ANY OF
THE LOAN DOCUMENTS OR TO ANY MATTER ARISING THEREFROM. BORROWER
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN
ANY OF SUCH COURTS, AND HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN,
AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS TO WHICH NOTICES ARE TO BE
SENT PURSUANT TO SECTION 15.1. BORROWER WAIVES ANY CLAIM THAT A
STATE OR FEDERAL COURT LOCATED IN HARRIS COUNTY, TEXAS IS AN
INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE.
SHOULD BORROWER, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER
TO ANY SUMMONS, COMPLAINT, OR PROCESS OR PAPERS SO SERVED WITHIN
THE TIME PRESCRIBED BY LAW AFTER THE MAILING THEREOF, BORROWER
SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED BY LENDER AGAINST BORROWER AS DEMANDED OR PRAYED FOR IN
SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE
OF FORUM FOR BORROWER SET FORTH IN THIS SECTION 15.15 SHALL NOT
BE DEEMED TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING BY LENDER OF ANY ACTION TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
Section XV.16 WAIVER OF RIGHT TO JURY TRIAL. LENDER
AND BORROWER ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER ANY OF THE LOAN DOCUMENTS OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON DIFFICULT
AND COMPLEX ISSUES, AND THEREFORE, THE PARTIES AGREE THAT ANY
LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.
Section XV.17 No Obligation to Renew. Borrower
acknowledges and agrees that the Loan is intended to be a six (6)
year loan only and that Lender has no obligation whatsoever,
express or implied, to extend the term of the Loan beyond the
Maturity Date. Borrower further agrees that in no event shall
any such obligation ever arise except in the event that Lender,
in Lender's sole discretion, shall elect to execute and deliver
to Borrower a written extension agreement (if any), which shall
be on such terms and conditions as may be required by Lender, in
Lender's sole discretion.
Section XV.18 STATUTE OF FRAUDS. THIS LOAN AGREEMENT
AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY ANY OF THE
PARTIES PRIOR TO OR SUBSTANTIALLY CONTEMPORANEOUSLY HEREWITH
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS
THAT FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section XV.19 Debt Incurrence Limitation of Parent.
Parent covenants and agrees that until all of the Obligations are
paid and performed in full, Parent will not incur any Debt if,
immediately following the incurrence of such Debt and the
acquisition of any assets in connection therewith, the Coverage
Ratio would be less than 1.35 to 1.0.
This Loan Agreement has been executed and delivered by each
of the parties hereto by a duly authorized officer of each such
party on the date first set forth above.
BORROWER:
STRATUS VENTURES I BORROWER L.L.C.,
a Delaware limited liability company
By: Stratus Properties Inc.,
a Delaware corporation,
its sole member
By:/s/William H. Armstrong III
---------------------------
William H. Armstrong, III
President
PARENT:
STRATUS PROPERTIES INC.,
a Delaware corporation
By: /s/ William H. Armstrong III
----------------------------
William H. Armstrong, III
President
LENDER:
OLY LENDER STRATUS, L.P.,
a Texas limited partnership
By: Oly Fund II GP Investments, L.P.,
a Texas limited partnership,
its general partner
By: Oly Real Estate Partners II, L.P.,
a Texas limited partnership,
its general partner
By: Oly REP II, L.P.,
a Texas limited partnership,
its general partner
By: Oly Fund II, LLC,
a Texas limited liability company,
its general partner
By:/s/ Hal R. Hall
---------------
Hal R. Hall
Vice President
EXHIBIT 1
Borrower Capital Stock
All stock of Stratus Ventures I Borrower, L.L.C. is
held by Stratus Properties Inc., a Delaware
corporation, its sole member.
Table of Contents
page
Article I
DEFINITIONS AND DETERMINATIONS
1.1 Definitions......................................... 1
1.2 Lender's Discretion................................. 13
1.3 Approval in Writing................................. 13
Article II
LOAN AND TERMS OF PAYMENT
2.1 Loan................................................ 13
2.2 Interest............................................ 13
2.3 Prepayments; Payments............................... 14
2.4 Conversion into Parent Common Stock................. 15
2.5 Payments After Event of Default..................... 15
2.6 Method of Payment; Good Funds; Net Payments......... 15
2.7 Maximum Interest.................................... 15
Article III
CONDITIONS FOR CLOSING AND FUNDING OF LOAN
AND INITIAL ADVANCE
3.1 Representations and Warranties...................... 17
3.2 Delivery of Documents............................... 17
3.3 Security Interests.................................. 18
3.4 Performance; No Default............................. 18
3.5 Approval of Loan Documents and Security Interests... 18
3.6 Additional Items.................................... 18
Article IV
CONDITIONS FOR FUTURE FUNDING COMMITMENTS
4.1 Representations Bringdown........................... 20
4.2 No Default; Compliance With Terms................... 20
4.3 Delivery of Documents............................... 20
4.4 Additional Items.................................... 20
Article V
CONDITIONS FOR OTHER ADVANCES
5.1 Representations Bringdown........................... 21
5.2 No Default; Compliance With Terms................... 21
Article VI
REPRESENTATIONS AND WARRANTIES OF BORROWER
6.1 Organization and Good Standing...................... 21
6.2 Authorization of Agreement; Binding Obligation...... 21
6.3 Required Consents................................... 22
6.4 Financial Statements................................ 22
6.5 Absence of Undisclosed Liabilities.................. 22
6.6 Books of Account.................................... 22
6.7 Title to Property; Liens............................ 23
6.8 Condition of Assets................................. 23
6.9 Insurance........................................... 23
6.10 Conduct of the Business............................. 23
6.11 Litigation.......................................... 23
6.12 Compliance With Law; Permits........................ 24
6.13 Taxes............................................... 24
6.14 Conflicting Agreements.............................. 25
6.15 Patents, Trademarks, Franchises, Etc................ 25
6.16 Full Disclosure..................................... 25
6.17 Employee Matters.................................... 25
6.18 Other Indebtedness.................................. 26
6.19 Possession of Franchises, Licenses, Etc............. 26
6.20 Use of Proceeds..................................... 26
Article VII
REPRESENTATIONS AND WARRANTIES OF PARENT
7.1 Organization; Powers................................ 26
7.2 Authorization....................................... 26
7.3 Governmental Approvals.............................. 27
7.4 Enforceability...................................... 27
7.5 Financial Statements................................ 27
7.6 Litigation; Compliance with Laws; etc............... 27
7.7 Title, etc.......................................... 28
7.8 Federal Reserve Regulations; Use of Proceeds........ 28
7.9 Taxes............................................... 28
7.10 Employee Benefit Plans.............................. 29
7.11 Investment Company Act.............................. 29
7.12 Public Utility Holding Company Act.................. 29
7.13 Environmental Matters............................... 29
7.14 No Material Misstatements........................... 30
Article VIII
REPRESENTATIONS AND WARRANTIES OF LENDER
8.1 Investment Intent, etc.............................. 30
8.2 Sophistication; Financial Strength, etc............. 30
8.3 Restrictions on Transfer............................ 30
Article IX
AFFIRMATIVE COVENANTS
9.1 Legal Existence..................................... 31
9.2 Inspection; Audit................................... 31
9.3 Financial Statements and Other Information.......... 31
(a) Financial Statements........................... 31
(b) Audit Reports.................................. 32
(c) Notice of Defaults............................. 32
(d) Notice of Suits, Adverse Events................ 32
(e) Other Information.............................. 33
9.4 Insurance........................................... 33
9.5 Maintenance of Patents and Licenses................. 33
9.6 Payment of Taxes.................................... 33
9.7 Advances............................................ 33
Article X
NEGATIVE COVENANTS
10.1 Borrowing........................................... 33
10.2 Liens............................................... 34
10.3 Merger and Acquisition.............................. 34
10.4 Contingent Liabilities.............................. 34
10.5 Dividends and Other Distributions................... 34
10.6 Scope of Borrower's Business........................ 34
10.7 Payments on Certain Indebtedness.................... 35
10.8 Amendment of Certificate of Incorporation, etc...... 35
10.9 Issuance, Conversion and Sale of Stock.............. 35
10.10 Transactions with Affiliates........................35
Article XI
DEFAULT AND REMEDIES
11.1 Events of Default................................... 35
(a) Default in Payment............................. 35
(b) Pledge......................................... 35
(c) Breach of Covenants............................ 36
(d) Breach of Representation and Warranty.......... 36
(e) Bankruptcy, Etc................................ 36
(f) Judgments...................................... 37
(g) Pledge or Encumbrance.......................... 37
11.2 Acceleration of the Obligations..................... 37
11.3 Remedies on Default................................. 37
(a) Enforcement of Security Interests.............. 37
(b) Other Remedies................................. 37
11.4 Application of Funds................................ 37
11.5 Reinstatement Following Event of Default............ 37
11.6 Nonrecourse as to Borrower.......................... 37
11.7 Nonrecourse as to Parent............................ 38
11.8 Subordination....................................... 38
11.9 Termination and Release............................. 38
11.10 Restrictive Legends................................ 38
Article XII
GENERAL PROVISIONS
12.1 Role of Lender...................................... 39
12.2 Defense of Actions.................................. 39
12.3 Indemnification; Subrogation........................ 39
12.4 Waiver of Offset.................................... 40
12.5 Sole Benefit........................................ 40
12.6 Conflicts and Construction.......................... 40
Article XIII
EXPENSES AND INDEMNITIES
13.1 Attorney's Fees and Other Expenses.................. 41
13.2 Indemnity........................................... 41
(a) Brokerage Fees................................. 41
(b) Securities Violations.......................... 41
(c) Operation of Collateral; Joint Venturers....... 41
(d) Representations................................ 41
Article XIV
CONVERSION RIGHTS; EXIT FEE
14.1 Conversion.......................................... 42
(a) Obligation to Convert Debt..................... 42
(b) Conversion Price............................... 42
14.2 Conversion Limitations.............................. 42
14.3 Guaranteed Yield.................................... 42
14.4 Subordination....................................... 42
14.5 Adjustment of Parent Common Stock and Stock Price... 44
Article XV
MISCELLANEOUS
15.1 Notices............................................. 45
15.2 Survival of Indemnity............................... 46
15.3 Further Assurances.................................. 46
15.4 Severability........................................ 46
15.5 Waiver.............................................. 46
15.6 Entire Agreement; Modification...................... 47
15.7 Captions............................................ 47
15.8 Counterparts........................................ 47
15.9 Successors and Assigns.............................. 47
15.10 Remedies Cumulative................................ 47
15.11 Time is of the Essence............................. 47
15.12 Survival of Representations and Warranties......... 48
15.13 Arbitration........................................ 48
15.14 APPLICABLE LAW..................................... 48
15.15 VENUE.............................................. 48
15.16 WAIVER OF RIGHT TO JURY TRIAL...................... 49
15.17 No Obligation to Renew............................. 49
15.18 STATUTE OF FRAUDS.................................. 49
15.19 Debt Incurrence Limitation of Parent............... 49
LOAN AGREEMENT
by and among
STRATUS VENTURES I BORROWER L.L.C.
as borrower,
OLY LENDER STRATUS, L.P.
as lender,
and
STRATUS PROPERTIES INC.
as parent
Dated as of May 22, 1998
Exhibit 99.1
MASTER AGREEMENT
This MASTER AGREEMENT (this "Agreement") is made and entered
into this 22nd day of May, 1998, by and among OLY FUND II GP
INVESTMENTS, L.P., a Texas limited partnership ("Olympus"), OLY
LENDER STRATUS, L.P., a Texas limited partnership ("Oly Lender"),
OLY/STRATUS EQUITIES, L.P., a Texas limited partnership, ("Oly
Equities"), STRATUS PROPERTIES INC., a Delaware corporation
("Stratus") and STRATUS VENTURES I BORROWER L.L.C. ("Stratus
Ventures").
RECITALS
WHEREAS, Stratus is in the business of land and
commercial real estate development ancillary to its land
development activities.
WHEREAS, Olympus desires to invest up to Fifty Million
and No/100 Dollars ($50,000,000.00) through the formation of a
series of entities with Stratus or affiliates of Stratus to
(i) develop certain properties currently owned by Stratus
(collectively, "Existing Properties") and individually, an
"Existing Property") and (ii) acquire and develop other
properties throughout the United States (collectively, "New
Properties") and individually, a "New Property").
WHEREAS, Olympus as general partner of Oly Equities
desires to invest Ten Million and No/100 Dollars ($10,000,000.00)
in Stratus in the form of a mandatorily redeemable preferred
stock pursuant to a "Securities Purchase Agreement" (herein so
called) to be entered into between Oly Equities and Stratus
contemporaneously herewith, which amount may be used by Stratus
for any corporate purposes it deems appropriate.
WHEREAS, Olympus as general partner of Oly Lender
desires to provide up to Ten Million and No/100 ($10,000,000.00)
in convertible debt financing to Stratus Ventures pursuant to a
"Loan Agreement" (herein so called) to be entered into between
Stratus Ventures and Oly Lender contemporaneously herewith, which
amount may be used by Stratus Ventures to invest with Olympus in
one or more entities that will be formed to acquire and develop
New Properties.
WHEREAS, Stratus desires to grant Olympus a first right
of refusal to invest in certain development opportunities.
NOW THEREFORE, for and in consideration of the premises
and mutual covenants and agreements contained in this Agreement,
the parties hereby agree as follows:
ARTICLE I
PROPERTY DEVELOPMENT
I.1 Equity Commitment. Olympus hereby agrees, for a
period of three (3) years from the date hereof, to co-invest with
Stratus in ventures in an amount up to Fifty Million and No/100
Dollars ($50,000,000.00) of equity capital (in the form of equity
and mezzanine debt, which shall be subordinate to third party
secured financing) (the "Equity Funds") for the development of
(i) certain Existing Properties and (ii) certain New Properties
on the basis described in this Agreement.
(a) Existing Properties. In accordance with and
subject to the Proposal Process set forth in Section 2.1,
for the development of an Existing Property, Olympus and
Stratus agree that the typical venture will provide (i) a
property contribution by Stratus at a contribution value to
be designated by Stratus and agreed to by Olympus, (ii) a
contribution of cash Equity Funds by Olympus and
(iii) unless otherwise mutually agreed, Stratus and Olympus
shall receive identical instruments in exchange for such
contributions, whether in the form of equity or mezzanine
debt. If the value of the Existing Property exceeds
Stratus' equity contribution amount to the venture, then
Stratus shall receive cash from the venture in the amount by
which the Existing Property contribution value exceeds
Stratus' equity contribution.
(b) New Properties. In accordance with and
subject to the Proposal Process set forth in Section 2.1,
for the acquisition and development of a New Property,
Olympus and Stratus agree that the typical venture will
provide (i) a capital contribution by Stratus of cash,
common stock or other securities, like-kind exchanges,
guarantees, or some combination thereof recorded at a value
mutually agreed by Stratus and Olympus, (ii) a capital
contribution by Olympus in cash and (iii) unless otherwise
mutually agreed, Stratus and Olympus shall receive identical
instruments in exchange for such contributions, whether in
the form of equity or mezzanine debt.
I.2 Third Party Investors/Developers. In the event
Olympus and Stratus agree to include a third party investor
and/or developer in any venture, Olympus and Stratus shall
mutually agree upon a reduction in the participation interest of
Olympus and Stratus in order to accommodate such third party;
provided, however, the participation interest offered to Olympus
shall at all times be equal to or greater than the participation
interest of each of the other parties.
ARTICLE II
FIRST RIGHT OF REFUSAL
II.1 Offer. Stratus shall provide Olympus a written
offer (an "Offer") to invest in any real estate acquisition or
development opportunity (the "Development Opportunity") that
becomes available to Stratus and Stratus desires to pursue;
provided, however, Stratus shall not be required to provide
Olympus with an Offer of any Development Opportunity for which
Equity Funds will be provided entirely by Stratus and Olympus
shall not have a right to participate therein. The economic
terms shall be established by the Proposal Process (herein so
called) of this Section 2.1 as follows:
(a) The Initial Proposal. Each Offer shall
include a proposal (the "Initial Proposal") which shall
contain the information described on Schedule 2.1(a)
attached hereto, to the extent reasonably available.
Subject to Section 1.2, Stratus shall at all times in the
Proposal Process offer to Olympus at least a 50%
equity/mezzanine participation. Within fifteen (15) days of
receiving the Offer and the Initial Proposal, Olympus shall
notify Stratus in writing whether or not the Initial
Proposal is acceptable to Olympus. If Olympus fails to
notify Stratus in writing within such fifteen (15) days of
receipt of any Offer and Initial Proposal, Olympus shall be
deemed to have declined such Offer and Initial Proposal and
shall have no further right to participate in such
Development Opportunity.
(b) The Alternative Proposal. If the Initial
Proposal is not acceptable to Olympus, Olympus may reject
the Initial Proposal or, alternatively, within such 15-day
period provided in Section 2.1(a), provide written notice to
Stratus that the Initial Proposal is not acceptable,
together with a bona fide alternative written proposal (the
"Alternative Proposal") which sets forth economic terms of
the Development Opportunity that would be acceptable to
Olympus. Within fifteen (15) days of receipt of the
Alternative Proposal, Stratus shall provide Olympus written
notice whether or not the Alternative Proposal is acceptable
to Stratus. If Stratus fails to provide Olympus such
written notice, Stratus shall be deemed to have declined the
Alternative Proposal.
(c) The Second Alternative Proposal. If Stratus
does not accept the Alternative Proposal, Stratus shall have
the right to proceed with the Development Opportunity if and
only if (i) (A) the Development Opportunity is capitalized
by a third party on materially more favorable terms and
conditions to Stratus than that proposed by Olympus'
Alternative Proposal and (B) the transaction (the "Third
Party Transaction") contemplated by the Development
Opportunity with the third party closes on or before six (6)
months after Olympus receives written notice from Stratus
that Stratus does not accept the Alternative Proposal or
Stratus is deemed to have declined the Alternative Proposal,
or (ii) Stratus elects to provide the Equity Funds required
for the Development Opportunity without third party equity
financing. A Third Party Transaction will be conclusively
presumed to be on materially more favorable terms and
conditions to Stratus than Olympus' Alternative Proposal if
Stratus elects to present to Olympus the terms and
conditions of the proposed Third Party Transaction and
Olympus does not within fifteen (15) days agree to enter
into a transaction regarding the Development Opportunity
upon the same terms and conditions as the third party
proposed; provided, however, Stratus shall not be required
to present any such third party proposal to Olympus. If,
within such 6-month period, Stratus has not closed the Third
Party Transaction and has not closed on the Development
Opportunity for its own account, Stratus and Olympus shall
reconsider the Initial Proposal and the Alternative
Proposal. On or before twenty (20) days after such 6-month
period, Olympus may, but shall not be obligated to, provide
Stratus with a second alternative proposal (the "Second
Alternative Proposal"), which sets forth economic terms of
the Development Opportunity that would be acceptable to
Olympus. Within twenty (20) days of receipt of the Second
Alternative Proposal, Stratus shall provide Olympus written
notice whether or not the Second Alternative Proposal is
acceptable to Stratus. If Stratus fails to provide Olympus
such written notice, Stratus shall be deemed to have
declined the Second Alternative Proposal. If Stratus
provides Olympus such written notice that Stratus does not
accept the Second Alternative Proposal or Stratus is deemed
to have declined the Second Alternative Proposal, Stratus
shall have the right to proceed with the Development
Opportunity if and only if (y) the Development Opportunity
is capitalized by a third party on at least as favorable
terms and conditions to Stratus as the Second Alternative
Proposal or (z) Stratus elects to provide the Equity Funds
required for the Development Opportunity without third party
equity financing.
Notwithstanding anything to the contrary contained in this
Agreement, the obligation of each party to proceed under the
terms of any "Proposal" (herein so defined to mean either the
Initial Proposal, the Alternative Proposal or the Second
Alternative Proposal) shall be contingent upon the right of such
party, for a period of thirty (30) days after receipt of the
written acceptance by either Olympus or Stratus of any Proposal,
to perform such due diligence and title and survey review as such
party deems necessary and which is consistent with ordinary and
customary real estate investment and/or underwriting criteria.
Each party shall use its best efforts and act in good faith to
perform all such due diligence.
II.2 Termination of First Right of Refusal. All of
Stratus' and Olympus' obiligations under this Article 2
including, without limitation, the obligation of Stratus to
provide Olympus any Offer shall terminate upon the earliest of
(i) the investment or commitment by Olympus of the full amount of
the Equity Funds for Development Opportunities, (ii) three (3)
years after the date hereof, (iii) Olympus' failure to
participate in or agree to participate in at least one (1)
Development Opportunity presented by Stratus to Olympus pursuant
to the terms of this Agreement within any consecutive 12-month
period or (iv) the mutual agreement of the parties.
II.3 Olympus' Origination. Olympus will endeavor to,
but shall not be obligated to, source and present new
opportunities to Stratus for acquisition and development
consistent with Stratus' existing business objectives. The
parties acknowledge and agree that each of Olympus and Stratus
and their respective affiliates shall be free to pursue and/or
invest in and/or operate other business opportunities that may or
may not compete with activities of the other party or its
affiliates, subject to the terms and conditions set forth in this
Agreement, including, specifically, without limitation, Stratus'
obligation to offer Olympus a first right of refusal as set forth
in this Article 2.
ARTICLE III
PARTNERSHIP STRUCTURE
III.1 Formation of Partnership. On or before
twenty (20) days after either Olympus or Stratus agrees in
writing to any Proposal delivered to the other pursuant to the
terms of Section 2.1, Olympus and Stratus agree to cause their
respective entities as contemplated by Section 3.2 to execute a
partnership (or, if appropriate to the situation and mutually
agreeable to the parties, other limited liability vehicle)
agreement which sets forth the terms and conditions of the
agreement between the Olympus and Stratus partners with regard to
the Development Opportunity described in such Proposal.
III.2 Entity Agreement. Attached as Exhibit A is
the form of the partnership agreement which shall be used by
Stratus and Olympus to negotiate an agreement regarding a
Proposal. The economic terms of equity participation, promoted
interests, if any, and distributions and other terms of the
partnership agreement and related documents shall reflect the
terms agreed to by both parties pursuant to the Proposal Process.
At the closing of the formation of any partnership, the
partnership shall reimburse each party's all expenses incurred in
connection with the Development Opportunity; provided, however,
that the legal expenses incurred in connection with each party's
negotiation of the partnership agreement shall be the
responsibility of such party and not be reimbursed by the
partnership. In addition, Stratus shall have the right of
reimbursement of Stratus' expenses incurred in pursuing other
Development Opportunities for the purposes hereof and which were
agreed to by Olympus, such agreement being evidenced upon
delivery by Olympus to Stratus of an executive summary of such
Development Opportunity prepared and executed by Olympus, as
provided in the Loan Agreement. The Olympus partner shall be a
special purpose entity that will be formed by Olympus or its
affiliates. The Stratus partner shall be a special purpose
entity that will be formed by Stratus or its affiliates; provided
that with respect to Development Opportunities relating to New
Properties in which Olympus provides proceeds under the Loan
Agreement between Olympus and Stratus Ventures, then the Stratus
partner shall be Stratus Ventures or a wholly-owned subsidiary of
Stratus Ventures. Unless otherwise agreed to in the Proposal
Process, each partner's interest (i.e., Olympus, Stratus and any
third party) shall be based on its respective aggregate cash
capital contribution or deemed capital contribution as a
percentage of the total cash capital contributions and deemed
capital contributions made by all the partners. Unless otherwise
agreed to in the Proposal Process, after payment of any non-
partner obligations, all net cash flow from a project shall be
distributed pro-rata to each partner in the ratio of its
respective ownership percentages.
III.3 Management Agreement. Unless otherwise
agreed, Stratus or its affiliate shall serve as property manager
to the partnership on market terms and conditions as mutually
agreed by Olympus and Stratus. Attached as Exhibit B is the form
of property management agreement to be used by Stratus and
Olympus to negotiate an agreement in connection with a Proposal.
The economic terms of the compensation to the property manager
shall be presented in the Proposal and be mutually agreeable to
the parties based upon the circumstances of the services to be
rendered.
ARTICLE IV
MANDATORILY REDEEMABLE PREFERRED STOCK
AND CONVERTIBLE LOAN
IV.1 Mandatorily Redeemable Preferred Stock .
Simultaneously with the execution of this Agreement, Oly Equities
and Stratus will execute and deliver the Securities Purchase
Agreement in the form of Exhibit C pursuant to which Oly Equities
will purchase from Stratus 1,712,328 shares of a mandatorily
redeemable preferred stock for the aggregate amount of Ten
Million and No/100 Dollars ($10,000,000.00).
IV.2 Loan Agreement. Simultaneously with the execution
of this Agreement, Oly Lender and Stratus Ventures will execute
the Loan Agreement in the form of Exhibit D pursuant to which Oly
Lender agrees to lend to Stratus Ventures up to Ten Million and
No/100 Dollars ($10,000,000.00) to be used in Development
Opportunities relating to New Properties. Stratus Ventures must
draw at least Seven Million Five Hundred Thousand and No/100
Dollars ($7,500,000.00) under the Loan Agreement prior to Stratus
contributing other forms of equity to the ventures, unless
otherwise approved by Oly Lender; provided that nothing herein
shall prohibit Stratus from funding any Development Opportunity.
IV.3 Investor Rights Agreement. Simultaneously with
execution of this Agreement, Oly Equities and Stratus will
execute and deliver the Investor Rights Agreement in the form of
Exhibit E.
IV.4 Conversion of Loan. Subject to the conversion
limitations set forth in Article XIV of the Loan Agreement,
Stratus will deliver to Oly Lender such number of shares of its
common stock into which the loan is converted pursuant to the
Loan Agreement at such time as Oly Lender converts the loan or
portion thereof as provided in the Loan Agreement.
ARTICLE V
MISCELLANEOUS
V.1 Entire Agreement. This Agreement, including all
exhibits and schedules attached hereto and all documents
referenced herein or therein, constitutes the entire agreement
among the parties with respect to the subject matter hereof and
supersedes any prior agreement or understanding among them with
respect to such subject matter.
V.2 Severability. If any provision of this Agreement,
or the application of such provision to any person or
circumstance, shall be held invalid under the applicable law of
any jurisdiction, the remainder of this Agreement or the
application of such provision to other persons or circumstances
or in other jurisdictions shall not be affected thereby. Also,
if any provision of this Agreement is invalid or unenforceable
under any applicable law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such law. Any provision
hereof that may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other
provision hereof.
V.3 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
to have been duly given if sent by overnight courier, hand
delivered, mailed (first class registered mail or certified mail,
postage prepaid) or sent by telecopy at the addresses or
facsimile numbers listed below or to such other address as any
party shall have last designated by notice to the other and all
other parties hereto in accordance with this Section 5.3 .
Notices sent by hand delivery shall be deemed to have been given
when received; notices mailed in accordance with the foregoing
shall be deemed to have been given three days following the date
so mailed; notices sent by telecopy shall be deemed to have been
given when electronically confirmed; and notices sent by
overnight courier shall be deemed to have been given on the next
business day
following the date so sent.
If to Olympus: Oly Fund II GP Investments, L.P.
200 Crescent Court, Suite 1650
Dallas, Texas 75201
Attention: Hal R. Hall
Telecopy: (214) 740-7355
with a required copy to: Robert C. Feldman, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy: (214) 746-7777
If to Oly Lender: Oly Lender Stratus, L.P.
200 Crescent Court, Suite 1650
Dallas, Texas 75201
Attention: Hal R. Hall
Telecopy: (214) 740-7355
with a required copy to: Robert C. Feldman, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy: (214) 746-7777
If to Oly Equities: Oly/Stratus Equities, L.P.
200 Crescent Court, Suite 1650
Dallas, Texas 75201
Attention: Hal R. Hall
Telecopy: (214) 740-7355
with a required copy to: Robert C. Feldman, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy: (214) 746-7777
If to Stratus: Stratus Properties Inc.
98 San Jacinto Blvd., Suite 2200
Austin, Texas 78701
Attention: William H. Armstrong, III
Telecopy: (512) 478-6340
with a required copy to: John G. Amato
1615 Poydras Street
New Orleans, Louisiana 70112
Telecopy: (504) 585-3513
If to Stratus Ventures: Stratus Ventures I Borrower L.L.C.
98 San Jacinto Blvd., Suite 2200
Austin, Texas 78701
Attention: William H. Armstrong, III
Telecopy: (512) 478-6340
with a required copy to: John G. Amato
1615 Poydras Street
New Orleans, Louisiana 70112
Telecopy: (504) 585-3513
V.4 Governing Laws. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the
State of Texas (without regard to principles of conflicts of
laws).
V.5 Successors and Assigns. Except as otherwise
specifically provided, this Agreement shall be binding upon and
inure to the benefit of Olympus, Oly Lender, Oly Equities,
Stratus and Stratus Ventures and their respective successors and
permitted assigns. Each of Olympus, Oly Lender and Oly Equities
shall have the right to assign its rights and obligations to an
affiliate controlled by or under common control with Olympus Real
Estate Fund II, L.P, which is at all times in a position to fund
the financial obligations hereunder.
V.6 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall constitute one and
the same instrument.
V.7 Headings. The section and article headings in
this Agreement are for convenience of reference only and shall
not be deemed to alter or affect the meaning or interpretation of
any provision hereof.
V.8 Other Terms. All references to "Articles" and
"Sections" contained in this Agreement are, unless specifically
indicated otherwise, references to articles, sections,
subsections and paragraphs of this Agreement. Whenever in this
Agreement the singular number is used, the same shall include the
plural where appropriate (and vice versa), and words of any
gender shall include each other gender where appropriate. As
used in this Agreement, the following words or phrases shall have
the meanings indicated: (i) "or" shall mean "and/or"; (ii) "day"
shall mean a calendar day; (iii) "including" or "include" shall
mean "including without limitation"; and (iv) "law" or "laws"
shall mean statutes, regulations, rules, judicial orders and
other legal pronouncements having the effect of law. Whenever
any provision of this Agreement requires or permits a party to
take or omit to take any action, or make or omit to make any
decision, unless the context clearly requires otherwise, such
provision shall be interpreted to authorize an action taken or
omitted, or a decision made or omitted, by the party acting alone
and in good faith.
V.9 No Recordation. Neither this Agreement nor any
document referring to this Agreement shall be recorded in any
county, public or official records other than as exhibits to
Stratus' reports filed with the Securities and Exchange
Commission or otherwise as required pursuant to any legal
obligations of any of the parties or their affiliates. If
requested by any party, upon expiration or other termination of
this Agreement or any obligations or rights hereunder, the
parties will promptly execute any document reasonably necessary
to evidence to third parties the termination of this Agreement or
any obligations or rights hereunder.
IN WITNESS WHEREOF, this Agreement has been executed as of
the day and year first above written.
OLYMPUS:
Oly Fund II GP Investments, L.P.,
a Texas limited partnership
By: Oly Real Estate Partners II, L.P.,
a Texas limited partnership,
its general partner
By: Oly REP II, L.P.,
a Texas limited partnership,
its general partner
By: Oly Fund II, LLC,
a Texas limited liability company,
its general partner
By: /s/Hal R. Hall
--------------
Hal R. Hall
Vice President
OLY LENDER:
OLY LENDER STRATUS, L.P.,
a Texas limited partnership
By: Oly Fund II GP Investments, L.P.,
a Texas limited partnership,
its general partner
By: Oly Real Estate Partners II, L.P.,
a Texas limited partnership,
its general partner
By: Oly REP II, L.P.,
a Texas limited partnership,
its general partner
By: Oly Fund II, LLC,
a Texas limited liability company,
its general partner
By: /s/ Hal R. Hall
---------------
Hal R. Hall
Vice President
OLY/STRATUS:
OLY/STRATUS EQUITIES, L.P.,
a Texas limited partnership
By: Oly Fund II GP Investments, L.P.,
a Texas limited partnership,
its general partner
By: Oly Real Estate Partners II, L.P.,
a Texas limited partnership,
its general partner
By: Oly REP II, L.P.,
a Texas limited partnership,
its general partner
By: Oly Fund II, LLC,
a Texas limited liability company,
its general partner
By: /s/Hal R. Hall
--------------
Hal R. Hall
Vice President
STRATUS:
STRATUS PROPERTIES INC.,
a Delaware corporation
By: /s/ William H. Armstrong III
----------------------------
William H. Armstrong, III
President
STRATUS VENTURES:
STRATUS VENTURES I BORROWER L.L.C.,
a Delaware limited liability company
By: Stratus Properties Inc.,
a Delaware corporation,
its sole member
By: /s/ William H. Armstrong III
----------------------------
William H. Armstrong, III
President
EXHIBIT A
FORM PARTNERSHIP AGREEMENT
[ATTACHED]
EXHIBIT B
FORM MANAGEMENT AGREEMENT
[ATTACHED]
EXHIBIT C
SECURITIES PURCHASE AGREEMENT
FILED AS SEPARATE EXHIBIT TO CURRENT REPORT ON
FORM 8-K
EXHIBIT D
LOAN AGREEMENT
FILED AS SEPARATE EXHIBIT TO CURRENT REPORT ON
FORM 8-K
EXHIBIT E
INVESTORS RIGHTS AGREEMENT
FILED AS SEPARATE EXHIBIT TO CURRENT REPORT ON
FORM 8-K
SCHEDULE 2.1(a)
INITIAL PROPOSAL OUTLINE
The following outline shall be representative of the information
that would normally be included in Initial Proposals that Stratus
presents to Olympus, to the extend reasonably available. Content
and format may vary from one Initial Proposal to another
depending on (i) the type of property being considered (i.e.,
office building vs. residential subdivision), (ii) the status of
the project (i.e., existing vs. proposed) and (iii) the
availability of information.
1. Executive Summary
A synopsis of the project, product, pricing, proposed
program, timing, capital requirements and resulting
financial projections.
2. Location Maps
Regional, area and local maps sufficient to locate the
project.
3. Property Photographs
Aerial, elevation, interior and area photographs to
illustrate the project and surrounding area.
4. Drawings
Site plans, building elevations and floor plans shall be
included when appropriate and/or available.
5. Proposed Transaction Terms
Proposed participants, expected capital contributions,
relative ownership, cash distribution priority, if any,
third party debt requirements, debt guarantees, partnership
governance and project management oversight and compensation
shall be outlined. Changes/variances to the partnership
agreement and management agreement templates shall be
highlighted.
6. Plan
A bullet point synopsis of the program envisioned to
develop, sell and/or operate the project, including a
summary of the project and its pricing, to the extent
practical and appropriate.
7. Financial Projections
Annual financial projections using discounted cash flow
analysis to evaluate the following three (3) scenarios:
best case, prudent case and pessimistic case. The financial
projections shall also include revenue, operating expense,
capital expenditures, annual debt service, cumulative
source/use statement and individual partner returns, to the
extent practical and appropriate.
8. Schedule
A high-level bar chart (Gantt chart) summarizing the tasks
to complete prior to closing along with the tasks and
milestones for the project that occur subsequent to closing.
9. Due Diligence Matters & Risk Assessment
A summary of completed and ongoing due diligence work,
including any material risks identified.
10. Appendix
Proposals may also include appropriate and pertinent
supporting information such as the following: purchase
agreement, market research product inventory listings,
entitlement information.
11. Recovery by Stratus of "Pursuit Costs" of Prior Development
Opportunities
Proposals will identify reimbursable actual direct expenses
incurred by Stratus in connection with its pursuit of prior
Development Opportunities to be offered to Olympus.
12. Revisions to the Representations and Warranties of Stratus
and Stratus Ventures Made in the Loan Agreement
Proposals may also include any revisions to be made to the
terms and conditions of the representations and warranties
made by Stratus and Stratus Ventures in Loan Agreement.
Exhibit A
_______________________ LIMITED PARTNERSHIP
(A Texas Limited Partnership)
LIMITED PARTNERSHIP AGREEMENT
____________________
Dated as of __________, 1998
____________________
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
1.1 Definitions....................................... 1
ARTICLE 2
Organization
2.1 Formation of Limited Partnership.................. 8
2.2 Name.............................................. 8
2.3 Character of Business............................. 8
2.4 Registered Office and Agent....................... 8
2.5 Fiscal Year....................................... 8
ARTICLE 3
Capital Contributions
3.1 Capital Contributions to the Partnership.......... 8
3.2 Additional Capital Contributions.................. 9
3.3 No Return of Capital Contributions................ 11
3.4 Interest.......................................... 11
ARTICLE 4
Rights and Obligations of Partners
4.1 Management of Partnership......................... 11
4.2 Management Committee.............................. 12
4.3 Major Decisions................................... 14
4.4 Budgets and Reports............................... 15
4.5 Powers of the Operating Partner................... 15
4.6 Liability of Partners............................. 15
4.7 Other Activities of Partners...................... 16
ARTICLE 5
Exculpation and Indemnity
5.1 Exculpation....................................... 16
5.2 Indemnity......................................... 16
ARTICLE 6
Distributions and Allocations
6.1 Distributions..................................... 17
6.2 Tax Allocations................................... 17
ARTICLE 7
Admissions, Transfers and Withdrawals
7.1 Admission of New Partners......................... 17
7.2 Transfer of Partnership Interests................. 17
7.3 Buy/Sell.......................................... 18
7.4 No Substituted Partners........................... 21
7.5 Withdrawal of Partners............................ 21
ARTICLE 8
General Accounting Provisions and Books
8.1 Books of Account; Tax Returns..................... 21
8.2 Place Kept; Inspection............................ 22
8.3 Tax Matters Partner............................... 22
ARTICLE 9
Amendments and Waivers
9.1 Amendments and Waivers............................ 22
9.2 Certain Other Amendments.......................... 22
ARTICLE 10
Dissolution and Termination
10.1 Dissolution....................................... 23
10.2 Accounting on Dissolution......................... 24
10.3 Termination....................................... 24
10.4 No Negative Capital Account Obligation............ 24
10.5 No Other Cause of Dissolution..................... 24
10.6 Merger............................................ 25
ARTICLE 11
Miscellaneous
11.1 Waiver of Partition............................... 25
11.2 Entire Agreement.................................. 25
11.3 Severability...................................... 25
11.4 Notices........................................... 25
11.5 Governing Laws.................................... 25
11.6 Successors and Assigns............................ 26
11.7 Counterparts...................................... 26
11.8 Headings.......................................... 26
11.9 Other Terms....................................... 26
11.10 Power of Attorney................................. 26
11.11 Transfer and Other Restrictions................... 27
______________________ LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
This Limited Partnership Agreement (this "Agreement") of
_____________________,a__________________(the "Part Partner")
and _____________________, as the financial partner (the "Financial
Partner") and __________________,a ______________________________
are referred to herein as the "Limited Partners"). The
General Partners and the Limited Partners are herein collectively
referred to as the "Partners" and individually referred to
as a "Partner". The Operating Partner is additionally referred
to as "FM." The Financial Partner is additionally referred to
as "Olympus."
RECITALS
A. The parties hereto desire to form a limited partnership
under the Act (as defined below).
B. The Partnership is being formed for the purpose of
acquiring, owning, developing and reselling that certain property
located in __________________________________________and known as
________________________ (the "Property").
C. The initial Partners hereto desire to enter into this
Agreement to establish their respective rights and obligations
with respect to the Partnership and to provide for the orderly
management of the affairs of the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Partners hereby agree as follows:
ARTICLE 1
Definitions
1.1 Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Act" shall have the meaning set forth in Section 2.1.
"Affiliate" shall mean, when used with reference to a
specified Person, any other Person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the
specified Person. As used in this definition of Affiliate,
the term "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through
ownership of voting securities, by contract, or otherwise.
"Business" shall mean all tangible and intangible
property of the Partnership as of the date of the Buy/Sell
offer and any proceeds therefrom subject to all obligations
or liabilities associated therewith.
"Business Day" shall mean any day other than a
Saturday, Sunday, or holiday on which national banking
associations in the State of Texas are authorized or
required to be closed.
"Business Plan" shall mean the business plan attached
hereto as Exhibit A and incorporated herein, and as may be
amended from time to time in accordance with the provisions
hereof or as may attached hereto within sixty (60) days of
the execution of this Agreement upon approval of the
Management Committee.
"Buy-Sell" shall have the meaning set forth in Section
7.3.
"Buy/Sell Closing Date" shall have the meaning set
forth in Section 7.3.
"Buy/Sell Election Period" shall have the meaning set
forth in Section 7.3.
"Buy/Sell Offer" shall have the meaning set forth in
Section 7.3.
"Buy/Sell Purchaser" shall have the meaning set forth
in Section 7.3.
"Buy/Sell Seller" shall have the meaning set forth in
Section 7.3.
"Capital Account" shall mean a separate account
maintained for each Partner in accordance with the
provisions of Regulation section 1.704-1(b)(2)(iv). Each
Partner shall have only one Capital Account, regardless of
the number of classes of units or other interests in the
Partnership owned by such Partner. Initially, the Capital
Account of each Partner shall have a positive balance equal
to its initial Capital Contribution. Such Capital Account
shall thereafter be adjusted in accordance with the
following provisions:
(a) Additions. The Capital Account shall be
increased by the sum of (i) except as otherwise
provided in paragraph (f) below in the case of a
contribution of a promissory note, the amount of cash
and the fair market value (determined as of the date of
contribution, without regard to section 7701(g) of the
Code, including a constructive contribution resulting
from a termination and reconstitution of the
Partnership under section 708(b)(1)(B) of the Code) of
property contributed, or deemed to have been
contributed, to the capital of the Partnership by the
Partner, net of any liabilities assumed by the
Partnership in connection with such contribution or to
which the contributed property is subject under section
752 of the Code; plus (ii) the amount of any net income
or other item of income or gain allocated to the
Partner pursuant to Article 6 hereof.
(b) Subtractions. The Capital Account shall be
reduced by the sum of (i) the amount of any net loss or
other item of expense, loss or deduction allocated to
the Partner pursuant to Article 6 hereof; plus (ii) the
Distribution Value (determined without regard to
section 7701(g) of the Code) of any cash or other
property distributed, or deemed to have been
distributed, by the Partnership to the Partner, net of
any liabilities assumed by the distributee in
connection with the distribution or to which the cash
or other distributed property is subject under section
752 of the Code.
(c) Other Adjustments. The Capital Account shall
otherwise be adjusted by the Financial Partner in
accordance with the other capital account maintenance
rules of Regulation section 1.704-1(b)(2)(iv). In
connection with the foregoing:
(d) Determination of Fair Market Value. In
determining the balance of each Partner's Capital
Account, and for all other purposes of this Agreement,
the fair market value of an asset contributed to or
distributed by the Partnership shall be determined in
good faith by the General Partners (which shall use
their reasonable efforts not to overstate or understate
the fair market value of any such asset).
Notwithstanding the preceding sentence, it is
understood that no Partner shall have any obligation to
contribute any real property asset to the Partnership
unless all General Partners have agreed to the fair
market value of the asset. [NOTE: The valuation of
significant property assets will be reflected in the
offer, as such term is defined in the Master Agreement
(the "Master Agreement"), between [Oly/FM Funding] and
FM Properties Inc., dated May 22, 1998, and agreed to
prior to the creation of the Partnership.]
(e) Capital Account of Transferee. A transferee of
all or part of an interest in the capital and profits
of the Partnership shall succeed to the Capital Account
of the transferor to the extent that such Capital
Account relates to the transferred interest.
(f) Contribution of Note. Notwithstanding any other
provision of this definition of Capital Account, if a
Partner has contributed his promissory note to the
capital of the Partnership and such note is not readily
traded on an established securities market, then the
principal of such note shall not be credited to the
Partner's Capital Account until and to the extent that
either (i) the Partnership makes a taxable disposition
of the note or (ii) principal payments are made on the
note, all in accordance with Regulation section
1.704-1(b)(2)(iv)(d)(2).
"Capital Contribution" shall mean the gross amount of
cash or the fair market value of other property contributed
or caused to be contributed to the capital of the
Partnership by a Partner with respect to such Partner's
capital account.
"Cash Flow" of the Partnership for any period shall
mean any and all cash revenues generated from the ownership,
sale of lots, sale of undeveloped parcels, lease and other
operation of the Partnership assets and any and all capital
transaction proceeds minus the sum of (i) any operating and
capital expenses incurred in the operation of the business
of the Partnership, including without limitation any
payments of interest and principal (other than payments of
principal that are refinanced by the Partnership) on
Partnership indebtedness required by the lender of such
indebtedness during the quarterly period in question, and
(ii) a reasonable reserve for necessary or desirable
operating and capital expenses of the Partnership that are
anticipated to be incurred or to become due and payable
within six (6) months as the Management Committee, in the
exercise of its reasonable discretion and as is consistent
with the Operating Budget and the Business Plan, shall
determine.
"Code" shall mean the Internal Revenue Code of 1986 and
any successor statute, as amended from time to time.
"Contribution Percentage" of a General Partner shall be
based on the actual equity capital contributions of such
Partner in relation to the total equity capital
contributions of all General Partners.
"Deadlock" shall mean the failure of the General
Partners to agree with respect to any Major Decision or
other issue with respect to the Partnership which could have
a material adverse effect or impact to the Partnership if
such issue remains unresolved between the Partners.
"Deemed Recipient" shall have the meaning set forth in
Section 3.2.
"Default Amount" shall have the meaning set forth in
Section 3.2.
"Default Date" shall have the meaning set forth in
Section 3.2.
"Defaulting Partner" shall have the meaning set forth
in Section 3.2.
"Distribution Period" shall mean (i) the period
beginning on the Effective Date and ending on ___________,
____ and (ii) each calendar quarter thereafter.
"Distribution Value" shall mean the dollar amount of
any cash distribution and the fair market value, as jointly
determined in good faith by the Partners (each of which
shall use its reasonable efforts not to overstate or
understate fair market value), of any non-cash property
distribution at the time of the distribution, net of the
distributee's share of any liabilities to which the
distributed property is subject and net of any liabilities
assumed by the distributee.
"Effective Date" shall have the meaning set forth in
the preamble to this Agreement.
"Escrow Agent" shall have the meaning set forth in
Section 7.3.
"Financial Partner" shall mean [Olympus], together with
its successors and assigns.
"FM" shall have the meaning set forth in the preamble
of this Agreement.
"FM Representative" shall have the meaning set forth in
Section 4.2.
"Indemnified Parties" shall have the meaning set forth
in Section 7.3.
"Loan" shall have the meaning set forth in Section 3.1.
"Lender" shall have the meaning set forth in Section
3.1.
"Major Decision" means any decision with respect to (1)
approval of the Business Plan, including the decision to
make additional Capital Contributions except as provided in
Section 3.2(a); (2) approval of the Operating Budget; (3)
approval of the plans and specifications for the Property,
and the subsequent approval of all material change orders or
amendments given in substitution for such approved plans and
specifications; (4) approval of any financing or
refinancing, whether secured or unsecured, unless previously
approved in the Business Plan or annual Operating Budget;
(5) approval of acquisition of any additional property, (6)
approval of admission or withdrawal of any Partners to the
Partnership, (7) approval of any sale, exchange or other
disposition of the Property unless pursuant to governance
deadlock provision in Section 7.3 below or in the Business
Plan or annual Operating Budget; (8) approval of any
amendments to the Agreement; (9) approval of any termination
or dissolution of the Partnership; and (10) appointment of a
successor property manager pursuant to Section 4.1.
"Management Agreement" shall have the meaning set forth
in Section 4.1.
"Management Committee" shall have the meaning set forth
in Section 4.2.
"Mandatory Additional Contribution" shall have the
meaning set forth in Section 3.2.
"Non-Defaulting Partners" shall have the meaning set
forth in Section 3.2.
"Offer Amount" shall have the meaning set forth in
Section 7.3.
"Offer Deposit" shall mean the sum of Five Hundred
Thousand and No/100 Dollars ($500,000.00) in cash.
"Offeree" shall have the meaning set forth in Section
7.3.
"Offeror" shall have the meaning set forth in Section
7.3.
"Olympus" shall have the meaning set forth in the
preamble of this Agreement.
"Olympus Representative " shall have the meaning set
forth in Section 4.2.
"Operating Budget " shall mean the budget attached
hereto as Exhibit B and incorporated herein, as may be
amended from time to time in accordance with the provisions
hereof, or to be attached hereto within sixty (60) days of
the execution of this Agreement upon approval by the
Management Committee in accordance with this Agreement.
"Operating Partner" shall mean [FM], together with its
successors or assigns.
"Partner" shall mean any Person executing this
Agreement as of the Effective Date as a partner or hereafter
admitted to the Partnership as a partner as provided in this
Agreement, but does not include any Person who has ceased to
be a Partner of the Partnership.
"Partnership" shall have the meaning set forth in the
preamble to this Agreement.
"Partnership Interest" shall have the meaning set forth
in Section 7.3.
"Person" shall mean an individual, partnership, joint
venture, limited partnership, limited liability company,
foreign limited liability company, trust, business trust,
estate, corporation, custodian, trustee, executor,
administrator, nominee, association, cooperative or entity
in a representative capacity.
"Property" shall have the meaning set forth in the
preamble of this Agreement.
[To be used where applicable: "Preferred Return" shall
mean the following:
(a) With respect to the first Distribution Period,
the Preferred Return of a Partner shall be the product
of (i) the Unreturned Capital of such Partner from time
to time during such Distribution Period, times (ii)
[_________ percent (____%)], times (iii) a fraction,
the numerator of which is the number of days in such
Distribution Period and the denominator of which is
three hundred and sixty-five (365).
(b) With respect to each Distribution Period
following the first Distribution Period, the Preferred
Return of a Partner shall be the sum of (i) the excess
(if any) of such Partner's Preferred Return determined
as of the last day of the Distribution Period
immediately preceding the Distribution Period under
consideration over any distribution made to such
Partner pursuant to Section 6.1 hereof with respect to
such immediately preceding Distribution Period, plus
(ii) the product of (A) the sum of (1) the excess (if
any) of such Partner's Preferred Return determined as
of the last day of the Distribution Period immediately
preceding the Distribution Period under consideration
over any distribution made to such Partner pursuant to
Section 6.1 hereof with respect to such immediately
preceding Distribution Period, plus (2) the Unreturned
Capital (if any) of such Partner from time to time
during the Distribution Period under consideration,
times (B) [_______ percent (____%)], times (C) a
fraction, the numerator of which is the number of days
in the Distribution Period under consideration and the
denominator of which is three hundred and sixty-five
(365).]
"Receipt Amount" shall have the meaning set forth in
Section 7.3.
"Regulation" shall mean Treasury Regulations
promulgated under Title 26 of the United States Code.
"Replacement Loan" shall have the meaning set forth in
Section 3.2.
"Representative" shall have the meaning set forth in
Section 4.2.
"Required Capital Contributions" shall have the meaning
set forth in Section 3.1.
"Required Interest" shall mean both of the General
Partners.
"Sharing Ratio" shall have the meaning set forth on
Schedule I attached hereto.
"Tax Matters Partner" shall have the meaning set forth
in Section 8.3.
"Unreturned Capital" as of a date shall mean the
following:
(a) In the case of each of the Partners, its
Unreturned Capital shall be the excess, if any, of the total
Capital Contributions made by such Partner over the total
distributions received by such Partner under [Section
6.1(ii)] hereof prior to the date as of which such Partner's
Unreturned Capital is determined.
(b) In the case of a transferee of an interest in
the Partnership, the transferee's Unreturned Capital shall
be the Unreturned Capital as of the date of the transfer of
the transferor times a fraction, the numerator of which is
the Contribution Percentage attributable to the interest in
Partnership capital and profits transferred by the
transferor to the transferee, and the denominator of which
is the sum of the Contribution Percentages attributable to
both the interest in Partnership capital and profits
retained by the transferor (if any) and the interest in
Partnership capital and profits transferred by the
transferor to the transferee. Likewise, the Unreturned
Capital of the transferor shall be reduced by the Unreturned
Capital of the transferee to whom all or part of the
transferor's interest in Partnership capital and profits has
been transferred.
ARTICLE 2
Organization
2.1 Formation of Limited Partnership. The Partners
have formed a limited partnership pursuant to and in accordance
with the provisions of the Texas Revised Limited Partnership Act,
as from time to time amended ("Act"). The Financial Partner
shall file, on behalf of the Partnership a certificate of limited
partnership with the office of the Secretary of State of Texas.
2.2 Name. The name of the Partnership is Oly FM
[Property Name] L.P. The Management Committee may change the
name of the Partnership from time to time and shall give prompt
written notice thereof to the Operating Partner and each Limited
Partner; provided, however, that such name may not contain any
portion of the name or mark of the Partners without such
Partner's consent. In such event, the Financial Partner shall
promptly file in the office of the Secretary of State of Texas an
amendment to the Partnership's certificate of limited partnership
reflecting such change of name.
2.3 Character of Business. The purpose of the
Partnership shall be (i) to acquire, hold, develop, sell,
encumber, or otherwise act with respect to investments, direct or
indirect, in the Property, and (ii) to engage in such other
business as may be conducted by a limited partnership organized
under the laws of the State of Texas.
2.4 Registered Office and Agent. The name and
address of the Partnership's initial registered agent are Olympus
Real Estate Corporation, 200 Crescent Court, Suite 1650, Dallas,
Texas 75201. The Partnership's initial principal place of
business shall be 200 Crescent Court, Suite 1650, Dallas,
Texas 75201. The Financial Partner may change such registered
agent, registered office, or principal place of business from
time to time. The Financial Partner shall give prompt written
notice of any such change to the Operating Partner and each
Limited Partner. The Partnership may from time to time have such
other place or places of business within or without the State of
Texas as may be determined by the Financial Partner.
2.5 Fiscal Year. The fiscal year of the Partnership
shall end on December 31 of each calendar year unless, for United
States federal income tax purposes, another fiscal year is
required. The Partnership shall have the same fiscal year for
United States federal income tax purposes and for accounting
purposes.
ARTICLE 3
Capital Contributions
3.1 Capital Contributions to the Partnership. The
Partners shall contribute or be deemed to have contributed
capital to the Partnership in the amounts respectively set forth
opposite their names on Schedule I to this Agreement on the
Effective Date (collectively, the "Required Capital
Contributions"). Also, in addition to the Required Capital
Contributions, the Partners acknowledge that in order to purchase
and develop the Property, the Partnership will need to secure
from a third party lender (the "Lender") a term loan, which shall
be in the amount set forth in the Business Plan and on terms and
conditions satisfactory to the Management Committee and approved
in accordance with this Agreement (the "Loan").
3.2 Additional Capital Contributions.
(a) After the funding of the Required Capital
Contribution set forth above (including any amounts deemed
to have been contributed), and to the extent not available
from proceeds of the Loan, either (i) the General Partners
may agree to make additional Capital Contributions to the
Partnership as are deemed advisable by the General Partners
(each exercising their independent discretion) and by
amendment to the Business Plan, or (ii) if either (A) there
has been a default or an event of default under the Loan or
(B) additional capital is necessary to complete any capital
improvement program approved in the Business Plan, or
(C) funds are necessary for continued operation of the
Property consistent with the Business, then the Financial
Partner may elect to call or not call for additional Capital
Contributions (in each case, the "Mandatory Additional
Contribution") to be made to the Partnership to cure any
default or event of default under the Loan or to complete
such capital improvement program or fund operations. The
Mandatory Additional Contribution in question shall be made
by the General Partners pro rata, based on the Contribution
Percentages of the General Partners. This Section 3.2 is
solely for the benefit of the Partners, and shall not, nor
shall it be deemed to, create any rights in, or provide any
benefit to, any other person or entity, and the decision to
make additional contributions to the Partnership shall be
made in the sole and absolute discretion of the Financial
Partner, except as my be provided in the Business Plan.
(b) Each General Partner shall be required to make
its Mandatory Additional Contribution to the Partnership on
or before twenty-one (21) days after written notice to such
Partner ("Default Date"). In the event any General Partner
fails to make a Mandatory Additional Contribution as
required by this Section 3.2 within the time period set
forth herein (such Partner, being herein referred to as the
"Defaulting Partner"), then, the "Non-Defaulting Partners"
(herein so called) shall be entitled, as their sole and
exclusive remedy for such failure, by giving written notice
to the Defaulting Partner to make a loan (the "Replacement
Loan") to the Defaulting Partner in the amount of such
Mandatory Additional Contribution, which Replacement Loan
(i) shall be applied solely to fund the delinquent Mandatory
Additional Contribution, (ii) shall have a term of one
hundred twenty (120) days from the date of such loan and
(iii) shall bear interest at the lesser of (A) eighteen
percent (18%) per annum and (B) the maximum rate of interest
which may be charged, collected or contracted for under
applicable law, with accrued interest due at the maturity of
such loan (each such Replacement Loan together with all
accrued interest thereon from time to time, the "Default
Amount"). Anything contained in this Agreement to the
contrary notwithstanding, any Partner who becomes a
Defaulting Partner shall immediately and without any further
demand, notice or cure period (time being of the essence
herein) automatically cease to have a right to vote on all
Partnership decisions from and after the Default Date for
any purposes hereunder for the remainder of the life of the
Partnership (unless reinstated as described below);
provided, however, if a Defaulting Partner shall pay the
Default Amount in full to the Non-Defaulting Partners who
elected to make such loan, on or before the expiration of
the 120-day term of the Replacement Loan to such Defaulting
Partner, such Defaulting Partner's voting rights hereunder
shall be automatically re-instated (effective as of the date
such Default Amount is paid in full) for all purposes
including voting rights. If the Default Amount is not paid
in full on or before the expiration of the 120-day period,
the Defaulting Partner's voting rights shall not be
reinstated upon the subsequent payment of the Default
Amount.
(c) The Partners further agree that if the Default
Amount is not repaid to the Non-Defaulting Partners within
the 120-day term, then, without demand, notice or cure
period (time being of the essence herein), such Default
Amount shall for all purposes hereunder be deemed to be a
Capital Contribution by the Non-Defaulting Partners to the
Partnership effective as of the expiration of such 120-day
term of such Replacement Loan, which deemed Capital
Contribution shall be credited as an amount equal to the
product of 200% times the Default Amount, and the Capital
Account of the Defaulting Partner shall for all purposes be
appropriately reduced to reflect such treatment; provided,
however, with respect to any Default Amount attributable to
a Replacement Loan made more than one hundred twenty (120)
days after the initial Replacement Loan (which is not repaid
during its 120-day term) is made by one or more Non-
Defaulting Partner, the deemed Capital Contribution shall be
credited as an amount equal to the product of 300% times the
Default Amount, and in each case the distribution
percentages of the Defaulting Partner (i.e., the pro rata
share of the particular distribution which such Partner
would otherwise receive under such sections) shall be
reduced by, and the distribution percentages of each Non-
Defaulting Partner who makes its pro rata share of such loan
shall be increased by an amount equal to the quotient of (i)
200% (or 300%, as the case may be) times the Default Amount,
divided by (ii) the aggregate Capital Contributions made by
the Partners to the Partnership prior to the date of
calculation (including the Mandatory Additional
Contributions of all Non-Defaulting Partners but excluding
the Default Amount then in question).
(d) The new distribution percentages computed in
accordance with this Section 3.2 shall remain in effect
under this Agreement unless and until there is a subsequent
adjustment to the distribution percentages. Notwithstanding
the foregoing, no Partner's distribution percentage shall be
reduced under any circumstance to less than zero, nor shall
any Partner's distribution percentage be increased under any
circumstance to more than 100%. Mandatory Additional
Contributions shall be made pro rata, based on the relative
Contribution Percentages of the General Partners.
(e) Each Partner which becomes a Defaulting Partner
hereby irrevocably grants to the other Partners a
continuing, first priority, perfected security interest in
the Partnership Interest of such Defaulting Partner to
secure the prompt payment of each Replacement Loan made to
such Defaulting Partner until such time, if ever, as the
Default Amount with respect to the Replacement Loan under
consideration has been converted to a deemed Capital
Contribution pursuant to Section 3.2(c). On or before
fifteen (15) days after any written request of any Non-
Defaulting Partner, the Defaulting Partner shall execute and
deliver a UCC-1 financing statement in form and substance
acceptable to such Non-Defaulting Partner to evidence such
security interest, the failure of which shall constitute a
default under the Replacement Loan. Prior to a default or
maturity of a Replacement Loan, and without limiting the
remedies of the Non-Defaulting Partners, at the election of
the Non-Defaulting Partners, all distributions payable to
any Defaulting Partner under this Agreement shall be payable
directly to the Non-Defaulting Partners (pro rata based on
the relative amount of the Replacement Loan made by such
Non-Defaulting Partner) until the Replacement Loan(s) of
such Defaulting Partner are paid in full (or converted to a
deemed Capital Contribution), shall be paid directly to the
Non-Defaulting Partners until the entire amount of the
Replacement Loan is paid in full. Any amounts paid directly
to a Non-Defaulting Partner pursuant to the terms of the
preceding sentence shall be treated as paid to the person
(the "Deemed Recipient") entitled to receive the amount of
the distribution in the absence of the requirements of the
preceding sentence (thereby discharging the Partnership's
obligation to make the payment in question to the Deemed
Recipient) and then as applied by the Deemed Recipient on
behalf of the Defaulting Partner to the repayment of the
Defaulting Partner's loan.
(f) EXCEPT AS SET FORTH IN SECTION 3.1 OR THIS
SECTION 3.2, NO ADDITIONAL CAPITAL CONTRIBUTIONS SHALL BE
REQUIRED BY ANY PARTNER UNLESS AN EXPRESS WRITTEN CALL FOR A
CAPITAL CONTRIBUTION IS MADE BY THE FINANCIAL PARTNER TO
EACH OF THE GENERAL PARTNERS.
3.3 No Return of Capital Contributions. No Partner
is entitled to a return of its Capital Contribution, but shall
look solely to distributions from the Partnership as provided for
in Article 6 of this Agreement.
3.4 Interest. No Partner shall be entitled to
interest on its Capital Contribution or its Capital Account,
provided that each Partner's Capital Contribution shall accrue
the Preferred Return (which shall not be deemed to be interest)
as set forth herein. Any interest actually received by reason of
temporary investment of any part of the Partnership's funds shall
be included in the Partnership's funds.
ARTICLE 4
Rights and Obligations of Partners
4.1 Management of Partnership. The management,
control and direction of the Partnership and its operations,
business and affairs shall be vested exclusively in the
Management Committee, which shall have the right, power and
authority, acting solely by itself and without the necessity of
approval by any Limited Partner or any other person, to carry out
any and all of the purposes of the Partnership and to perform or
refrain from performing any and all acts that the Management
Committee may deem necessary, desirable, appropriate or
incidental thereto, except as otherwise provided in this
Agreement; provided, however, that the Operating Partner shall
manage the Partnership and its operations, business and affairs
solely as described in Section 4.5. The Management Committee may
assume the management duties and responsibilities of the
Operating Partner as set forth in Section 4.5 at any time in the
event the Management Committee determines in its good faith
discretion that either (i) the Operating Partner has acted
negligently or with willful misconduct in performing its duties
or (ii) the monthly financial reports of the Partnership reveal a
material adverse deviation from the Business Plan more than three
(3) times within any twelve (12) month period. The Management
Committee agrees that prior to its exercise of its right to
assume the management duties and responsibilities of the
Operating Partner as result of either default by the Operating
Partner, the Management Committee shall first deliver written
notice of said default to the Operating Partner and give the
Operating Partner ten (10) days thereafter in which to cure said
default, the Operating Partner so elects. No Limited Partner
shall participate in the management, control or direction of the
Partnership's operations, business or affairs, transact any
business for the Partnership, or have the power to act for or on
behalf of or to bind the Partnership. Notwithstanding anything
to the contrary provided herein, the Property shall be managed in
accordance with the terms and conditions of that certain
Management Agreement (the "Management Agreement") dated of even
date herewith by and between_____________ and___________________.
4.2 Management Committee.
[The structure and duties of the Management Committee
are subject to the proposal process of Section 2.1 of the
Master Agreement. Two (2) alternatives, depending on the
Capital Contributions of Olympus and FM, are provided
below.]
[Alternative 1
(a) The "Management Committee" (herein so called)
shall consist of three (3) representatives, one (1) of which
shall be designated by [Partner 1] (the "[Partner 1]
Representative") and two (2) of which shall be designated by
[Partner 2] (jointly, the "[Partner 2] Representative")
(individually, a "Representative and collectively, the
"Representatives"). The initial Representatives designated
by [Partner 1] and [Partner 2] are set forth opposite such
Partner's name below:
Partner Initial Representative
[Partner 1]
[Partner 2]
[Partner 2]
Olympus and FM may appoint alternates for the
Representatives appointed by it, which alternates shall have
all the powers of the Representatives in their absence or
inability to serve. Olympus and FM may change its
designated Representatives effective upon written notice
from Olympus or FM designating such Representative to the
other Partners. One of the [Partner 2] Representatives
shall serve as Chairman of the Management Committee and
shall set the agenda for such meetings.
(b) The Representatives shall meet quarterly (or
more often as the Management Committee may reasonably
determine) in the offices of the Partnership or by telephone
conference, unless the Representatives jointly agree that
the meeting is unnecessary or that a different schedule or
location for the meeting is appropriate, to discuss current
material management issues (but not day-to-day operations
matters which are in accordance with the operation
parameters set forth in the Business Plan, Operating Budget
or otherwise set forth in writing) or Major Decisions. At
each meeting the Representatives shall each receive one (1)
vote. All action taken by the Management Committee shall
require the approval or consent of at least two (2)
Representatives except Major Decisions which require
unanimous consent as described in Section 4.3 below.
Representatives may bring to any meeting such employees,
agents, professionals and advisors as they deem necessary or
appropriate to assist them at such meeting. A quorum shall
consist of at least one [Partner 1] Representative and one
[Partner 2] Representative unless the [Partner 1]
Representative has declined to attend two (2) consecutive
meetings, which are scheduled with at least seventy-two (72)
hours prior notice for each meeting at the offices of the
Partnership, in which event the quorum may be two (2)
[Partner 2] Representatives.
(c) The Financial Partner, on behalf of the
Management Committee, shall be authorized and empowered to
(i) make all day-to-day management decisions (provided that
such decisions are consistent with the operation parameters
set forth in the Business Plan, Operating Budget or
otherwise in writing) except for Major Decisions, (ii)
direct the Operating Partner, (iii) perform all acts and
enter into and perform all contracts and other undertakings
that the Financial Partner may, in the exercise of its
reasonable discretion, deem necessary, advisable,
appropriate or incidental thereto consistent with the
Business Plan and Operating Budget and (iv) terminate the
property manager in the event of a default in the Management
Standard (as that term is defined in the Management
Agreement), provided, if the property manager is terminated,
then the Partnership (as a Major Decision) shall designate a
successor property manager.]
[Alternative 2
(a) The "Management Committee" (herein so called)
shall consist of four (4) representatives, two (2) of which
shall be designated by [Partner 1] (jointly, the "[Partner
1] Representative") and two (2) of which shall be designated
by [Partner 2] (jointly, the "[Partner 2] Representative")
(individually, a "Representative and collectively, the
"Representatives"). The initial Representatives designated
by [Partner 1] and [Partner 2] are set forth opposite such
Partner's name below:
Partner Initial Representative
[Partner 1]
[Partner 1]
[Partner 2]
[Partner 2]
Olympus and FM may appoint alternates for the
Representatives appointed by it, which alternates shall have
all the powers of the Representatives in their absence or
inability to serve. Olympus and FM may change its
designated Representatives effective upon written notice
from Olympus or FM designating such Representative to the
other Partners. One of the [Partner 2] Representatives
shall serve as Chairman of the Management Committee and
shall set the agenda for such meetings.
(b) The Representatives shall meet quarterly (or
more often as the Management Committee may reasonably
determine) in the offices of the Partnership or by telephone
conference, unless the Representatives jointly agree that
the meeting is unnecessary or that a different schedule or
location for the meeting is appropriate, to discuss current
material management issues (but not day-to-day operations
matters which are in accordance with the operation
parameters set forth in the Business Plan, Operating Budget
or otherwise set forth in writing) or Major Decisions. At
each meeting the Representatives shall each receive one (1)
vote. All action taken by the Management Committee shall
require the approval or consent of at least three (3)
Representatives except Major Decisions which require
unanimous consent as described in Section 4.3 below.
Representatives may bring to any meeting such employees,
agents, professionals and advisors as they deem necessary or
appropriate to assist them at such meeting. A quorum shall
consist of at least one [Partner 1] Representative and one
[Partner 2] Representative unless both [Partner 2]
Representatives have declined to attend two (2) consecutive
meetings, which are scheduled with at least seventy-two (72)
hours prior notice for each meeting at the offices of the
Partnership, in which event the quorum may be two (2)
[Partner 1] Representatives, and vice versa.
(c) The Financial Partner, on behalf of the
Management Committee, shall be authorized and empowered to
(i) make all day-to-day management decisions (provided that
such decisions are consistent with the operation parameters
set forth in the Business Plan, Operating Budget or
otherwise in writing) except for Major Decisions, (ii)
direct the Operating Partner, (iii) perform all acts and
enter into and perform all contracts and other undertakings
that the Financial Partner may, in the exercise of its
reasonable discretion, deem necessary, advisable,
appropriate or incidental thereto and (iv) terminate the
property manager in the event of a default in the Management
Standard (as that term is defined in the Management
Agreement), provided, if the property manager is terminated,
then the Partnership (as a Major Decision) shall designate a
successor property manager.]
4.3 Major Decisions. All Major Decisions shall be made by
both the [Partner 1] Representative and the [Partner 2]
Representative. Accordingly, neither FM nor Olympus, on behalf
of the Management Committee, shall have the right or the power to
make any binding commitment on behalf of the Partnership in
respect of a Major Decision unless and until all of the
Representatives have authorized the same in writing.
4.4 Budgets and Reports.
(a) By January 31st of each calender year hereafter
during the term hereof, the Operating Partner shall prepare
a revised Operating Budget and the Business Plan for the
operation of the Partnership. The Management Committee
shall have thirty (30) days after receipt thereof to either
approve the submitted Business Plan and Operating Budget or
respond with required changes to same.
(b) The Operating Partner agrees to use diligence
and to employ all reasonable efforts to ensure that the
actual costs of operating the Partnership shall not exceed
the Operating Budget, either in total or for any one
accounting category. The Operating Partner shall secure the
written approval of the Management Committee for any
expenditure that (i) exceeds fifteen percent (15%) of the
annual budgeted amount for the Partnership in any one
accounting category on such Operating Budget or (ii) exceeds
ten percent (10%) of the annual budgeted amount for the
Partnership in all accounting categories of the Operating
Budget. During each applicable calendar year, the Operating
Partner agrees to promptly inform the Management Committee
of any major increases in costs and expenses or any major
decreases in revenue that were not foreseen during the
budget preparation period and thus were not reflected in the
Operating Budget.
(c) The Operating Partner shall also submit any
additional financial or operational reports as the Financial
Partner may from time to time reasonably request.
4.5 Powers of the Operating Partner. Subject to
Section 4.3, the Operating Partner shall have the duties, rights
and obligations to implement the operations of the Partnership as
described in the Business Plan, Operating Budget or approved in
writing by the Management Committee. Without limiting the
generality of Section 4.1, but subject to Section 4.3, the
Operating Partner, acting on behalf of the Partnership, shall
oversee the activities of property manager, or, if the Management
Agreement is terminated, until a successor property manager is
appointed, perform the duties, rights and obligations of the
property manager; provided, however, neither the Operating
Partner nor the property manager shall take any action that has a
material economic affect on the Partnership without the prior
approval of the Management Committee, including, without
limitation, approving the form and substance of all contracts,
loan documents or other documents necessary to operate the
business of the Partnership.
4.6 Liability of Partners. The General Partners
shall be personally liable for the debts and obligations of the
Partnership if (but solely to the extent) required by applicable
law; provided, however, that all such debts and obligations shall
be paid or discharged first with the property of the Partnership
(including insurance proceeds) before the General Partners shall
be obligated to pay or discharge any such debt or obligation with
its personal assets. Notwithstanding the preceding sentence, the
General Partners shall not be personally liable for any debts or
obligations which are nonrecourse or which, under the terms
thereof, do not create or impose such liability. No Limited
Partner shall be personally liable for any of the debts or
obligations of the Partnership.
4.7 Other Activities of Partners. Except as
otherwise agreed in writing, including, but not limited to, the
Commitment Agreement, each Partner (i) may carry on and conduct
in any way or in any capacity, including, but not limited to, for
such Partner's own right and for such Partner's own personal
account, as a partner in any other partnership, as a venturer in
any joint venture, as a member or manager in any limited
liability company, as an employee, officer, director or
stockbroker of any corporation, or as a participant in any
syndicate, pool, trust, association or other business
organization, a business that competes, directly or indirectly,
with the business of the Partnership, (ii) will be free in any
capacity to conduct business activities the same or similar as
conducted by the Partnership and (iii) may make investments in
any kind of property. The Partnership will have absolutely no
claim or right to any such business or assets thereof. Further,
the Partnership will have claim to and will own only those assets
contributed to the Partnership or acquired with Partnership funds
or credit. Neither this Agreement nor any principle of law or
equity shall preclude or limit, in any respect, the right of any
Partner or any affiliate thereof to engage in or derive profit or
compensation from any activities or investments, nor give any
other Partner any right to participate or share in such
activities or investments or any profit or compensation derived
therefrom.
ARTICLE 5
Exculpation and Indemnity
5.1 Exculpation. Neither the General Partners
nor any affiliate of the General Partners, nor any officer,
director, manager, member, employee, agent, stockholder, or
partner of the General Partners or any of its affiliates, shall
be liable, responsible, or accountable in damages or otherwise to
the Partnership or any Partner by reason of, or arising from or
relating to the operations, business, or affairs of, or any
action taken or failure to act on behalf of, the Partnership,
except to the extent that any of the foregoing is determined, by
a final, nonappealable order of a court of competent
jurisdiction, to have been primarily caused by the gross
negligence, willful misconduct, or bad faith of the person
claiming exculpation.
5.2 Indemnity. The Partnership shall indemnify the
General Partners, each affiliate of the General Partners, and
each officer, director, stockholder, manager, member, and partner
of the General Partners or any of its affiliates, and if so
determined by the General Partners, each employee or agent of the
General Partners or any of its affiliates, against any claim,
loss, damage, liability, or expense (including reasonable
attorneys' fees, court costs, and costs of investigation and
appeal) suffered or incurred by any such indemnitee by reason of,
or arising from or relating to the operations, business, or
affairs of, or any action taken or failure to act on behalf of,
the Partnership, except to the extent any of the foregoing (i) is
determined by final, nonappealable order of a court of competent
jurisdiction to have been primarily caused by the gross
negligence, willful misconduct, or bad faith of the person
claiming indemnification or (ii) is suffered or incurred as a
result of any claim (other than a claim for indemnification under
this Agreement) asserted by the indemnitee as plaintiff against
the Partnership. Unless a determination has been made (by final,
nonappealable order of a court of competent jurisdiction) that
indemnification is not required, the Partnership shall, upon the
request of any indemnitee, advance or promptly reimburse such
indemnitee's reasonable costs of investigation, litigation, or
appeal, including reasonable attorneys' fees; provided, however,
that the affected indemnitee shall, as a condition of such
indemnitee's right to receive such advances and reimbursements,
undertake in writing to repay promptly the Partnership for all
such advancements or reimbursements if a court of competent
jurisdiction determines that such indemnitee is not then entitled
to indemnification under this Section 5.2. No Partner shall be
required to contribute capital in respect of any indemnification
claim under this Section 5.2 unless otherwise provided in any
other written agreement to which such Partner is a party.
ARTICLE 6
Distributions and Allocations
6.1 Distributions. No later than thirty (30) days
after the end of each Distribution Period during which the
Partnership has Cash Flow, such Cash Flow shall be distributed as
set forth below and in the order of priority as set forth below.
[Economic terms to be agreed per proposal process of Section 2.1
of the Commitment Agreement.]
6.2 Tax Allocations. For United States federal
income tax purposes, allocations of items of income, gain, loss,
deduction, expense, and credit for each fiscal year of the
Partnership shall be in accordance with each Partner's economic
interest in the respective item, as determined by the Management
Committee pursuant to Section 704(b) of the Code, and the
regulations promulgated thereunder and subject to the
requirements of Section 704(c) of the Code and the regulations
promulgated thereunder. Unless the Management Committee
determines otherwise, allocations shall be made to each Partner
in the same manner as such Partner (i) would be required to
contribute to the Partnership or (ii) would receive as
distributions if the Partnership were to liquidate the assets of
the Partnership at their book value and distribute the proceeds
in accordance with Section 6. ; provided, however, that if any
such allocation is not permitted by applicable law, the
Partnership's subsequent income, gain, loss, deduction, expense
and credit shall be allocated among the Partners so as to reflect
as nearly as possible the allocation used in computing capital
accounts.
ARTICLE 7
Admissions, Transfers and Withdrawals
7.1 Admission of New Partners. After the Effective
Date, new Partners may be admitted to the Partnership only with
the written consent of, and upon such terms and conditions as are
approved by the unanimous approval of the Management Committee.
No admission of any new Partner shall cause the General Partner's
interest in Partnership allocations, distributions and capital to
be less than one percent (1%), and no Partner's Sharing Ratio in
the Partnership shall be reduced or diluted unless approved in
writing by such Partner or unless otherwise provided in any other
written agreement to which such Partner is a party.
7.2 Transfer of Partnership Interests.
(a) No Transfers Without Consent. No Partner may
transfer or encumber all or any portion of such Partner's
interest in the Partnership without the prior written
consent of the Management Committee; provided, however, that
Olympus may transfer all or any portion of its interest in
the Partnership to an Affiliate of Olympus Real Estate
Corporation without the consent of FM. Additionally, any
interest in the Partnership held by Olympus or its
Affiliates may be transferred in the exercise of rights of
the limited partners of Olympus Real Estate Fund II, L.P.
("Fund II") to remove the general partner under the limited
partnership agreement of Fund II.
(b) Death, Bankruptcy, etc. of Limited Partner. In
the event of the death, incompetence, insolvency,
bankruptcy, termination, liquidation or dissolution of any
Limited Partner:
(i) the Partnership shall not be terminated
or dissolved, and the remaining Partners shall continue
the Partnership and its operations, business and
affairs until the dissolution thereof as provided in
Section 10.1 of this Agreement;
(ii) such affected Limited Partner shall
thereupon cease to be a Partner for all purposes of
this Agreement and no officer, partner, beneficiary,
creditor, trustee, receiver, fiduciary or other legal
representative and no estate or other successor in
interest of such Limited Partner (whether by operation
of law of otherwise) shall become or be deemed to
become a Limited Partner for any purpose under this
Agreement;
(iii) the Partnership interest of such
affected Limited Partner shall not be subject to
withdrawal or redemption in whole or in part prior to
the dissolution, liquidation and termination of the
Partnership;
(iv) the estate or other successor in
interest of such affected Limited Partner shall be
deemed a transferee of, and shall be subject to all of
the obligations with respect to, the Partnership
interest of such affected Limited Partner as of the
date of death, incompetence, insolvency, bankruptcy,
termination, liquidation or dissolution, except to the
extent the Management Committee releases such estate or
successor from such obligations; and
(v) any legal representative or successor in
interest having lawful ownership of the assigned
Partnership interest of such affected Limited Partner
shall have the right to receive notices, reports and
distributions, if any, to the same extent as would have
been available to such affected Limited Partner.
7.3 Buy/Sell Option.
(a) In the event of a Deadlock at any time during
the term of the Partnership, either General Partner may
exercise a "buy-sell" right (the "Buy-Sell") as follows:
either General Partner (the "Offeror") exercising such Buy-
Sell (A) shall deliver to the other General Partner (the
"Offeree") a written notice (the "Buy/Sell Offer") stating
the Offeror's exercise of such right and setting forth the
Buy/Sell Offer and a description of any negotiations or
discussions with third parties that Offeror may have had
with respect to the sale of the Partnership Interest and the
Business, which Buy/Sell Offer shall represent the dollar
amount (without reduction for any deemed or imputed expenses
of sale) that the Offeror would be willing to pay to the
Partnership in cash for the Business (the "Offer Amount")
and (B) simultaneously with the delivery of the Buy/Sell
Offer, shall deliver into escrow with a title insurance
company located in Dallas, Texas selected by the Offeror
(the "Escrow Agent"), a good faith deposit in the amount of
the Offer Deposit. The Offeror hereby instructs the Escrow
Agent that the Escrow Agent shall either (i) in the event
the Offeree elects to sell its interest in the Partnership
(the "Partnership Interest") in accordance with the terms
hereof, apply such Offer Deposit to the purchase price as of
the Buy/Sell Closing Date (as hereinafter defined) or if the
Offeror fails to timely purchase the Offeree's Partnership
Interest in accordance with the terms hereof, disburse such
Offer Deposit in accordance with Section 7.3(g), or (ii) in
the event the Offeree elects to purchase the Offeror's
Partnership Interest, disburse such Offer Deposit in
accordance with Section 7.3(e).
(b) The notice transmitting the Buy/Sell Offer shall
be deemed to constitute an offer by the Offeror to purchase
the Offeree's Partnership Interest for a price equal to the
Receipt Amount. "Receipt Amount" shall mean the aggregate
amount which the Partner whose Partnership Interest is to be
transferred, whether Offeror or Offeree, would receive as a
Partnership distribution if (i) the Business were sold for
cash for the Offer Amount, (ii) all debts and liabilities of
the Partnership but without taking into account any deemed
or imputed expenses which would occur for the sale to third
parties (e.g. imputed brokerage fees, etc.) were paid in
full from such proceeds and (iii) prorations were made with
respect to all current assets and current liabilities of the
Partnership.
(c) The Offeree shall have forty-five (45) days from
the date of the Buy/Sell Offer to elect, by written notice
to the Offeror signed by the Partner constituting the
Offeree, whether to sell such Offeree's Partnership Interest
to the Offeror or whether to purchase (or cause its designee
to purchase) the Offeror's Partnership Interest in the
Partnership (the "Buy/Sell Election Period").
(d) If the Offeree fails to make an election within
such forty-five (45) day period, or fails to comply with
subsection (e) below, such Offeree shall be conclusively
deemed to have elected to sell its Partnership Interest in
the Partnership to the Offeror according to the terms of
this Section 7.3.
(e) If the Offeree makes an election to purchase
within such forty-five (45) day period by sending written
notice to the Offeror as required by subsection (c), and by
delivering into escrow with the Escrow Agent a good faith
deposit in the amount of the Offer Deposit, then, the
original Offeror shall be conclusively deemed to have
elected to sell its Partnership Interest in the Partnership
to the Offeree for a price equal to the applicable Receipt
Amount. In the event the Offeree timely makes an election
to purchase, the Offeree hereby instructs the Escrow Agent
that the Escrow Agent shall (i) return the Offeror's Offer
Deposit to the Offeror and (ii) hold the Offeree's Offer
Deposit and shall either apply such Offeree's Offer Deposit
to the purchase price or disburse such Offeree's Offer
Deposit in accordance with Section 7.3(g).
(f) The General Partner (the "Buy/Sell Purchaser")
that is obligated to purchase the Partnership Interest in
the Partnership of the other General Partner (the "Buy/Sell
Seller") pursuant to this Section 7.3 shall fix a closing
date (the "Buy/Sell Closing Date") for such purchase that is
not a Business Day that is not later than forty-five (45)
days after the expiration of the Buy/Sell Election Period,
by written notice to the Buy/Sell Seller at least fifteen
(15) days in advance of Buy/Sell Closing Date. The closing
of such purchase shall take place on the Buy/Sell Closing
Date at the address of the Escrow Agent. At such closing,
the Partner constituting the Buy/Sell Seller shall execute
and deliver to the Buy/Sell Purchaser (or its designee) such
instruments of assignment, bills of sale, amendments to this
Agreement and other instruments and documents as the
Buy/Sell Purchaser and the Buy/Sell Seller (or such
designee) may reasonably require for the conveyance to such
Buy/Sell Purchaser (or such designee) of all of the Buy/Sell
Seller's right, title and interest in and to the Buy/Sell
Seller's Partnership Interest in the Partnership against
receipt by the Buy/Sell Seller of a wire transfer of
immediately available funds in an amount equal to the
applicable Receipt Amount; and the Buy/Sell Seller hereby
irrevocably constitutes and appoints the Buy/Sell Purchaser
as its attorney-in-fact to execute, acknowledge and deliver
any of such instruments or documents. Each of the Buy/Sell
Seller and Buy/Sell Purchaser shall each bear their
respective closing costs and expenses (including, but not
limited to, all attorney's fees and costs and all applicable
transfer and income taxes) incurred in the purchase or sale
of the Buy/Sell Seller's Partnership Interest in the
Partnership hereunder. Such sale of such Partnership
Interest shall be made without representation, warranty or
recourse, except for representations and warranties in form
and substance reasonably acceptable to the Buy/Sell
Purchaser and the Buy/Sell Seller with respect to existence,
good standing, title, no encumbrance, authority,
authorization, no conflicts, and such other customary
matters as may be reasonably requested by the Buy/Sell
Purchaser. If the Buy/Sell Offer or the closing of the
purchase contemplated thereby causes the maturity of any
Partnership indebtedness to be accelerated, the Buy/Sell
Seller shall be released from liability resulting from such
accelerated indebtedness and the Buy/Sell Purchaser shall
pay such indebtedness in full (including without limitation,
any accrued but unpaid interest and any prepayment premiums
or penalties) at Buy/Sell Purchaser's sole cost and expense
and shall indemnify and hold Buy/Sell Seller harmless from
and against any losses, damages, costs or expenses
(including attorneys' fees) incurred by Buy/Sell Seller, or
the Buy/Sell Seller's Affiliates, employees, agents,
representatives, consultants, attorneys, fiduciaries,
servants, officers, directors, partners, predecessors,
successors and assigns and Affiliates of the foregoing (the
"Indemnified Parties"), as a direct or indirect result
thereof, other than any losses, damages, costs or expenses
(including attorneys' fees) incurred by any of the
Indemnified Parties as a direct result of such Indemnified
Party's bad conduct. As a precondition to the closing of
the Buy/Sell transaction, the Buy/Sell Seller shall be
released from liability from any indebtedness of the
Partnership, including, without limitation, the release of
any guaranty and collateral pledged to secure any guaranty
debt. Anything contained in this Agreement to the contrary
notwithstanding, in the event the sale of the Partnership
Interest is not consummated because of a default on the part
of Buy/Sell Seller or if a condition precedent cannot be
fulfilled because Buy/Sell Seller frustrated such
fulfillment, Buy/Sell Purchaser may, at its election, pursue
an action for specific performance and/or costs and
expenses.
(g) In the event that the Buy/Sell Purchaser
defaults in its obligation to purchase the Partnership
Interest of the Buy/Sell Seller in the Partnership on the
Buy/Sell Closing Date, the Buy/Sell Seller shall have the
right to (i) solicit third party offers on behalf of the
Partnership for the purchase of the Business, to accept the
best such offer, as determined by the Buy/Sell Seller in its
sole and absolute discretion, and to consummate the sale of
the Business to such third party pursuant to such offer,
(ii) purchase the Partnership Interest of the Buy/Sell
Purchaser for a purchase price equal to ninety percent (90%)
of the aggregate Partnership distributions that the Buy/Sell
Purchaser would be entitled to receive under this Agreement
if the Business were sold for cash for the Offer Amount and
all debts and liabilities of the Partnership (excluding
imputed sale expenses) were paid in full from such proceeds
and proration were made with respect to all current assets
and current liabilities of the Partnership, (iii)
specifically enforce the Buy/Sell Purchaser's obligation to
purchase the Partnership interest of the Buy/Sell Seller,
and (iv) notify the Escrow Agent holding the Offer Deposit
of the Buy/Sell Purchaser immediately to deliver such Offer
Deposit to the Buy/Sell Seller as liquidated damages for the
breach by such Buy/Sell Purchaser (and the Buy/Sell
Purchaser covenants and agrees to cause, and hereby
instructs, the Escrow Agent to deliver such Offer Deposit to
the Buy/Sell Seller). The delivery of the Offer Deposit to
the Buy/Sell Seller shall not constitute a return of
capital. The Buy/Sell Purchaser hereby constitutes and
appoints the Buy/Sell Seller as its attorney-in-fact to
execute and deliver on behalf of the Buy/Sell Purchaser all
documents as may be reasonably required in connection with
the delivery by the Escrow Agent of the Offer Deposit to the
Buy/Sell Seller.
7.4 No Substituted Partners. Except as permitted by
Section 7.1, no transferee of any general or limited partnership
interest in the Partnership may become a substituted General or
Limited Partner. Rather, any transferee of any Partnership
interest of a Partner shall be entitled solely to rights as
assignee of the rights to receive all or part of the share of the
income, gains, losses, deductions, expenses, credits,
distributions, or returns of capital to which his or its
transferor would otherwise be entitled with respect to the
Partnership interest so transferred.
7.5 Withdrawal of Partners. Except as permitted by
Section 7.2 hereof, no Partner shall have any right to withdraw
or resign from the Partnership without the unanimous consent of
the Management Committee.
ARTICLE 8
General Accounting Provisions and Books
8.1 Books of Account; Tax Returns. The Financial
Partner shall prepare and file, or shall cause to be prepared and
filed, all United States federal, state, and local income and
other tax returns required to be filed by the Partnership and
shall keep or cause to be kept complete and appropriate records
and books of account in which shall be entered all such
transactions and other matters relative to the Partnership's
operations, business and affairs as are usually entered into
records and books of account that are maintained by persons
engaged in business of like character or are required by the Act.
Except as otherwise expressly provided herein, such books and
records shall be maintained in accordance with the basis utilized
in preparing the Partnership's United States federal income tax
returns, which returns, if allowed by applicable law, may upon
the approval of the Management Committee be prepared on an
accrual basis.
8.2 Place Kept; Inspection. The books and records
shall be maintained at the principal place of business of the
Partnership, and all such books and records shall be available
for inspection and copying at the reasonable request, and at the
expense, of any Partner during the ordinary business hours of the
Partnership.
8.3 Tax Matters Partner. The Financial Partner
shall be the tax matters partner of the Partnership and, in such
capacity, shall exercise all rights conferred, and perform all
duties imposed, upon a tax matters partner under Sections 6221
through 6233 of the Code and the regulations promulgated
thereunder; provided, however, that the Operating Partner shall
have the right to review and approve any actions taken by the
Financial Partner in its capacity as the tax matters partner.
Notwithstanding the foregoing, the Financial Partner shall have
the right to select the methodology to be used pursuant to
Section 704(c) of the Code subject to the Operating Partner's
consent, which consent shall not be unreasonably withheld.
ARTICLE 9
Amendments and Waivers
9.1 Amendments and Waivers. Except as expressly
provided in Section 9.3 of this Agreement, the Management
Committee may, whether with or without the consent or vote of any
Limited Partner, amend or waive any provision of this Agreement
which merely (i) reflects the admission or withdrawal of one or
more Limited Partners in accordance with this Agreement,
(ii) corrects an error or clarifies an ambiguity in this
Agreement, (ii) does not adversely affect the Financial Partner
or the Operating Partner in any material respect or (iii) changes
Schedule I to this Agreement to reflect the Sharing Ratios or
Partnership Interests of the Partners as from time to time
amended in accordance with this Agreement. The Management
Committee shall amend Schedule I to this Agreement to reflect any
additional Capital Contributions. The Partners agree to look to
the books and records of the Partnership for determination of the
actual amount of Capital Contributions made to the Partnership,
as provided in Section 3.1 of this Agreement.
9.2 Certain Other Amendments. Notwithstanding any
provision to the contrary contained herein, no amendment to or
waiver of any provision of this Agreement shall be effective
against a given Partner without the consent or vote of such
Partner if such amendment or waiver would (i) cause the
Partnership to fail to be treated as a limited partnership under
the Act or cause a Limited Partner to become liable as a general
partner of the Partnership, (ii) change Section 3.1 of this
Agreement to increase a Partner's obligation to contribute to the
capital of the Partnership, (iii) change Section 5.1 or 5.2 of
this Agreement to affect adversely any Partner's rights to
exculpation or indemnification, (iv) change Section 6.1 or 6.2 of
this Agreement to affect adversely the participation of such
Partner in the income, gains, losses, deductions, expenses,
credits, capital or distributions of the Partnership (including
any amendments to admit one or more new Limited Partners or
General Partners), (v) change Section 7.1 of this Agreement to
affect adversely the anti-dilution rights of such Partner,
(vi) change the percentage of Partners necessary for any consent
or vote required hereunder to the taking of any action or (vii)
amend Section 9.2 of this Agreement.
ARTICLE 10
Dissolution and Termination
10.1 Dissolution. The Partnership shall be dissolved
upon the first to occur of the following events:
(i) the election of the both General
Partners to dissolve the Partnership with the consent
of the Limited Partners then representing eighty
percent (80%) in interest of all Limited Partners at
any time;
(ii) the election of the Financial Partner to
dissolve the Partnership if all or substantially all
Partnership assets shall have been sold or disposed of
or shall consist of cash;
(iii) both the General Partners shall
have withdrawn from the Partnership within the meaning
of the Act, or any other dissolution event specified in
the Act shall have occurred;
(iv) the Financial Partner shall have
(A) made a general assignment for the benefit of
creditors, (B) filed a voluntary petition in
bankruptcy, (C) filed a petition or answer seeking for
itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar
relief under any bankruptcy or debtor relief law,
(D) filed an answer or other pleading admitting or
failing to contest the material allegations of a
petition filed against it in any bankruptcy or
insolvency proceeding brought against it or (E) sought,
consented to, or acquiesced in the appointment of a
trustee, receiver or liquidator of the Financial
Partner or of all or any substantial part of its
property;
(v) if within sixty (60) days after the
commencement of any proceeding against the Financial
Partner seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or
similar relief under any bankruptcy or debtor relief
law, the proceeding shall not have been dismissed; or
(vi) if within sixty (60) days after the
appointment (without the Financial Partner's consent or
acquiescence) of a trustee, receiver or liquidator of
the Financial Partner or of all or any substantial part
of its property, the appointment shall not have been
vacated or stayed if within sixty (60) days after the
expiration of any such stay, the appointment shall not
have been vacated.
Notwithstanding the foregoing, the Partnership shall not be
dissolved upon the occurrence of an event specified in (iii)
through (vi) of this Section 10.1 if within ninety (90) days
after such occurrence a majority in interest (under applicable
federal income tax principles) of the remaining Partners agree in
writing to continue the business of the Partnership and to the
appointment, effective as of the date of withdrawal, of a
successor Financial Partner.
10.2 Accounting on Dissolution. Following the
dissolution of the Partnership pursuant to Section 10.1 of this
Agreement, the books of the Partnership shall be closed, and a
proper accounting of the Partnership's assets, liabilities and
operations shall be made by the Financial Partner, all as of the
most recent practicable date. The Financial Partner shall serve
as the liquidator of the Partnership unless it has been removed
or unless it otherwise fails or refuses to serve. If the
Financial Partner does not serve as the liquidator, one or more
other persons or entities may be selected to serve by the
Operating Partner. The expenses incurred by the liquidator in
connection with the dissolution, liquidation and termination of
the Partnership shall be borne by the Partnership.
10.3 Termination. As expeditiously as practicable,
but in no event later than one year (except as may be necessary
to realize upon any material amount of property that may be
illiquid), after the dissolution of the Partnership pursuant to
Section 10.1 of this Agreement, the liquidator shall cause the
Partnership to pay the current liabilities of the Partnership and
(i) establish a reserve fund (which may be in the form of cash or
other property, as the liquidator shall determine) for any and
all other liabilities, including contingent liabilities, of the
Partnership in a reasonable amount determined by the liquidator
to be appropriate for such purposes or (ii) otherwise make
adequate provision for such other liabilities. To the extent
that cash required for the foregoing purposes is not otherwise
available, the liquidator may sell property, if any, of the
Partnership for cash. Thereafter, all remaining cash or other
property, if any, of the Partnership shall be distributed to the
Partners in accordance with the provisions of Section 6.1 of this
Agreement. The Partners must agree on the value and distributee
for all in-kind distributions or else all property must be sold
and the proceeds distributed in accordance herewith. At the time
final distributions are made in accordance with Section 6.1 of
this Agreement, a certificate of cancellation shall be filed in
accordance with the Act, and the legal existence of the
Partnership shall terminate, but if at any time thereafter any
reserved cash or property is released because in the judgment of
the liquidator the need for such reserve has ended, then such
cash or property shall be distributed in accordance with Section
6.1 of this Agreement.
10.4 No Negative Capital Account Obligation.
Notwithstanding any other provision of this Agreement to the
contrary, in no event shall any Partner who has a negative
capital account upon final distribution of all cash and other
property of the Partnership be required to restore such negative
account to zero.
10.5 No Other Cause of Dissolution . The Partnership
shall not be dissolved, or its legal existence terminated, for
any reason whatsoever except as expressly provided in this
Article 10.
10.6 Merger. Subject to the rights of the Partners
pursuant to Section 9.2, the Partnership may, with the written
consent of the Financial Partner acting with the unanimous
approval of the Management Committee, adopt a plan of merger and
engage in any merger permitted by applicable law.
ARTICLE 11
Miscellaneous
11.1 Waiver of Partition. Each Partner hereby
irrevocably waives any and all rights that he or it may have to
maintain an action for partition of any of the Partnership's
property.
11.2 Entire Agreement. This Agreement constitutes
the entire agreement among the Partners with respect to the
subject matter hereof and supersedes any prior agreement or
understanding among them with respect to such subject matter.
11.3 Severability. If any provision of this
Agreement, or the application of such provision to any person or
circumstance, shall be held invalid under the applicable law of
any jurisdiction, the remainder of this Agreement or the
application of such provision to other persons or circumstances
or in other jurisdictions shall not be affected thereby. Also,
if any provision of this Agreement is invalid or unenforceable
under any applicable law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such law. Any provision
hereof that may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other
provision hereof.
11.4 Notices. All notices, requests, demands, and
other communications hereunder shall be in writing and shall be
deemed to have been duly given if sent by overnight courier, hand
delivered, mailed (first class registered mail or certified mail,
postage prepaid), or sent by telex or telecopy if to the
Partners, at the addresses or telex or facsimile numbers set
forth on Schedule I hereto, and if to the Partnership, at the
address of its principal place of business at 200 Crescent Court,
Suite 1650, Dallas, Texas 75201 (fax 214/740-7340), or to such
other address as the Partnership or any Partner shall have last
designated by notice to the Partnership and all other parties
hereto in accordance with this Section 11.4. Notices sent by
hand delivery shall be deemed to have been given when received;
notices mailed in accordance with the foregoing shall be deemed
to have been given three days following the date so mailed;
notices sent by telex or telecopy shall be deemed to have been
given when electronically confirmed; and notices sent by
overnight courier shall be deemed to have been given on the next
business day following the date so sent.
11.5 Governing Laws. This Agreement shall be
governed by and construed and enforced in accordance with the
laws of the State of Texas (without regard to principles of
conflicts of laws).
11.6 Successors and Assigns. Except as otherwise
specifically provided, this Agreement shall be binding upon and
inure to the benefit of the Partners and their respective
successors and permitted assigns.
11.7 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall constitute one and
the same instrument.
11.8 Headings. The section and article headings in
this Agreement are for convenience of reference only and shall
not be deemed to alter or affect the meaning or interpretation of
any provision hereof.
11.9 Other Terms. All references to "Articles" and
"Sections" contained in this Agreement are, unless specifically
indicated otherwise, references to articles, sections,
subsections, and paragraphs of this Agreement. Whenever in this
Agreement the singular number is used, the same shall include the
plural where appropriate (and vice versa), and words of any
gender shall include each other gender where appropriate. As
used in this Agreement, the following words or phrases shall have
the meanings indicated: (i) "or" shall mean "and/or"; (ii) "day"
shall mean a calendar day; (iii) "including" or "include" shall
mean "including without limitation"; and (iv) "law" or "laws"
shall mean statutes, regulations, rules, judicial orders, and
other legal pronouncements having the effect of law. Whenever
any provision of this Agreement requires or permits a Partner to
take or omit to take any action, or make or omit to make any
decision, unless the context clearly requires otherwise, such
provision shall be interpreted to authorize an action taken or
omitted, or a decision made or omitted, by the Partner acting
alone and in good faith.
11.10 Power of Attorney. By execution of this
Agreement, the Operating Partner and each Limited Partner hereby
makes, constitutes and appoints the Financial Partner, with full
power of substitution and re-substitution in the Financial
Partner (in its sole discretion), such Partner's true and lawful
attorney-in-fact (the "Attorney") for and in the Operating
Partner's or the Limited Partner's name, place and stead and for
its use and benefit, to prepare, execute, certify, acknowledge,
swear to, file, deliver or record any or all of the following,
authorized pursuant to the terms of this Agreement:
(i) the Partnership's certificate of limited
partnership or any other agreement, certificate,
report, consent, instrument, filing or writing made by
or relating to the Partnership that the Attorney deems
necessary, desirable, or appropriate for the lawful
purpose of (A) organizing the Partnership under the
Act, (B) admitting Partners with respect to the
Partnership, (C) pursuing or effecting any rights or
remedies available under this Agreement or otherwise
with respect to a defaulting Partner, (D) qualifying
the Partnership to do business in any jurisdiction and
(E) complying with any law, agreement or obligation
applicable to the Partnership;
(ii) any agreement, certificate, report,
consent, instrument, filing or writing made by or
relating to the Partnership necessary, desirable or
appropriate to effectuate the business purposes of, or
the dissolution, termination or liquidation of, the
Partnership pursuant to applicable law or the
respective terms of this Agreement; and
(iii) any amendment to or modification or
restatement of this Agreement, the Partnership's
certificate of limited partnership, or any other
agreement, certificate, report, consent, instrument,
filing or writing of any type described in subsection
(i) or (ii) of this Section 11.10, provided that any
amendment of or modification to this Agreement shall
first have been adopted in accordance with Article 9 of
this Agreement.
11.11 Transfer and Other Restrictions. INTERESTS IN
THE PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD UNLESS SUCH
INTERESTS HAVE BEEN REGISTERED UNDER SUCH ACT OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. INTERESTS IN THE
PARTNERSHIP ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER,
VOTING AND OTHER TERMS AND CONDITIONS SET FORTH IN (1) ARTICLE 7
AND (2) VARIOUS INVESTMENT AGREEMENTS BETWEEN OR AMONG CERTAIN
PARTNERS. COPIES OF SUCH AGREEMENTS MAY BE OBTAINED FROM THE
PARTNERSHIP OR THE FINANCIAL PARTNER AT THEIR PRINCIPAL EXECUTIVE
OFFICES.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned have executed this
instrument effective as of the Effective Date.
FINANCIAL PARTNER:
a___________________
By:_______________
Name:_____________
Title:____________
OPERATING PARTNER:
a__________________
By:________________
Name:______________
Title:_____________
LIMITED PARTNERS:
a__________________
By:________________
Name:______________
Title:_____________
a__________________
By:________________
Name:______________
Title:_____________
EXHIBIT A
Business Plan
EXHIBIT B
Operating Budget
SCHEDULE I
Partnership Capital Contributions and Sharing Ratios
[TO BE DETERMINED PER SECTION 2.1 OF COMMITMENT AGREEMENT]
Initial Capital Sharing
Partner and Address Contributions Ratios
Financial Partner:
Operating partner:
Limited Partners:
Total All Partners
Exhibit B
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is
executed as of the day of _______________ 1998, to be
effective conditioned upon and as of the date of the acquisition
of the Property by Owner, by and between
______________________________ a ___________________ (hereinafter
called "Owner"), and _____________________________ a
___________________ (hereinafter called "Property Manager").
W I T N E S S E T H:
WHEREAS, Owner is acquiring that certain real property
located in _________ _______________________ more particularly
described on Exhibit A attached hereto and made a part hereof for
all purposes, together with all of the improvements located
thereon (collectively, the "Property").
WHEREAS, Owner desires to engage Property Manager to
develop, lease, manage, maintain and operate the Property and
Property Manager desires to accept such engagement, upon the
terms and conditions hereinafter set forth.
WHEREAS, Owner has provided to Property Manager, Owner's
current Business Plan (hereinafter defined) and the operating and
capital budgets approved by Owner as of the date hereof.
NOW, THEREFORE, for and in consideration of the premises and
mutual covenants and agreements contained in this Agreement and
the compensation to be paid hereunder, Owner and Property Manager
hereby agree as follows:
ARTICLE I
ENGAGEMENT OF PROPERTY MANAGER
Owner hereby engages Property Manager and Property Manager
hereby accepts such engagement on the terms and conditions
hereinafter provided as manager for the Property. Property
Manager shall develop, lease, manage, maintain and operate the
Property in an efficient and first class manner consistent with
the Business Plan and Budget (hereinafter defined) and shall
exercise due diligence in all of its endeavors. All of Property
Manager's duties under this Agreement shall be subject to funds
being made available to Property Manager by Owner for the
Property Manager to perform its duties.
ARTICLE II
SERVICES TO BE PERFORMED BY PROPERTY MANAGER
II.1 Expenses. All reasonable obligations or reasonable
expenses approved by Owner in writing and incurred by Property
Manager in the performance of its duties hereunder in accordance
with the provisions hereof shall be at the expense of Owner
except as otherwise specifically provided in this Agreement.
Without Owner's prior written consent or as authorized in the
Business Plan or Budget, Property Manager shall not incur any
cost not specifically set forth in the most recently approved
Budget.
II.2 Contracts. To the extent necessary to fulfill its
obligations under this Agreement, Property Manager shall (i)
identify and, with the prior written approval of Owner or as set
forth in the Business Plan or Budget, enter into, in Owner's
name, contracts with engineers, tradesmen and other independent
contractors to perform services necessary or advisable for the
development, operation, maintenance or repair of the Property;
and (ii) with the prior written approval of Owner or as set forth
in the Business Plan or Budget, place orders, in Property
Manager's name on behalf of Owner, for such equipment, tools,
appliances, materials and supplies as are reasonable and
necessary to properly develop, maintain, manage, operate or
repair the Property. Except with the prior written consent of
Owner, every contract entered into by Property Manager for or in
connection with the Property shall include as a condition thereof
the right by Owner to terminate, with or without cause, on thirty
(30) days prior written notice, without the payment of a
cancellation fee. Owner shall be obligated to pay the cost of
any contract or agreement described in this section only if such
cost is provided for in the Preliminary Budget or the most
recently approved Budget or is otherwise approved by Owner in
writing.
II.3 Maintenance, Repair and Sale of Property. Property
Manager shall supervise the development and sale of the Property
and shall maintain the improvements, appurtenances and grounds of
the Property in accordance with the "Management Standard" (as
defined in Section 4.1 hereof), including within such
maintenance, without limitation thereof, such normal maintenance
and repair work as may be necessary or, with Owner's prior
written consent, desirable.
II.4 Insurance.
(a) Owner Obligations. Owner shall cause to be placed
and kept in force all forms of insurance as Owner deems
prudent and reasonable given the nature of the Property.
All insurance coverage shall be placed with such companies,
in such amounts, and with such beneficial interests
appearing therein as Owner deems prudent and reasonable
given the nature of the Property. Owner shall procure
appropriate clauses in, or endorsements on, all of the
policies whereby the insurer names Property Manager as an
additional insured, and the insurer waives subrogation and
agrees to not terminate any such policy or reduce coverage
or amount without giving Owner at least thirty (30) days
prior written notice.
(b) Property Manager Obligations. Property Manager
shall promptly investigate and make a full and timely
written report to Owner and, if Owner requests, to Owner's
insurance company as to all accidents, claims for damages
relating to the ownership, operation and maintenance of the
Property and any damage or destruction to the Property and
the estimated cost of repair thereof and shall prepare any
and all reports required by Owner and, if Owner requests, by
its insurance company in connection therewith. All such
reports shall be timely filed with the insurance company as
required under the terms of the insurance policy involved.
Without obtaining the prior written approval of Owner, which
may be granted or withheld in Owner's sole discretion,
Property Manager shall not settle any claims against
insurance companies arising out of any policies or take any
other action in connection with such settlements, including
the execution of proofs of loss, the adjustment of losses,
signing of receipts and collection of money. The cost of
the insurance and the payment of all premiums therefor shall
be the sole responsibility of, and at the sole expense of,
Owner. Property Manager shall assist Owner in completing
any insurance applications, questionnaires, etc. reasonably
requested by Owner or Owner's insurance agent or insurance
company.
II.5 Operating Budgets; Business Plans. Notwithstanding the
delivery of the approved Budget and Business Plan, unless some or
all of the obligations of this Section 2.5 are specifically
waived in writing by Owner, Property Manager shall prepare the
items described herein.
(a) Preliminary Budgets. Within thirty (30) days of
the date this Agreement is fully executed, Property Manager
shall prepare and deliver to Owner, for Owner's approval, a
proposed budget and operating plan for the upcoming one
hundred twenty (120) days, which budget and operating plan
shall reflect thereon projections of all receipts (if any)
and operating costs and expenses, capital expenditures and
reserves that Property Manager, in the exercise of good
business judgment, believes will be received or necessary to
be incurred, as the case may be, to develop and maintain the
Property during such one hundred twenty (120) days. Within
ninety (90) days of the date this Agreement is fully
executed, Property Manager shall further prepare and deliver
to Owner an additional proposed budget and operating plan
(such proposed budget and operating plan, together with the
foregoing budget and operating plan, the "Preliminary
Budget" and the "Preliminary Plan", respectively), for the
upcoming calendar year, which budget and operating plan
shall reflect thereon projections of all receipts (if any)
and operating costs and expenses, capital expenditures and
reserves that Property Manager, in the exercise of good
business judgment, believes will be received or necessary to
be incurred, as the case may be, to develop and maintain the
Property during such calendar year.
(b) Annual Budgets. Thereafter, on or prior to
October 31st of each calendar year during the Term (as
defined in Section 4.4) hereof, beginning on the first
October 31st, after the date hereof, Property Manager shall
submit to Owner, for Owner's approval, proposed budgets and
operating plans for the Property on an annual basis for the
upcoming calendar year, which proposed budgets and operating
plans shall reflect thereon projections of all receipts (if
any) and operating costs and expenses, capital expenditures
and reserves that Property Manager, in the exercise of good
business judgment, believes will be received or necessary to
be incurred, as the case may be, to develop and maintain the
Property during such calendar year. Such proposed budgets
and operating plans (including the Preliminary Budget and
the Preliminary Plan) shall be submitted by Property Manager
solely as good faith estimates, without warranty of their
accuracy or attainability; provided, however, that, except
as otherwise expressly provided in this Agreement, Property
Manager shall not be reimbursed by Owner for, and Property
Manager hereby expressly indemnifies Owner against, any
loss, expense or claim in connection with any unauthorized
expenditure or liability incurred by any action taken by
Property Manager. Property Manager shall use its best
efforts to manage the development of the Property in a
manner consistent with, and subject to, both the total cost
limitations and categories in the most recently approved
Budget.
(c) Contents. Without limiting the foregoing, each
Budget and Business Plan (including the Preliminary Budget
and the Preliminary Plan) shall include between them: (i) a
projected income statement for the Property, (ii) a
projected balance sheet for the Property, (iii) a schedule
of projected operations and cash flow, (iv) a reasonable
estimate and projected budget of gross receipts and
operating expenses, itemized in a manner acceptable to
Owner, (v) a projected budget for capital expenditures and
replacements, (vi) an identification of staffing to be
employed, (vii) a separate estimate of the Property
Management Fee (as defined in Section 31.), (viii) a
narrative description of the program for the development and
marketing of the Property, and (ix) any and all other
matters reasonably requested by Owner.
(d) Owner Approval. Owner shall, within thirty (30)
days after receipt of a proposed Budget and Business Plan
(including the Preliminary Budget and the Preliminary Plan),
approve or disapprove such Budget and Business Plan in its
sole discretion. As used herein, the terms "Business Plan"
and "Budget" shall refer to the currently approved Budget
and Business Plan approved by Owner as amended and/or
modified from time to time. Owner shall provide Manager
written notice of its approval or disapproval; provided,
that in the event Owner fails to do so, the Budget or
Business Plan, as the case may be, from the previous year
shall control until a new budget or business plan is
approved. Within fifteen (15) days after Owner submits any
objection to the proposed budget or business plan, Manager
will submit a revised budget or business plan to Owner, as
the case may be. If Owner does not approve such revised
budget or business plan within fifteen (15) days of its
submission to Owner, the budget or business plan as the case
may be, from the previous year shall control until a new
budget or business plan is approved.
II.6 Property Account and Owner Account.
(a) Owner Account. Property Manager shall establish
and maintain in a banking or other financial institution
approved by Owner or set forth in the Business Plan from
time to time throughout the term of this Agreement, a
separate bank or similar account in the name of Owner for
the deposit of moneys of Owner received, if any, with
respect to the Property (the "Owner Account"). Property
Manager shall also establish such other special bank or
similar accounts as may be approved by Owner. All revenue
from the Property shall be promptly deposited in the Owner
Account.
(b) Property Account. Operating expenses of the
Property shall be paid by the Property Manager from an
account established in a financial institution approved by
Owner to process funds as described in Section 2.7 (the
"Property Account")
II.7 Disbursements by Owner to Property Manager.
(a) Monthly Payments. On or before the twentieth
(20th) day of each calendar month, Property Manager shall
deliver to Owner a written request for disbursement, setting
forth, in reasonable detail, the costs and expenses
reasonably estimated to be paid by Property Manager for the
upcoming calendar month, together with any other working
capital needs of the Property for the upcoming calendar
month, in each case, in accordance with the Budget (the
"Required Monthly Funds"). Property Manager shall also
submit reasonable substantiation as requested by Owner for
all requested disbursements. In the event that any
requested disbursement is not consistent with, or in
compliance with, the Budget, Property Manager shall set
forth such requested disbursements in a separate report and
shall set forth a brief explanation for the reason for such
discrepancy. On or before the first day of the month for
which the particular request for the Required Monthly Funds
is made, Owner shall transfer, via wire transfer, from the
Owner Account to the Property Account designated by Property
Manager the Required Monthly Funds approved by Owner.
(b) Emergency Withdrawals. Property Manager shall
only be entitled to make withdrawals from the Property
Account in accordance with the Budget or the Business Plan
or in connection with a bona fide emergency due to casualty
or act of God under circumstances in which it would be
unreasonable to seek to obtain Owner's approval, in which
case Property Manager shall be entitled to exceed, by a
reasonable amount, the amounts set forth in the Budget in
order to address such bona fide emergency situation;
provided that as soon as practicable after such emergency,
Property Manager shall fully inform Owner of the
circumstances surrounding such situation and obtain, on a
"going-forward" basis only, Owner's approval with respect to
Property Manager's handling of similar emergency events at
the Property in the future. It is understood that any
action taken by Property Manager under this Section 2.7(b)
in connection with any particular emergency event shall be
considered as being within Property Manager's scope of
authority under this Agreement but shall not create any
precedent or duty on the part of Property Manager or Owner
to take any action in connection with any future event.
Nothing contained in this Section 2.7(b) or elsewhere in
this Agreement is intended to provide any benefit to any
third parties who are not parties hereto or successors or
permitted assigns of parties hereto or impose upon Property
Manager or Owner any duty or obligation to any third parties
who are not parties hereto or successors or permitted
assigns of parties hereto, nor shall it have the effect of
giving, any enforceable rights to any third parties who are
not parties hereto or successors or permitted assigns of
parties hereto, whether such claims are asserted as third
party beneficiary rights or otherwise. The Owner and
Property Manager hereby acknowledge and agree that, if the
Owner fails to deposit funds in the Property Account in an
amount sufficient to fund the expenses authorized in the
Budget, Property Manager shall not be required to incur any
out of pocket costs in order to perform Property Manager's
obligations under this Agreement.
II.8 Costs Not Reimbursed to Property Manager. Unless
otherwise provided herein, Owner shall not be obligated to
reimburse Property Manager for the payment by Property Manager of
(a) any expense for office equipment or office supplies of
Property Manager other than those used on the Property and
approved in writing by Owner; (b) any overhead expenses of
Property Manager incurred in its general offices; (c) unless
otherwise consented to by Owner in writing, any salaries, wages
and expenses for any personnel, including, without limitation,
personnel spending all or a portion of their working hours at or
providing services to the Property specifically performing
Property Manager's duties hereunder; (d) the cost of fidelity
insurance; (e) any accounting costs or overhead costs incurred in
connection with the preparation and delivery of the statements
and reports required hereunder; or (f) any travel costs incurred
by Property Manager not specifically provided for in the Budget.
II.9 Records; Reporting.
(a) Records. All statements, receipts, invoices,
checks, leases, contracts, worksheets, financial statements,
books and records, and all other instruments and documents
relating to or arising from the development, operation or
management of the Property shall be the property of Owner;
provided, that throughout the term of this Agreement, all of
such items shall be maintained by Property Manager in a
manner consistent with the terms of this Agreement and with
books and records customarily maintained by managing agents
of properties similar in location, size and revenue to the
Property. Owner and Property Manager shall have the right
to inspect and to copy all such items, at such party's
expense, at all reasonable times, and from time to time,
during the term of this Agreement. Upon the termination of
this Agreement, all of such books, records and all other
information relating to the Property promptly shall be
delivered to Owner; provided, however, that at Property
Manager's sole expense, Property Manager or its
representatives shall have the right, for a reasonable
period of time not to exceed three (3) years following such
termination, to inspect such books, records and other
information for data that directly relates to the period
during which Property Manager managed the Property and to
make copies thereof, at the offices of Owner upon reasonable
advance notice to Owner.
(b) Statements. Property Manager shall prepare and
deliver to Owner on a monthly and on a calendar quarterly
basis, Property Manager's written estimates of the amounts,
if any, by which any categories of the Preliminary Budget or
the Budget must be adjusted to adequately fund the
development, operation and maintenance of the Property for
the then current month or quarter as the case may be,
although Owner shall be under no obligation to change the
Preliminary Budget or the Budget. Such reports shall
include the following information: (i) a statement of
operations on the Property during such month or quarter as
the case may be, and the cost thereof, (ii) a statement of
year-to-date operations on the Property, and the cost
thereof, (iii) a statement of the actual cost of operations
on the Property during such month or quarter as the case may
be compared to the Preliminary Budget or the Budget which
identifies any variance between such costs and the
Preliminary Budget or the Budget, and (iv) a description and
explanation of such variances. Property Manager also shall
furnish Owner, within thirty (30) days after Owner's
request, such further information covering the operation and
maintenance of the Property as Owner may reasonably require,
including, but not limited to, the following: (i) income
statement (accrual basis for taxes and insurance), month and
year-to-date versus Budget; (ii) variance report (narrative
form, month and year-to-date), (iii) balance sheet, (iv)
general ledger, (v) rent roll (including security deposit
listing), (vi) accounts receivable aging report, (vii) bank
reconciliation for each account, (viii) calculation of
Property Management Fee, (ix) schedule of reserve and escrow
accounts, (x) schedule of capital expenditures, (xi) a re-
forecast report, on a quarterly basis, of current full year
operations compared to the Budget with explanations for all
material variances, (xii) a marketing qualitative summary of
property operations for the preceding month including
comments on revenues, expenses, marketing, leases,
competition, legal and other issues affecting the Property,
and (xiii) any and all other reports reasonably requested by
Owner.
(c) Annual Accounting Report. Property Manager agrees
(i) to deliver to owner, within twenty (20) days after the
end of each fiscal year, an annual accounting report
(including balance sheet, income statement and other
financial statements), showing the results of gross
receipts, gross operating expenses, net operating income,
net cash flow and the Property Management Fee which would be
payable if the Agreement were terminated as of the end of
such fiscal year and any other information necessary to make
the computations required hereby or which may be requested
by Owner, all for such fiscal year and (ii) to cooperate
fully with Owner, at no additional expense to Property
Manager, but without limiting Property Manager's obligations
under Section 2.9(e), in supplying all of the information
and documentation necessary for a nationally recognized firm
of certified public accountants selected by Owner (the
"Auditor") to prepare and deliver to Owner an audit of the
annual accounting report provided by Property Manager to
Owner pursuant to this Section 2.9(c) within forty-five (45)
days after the end of each fiscal year.
(d) Additional Fiscal Reports. Property Manager
shall, upon the request of Owner, prepare for Owner or
assist Owner in the preparation of such additional financial
reports with respect to the Owner or the Property as Owner
may reasonably request or may be required in the preparation
of the audited annual accounting to be prepared pursuant to
this Section 2.9. Property Manager acknowledges and agrees
that the Property Management Fee to be paid under this
Agreement includes compensation to Property Manager for the
preparation of papers and schedules reasonably necessary for
the Auditor to conduct its review of the Property's books
and records. To the extent such papers and schedules are
not properly prepared, Property Manager agrees to reimburse
Owner for the reasonable additional cost and expense
incurred by Owner for the Auditor to prepare such papers or
schedules.
(e) No Liability for Returns Required by Law.
Property Manager shall be responsible for preparing and
filing any forms, reports or returns (except Owner's tax
returns) that may be required by law relating to the
Property. Property Manager shall also be responsible for
any forms, reports or returns that may be required by law
relating to any of Property Manager's employees.
II.10 Compliance with Legal Requirements. Property
Manager shall take such action as may be necessary to comply with
any and all orders or requirements affecting the Property by any
federal, state, county or municipal authority having jurisdiction
thereover. Property Manager, however, shall not take any such
action as long as Owner is contesting, or has affirmed Owner's
intention to contest and institutes proceedings contesting, any
such order or requirement, except that if failure to comply
promptly with any such order or requirement would or might expose
Property Manager to criminal liability, Property Manager shall
comply with same. Property Manager shall promptly notify Owner
in writing of all such orders and notices or requirements.
Nothing contained herein shall require Property Manager to employ
counsel to represent Owner in any such proceeding or suit.
II.11 Taxes. Property Manager shall timely render the
Property for taxation, and obtain and verify bills for real
estate, personal property, and all other taxes and assessments,
if any, against the Property and promptly pay such tax bills and
any other Impositions (as defined below), and assist and
cooperate with Owner in connection with all such taxes and
assessments in all ways reasonably requested by Owner including
applications or petitions of Owner for reduction of taxes or
assessments. Owner shall have the option but not obligation to
employ a third party consultant to accomplish the foregoing, in
which event, Property Manager shall assist and cooperate with
such consultant. As used herein, "Impositions" shall mean all
taxes, assessments, special assessments, rents and charges for
any easement or agreement maintained as part of or for the
benefit of the Property, use and occupancy taxes and charges,
water and sewer for public and private utilities, excises,
levies, license and permit fees and other governmental charges,
general and special, ordinary and extraordinary, unforeseen and
foreseen, of any kind and nature whatsoever which at any time
prior to or during the term of this Agreement may be assessed,
levied, confirmed, imposed upon or grow or become due and payable
out of or in respect of, or become a lien on (i) the Property or
any part thereof or any appurtenances thereto, or upon any
personal property located, or used in connection with, the
Property, (ii) the rent, income or other payments (if any)
received by or for the account of Owner or anyone claiming by,
through or under Owner, (iii) any use or occupation of the
Property, (iv) such franchises, licenses and permits as may be
appurtenant to the use of the Property and (v) any document to
which Owner is a party transferring an interest or estate in the
Property.
ARTICLE III
FEES TO PROPERTY MANAGER
[The economic terms shall be agreed among the parties]
In consideration for the performance of Property Manager's
duties and responsibilities under this Agreement, in exchange for
its services provided to Owner and the Property, Owner shall pay
to Property Manager a management fee to be computed as follows:
Property Manager shall receive an annual fee from Owner (the
"Management Fee") equal to one percent (1%) of the Acquisition
and Development Costs (as defined hereinbelow) computed as
follows:
(i) the Management Fee shall commence on the first day
of the month following the initial acquisition of the
Property;
(ii) the monthly balance subject to the Management Fee
shall be the arithmetic average of the Acquisition and
Development Costs of the Property owned by Owner on the
first day of the month and on the last day of the month; and
(iii) the Management Fee shall be payable monthly
in arrears and shall be equal to 0.000833 multiplied by the
balance computed in (ii) above.
As used herein, "Acquisition and Development Costs" means the sum
of (a) purchase price, whether cash or credit, paid, or for which
Owner is obligated to pay (if on credit), for the Property,
together with all closing costs paid by Owner, including title
insurance, recordation charges, registration and transfer taxes,
if any, and similar expenses, and to the extent reflected on the
closing statement executed by Owner in connection with the
acquisition of the Property, all fees and expenses paid or
incurred by or on behalf of Owner in connection with the
acquisition of the Property, including legal, engineering and
consulting fees, any real estate commissions or brokerage fees
paid by Owner, or on behalf of Owner, to anyone in connection
with such acquisition (the "Acquisition Costs") and (b) all costs
and expenses incurred by Owner in connection with development and
marketing of the Property, including, without limitation,
engineering, legal, land planning and related expenses (the
"Development Costs").
ARTICLE IV
RELATIONSHIP OF PROPERTY MANAGER TO OWNER
IV.1 Use and Maintenance of Premises. Property Manager
shall employ its best efforts to develop, operate and maintain
the Property in a manner (referred to herein as the "Management
Standard") consistent with (i) first class standards (consistent
with the Business Plan); (ii) prudent business and management
practices applicable to the development, operation, management
and maintenance of the Property; and (iii) the requirements of
any deeds of trust, certificates of occupancy, permits, licenses,
consents or other recorded or unrecorded agreements now or
hereafter affecting the Property or as required by the limited
partnership agreement (collectively referred to herein as the
"Key Documents"). Property Manager shall use all contacts,
discount programs and cost-savings measures at its disposal to
obtain services, products and tax and insurance rates for the
Property at the lowest cost, without sacrificing the quality of
such services or products. Property Manager shall perform such
other acts and deeds as are reasonable, necessary and proper in
the discharge of its duties under this Agreement. Property
Manager may with prior written approval of Owner obtain goods or
services for the Property from direct or indirect affiliates of
Property Manager, its officers, directors, shareholders or
employees, but only if such goods and services are of at least
equal quality and of no higher prices than comparable goods and
services obtainable from unaffiliated parties and such goods and
services are otherwise competitive with comparable goods and
services.
IV.2 Sale or Refinancing of the Property. Upon the express
request of Owner but not otherwise, Property Manager shall assist
and cooperate in any attempt(s) by Owner to sell, finance or
refinance all or any portion of the Property. Such assistance
and cooperation by Property Manager and Property Manager's
personnel shall not be deemed to create a broker-principal or
similar relationship unless Owner and Property Manager enter into
a separate written agreement engaging Property Manager as broker
with respect to all or any portion of the Property. Such
assistance and cooperation shall include, without limitation,
answering prospective purchasers' or lenders' questions about the
Property or any portion thereof, preparing rent rolls, notifying
tenants about the sale of the Property and obtaining estoppel
certificates and other documents from all tenants of the Property
in the form required by the prospective purchaser or lender.
Property Manager shall also provide, promptly upon request by
Owner, (a) an estoppel certificate executed by Property Manager
certifying that no uncured default by the Owner exists under this
Agreement or, if such a default(s) exists, stating the nature
thereof, (b) a certificate in favor of Owner and any lender
executed by Property Manager confirming, to the best of Property
Manager's actual knowledge, that any representations and
warranties made (or to be made) by Owner with respect to the
Property, or the condition or operation thereof, in any loan
documents executed (or to be executed) by Owner in connection
with any sale, financing or refinancing of the Property, are
substantially true, correct and complete, or, if not
substantially true, correct or complete, stating with
particularity why such representations and warranties are not
substantially true, correct or complete, and (c) a subordination
and attornment agreement executed by Property Manager in
accordance with the provisions of Section 5.9 of this Agreement.
IV.3 Approvals and Consents to Property Manager. Owner and
Property Manager hereby acknowledge and agree that_______________
is authorized by Owner to grant approvals and consents required
under this Agreement to Property Manager, and otherwise instruct
Property Manager with respect to Property Manager's obligations
and performance under this Agreement.
IV.4 Term. This Agreement shall commence on the date hereof
and continue until such time as it is terminated as provided
herein (a) for Cause (as herein defined) or (b) upon the mutual
agreement of the parties. The entire term of this Agreement is
sometimes herein referred to as the "Term".
IV.5 Termination by Owner. Owner, at its option, may
terminate this Agreement for "Cause" at any time upon giving
written notice thereof. The term Cause shall include (a) the
failure of Property Manager to cure any fraud, misrepresentation,
misappropriation of funds, furnishing any statement, report,
notice, writing or schedule to Owner that Property Manager knows,
or reasonably should have known, is untrue or misleading in any
material respect on the date as of which the facts set forth
therein are stated or certified or the date such statement,
report, notice, writing or schedule is furnished to Owner, and
such failure continues for a period of ten (10) days after
written notice thereof by Owner to Property Manager, (b) the
failure of Property Manager to comply with any term or condition
of this Agreement (except for breach of the Management Standard)
and such failure continues for a period of thirty (30) days after
written notice thereof by Owner to Property Manager, provided
that if such default is not reasonably susceptible of cure within
thirty (30) days, then such reasonable time so long as Property
Manager is diligently prosecuting the cure of the default, but in
no event longer than ninety (90) days, (c) the bankruptcy or
insolvency of, the assignment for the benefit of creditors by, or
the appointment of a receiver for any of the property of,
Property Manager, (d) the sale of all or part of the Property;
provided that in the case of a partial sale, termination will
only apply to those portions of the Property sold, (e) the
failure of Property Manager to cure an intentional or grossly
negligent or illegal act committed by Property Manager against
Owner and such failure continues for a period of ten (10) days
after written notice thereof by Owner to Property Manager, (f)
the failure of Property Manager to cure Property Manager's
willful and/or reckless misconduct that causes damage to Owner
and such failure continues for a period of ten (10) days after
written notice thereof by Owner to Property Manager, or (g) upon
thirty (30) days written notice from Owner to Property Manager in
the event Property Manager fails to perform its duties consistent
with the Management Standard as determined by the management
committee of Owner.
IV.6 Termination by Property Manager. Property Manager, at
its option, may terminate this Agreement for the failure of Owner
to comply with any term or condition of this Agreement and such
failure continues for a period of thirty (30) days after written
notice thereof by Owner to Property Manager, provided that if
such default is not reasonably susceptible of cure within thirty
(30) days, then such reasonable time so long as Owner is
diligently prosecuting the cure of the default, but in no event
longer than ninety (90) days.
IV.7 Obligations Upon Termination.
(a) Upon termination of this Agreement, each party
shall continue to be fully liable for their respective
obligations which have accrued up to and including the
termination date and shall promptly pay to the other all
amounts due to the other party under the terms of this
Agreement. Such payment shall be made as soon after the
effective date of termination as such amounts are
determinable. Upon such payment, neither party shall have
any further claim or right against the other, except as
expressly provided herein.
(b) In the event of termination of this Agreement,
upon the effective date of such termination, Property
Manager shall (i) surrender and deliver to Owner all income
of the Property, if any, and other monies of Owner then held
by Property Manager and/or in any bank account (including,
without limitation, the Owner Account and the Property
Account) in excess of the reimbursements due and payable to
Property Manager up to and including the effective date of
such termination, (ii) deliver to Owner as received by
Property Manager any monies or other property due Owner
under this Agreement but received after such termination,
and (iii) deliver to Owner everything then held by Property
Manager pertaining to the Property, including, without
limitation copies of all books, records, keys and all other
materials, property and supplies pertaining to the Property
and/or this Agreement.
IV.8 Negation of Partnership, Joint Venture or Lease.
Nothing in this Agreement shall constitute, or be construed to be
or to create, a partnership, joint venture or lease between Owner
and Property Manager with respect to the Property. In the
performance of this Agreement, Property Manager shall act solely
as an independent contractor. Neither this Agreement nor any
agreements, instruments, documents or transactions contemplated
hereby shall in any respect be interpreted, deemed or construed
as making either party a partner, joint venturer, principal or
agent with, or with respect to, the other party or as creating
any similar relationship or entity, and each party hereto agrees
that it will not make any contrary assertion, contention, claim
or counterclaim in any action, suit or other legal proceedings
involving Property Manager and Owner.
IV.9 Indemnification. Property Manager shall be liable for
and shall indemnify and hold harmless Owner (and each partner,
venturer, employee, agent, shareholder, director and officer of
Owner) from any loss, damage, liability, cost or expense
(including reasonable attorneys' fees) arising out of (i) any
actions of Property Manager not within the scope of Property
Manager's duties hereunder, (ii) any breach by Property Manager
of Property Manager's obligations hereunder or (iii) the gross
negligence or willful misconduct of Property Manager. Owner
shall indemnify and hold harmless Property Manager (and each
employee, agent, director, shareholder are officer of Property
Manager) from any loss, damage, liability, cost or expense
(including reasonable attorneys' fees) arising out of (x) a
breach by Owner of Owner's obligations hereunder, (y) Owner's
gross negligence or willful misconduct or (z) actions taken by
Property Manager within the scope of Property Manager's
responsibilities under this Agreement.
IV.10 Owner's Limited Liability. No general or limited
partner in or of Owner, whether direct or indirect, or any
disclosed or undisclosed officers, shareholders, principals,
directors, employees, partners, servants or agents of Owner or
any of the foregoing or any investment advisor of Owner
(including any assignee or successor of Owner) or other holder of
any equity interest in Owner, shall be personally liable for the
performance of Owner's obligations under this Agreement. The
liability of Owner (including any assignee or successor of Owner)
for Owner's obligations hereunder shall be limited to the equity
interest of Owner in the Property.
IV.11 Property Manager's Limited Liability. No general
or limited partner in or of Property Manager, whether direct or
indirect, or any disclosed or undisclosed officers, shareholders,
principals, directors, employees, partners, servants or agents of
Property Manager or any of the foregoing or any investment
advisor of Property Manager (including any assignee or successor
of Property Manager) or other holder of any equity interest in
Property Manager, shall be personally liable for the performance
of Property Manager's obligations under this Agreement.
ARTICLE V
MISCELLANEOUS
V.1 No Assignment by Property Manager Etc. Without the
prior written consent of Owner, which consent may be granted or
withheld in Owner's sole discretion, Property Manager shall not
have the right to assign, transfer or convey any of Property
Manager's right, title or interest hereunder, nor shall Property
Manager have the right to delegate any of the obligations or
duties required to be kept or performed by Property Manager
hereunder.
V.2 Notices. All notices, demands, consents, approvals and
requests given by either party to the other hereunder shall be in
writing and sent via the U.S. Postal Service by registered or
certified mail, postage prepaid or via a nationally recognized
overnight delivery service (e.g. Federal Express) and addressed
to the appropriate party at the respective addresses shown below.
All such notices shall be deemed given on the earlier of actual
receipt or refusal of receipt by the addressee. The respective
addresses and additional notice parties are as follows:
If to Owner: _______________________ Partnership
c/o Olympus Real Estate Corporation
200 Crescent Court, Suite 1650
Dallas, Texas 75201
Attention: Hal R. Hall
and to: Robert C. Feldman
Weil, Gotshal & Manges, LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
If to Property Manager:___________________________
98 San Jacinto Blvd., Suite 220
Austin, Texas 78701
Attention: Mr. William H. Armstrong, III
With a copy to: Kenneth N. Jones
Armburst, Brown & Davis, L.L.P.
100 Congress, Suite 1350
Austin, Texas 78701
Any party may at any time change its respective address by
sending written notice to the other parties of the change in the
manner hereinabove prescribed.
V.3 GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND
DELIVERED AND IS INTENDED TO BE PERFORMED IN THE STATE OF TEXAS,
AND THE TERMS AND PROVISIONS HEREOF SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THIS
AGREEMENT IS PERFORMABLE IN, AND THE EXCLUSIVE VENUE FOR ANY
ACTION BROUGHT WITH RESPECT HERETO SHALL LIE IN, DALLAS COUNTY,
TEXAS.
V.4 Not a Third Party Beneficiary Contract. Neither this
Agreement nor any part hereof nor any service, relationship or
other matter alluded to herein shall inure to the benefit of any
third party (specifically including any lender, tenants or
contractors), to any trustee in bankruptcy, to any assignee for
the benefit of creditors, to any receiver by reason of
insolvency, to any other fiduciary or officer representing a
bankruptcy or insolvent estate of either party or to the
creditors or claimants of such an estate. In addition, this
Agreement shall terminate and be of no further force or effect
upon the filing of any bankruptcy petition by or against Property
Manager.
V.5 Validity. If any term or provision of this Agreement
or the application thereof to any person or circumstance shall,
to any extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law.
V.6 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the matters
herein contained and any agreement hereafter made shall be
ineffective to effect any change or modification, in whole or in
part, unless such agreement is in writing and signed by the party
against whom enforcement of the change or modification is sought.
This Agreement shall bind, and inure to the benefit of, the
parties hereto and their respective successors, legal
representatives and assigns.
V.7 Attorneys' Fees. If either Owner or Property Manager
employs an attorney to enforce or defend its rights hereunder,
the prevailing party shall be entitled to recover its reasonable
attorneys' fees, costs and expenses incurred in connection with
such enforcement or defense.
V.8 INDEMNIFICATION PROVISIONS. THIS AGREEMENT CONTAINS
INDEMNIFICATION PROVISIONS SPECIFICALLY DESCRIBED IN SECTIONS 2.5
AND 4.7 HEREOF.
V.9 Subordination. This Agreement and any extension hereof
shall be subordinate to any mortgage or similar security
instrument now or hereafter affecting the Property, and all
renewals, modifications, consolidations, replacements and
extensions thereof (a "Mortgage"). Property Manager further
agrees to attorn to the holder of any Mortgage or similar
security instrument affecting the Property, and any successor or
assignee thereof, upon Owner's being dispossessed by such holder
of Owner's interest in all or any portion of the Property. The
provisions of this Section 5.9 shall be self-operative and no
further instrument of subordination or attornment shall be
required. Property Manager shall execute promptly any
certificate or other document that Owner or any mortgagee or
other security holder may request as to such subordination and/or
attornment, which certificate or document may include such
customary and normal provisions as Owner may determine in its
sole discretion. In the event that Property Manager fails to
execute and deliver such certificate or document on or before
five (5) business days after written notice to Property Manager
by Owner, then without any further notice and opportunity to
cure, such failure by Property Manager shall be deemed to be an
event for Cause hereunder.
V.10 Representations, Warranties and Covenants of Property
Manager. In order to induce Owner to enter into this Agreement,
Property Manager does hereby make the following representations,
warranties and covenants:
(a) Property Manager represents and warrants to Owner
that Property Manager is a , is duly
and legally existing under the laws of the state of
its and is duly qualified to do
business in the State of Texas.
(b) Property Manager represents and warrants to Owner
that Property Manager has full power and authority to enter
into this Agreement and to carry out the transactions herein
contemplated, and that the undersigned officers of Property
Manager have all necessary authority to execute and deliver
this Agreement on behalf of Property Manager.
(c) Property Manager represents and warrants to Owner
that this Agreement has been duly execuded and delivered by
Property Manager and constitutes the legal, valid and
binding obligations of Property Manager enforceable in
accordance with their terms, subject to laws applicable
generally to creditor's rights.
(d) Property Manager shall deliver to Owner, upon the
effective date hereof (i) a good standing certificate from
the State of Texas, and (ii) an incumbency certificate and
_________resolutions of Property Manager authorizing the
execution and delivery by Property Manager of this
Agreement, certified by an authorized officer of Property
Manager as being true, correct and complete.
(e) There is no claim, litigation, proceedings or
governmental investigation pending, or as far as is known to
Property Manager, threatened, against Property Manager or
relating to the Property or the transactions contemplated by
this Agreement which does, or may reasonably be expected to,
affect the ability of Property Manager to enter into this
Agreement or to carry out its obligations hereunder, and, to
Property Manager's actual knowledge, there is no basis for
any such claim, litigation, proceedings or governmental
investigation.
(f) Neither the consummation of the actions
contemplated by this Agreement on the part of Property
Manager to be performed, nor the fulfillment of the terms,
conditions and provisions of this Agreement, conflicts with
or will result in the breach of any of the terms, conditions
or provisions of, or constitute a default under, any
agreement, indenture, instrument or undertaking to which
Property Manager is a party or by which it is bound.
(g) Property Manager has and will continue to have
during the term of this Agreement qualified personnel to
implement Property Manager's obligations hereunder.
V.11 Publicity and Public Relations. Owner shall have the
exclusive right to control, manage and monitor all publicity and
public relations with respect to the Property or Owner's
ownership thereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
OWNER:
_____________________,
a____________________
By:____________________
Name:__________________
Title:_________________
PROPERTY MANAGER:
_______________________,
a______________________
By:_________
Name:__________________
Title:_________________
EXHIBIT A
TO MANAGEMENT AGREEMENT
(ATTACH PROPERTY DESCRIPTION)
Exhibit 99.2
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of May 22, 1998, by and between
Oly/Stratus Equities, L.P., a Texas limited partnership (the
"Purchaser"), and Stratus Properties Inc. (formerly known as FM
Properties Inc.), a Delaware corporation (the "Company").
RECITALS:
A. The Company presently conducts the business of
developing and marketing certain real property (the "Business");
B. The Company requires additional capital in order to
expand the Business; and
C. The Purchaser desires to provide additional capital to
the Company for such purpose in accordance with the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I. ISSUANCE OF SECURITIES
I.1. Authorization. The Company has duly authorized the
issuance and sale of 1,712,328 shares of its Series B
Participating Preferred Stock, par value $0.01 per share (the
"Securities"), having an aggregate initial liquidation preference
of $9,999,995.52 plus accrued and unpaid dividends thereon, if
any, and other rights as specified in the Certificate of
Designations of the Powers, Preferences and Relative
Participating, Optional and Other Special Rights of Series B
Participating Preferred Stock and Qualifications, Limitations and
Restrictions Thereof, substantially in the form of Exhibit A
attached hereto (the "Certificate of Designations").
I.2. Purchase and Sale of the Securities; the Closing.
Subject to the terms and conditions hereof, the Company hereby
agrees to sell to the Purchaser, and the Purchaser hereby agrees
to purchase from the Company, the Securities for an aggregate
purchase price of $9,999,995.52. The closing of such sale and
purchase shall be held at 10:00 A.M., Dallas, Texas time, on May
22, 1998, or on such other day and time as may be agreed by the
Company and the Purchaser (the "Closing Date"), at the offices of
Weil, Gotshal & Manges LLP, 100 Crescent Court, Suite 1300,
Dallas, Texas 75201.
On the Closing Date, the Company will deliver to the
Purchaser one or more certificates representing the Securities,
registered in the name of the Purchaser or in the names of one or
more nominees of the Purchaser and in any denomination as the
Purchaser may specify by timely notice to the Company (or, in the
absence of such notice, one certificate representing 1,712,328
shares registered in the name of the Purchaser), against delivery
to the Company of immediately available funds in the amount of
the purchase price of such Securities by wire transfer to an
account or accounts designated in writing by the Company prior to
the Closing Date.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
II.1. Representations and Warranties of the Company. The
Company makes the following representations and warranties to the
Purchaser, each of which is true and correct as of the date
hereof and shall be true and correct as of the Closing Date and
shall be unaffected by any investigation heretofore or hereafter
made by the Purchaser.
II.1.1. Organization and Good Standing. The Company
and each of the Subsidiaries (as hereinafter defined) is duly
organized, validly existing and in good standing under the laws
of the state of its organization. The Company and each of the
Subsidiaries has the requisite power and authority to own, lease
or otherwise hold the assets owned, leased or otherwise held by
it and to carry on its business as presently conducted by it.
The Company and each of the Subsidiaries is in good standing and
duly qualified to conduct business as a foreign corporation,
partnership or limited liability company, as applicable, in every
state of the United States in which its ownership or lease of
property or conduct of business makes such qualification
necessary.
II.1.2. Authorization of Agreement; Binding
Obligation. The Company has the requisite corporate power to
execute and to deliver this Agreement and the other Transaction
Documents and to perform the transactions contemplated hereby and
thereby to be performed by it. The execution and delivery by the
Company of this Agreement and the other Transaction Documents and
the performance by it of the transactions contemplated hereby and
thereby to be performed by it have been duly authorized by all
necessary corporate action on the part of the Company. This
Agreement and the other Transaction Documents have been duly
executed and delivered by duly authorized officers of the Company
and constitute valid and binding obligations of the Company
enforceable against it in accordance with terms hereof or
thereof, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
II.1.3. Subsidiaries and Equity Investments. (a)
Schedule 2.1.3 sets forth (i) the name of each entity of which
the Company directly or indirectly owns shares of capital stock
or other equity interests having in the aggregate 50% or more of
the total voting power of the issued and outstanding shares of
capital stock or other equity interests (individually, a
"Subsidiary" and collectively, the "Subsidiaries"); (ii) the name
of each corporation, partnership, limited liability company,
joint venture or other entity (other than the Subsidiaries) in
which the Company or any Subsidiary has, or pursuant to any
agreement has the right to acquire at any time by any means, an
equity interest or investment; (iii) in the case of each of the
Subsidiaries, (A) the jurisdiction of organization and (B) the
capitalization thereof and the percentage of each class of voting
stock or other equity interests owned by the Company or by any of
the Subsidiaries; and (iv) in the case of each of such entities
listed pursuant to clause (ii) hereof, the equivalent of the
information provided pursuant to the preceding clause (iii) with
regard to the Subsidiaries.
(b) All of the outstanding shares of capital stock or
other equity interests of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable,
have not been issued in violation of any preemptive, maintenance
or similar rights. The shares of capital stock or other equity
interests owned by the Company or any of the Subsidiaries as set
forth on Schedule 2.1.3 are owned of record and beneficially by
the Company or such Subsidiary, free and clear of any liens,
claims, charges, security interests or other legal or equitable
encumbrances, limitations or restrictions, except for security
interests granted to IMC Global Inc. ("IMC") pursuant to the Sale
and Guaranty Agreement among the Company, FM Properties Operating
Co., Circle C Land Corp., Freeport McMoRan Inc. and IMC.
(c) There are no options, warrants, calls,
subscriptions, conversion or other rights, agreements or
commitments obligating any Subsidiary to issue any additional
shares of capital stock or other equity interests or any other
securities convertible into, exchangeable for or evidencing the
right to subscribe for any shares of such capital stock or other
equity interests.
II.1.4. No Restrictions Against Issuance of
Securities; Required Consents. The execution and delivery of
this Agreement and the other Transaction Documents by the Company
does not, and the performance by the Company of the transactions
contemplated hereby or thereby to be performed by it will not
(a) conflict with the certificate of incorporation or bylaws,
partnership agreement, operating agreement, or other
organizational documents, as applicable, of the Company or any
Subsidiary, (b) conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation
or acceleration of any material obligation or to loss of a
benefit under, any material contract, permit, order, judgment or
decree to which the Company or any Subsidiary is a party or by
which any of their properties are bound, (c) constitute a
violation of any law or regulation applicable to the Company or
any Subsidiary, or (d) result in the creation of any lien, charge
or encumbrance upon any of the Company's or the Subsidiaries'
assets except, in the case of (a) through (d) hereof, for those
that, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect (i) on the business,
assets, financial condition, prospects, financial projections, or
results of operations of the Company and its Subsidiaries taken
as a whole or (ii) on the ability of the Company to perform on a
timely basis any material obligation under this Agreement or the
other Transaction Documents or to consummate the transactions
contemplated hereby or thereby (each, a "Material Adverse
Effect"). Except as set forth on Schedule 2.1.4, no consent,
approval, order or authorization of, or registration, declaration
or filing with, any nation or government, any state or other
political subdivision thereof or an entity exercising executive,
legislative, judicial, regulatory or administrative function of
or pertaining to government (each a "Governmental Entity") is
required to be obtained or made by or with respect to the Company
in connection with the execution and delivery of this Agreement
or any of the other Transaction Documents by the Company or the
performance by the Company of the transactions contemplated
hereby or thereby to be performed by it. Assuming the accuracy
of the Purchaser's representations and warranties contained in
Section 2.2 hereof, the issuance and sale of the Securities are
exempt from the registration and prospectus delivery requirements
of the Securities Act of 1933, as amended (the "Securities Act").
II.1.5. Capitalization. The authorized capital stock
of the Company consists of 150,000,000 shares of common stock,
$0.01 par value ("Common Stock"), and 50,000,000 shares of
preferred stock, $0.01 par value ("Preferred Stock"). As of
March 31, 1998, the Company had, in the aggregate, 14,288,270
shares of Common Stock issued and outstanding. As of the date of
this Agreement and as of the Closing Date, except for the
Securities, the Company had and will have no shares of Preferred
Stock issued and outstanding. All of the outstanding shares of
Common Stock have been validly issued, are fully paid and
non-assessable and were not issued in violation of any
preemptive, maintenance or similar rights. At the Closing, the
Securities shall be validly issued, fully paid and non-assessable
and shall have not been issued in violation of any preemptive,
maintenance or similar rights. Except as disclosed in the SEC
Reports (as hereinafter defined), there are no options, warrants,
calls, subscriptions, conversion or other rights, agreements or
commitments obligating the Company to issue any capital stock of
the Company or any other securities convertible into, or
exchangeable, exercisable or evidencing the right to subscribe
for, capital stock of the Company.
II.1.6. Financial Statements. The Company has
delivered to the Purchaser true and complete copies of (a) the
audited consolidated balance sheets of the Company at December
31, 1996 and 1997 and the related statements of income, cash flow
and changes in shareholders' equity for the three years in the
period ended December 31, 1997, accompanied by certified opinions
of the Company's independent auditing firm as included in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997; and (b) unaudited consolidated balance sheets
of the Company at March 31, 1997 and 1998 and related statements
of income, cash flow and changes in shareholders' equity for the
periods then ended as contained in the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 1998, all of
which have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved. Such consolidated
balance sheets, including the related notes, fairly present the
consolidated financial position, assets and liabilities (whether
accrued, absolute, contingent or otherwise) of the Company and
the Subsidiaries at the dates indicated and such statements of
income, cash flow and changes in shareholders' equity fairly
present the consolidated results of operations, cash flow and
changes in shareholders' equity of the Company and the
Subsidiaries for the periods indicated. The unaudited
consolidated financial statements as of and for the periods
ending March 31, 1997 and 1998 contain all adjustments, which are
solely of a normal recurring nature, necessary for a fair
statement of the consolidated financial position and results of
operations of the Company and the Subsidiaries for the periods
then ended. References in this Agreement to the "Interim Balance
Sheet" shall mean the consolidated balance sheet of the Company
as of March 31, 1998 referred to above, and references in this
Agreement to the "Interim Balance Sheet Date" shall be deemed to
refer to March 31, 1998.
II.1.7. Business, Properties and Other Information.
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and has delivered to the Purchaser true and complete copies of
the following reports and proxy statements filed with the
Securities and Exchange Commission (the "Commission"):
A. its Annual Report on Form 10-K for its fiscal year
ended December 31, 1997;
B. its Quarterly Report on Form 10-Q for its fiscal
quarter ended March 31, 1998;
C. its Current Report on Form 8-K dated March 3,
1998; and
D. the Proxy Statement for its 1998 Annual Meeting of
Stockholders, dated March 30, 1998.
Said reports and proxy statements comprise all materials required
to be filed by the Company with the Commission since December 31,
1997 and are collectively called the "SEC Reports," which term
shall also include on the Closing Date all further reports which
the Company may theretofore have filed with the Commission.
The SEC Reports do not contain any untrue statement of
a material fact or omit to state a material fact necessary in
order to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading;
provided that to the extent any such information therein was
based upon or constitutes an estimate or projection, the Company
represents only that in preparing such estimate or projection it
acted in good faith and on a basis which the Company reasonably
believed to be reasonable and on a basis consistent with the
financial statements described in Section 2.1.6 hereof and
contained in the SEC Reports. The Company knows of no facts not
disclosed in the SEC Reports listed above which facts
individually or in the aggregate could reasonably be expected to
have a Material Adverse Effect.
II.1.8. Absence of Undisclosed Liabilities. Neither
the Company nor any of the Subsidiaries has liabilities or
obligations, either direct or indirect, matured or unmatured or
absolute, contingent or otherwise, except:
(a) those liabilities or obligations set forth on the
Interim Balance Sheet (including the notes thereto) and not
heretofore paid or discharged;
(b) liabilities arising in the ordinary course of
business under any agreement, contract, commitment, lease or plan
specifically disclosed in the SEC Reports or not required to be
disclosed therein because of the term or amount involved;
(c) those liabilities or obligations incurred,
consistently with past business practice, in or as a result of
the normal and ordinary course of business since the Interim
Balance Sheet Date;
(d) the obligations set forth in the Transaction
Documents; and
(e) those which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse
Effect.
II.1.9. Books of Account. The books, records and
accounts of the Company accurately and fairly reflect, in
reasonable detail, the transactions and the assets and
liabilities of the Company and the Subsidiaries and do not
contain any material inaccurate information or omit any material
information necessary in order to make such books, records and
accounts, in light of the circumstances under which they were
prepared, not misleading. Neither the Company nor any of the
Subsidiaries has engaged in any transaction, maintained any bank
account or used any of the funds of the Company or the
Subsidiaries except for transactions, bank accounts and funds
which have been and are reflected in the normally maintained
books and records of the Company.
II.1.10. Contracts and Commitments. (a) The SEC
Reports contain descriptions of and include as exhibits thereto
all agreements, contracts, commitments, leases, plans and other
instruments, documents and undertakings required to be described
therein and filed as an exhibit thereto pursuant to the Exchange
Act and the rules and regulations of the Commission promulgated
thereunder.
(b) Each of the agreements, contracts, commitments,
leases, plans and other instruments, documents and undertakings
described in and filed as an exhibit to (or required to be
described in and filed as an exhibit to) the SEC Reports is valid
and enforceable in accordance with its terms; the Company and the
Subsidiaries are (to the extent they are a party thereto), and to
the Company's knowledge all other parties thereto are, in
material compliance with the provisions thereof; the Company and
the Subsidiaries are not, and to the Company's knowledge no other
party thereto is, in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained
therein; and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a
default thereunder. Furthermore, no such agreement, contract,
commitment, lease, plan or other instrument, document or
undertaking, in the reasonable opinion of the Company, contains
any contractual requirement with which there is a reasonable
likelihood the Company, any Subsidiary or any other party thereto
will be unable to comply.
II.1.11. Liens and Encumbrances; Condition of Assets.
(a) The Company and each of the Subsidiaries has good, valid
and indefeasible title to its material assets free and clear of
all title defects or objections, mortgages, liens, claims,
charges, pledges, or other encumbrances of any nature whatsoever,
including without limitation licenses, leases, chattel or other
mortgages, collateral security arrangements, pledges, title
imperfections, defect or objection liens, security interests,
conditional and installment sales agreements, charges, easements,
encroachments or restrictions, of any kind and other title or
interest retention arrangements, reservations or limitations of
any nature (collectively, "Liens"), other than (i) those
reflected or reserved against on the Interim Balance Sheet
(including the notes thereto), (ii) Liens for Taxes, assessments
and other governmental charges that are not due and payable or
that may thereafter be paid without penalty, (iii) those imposed
by municipal, county, state or federal land use or development
statutes, ordinances, rules, regulations or restrictions, and
(iv) those that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. (The
items referred to in the exception to the immediately preceding
sentence are hereinafter referred to as "Permitted Liens".)
(b) All of the assets of the Company and the
Subsidiaries are in good operating condition and repair, subject
to normal wear and maintenance, are usable in the regular and
ordinary course of business and materially conform to all
applicable laws, ordinances, codes, rules and regulations, and
Permits relating to their construction, use and operation.
II.1.12. Insurance. The Company and each of the
Subsidiaries has insurance policies in full force and effect for
such amounts as are sufficient for material compliance with all
requirements of law and of all material agreements to which the
Company or any of the Subsidiaries is a party or by which any of
them is bound. Except as set forth in Schedule 2.1.12, no event
relating to the Company or the Subsidiaries has occurred that can
reasonably be expected to result in a material retroactive upward
adjustment in premiums under any such insurance policies or that
is likely to result in a material prospective upward adjustment
in such premiums. Excluding insurance policies that have expired
and been replaced in the ordinary course of business, no
insurance policy has been cancelled within the last two years
and, to the Company's knowledge, no threat has been made to
cancel any insurance policy of the Company or any Subsidiary
during such period. No event has occurred, including, without
limitation, the failure by the Company or any Subsidiary to give
any notice or information or the Company or any Subsidiary giving
any inaccurate or erroneous notice or information, which limits
or impairs the rights of the Company or any Subsidiary under any
such insurance policies. The Company has provided the Purchaser
with true and complete copies of all regularly prepared loss run
reports as of the date hereof.
II.1.13. Conduct of the Business Since the Interim
Balance Sheet Date. Except for the transactions contemplated by
the Transaction Documents, since the Interim Balance Sheet Date,
neither the Company nor any of the Subsidiaries has:
(a) incurred any liabilities, other than liabilities
incurred in the ordinary course of business consistent with past
practice, or discharged or satisfied any lien or encumbrance, or
paid any liabilities, other than in the ordinary course of
business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or
discharge has caused or will cause any material damage or risk of
material loss to it or any of its material assets or properties;
(b) sold, encumbered, assigned or transferred any
material assets or properties other than in the ordinary course
of business consistent with past practices;
(c) created, incurred, assumed or guaranteed any
indebtedness for money borrowed, or mortgaged, pledged or
subjected any of its assets to any mortgage, lien, pledge,
security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except for Permitted Liens,
in each case other than in the ordinary course consistent with
past practices;
(d) made or suffered any amendment or termination of
any material agreement, contract, commitment, lease or plan to
which it is a party or by which it is bound, or cancelled,
modified or waived any substantial debts or claims held by it or
waived any rights of substantial value, in each case other than
in the ordinary course of business consistent with past
practices;
(e) declared, set aside or paid any dividend or made
or agreed to make any other distribution or payment in respect of
its capital shares or redeemed, purchased or otherwise acquired
or agreed to redeem, purchase or acquire any of its capital
shares;
(f) suffered any damage, destruction or loss that,
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect;
(g) made commitments or agreements for capital
expenditures or capital additions or betterments exceeding in the
aggregate $500,000 except in the ordinary course of business
consistent with past practices or such as may be involved in
ordinary repair, maintenance or replacement of its assets;
(h) increased the salaries or other compensation of,
or made any advance (excluding advances for ordinary and
necessary business expenses) or loan to, any of its employees or
made any increase in, or any addition to, other benefits to which
any of its employees may be entitled, other than regularly
scheduled increases in the ordinary course of business consistent
with past practices;
(i) except as required by law or GAAP, changed any of
the accounting principles followed by it or the methods of
applying such principles;
(j) entered into any transaction other than in the
ordinary course of business consistent with past practice; or
(k) suffered any material adverse change in its
business, operations, assets, properties, prospects or condition
(financial or otherwise).
II.1.14. Employee Benefit Plans. (a) All "employee
benefit plans," as defined by Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and
all other employee benefit arrangements or payroll practices,
including, without limitation, bonus plans, consulting or other
compensation agreements, incentive, equity or equity-based
compensation, deferred compensation arrangements, stock purchase,
severance pay, and change in control agreements, programs,
policies or arrangements maintained by the Company or any
Subsidiary or to which the Company or any Subsidiary contributes
or contributed on behalf of its respective employees or has any
liability, contingent or otherwise (the "Employee Plans"), are
listed on Schedule 2.1.14(a). Any Employee Plans which
constitute "employee pension benefit plans" as defined in Section
3(2) of ERISA (the "Pension Plans") are so designated on
Schedule 2.1.14(a). No Pension Plan is subject to Title IV of
ERISA or Section 412 of the Code.
(b) Except as set forth on Schedule 2.1.14(b),
(i) each Pension Plan is qualified under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code"), and any
trust maintained pursuant thereto is exempt from federal income
taxation under Section 501 of the Code; and (ii) the Company and
each of the Subsidiaries has complied with respect to each
Employee Plan in all material respects with the reporting and
disclosure requirements of ERISA and no "party in interest" or
"disqualified person" has engaged in a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the
Code.
(c) The Employee Plans have been established,
maintained and operated in all material respects in accordance
with their terms and with all provisions of ERISA, the Code and
other applicable federal and state laws and regulations.
(d) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment becoming due to any
employee or consultant (current, former or retired) of the
Company or any of the Subsidiaries, (ii) increase any benefits
otherwise payable under any Employee Plan or (iii) result in the
acceleration of the time of payment or vesting of any such
benefits.
II.1.15. Litigation; Decrees. There are no judicial
or administrative actions, proceedings or investigations pending
or, to the Company's knowledge, threatened that question the
validity of this Agreement or any action taken or to be taken by
the Company in connection with this Agreement. Except as
described in the SEC Reports or on Schedule 2.1.15, there are no
(i) lawsuits, claims, administrative or other proceedings or
investigations relating to the conduct of the Business pending
or, to the Company's knowledge, threatened by, against or
affecting the Company or any affiliate thereof or (ii) judgments,
orders or decrees of any Governmental Entity binding on the
Company or any Subsidiary.
II.1.16. Compliance With Law; Permits. The Company
and each of the Subsidiaries has complied with each law,
judgment, order and decree of any Governmental Entity to which
the Company or the Subsidiaries or their business, operations,
assets or properties is subject and is not currently in violation
of any of the foregoing, except where the failure to so comply
with or violation of any of the foregoing could not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company and each of the Subsidiaries owns,
holds, possesses or lawfully uses in the operation of its
business all material licenses, permits, authorizations and
approvals (collectively, "Permits") which are necessary to
conduct the Business as now conducted or for the ownership and
use of its assets, free and clear of all Liens and in compliance
with all laws. For purposes of this Agreement, the term "Permit"
excludes any development permit, approval or authorization issued
by any municipal, county, state or federal agency. Neither the
Company nor any Subsidiary is in default, nor has the Company or
any Subsidiary received any notice of any claim of default, with
respect to any such Permits. All such Permits are renewable by
their terms or in the ordinary course of business without the
need to comply with any special qualification procedures or to
pay any amounts other than routine filing fees. None of such
Permits will be adversely affected by consummation of the
transactions contemplated hereby. No shareholder, director,
officer, employee or former employee of the Company or any
affiliates of the Company, or any other person, firm or
corporation owns or has any proprietary, financial or other
interest (direct or indirect) in any Permits which the Company or
any Subsidiary owns, possesses or uses in the operation of the
Business as now conducted.
II.1.17. Taxes. (a) All Tax Returns (as defined in
paragraph (e) below) that are required to be filed on or before
the Closing Date by the Company or any of the Subsidiaries have
been duly filed on a timely basis under the statutes, rules or
regulations of each applicable jurisdiction. To the best
knowledge of the Company, all such Tax Returns were complete and
accurate in all material respects. All Taxes reflected on such
returns as owed by the Company or the Subsidiaries have been
paid, whether or not such Taxes are disputed.
(b) No claim for assessment or collection of Taxes has
been asserted against the Company or any of the Subsidiaries.
Except as disclosed on Schedule 2.1.17(b), neither the Company
nor any of the Subsidiaries is a party to any pending action,
proceeding or investigation by any Governmental Entity for the
assessment or collection of Taxes nor does the Company have
knowledge of any such threatened action, proceeding or
investigation.
(c) Except as disclosed on Schedule 2.1.17(c), no
waivers of statutes of limitation in respect of any Tax Returns
have been given or requested by the Company or any of the
Subsidiaries nor has the Company or any Subsidiary agreed to any
extension of time with respect to a Tax assessment or deficiency.
No claim has ever been made by a Governmental Entity in a
jurisdiction where the Company or any Subsidiary does not
currently file Tax Returns that it is or may be subject to
taxation by that jurisdiction nor is the Company aware that any
such assertion of jurisdiction is threatened. No security
interests have been imposed upon or asserted against any of the
assets of the Company or any of the Subsidiaries as a result of
or in connection with any failure, or alleged failure, to pay any
Tax.
(d) To the best knowledge of the Company, the Company
and each of the Subsidiaries has withheld and paid all Taxes
required to be withheld in connection with any amounts paid or
owing to any employee, creditor, consultant, independent
contractor or other third party.
(e) For purposes of this Agreement, the terms "Tax"
and "Taxes" shall mean all federal, state, local, or foreign
income, payroll, employee withholding, unemployment insurance,
social security, sales, use, service, service use, leasing,
leasing use, excise, franchise, gross receipts, value added,
alternative or add-on minimum, estimated, occupation, real and
personal property, stamp, transfer, workers' compensation,
severance, windfall profits, environmental (including taxes under
Section 59A of the Code), or other tax of the same or of a
similar nature, including any interest, penalty, or addition
thereto, whether disputed or not. The term "Tax Return" means
any return, declaration, report, claim for refund, or information
return or statement relating to Taxes or any amendment thereto,
and including any schedule or attachment thereto.
II.1.18. Real Property. (a) The SEC Reports list all
material real property owned by the Company and each of its
Subsidiaries (collectively, the "Owned Real Property"). Except
as described in the SEC Reports or on Schedule 2.1.18(a), the
Company and each of its Subsidiaries has good and indefeasible
title in fee simple title to all Owned Real Property owned by it,
free and clear of all Liens (other than Permitted Liens).
(b) The SEC Reports describe all material real property
leased by the Company and each of its Subsidiaries (collectively,
the "Leased Real Property"). Except as described in the SEC
Reports or on Schedule 2.1.18(b), the Company and each of the
Subsidiaries has good and valid leaseholds in all Leased Real
Property, in each case, under enforceable leases, free and clear
of all Liens (except Permitted Liens).
(c) None of such Owned Real Property or Leased Real
Property is subject to any easements, rights of way, licenses,
grants, building or use restrictions, exceptions, reservations,
limitations or other impediments which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
II.1.19. Commissions or Finders Fees. Neither the
Company or any Subsidiary nor any person or entity acting on the
behalf of the Company or any Subsidiary has agreed to pay a
commission, finder's fee or similar payment in connection with
this Agreement or any matter related hereto to any other person
or entity.
II.1.20. Certain Business Practices and Regulations;
Affiliate Transactions. (a) None of the Company, the
Subsidiaries or any directors, officers, agents or employees of
the Company or the Subsidiaries has (i) used any corporate funds
for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or
campaigns from corporate funds or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (iii) made
any other unlawful payment.
(b) Except as described in the SEC Reports or on
Schedule 2.1.20(b), none of (A) the officers or directors of the
Company or any of the Subsidiaries or any entity controlling or
controlled by any of the foregoing, or (B) any securityholder
known to the Company to own of record or beneficially more than
5% of the Common Stock, (i) owns, directly or indirectly, in
whole or in part, any Leased Real Property or other property the
use of which is necessary for the Business, (ii) has any cause of
action or other suit, action or claim whatsoever against, or owes
any amount to the Company or any of the Subsidiaries other than
claims in the ordinary course of business, (iii) has sold to, or
purchased from, the Company or any of the Subsidiaries any assets
or property for aggregate consideration in excess of $60,000
since January 1, 1998, or (iv) is a party to any contract or
participates in any arrangement, written or oral, pursuant to
which the Business provides services of any nature to any such
individual or entity, except to such individual in his capacity
as an employee of the Company or any of the Subsidiaries.
II.1.21. Compliance with Nasdaq National Market Rules
and Regulations. The Company has complied in all material
respects with all rules and regulations of the National
Associations of Securities Dealers, Inc. ("NASD") as they pertain
to the Nasdaq Stock Market's National Market interdealer
quotation system since the date the Common Stock was originally
approved for quotation thereon. No event has occurred or, to the
knowledge of the Company, is reasonably likely to occur which
could result in the Common Stock being delisted from the Nasdaq
National Market or the Company being subject to any material fine
or sanction imposed by The Nasdaq Stock Market or the NASD.
II.2. Representations and Warranties of the Purchaser. The
Purchaser makes the following representations and warranties to
the Company, each of which is true and correct as of the date
hereof and shall be true and correct as of the Closing Date and
shall be unaffected by any investigation heretofore or hereafter
made by the Company.
II.2.1. Corporate Organization. The Purchaser is a
limited partnership duly formed and validly existing under the
laws of the State of Texas and has the requisite partnership
power and authority to own, lease or otherwise hold its
properties and assets and to carry on its business as presently
conducted.
II.2.2. Authorization and Effect of Agreement. The
Purchaser has the requisite partnership power to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby to be consummated by it. The execution and
delivery by the Purchaser of this Agreement and the consummation
by it of the transactions contemplated hereby to be consummated
by it have been duly authorized by all necessary partnership
action on the part of the Purchaser. This Agreement has been
duly executed and delivered by the Purchaser and constitutes a
valid and binding obligation of the Purchaser, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
II.2.3. Investment Intent. The Purchaser is acquiring
the Securities for its own account for investment and not with a
view to, or for sale or other disposition in connection with, any
distribution thereof, nor with any present intention, agreement
or understanding to sell or otherwise dispose of all or any part
of the Securities.
II.2.4. Sophistication and Financial Strength. The
Purchaser is an "accredited investor" (as that term is defined in
Rule 501 promulgated under the Securities Act) with such
knowledge and experience in business and financial matters that
the Purchaser is capable of evaluating, and has evaluated, the
merits and risks of an investment in the Company and of making an
informed investment decision. The Purchaser has sufficient
financial strength to hold the Securities as an investment and to
bear the economic risks of such investment (including the
possible loss of such investment) for an indefinite period of
time. The Purchaser has had the opportunity to ask questions of
representatives of the Company and receive answers concerning the
terms and conditions of the Securities and to obtain any
additional information that it deemed necessary to verify the
accuracy of information provided to Purchaser by the Company.
II.2.5. Restrictions on Transfer. The Purchaser
understands that neither the Securities nor the Common Stock for
which the Securities may be redeemed has been registered under
the Securities Act or the securities laws of any state or other
jurisdiction and that neither the Securities nor the Common Stock
may be offered for sale, sold, transferred or otherwise disposed
of unless registered under the Securities Act and any applicable
state securities laws or sold, transferred or disposed of in a
transaction exempt for the registration requirements of the
Securities Act and any applicable state securities laws (and, if
requested by the Company, the Purchaser shall deliver an opinion
of counsel reasonably satisfactory to the Company that such
transaction is exempt from such registration requirements).
ARTICLE III. CONDITIONS TO CLOSING
III.1. Conditions Precedent to Obligations of the
Purchaser. The obligations of the Purchaser under this Agreement
to consummate the transactions contemplated hereby will be
subject to the satisfaction, at or prior to Closing, of all of
the following conditions, any one or more of which may be waived
at the option of the Purchaser:
III.1.1. Representations, Warranties and Covenants.
(a) All representations and warranties of the Company
made in this Agreement or in any Exhibit, Schedule or
document delivered pursuant hereto that are qualified with
respect to materiality shall be true and complete in all
respects as of the date hereof and on and as of the Closing
Date and such representations and warranties that are not so
qualified shall be true and complete on the date hereof and,
in all material respects, on and as of the Closing Date,
without regard to any schedule updates furnished by the
Company after the date hereof.
(b) All of the terms, covenants and conditions to be
complied with and performed by the Company on or prior to
the Closing Date shall have been complied with or performed.
(c) The Purchaser shall have received a certificate,
dated as of the Closing Date, executed by an Executive
Officer of the Company, certifying in such detail as the
Purchaser may reasonably request that the conditions
specified in Sections 3.1.1(a) and (b) hereof have been
fulfilled.
III.1.2. Closing Deliveries. The Company shall have
delivered to the Purchaser the documents identified in Section
4.1.
III.1.3. Governmental Consents or Approvals. Each of
the governmental and other approvals, consents or waivers listed
or required to be listed on Schedule 2.1.4 shall have been
obtained.
III.1.4. No Adverse Proceedings. No suit, action,
claim or governmental proceeding shall be pending against, and no
order, decree or judgment of any court, agency or Governmental
Entity shall have been rendered against, any party hereto which
would render it unlawful, as of the Closing Date, to effect the
transactions contemplated by this Agreement in accordance with
its terms.
III.1.5. Stock Certificates. Stock certificates
representing the Securities shall have been duly executed and
delivered in accordance with Section 1.2.
III.1.6. Certificate of Designations. The Certificate
of Designations shall have been duly filed with, and accepted by,
the Secretary of State of the State of Delaware.
III.2. Conditions Precedent to Obligations of the Company.
The obligations of the Company under this Agreement to
consummate the transactions contemplated hereby will be subject
to the satisfaction, at or prior to the Closing, of all of the
following conditions, any one or more of which may be waived at
the option of the Company:
III.2.1. No Material Misrepresentation or Breach.
(a) All representations and warranties of the
Purchaser made in this Agreement or in any Exhibit, Schedule
or document delivered pursuant hereto, shall be true and
complete in all material respects as of the date hereof and
on and as of the Closing Date.
(b) All of the terms, covenants and conditions to be
complied with and performed by the Purchaser on or prior to
the Closing Date shall have been complied with or performed.
(c) The Company shall have received a certificate,
dated as of the Closing Date, executed by an Executive
Officer of the Purchaser, certifying in such detail as the
Company may reasonably request that the conditions specified
in Sections 3.2.1(a) and (b) hereof have been fulfilled.
III.2.2. Closing Deliveries. The Purchaser shall have
delivered to the Company the purchase price and certificate as
set forth in Section 4.2.
III.2.3. Governmental Consents or Approvals. Each of
the governmental and other approvals, consents or waivers listed
on Schedule 2.1.4 shall have been obtained.
III.2.4. No Adverse Proceedings. No suit, action,
claim or governmental proceeding shall be pending against, and no
order, decree or judgment of any court, agency or other
Governmental Entity shall have been rendered against, any party
hereto which would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement in
accordance with its terms.
III.3. Conditions Precedent to Obligations of each of the
Company and the Purchaser. The obligations of the Company and
the Purchaser under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or
prior to the Closing, of all of the following conditions, any one
or more of which may be waived by mutual agreement of the Company
and the Purchaser:
III.3.1. Investor Rights Agreement. An Investor
Rights Agreement (the "Investor Rights Agreement"), in the form
attached as an exhibit to the Master Agreement (as defined),
shall have been duly executed and delivered, shall be in full
force and effect and no term or condition thereof shall have been
amended, modified or waived.
III.3.2. Master Agreement. A Master Agreement (the
"Master Agreement"), shall have been duly executed and delivered,
shall be in full force and effect and no term or condition
thereof shall have been amended, modified or waived.
III.3.3. Loan Agreement. A Loan Agreement (the "Loan
Agreement"), in the form attached as an exhibit to the Master
Agreement, shall have been duly executed and delivered, shall be
in full force and effect and no term or condition thereof shall
have been amended, modified or waived.
ARTICLE IV. CLOSING DELIVERIES
IV.1. Deliveries by the Company. At the Closing, the
Company will deliver to the Purchaser the following:
IV.1.1. Certified Resolutions. Certified resolutions
of the Board of Directors of the Company approving the execution
and delivery of this Agreement, the Transaction Documents, and
each of the other documents delivered by the Company pursuant
hereto or thereto and authorizing the consummation of the
transactions contemplated hereby and thereby.
IV.1.2. Officer's Certificate. A certificate, dated
the Closing Date, executed on behalf of the Company in the form
described in Section 3.1.1.
IV.1.3. Good Standing Certificates. Governmental
certificates showing that the Company and the Subsidiaries are
duly incorporated and in good standing in the state of its
organization certified as of a date not more than five (5) days
before the Closing Date.
IV.2. Deliveries by the Purchaser. At the Closing, the
Purchaser will deliver to the Company:
IV.2.1. Purchase Price. Cash in immediately available
funds via wire transfer in the aggregate amount of $9,999,995.52
to the account or accounts designated by the Company pursuant to
Section 1.2.
IV.2.2. Officer's Certificate. A certificate, dated
the Closing Date, executed on behalf of the Purchaser in the form
described in Section 3.2.1.
ARTICLE V. POST-CLOSING COVENANTS
V.1. Post-Closing Notifications. The Purchaser and the
Company will, and each will cause their respective affiliates to,
comply with any post-Closing notification or other requirements,
to the extent then applicable to such party, of any antitrust,
trade competition, investment or control, export or other law of
any Governmental Entity having jurisdiction over the Purchaser or
the Company.
V.2. Certain Tax Matters. All sales, use, transfer, stamp,
conveyance, value added or other similar taxes, duties, excises
or governmental charges imposed by any taxing jurisdiction,
domestic or foreign, and all recording or filing fees, notarial
fees and other similar costs of Closing with respect to the
issuance of the Securities or otherwise on account of this
Agreement or the transactions contemplated hereby will be borne
by the Company. The Company will indemnify the Purchaser against
any liability, direct or indirect, for any Taxes imposed on the
Purchaser with respect to the issuance of the Securities.
ARTICLE VI. SURVIVAL AND INDEMNIFICATION
VI.1. Survival of Representations, Warranties and
Covenants. (a) The representations and warranties of the
Company and of the Purchaser contained in this Agreement shall
survive the Closing for a period of two years thereafter. Any
claim for an Indemnifiable Loss (as hereafter defined) asserted
within such period of survival as herein provided will be timely
made for purposes hereof.
(b) Unless a specified period is set forth in this
Agreement (in which event such specified period will control),
the covenants in this Agreement shall survive the Closing and
remain in effect for two years.
VI.2. Certain Definitions. For purposes of this Agreement,
(i) "Indemnity Payment" means any amount of Indemnifiable Losses
required to be paid pursuant to this Agreement, (ii) "Indemnitee"
means any person or entity entitled to indemnification under this
Agreement, (iii) "Indemnifying Party" means any person or entity
required to provide indemnification under this Agreement,
(iv) "Indemnifiable Losses" means any and all damages, losses,
liabilities, obligations, costs and expenses, and any and all
claims, demands or suits (by any person or entity, including
without limitation any Governmental Entity), including without
limitation the costs and expenses of any and all actions, suits,
proceedings, demands, assessments, judgments, settlements and
compromises relating thereto and including reasonable attorneys'
fees and expenses in connection therewith; provided, that
Indemnifiable Losses shall not include any loss of anticipated
profits, loss of use of revenues or capital, or any other
special, incidental or consequential losses or damages, and
(v) "Third Party Claim" means any claim, action or proceeding
made or brought by any person or entity who or which is not a
party to this Agreement or an affiliate of a party to this
Agreement.
VI.3. Indemnification. (a) The Company agrees to
indemnify, defend and hold harmless the Purchaser and its
affiliates and their respective directors, officers, partners,
employees, agents and representatives from and against any and
all Indemnifiable Losses, subject to the limitations and
equitable adjustments set forth Section 6.5 hereof, to the extent
relating to, resulting from or arising out of:
(i) any breach of representation or warranty of
the Company under Article II of this Agreement; and
(ii) any breach or nonfulfillment of any agreement
or covenant of the Company under the terms of this
Agreement.
(b) The Purchaser agrees to indemnify, defend and hold
harmless the Company and its affiliates and their respective
directors, officers, partners, employees, agents, and
representatives from and against any and all Indemnifiable
Losses, subject to the limitations set forth Section 6.5 hereof,
to the extent relating to, resulting from and arising out of:
(i) any breach of representation or warranty by
the Purchaser under Article II of this Agreement; and
(ii) any breach or nonfulfillment of any agreement
or covenant of the Purchaser under the terms of this
Agreement.
(c) (i) The Company agrees to pay, in accordance with
Section 6.3(c)(ii) below, any costs and expenses of the
defense of any lawsuit (a "Transaction Suit"), including any
negotiations relating to the settlement or compromise
thereof, initiated by a third party against the Purchaser or
any of its affiliates or their respective officers,
directors, employees, partners, agents or representatives
(each, a "Purchaser Transaction Defense Party") that arises
out of or is based upon allegations relating to the
transactions contemplated by the Transaction Documents that
are consummated on the Closing Date in the event that any
such Transaction Suit is filed within two years of the date
of this Agreement.
(ii) If any Purchaser Transaction Defense Party is
named or becomes party to any Transaction Suit, the Company
agrees to assume and provide for the defense of such
Purchaser Transaction Defense Party, including providing a
joint defense in the event that the Company or any of its
affiliates or their officers, directors, employees,
partners, agents or representatives (each, a "Company
Transaction Defense Party") is named or becomes a party to
such Transaction Suit. The Company shall provide legal
counsel to the Purchaser Transaction Defense Party (and pay
all related fees and expenses of such counsel), which
counsel shall be reasonably satisfactory to Purchaser and
may be counsel for the Company. Notwithstanding the
foregoing, the Purchaser Transaction Defense Parties shall
have the right to employ their own counsel, and the Company
shall pay the reasonable fees and expenses of such counsel
in an amount up to $250,000, in the event that the
Purchaser, upon advice of counsel, reasonably concludes that
there is a conflict of interest between any Purchaser
Transaction Defense Party, on the one hand, and any Company
Transaction Defense Party, on the other hand, in any such
Transaction Suit.
VI.4. Defense of Claims. (a) If any Indemnitee receives
notice of assertion or commencement of any Third Party Claim
against such Indemnitee with respect to which an Indemnifying
Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not
later than 20 calendar days after receipt of such notice of such
Third Party Claim. Such notice will describe the Third Party
Claim in reasonable detail, will include copies of all material
written evidence thereof and will indicate the estimated amount,
if reasonably practicable, of the Indemnifiable Loss that has
been or may be sustained by the Indemnitee. The Indemnifying
Party will have the right to participate in, or, by giving
written notice to the Indemnitee, to assume, the defense of any
Third Party Claim at such Indemnifying Party's own expense and by
such Indemnifying Party's own counsel (reasonably satisfactory to
the Indemnitee), and the Indemnitee will cooperate in good faith
in such defense.
(b) If, within ten calendar days after giving notice
of a Third Party Claim to an Indemnifying Party pursuant to
Section 6.4(a), an Indemnitee receives written notice from the
Indemnifying Party that the Indemnifying Party has elected to
assume the defense of such Third Party Claim as provided in the
last sentence of Section 6.4(a), the Indemnifying Party will not
be liable for any legal expenses subsequently incurred by the
Indemnitee in connection with the defense thereof; provided,
however, that if the Indemnifying Party fails to take reasonable
steps necessary to defend diligently such Third Party Claim
within ten calendar days after receiving written notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party
has failed to take such steps or if the Indemnifying Party has
not undertaken fully to indemnify the Indemnitee in respect of
all Indemnifiable Losses relating to the matter, the Indemnitee
may assume its own defense, and the Indemnifying Party will be
liable for all reasonable costs or expenses paid or incurred in
connection therewith. Without the prior written consent of the
Indemnitee, the Indemnifying Party will not enter into any
settlement of any Third Party Claim which would lead to liability
or create any financial or other obligation on the part of the
Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder. If a firm offer is made to settle a
Third Party Claim without leading to liability or the creation of
a financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder
and the Indemnifying Party desires to accept and agree to such
offer, the Indemnifying Party will give written notice to the
Indemnitee to that effect. If the Indemnitee fails to consent to
such firm offer within ten calendar days after its receipt of
such notice, the Indemnitee may continue to contest or defend
such Third Party Claim and, in such event, the maximum liability
of the Indemnifying Party as to such Third Party Claim will not
exceed the amount of such settlement offer, plus costs and
expenses paid or incurred by the Indemnitee through the end of
such ten calendar day period.
(c) A failure to give timely notice or to include any
specified information in any notice as provided in Sections
6.4(a) or 6.4(b) will not affect the rights or obligations of any
party hereunder except and only to the extent that, as a result
of such failure, any party which was entitled to receive such
notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise damaged as a
result of such failure.
(d) The Indemnifying Party will have a period of 30
calendar days within which to respond in writing to any claim by
an Indemnitee on account of an Indemnifiable Loss which does not
result from a Third Party Claim (a "Direct Claim"). If the
Indemnifying Party does not so respond within such 30 calendar
day period, the Indemnifying Party will be deemed to have
rejected such claim, in which event the Indemnitee will be free
to pursue such remedies as may be available to the Indemnitee on
the terms and subject to the provisions of this Article VI.
VI.5. Limitation of Liability. (a) Notwithstanding any
other provision hereof, no Indemnitee will be entitled to make a
claim against an Indemnifying Party in respect of any breach of a
representation or warranty under Section 6.3(a)(i) or 6.3(b)(i)
unless and until the aggregate amount of claims in respect of
breaches of representations and warranties asserted for
Indemnifiable Losses under Section 6.3(a)(i) or 6.3(b)(i), as
applicable, exceeds $500,000, in which event the Indemnitee will
be entitled to make a claim against the Indemnifying Party to the
extent of the full amount of the Indemnifiable Losses.
(b) Notwithstanding any other provision hereof, in no
event shall an Indemnifying Party be liable under this Article VI
for any Indemnifiable Losses in excess of $10,000,000.
(c) In the event of a claim or right of action by
either party hereto against the other party arising out of this
Agreement and the transactions contemplated hereby (whether based
on contract, tort (including negligence), strict liability or
otherwise), each party's sole and exclusive remedy shall be its
rights under this Article VI and Section 8.1 of this Agreement.
ARTICLE VII. TERMINATION
VII.1. Termination. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated
at any time prior to the Closing, (a) by the mutual written
consent of the Purchaser and the Company, or (b) if the party
seeking to terminate is not then in material default or breach of
this Agreement:
(i) by either the Purchaser or the Company if the
Closing shall not have occurred on or before June 30, 1998;
(ii) by either the Purchaser or the Company if there
shall have been entered a final, nonappealable order or
injunction of any Governmental Entity restraining or
prohibiting the consummation of the transactions
contemplated hereby or any material part thereof; or
(iii) by either the Purchaser or the Company if the
other party is in material breach of any representation,
warranty, covenant or agreement herein contained and such
breach shall not be cured within twenty (20) days of the
date of notice of default served by the party claiming such
material default.
In no event shall termination of this Agreement relieve any party
of any liability for breaches of this Agreement prior to the date
of termination.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
VIII.1. Specific Performance. The parties recognize that
if the Company refuses to perform under the provisions of this
Agreement, monetary damages alone will not be adequate to
compensate the Purchaser for its injury. The Purchaser shall
therefore be entitled, in addition to any other remedies that may
be available, to obtain specific performance of the terms of this
Agreement. If any action is brought by the Purchaser to enforce
this Agreement, the Company shall waive the defense that there is
an adequate remedy at law. In the event of a default by the
Company which results in the filing of a lawsuit for damages,
specific performances, or other remedies, the Purchaser shall be
entitled to reimbursement by the Company of reasonable legal fees
and expenses incurred by the Purchaser.
VIII.2. Notices. All notices and other communications
required or permitted hereunder will be in writing and (i)
delivered personally, (ii) sent by telefacsimile, (iii) delivered
by a nationally recognized overnight courier service, or (iv)
sent by registered or certified mail, postage prepaid, as
follows:
(a) If to the Company, to:
Stratus Properties Inc.
98 San Jacinto Boulevard, Suite 2200
Austin, Texas 78701
Facsimile No.: (512) 478-5788
Attention: William H. Armstrong, III
with a copy to:
Stratus Properties Inc.
1615 Poydras
New Orleans, LA 70112
Facsimile No.: (504) 585-3513
Attention: John G. Amato
(b) If to the Purchaser, to:
Oly/Stratus Equities, L.P.
200 Crescent Court, Suite 1650
Dallas, Texas 75201
Facsimile No.: (214) 740-7355
Attention: David D. Deniger
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Facsimile No.: (214) 746-7777
Attention: Robert C. Feldman
All notices and other communications required or permitted under
this Agreement that are addressed as provided in this Section 8.2
will (x) if delivered personally or by overnight courier service,
be deemed given upon delivery; (y) if delivered by telefacsimile
or similar facsimile transmission, be deemed given when electron-
ically confirmed; and (z) if sent by registered or certified
mail, be deemed given three days following the date mailed. Any
party from time to time may change its address for the purpose of
notices to that party by giving a similar notice specifying a new
address, but no such notice will be deemed to have been given
until it is actually received by the party sought to be charged
with the contents thereof.
VIII.3. Expenses. Except as otherwise expressly set forth
herein, each party hereto shall pay its own fees and expenses
incurred by it in connection with the transactions contemplated
by this Agreement.
VIII.4. Successors and Assigns. This Agreement will be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but will not
be assignable or delegable by the Company. Nothing in this
Agreement is intended to limit the ability of the Purchaser to
sell or to transfer any or all of the Securities (and the rights
relating thereto) following the Closing Date.
VIII.5. Waiver. The Purchaser and the Company by written
notice to the other may (a) extend the time for performance of
any of the obligations of the other under this Agreement,
(b) waive any inaccuracies in the representations or warranties
of the other contained in this Agreement or in any document
delivered in connection herewith, (c) waive compliance with any
of the conditions or covenants of the other contained in this
Agreement, or (d) waive or modify performance of any of the
obligations of the other under this Agreement; provided, however,
that no such party may, without the prior written consent of the
other party, make or grant such extension of time, waiver of
inaccuracies or compliance or waiver or modification of
performance with respect to its (or any of its affiliates)
representations, warranties, conditions or covenants hereunder.
Except as provided in the immediately preceding sentence, no
action taken pursuant to this Agreement will be deemed to
constitute a waiver of compliance with any representations,
warranties, conditions or covenants contained in this Agreement
and will not operate or be construed as a waiver of any
subsequent breach, whether of a similar or dissimilar nature.
VIII.6. Entire Agreement. The Transaction Documents
(including the Schedules and Exhibits hereto and thereto)
supersedes any other agreement, whether written or oral, that may
have been made or entered into by any party or any of their
respective affiliates (or by any director, officer or
representative thereof) relating to the matters contemplated
hereby or thereby. The Transaction Documents (together with the
Exhibits and Schedules hereto and thereto) constitutes the entire
agreement by and among the parties hereto and there are no
agreements or commitments by or among such parties or their
affiliates except as expressly set forth herein.
VIII.7. Amendments and Supplements. This Agreement may be
amended or supplemented at any time by additional written
agreements signed by the parties hereto.
VIII.8. Rights of the Parties. Except as expressly
provided in Article VI or in Section 8.4, nothing expressed or
implied in this Agreement is intended or will be construed to
confer upon or give any person or entity other than the parties
hereto and their respective affiliates any rights or remedies
under or by reason of this Agreement or any transaction
contemplated hereby.
VIII.9. Brokers. The Purchaser hereby agrees to indemnify
and hold harmless the Company, and the Company hereby agrees to
indemnify and hold harmless the Purchaser, against any liability,
claim, loss, damage or expense incurred by the Purchaser or by
the Company, as the case may be, relating to any fees or
commissions owed to any broker, finder, or financial advisor as a
result of actions taken by the other in connection with this
Agreement or the transactions contemplated hereby. Any
indemnification payment by the Company required by this Section
shall be equitably adjusted so that the payment of such amount
shall not adversely affect the Purchaser, through its ownership
of the Securities or the Common Stock issuable upon redemption
thereof, if any, or otherwise.
VIII.10. Further Assurances. From time to time, as and
when requested by any party, the other party will execute and
deliver, or cause to be executed and delivered, all such
documents and instruments as may be reasonably necessary to
consummate the transactions contemplated by this Agreement.
VIII.11. Governing Law. This Agreement, including without
limitation, the interpretation, construction and validity hereof,
shall be governed by the laws of the State of Delaware, without
regard to conflict of law principles thereof.
VIII.12. Severability. The parties agree that if one or
more provisions contained in this Agreement shall be deemed or
held to be invalid, illegal or unenforceable in any respect under
any applicable law, this Agreement shall be construed with the
invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions
contained herein shall not be affected or impaired thereby.
VIII.13. Execution in Counterparts. This Agreement may be
executed in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one
and the same agreement.
VIII.14. Titles and Headings. Titles and headings to
sections herein are inserted for convenience of reference only,
and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
VIII.15. Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) "Transaction
Documents" mean, collectively, this Agreement, the Certificate of
Designations, the Investor Rights Agreement, the Master
Agreement, and the Loan Agreement, including all exhibits and
schedules hereto or thereto, (ii) all references to Sections,
Articles or Schedules are to Sections, Articles or Schedules of
or to this Agreement, (iii) each term defined in this Agreement
has the meaning assigned to it, (iv) each accounting term not
otherwise defined in this Agreement has the meaning assigned to
it in accordance with GAAP, (v) "or" is disjunctive but not
necessarily exclusive, (vi) words in the singular include the
plural and vice versa, and (vii) the terms "affiliate" and
"subsidiary" have the meanings given to them in Rule 12b-2 of
Regulation 12B under the Exchange Act. All references to "$" or
dollar amounts will be to lawful currency of the United States of
America.
(b) No provision of this Agreement will be interpreted
in favor of, or against, either of the parties hereto by reason
of the extent to which either such party or its counsel
participated in the drafting thereof or by reason of the extent
to which any such provision is inconsistent with any prior draft
hereof or thereof.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
STRATUS PROPERTIES INC.
(formerly known as FM Properties Inc.)
By:
Name:
Title:
OLY/STRATUS EQUITIES, L.P.
By: Oly Fund II GP Investments, L.P.,
its General Partner
By: Oly Real Estate Partners II,
L.P., its General Partner
By: Oly REP II, L.P., its
General Partner
By: Oly Fund II, LLC,
its General Partner
By:
Name:
Title:
TABLE OF CONTENTS
Page
ARTICLE I. ISSUANCE OF SECURITIES ............ 1
1.1. Authorization...................................... 1
1.2. Purchase and Sale of the Securities; the Closing... 1
ARTICLE II. REPRESENTATIONS AND WARRANTIES........ 2
2.1. Representations and Warranties of the Company...... 2
2.1.1. Organization and Good Standing.............. 2
2.1.2. Authorization of Agreement; Binding
Obligation..................................... 2
2.1.3. Subsidiaries and Equity Investments......... 3
2.1.4. No Restrictions Against Issuance of
Securities; Required Consents.................. 3
2.1.5. Capitalization.............................. 4
2.1.6. Financial Statements........................ 5
2.1.7. Business, Properties and Other
Information.................................... 5
2.1.8. Absence of Undisclosed Liabilities.......... 6
2.1.9. Books of Account............................ 7
2.1.10. Contracts and Commitments.................. 7
2.1.11. Liens and Encumbrances; Condition of
Assets......................................... 7
2.1.12. Insurance.................................. 8
2.1.13. Conduct of the Business Since the Interim
Balance Sheet Date............................. 8
2.1.14. Employee Benefit Plans..................... 10
2.1.15. Litigation; Decrees........................ 10
2.1.16. Compliance With Law; Permits............... 11
2.1.17. Taxes...................................... 11
2.1.18. Real Property.............................. 12
2.1.19. Commissions or Finders Fees................ 13
2.1.20. Certain Business Practices and
Regulations; Affiliate Transactions............ 13
2.1.21. Compliance with Nasdaq National Market
Rules and Regulations.......................... 13
2.2. Representations and Warranties of the Purchaser.... 14
2.2.1. Corporate Organization...................... 14
2.2.2. Authorization and Effect of Agreement....... 14
2.2.3. Investment Intent........................... 14
2.2.4. Sophistication and Financial Strength....... 14
2.2.5. Restrictions on Transfer.................... 15
ARTICLE III. CONDITIONS TO CLOSING............ 15
3.1. Conditions Precedent to Obligations of the
Purchaser........................................... 15
3.1.1. Representations, Warranties and Covenants... 15
3.1.2. Closing Deliveries.......................... 16
3.1.3. Governmental Consents or Approvals.......... 16
3.1.4. No Adverse Proceedings...................... 16
3.1.5. Stock Certificates.......................... 16
3.1.6. Certificate of Designations................. 16
3.2. Conditions Precedent to Obligations of the
Company............................................. 16
3.2.1. No Material Misrepresentation or Breach..... 16
3.2.2. Closing Deliveries.......................... 17
3.2.3. Governmental Consents or Approvals.......... 17
3.2.4. No Adverse Proceedings...................... 17
3.3. Conditions Precedent to Obligations of each of
the Company and the Purchaser....................... 17
3.3.1. Investor Rights Agreement................... 17
3.3.3. Loan Agreement.............................. 17
ARTICLE IV. CLOSING DELIVERIES.............. 17
4.1. Deliveries by the Company.......................... 17
4.1.1. Certified Resolutions....................... 18
4.1.2. Officer's Certificate....................... 18
4.1.3. Good Standing Certificates.................. 18
4.2. Deliveries by the Purchaser........................ 18
4.2.1. Purchase Price.............................. 18
4.2.2. Officer's Certificate....................... 18
ARTICLE V. POST-CLOSING COVENANTS ............ 18
5.1. Post-Closing Notifications......................... 18
5.2. Certain Tax Matters................................ 18
ARTICLE VI. SURVIVAL AND INDEMNIFICATION......... 19
6.1. Survival of Representations, Warranties and
Covenants........................................... 19
6.2. Certain Definitions................................ 19
6.3. Indemnification.................................... 19
6.4. Defense of Claims.................................. 20
6.5. Limitation of Liability............................ 22
ARTICLE VII. TERMINATION................. 22
7.1. Termination........................................ 22
ARTICLE VIII. MISCELLANEOUS PROVISIONS.......... 23
8.1. Specific Performance............................... 23
8.2. Notices............................................ 23
8.3. Expenses........................................... 24
8.4. Successors and Assigns............................. 24
8.5. Waiver............................................. 25
8.6. Entire Agreement................................... 25
8.7. Amendments and Supplements......................... 25
8.8. Rights of the Parties.............................. 25
8.9. Brokers............................................ 25
8.10. Further Assurances................................ 26
8.11. Governing Law..................................... 26
8.12. Severability...................................... 26
8.13. Execution in Counterparts......................... 26
8.14. Titles and Headings............................... 26
8.15. Certain Interpretive Matters and Definitions...... 26
Defined Terms
Agreement.......................................... Introduction
Business............................................... Recitals
Certificate of Designations.......................... Section 1.1
Closing Date......................................... Section 1.2
Code........................................... Section 2.1.14(b)
Commission......................................... Section 2.1.7
Common Stock....................................... Section 2.1.5
Company............................................. Introduction
Company Transaction Defense Party..............Section 6.3(c)(ii)
Direct Claim...................................... Section 6.4(d)
Employee Plans................................. Section 2.1.14(a)
ERISA.......................................... Section 2.1.14(a)
Exchange Act....................................... Section 2.1.7
GAAP............................................... Section 2.1.6
Governmental Entity............................... Section 2.1.4
Indemnifiable Losses................................. Section 6.2
Indemnifying Party................................... Section 6.2
Indemnitee........................................... Section 6.2
Indemnity Payment.................................... Section 6.2
Interim Balance Sheet Date......................... Section 2.1.6
Interim Balance Sheet.............................. Section 2.1.6
Investor Rights Agreement.......................... Section 3.3.1
Leased Real Property........................... Section 2.1.18(b)
Liens.......................................... Section 2.1.11(a)
Master Agreement................................... Section 3.3.2
NASD.............................................. Section 2.1.21
Owned Real Property............................ Section 2.1.18(a)
Pension Plans.................................. Section 2.1.14(a)
Permits........................................... Section 2.1.16
Permitted Liens................................ Section 2.1.11(a)
Preferred Stock.................................... Section 2.1.5
Purchaser........................................... Introduction
Purchaser Transaction Defense Party.............Section 6.3(c)(i)
SEC Reports........................................ Section 2.1.7
Securities........................................... Section 1.1
Securities Act..................................... Section 2.1.4
Subsidiaries....................................... Section 2.1.3
Tax Return..................................... Section 2.1.17(e)
Tax............................................ Section 2.1.17(e)
Taxes.......................................... Section 2.1.17(e)
Third Party Claim.................................... Section 6.2
Transaction Documents............................ Section 8.15(a)
Transaction Suit................................Section 6.3(c)(i)
Exhibits
Exhibit A Form of Certificate of Designations
Schedules
Schedule 2.1.3 Subsidiaries and Equity Investments
Schedule 2.1.4 Governmental Entity Consents
Schedule 2.1.12 Insurance Matters
Schedule 2.1.14(a) Employee Plans and Pension Plans
Schedule 2.1.14(b) Pension Plans Qualification
Schedule 2.1.15 Litigation
Schedule 2.1.17(b) Tax Proceedings
Schedule 2.1.17(c) Tax Waivers
Schedule 2.1.18(a) Owned Real Property
Schedule 2.1.18(b) Leased Real Property
Schedule 2.1.20(b) Affiliate Transactions
NOTICE OF INDEMNIFICATION: THIS AGREEMENT CONTAINS
INDEMNIFICATION PROVISIONS IN ARTICLE VI, NOTICE OF WHICH IS
HEREBY GIVEN.
SECURITIES PURCHASE AGREEMENT
DATED AS OF MAY 22, 1998
BY AND BETWEEN
OLY/STRATUS EQUITIES, L.P.
AND
STRATUS PROPERTIES INC.
Exhibit 99.3
STATUS PROPERTIES INC. AND OLYMPUS REAL ESTATE CORPORATION
COMPLETE FORMATION OF STRATEGIC ALLIANCE FOR
REAL ESTATE ACQUISITION AND DEVELOPMENT ACTIVITIES
AUSTIN and DALLAS, TEXAS, May 26, 1998 - Stratus
Properties Inc . (NASDAQ: STRS) and Olympus Real Estate
Corporation (Olympus), an affiliate of Hicks, Muse, Tate &
Furst Incorporated, announced today that they have completed
the formation of their previously announced strategic
alliance to develop certain of STRS' existing properties and
to pursue new real estate acquisition and development
opportunities. Under the terms of the agreements, Olympus
has made a $10 million investment in STRS' mandatory
redeemable preferred stock, provided a $10 million
convertible debt financing facility to STRS and made
available up to $50 million of capital for direct investment
in joint STRS/Olympus projects.
Stratus Properties Inc., headquartered in Austin,
Texas, is engaged in the development and marketing of real
estate in the Austin, Dallas, Houston and San Antonio, Texas
areas.
Olympus Real Estate Corporation is a leading private
investment firm which invests in real estate equities,
mortgages, securities and operating businesses on a global
basis. Olympus was formed in 1994 by David B. Deniger as
the real estate investment affiliate of Hicks, Muse, Tate &
Furst Incorporated. Since the formation Olympus has
completed nearly $3 billion in real estate investments,
including numerous commercial, residential, hospitality and
golf-related projects throughout the world.
