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):
July 31, 1998
KENNEDY-WILSON, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-20418 95-4364537
(State or other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
530 Wilshire Boulevard, #101
Santa Monica, California 90401
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (310) 314-8400
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TABLE OF CONTENTS
Page
Item 2 Acquisition or Disposition of Assets 4
Item 5 Other Events 4
Item 7(a) Financial Statements 4
Item 7(b) Pro Forma Financial Information 4
Item 7(c) Exhibits 4
Signatures 5
Exhibit Index 6
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 17, 1998, Kennedy-Wilson, Inc. (the "Company") acquired from
Heitman Financial Ltd., a wholly-owned subsidiary of United Asset Management
Corporation, all of the issued and outstanding shares of capital stock of
Heitman Properties, Ltd., an Illinois corporation (the "Acquired Company"),
which, by and through its subsidiaries, provides property management, leasing
and construction management services to owners of commercial, residential and
industrial properties in approximately 26 states. The Company paid a total
purchase price of $20 million in cash for the Acquired Company. No material
relationship existed between the Company and Heitman Financial Ltd. prior to the
acquisition.
The purchase price and a portion of the expenses associated with the
acquisition were financed from the proceeds of a $21 million subordinated loan
(the "Loan") made by Colony K-W, LLC ("Colony") pursuant to a Bridge Loan
Agreement (the "Loan Agreement") dated as of July 16, 1998 among Colony, the
Company and certain of its subsidiaries. The Loan bears interest at a rate of
14% per annum and matures on January 15, 2000. The Loan is guaranteed by certain
subsidiaries of the Company on a subordinated basis and, pursuant to a Pledge
Agreement dated as of July 16, 1998 made by the Company in favor of Colony, is
secured by a pledge of all of the outstanding shares of the Acquired Company.
The terms of the Loan Agreement restrict, among other things, certain
borrowings, distributions and mergers involving the Company and the guarantors
and is subject to additional customary restrictive covenants. The remainder of
the acquisition expenses were paid utilizing a portion of the Company's existing
$15 million credit facility with East-West Bank.
The Acquired Company has been renamed Kennedy-Wilson Properties, Ltd.
and it is anticipated that it will continue to be operated primarily as a
property manager, leasing agent and construction manager.
ITEM 5. OTHER EVENTS
On July 16, 1998, Colony Investors III, L.P., the sole member of
Colony ("Colony Investors"), and the Company entered into a Stock Purchase
Agreement and a Warrant Agreement, pursuant to which Colony Investors purchased
(a) 440,085 shares of Common Stock of the Company and (b) warrants, exercisable
for seven years from July 16, 1998, to purchase an additional 132,026 shares of
Common Stock of the Company at an initial exercise price of $15.00 per share
(subject to adjustment as provided in said Warrant Agreement) for a total
aggregate purchase price of $5,232,610 (such Common Stock and warrants
collectively, the "Securities").
In connection with the purchase of the Securities, Colony Investors
and the Company entered into an Investor's Agreement, dated as of July 16, 1998
(the "Investor's Agreement"), pursuant to which the Company has agreed, during
the term and subject to the provisions thereof (including the continued
ownership of a specified minimum number of shares of Common Stock), among other
things, to take all action necessary such that the Board of Directors of the
Company shall include one class III director designated by Colony Investors, and
thereafter, to use its best efforts to cause a person designated by Colony
Investors to be included in each slate of proposed class III directors put forth
by the Company and its stockholders and recommended for election in any proxy
solicitation materials disseminated by the Company. Colony Investors has
designated as its initial director its affiliate, Thomas J. Barrack, Jr. With
certain exceptions as described in the Investor's Agreement, Colony Investors
has preemptive purchase rights to maintain its beneficial ownership percentage
for so long as its investment continues to represent at least 5% of the Company.
Colony Investors and the Company executed a Registration Rights
Agreement on July 16, 1998 (the "Registration Rights Agreement") with respect to
the Securities. Pursuant to the Registration Rights Agreement, and subject to
the terms and conditions thereof, the Securities beneficially owned by Colony
Investors are subject to demand and customary piggyback registration rights.
ITEM 7(a). FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The required financial statements will be provided by amendment in
accordance with Item 7(a)(4).
ITEM 7(b). PRO FORMA FINANCIAL INFORMATION
The required pro forma financial information will be provided by
amendment in accordance with Item 7(b)(2).
ITEM 7(c). EXHIBITS
The information set forth in the Exhibits attached hereto is hereby
expressly incorporated herein by reference and the response to each item of this
report is qualified in its entirety by the provisions of such exhibits.
Exhibit 2.1 Stock Purchase Agreement, dated as of July 17, 1998, between
Kennedy-Wilson, Inc. and Heitman Financial Ltd.
Exhibit 4.1 Registration Rights Agreement, dated as of July 16, 1998,
between Kennedy-Wilson, Inc. and Colony Investors III, L.P.
Exhibit 10.1 Bridge Loan Agreement, dated as of July 16, 1998, among
Kennedy-Wilson, Inc., as borrower, Kennedy-Wilson
International, K-W Properties and Kennedy-Wilson Properties,
Ltd., as guarantors, and Colony K-W, LLC, as lender.
Exhibit 10.2 Pledge Agreement, dated as of July 16, 1998 made by
Kennedy-Wilson, Inc. in favor of Colony K-W, LLC.
Exhibit 10.3 Stock Purchase Agreement, dated as of July 16, 1998, between
Kennedy-Wilson, Inc. and Colony Investors III, L.P.
Exhibit 10.4 Warrant Agreement, dated as of July 16, 1998, between
Kennedy-Wilson, Inc. and Colony Investors III, L.P.
Exhibit 10.5 Investor's Agreement, dated as of July 16, 1998, between
Kennedy-Wilson, Inc. and Colony Investors III, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 31, 1998 KENNEDY-WILSON, INC.
By:/s/ William J. McMorrow
-----------------------
Name: William J. McMorrow
Title: Chairman of the Board and
Chief Executive Officer
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EXHIBIT INDEX
Exhibit 2.1 Stock Purchase Agreement, dated as of July 17, 1998, between
Kennedy-Wilson, Inc. and Heitman Financial Ltd.
Exhibit 4.1 Registration Rights Agreement, dated as of July 16, 1998,
between Kennedy-Wilson, Inc. and Colony Investors III, L.P.
Exhibit 10.1 Bridge Loan Agreement, dated as of July 16, 1998, among
Kennedy-Wilson, Inc., as borrower, Kennedy-Wilson
International, K-W Properties and Kennedy-Wilson Properties,
Ltd., as guarantors, and Colony K-W, LLC, as lender.
Exhibit 10.2 Pledge Agreement, dated as of July 16, 1998 made by
Kennedy-Wilson, Inc. in favor of Colony K-W, LLC.
Exhibit 10.3 Stock Purchase Agreement, dated as of July 16, 1998, between
Kennedy-Wilson, Inc. and Colony Investors III, L.P.
Exhibit 10.4 Warrant Agreement, dated as of July 16, 1998, between
Kennedy-Wilson, Inc. and Colony Investors III, L.P.
Exhibit 10.5 Investor's Agreement, dated as of July 16, 1998, between
Kennedy-Wilson, Inc. and Colony Investors III, L.P.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of July 16,
1998, by Kennedy-Wilson, Inc. a Delaware corporation ("Buyer"), and Heitman
Financial Ltd., an Illinois corporation ( "Seller").
RECITALS
Seller desires to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of capital stock of Heitman
Properties Ltd., an Illinois corporation (the "Company"), for the consideration
and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings specified or referred to in this Section 1:
"Acquired Companies" -- the Company and the Subsidiaries,
collectively.
"Applicable Contract" -- any Contract included in the Retained Assets
(a) under which any Acquired Company has or may acquire any rights, (b) under
which any Acquired Company has or may become subject to any obligation or
liability, or (c) by which any Acquired Company or any of the assets owned or
used by it which is included in the Retained Assets is or may become bound.
"Balance Sheet" -- as defined in Section 3.4.
"Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any material inaccuracy in or material breach of, or any failure to
perform or comply with, such representation, warranty, covenant, obligation, or
other provision, or (b) any claim (by any Person) other than the Buyer or Seller
or a Related Person thereof or other occurrence or circumstance that is or was
materially inconsistent with such representation, warranty, covenant,
obligation, or other provision, and the term "Breach" means any such inaccuracy,
breach, failure, claim, occurrence, or circumstance.
"Buyer" -- as defined in the first paragraph of this Agreement.
"Buyer's Advisors"--as defined in Section 5.1.
"Closing" -- as defined in Section 2.3.
"Closing Date" -- the date and time as of which the Closing actually
takes place.
"Company" -- as defined in the Recitals of this Agreement.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the execution, delivery, and performance of the Mutual Release;
(c) the performance by Buyer and Seller of their respective covenants
and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and power to
exercise control over the Acquired Companies.
"Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is or
purports to be legally binding.
"Damages" -- as defined in Section 10.2.
"Disclosure Letter" -- the disclosure letter delivered by Seller to
Buyer concurrently with the execution and delivery of this Agreement and which
is so identified therein by the parties hereto.
"Employee Benefit Plan"--as defined in Section 3.13.
"Employee Benefits Agreement"--as defined in Section 7.9.
"Encumbrance" -- any mortgage, charge, claim, condition, equitable
interest, lien, option, pledge, security interest, right of first refusal, or
restriction of any kind, including any restriction on use, voting, transfer,
receipt of income, or exercise of any other attribute of ownership.
"Environmental Claims" -- as defined in Section 3.19.
"Environmental, Health, and Safety Liabilities" -- any cost, damages,
expense, liability, obligation, or other responsibility of the Acquired
Companies arising from or under Environmental Law or Occupational Safety and
Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law; or
(c) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA") as in effect on or before the Closing Date and not including any
change in such law which may be made after the Closing Date, irrespective of
whether such change is made effective as of a date prior to the Closing Date.
"Environmental Law" -- the meaning provided in Section 3.19; provided,
however, that the term Environmental Law does not include any change in such law
after the Closing Date, irrespective of whether such change is made effective as
of a date prior to the Closing Date.
"ERISA" -- the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Excluded Assets"--as defined in Section 2.5(a).
"Facilities" -- any real property and improvements currently or
formerly owned, leased or occupied by any Acquired Company; provided, however,
that the term Facilities does not include any real property currently or
formerly owned or leased by any Acquired Company as trustee for the benefit of
another or any real property currently or formerly managed by any Acquired
Company directly or indirectly for an owner of such property, irrespective of
whether any such property may be occupied by an Acquired Company.
"GAAP" -- generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4(b) were prepared.
"Governmental Authorization" -- any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" -- any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government; or
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal).
"Guaranty"--the guaranty given by United Asset Management Corporation
("UAM") to Buyer pursuant to Section 2.4(a)(iv).
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities.
"Hazardous Materials" -- as defined in Section 3.19.
"HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"Indemnified Claims"--as defined in Section 10.7.
"Indemnified Persons"--as defined in Section 10.2.
"Indemnity" -- the indemnity given by UAM to Buyer pursuant to Section
2.4(a)(v).
"Intellectual Property Assets" -- as defined in Section 3.22.
"Interim Balance Sheet" -- as defined in Section 3.4.
"IRC" -- the Internal Revenue Code of 1986, as amended, or any
successor law, and rules and regulations issued by the IRS pursuant to the
Internal Revenue Code or any successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) such individual, acting prudently, would be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter.
Seller, the Company, and the Acquired Companies will be deemed to have
"Knowledge" of a particular fact or other matter if and only if any Senior
Executive has, or at any time had, Knowledge of such fact or other matter prior
to the Closing.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other judicial or administrative order, consent
decree, judgment, constitution, law, ordinance, principle of common law, rule,
regulation, statute or treaty as in effect prior to the Closing and excluding
any change therein which may be made after the Closing, irrespective of whether
such change is made effective as of a date prior to the Closing.
"Mutual Release" -- as defined in Section 2.4(a)(ii).
"Occupational Safety and Health Law" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions as in
effect prior to the Closing and excluding any change therein which may be made
after the Closing, irrespective of whether such change is made effective as of a
date prior to the Closing..
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator prior to
the Closing..
"Ordinary Course of Business" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
shareholders of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, committee, department, organization, labor
union, or other entity or Governmental Body whether having a distinct legal
identity or not.
"Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body, mediator or arbitrator.
"Related Person" -- with respect to a particular individual:
(a) any Person that is directly or indirectly Controlled by such
individual;
(b) any Person in which such individual holds a Material Interest; and
(c) any Person with respect to which such individual serves as a
director, officer, partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly Controls, is directly or
indirectly Controlled by, or is directly or indirectly under common Control with
such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of voting securities or other voting interests representing at least
50% of the outstanding voting power of a Person; and "Control" or "Controlled"
means, with respect to any Person, the ability to make or veto all management
decisions on behalf of such Person. Related Person does not include any owner of
any property managed by any of the Acquired Companies other than Seller, if
applicable.
"Release"--as defined in Section 3.19.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Retained Assets"--as defined in Section 2.5(b).
"Retained Liabilities"--as defined in Section 2.5(c)(ii).
"Retained Liabilities Indemnity Agreement"--as defined in Section
2.5(c)(ii).
"Securities Act" -- the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"Seller" -- as defined in the first paragraph of this Agreement.
"Seller Assumed Liabilities"--as defined in Section 2.5(c)(i). Seller
Assumed Liabilities which apply to a period beginning before and ending after
the Closing Date will be prorated as of the Closing Date and Seller will be
responsible for payment of the prorata portion of such liabilities relating to
the period before the Closing Date and the Acquired Companies will be
responsible for the prorata portion of such liabilities relating to the period
after the Closing Date, as provided in the Seller Assumed Liabilities Agreement
and the Retained Liabilities Indemnity Agreement.
"Seller Assumed Liabilities Agreement"--as defined in Section
2.5(c)(i).
"Senior Executives"--the individuals listed on Schedule 1.EXECS
hereto.
"Shares" -- as defined in the Recitals of this Agreement and as more
particularly described in Schedule 1.SHS hereto.
"Subsidiaries" -- the corporations listed on Schedule 1.SUBS hereto.
"Tax" or "Taxes" - shall mean any and all taxes, assessments, charges,
duties, fees, levies or other governmental charges (whether federal, state,
local or foreign), including without limitation income, profits, franchise,
gross receipts, payroll, sales, employment, use, property, withholding, excise,
value added, ad valorem, transfer, capital gains, stamp, license and other taxes
of any nature whatsoever, together with any interest, penalties or additions to
tax imposed with respect thereto.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made in writing or any notice has been given in writing, that would lead a
prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter is likely to be asserted, commenced, taken, or otherwise pursued in
the future.
"UAM"--as defined in the definition of "Guaranty" above.
2. SALE AND TRANSFER OF SHARES; CLOSING; RETAINED ASSETS
2.1 SHARES. Subject to the terms and conditions of this Agreement, at
the Closing, Seller will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Seller.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares will be Twenty Million Dollars ($20,000,000.00).
2.3 CLOSING. Subject to the provisions of Section 9, the purchase and
sale of the Shares (the "Closing") provided for in this Agreement will take
place at the offices of Buyer's counsel at 1880 Century Park East, Suite 1150,
Los Angeles, California 90067 at 10:00 a.m. (local time) on the date that is the
later of (i) thirty (30) days after the date of this Agreement or (ii) the date
that is five (5) business days following the termination of the applicable
waiting period under the HSR Act, or at such other time and place as the parties
may agree in writing. Subject to the provisions of Section 9, failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 2.3 alone will not
result in the termination of this Agreement and will not relieve any party of
any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) Seller will deliver to Buyer:
(i) a certificate or certificates representing the Shares,
duly endorsed (or accompanied by duly executed stock powers), with all necessary
transfer tax and other revenue stamps acquired at Seller's expense, affixed and
canceled free and clear of all encumbrances and with signatures guaranteed by a
commercial bank;
(ii) a release in the form of Exhibit 2.4(a)(ii) executed by
Seller, UAM and the Acquired Companies (the "Mutual Release"); and
(iii) a certificate executed by a duly authorized officer of
Seller, which officer shall be a Senior Executive, stating to Buyer that, to the
Knowledge of such officer, each of Seller's representations and warranties in
this Agreement was materially accurate in all respects as of the date of this
Agreement and is materially accurate in all respects as of the Closing Date as
if made on the Closing Date (giving full effect to any supplements to the
Disclosure Letter made by Seller and delivered to Buyer prior to the Closing);
(iv) the Guaranty to Buyer in the form of Exhibit 2.4(a)(iv)
executed by UAM;
(v) the Indemnity to Buyer in the form of Exhibit 2.4(a)(v)
executed by UAM; and
(vi) the additional documents described in Section 7.4.
(b) Buyer will deliver to Seller or Seller's designee:
(i) by wire transfer of immediately available federal funds
in the amount of Twenty Million Dollars ($20,000,000.00); and
(ii) a certificate executed by a duly authorized officer of
Buyer stating to Seller that, to the Knowledge of such officer, each of Buyer's
representations and warranties in this Agreement was materially accurate in all
respects as of the date of this Agreement and is materially accurate in all
respects as of the Closing Date as if made on the Closing Date.
(iii) the additional documents described in Section 8.3.
2.5 RETAINED AND EXCLUDED ASSETS AND LIABILITIES.
(a) The Acquired Companies shall distribute and transfer the
following assets, properties, rights, and interests (the "Excluded Assets") to
Seller prior to the Closing and retain no interest whatsoever in such Excluded
Assets: (i) the retail property management agreements described in Schedule
2.5(a)(i) hereto, (ii) the name "Heitman Properties, Ltd." and all derivatives
thereof, (iii) the management information systems of Seller consisting of the
items described on Schedule 2.5(a)(iii) hereto, (iv) the shares of stock of the
corporations listed or described on Schedule 2.5(a)(iv) hereto, (v) rights to
indemnification or contribution under insurance contracts or otherwise in
respect of any of the Seller Assumed Liabilities, (vi) cash, accounts and notes
receivable (including, without limitation, receivables and claims to payment in
respect of liabilities and obligations of Seller or any of its Related Persons
to any of the Acquired Companies), refunds and rebates, and other assets of the
type included as current assets in the Balance Sheet (except deposits under
leases which are not included in the Seller Assumed Liabilities and excluding
all tenant deposits with Acquired Companies under property management agreements
other than deposits under retail property management agreements), and (vii)
assets listed on Schedule 2.5(a)(vii) hereto. Seller acknowledges that
subsequent to the Closing Date, Buyer must file name change applications with
state corporate and real estate authorities throughout the United States, and
that it would be impractical for Buyer to immediately cease further use of the
name "Heitman Properties Ltd." or any derivative thereof now in use in
connection with the Acquired Companies' businesses on the Closing Date.
Therefore, Seller hereby irrevocably grants to Buyer a royalty-free
non-exclusive right and license to use the trade name/service mark "Heitman
Properties Ltd." and all derivatives thereof in use in connection with the
Acquired Companies' business on the Closing Date (excluding the names Heitman
Financial and Heitman Capital Management) in connection with the operation of
the property management business for a period ending on December 31, 1998 or,
with respect to any particular "Heitman" named entity, until all required name
change efforts are successfully completed, whichever is earlier.
(b) The Acquired Companies shall not distribute or transfer any
of their assets, properties, rights, and interests (other than the Excluded
Assets) to Seller or any Related Person and shall retain and continue to own as
of the Closing the following assets, properties, rights, and interests (the
"Retained Assets"): (i) the outstanding shares of stock of the Subsidiaries,
(ii) the tangible personal property reflected in the Balance Sheet or acquired
by any of the Acquired Companies in the Ordinary Course of Business since the
date of the Balance Sheet (less any of such property which is disposed of in the
Ordinary Course of Business prior to the Closing), (iii) the Applicable
Contracts described in Schedule 2.5(b)(iii) hereto, (iv) assets listed on
Schedule 2.5(b)(iv) hereto, and (v) all other assets that are not Excluded
Assets..
(c) At the Closing:
(i) Seller will execute and deliver to Buyer an agreement in
the form of Exhibit 2.5(c)(i) hereto (the "Seller Assumed Liabilities
Agreement") pursuant to which Seller will assume and agree to indemnify the
Acquired Companies and Buyer and its Related Persons against the liabilities and
obligations of the Acquired Companies described therein (the "Seller Assumed
Liabilities"), which shall consist generally of all liabilities and obligations
of the Acquired Companies under Contracts which are not Applicable Contracts,
accounts payable and accrued expenses of the Acquired Companies as of the
Closing Date, liabilities of the Acquired Companies to Seller included in the
Balance Sheet, and other liabilities which are not Retained Liabilities as of
the Closing Date. In the event of any conflict between this Agreement and the
Seller Assumed Liabilities Agreement, the applicable provisions of the Seller
Assumed Liabilities Agreement shall control and the inconsistent provisions of
this Agreement shall be disregarded.
(ii) Buyer and the Acquired Companies will execute and
deliver to Seller an agreement in the form of Exhibit 2.5(c)(ii) hereto (the
"Retained Liabilities Indemnity Agreement") pursuant to which Buyer and the
Acquired Companies will agree to indemnify Seller and its Related Persons
against the liabilities and obligations of the Acquired Companies other than the
Seller Assumed Liabilities (the "Retained Liabilities"), which shall consist
generally of all liabilities and obligations of the Acquired Companies under the
Applicable Contracts subject to the indemnity obligations of Seller hereunder
with respect to liabilities resulting from any breach of an Applicable Contract
prior to the Closing. In the event of any conflict between this Agreement and
the Retained Liabilities Indemnity Agreement, the applicable provisions of the
Retained Liabilities Indemnity Agreement shall control and the inconsistent
provisions of this Agreement shall be disregarded.
(iii) Buyer, Seller and the Acquired Companies will execute
and deliver a Transitional Services Agreement in the form of Exhibit 2.5(c)(iii)
hereto (the "Transitional Services Agreement") with respect to management of the
properties described therein after the Closing.
3. REPRESENTATIONS AND WARRANTIES OF Seller. Seller represents and
warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING.
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list for each Acquired Company of its name, its jurisdiction of
incorporation, other jurisdictions in which it is authorized to do business, and
its capitalization (including the identity of each stockholder and the number of
shares held by each). Seller and each Acquired Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. Seller and each Acquired Company is duly qualified
to do business as a foreign corporation and is in good standing under the laws
of each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification and the failure to have such qualification would
result in a material liability of the Acquired Companies taken as a whole or the
impairment of the ability of any Acquired Company to conduct its business as
such business has been conducted.
(b) Seller has delivered to Buyer true, complete and correct
copies of the Organizational Documents of each Acquired Company, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
Upon the execution and delivery by Seller of the Mutual Release, the Mutual
Release will constitute the legal, valid, and binding obligation of Seller,
enforceable against Seller in accordance with its terms. Seller has the absolute
and unrestricted right, power, authority, and capacity to execute and deliver
this Agreement and the Mutual Release and to perform its obligations under this
Agreement and the Mutual Release.
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) materially contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Acquired
Companies, or (B) any resolution adopted by the board of directors or the
stockholders of any Acquired Company;
(ii) materially contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which any
Acquired Company or either Seller, or any of the material assets owned or used
by any Acquired Company, may be subject;
(iii) materially contravene, conflict with, or result in a
material violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or any of the assets owned or used
by, any Acquired Company;
(iv) cause any Acquired Company to become subject to, or to
become liable for the payment of, any Tax (other than any Tax which is included
in the Seller Assumed Liabilities);
(v) cause any of the Retained Assets owned by any Acquired
Company to be reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) materially contravene, conflict with, or result in a
material violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any material Applicable
Contract included in the Retained Assets; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the Retained Assets owned or used by
any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Seller or
Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 CAPITALIZATION. The authorized and outstanding equity securities
of the Company are as described in Schedule 3.3 hereto. The shares which are
issued and outstanding are as set forth in Schedule 3.3 and constitute the
Shares. Seller is and will be on the Closing Date the record and beneficial
owner and holder of the Shares, free and clear of all Encumbrances. All of the
outstanding equity securities and other securities of each Acquired Company are
owned of record and beneficially by Seller (or one of the Acquired Companies)
free and clear of all Encumbrances. No legend or other reference to any
purported Encumbrance appears upon any certificate representing equity
securities of any Acquired Company. All of the outstanding equity securities of
each Acquired Company have been duly authorized and validly issued and are fully
paid and nonassessable. There are no Contracts relating to the issuance, sale,
or transfer of any equity securities or other securities of any Acquired Company
other than this Agreement. None of the outstanding equity securities or other
securities of any Acquired Company was issued in violation of the Securities Act
or any other Legal Requirement. No Acquired Company owns, or has any Contract to
acquire, any equity securities or other securities of any Person (other than
Acquired Companies) or any direct or indirect equity or ownership interest in
any other business.
3.4 FINANCIAL STATEMENTS. Seller has delivered to Buyer: (a) unaudited
consolidated pro forma and adjusted balance sheets of the Acquired Companies as
at December 31 in each of the years 1995 through 1997, inclusive, and the
related unaudited consolidated pro forma and adjusted statements of income for
each of the fiscal years then ended, and (b) an unaudited consolidated pro forma
and adjusted balance sheet of the Acquired Companies as at March 31, 1998 (the
"Interim Balance Sheet") and the related unaudited consolidated pro forma and
adjusted statements of income for the three months then ended. Such financial
statements fairly present the financial condition and the results of operations
of the Acquired Companies as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP (except
for the lack of notes which, if included, would not disclose material
liabilities or obligations of the Acquired Companies which are not either
reflected in such financial statements or elsewhere in this Agreement or the
Disclosure Letter) consistently followed throughout the periods indicated,
subject, in the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse) and subject to the allocation and/or
elimination of income and expense items between the Acquired Companies and
Seller and other Related Persons determined by Seller and Buyer to be
reasonable; the financial statements referred to in this Section 3.4 reflect the
consistent application of such accounting principles throughout the periods
involved, except as disclosed in Part 3.4 of the Disclosure Letter.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Acquired Companies, all of which have
been made available to Buyer, are complete and correct and have been maintained
in accordance with sound business practices and the requirements of Section
13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless of
whether or not the Acquired Companies are subject to that Section), including
the maintenance of an adequate system of internal controls. The minute books of
the Acquired Companies contain accurate and complete records of all meetings
held of, and corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the Acquired Companies,
and no meeting of any such stockholders, Board of Directors, or committee has
been held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be in the
possession of the Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. The Acquired Companies do not
own any real property for their own account. Part 3.6 of the Disclosure Letter
contains a complete and accurate list of all leaseholds owned by any Acquired
Company. Seller has delivered or made available to Buyer copies of all leases in
the possession of Seller or the Acquired Companies and relating to such
leaseholds. The Acquired Companies own good, valid and marketable title to all
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible) that they purport to own located in the facilities leased or
occupied by the Acquired Companies or reflected as owned in the books and
records of the Acquired Companies, including all of the properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet (except for
personal property sold since the date of the Balance Sheet and the Interim
Balance Sheet, as the case may be, in the Ordinary Course of Business), and all
of the properties and assets purchased or otherwise acquired by the Acquired
Companies since the date of the Balance Sheet (except for personal property
acquired and sold since the date of the Balance Sheet in the Ordinary Course of
Business and consistent with past practice), which subsequently purchased or
acquired properties and assets (other than inventory and short-term investments)
are listed in Part 3.6 of the Disclosure Letter. All properties and assets of
the Acquired Companies are free and clear of all Encumbrances and other (a)
mortgages, leases or security interests shown on the Balance Sheet or the
Interim Balance Sheet as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the Interim Balance Sheet (such mortgages and security interests being limited
to the property or assets so acquired), with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, and (c) liens for current taxes not yet due. Anything set forth in this
Agreement to the contrary notwithstanding, references herein to properties and
assets of any of the Acquired Companies do not include properties and assets
managed by any of the Acquired Companies which are owned by others.
3.7 INTENTIONALLY OMITTED.
3.8 INTENTIONALLY OMITTED.
3.9 INTENTIONALLY OMITTED
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 3.10 of
the Disclosure Letter, the Acquired Companies have no material liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet or the Interim Balance Sheet,
current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof, liabilities and obligations under the Applicable
Contracts, the Retained Liabilities, and the Seller Assumed Liabilities.
3.11 TAXES.
(a) Part 3.11 of the Disclosure Letter lists all material types
of Taxes paid or owed by the Acquired Companies and material types of Tax
Returns filed by or on behalf of the Acquired Companies, and indicates those
Taxes with respect to which the Acquired Companies are or have been members of a
consolidated, unitary or combined group.
(b) Except as set forth in Part 3.11 of the Disclosure Letter:
(i) All Tax Returns required to be filed by or on behalf of
the Acquired Companies have been duly filed, and all Taxes shown as payable on
such Tax Returns have been paid.
(ii) All Taxes due by or with respect to the Acquired
Companies have been paid or adequately disclosed and fully provided for on the
books and records of the Acquired Companies in accordance with GAAP, and no
deficiencies for any such Taxes have been asserted to or assessed against or
with respect to the Acquired Companies, other than assessments that have been
fully paid or otherwise fully settled.
(iii) To the Knowledge of Seller, the Acquired Companies or
any of the Senior Executives, no governmental audits or investigations with
respect to Taxes relating to the Acquired Companies are in progress, and neither
Seller nor the Acquired Companies have received any notice from any taxing
authority that it intends to conduct such an audit or investigation.
(iv) The Acquired Companies are not parties to any Tax
sharing, Tax allocation, Tax indemnification or similar agreement pursuant to
which any of the Acquired Companies will have any liability to make any payments
after the date of this Agreement.
(v) All tax returns filed by or on behalf of the Acquired
Companies for the Tax years ending on the respective dates set forth in Part
3.11 of the Disclosure Letter have been examined by the applicable taxing
authority or the statute of limitations with respect to such returns has
expired, and no waiver with respect to any such statute of limitations is in
effect.
(c) Neither Seller nor the Acquired Companies have consented,
pursuant to Section 341(f) of the IRC, to have such Section apply to any
disposition of any asset owned by the Acquired Companies.
(d) All taxes relating to the income, properties or operations of
the Acquired Companies or payments by the Acquired Companies which the Acquired
Companies are required to withhold or collect, have been duly withheld and
collected and have been timely paid over to the proper authorities to the extent
due and payable.
(e) Each of the Acquired Companies is a member of Seller's or
Indemnitor's affiliated group (as such term is defined in Section 1504 of the
IRC). Seller will be eligible to make an election under Section 338(h)(10) of
the IRC with respect to the sale of the Shares of the Company.
3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there has been (x) no material adverse change in the assets or liabilities, or
in the business or condition, financial or otherwise, or in the results of
operations or prospects, of the Acquired Companies taken as a whole, whether as
a result of any legislative or regulatory change, revocation of any license or
rights to do business, fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation, act of God, public force or
otherwise, or in the results of operations or prospects, of the Acquired
Companies taken as a whole, except in the Ordinary Course of Business; and, (y)
to the Knowledge of Seller, no fact or condition exists or is contemplated or
threatened which Seller believes will cause a material adverse change in the
business of the Acquired Companies taken as a whole in the foreseeable future.
3.13 EMPLOYEE BENEFIT PLANS.
(a) List of Plans. Set forth in Part 3.13 of the Disclosure
Letter is an accurate and complete list of all domestic and foreign (i)
"employee benefit plans," within the meaning of Section 3(3) of ERISA; (ii)
bonus, stock option, stock purchase, restricted stock, incentive, fringe
benefit, "voluntary employees' beneficiary associations" ("VEBAs"), under
Section 501(c)(9) of the IRC, profit-sharing, pension or retirement, deferred
compensation, medical, life, disability, accident, salary continuation,
severance, accrued leave, vacation, sick pay, sick leave, supplemental
retirement and unemployment benefit plans, programs, arrangements, commitments
and/or practices (whether or not insured); and (iii) employment, consulting,
termination, and severance contracts or agreements; in each case for active,
retired or former employees or directors of the Acquired Companies, whether or
not any such plans, programs, arrangements, commitments, contracts, agreements
and/or practices (referred to in (i), (ii) or (iii) above) are in writing or are
otherwise exempt from the provisions of ERISA; that have been established,
maintained or contributed to (or with respect to which an obligation to
contribute has been undertaken) or with respect to which any potential liability
is borne by any Acquired Company (including, for this purpose and for the
purpose of all of the representations in this Section 3.13, any predecessors to
any Acquired Company and all employers (whether or not incorporated) that would
be treated together with any Acquired Company and/or Seller as a single employer
(1) within the meaning of Section 414 of the IRC, or (2) as a result of any
Acquired Company and/or Seller being or having been a general partner of any
such employer), since September 2, 1974 ("Employee Benefit Plans").
(b) Status of Plans. Each Employee Benefit Plan (including any
related trust) complies in form with the requirements of all applicable laws,
including, without limitation, ERISA and the IRC, except to the extent that any
failure to so comply would not result in any material liability to the Acquired
Companies, and has at all times been maintained and operated in substantial
compliance with its terms and the requirements of all applicable laws,
including, without limitation, ERISA and the IRC. No complete or partial
termination of any Employee Benefit Plan has occurred or is expected to occur.
No Acquired Company has any commitment, intention or understanding to create,
modify or terminate any Employee Benefit Plan. Except as required to maintain
the tax-qualified status of any Employee Benefit Plan intended to qualify under
Section 401(a) of the IRC, no condition or circumstance exists that would
prevent the amendment or termination of any Employee Benefit Plan. No event has
occurred and no condition or circumstance has existed that could result in a
material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof.
(c) No Pension Plans. No Employee Benefit Plan is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) subject to
Section 412 of the IRC or Section 302 or Title IV of ERISA. No Acquired Company
has ever maintained or contributed to, or had any obligation to contribute to
(or borne any liability with respect to) any "multiple employer plan" (within
the meaning of the IRC or ERISA) or any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA).
(d) Liabilities. No Acquired Company maintains any Employee
Benefit Plan which is a "group health plan" (as such term is defined in Section
607(1) of ERISA or Section 5000(b)(1) of the IRC) that has not been administered
and operated in all respects in compliance with the applicable requirements of
Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the IRC and no
Acquired Company is subject to any material liability, including, without
limitation, additional contributions, fines, taxes, penalties or loss of tax
deduction as a result of such administration and operation. No Employee Benefit
Plan which is such a group health plan is a "multiple employer welfare
arrangement," within the meaning of Section 3(40) of ERISA. Each Employee
Benefit Plan that is intended to meet the requirements of Section 125 of the IRC
meets such requirements, and each program of benefits for which employee
contributions are provided pursuant to elections under any Employee Benefit Plan
meets the requirements of the IRC applicable thereto. No Acquired Company
maintains any Employee Benefit Plan which is an "employee welfare benefit plan"
(as such term is defined in Section 3(1) of ERISA) that has provided any
"disqualified benefit" (as such term is defined in Section 4976(b) of the IRC)
with respect to which an excise tax could be imposed.
No Acquired Company maintains any Employee Benefit Plan (whether
qualified or non-qualified under Section 401(a) of the IRC) providing for
post-employment or retiree health, life insurance and/or other welfare benefits
and having unfunded liabilities, and no Acquired Company has any obligation to
provide any such benefits to any retired or former employees or active employees
following such employees' retirement or termination of service. No Acquired
Company has any unfunded liabilities pursuant to any Employee Benefit Plan that
is not intended to be qualified under Section 401(a) of the IRC. No Employee
Benefit Plan holds as an asset any interest in any annuity contract, guaranteed
investment contract or any other investment or insurance contract, policy or
instrument issued by an insurance company that, to the Knowledge of Seller or
any Acquired Company, is or may be the subject of bankruptcy, conservatorship,
insolvency, liquidation, rehabilitation or similar proceedings.
No Acquired Company has incurred any liability for any tax or
excise tax arising under Chapter 43 of the IRC, and no event has occurred and no
condition or circumstance has existed that could give rise to any such
liability.
There are no actions, suits, claims or disputes pending, or, to
the best Knowledge of the Acquired Company and Seller, threatened, anticipated
or expected to be asserted against or with respect to any Employee Benefit Plan
or the assets of any such plan (other than routine claims for benefits and
appeals of denied routine claims). No civil or criminal action brought pursuant
to the provisions of Title I, Subtitle B, Part 5 of ERISA is pending,
threatened, anticipated, or expected to be asserted against any Acquired Company
or any fiduciary of any Employee Benefit Plan, in any case with respect to any
Employee Benefit Plan. No Employee Benefit Plan or any fiduciary thereof has
been the direct or indirect subject of an audit, investigation or examination by
any governmental or quasi-governmental agency.
(e) Contributions. Full payment has been timely made of all
amounts which any Acquired Company is required, under applicable law or under
any Employee Benefit Plan or any agreement relating to any Employee Benefit Plan
to which any Acquired Company is a party, to have paid as contributions or
premiums thereto as of the last day of the most recent fiscal year of such
Employee Benefit Plan ended prior to the date hereof. All such contributions
and/or premiums have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any governmental entity, and to
the best Knowledge of Seller and the Acquired Companies and its subsidiaries no
event has occurred and no condition or circumstance has existed that could give
rise to any such challenge or disallowance. The Acquired Companies have made
adequate provision for reserves to meet contributions and premiums and any other
liabilities that have not been paid or satisfied because they are not yet due
under the terms of any Employee Benefit Plan, applicable law or related
agreements. Benefits under all Employee Benefit Plans are as represented and
have not been increased subsequent to the date as of which documents have been
provided.
(f) Tax Qualification. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the IRC has, as currently in effect, been
determined to be so qualified by the IRS. Each trust established in connection
with any Employee Benefit Plan which is intended to be exempt from Federal
income taxation under Section 501(a) of the IRC has, as currently in effect,
been determined to be so exempt by the IRS. Each VEBA has been determined by the
IRS to be exempt from Federal income tax under Section 501(c)(9) of the IRC.
Since the date of each most recent determination referred to in this paragraph
(f), no event has occurred and no condition or circumstance has existed that
resulted or is likely to result in the revocation of any such determination or
that could adversely affect the qualified status of any such Employee Benefit
Plan or the exempt status of any such trust or VEBA.
(g) Transactions. No Acquired Company and none of their
respective directors, officers, employees or, to the Knowledge of Seller and the
Acquired Companies, other persons who participate in the operation of any
Employee Benefit Plan or related trust or funding vehicle, has engaged in any
transaction with respect to any Employee Benefit Plan or breached any applicable
fiduciary responsibilities or obligations under Title I of ERISA that would
subject any of them to a tax, penalty or liability for prohibited transactions
or breach of any obligations under ERISA or the IRC or would result in any claim
being made under, by or on behalf of any such Employee Benefit Plan by any party
with standing to make such claim.
(h) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan, policy, arrangement,
statement, commitment or agreement, whether or not legally enforceable, which
(either alone or upon the occurrence of any additional or subsequent event) will
or may result in any payment (whether of severance pay or otherwise), "parachute
payment" (as such term is defined in Section 280G of the IRC), acceleration,
vesting or increase in benefits to any employee or former employee or director
of any Acquired Company or any of its subsidiaries. No Employee Benefit Plan
provides for the payment of severance, termination, change in control or
similar-type payments or benefits.
(i) Documents. Seller has made available to Buyer for review and
copying true and complete copies of all material documents in connection with
each Employee Benefit Plan, including, without limitation (where applicable):
(i) all Employee Benefit Plans as in effect on the date hereof, together with
all amendments thereto, including, in the case of any Employee Benefit Plan not
set forth in writing, a written description thereof; (ii) all current summary
plan descriptions, summaries of material modifications, and material
communications; (iii) all current trust agreements, declarations of trust and
other documents establishing other funding arrangements (and all amendments
thereto and the latest financial statements thereof); (iv) the most recent IRS
determination letter obtained with respect to each Employee Benefit Plan
intended to be qualified under Section 401(a) of the IRC or exempt under Section
501(a) or 501(c)(9) of the IRC; (v) the annual report on IRS Form 5500-series or
990 for each of the last three years for each Employee Benefit Plan required to
file such form; (vi) the most recently prepared financial statements for each
Employee Benefit Plan for which such statements are required; and (vii) all
contracts and agreements relating to each Employee Benefit Plan, including,
without limitation, service provider agreements, insurance contracts, annuity
contracts, investment management agreements, subscription agreements,
participation agreements, and record keeping agreements and collective
bargaining agreements.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATION.
(a) Except as set forth in Part 3.14 of the Disclosure Letter and
except with respect to matters which have heretofore been concluded without any
resultant material adverse impact on the business, operations, assets, condition
or prospects of any Acquired Company:
(i) each Acquired Company is, and at all times since the date of
its respective incorporation has been, in material compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a material
violation by any Acquired Company of, or a failure on the part of any Acquired
Company to materially comply with, any Legal Requirement, or (B) may give rise
to any material obligation on the part of any Acquired Company to undertake, or
to bear all or any portion of the cost of, any remedial action of any nature;
and
(iii) no Acquired Company has received, at any time since the
date of its respective incorporation, any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of any Acquired Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature under any law in
effect on or prior to the Closing Date.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by any Acquired
Company or that otherwise, to the Knowledge of Seller or the Acquired Companies,
relates to the business of, or to any of the assets owned or used by, any
Acquired Company. Each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect, except as set forth in Part 3.14 of the Disclosure Letter and except
with respect to matters which have heretofore been concluded without any
resultant material adverse impact on the business, operations, assets, condition
or prospects of any Acquired Company:
(i) each Acquired Company is, and at all times since the date of
its respective incorporation has been, in material compliance with all of the
terms and requirements of each Governmental Authorization identified or required
to be identified in Part 3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with
or without notice or lapse of time) (A) constitute or result directly or
indirectly in a material violation of or a failure to materially comply with any
term or requirement of any Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter;
(iii) no Acquired Company has received, at any time since the
date of its respective incorporation, any written notice or other communication
from any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential material violation of or failure to materially
comply with any term or requirement of any Governmental Authorization, or (B)
any actual, proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental Authorization;
and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in Part 3.14
of the Disclosure Letter have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
To the Knowledge of Seller and the Acquired Companies, the Governmental
Authorizations listed in Part 3.14 of the Disclosure Letter collectively
constitute all of the Governmental Authorizations necessary to permit the
Acquired Companies to lawfully conduct and operate their businesses in the
manner they currently conduct and operate such businesses and to permit the
Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets. Anything set forth herein to the contrary
notwithstanding, this Section 3.14 does not apply to Environmental Laws and
Section 3.19 is the exclusive representation and warranty contained in this
Agreement with respect to compliance by the Acquired Companies with
Environmental Laws.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding to the Knowledge of Seller and the Acquired
Companies:
(i) that has been commenced by or against any Acquired
Company or that may materially and adversely affect the business of, or any of
the assets owned or used by, any Acquired Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller and the Acquired Companies, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding. Seller has delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Disclosure Letter. To the Knowledge of Seller and the Acquired
Companies, neither the Proceedings listed in Part 3.15 of the Disclosure Letter
nor the resolution thereof, individually or in the aggregate, will have a
material adverse effect on the business, operations, assets, condition, or
prospects of any Acquired Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired
Companies, or any of the assets owned or used by any Acquired Company, is
subject;
(ii) Seller is not subject to any Order that relates to the
business of, or any of the assets owned or used by, any Acquired Company; and
(iii) To the Knowledge of Seller or the Acquired Companies,
no officer, director, agent, or employee of any Acquired Company is subject to
any Order that prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice relating to the
business of any Acquired Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter and
except with respect to matters which have heretofore been concluded without any
resultant material adverse impact on the business, operations, assets, condition
or prospect of any Acquired Company:
(i) each Acquired Company is, and at all times since the
date of its respective incorporation has been, in material compliance with all
of the terms and requirements of each Order to which it, or any of the assets
owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to materially comply with any term or requirement of any Order to
which any Acquired Company, or any of the assets owned or used by any Acquired
Company, is subject; and
(iii) no Acquired Company has received, at any time since
the date of its respective incorporation , any written notice or other
communication from any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential material violation of, or failure to
materially comply with, any term or requirement of any Order to which any
Acquired Company, or any of the assets owned or used by any Acquired Company, is
or has been subject.
(d) Anything set forth in this Agreement to the contrary
notwithstanding, this Section 3.15 does not apply to any Proceeding which does
not include any of the Acquired Companies as a party or any Order which is not
against any of the Acquired Companies, irrespective of whether such Proceeding
or Order relates to or may affect assets managed by any of the Acquired
Companies for another owner.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Part 3.16 of the Disclosure Letter, since the date of the Balance Sheet, the
Acquired Companies have conducted their businesses only in the Ordinary Course
of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
any Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by any Acquired Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) payment or increase by any Acquired Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
any Acquired Company;
(e) damage to or destruction or loss of any asset or property of
any Acquired Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any material property management agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to any
Acquired Company of at least $50,000 per year;
(g) lease, or other disposition of any asset or property of any
Acquired Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of any Acquired Company, including
the sale, lease, or other disposition of any of the Intellectual Property
Assets;
(h) cancellation or waiver of any claims or rights with a value
to any Acquired Company in excess of $50,000;
(i) material change in the accounting methods used by any
Acquired Company; or
(j) agreement, whether oral or written, by any Acquired Company
to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Seller has delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by one or more Acquired Companies of
an amount or value in excess of $10,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to one or more Acquired Companies of
an amount or value in excess of $10,000;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or receipts of
one or more Acquired Companies in excess of $10,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $25,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by any Acquired Company with any other Person;
(vii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of any Acquired Company or
limit the freedom of any Acquired Company to engage in any line of business or
to compete with any Person;
(viii) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than direct payments
for goods;
(ix) each power of attorney granted by any Acquired Company
to an attorney-in-fact of such Acquired Company that is currently effective and
outstanding;
(x) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by any Acquired Company to be responsible for consequential damages;
(xi) each Applicable Contract for capital expenditures in
excess of $50,000;
(xii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any Acquired
Company other than in the Ordinary Course of Business; and
(xiii) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) Seller (and no Related Person other than Acquired
Companies or any other party to a property management agreement) has no nor
shall acquire any rights under, and Seller has no nor shall become subject to
any obligation or liability under, any Applicable Contract that relates to the
business of, or any of the assets owned or used by, any Acquired Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of any Acquired Company is bound by any Contract that purports to
limit the ability of such officer, director, agent, employee, consultant, or
contractor to (A) engage in or continue any conduct, activity, or practice
relating to the business of any Acquired Company, or (B) assign to any Acquired
Company or to any other Person any rights to any invention, improvement, or
discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter,
each Applicable Contract identified or required to be identified in Part 3.17(a)
of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter
and except with respect to matters which have heretofore been concluded without
any resultant material adverse impact on the business, operations, assets,
condition or prospects of any Acquired Company:
(i) each Acquired Company is, and at all times since the
date of its respective incorporation has been, in material compliance with all
applicable terms and requirements of each Applicable Contract under which such
Acquired Company has or had any obligation or liability or by which such
Acquired Company or any of the assets owned or used by such Acquired Company is
or was bound (provided, however, that this subparagraph (i) does not require
disclosure regarding compliance with any Legal Requirement or Environmental Law
in addition to the disclosures required under Sections 3.14 and 3.19);
(ii) each other Person that has or had any obligation or
liability under any Applicable Contract under which an Acquired Company has or
had any rights is, and at all times since has been, in material compliance with
all applicable terms and requirements of such Applicable Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may materially contravene, conflict
with, or result in a material violation or breach of, or give any Acquired
Company or other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any
other Person, at any time since the date of its respective incorporation, any
written notice or other communication regarding any actual, alleged, possible,
or potential violation or breach of, or default under, any Applicable Contract.
(e) Except as disclosed in Part 3.17(e) of the Disclosure Letter,
there are no renegotiations of, attempts to renegotiate, or outstanding rights
to renegotiate any material amounts paid or payable to any Acquired Company
under current or completed Applicable Contract with any Person and no such
Person has made written demand for such renegotiation.
(f) The Applicable Contracts relating to the sale, design,
manufacture, or provision of products or services by the Acquired Companies have
been entered into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or would be in material
violation of any Legal Requirement.
3.18 INSURANCE.
(a) Seller has made available to Buyer for review and copying:
(i) true and complete copies of all insurance certificates
and policies of insurance to which any Acquired Company is a named insured or
under which any Acquired Company, or any director of any Acquired Company, is or
has been covered as an insured at any time within the three years preceding the
date of this Agreement;
(ii) true and complete copies of all pending applications
for policies of insurance with respect to the Acquired Companies; and
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting any
Acquired Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by any Acquired Company; and
(iii) all material obligations of the Acquired Companies to
third parties with respect to insurance (including such obligations under leases
and service agreements) and identifies the policy under which such coverage is
provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year,
for the current policy year and each of the three preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $50,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost of such
claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) To the Knowledge of Seller and the Acquired Companies,
all policies to which any Acquired Company is a party or that provide coverage
to either Seller, any Acquired Company, or any director or officer of an
Acquired Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound
and reputable;
(C) taken together, provide adequate insurance coverage
for the assets and the operations of the Acquired Companies for all risks
normally insured against by a Person carrying on the same business or businesses
as the Acquired Companies;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which any Acquired Company is a party or by which
any of them is bound;
(E) will continue in full force and effect following
the consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of any Acquired
Company.
(ii) No Seller or Acquired Company has received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Acquired Companies have paid all premiums due, and
have otherwise performed all of their respective obligations, under each policy
to which any Acquired Company is a party or that provides coverage to any
Acquired Company or director thereof.
(iv) The Acquired Companies have given notice to the insurer
of all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS.
(a) Environmental Laws and Regulations. Except as set forth in
Part 3.19 of the Disclosure Letter, to the Knowledge of Seller, (a) Hazardous
Materials have not at any time been generated, used, treated or stored on, or
transported to or from, any Facilities or any property adjoining or adjacent to
any Facilities, (b) Hazardous Materials have not at any time been released or
disposed of on any Facilities or any property adjoining or adjacent to any
Facilities, (c) the Acquired Companies are in compliance with respect to any
Facilities in all material respects with all Environmental Laws and the
requirements of any permits issued under such Environmental Laws , (d) there are
no past, pending or threatened Environmental Claims against the Acquired
Companies or any Facilities, (e) there are no facts or circumstances, conditions
or occurrences regarding any Facilities or any property adjoining or adjacent to
any Facilities, that could reasonably be anticipated (A) to form the basis of an
Environmental Claim against the Acquired Companies or any Facilities or (B) to
cause such Facilities to be subject to any restrictions on its ownership,
occupancy, use or transferability under any Environmental Law, and (f) there are
not now and never have been any underground storage tanks located on any
Facilities or on any property adjoining or adjacent to any Company Property.
"Hazardous Materials" means (i) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; (ii) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import, under any
applicable Environmental Law; and (iii) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority.
"Environmental Law" means any Legal Requirement relating to the
environment, health, safety or Hazardous Materials in effect on or before the
Closing Date and excluding any change in such law of legal requirement made
after the Closing Date, irrespective of whether such change is made effective as
of a date prior to the Closing Date, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. ss. 9601 et seq.; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. ss. 6901 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. ss. 1251 et seq.; the Toxic Substances Control Act,
15 U.S.C. ss. 2601 et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the
Safe Drinking Water Act, 42 U.S.C. ss. 3808 et seq.
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law (for purposes of this definition, "Claims") or
any permit issued under any such Environmental Law, including without limitation
(i) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law and (ii) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
3.20 EMPLOYEES.
(a) Schedule 3.20 hereto contains a complete and accurate
schedule of all employment contracts and consulting agreements to which the
Acquired Companies are a party or otherwise bound to and Part 3.20 of the
Disclosure Letter contains a complete and accurate list of the following
information for each "corporate staff" employee (i.e., employees who are paid by
the Acquired Companies as opposed to employees whose compensation is reimbursed
by owners of properties managed by the Acquired Companies) or director of the
Acquired Companies, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or payable and any
change in compensation since January 1, 1998; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under any
Acquired Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, or any other Employee Benefit
Plan.
(b) To the Knowledge of Seller, no employee or director of any
Acquired Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, non-competition, or proprietary
rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an employee or director of the
Acquired Companies, or (ii) the ability of any Acquired Company to conduct its
business, including any Proprietary Rights Agreement with Seller or the Acquired
Companies by any such employee or director. To Seller's Knowledge, no director,
officer, or other key employee of any Acquired Company intends to terminate his
employment with such Acquired Company.
(c) No employee or director of any Acquired Company will be a
party to, or will otherwise be bound by, any agreement or arrangement with
Seller or any Related Person of Seller immediately following the Closing.
(d) Part 3.20 of the Disclosure Letter also contains a complete
and accurate list of the following information for each retired employee or
director of the Acquired Companies, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE. Since the date of its respective
incorporation, no Acquired Company has been or is a party to any collective
bargaining or other labor Contract. Since the date of its respective
incorporation and except with respect to matters which have heretofore been
concluded without any resultant material adverse impact on the business,
operations, assets, condition or prospects of any Acquired Company, there has
not been, there is not presently pending or existing, and there is not
Threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any Proceeding against or affecting any Acquired Company
relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed by an
employee or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting any of the
Acquired Companies or their premises, or (c) any application for certification
of a collective bargaining agent. No event has occurred or circumstance exists
that could provide the basis for any work stoppage or other labor dispute. There
is no lockout of any employees by any Acquired Company, and no such action is
contemplated by any Acquired Company. Each Acquired Company has complied in all
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. No Acquired Company is liable for the
payment of any compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.22 INTELLECTUAL PROPERTIES. The operation of the business of the
Acquired Companies requires no rights under Intellectual Property (as
hereinafter defined) other than rights under Intellectual Property listed in
Part 3.22 of the Disclosure Letter attached hereto and rights granted to the
Acquired Companies pursuant to agreements listed in Part 3.22 of the Disclosure
Letter. Within the six year period immediately prior to the date of this
Agreement, the business of the Acquired Companies made use of no Intellectual
Property rights other than rights under Intellectual Property listed in Part
3.22 of the Disclosure Letter and rights granted to the Acquired Companies
pursuant to agreements listed in Part 3.22 of the Disclosure Letter. Except as
otherwise set forth in Part 3.22 of the Disclosure Letter, the Acquired
Companies own all right, title and interest in the Intellectual Property listed
in Part 3.22 of the Disclosure Letter including, without limitation, exclusive
rights to use and license the same. Each item of Intellectual Property listed in
Part 3.22 of the Disclosure Letter has been duly registered with, filed in, or
issued by the appropriate domestic or foreign governmental agency, to the extent
required, and each such registration, filing and issuance remains in full force
and effect. Except as set forth in Part 3.22 of the Disclosure Letter, no claim
adverse to the interests of the Acquired Companies in the Intellectual Property
or agreements listed in Part 3.22 of the Disclosure Letter has been made in
litigation or otherwise. To the Knowledge of Seller, no such claim has been
threatened or asserted, no basis exists for any such claim, and no Person has
infringed or otherwise violated any Acquired Company's right in any of the
Intellectual Property or agreements listed in Part 3.22 of the Disclosure
Letter. Except as set forth in Part 3.22 of the Disclosure Letter, no litigation
is pending wherein any Acquired Company is accused of infringing or otherwise
violating the Intellectual Property right of another, or of breaching a contract
conveying rights under Intellectual Property. To the Knowledge of Seller, no
such claim has been asserted or threatened against any Acquired Company, nor are
there any facts that would give rise to such a claim. For purposes of this
Section 3.22, "Intellectual Property" means domestic and foreign patents, patent
applications, registered trade marks and service marks, and registered
copyrights.
3.23 CERTAIN PAYMENTS. Since the date of its respective incorporation,
except as disclosed in the Disclosure Letter, no Acquired Company or director,
officer, agent, or employee of any Acquired Company, or to Seller's Knowledge,
any other Person associated with or acting for or on behalf of any Acquired
Company, has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of any Acquired
Company or any Affiliate of an Acquired Company, or (iv) in violation of any
Legal Requirement, or (b) established or maintained any fund or asset that has
not been recorded in the books and records of the Acquired Companies.
3.24 DISCLOSURE.
(a) No representation or warranty of Seller in this Agreement and
no statement in the Disclosure Letter omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
(b) No notice given pursuant to Section 5.4 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
(c) To the Knowledge of Seller, there is no fact that has
specific application to either Seller or any Acquired Company (other than
general economic or industry conditions) and that materially adversely affects
or, as far as Seller reasonably foresees, materially threatens, the assets,
business, prospects, financial condition, or results of operations of the
Acquired Companies (on a consolidated basis) that has not been set forth in this
Agreement or the Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS. Except as disclosed in Part
3.25 of the Disclosure Letter, neither Seller nor any Controlled subsidiary of
Seller or of any Acquired Company has, or since January 1, 1998 has had, any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Acquired Companies' businesses.
Neither Seller nor any Controlled subsidiary of Seller or of any Acquired
Company is, or since January 1, 1998 has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with any Acquired Company other than business dealings or
transactions conducted in the Ordinary Course of Business with the Acquired
Companies at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with any Acquired
Company with respect to any line of the products or services of such Acquired
Company (a "Competing Business") in any market presently served by such Acquired
Company [except for less than one percent of the outstanding capital stock of
any Competing Business that is publicly traded on any recognized exchange or in
the over-the-counter market]. Except as set forth in Part 3.25 of the Disclosure
Letter, no Seller or any Related Person of Seller or of any Acquired Company is
a party to any Contract with, or has any claim or right against, any Acquired
Company. Anything set forth in this Agreement to the contrary notwithstanding,
for purposes of this Section 3.25, the term "Related Person" of Seller or any of
the Acquired Companies does not include (i) any owner of properties or assets
managed by any of the Acquired Companies or (ii) other parties to any property
management agreements.
3.26 BROKERS OR FINDERS. Except as set forth in Part 3.26 of the
Disclosure Letter, Seller and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement. Seller
shall be responsible for payment of brokerage or finder's fees claimed by
brokers or finders as a result of the action of Seller or its officers or
agents.
3.27 PERMITS AND LICENSES. Part 3.27 of the Disclosure Letter
describes all permits and licenses which are held or, to the Knowledge of Seller
and the Acquired Companies, required to be held by the Acquired Companies by any
federal, state or local authority used for or pertaining to the Acquired
Companies' businesses. Schedule 3.27 hereto describes all bank accounts, trading
accounts and safe deposit boxes maintained by any of the Acquired Companies.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
4.2 AUTHORITY; NO CONFLICT. This Agreement constitutes the legal,
valid, and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.4 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement other than Prudential Securities Incorporated and will indemnify
and hold Seller harmless from any such payment alleged to be due by any alleged
broker or finder, including without limitation Prudential Securities
Incorporated, or through Buyer as a result of the action of Buyer or its
officers or agents.
4.5 NO RESALE OF ACQUIRED COMPANIES. Buyer has no current plans,
intentions or expectations of selling any of the Acquired Companies within two
years after the Closing Date. Buyer and its officers and agents have not engaged
in any discussions or communications with any Person regarding sale of the
Acquired Companies after the Closing Date. A sale of any of the Acquired
Companies within such two-year period shall not constitute a misrepresentation
or breach of warranty if the foregoing representation and warranty was true when
made as of the date of this Agreement and as of the Closing Date.
4.6 FINANCIAL CAPABILITY. Buyer has the financial capability to
consummate the Contemplated Transactions.
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE.
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Seller will, and will cause each Acquired Company and its
Representatives to, (a) afford Buyer and its Representatives and prospective
lenders and their Representatives (collectively, "Buyer's Advisors") full and
free access to each Acquired Company's personnel, properties, contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE ACQUIRED COMPANIES. Between the
date of this Agreement and the Closing Date, Seller will, and will cause the
Acquired Companies to, conduct the business of the Acquired Companies in the
Ordinary Course of Business, unless in the good faith but absolute discretion
and judgment of Seller or the Company an exception should be made in the conduct
of the business of any of the Acquired Companies in the ordinary course, taking
into consideration the fact that consummation of the Contemplated Transactions
is not assured. If an exception is be made in the conduct of the business of any
of the Acquired Companies in the Ordinary Course of Business prior to the
Closing, (a) Seller shall give prompt written notice thereof to Buyer, and (b)
Buyer shall have the right to terminate this Agreement pursuant to Section
9(b)(i) if such exception results in a failure of any condition in Section 7 to
be satisfied as provided therein. Seller will not cause any of the Acquired
Companies to conduct business other than in the Ordinary Course of Business
prior to the Closing in bad faith solely for the purpose of causing any such
condition not to be satisfied and to cause or provoke a termination of this
Agreement by Buyer pursuant to Section 9(b)(i).
5.3 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Seller will, and will cause each Acquired Company to, make all
filings required by Legal Requirements to be made by them in order to consummate
the Contemplated Transactions (including all filings relating to the Acquired
Companies under the HSR Act). Between the date of this Agreement and the Closing
Date, Seller will, and will cause each Acquired Company to cooperate with Buyer
with respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions.
5.4 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Seller will promptly notify Buyer in writing if such Seller or any
Acquired Company becomes aware of any fact or condition that causes or
constitutes a Breach of any of Seller's representations and warranties as of the
date of this Agreement, or if such Seller or any Acquired Company becomes aware
of the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the occurrence
or discovery of any such fact or condition, Seller will promptly deliver to
Buyer a supplement to the Disclosure Letter specifying such change. During the
same period, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Seller in this Section 5 or of the occurrence of any
event that may make the satisfaction of the conditions in Section 7 impossible
or unlikely.
5.5 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Seller will not, and will cause each Acquired
Company and each of their Representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of any Acquired Company, or any of the capital
stock of any Acquired Company, or any merger, consolidation, business
combination, or similar transaction involving any Acquired Company.
5.6 REASONABLE EFFORTS. Between the date of this Agreement and the
Closing Date, Seller will use commercially reasonable efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
5.7 DISPOSITION OF EXCLUDED ASSETS. Between the date of this Agreement
and the Closing Date, Seller will cause the Acquired Companies to distribute and
transfer the Excluded Assets to Seller or a Related Person of Seller.
5.8 CHARTER DOCUMENTS. Between the date of this Agreement and the
Closing Date, Seller will not allow any of the Acquired Companies to modify
materially its articles or certificate of incorporation or bylaws without the
prior written consent of Buyer, which consent will not unreasonably be withheld.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after
the date of this Agreement, Buyer will, and will cause each of its Related
Persons to, make all filings required by Legal Requirements to be made by them
to consummate the Contemplated Transactions (including all filings relating to
Buyer under the HSR Act). Between the date of this Agreement and the Closing
Date, Buyer will, and will cause each Related Person to, cooperate with Seller
with respect to all filings that Seller is required by Legal Requirements to
make in connection with the Contemplated Transactions; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation
to purchase the Shares and to take the other actions required to be taken by
Buyer at the Closing is subject to the satisfaction, at or prior to the Closing,
of each of the following conditions (any of which may be waived by Buyer, in
whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Seller's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure Letter
which Buyer reasonably considers to contain a disclosure which is materially
adverse to the business, assets, condition or prospects of the Acquired
Companies. If Buyer shall discover any inaccuracy in any such representation and
warranty prior to the Closing, Buyer shall give prompt written notice thereof to
Seller prior to the Closing, failing which Buyer shall be deemed to have waived
all rights resulting from such inaccuracy.
7.2 SELLER'S PERFORMANCE.
(a) All of the covenants and obligations that Seller is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered pursuant to Section
2.4 must have been executed and delivered, and each of the other covenants must
have been performed and complied with in all material respects.
7.3 CONSENTS. Each Consent identified in Part 3.2 of the Disclosure
Letter, and each Consent identified in Schedule 3.2, must have been obtained and
must be in full force and effect and the applicable waiting period under the HSR
Act shall have expired or been terminated without objection, disapproval or
imposition of conditions by applicable Governmental Bodies.
7.4 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
(a) An opinion of Seller's counsel dated the Closing Date as to
such matters as Buyer shall reasonably request;
(b) Articles of Incorporation and Good Standing certified by
Secretaries of State and bylaws certified by corporate secretary with respect to
all of the Acquired Companies;
(c) Resolutions of Seller and Indemnitor authorizing the
respective transactions and officer's certificates from Indemnitor;
(d) Such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (ii) evidencing the accuracy of any of Seller's representations
and warranties, (iii) evidencing the performance by Seller of, or the compliance
by Seller with, any covenant or obligation required to be performed or complied
with by Seller, (iv) evidencing the satisfaction of any condition referred to in
this Section 7, or (v) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions;
(e) The Indemnity;
(f) The Guaranty;
(g) Consents to the assignment of all property management
agreements by the applicable property owner and property owner's agent for each
property management agreement to which an Acquired Company is a party if and
only if any consent is specifically required in connection with a sale of the
Shares by virtue of any "change in control" provisions in any applicable
agreement;
(h) Consents to the assignment of the applicable Facilities
leases from each landlord of a Facility lease with any of the Acquired Companies
if such consent is required by the applicable lease because of a change in
control of the applicable Acquired Company;
(i) A "service bureau agreement" between Seller and Buyer
substantially in the form of Exhibit 7.4(i) hereto (subject to negotiation and
agreement of the parties with respect to the Schedule of Services and Schedule
of Fees referred to therein) whereby Seller agrees to provide to Buyer for a
specified term the use and benefit of the management information systems which
shall be retained by Seller from the assets of the Acquired Companies; and
(j) The Seller Assumed Liabilities Agreement; and
(k) An "employee benefits agreement" among Seller, Buyer and the
Acquired Companies in substantial conformity with the terms summarized on
Schedule 7.4(k) hereto and in form and substance satisfactory to the parties
with respect to the administration of benefits of employees of the Acquired
Companies for a limited period of time following the Closing Date (the "Employee
Benefits Agreement").
7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must
not have been made or Threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to acquire
or to obtain beneficial ownership of, any stock of, or any other voting, equity,
or ownership interest in, any of the Acquired Companies, or (b) is entitled to
all or any portion of the Purchase Price payable for the Shares.
7.7 NO PROHIBITION. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO MATERIAL ADVERSE CHANGE. During the period from the date of the
most recent financial statement delivered by Seller to Buyer to the Closing
Date, there will not have been any material adverse change in the financial
condition or the results of operations of the Acquired Companies except as
contemplated herein or as disclosed in the Disclosure Letter, and no Acquired
Company shall have sustained any insured or uninsured loss or damage to its
assets that materially affects its ability to conduct a material part of its
business.
7.9 EMPLOYMENT MATTERS. Seller will have delivered to Buyer, except as
otherwise requested by Buyer, the written resignations of all of the officers
and directors of the Acquired Companies, and will cause any other action to be
taken with respect to these resignations as Buyer may reasonably request. The
Acquired Companies or Seller shall have paid or made arrangements reasonably
satisfactory to Buyer to pay all employees of the Acquired Companies all
salaries, wages, income, benefits, including without limitation, unused
vacation, sick leave and other benefits to the extent that same are accrued
and/or required to be paid by applicable law or contract for services of such
employees through the Closing Date and shall have paid or arranged to pay all
withholding taxes and similar payments required to be paid in respect of such
employees for services through the Closing Date. Buyer shall have received by
the Closing Date (i) written employment agreements in form and substance
satisfactory to Buyer in its sole and absolute discretion from all employees of
the Acquired Companies identified by Buyer and (ii) subject to Section 8.6,
written terminations of the written employment agreements listed on Schedule 7.9
hereto. Seller, Buyer and the Acquired Companies will have executed and
delivered the Employee Benefits Agreement.
7.10 CLEARANCE CERTIFICATES. Buyer shall have received by the Closing
Date corporation tax and employment clearance certificates stating that, as of a
date not more than 20 calendar days prior to the Closing Date, no corporation
taxes or contributions, interest or penalties, respectively, for any or all of
the Acquired Companies are due to any applicable taxing or employment authority
in any state in which the Acquired Companies are subject to the jurisdiction of
such agencies.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's
obligation to sell the Shares and to take the other actions required to be taken
by Seller at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to
be delivered by Buyer pursuant to Section 2.4 and must have made the cash
payment required to be made by Buyer pursuant to Section 2.4(b)(i).
(c) Buyer and the Acquired Companies must have executed and
delivered to Seller the Retained Liabilities Indemnity Agreement.
8.3 ADDITIONAL DOCUMENTS. An opinion of Buyer's counsel dated the
Closing Date as to such matters as Seller shall reasonably request shall have
been delivered to Seller. In addition, Buyer must have caused to be delivered to
Seller such other documents as Seller may reasonably request for the purpose of
(i) enabling Seller's counsel to provide the opinion referred to in Section
7.4(a), (ii) evidencing the accuracy of any representation or warranty of Buyer,
(iii) evidencing the performance by Buyer of, or the compliance by Buyer with,
any covenant or obligation required to be performed or complied with by Buyer,
(iv) evidencing the satisfaction of any condition referred to in this Section 8,
or (v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.4 NO INJUNCTION. There must not be in effect any Legal Requirement
or any injunction or other Order that (a) prohibits the sale of the Shares by
Seller to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
8.5 SUBLEASES WITH THE COMPANY. Seller and the Company shall have
negotiated and executed subleases of facilities in Chicago, Illinois, which are
leased by Seller and which will be occupied and used by the Company as Seller's
tenant after the Closing on terms and conditions mutually agreeable to Seller
and Buyer.
8.6 AMENDMENT OF EMPLOYMENT AGREEMENTS. Existing employment agreements
between Seller or any of its Related Persons and employees of the Acquired
Companies designated by Seller shall have been amended by mutual agreement of
the parties to such agreements to preserve and continue noncompetition
obligations of such employees after the Closing.
9. TERMINATION.
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or Seller if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been cured or waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Seller, if any of the conditions in
Section 8 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Seller
to comply with its obligations under this Agreement) and Seller have not waived
such condition on or before the Closing Date;
(c) by either Buyer or Seller if the Closing does not occur by
July 24, 1998 and the terminating party is not then in material Breach of this
Agreement; or
(d) by mutual consent of Buyer and Seller.
9.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies, except as otherwise provided herein. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1,
11.2 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of this Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
Anything set forth in this Agreement to the contrary notwithstanding, Seller and
its Related Persons shall have no liabilities or obligations whatsoever to Buyer
or its Related Persons if this Agreement is terminated by Buyer pursuant to
Section 9.1(b), (c), or (d) or pursuant to Section 9.1(a) because of an alleged
misrepresentation or breach of warranty by Seller.
10. INDEMNIFICATION; REMEDIES.
10.1 SURVIVAL. Anything set forth in this Agreement to the contrary
notwithstanding, all representations, warranties, covenants, and obligations of
Seller in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, the certificate delivered pursuant to Section 2.4(a)(iii),
and any other certificate or document delivered by Seller pursuant to this
Agreement will survive the Closing for nine (9) months following the Closing
Date, will expire nine (9) months after the Closing Date, and shall no longer be
of any force or effect after nine (9) months following the Closing Date, and no
claim may be made thereafter with respect thereto. The right to indemnification,
payment of Damages or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation conducted
with respect to, or any Knowledge acquired (or capable of being acquired) at any
time by the claimant, whether before or after the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation,
unless such claimant had actual Knowledge of the inaccuracy of the applicable
representation or warranty or noncompliance with the applicable covenant or
obligation prior to the Closing.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Subject to the
limitations hereinafter set forth, after the Closing if the Closing occurs,
Seller will indemnify and hold harmless Buyer, the Acquired Companies, and their
respective Representatives and Related Persons (collectively, the "Indemnified
Persons") on an after-tax basis for, and will pay to the Indemnified Persons the
amount of, any loss, liability, claim, damage (including incidental and
consequential damages), penalties, fines, fees, costs, Taxes, expenses
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim, actually
suffered by the Indemnified Persons before or after the Closing which are not
otherwise indemnified or reimbursed by insurance (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Seller
in this Agreement as if such representation or warranty were made on and as of
the Closing Date, other than any such misrepresentation or Breach of warranty
that is made by Seller as of the date of this Agreement which is subsequently
disclosed in a supplement to the Disclosure Letter and is expressly identified
in the certificate delivered pursuant to Section 2.4(a)(iii) as having caused
the condition specified in Section 7.1 not to be satisfied;
(b) any Breach by Seller of any covenant or obligation of Seller
in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or any Acquired Company
(or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 and Section 10.3 will
be exclusive of and completely replace and eliminate any other remedies
(including, without limitation, rights of subrogation, contribution or
apportionment under the Comprehensive Environmental Response, Compensation or
Liability Act of 1980, as amended, 42 U.S.C. ss. 9601, et seq., or any analogous
state or local law, regulation or ordinance, or the common law) that may be
available to Buyer or the other Indemnified Persons for Damages.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER -- ENVIRONMENTAL
MATTERS. In addition to the provisions of Section 10.2, Seller will indemnify
and hold harmless Buyer, the Acquired Companies, and the other Indemnified
Persons for, and will pay to Buyer, the Acquired Companies, and the other
Indemnified Persons the amount of, any Damages arising, directly or indirectly,
from or in connection with:
(a) any Environmental Claim arising out of or relating to: (i)
(A) the ownership, operation, or condition at any time on or prior to the
Closing Date of the Facilities or (B) any Hazardous Materials or other
contaminants that were present on the Facilities at any time on or prior to the
Closing Date; or (ii) (A) any Hazardous Materials or other contaminants that
were, or were allegedly, generated, transported, stored, treated, Released, or
otherwise handled by Seller or any Acquired Company or by any other Person for
whose conduct they are or may be held responsible at any time on or prior to the
Closing Date at any of the Facilities, or (B) any Hazardous Activities that
were, or were allegedly, conducted by Seller or any Acquired Company or by any
other Person for whose conduct they are or may be held responsible at any of the
Facilities; or
(b) any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
Seller or any Acquired Company or any other Person for whose conduct they are or
may be held responsible, in any way arising from or allegedly arising from any
Hazardous Activity conducted or allegedly conducted at the Facilities by the
Acquired Companies prior to the Closing Date, or from Hazardous Material that
was (i) present or suspected to be present on or before the Closing Date on or
at the Facilities (or present or suspected to be present on any other property,
if such Hazardous Material emanated or allegedly emanated from any of the
Facilities and was present or suspected to be present on any of the Facilities
on or prior to the Closing Date) or (ii) Released or allegedly Released by
Seller or any Acquired Company or any other Person for whose conduct they are or
may be held responsible, at any time on or prior to the Closing Date.
(c) Anything set forth in this Agreement to the contrary
notwithstanding, (i) Seller and its Related Persons shall have no liabilities or
obligations whatsoever under this Section 10.3 in respect of any Environmental
Claim except (subject to clause (ii) of this sentence) to the extent that it
relates to a Release at a Facility leased or occupied by any of the Acquired
Companies prior to the Closing, and (ii) Seller and its Related Persons shall
have no liabilities or obligations whatsoever under this Section 10.3 or
otherwise in respect of any Environmental Claim which relates to any property
ever managed by any of the Acquired Companies.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Seller and its Representatives and Related Persons,
and will pay to Seller and its Representatives and Related Persons the amount of
any Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, (c) any claim by
any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions, and/or (d) any use by any of the Acquired
Companies after the Closing of the name "Heitman" in any form..
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section
10.2, 10.3 or 10.4 of notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 10.5(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 10 for any
fees of other counsel with respect to the defense of such Proceeding, in each
case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) Seller hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agrees that
process may be served on Seller with respect to such a claim anywhere in the
world.
10.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
10.7 LIMITS ON DAMAGES AND INDEMNIFICATION BY SELLER. Anything set
forth in this Agreement to the contrary notwithstanding, the liabilities and
obligations of Seller, Indemnitor and their Related Persons for or in respect of
(i) Damages, (ii) Environmental, Health and Safety Liabilities, (iii)
indemnities under this Section 10 (including, without limitation, Sections 10.2,
10.3 and 10.5), or (iv) as a result of any alleged misrepresentation or breach
of warranty under Section 3 (other than common law fraud) (collectively
"Indemnified Claims") shall be limited as follows:
(a) Seller, Indemnitor and their Related Persons shall have no
liability or obligation for or in respect of the first Twenty-Five Thousand
Dollars ($25,000.00) of Indemnified Claims or Damages; and
(b) Seller, Indemnitor and their Related Persons shall have no
liability or obligation in excess of an aggregate of Five Hundred Thousand
Dollars ($500,000.00) for or in respect of Indemnified Claims or Damages.
10.8 CORPORATE EXISTENCE. Seller shall maintain its status as a
corporation in good standing under the laws of the State of Illinois until the
later of: (i) nine (9) months from and after the Closing Date; or (ii) the
resolution of all indemnification claims submitted by Buyer in writing to Seller
prior to the expiration of such nine-month period.
11. GENERAL PROVISIONS.
11.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Buyer will pay one-half and
Seller will pay one-half of the HSR Act filing fee. Seller will cause the
Acquired Companies not to incur any out-of-pocket expenses in connection with
this Agreement. In the event of termination of this Agreement, the obligation of
each party to pay its own expenses will be subject to any rights of such party
arising from a breach of this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer and Seller
mutually determine. Unless consented to by Buyer and Seller in advance or
required by Legal Requirements, prior to the Closing Buyer and Seller shall, and
shall cause the Acquired Companies to, keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person. Seller and
Buyer will consult with each other concerning the means by which the Acquired
Companies' employees, customers, and suppliers and others having dealings with
the Acquired Companies will be informed of the Contemplated Transactions, and
Buyer will have the right to be present for any such communication.
11.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Acquired
Companies to maintain in confidence, [and not use to the detriment of another
party or an Acquired Company] any [written information stamped "confidential"
when originally furnished by] another party or an Acquired Company in connection
with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by [or necessary or appropriate in connection with]
legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Seller waives any
cause of action, right, or claim arising out of the access of Buyer or its
representatives to any trade secrets or other confidential information of the
Acquired Companies except for the intentional competitive misuse by Buyer of
such trade secrets or confidential information.
11.4 KNOWLEDGE OF THE SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the Knowledge
of the Seller, Seller confirms that it has made due and diligent inquiry as to
the matters that are the subject of such representations and warranties.
11.5 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), or (c) when received
by the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller: Heitman Financial Ltd.
180 North LaSalle St.
Chicago, Illinois 60601
Attention: Roger Smith, Chief Financial Officer
Facsimile No.: (312) 629-5840
and
Heitman Financial Ltd.
9601 Wilshire Boulevard, Suite 200
Beverly Hills, California 90210
Attention: Eric Mayer, Vice Chairman
Facsimile No.: (310) 550-7731
with a copy: Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, CA 90067-5010
Attention: Robert H. Goon, Esq.
Facsimile No.: (310) 203-0567
Buyer: Kennedy-Wilson, Inc.
530 Wilshire Boulevard, Suite 101
Santa Monica, CA 90401
Attention: Mr. William J. McMorrow
Facsimile No.: (310) 314-8400
with a copy: Kulik, Gottesman & Mouton, LLP
1880 Century Park East, Suite 1150
Los Angeles, CA 90067
Attention: Kent Y. Mouton, Esq.
Facsimile No.: (310) 557-0224
11.6 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties only in the courts of the
State of Illinois, County of Cook, or, if it has or can acquire jurisdiction, in
the United States District Court for the Northern District of Illinois, Eastern
Division, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world.
11.7 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.8 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative except as otherwise provided herein. Neither
the failure nor any delay by any party in exercising any right, power, or
privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
11.9 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.10 DISCLOSURE LETTER.
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
11.11 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, [which will not be unreasonably withheld], except
that Buyer may assign any of its rights under this Agreement to any Subsidiary
of Buyer. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
11.12 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.13 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.14 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.15 GOVERNING LAW. This Agreement will be governed by the laws of
the State of Illinois without regard to conflicts of laws principles.
11.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
11.17 NONCOMPETITION AND NONSOLICITATION COVENANT. For a period of two
(2) years following the Closing Date, (a) if Heitman Capital Management Ltd.,
acting in behalf of any of its clients, shall terminate a contract for property
management with any Acquired Company, then neither Seller or any of its
Controlled subsidiaries will enter into a contract to manage such property,
unless such client insists that Seller or one of its Related Persons manage such
property, and (b) Seller and its Related Persons will not solicit any of the
employees of the Company listed on Schedule 11.17 hereto to terminate their
employment with the Company and accept employment with Seller or any of its
Related Persons.
11.18 LIABILITIES AND OBLIGATIONS. Anything set forth in this
Agreement to the contrary notwithstanding, references in this Agreement to
liabilities and/or obligations of any of the Acquired Companies do not include
liabilities or obligations of any of the Acquired Companies in the capacity of a
disclosed or undisclosed agent of a principal.
11.19 LICENSING. Buyer will be responsible for making all necessary
arrangements at its expense prior to the Closing to assure that the Acquired
Companies will continue to have all licenses required by them for the conduct of
their business after the Closing without dependence on the license or
authorization of any individual employed by or associated with Seller or any of
its Related Persons who will not continue to serve as an officer, director or
employee of any of the Acquired Companies after the Closing.
11.20 INSURANCE. Buyer will be responsible for making all necessary
arrangements at its expense prior to the Closing to assure that appropriate
insurance coverage with respect to the employees, business, assets, and
operations of the Acquired Companies will continue without interruption after
the Closing; provided, however, that Seller will cooperate with Buyer as
requested by Buyer in an effort to obtain from the insurance carriers of the
policies of insurance currently maintained by Seller and its Related Persons
with respect to the employees, business, assets, and operations of the Acquired
Companies continued coverage under such policies after the Closing at the
expense of Buyer and the Acquired Companies.
12. TAX MATTERS.
12.1 TAX RETURNS.
(a) Seller or UAM shall have the exclusive authority and
obligation to prepare, and timely file, or cause to be prepared and timely filed
at the Acquired Companies' expense, all Tax Returns of the Acquired Companies
that are due with respect to any taxable year or other taxable period ending
prior to or ending on and including the Closing Date. Such authority shall
include, but not be limited to, the determination of the manner in which any
items of income, gain, deduction, loss or credit arising out of the income,
properties and operations of the Acquired Companies shall be reported or
disclosed in such Tax Returns; provided, however, that such Tax Returns shall be
prepared in a manner consistent with the past practices with respect to such
items and, provided, further, however, that Seller or UAM shall provide Buyer a
copy of the draft federal income tax return of the Acquired Companies for the
period ending immediately prior to the Closing Date and the opportunity to
comment on the positions taken in such return with respect to, or affected by,
the transactions contemplated by this Agreement, including the Section
338(h)(10) Election.
(b) Except as provided in Section 12.1(a), Buyer shall have the
exclusive authority and obligation to prepare and timely file, or cause to be
prepared and timely file, all Tax Returns of the Acquired Companies; provided,
however, with respect to Tax Returns to be filed by Buyer pursuant to this
Section 12.1 for taxable periods beginning before the Closing Date and ending
after the Closing Date, items set forth on such Tax Returns shall be treated in
a manner consistent with the past practices with respect to such items.
12.2 CONTROVERSIES.
(a) Buyer shall promptly notify Seller in writing upon receipt by
Buyer or any of the Acquired Companies after the Closing Date of written notice
of any inquiries, claims, assessments, audits or similar events with respect to
Taxes relating to a taxable period ending prior to or ending on and including
the Closing Date for which Seller may be liable under this Agreement (any such
inquiry, claim, assessment, audit or similar event, a "Tax Matter"). Seller or
UAM, or its duly appointed representative (the "Seller's Representative"), at
its sole expense, shall have the authority to represent the interests of the
Acquired Companies with respect to any Tax Matter before the IRS, any other
taxing authority, any other governmental agency or authority or any court and
shall have the sole right to control the defense, compromise or other resolution
of any Tax Matter, including responding to inquiries, filing Tax Returns and
contesting, defending against and resolving deficiency or other adjustment of
Taxes of, or relating to, a Tax Matter; provided, however, that Seller or UAM
shall not enter into any settlement of or otherwise compromise any Tax Matter
that affects or may affect the Tax liability of Buyer, the Acquired Companies or
any affiliate of the foregoing for any period ending after the Closing Date,
including the portion of a period beginning before the Closing Date and ending
after the Closing Date (the "Overlap Period"), without the prior written consent
of Buyer, which consent shall not be unreasonably withheld. Seller or UAM shall
keep Buyer fully and timely informed with respect to the commencement, status
and nature of any Tax Matter. Seller shall, in good faith, allow buyer, at
Buyer's sole expense, to make comments to Seller regarding the conduct of or
positions taken in any proceeding.
(b) Except as otherwise provided in this Section 12.3, Buyer
shall have the sole right to control any audit or examination by any taxing
authority, initiate any claim for refund or amend any Tax Return, and contest,
resolve and defend against any assessment for additional Taxes, notice of Tax
deficiency or other adjustment of Taxes of, or relating to, the income, assets
or operations of the Company for all taxable periods; provided, however, that
Buyer shall not, and shall cause its affiliates (including the Acquired
Companies) not to, enter into any settlement of any contest or otherwise
compromise any issue with respect to the portion of the Overlap Period ending on
or prior to the Closing Date without the prior written consent of Seller, which
consent shall not be unreasonably withheld.
12.3 NON-FOREIGN PERSON AFFIDAVIT. Seller shall furnish to Buyer on or
before the Closing Date a non-foreign person affidavit as required by Section
1445 of the Code.
12.4 INDEMNIFICATION.
(a) Seller agrees to indemnify, defend and hold harmless Buyer,
its Related Persons (including each of the Acquired Companies) and the
successors to the foregoing on an after-tax basis against (i) all Taxes (other
than Taxes based on income which are the subject of the Indemnity by UAM),
losses, claims and expenses arising out of, or incurred with respect to, any
claims that may be asserted by any party based upon, attributable to, or
resulting from the failure of any representation or warranty made pursuant to
Section 3.11 to be true and correct as of the Closing Date (it being understood
that such representations and warranties of Seller set forth in Section 3.11
shall survive from the date hereof until 60 days after the expiration of the
applicable statute of limitations); (ii) all Taxes (other than taxes based on
income) imposed or asserted against the properties, income or operations of any
of the Acquired Companies for any period or portion of a period ending on or
prior to the Closing Date to the extent such Taxes have not been fully reserved
for on the Balance Sheet; and (iii) all Taxes (other than taxes based on income)
imposed on Seller and the Acquired Companies or for which Seller or the Acquired
Companies may be liable as a result of any transactions contemplated by this
Agreement, specifically excluding all Taxes imposed as a result of the Section
338(h)(10) election (which are the subject of the Indemnity by UAM). Buyer shall
promptly give Seller written notice of all Taxes (other than taxes based on
income), losses, claims and expenses which Buyer has deter mined may give rise
to a right of indemnification under this Section 12.4, including a computation
of the amount of the claimed indemnification with sufficient detail and
particularity to enable Seller to determine the amount of the required
indemnification.
(b) Anything set forth in this Agreement to the contrary
notwithstanding, in the event of any conflict or inconsistency between any
provision of this Agreement and any provision of the Indemnity, the applicable
provision of the Indemnity shall prevail and control and the inconsistent or
conflicting provision of this Agreement shall be disregarded and of no force or
effect.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLER:
KENNEDY-WILSON, INC., HEITMAN FINANCIAL LTD.,
a Delaware corporation an Illinois corporation
By: /s/ William J. McMorrow By: /s/ Roger Smith
--------------------------------- ------------------------------
Name: William J. McMorrow Name: Roger Smith
------------------------------- ----------------------------
Title: Chairman of the Board and Chief Title:
Executive Officer ---------------------------
---------------------------------
<PAGE>
IDENTIFICATION OF CONTENTS OF OMITTED SCHEDULES AND EXHIBITS
The Company agrees to file supplementally a copy of any of the
following omitted schedules to the Commission upon request.
Schedule 1.SHS The number of shares of Heitman Properties. Ltd.
Schedule 2.5(a)(i) List of Retail Property Management Agreements
(Excluded Asset)
Schedule 2.5(a)(iii) Schedule of Management Information Systems
Schedule 2.5(a)(iv) Shares of Stock of Certain Corporations retained by
Heitman Financial. Ltd.
Schedules 2.5(a)(vii) Excluded Assets
Schedules 2.5(b)(iii) List of Property Management Contracts
Schedule 2.5(c)(iii) Transitional Service Agreement
Schedule 3.3 List of Outstanding Equity Securities of Heitman
Properties, Ltd.
Schedule 3.20 List of Employment Contracts
Schedule 3.27 List of Bank Accounts, Safe Deposit Boxes maintained by
Acquired Companies
Schedule 7.4(k) Employee Benefits Agreement
Schedule 7.9 List of Employment Agreements Terminated Prior
to Closing
<PAGE>
SCHEDULE 1.SUBS
Heitman Properties Ltd. - Subsidiaries
COMPANY NAME STATE OF INCORPORATION
Heitman D.C. Properties Ltd. DE
Heitman Florida Management Inc. DE
Heitman Kentucky Management Inc. DE
Heitman Minnesota Management Inc. DE
Heitman Nevada Management Inc. DE
Heitman Ohio Management Inc. DE
Heitman Pennsylvania Management Inc. DE
Heitman Virginia Management Inc. DE
Heitman Wisconsin Management Inc. WI
Heitman Properties Ltd. IL
Heitman Properties of Arizona AZ
Heitman Properties of Colorado Ltd. CO
Heitman Properties of Connecticut Ltd. CT
Heitman Properties of Delaware Ltd. DE
Heitman Properties of Georgia Ltd. GA
Heitman Properties of Indiana Ltd. IN
Heitman Properties of Louisiana DE
Heitman Properties of Maryland Ltd. MD
Heitman Properties of Massachusetts Ltd. MA
Heitman Properties of Michigan Ltd. MI
Heitman Properties of Missouri Ltd. MO
Heitman Properties of New Jersey Ltd. NJ
Heitman Properties of New York Ltd. NY
Heitman Properties of North Carolina Ltd. NC
Heitman Properties of Oklahoma Ltd. OK
Heitman Properties of Rhode Island Ltd. RI
Heitman Properties of Tennessee Ltd., Corp TN
Heitman Properties of Texas Ltd., Inc. TX
Heitman Properties of Washington Ltd. WA
Heitman Properties Houston Center Inc. TX
<PAGE>
SCHEDULE 2.4(A)(II)
FORM OF MUTUAL RELEASE
This Mutual Release (this "Release") is made this 16th day of July
1998 by and among Heitman Financial Ltd., an Illinois corporation ("Seller"),
Heitman Properties Ltd., an Illinois corporation (the "Company"), United Asset
Management Corporation, a Delaware corporation ("UAM"), and the other
undersigned parties listed in Exhibit A hereto (the "Other Acquired Companies"),
which are wholly-owned subsidiaries of the Company and which are hereinafter
referred to collectively with the Company as the "Acquired Companies."
RECITALS:
M. Seller and Kennedy-Wilson, Inc., a Delaware corporation ("Buyer"),
are parties to the Stock Purchase Agreement dated July 16, 1998 (the "Stock
Purchase Agreement") covering the purchase by Buyer from Seller of all of the
outstanding stock of the Company (the "Shares"). Seller is a subsidiary of UAM.
N. The execution and delivery of this Release is a condition to the
obligations of Buyer and Seller to complete the purchase and sale of the Shares
pursuant to the Stock Purchase Agreement. This Release is being executed and
delivered by the parties hereto to satisfy that condition and to induce Buyer
and Seller to complete the purchase and sale of the Shares pursuant to the Stock
Purchase Agreement.
O. The consideration for this Release includes the completion of the
purchase and sale of the Shares pursuant to the Stock Purchase Agreement, the
agreements and releases included herein, the execution and delivery of the
Seller Assumed Liabilities Agreement of even date herewith among Seller, the
Acquired Companies and Buyer, and the execution and delivery of the Retained
Liabilities Indemnity Agreement of even date herewith among Seller, the Acquired
Companies and Buyer.
P. Capitalized terms which are not defined herein have the same
meanings given to them in the Stock Purchase Agreement.
AGREEMENTS AND RELEASES:
Now, therefore, in consideration of the foregoing Recitals and the
consideration described therein, the parties hereto do hereby agree as follows:
1. Except as otherwise provided in Paragraph 6 hereof, each of Seller
and UAM, on behalf of itself and each of its Controlled subsidiaries
(collectively, "Releasors"), hereby forever releases and discharges the Acquired
Companies (collectively, "Releasees") from any and all claims, demands,
Proceedings, causes of action, Orders, obligations, contracts, agreements, debts
and liabilities whatsoever, whether known or unknown, suspected or unsuspected,
both at law and in equity, which Seller, UAM, or any such Controlled subsidiary
now has, ever had, or may hereafter have against any of the Acquired Companies
arising contemporaneously with or prior to the Closing Date or on account of or
arising out of any matter, cause or event occurring contemporaneously with or
prior to the Closing Date, including, but not limited to, any rights to
indemnification or reimbursement from the Company, whether pursuant to its
respective Organizational Documents, contract or otherwise and whether or not
relating to claims pending on, or asserted after, the Closing Date. Anything set
forth in this Release to the contrary notwithstanding, the term "Controlled
subsidiary" does not include any owner of any property which is managed by any
of the Acquired Companies.
2. Except as otherwise provided in Paragraph 6 hereof, each of the
Acquired Companies (collectively, "Releasors") hereby forever releases and
discharges Seller, UAM and their Controlled subsidiaries (collectively,
"Releasees") from any and all claims, demands, Proceedings, causes of action,
Orders, obligations, contracts, agreements, debts and liabilities whatsoever,
whether known or unknown, suspected or unsuspected, both at law and in equity,
which any of the Acquired Companies now has, ever had, or may hereafter have
against any of Seller, UAM or any of their Controlled subsidiaries arising
contemporaneously with or prior to the Closing Date or on account of or arising
out of any matter, cause or event occurring contemporaneously with or prior to
the Closing Date, including, but not limited to, any rights to indemnification
or reimbursement from Seller, UAM or any of their Controlled subsidiaries,
whether pursuant to its respective Organizational Documents, contract or
otherwise and whether or not relating to claims pending on, or asserted after,
the Closing Date.
3. Each of the Releasors hereby irrevocably covenants to refrain from,
directly or indirectly, asserting any claim or demand, or commencing,
instituting or causing to be commenced, any proceeding of any kind against such
Releasor's Releasees, based on any matter purported to be released by such
Releasor hereunder.
4. Without in any way limiting any of the rights and remedies
otherwise available to any Releasee, each Releasor shall indemnify and hold
harmless each of such Releasor's Releasees from and against all loss, liability,
claim, damage (including incidental and consequential damages) or expense
(including costs of investigation and defense and reasonable attorney's fees)
whether or not involving third party claims, arising directly or indirectly from
or in connection with (i) the assertion by or on behalf of such Releasor of any
claim or other matter purported to be released pursuant to this Release by such
Releasor and (ii) the assertion by any third party of any claim or demand
against any of such Releasor's Releasees which claim or demand arises directly
or indirectly from, or in connection with, any assertion by or on behalf of such
Releasor against such third party of any claims or other matters purported to be
released by such Releasor pursuant to this Release.
5. If any provision of this Release is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Release
will remain in full force and effect. Any provision of this Release held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
6. Anything set forth in this Release to the contrary notwithstanding,
none of the Releasors is releasing any rights or obligations under or in respect
of (i) any of the agreements described in Exhibit B hereto, or (ii) any rights
of any principal of which it is an agent or any trust of which it is a trustee.
7. This Release may not be changed except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of California without
regard to principles of conflicts of law.
8. All words used in this Release will be construed to be of such
gender or number as the circumstances require.
IN WITNESS WHEREOF, the parties have executed and delivered this
Release as of the date first written above.
HEITMAN FINANCIAL LTD. HEITMAN PROPERTIES LTD.
By: By:
-------------------------- ----------------------------
UNITED ASSET MANAGEMENT OTHER ACQUIRED COMPANIES
CORPORATION
By: By:
-------------------------- --------------------------
Attorney-In-Fact
<PAGE>
EXHIBIT A
HEITMAN PROPERTIES LTD. - SUBSIDIARIES
COMPANY NAME STATE OF INCORPORATION
Heitman D.C. Properties Ltd. DE
Heitman Florida Management Inc. DE
Heitman Kentucky Management Inc. DE
Heitman Minnesota Management Inc. DE
Heitman Nevada Management Inc. DE
Heitman Ohio Management Inc. DE
Heitman Pennsylvania Management Inc. DE
Heitman Virginia Management Inc. DE
Heitman Wisconsin Management Inc. WI
Heitman Properties Ltd. IL
Heitman Properties of Arizona AZ
Heitman Properties of Colorado Ltd. CO
Heitman Properties of Connecticut Ltd. CT
Heitman Properties of Delaware Ltd. DE
Heitman Properties of Georgia Ltd. GA
Heitman Properties of Indiana Ltd. IN
Heitman Properties of Louisiana DE
Heitman Properties of Maryland Ltd. MD
Heitman Properties of Massachusetts Ltd. MA
Heitman Properties of Michigan Ltd. MI
Heitman Properties of Missouri Ltd. MO
Heitman Properties of New Jersey Ltd. NJ
Heitman Properties of New York Ltd. NY
Heitman Properties of North Carolina Ltd. NC
Heitman Properties of Oklahoma Ltd. OK
Heitman Properties of Rhode Island Ltd. RI
Heitman Properties of Tennessee Ltd., Corp TN
Heitman Properties of Texas Ltd., Inc. TX
Heitman Properties of Washington Ltd. WA
Heitman Properties Houston Center Inc. TX
<PAGE>
EXHIBIT B
EXCEPTIONS TO RELEASES
1. Stock Purchase Agreement
2. Seller Assumed Liabilities Agreement
3. Retained Liabilities Indemnity Agreement
4. Mutual Release
5. Guaranty
6. Indemnity
7. Service Bureau Agreement
8. Employee Benefits Agreement
9. Equipment and Facilities Leases between Seller and any Acquired Company
10. Transitional Services Agreement
11. Amendments to Employment Agreements of B. Schlesinger, T. Wachsner,
J. Powalish, and D. Latvaaho.
<PAGE>
SCHEDULE 2.4(A)(IV)
FORM OF GUARANTY AGREEMENT
This Guaranty Agreement ("Agreement") is made and entered into as of
July 17, 1998 by United Asset Management Corporation, a Delaware corporation
("UAM"), and Kennedy-Wilson, Inc., a Delaware corporation ("KW"), with reference
to the following facts and circumstances:
R E C I T A L S :
A. KW has entered into a stock purchase and sale agreement dated July
___, 1998 (the "Purchase Agreement") with Heitman Financial Ltd., an Illinois
corporation ("Heitman Financial"), for the purchase of all of the shares of
stock of Heitman Properties Ltd. ("Heitman Properties") held by Heitman
Financial. UAM is the sole shareholder of Heitman Financial, and Heitman
Financial is the sole shareholder of Heitman Properties.
B. Purchase Agreement Section 3 sets forth representations and
warranties (individually, a "Warranty," and collectively, the "Warranties") by
Heitman Financial for the benefit of KW. A "Breach" (as defined in Purchase
Agreement Section 1) of any such representation and warranty could result in
damage, liability or loss to KW. Heitman Financial would be liable to KW for any
Breach of any such Warranty, subject to the limitations on liability contained
in Section 10.7 of the Purchase Agreement. A material portion of Heitman
Financial's net worth is represented by the shares being purchased by KW, and KW
would not be willing to enter into the Purchase Agreement and consummate the
transactions contemplated thereunder if UAM did not guaranty Heitman Financial's
obligation to indemnify KW against any damage, liability, or loss resulting from
a Breach of any such representation and warranty as more particularly set forth
herein. The consummation of the transactions described in the Purchase Agreement
shall be of material direct and indirect benefit to UAM, and accordingly UAM is
willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for good and valuable consideration the receipt and adequacy of
which are hereby acknowledged, UAM agrees as follows:
1. Guaranty.
UAM agrees to guaranty the obligations of Heitman Financial to
indemnify, protect, defend and hold harmless KW and its directors, officers,
employees, shareholders, affiliates and subsidiaries (individually, an
"Indemnitee," and collectively, the "Indemnitees") pursuant to Section 10.2(a)
of the Purchase Agreement from and against any action, cause of action, claim,
cost, damage, demand, expense (including reasonable attorneys' fees, court costs
and litigation expenses), judgment, liability or loss suffered or incurred by
the Indemnitee which arises from or relates to a Breach of any Warranty, subject
to the limitations on liability contained in Section 10.7 of the Purchase
Agreement
UAM agrees to reimburse each Indemnitee for all sums paid and
costs incurred by such Indemnitee which have not been reimbursed by Heitman
Financial within ten (10) business days of Heitman Financial's receipt of demand
therefor (without any obligation on the part of KW to institute any action to
collect the sums due from Heitman Financial) with respect to any indemnified
matter within twenty (20) days following the Indemnitee's written demand
therefor with interest thereon at the maximum legal rate if not paid within such
twenty (20) day period. Should any Indemnitee institute any action or proceeding
at law or in equity to enforce any provision of this Agreement (including an
action for declaratory relief or for damages by reason of any alleged breach of
any provision of this Agreement) or otherwise in connection with this Agreement
or any provision hereof, it shall be entitled to recover from UAM its reasonable
attorneys' fees and disbursements incurred in connection therewith if it is the
prevailing party in such action or proceeding.
2. Representations and Warranties.
UAM represents and warrants to KW as follows:
(a) UAM is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under this Agreement.
(b) This Agreement constitutes the legal, valid, and binding
obligation of UAM, enforceable against UAM in accordance with its terms. UAM has
the absolute and unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and to perform its obligations under this Agreement.
(c) Neither the execution nor delivery of this Agreement nor the
consummation or performance of same will, directly or indirectly (with or
without notice or lapse of time), contravene, conflict with, or result in a
violation of (A) any provision of the organizations documents of UAM or (B) any
resolution adopted by the board of directors or the stockholders of UAM.
3. Subrogation. If UAM fails to indemnify the Indemnitees as provided
in this Agreement, the Indemnitees shall be subrogated to any rights UAM may
have against third parties relating to the matters covered by this Agreement.
4. Waivers of Defenses. UAM hereby waives and agrees not to assert or
take advantage of any right or defense based upon:
(a) The incapacity or lack of authority of Heitman Financial or
UAM, or any other person or entity;
(b) The failure of KW to commence an action against Heitman
Financial or UAM, or any other person or entity, or to proceed against or
exhaust any security held by KW at any time or to pursue any other remedy
whatsoever at any time;
(c) The consideration for this Agreement; and
(d) Any statute or rule of law which provides that the obligation
of a surety must be neither larger in amount nor in any other aspects more
burdensome than that of Heitman Financial or UAM.
5. Miscellaneous.
(a) Entire Agreement. This Agreement represents the entire
integrated agreement between the parties relating to the subject matter of this
Agreement. The parties agree that there are no other agreements or
understandings, written or oral, express or implied, tacit or otherwise in
respect of the subject matter of this agreement. This is a guaranty by UAM of
only those specific indemnification obligations of Heitman Financial identified
in Section 1 above; it is not a guaranty of any other obligations of Heitman
Financial, whether arising under or in connection with the Purchase Agreement or
otherwise. This Agreement may be amended only in writing signed by the parties
hereto.
(b) Attorneys' Fees. If any action is threatened or commenced to
interpret or enforce the terms and provisions of this Agreement, the prevailing
party shall be entitled to recover its attorneys' fees and costs of suit from
the other.
(c) Fair Meaning. This Agreement shall be interpreted according
to its fair meaning and not for or against any party hereto or the drafter of
the Agreement. This Agreement has been negotiated between independent counsel
separately representing each party to this Agreement.
(d) Independent Representation. The parties hereto acknowledge
that each has been represented by separate legal counsel of their own choice,
and that no legal advice in respect of this Agreement has been rendered by the
counsel of one party to the other party.
(e) Cooperation. The parties hereto agree to cooperate with each
other to the extent necessary to effect the purposes of this Agreement,
including without limitation executing additional documents, providing
introductions to other persons and providing copies of books and records.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all which taken
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signatures which shall be deemed original signatures for
all purposes.
(g) Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt), or (c)
when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
UAM: United Asset Management Corporation
One International Place
Boston, MA 02110
Attn: Joseph R. Ramrath, Senior Vice President, General
Counsel
Facsimile No. (617) 330-1133
KW: Kennedy-Wilson, Inc.
530 Wilshire Boulevard, Suite 101
Santa Monica, CA 90401
Attn: William J. McMorrow
Facsimile No. (310) 314-8510
<PAGE>
(h) Separate Actions. Multiple actions may be brought and
judgments obtained under this Agreement. A separate and new right of action
arises each time that a claim or liability arises under this Agreement.
KW: UAM:
KENNEDY-WILSON, INC., UNITED ASSET MANAGEMENT CORPORATION,
a Delaware corporation a Delaware corporation
By: By:
-------------------------------- ---------------------------------
Name: Name:
------------------------------ -------------------------------
Title: Title:
----------------------------- ------------------------------
<PAGE>
SCHEDULE 2.4(A)(V)
FORM OF INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made and entered into as of
July 17, 1998 by United Asset Management Corporation, a Delaware corporation
("UAM"), and Kennedy-Wilson, Inc., a Delaware corporation ("KWI"), with
reference to the following facts and circumstances:
R E C I T A L S:
A. KWI has entered into a stock purchase agreement dated July __, 1998
(the "Purchase Agreement") with Heitman Financial Ltd., an Illinois corporation
("Heitman Financial") for the purchase of all of the shares of stock of Heitman
Properties Ltd. ("Heitman Properties") held by Heitman Financial. UAM is the
sole shareholder of Heitman Financial, and Heitman Financial is the sole
shareholder of Heitman Properties.
B. KWI would not be willing to enter into the Purchase Agreement and
consummate the transactions contemplated thereunder if UAM did not indemnify KWI
against any damage, liability, or loss resulting from any tax based upon income
("Income Tax") assessed against Heitman Properties and attributable to a period
ending on or before the Closing Date. The consummation of the transactions
described in the Purchase Agreement shall be of direct and indirect benefit to
UAM, and accordingly UAM is willing to enter into this Agreement.
C. Capitalized terms not otherwise defined herein shall have the
meanings attributable to such terms in the Purchase Agreement.
1. SECTION 338(10) ELECTION.
(a) At the request of KWI, or its wholly-owned subsidiary,
Kennedy-Wilson Properties, Ltd., a Delaware corporation (collectively, "KW"),
UAM shall take any action required to be taken by UAM to effect an election for
federal income tax purposes under Section 338(h)(10) of the IRC pertaining to
KW's purchase of Heitman Properties (the "Section 338(h)(10) Election").
(b) KW and UAM shall cooperate in the preparation of a joint schedule
(the "Allocation Schedule") allocating the "deemed sale price" (within the
meaning of Treasury Regulation Section 1.338(h)(10)-1(f)) among the assets of
the Acquired Companies for purposes of the Section 338(h)(10) Election. KW and
UAM agree to file (and to cause the Acquired Companies to file) all federal
income tax returns in accordance with the Allocation Schedule. If KW and UAM are
unable to complete the Allocation Schedule within ninety (90) days following the
Closing Date, or such later date as agreed by the parties, KW and UAM shall
refer the disagreement to an independent accounting firm mutually acceptable to
KW and UAM for resolution of the matter within thirty (30) days. KW, the
Acquired Companies and UAM may not file federal income tax returns in a manner
that is inconsistent with the allocations determined under this Section 1.1.
(c) UAM shall pay any federal income taxes attributable to the making
of the Section 338(h)(10) Election and will indemnify the Acquired Companies and
KW against any such tax (including interest and penalties).
2. TAX RETURNS. UAM shall have the exclusive authority and obligation
to prepare, and timely file, or cause to be prepared and timely filed at the
Acquired Companies' expense, all Tax Returns of the Acquired Companies relating
to Income Taxes that are due with respect to any taxable year or other taxable
period ending prior to or ending on and including the Closing Date, consistent
with past practices. Subject to the provision of Section 1, such authority shall
include, but not be limited to, the determination of the manner in which any
items of income, gain, deduction, loss or credit arising out of the income,
properties and operations of the Acquired Companies shall be reported or
disclosed in such Tax Returns. KW shall have the exclusive authority and
obligation to prepare, and timely file, or cause to be prepared and timely filed
at the Acquired Companies' expense, all Tax Returns of the Acquired Companies
relating to Income Taxes in those jurisdictions in which the tax period does not
end on the Closing Date, consistent with past practices, and UAM shall be
responsible for Income Tax liabilities for the period preceding the Closing Date
based upon an interim closing of the books of the Acquired Companies as of the
Closing Date.
3. CONTROVERSIES. KW shall promptly notify UAM in writing upon receipt
by KW or any of the Acquired Companies after the Closing Date of written notice
of any inquiries, claims, assessments, audits or similar events with respect to
Income Taxes relating to a taxable period ending prior to or ending on and
including the Closing Date for which UAM may be liable under this Agreement (any
such inquiry, claim, assessment, audit or similar event, a "Tax Matter"). UAM,
or its duly appointed representative (the "UAM's Representative"), at its sole
expense, shall have the authority to represent the interests of the Acquired
Companies with respect to any Tax Matter relating to Income Taxes before the
IRS, any other taxing authority, any other governmental agency or authority or
any court and shall have the sole right to control the defense, compromise or
other resolution of any such Tax Matter, including responding to inquiries,
filing Tax Returns relating to Income Taxes and contesting, defending against
and resolving deficiency or other adjustment of Income Taxes of, or relating to,
a Tax Matter relating to Income Taxes. UAM shall keep KW fully and timely
informed with respect to the commencement, status and nature of any Tax Matter
relating to Income Taxes. UAM shall, in good faith, allow buyer, at KW's sole
expense, to make comments to UAM regarding the conduct of or positions taken in
any proceeding. Neither UAM nor KW shall enter into any settlement of or
otherwise compromise any Tax Matter that affects the Tax Liability of the other
party in respect of Income Taxes without the prior consent of such other party,
which consent will not be withheld unreasonably.
4. INDEMNIFICATION. UAM agrees to indemnify, defend and hold harmless
KW, KW'S Related Persons (including each of the Acquired Companies) and the
successors to the foregoing on an after-tax basis against all Income Taxes
attributable to a period ending on or before the Closing Date, including all
losses, claims and expenses relating thereto, including all Taxes imposed as a
result of the Section 338(h)(10) Election.
5. MISCELLANEOUS.
(a) Entire Agreement. This Agreement represents the entire integrated
agreement between the parties relating to the subject matter of this Agreement.
The parties agree that there are no other agreements or misunderstandings,
written or oral, express or implied, tacit or otherwise in respect of the
subject matter of this Agreement. This Agreement may be amended only in writing.
(b) Attorneys' Fees. If any action is threatened or commenced to
interpret or enforce the terms and provisions of this Agreement, the prevailing
party shall be entitled to recover its attorneys' fees and cots of suit from the
other.
(c) Fair Meaning. This Agreement shall be interpreted according to its
fair meaning and not for or against any party hereto or the drafter of the
Agreement. This Agreement has been negotiated between independent counsel
separately representing each party to this Agreement.
(d) Cooperation. The parties hereto agree to cooperate with each other
to the extent necessary to effect the purposes of this Agreement.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all which taken
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signatures which shall be deemed original signatures for
all purposes.
(f) Notices. All notices, consents, waivers, and other communications
under this Agreement musts be in writing and given (a) by hand delivery, (b) by
telecopier, or (c) by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
UAM: United Asset Management Corporation
One International Place
Boston, MA 02110
Attention: Joseph R. Ramrath
Senior Vice President, General Counsel
Facsimile No. (617) 330-1133
KW: Kennedy-Wilson, Inc.
Kennedy-Wilson Properties, Ltd.
530 Wilshire Boulevard, Suite 101
Santa Monica, CA 90401
Attention: William J. McMarrow
Facsimile No. (310) 314-8400
(g) Separate Actions. Multiple actions may be brought and judgments
obtained under this Agreement. A separate and new right of action arises each
time that a claim or liability arises under this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
KW: UAM:
KENNEDY-WILSON, INC., UNITED ASSET MANAGEMENT CORPORATION,
a Delaware corporation a Delaware corporation
By: By:
---------------------------- -----------------------------
Name: Name:
-------------------------- ---------------------------
Title: Title:
------------------------- --------------------------
<PAGE>
SCHEDULE 2.5(B)(IV)
OTHER RETAINED ASSETS
None.
<PAGE>
SCHEDULE 2.5(C)(I)
FORM OF SELLER ASSUMED LIABILITIES AGREEMENT
THIS AGREEMENT is made as of the 17th day of July 1998 by and among
Heitman Properties Ltd., an Illinois corporation (the "Company"),
Kennedy-Wilson, Inc., a Delaware corporation ("Buyer"), Heitman Financial Ltd.,
an Illinois corporation ("Seller"), and the other corporations which are
signatories to this Agreement and wholly-owned subsidiaries of the Company
listed on Exhibit A hereto (referred to collectively with the Company as the
"Acquired Companies").
RECITALS:
A. Buyer and Seller are parties to the Stock Purchase Agreement dated
July 17, 1998 (the "Stock Purchase Agreement") providing for the purchase of all
of the outstanding stock of the Company by Buyer from Seller.
B. This Agreement is the "Seller Assumed Liabilities Agreement" which
is referred to in, and is being executed and delivered by the parties pursuant
to, Section 2.5(c)(ii) of the Stock Purchase Agreement.
C. Capitalized terms which are not otherwise defined herein have the
meanings given to them in the Stock Purchase Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing Recitals,
consummation of the Stock Purchase Agreement, execution and delivery of the
Retained Liabilities Agreement, and the agreements hereinafter set forth, the
parties hereto do hereby agree as follows:
1. Assumption of Liabilities. Seller hereby assumes all of the
liabilities and obligations of the Acquired Companies which exist at the time of
execution of this Agreement described in Exhibit B attached hereto and
incorporated herein by this reference (referred to herein and in the Stock
Purchase Agreement as the "Seller Assumed Liabilities"). Notwithstanding the
foregoing, Seller Assumed Liabilities which relate to a period beginning before
and ending after the date of this Agreement (e.g., rent and payroll) shall be
prorated as of the date of this Agreement and Seller shall assume and be
responsible for payment of the portion of such liabilities which relate to the
period before the date of this Agreement and Buyer and the Acquired Companies
shall retain and be responsible for payment of the balance of such liabilities.
2. Indemnity. Seller will pay and discharge in a timely manner and
will defend, indemnify and hold harmless Buyer and the Acquired Companies and
all of their Representatives and Related Persons (collectively, the
"Indemnities") from and against any and all actions, causes of action, claims,
costs, damages, demands, expenses (including reasonable attorneys and
accountants fees and expenses, court costs and litigation expenses), judgments,
liabilities and/or losses suffered or incurred by any Indemnitee arising out of
or in any manner relating to any of the Seller Assumed Retained Liabilities
assumed by Seller pursuant to Paragraph I above.
3. Defense. If any Indemnitee notifies Seller of any claim or notice
of the commencement of any action, administrative or legal proceeding or
investigation as to which Seller's obligation to indemnify hereunder applies,
Seller shall assume on behalf of such Indemnitee, and conduct with due diligence
and in good faith, the investigation and defense of, and the response to, such
claim, action, proceeding or investigation, with counsel reasonably satisfactory
to the Indemnitee; provided, however, that such Indemnitee will have the right
to be represented by advisory counsel of its own selection and at its own
expense; and provided further that if any such claim, action, proceeding, or
investigation involves both one or more Indemnitees and Seller and such
Indemnitee shall have reasonably concluded that there may be legal defenses
available to such Indemnitee which are different from, additional to, or
inconsistent with those available to Seller, then such Indemnitee shall have the
right to select separate counsel to participate in the investigation and defense
of and response to such claim, action, proceeding or investigation on its own
behalf and at the expense of Seller.
4. Failure to Defend. If any claim, action, proceeding or
investigation arises as to which Seller's duty to indemnify hereunder applies
and Seller fails to assume promptly (and in any event within ten (10) days after
being notified of the claim, action, proceeding or investigation) the defense of
an Indemnitee, then such Indemnitee may contest and settle the claim, action,
proceeding or investigation at the expense of Seller using counsel selected by
such Indemnitee; provided, however, that after any such failure by Seller no
such contest need be made by such Indemnitee and settlement or full payment of
any claim may be made by such Indemnitee without Seller's consent and without
releasing Seller from any obligations to such Indemnitee hereunder.
5. Expense Reimbursement. Seller will reimburse each Indemnitee for
all sums paid and costs incurred by such Indemnitee with respect to any
indemnified matter within twenty (20) days following written demand therefor
with interest thereon at the maximum legal rate if not paid within such twenty
(20) day period. Should any Indemnitee institute any action or proceeding at law
or in equity to enforce any provision of this Agreement (including an action for
declaratory relief or for damages by reason of any alleged breach of any
provision of this Agreement) or otherwise in connection with this Agreement or
any provision hereof, it shall be entitled to recover from Seller its reasonable
attorneys fees and disbursements incurred in connection therewith if it is the
prevailing party in such action or proceeding.
6. Subrogation. If Seller fails to indemnify any Indemnitee as
provided herein, such Indemnitee shall be subrogated to any rights Seller may
have against third parties relating to the indemnified matter.
7. Waiver of Defenses. Seller hereby waives and agrees not to assert
or take advantage of any right or defense based on (a) the incapacity or lack of
authority of any Indemnitee, (b) the failure of any Indemnitee to commence an
action against Seller or any other person or entity or to proceed against or
exhaust any security held by any person or entity at any time or to pursue any
other remedy whatsoever at any time, (c) lack of notice of default, demand for
performance (except pursuant to Paragraph 3 above) or notice of acceleration to
Seller or any other person or entity, (d) consideration for this Agreement, (e)
any statute of limitations affecting the liability of Seller or any Indemnitee,
and (f) any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in any other aspects more burdensome
than that of Seller.
8. Miscellaneous.
(a) Entire Agreement. This Agreement represents the entire
integrated agreement among the parties relating to the subject matter hereof.
The parties agree that there are no other agreements or understandings, written
or oral, express or IMPLIED, TACIT or otherwise in respect of the subject matter
hereof. This agreement may be amended only in writing.
(b) Attorneys Fees. If any action is threatened or commenced to
interpret or enforce the terms and provisions of this Agreement, the prevailing
party or parties shall be entitled to recover its attorneys fees and costs of
suit from the other party or parties.
(c) Fair Meaning. This Agreement shall be interpreted according
to its fair meaning and not for or against any party hereto or the drafter of
this Agreement. This Agreement has been negotiated between independent counsel
separately representing the interests of the Indemnitors and the Indemnitees.
(d) Independent Representation. The parties hereto acknowledge
that each has been represented by separate legal counsel of their own choice,
and that no legal advice in respect of this Agreement has been rendered by the
counsel of one group of parties to the other group of parties.
(e) Cooperation. The parties hereto agree to cooperate with each
other to the extent necessary to effect the purposes of this Agreement,
including without limitation executing additional documents, providing
instructions to other persons and providing copies of books and records.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile copies of
signatures on signature pages hereof shall be deemed original signatures for all
purposes.
(g) Notice. All notices, consents, waivers and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt), (c)
when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth on Exhibit C attached hereto and incorporated
herein by this reference (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties).
(h) Separate Actions. Multiple actions may be brought and
judgments obtained under this Agreement. A separate and new right of action
arises each time that a claim or liability arises under this Agreement.
(i) No inducement of Claims. Buyer covenants and agrees that,
from and after the Closing, it shall not with malicious or punitive intent or to
obtain an economic benefit induce or suggest to creditors of Seller that they
assert or make any claims against Seller in respect of any of the Seller Assumed
Liabilities.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as
of the day and year first above written.
KENNEDY WILSON, INC. HEITMAN FINANCIAL LTD.
By: By:
------------------------- ----------------------------
HEITMAN PROPERTIES LTD. OTHER ACQUIRED COMPANIES
By: By:
------------------------- ----------------------------
Secretary & Vice President
<PAGE>
EXHIBIT A
Heitman Properties Ltd. - Subsidiaries
COMPANY NAME STATE OF INCORPORATION
Heitman D.C. Properties Ltd. DE
Heitman Florida Management Inc. DE
Heitman Kentucky Management Inc. DE
Heitman Minnesota Management Inc. DE
Heitman Nevada Management Inc. DE
Heitman Ohio Management Inc. DE
Heitman Pennsylvania Management Inc. DE
Heitman Virginia Management Inc. DE
Heitman Wisconsin Management Inc. WI
Heitman Properties Ltd. IL
Heitman Properties of Arizona AZ
Heitman Properties of Colorado Ltd. CO
Heitman Properties of Connecticut Ltd. CT
Heitman Properties of Delaware Ltd. DE
Heitman Properties of Georgia Ltd. GA
Heitman Properties of Indiana Ltd. IN
Heitman Properties of Louisiana DE
Heitman Properties of Maryland Ltd. MD
Heitman Properties of Massachusetts Ltd. MA
Heitman Properties of Michigan Ltd. MI
Heitman Properties of Missouri Ltd. MO
Heitman Properties of New Jersey Ltd. NJ
Heitman Properties of New York Ltd. NY
Heitman Properties of North Carolina Ltd. NC
Heitman Properties of Oklahoma Ltd- OK
Heitman Properties of Rhode Island Ltd. RI
Heitman Properties of Tennessee Ltd., Corp TN
Heitman Properties of Texas Ltd., Inc. TX
Heitman Properties of Washington Ltd. WA
Heitman Properties Houston Center Inc. TX
<PAGE>
EXHIBIT B
SELLER ASSUMED LIABILITIES
Following is an exclusive list and description of the Seller Assumed
Liabilities:
1. All liabilities which should be included as monetary liabilities in
the liabilities section of a balance sheet of any of the Acquired Companies as
of the Closing Date prepared from the books and records of the Acquired
Companies in accordance with generally accepted accounting principles (other
than contingent liabilities), including, without limitation, the following:
a. Accounts payable and accrued expenses;
b. Leasing commissions payable to employees of the Acquired Companies;
c. Reimbursement to employees of the Acquired Companies for travel and
entertainment expenses; and
d. Accrued salaries and other compensation and benefits of employees
of the Acquired Companies.
2. Liabilities which are related solely to the operations of the
retail property management activities of the Acquired Companies.
3. Liabilities (including contingent liabilities) under the
Proceedings listed in Part 3.15 of the Disclosure Letter.
4. Liabilities (including contingent liabilities) under Contracts of
the Acquired Companies other than the Applicable Contracts.
5. Contingent liabilities of the Acquired Companies proximately caused
by acts or omissions of the Acquired Companies or their respective directors,
officers, employees or agents prior to the Closing (excluding contingent
liabilities and other obligations under the Applicable Contracts).
<PAGE>
EXHIBIT C
SELLER ASSUMED LIABILITIES AGREEMENT
NOTICES, ADDRESSES, AND TELECOPIER NUMBERS
KENNEDY-WILSON, INC. HEITMAN FINANCIAL LTD
530 Wilshire Boulevard, Suite 101 180 North LaSalle Street
Santa Monica, CA 90401 Chicago, IL 60601
Attention: Mr. William J. McMorrow Attention: Roger Smith,
Facsimile No.: (310) 314-8540 Chief Financial Officer
Facsimile No.: (312) 629-5840
HEITMAN PROPERTIES LTD. HEITMAN PROPERTIES LTD.
530 Wilshire Boulevard, Suite 101 530 Wilshire Boulevard, Suite 101
Santa Monica, CA 90401 Santa Monica, CA 90401
Attention: Mr. William J. McMorrow Attention: Mr. William J. McMorrow
Facsimile No.: (310) 314-8540 Facsimile No.: (310) 314-8540
<PAGE>
SCHEDULE 2.5(C)(II)
FORM OF RETAINED LIABILITIES INDEMNITY AGREEMENT
THIS AGREEMENT is made as of the 16th day of July 1998 by and among
Heitman Properties Ltd., an Illinois corporation (the "Company"),
Kennedy-Wilson, Inc., a Delaware corporation ("Buyer"), Heitman Financial Ltd.,
an Illinois corporation ("Seller"), and the other corporations which are
signatories to this Agreement and wholly-owned subsidiaries of the Company
listed on Exhibit A hereto (referred to collectively with the Company as the
"Acquired Companies").
RECITALS:
I. Buyer and Seller are parties to the Stock Purchase Agreement dated
July 16, 1998 (the "Stock Purchase Agreement") providing for the purchase of all
of the outstanding stock of the Company by Buyer from Seller.
J. This Agreement is the "Retained Liabilities Indemnity Agreement"
which is referred to in, and is being executed and delivered by the parties
pursuant to, Section 2.5(c)(ii) of the Stock Purchase Agreement.
K. Capitalized terms which are not otherwise defined herein have the
meanings given to them in the Stock Purchase Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing Recitals,
consummation of the Stock Purchase Agreement, execution and delivery of the
Seller Assumed Liabilities Agreement, and the agreements hereinafter set forth,
the parties hereto do hereby agree as follows:
1. Indemnity. Buyer and the Acquired Companies, jointly and severally,
will pay and discharge in a timely manner and will defend, indemnify and hold
harmless Seller and all of its Representatives and Related Persons
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, claims, costs, damages, demands, expenses (including reasonable
attorneys and accountants fees and expenses, court costs and litigation
expenses), judgments, liabilities and/or losses suffered or incurred by any
Indemnitee arising out of or in any manner relating to (a) any of the
liabilities and obligations of the Acquired Companies other than the Seller
Assumed Liabilities (referred to herein and in the Stock Purchase Agreement as
the "Retained Liabilities"), which shall consist of all liabilities and
obligations of the Acquired Companies under the Applicable Contracts subject to
the indemnity obligations of Seller under the Stock Purchase Agreement with
respect to liabilities resulting from any breach of an Applicable Contract prior
to the Closing, and/or (b) any claims by Mas Asset Management Corporation, a
California corporation, Willy K. Mas, or any successor, assignor or affiliate
thereof. Notwithstanding the foregoing, Buyer and the Acquired Companies will
not be responsible for payment of the Seller Assumed Liabilities assumed by
Seller pursuant to the Seller Assumed Liabilities Agreement, including Seller's
prorata share of Retained Liabilities which relate to a period beginning before
and ending after the date of this Agreement (e.g., rent and payroll).
2. Defense. If any Indemnitee notifies Buyer and/or any of the
Acquired Companies (collectively, the "Indemnitors") of any claim or notice of
the commencement of any action, administrative or legal proceeding or
investigation as to which the Indemnitors' obligation to indemnify hereunder
applies, the Indemnitors, jointly and severally, shall assume on behalf of such
Indemnitee, and conduct with due diligence and in good faith, the investigation
and defense of, and the response to, such claim, action, proceeding or
investigation, with counsel reasonably satisfactory to the Indemnitee; provided,
however, that such Indemnitee will have the right to be represented by advisory
counsel of its own selection and at its own expense; and provided further that
if any such claim, action, proceeding, or investigation involves both one or
more Indemnitees and one or more Indemnitors and such Indemnitee shall have
reasonably concluded that there may be legal defenses available to such
Indemnitee which are different from, additional to, or inconsistent with those
available to any Indemnitor, then such Indemnitee shall have the right to select
separate counsel to participate in the investigation and defense of and response
to such claim, action, proceeding or investigation on its own behalf and at the
expense of the Indemnitors.
3. Failure to Defend. If any claim, action, proceeding or
investigation arises as to which the Indemnitors' duty to indemnify hereunder
applies and the Indemnitors fail to assume promptly (and in any event within ten
(10) days after being notified of the claim, action, proceeding or
investigation) the defense of an Indemnitee, then such Indemnitee may contest
and settle the claim, action, proceeding or investigation at the expense of the
Indemnitors using counsel selected by such Indemnitee; provided, however, that
after any such failure by the Indemnitors no such contest need be made by such
Indemnitee and settlement or full payment of any claim may be made by such
Indemnitee without the Indemnitors' consent and without releasing the
Indemnitors from any obligations to such Indemnitee hereunder.
4. Expense Reimbursement. The Indemnitors, jointly and severally, will
reimburse each Indemnitee for all sums paid and costs incurred by such
Indemnitee with respect to any indemnified matter within twenty (20) days
following written demand therefor with interest thereon at the maximum legal
rate if not paid within such twenty (20) day period. Should any Indemnitee
institute any action or proceeding at law or in equity to enforce any provision
of this Agreement (including an action for declaratory relief or for damages by
reason of any alleged breach of any provision of this Agreement) or otherwise in
connection with this Agreement or any provision hereof, it shall be entitled to
recover from the Indemnitors, jointly and severally, its reasonable attorneys
fees and disbursements incurred in connection therewith if it is the prevailing
party in such action or proceeding.
5. Subrogation. If any of the Indemnitors fails to indemnity any
Indemnitee as provided herein, such Indemnitee shall be subrogated to any rights
such Indemnitor may have against third parties relating to the indemnified
matter.
6. Waiver of Defenses. Each of the Indemnitors hereby waives and
agrees not to assert or take advantage of any right or defense based on (a) the
incapacity or lack of authority or any person or entity, (b) the failure of any
Indemnitee to commence an action against any Indemnitor or any other person or
entity or to proceed against or exhaust any security held by any person or
entity at any time or to purse any other remedy whatsoever at any time, (c) lack
of notice of default, demand for performance or notice of acceleration to any
Indemnitor or any other person or entity, (d) consideration for this Agreement,
(e) any statute of limitations affecting the liability of any Indemnitor or any
other person or entity, and (f) any statute or rule of law which provides that
the obligation of a surety must be neither larger in amount nor in any other
aspects more burdensome than that of any Indemnitor.
7. Miscellaneous.
(a) Entire Agreement. This Agreement represents the entire integrated
agreement among the parties relating to the subject matter hereof. The parties
agree that there are no other agreements or understandings, written or oral,
express or implied, tacit or otherwise in respect of the subject matter hereof.
This agreement may be amended only in writing.
(b) Attorneys Fees. If any action is threatened or commenced to
interpret or enforce the terms and provisions of this Agreement, the prevailing
party or parties shall be entitled to recover its attorneys fees and costs of
suit from the other party or parties.
(c) Fair Meaning. This Agreement shall be interpreted according to its
fair meaning and not for or against any party hereto or the drafter of this
Agreement. This Agreement has been negotiated between independent counsel
separately representing the interests of the Indemnitors and the Indemnitees.
(d) Independent Representation. The parties hereto acknowledge that
each has been represented by separate legal counsel of their own choice, and
that no legal advice in respect of this Agreement has been rendered by the
counsel of one group of parties to the other group of parties.
(e) Cooperation. The parties hereto agree to cooperate with each other
to the extent necessary to effect the purposes of this Agreement, including
without limitation executing additional documents, providing introductions to
other persons and providing copies of books and records.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile copies of
signatures on signature pages hereof shall be deemed original signatures for all
purposes.
(g) Notices. All notices, consents, waivers and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth on Exhibit B attached hereto and incorporated herein by this
reference (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties).
(h) Separate Actions. Multiple actions may be brought and judgments
obtained under this Agreement. A separate and new right of action arises each
time that a claim or liability arises under this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as
of the day and year first above written.
KENNEDY WILSON, INC. HEITMAN FINANCIAL LTD.
By:_________________________ By:_________________________
HEITMAN PROPERTIES LTD. OTHER ACQUIRED COMPANIES
By:_________________________ By:_________________________
Attorney-in-Fact
<PAGE>
SCHEDULE 7.4(I)
FORM OF SERVICE BUREAU AGREEMENT
This Service Bureau Agreement (this "Service Bureau Agreement") is
made as of the 17th day of July 1998 (the "Effective Date") by and between
Heitman Financial Ltd., an Illinois corporation ("the Service Bureau"), and
Kennedy-Wilson, Inc., a Delaware corporation ("KWI").
RECITALS:
A. The Service Bureau and KWI are parties to the Stock Purchase
Agreement dated July 17, 1998 (the "Stock Purchase Agreement") providing for the
purchase of all of the outstanding stock of Heitman Properties Ltd., an Illinois
corporation (the "Company"), by KWI from the Service Bureau.
B. This Agreement is the "Service Bureau Agreement" which is referred
to in, and is being executed and delivered by the parties pursuant to, Section
7.4(i) of the Stock Purchase Agreement.
C. Capitalized terms which are not otherwise defined herein have the
meanings given to them in the Stock Purchase Agreement.
AGREEMENTS:
NOW THEREFORE, in consideration of the mutual agreements and the
premises set forth herein, the parties hereto, intending to be legally bound, do
hereby agree as follows:
Section 12. Services. During the term of this Service Bureau
Agreement, the Service Bureau shall continue to provide to the Acquired
Companies each and all of the components (the "Components") of services
described in the Schedule of Services attached as Exhibit I hereto (the
"Schedule of Services") containing the description of departmental
responsibilities set forth therein, on an as-needed basis and on the same basis
and to the same extent as historically provided by the Service Bureau
(collectively, the "Services") to the Acquired Companies (the "Business"). At
all times during the term of this Service Bureau Agreement, the Services shall
be performed in accordance with the standards set forth on the Schedule of
Services, and the quality and promptness of the Services shall be consistent
with the current quality and promptness of services provided by the Service
Bureau to the Business, provided, however, that in no event shall the quality
and promptness of delivery of the Services be less than that provided to the
Business prior to the Effective Date. Subject to the foregoing, the Service
Bureau may perform all services properly authorized by KWI or any of the
Acquired Companies, without respect to whether such performance is in violation
of the Service Bureau's internal policies and practices.
Section 13. Term and Termination.
13.1. Term. The term of this Service Bureau Agreement shall be from
the Effective Date until July 15, 1999 unless all Services are terminated sooner
pursuant to the terms of Section 2.2; provided, however, that the term of this
Service Bureau Agreement may be extended by mutual agreement of KWI and the
Service Bureau.
13.2. Termination of Services by Department. KWI shall have the right
to terminate this Service Bureau Agreement with respect to all the Services to
be provided or by any component, upon written notice to the Service Bureau,
based upon the following schedule of notification:
Component Number of Days' Notice
Corp. Accounts Payable 30
Cash Management 60
Payroll and Labor and Benefits 60
Human Resources 60
Information Services 60
Office Services 30
Section 14. Compensation. KWI shall pay compensation (the
"Compensation") to the Service Bureau for the Services as follows:
(i) Compensation shall be paid to the Service Bureau monthly in
advance on the Effective Date and on the corresponding day of each succeeding
month during which any Services are provided by the Service Bureau hereunder.
Compensation shall be paid in accordance with the Schedule of Fees included in
Exhibit I (the "Schedule of Fees") for the components of Services itemized
therein until changed as provided herein. In the event of any increase or
decrease in the amount or cost of any Component of Services resulting from an
increase or decrease in the number of properties managed by the Acquired
Companies during the term of this Service Bureau Agreement, the Schedule of Fees
shall be equitably increased or decreased, as applicable, by mutual agreement of
KWI and the Service Bureau.
(ii) Upon termination of any of the Services by an entire Component
class pursuant to Section 2.2 hereof, the Compensation shall be reduced by that
amount attributed on the Schedule of Services which have been terminated, such
reduction to be effective as of the first day of the calendar month of such
termination of Services.
(iii) The Service Bureau and KWI agree that the Compensation to be
paid to the Service Bureau for the Services will be competitive with third party
independent service providers, by Component or by total Services, and that KWI
may terminate any Component of the Services in accordance with Section 2.2
hereof if KWI believes that the Compensation for such Component of Services in
the Schedule of Fees is not competitive with fees charged by third party
independent service providers; provided, however, that the Service Bureau will
have the opportunity to match third party sources as to pricing and quality of
service provided (unless the Service Bureau declines to provide the service at
third party pricing), before KWI terminates a particular Service or Component
provided by the Service Bureau.
Section 15. Confidentiality. Prior to and during the term of this
Service Bureau Agreement and in connection with its performance of the Services,
each of the parties hereto, its employees, consultants and agents have had and
will have access to certain information of a confidential or proprietary nature
concerning the other party hereto, its clients, and business (the party which
obtains access to information of the other party is hereinafter referred to in
this Section 4 as the "receiving party" and the other party is referred to as
the "disclosing party"). Each receiving party, recognizing that a relationship
of trust and confidence will exist between it and the disclosing party in
connection with the providing of the Services, agrees that it, its employees,
consultants and agents shall at all times during the term of this Service Bureau
Agreement and at all times thereafter treat and maintain as confidential, and
shall not at any time use (other than as necessary in the performance of the
Services) or disclose to others, any such confidential or proprietary
information, including without limitation any information regarding the
disclosing party's officers, employees, plans, projects, systems, costs,
methods, procedures, finances, services, operations, clients, techniques or
records, or any similar information belonging to or concerning clients of the
disclosing party which may come within the knowledge of, or which may be
developed by the receiving party, its employees, consultants or agents, without
in each instance securing the prior written approval of the disclosing party.
The receiving party shall exercise the same degree of care in dealing with
confidential and/or proprietary information of the disclosing party as it
normally exercises in preserving and safeguarding the receiving party's own
confidential or proprietary information or confidential and/or proprietary
information of its clients generally.
Section 16. Records and Documents. It is expressly understood and
agreed that all records of the Service Bureau relating exclusively to the
Acquired Companies' business activities, including but not limited to customer
lists, prospects lists, books, records, personnel records, customer files,
correspondence files, other files, data, memoranda, printouts, notebooks,
reports, reference and resource library materials, financial records of all
types and all other documentation relating exclusively to the Acquired
Companies, whether in writing, recorded electronically, or in any other form or
format whatsoever, and whether delivered to KWI or remaining in. the possession
of the Service Bureau, are the sole and exclusive property of KWI and that such
records of any type and in any form or format relating to the Services, whether
now existing or hereafter created in connection with performance of the
Services, likewise are and shall be the sole and exclusive property of KWI. The
Service Bureau agrees that at KWI's request it shall deliver all or any portion
of such records to KWI and that if no t sooner requested, such records shall be
delivered to KWI upon the termination of this Service Bureau Agreement.
Section 6. Relationship between the Parties. It is expressly
understood and agreed that the Service Bureau is not the agent of KWI but is an
independent contractor while performing the Services, and the Service Bureau
will not represent to anyone that it is the agent of KWI. This Service Bureau
Agreement shall not be deemed to create any relationship of partnership, agency
or employment.
Section 7. Entire Agreement. This Service Bureau Agreement contains
the entire agreement between the parties with respect to the subject matter
hereof.
Section 8. Binding Effect. This Service Bureau Agreement shah be
binding upon and inure to the benefit of the parities hereto and their
respective successors and assigns; provided, however, that this Service Bureau
Agreement and all rights hereunder may not be assigned by the Service Bureau
except with the prior written consent of KWI; PROVIDED that this Agreement may
be assigned by the Service Bureau to any affiliate controlled. by Heitman
Financial Ltd. No amendment of this Service Bureau Agreement or waiver of any of
its provisions shall be effective except by a writing signed by both parties
hereto.
Section 9. Severability. The provisions of this Service Bureau
Agreement are severable and the invalidity of any provision shall not affect the
validity of any other provision.
Section 10. Caption. The captions herein have been inserted solely for
convenience of reference and in no way define, limit or describe the scope or
substance of any provision of this Service Bureau Agreement.
Section 11. Separate Counterparts. This Service Bureau Agreement may
be executed in several counterparts, all of which when taken together (whether
the signatures of all the parties appear on one or several counterparts) shall
constitute but one instrument, and it shall not be necessary in any court of law
to introduce more than one fully executed counterpart in proving this Service
Bureau Agreement.
Section 12. Notices. All notices hereunder shall be given in
accordance with the notice provisions of the Stock Purchase Agreement.
Section 13. Governing Law and Jurisdiction and Service of Process. The
execution, interpretation and performance of this Service Bureau Agreement shall
be governed by the laws of the State of Illinois (without regard to conflicts of
laws principles) which apply to contracts executed and to be performed solely in
Illinois. Any ' action or proceeding with respect to this Service Bureau
Agreement shall be subject to the provisions of Section 11.6 of the Stock
Purchase Agreement.
Section 14. Consequential Damage. The Service Bureau shall not be
liable to KWI for indirect, consequential or incidental damages of any kind or
nature, including, without limitation, loss of profits or damage to or loss of
use of any property, any interruption or loss of service, or any loss of
business, howsoever caused.
Section 15. Force Majeure. The Service Bureau shall be excused for
failure to provide any Service to the extent that such failure is directly or
indirectly caused by acts of God, national emergency, labor dispute, electrical
malfunction, transportation delays, telecommunication failures, or any other
event or circumstance beyond the reasonable control of the Service Bureau, but
only until the cessation of such event or circumstance. In the event that the
Service Bureau's performance hereunder is affected by such an event or
circumstance, the Service Bureau shall promptly notify KWI of same, giving
reasonably full particulars thereof and, insofar as known, the probable extent
to which it will be unable to perform, or will be delayed in performing, its
obligations hereunder and the Service Bureau shall use reasonable efforts to
remove such force majeure.
Section 16. Exculpation of Service Bureau. The Service Bureau shall be
excused from, have no liability for, and be defended, indemnified and held
harmless by KWI and the Acquired Companies, from and against, all liabilities,
claims, damages and expenses (including reasonable attorneys fees) arising out
of or relating to this Agreement except for gross negligence or willful
misconduct of the Service Bureau.
IN WITNESS WHEREOF, the parties hereto have duly executed this Service
Bureau Agreement as of the date first above written.
HEITMAN FINANCIAL LTD.
By:__________________________
KENNEDY-WILSON, INC.
By:__________________________
<PAGE>
Propos Vice Bur. Cost
PAYROLL
MCLAUGHLIN.MICHAEL J.
RAMIREZ, LETICIA
75,000
HFL CASH MGMT
MERTENS, JEAN M
SHILLINGTON, JEFF K
KIKOS, LAURIE L
RAGIS, MARGE
GARCIA, JEAN
RISBERG, ARLENE
BROUSSARD, SHERRY D.
FUNG, KITMEI
HERRES, TERESA
CHOY, WING YIP
KAUFFIN, KIM ALICIA
226,000
HFL HUMAN RESOURCES
SMITH LAPPLEY, MARY JANE
GRUEMMER, PAIGE E
HOEMEKE, DEBORAH
REICH, MARGARET E
ROBERTSON, JENNIFER
SHERMAN, NATALIE
LUCAS, GINA
KUH, CAROLINE
PITTS, ANGILIQUE
CHLOPEK, ESTELLE M
152,000
HFL MIS
Applications
SLONSKI, MARK R
THOMAS, JUDFTH A
RYBAK, KATHLEEN
BROOKS, CARRIE
KELLY, CHRISTINE
PRIEST KIT (C)
125,000
Network/Email/Hardware
JONES,KELLY
KAYE, DAN M.
HOBSON, SHIRLEY
SCHFCK, MICHAEL R.
SOBEL, ROBERT RHEE
BANKS, JOSHUA
DESCO, JOALLE MARIE
GAVENDA(C)
WADZINSKI (C)
283,000
Help Desk
FELLER, JULIE
WEISS, STEPHAN
MUELLER, TODD
DAVIS, BERNARD
URICH, ROBERT JOHN
GUNDERSON, GARY
JEFFERSON, TONYA
WILLTAMS, DARREN (C)
COOPER, LARONA D
139,000
---------
HFL 1,000,000
FORM OF DISCLOSURE LETTER
<PAGE>
HEITMAN FINANCIAL LTD.
9601 WILSHIRE BLVD., SUITE 200
BEVERLY HILLS, CALIFORNIA 90210
July 16, 1998
Kennedy-Wilson, Inc.
530 Wilshire Boulevard, Suite 101
Santa Monica, California 90401
Attention: Mr. William J. McMorrow
Ladies and Gentlemen:
This is the initial Disclosure Letter referred to and defined in that certain
Stock Purchase Agreement (the "Stock Purchase Agreement") between Heitman
Financial Ltd., an Illinois corporation ("Seller"), and Kennedy-Wilson, Inc., a
Delaware corporation ("Buyer"), covering the purchase and sale of outstanding
stock of Heitman Properties Ltd., an Illinois corporation (the "Company").
Capitalized terms herein which are not otherwise defined herein have the
meanings given to them in the Stock Purchase Agreement. References herein to a
"Part" of this Disclosure Letter correspond to the references to Parts of the
Disclosure Letter in the Stock Purchase Agreement. References herein to Exhibits
and Schedules are to Exhibits and Schedules to the Stock Purchase Agreement
which are incorporated herein by such references.
Part 3.1 See Schedules 1.SHS, 1.SUBS, and 3.3. The Company is qualified to
do business in California.
Part 3.2 There may be one or more Contracts which require a Consent due to
"change in control" provisions.
Part 3.4 No exceptions.
Part 3.6 See Schedule 2.5(b)(iii) listing Applicable Contracts, including
leases.
Part 3.10 No exceptions.
Part 3.11 See Part 3.11 attached hereto and the Indemnity.
Part 3.13 See Part 3.13 attached hereto.
Part 3.14(b) See Part 3.27 attached hereto. Each of the Acquired Companies (or
an individual associated therewith) is licensed as a real estate
broker in the state in which it does business if and as required
by applicable law.
Part 3.15 See Part 3.15 attached hereto.
Part 3.16 No exceptions.
Part 3.17(a) See Schedule 2.5(b)(iii) and Schedule 3.20. The property
management contract for the Hunt Club in Oregon will be assigned
prior to the Closing by Heitman Properties of Oregon Ltd.
("Oregon") to one of the Acquired Companies or another subsidiary
of Buyer because the stock of Oregon is an Excluded Asset. The
Transitional Services Agreement which will be entered into by the
parties thereto at the Closing will constitute one of the
Applicable Contracts. The retail property management agreements
for Arden Fair, McKinely Mall and Plaza Frontenac will be
retained by the Company but the management services for those
properties will be provided by Seller or an affiliate of Seller
pursuant to the Transitional Services Agreement.
Part 3.17(b) No exceptions.
Part 3.17(c) No exceptions.
Part 3.17(d) No exceptions.
Part 3.17(e) See Part 3.17(e) attached hereto.
Part 3.18(b) See Part 3.18 attached hereto. Insurance policies maintained by
or for the benefit of the Acquired Companies include customary
deductibles and co- insurance provisions.
Part 3.18(c) See Part 3.18 attached hereto.
Part 3.18(d) See Part 3.18 attached hereto.
Part 3.19 No exceptions.
Part 3.20 See Schedule 3.20 and Part 3.20 attached hereto. Detailed
information with respect to the position, compensation and
benefits of employees of the Acquired Companies has been provided
to Buyer in connection with its due diligence investigation and
additional information required by Buyer will be provided on
request.
Part 3.22 Licenses for use of copyrighted software used in the Ordinary
Course of Business and pending copyright to name STRATA Real
Estate Services.
Part 3.25 See Part 3.25 attached hereto.
Part 3.26 See Part 3.26 attached hereto.
Part 3.27 See Part 3.27 attached hereto.
Very truly yours,
HEITMAN FINANCIAL LTD.
By:_________________________
Eric Mayer, Vice Chairman
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
Kennedy-Wilson, Inc., a Delaware corporation (the "Company"), hereby
grants to Colony Investors III, L.P. ("Purchaser") and any permitted assignee of
the registration rights provided for herein.
Section 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
"Advice" has the meaning set forth in Section 5.
"Additional Warrants" has the meaning set forth in Section 3.3 of the
Investor's Agreement.
"Affiliate" means, with respect to any Person, (a) any Person or
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person, (b) any spouse or non-adult child
(including by adoption) of any natural person described in clause (a) above, (c)
any relative other than a spouse or non-adult child (including by adoption) who
has the same principal residence of any natural person described in clause (a)
above, (d) any trust in which any such Persons described in clause (a), (b) or
(c) above has a beneficial interest and (e) any corporation, partnership,
limited liability company or other organization of which any such Persons
described in clause (a), (b) or (c) above collectively own more than fifty
percent (50%) of the equity of such entity. For purposes of this definition,
beneficial ownership of more than ten percent (10%) of the voting common equity
of a Person shall be deemed to be control of such Person.
"Agreement" means this Registration Rights Agreement, dated as of July
16, 1998.
"Business Day" means any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company as filed with the Secretary of State of the State of Delaware on
March 27, 1992, as amended through and including April 30, 1998.
"Commission" means the Securities and Exchange Commission or any other
similar or successor agency of the Federal government administering the
Securities Act and/or the Exchange Act from time to time.
"Common Shares" means the shares of Common Stock issued pursuant to
that certain Stock Purchase Agreement, dated July 16, 1998, between the Company
and Purchaser.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" has the meaning set forth in the first paragraph hereof and
shall include the Company's successors by merger, acquisition, reorganization or
otherwise.
"Controlling Persons" has the meaning set forth in Section 8(a).
"Effective Period" has the meaning set forth in Section 4(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, and the rules and regulations of
the Commission promulgated thereunder.
"Holders" means the registered holders of Registrable Securities.
"Inspectors" has the meaning set forth in Section 4(m).
"Investor's Agreement" means that certain Investor's Agreement between
the Company and Purchaser dated of even date herewith.
"Market Value" means the number of shares of Common Stock to be
registered (or issuable upon the conversion or exchange of other securities to
be registered) pursuant to the demand for registration provided in Section 2
below multiplied by the then Per Share Price of the Common Stock.
"NASD" has the meaning set forth in Section 4(q).
"Objecting Party" has the meaning set forth in Section 4(a).
"Per Share Price" means the daily closing price of the Common Stock on
the NASDAQ on the trading day before the Company receives the written demand for
registration.
"Person" means 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.
"Piggy-Back Registration" has the meaning set forth in Section 3(a).
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
including a prospectus supplement with respect to the terms of the offering of
any portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to the prospectus,
including post-effective amendments, and in each case including all material
incorporated by reference or deemed to be incorporated by reference in such
prospectus.
"Records" has the meaning set forth in Section 4(m).
"Registrable Securities" means, collectively, the Common Shares, the
Warrants, any Additional Warrants, the Warrant Shares and any other shares of
Common Stock acquired by Purchaser or its permitted assigns (so long as not
acquired in violation of the Investor's Agreement), unless (in the case of any
such securities) such securities have been (a) effectively registered under
Section 5 of the Securities Act and disposed of pursuant to an effective
Registration Statement, or (b) such securities have been transferred pursuant to
Rule 144 under the Securities Act or any successor rule such that, after any
such transfer referred to in this clause (b), such securities may be freely
transferred without restriction under the Securities Act.
"Registration Expenses" has the meaning set forth in Section 7.
"Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"Rule 144" has the meaning set forth in Section 9(a).
"Rule 144A" has the meaning set forth in Section 9(b).
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Suspension Notice" has the meaning set forth in Section 5(a).
"Suspension Period" means the period from the date on which the
Holders receive a Suspension Notice to the date on which any Holder receives
either the Advice or copies of the supplemented or amended Prospectus
contemplated by Section 4(f).
"Warrants" means the warrants to acquire shares of Common Stock,
issued pursuant to that certain Warrant Agreement, dated of even date herewith,
between the Company and Purchaser.
"Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the Warrants and any Additional Warrants.
Section 2. DEMAND REGISTRATION.
(a) Demand for Registration. The Holders may, at their
option, at any time after the date hereof, require the Company to use
its best efforts to effect a registration of Registrable Securities
under the Securities Act (the "Demand Registration"); provided,
however, that (i) the Company shall not be required to effect such
Demand Registration unless the Company is requested to do so with
respect to Registrable Securities having a Market Value of not less
than $2,000,000; (ii) at its option, the Company shall not be required
to effect such registration prior to three (3) months immediately
following the date on which an underwritten public offering of equity
securities (pursuant to an effective registration statement under the
Securities Act) is commenced, if such public offering is commenced
prior to the date of a request for the Demand Registration; provided,
further, that, if in the opinion of an independent investment banking
firm of national reputation such registration, if not deferred,
materially and adversely would affect a proposed business or financial
transaction of substantial importance to the Company's financial
condition, the Company may defer such registration for a single period
(specified in such notice) of not more than 180 days; and (iii) the
Company shall not be required to use its best efforts to effect a
registration of Registrable Securities under this Section 2 more than
three times or more often than nine months following the completion of
a Demand Registration. At the election of Holders requesting a Demand
Registration, such registration statement shall be filed under Rule
415 promulgated under the Securities Act (a "Resale Registration
Statement"), and the Company shall use its best efforts to keep a
Resale Registration Statement continuously effective until the earlier
of four (4) years and the date on which there are no more Registrable
Securities unsold thereunder. The Company shall promptly cause a
Resale Registration Statement to be amended to remove a Holder's
Registrable Securities upon notice to the Company from such Holder.
The Company shall not be required to file and effect more than one (1)
Resale Registration Statement pursuant to this Section 2(a). If, after
a Demand Registration becomes effective, the offering of securities
thereunder is or becomes subject to any stop order, injunction or
other order or requirement of the Commission that prevents or limits
the sale of securities thereunder for a period of more than five (5)
Business Days, then such Demand Registration shall be deemed not to
have been effected for purposes of this Section 2(a).
(b) Underwritten Offerings. If underwritten, the underwriter
in a Demand Registration must be reasonably acceptable to the Company.
In connection with any Demand Registration in which more than one
Holder participates, in the event that such Demand Registration
involves an underwritten offering and the managing underwriter or
underwriters participating in such offering advise in writing the
Holders of Registrable Shares to be included in such offering that the
total number of Registrable Shares to be included in such offering
exceeds the amount that can be sold in (or during the time of) such
offering without delaying or jeopardizing the success of such offering
(including the price per share of the Registrable Shares to be sold),
then the amount of Registrable Shares to be offered for the account of
such Holders shall be reduced pro rata on the basis of the number of
Registrable Shares to be registered by each such Holder. The Company
shall not include any securities that are not Registrable Securities
in any Registration Statement filed pursuant to this Section 2 without
the prior written consent of the Holders of a majority in number of
the Registrable Securities covered by such Registration Statement.
Section 3. PIGGY-BACK REGISTRATION.
(a) Request for Registration. Each time the Company proposes
to file a registration statement under the Securities Act with respect
to an offering by the Company for its own account or for the account
of any of its securityholders of any class of equity security (except,
(i) a registration statement on Form S-4 or S-8 (or any substitute
form that is adopted by the Commission), (ii) a registration statement
filed in connection with a dividend reinvestment plan, stock option
plan or unit investment trusts, or (iii) a registration statement
filed in connection with an exchange offer or offering of securities
solely to the Company's existing securityholders), and the form of
registration statement to be used permits the registration of
Registrable Securities, then the Company shall give written notice of
such proposed filing to the Holders as soon as reasonably practicable
(but in no event less than 20 days before the anticipated filing date
and no less than 30 days before the anticipated effective date), and
such notice shall offer the Holders the opportunity to register such
Registrable Securities as the Holders may request (which request shall
specify the Registrable Securities intended to be disposed of by the
Holders and the intended method of distribution thereof) up to 20 days
before the anticipated effective date (a "Piggy-Back Registration").
The Company shall cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the Registrable Securities
requested to be included in a Piggy-Back Registration to be included
on substantially the same terms and conditions as any similar
securities of the Company or any other securityholder included therein
and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution
thereof. Any Holder shall have the right to withdraw such Holder's
request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 3 by giving written
notice to the Company of such withdrawal no later than two Business
Days prior to the anticipated effective date. The Company may withdraw
a Piggy-Back Registration at any time prior to the time it becomes
effective, provided that the Company shall give prompt notice of such
withdrawal to the other Holders, if any, requested to be included in
such Piggy-Back Registration.
(b) Reduction of Offering. If the managing underwriter or
underwriters of an underwritten offering with respect to which
Piggy-Back Registration has been requested as provided in Section 3(a)
hereof shall have informed the Company, in writing, that in the
opinion of such underwriter or underwriters the total number of shares
which the Company, the Holders and any other Persons participating in
such registration intend to include in such offering is such as to
materially and adversely affect the success of such offering
(including without limitation any material decrease in the proposed
public offering price), then the number of shares to be offered for
the account of all Persons and Holders (other than the Company)
participating in such registration shall be reduced or limited (to
zero if necessary) pro rata in proportion to the respective number of
shares requested to be registered by such Persons to the extent
necessary to reduce the total number of shares requested to be
included in such offering to the number of shares, if any, recommended
by such managing underwriter or underwriters.
(c) Underwriting. In the case of a Piggy-Back Registration,
if the Company has determined to enter into an underwriting agreement
in connection therewith, all Registrable Securities to be included in
such Registration Statement shall be subject to such underwriting
agreement, and no Holder may participate in such Registration unless
such Holder agrees to sell its Registrable Securities on the basis
provided for in such underwriting arrangements approved by the Company
and completes and/or executes all reasonable and customary
questionnaires, powers of attorney, indemnities, underwriting
agreements and other reasonable documents which must be executed under
the terms of such underwriting arrangements.
Section 4. REGISTRATION PROCEDURES. In connection with the obligations
of the Company to effect or cause the registration of any Registrable Securities
pursuant to the terms and conditions of this Agreement, the Company shall use
its best efforts to effect the registration and sale of such Registrable
Securities in accordance with the terms of this Agreement as quickly as
reasonably practicable, and in connection therewith:
(a) Prior to filing a Registration Statement or Prospectus
or any amendments or supplements thereto, excluding for purposes of
this Section 4(a) documents incorporated by reference after the
initial filing of the Registration Statement, the Company will furnish
to the Holders covered by such Registration Statement (the "Selling
Holders") and the underwriters, if any, draft copies of all such
documents proposed to be filed at least ten Business Days prior
thereto (or, in the case of amendments or supplements, such shorter
period as may be reasonably permitted under the circumstances), which
documents will be subject to the reasonable review of the Holders and
the underwriters, if any, and the Company will not, unless required by
law, file any Registration Statement or amendment thereto or any
Prospectus or any supplement thereto to which Selling Holders of at
least a majority in interest of the Registrable Securities (the
"Objecting Party") shall reasonably object pursuant to notice given to
the Company prior to the filing of such amendment or supplement (the
"Objection Notice") and no later than five Business Days after receipt
of the documents to which the Objection Notice relates. The Objection
Notice shall set forth the objections and the specific areas in the
draft documents where such objections arise. The Company shall have
five Business Days after receipt of the Objection Notice to correct
such deficiencies to the reasonable satisfaction of the Objecting
Party, and will notify each Selling Holder of any stop order issued or
threatened by the Commission in connection therewith and take all
reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
(b) The Company promptly shall prepare and file with the
Commission such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration
Statement effective for a period of not more than 60 days or (in the
case of a Resale Registration Statement) up to four (4) years (as
applicable, the "Effective Period"); shall cause the Prospectus to be
supplemented by any required Prospectus supplements, and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities
Act; and shall comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all Registrable
Securities covered by such Registration Statement during the Effective
Period in accordance with the intended methods of disposition by the
Holders set forth in such Registration Statement or supplement to the
Prospectus.
(c) The Company promptly shall furnish to any Holder and the
underwriters, if any, without charge, such reasonable number of
conformed copies of each Registration Statement and any post-effective
amendment thereto and such number of copies of the Prospectus
(including each preliminary Prospectus) and any amendments or
supplements thereto, any documents incorporated by reference therein
and such other documents as such Holder or underwriter reasonably may
request in order to facilitate the public sale or other disposition of
the Registrable Securities being sold by such Holder.
(d) The Company shall, (i) on or prior to the date on which
a Registration Statement is declared effective, use its reasonable
best efforts to register or qualify the Registrable Securities covered
by such Registration Statement under such other securities or "blue
sky" laws of such states of the United States as any Holder or
underwriter requests; (ii) do any and all other acts and things which
may be reasonably necessary to enable such Holder to consummate the
disposition of such Registrable Securities owned by such Holder in
accordance with the intended methods for distribution set forth
therein; and (iii) use its reasonable best efforts to keep each such
registration or qualification (or exemption therefrom) effective
during the Effective Period; provided, however, that the Company shall
not be required (A) to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 4(d) or (B) to file any general consent to service of
process.
(e) The Company shall cause the Registrable Securities
covered by a Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be
reasonably necessary by virtue of the business and operations of the
Company to enable the Holders to consummate the disposition of such
Registrable Securities.
(f) The Company promptly shall notify each Holder and any
underwriter in writing, (i) 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, (ii) of any request by the
Commission or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the issuance
by any state securities commission or other regulatory authority of
any order suspending the qualification or exemption from qualification
of any of the Registrable Securities under state securities or "blue
sky" laws or the initiation of any proceedings for that purpose, and
(v) of the happening of any event which makes any statement made in a
Registration Statement or related Prospectus untrue or which requires
the making of any changes in such Registration Statement or Prospectus
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, in light of the
circumstances under which they were made, not misleading.
(g) The Company shall make generally available to the
Holders an earnings statement satisfying the provisions of Section
11(a) of the Securities Act no later than 45 days (90 days in the
event it relates to a fiscal year) 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 said 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.
(h) The Company promptly shall use its reasonable best
efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement, and in the event a stop
order is issued, use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of a Registration
Statement at the earliest possible moment.
(i) If requested by the managing underwriter or
underwriters, if any, or any Holder, the Company promptly shall
incorporate in a Prospectus supplement or post-effective amendment
such information as such managing underwriter or underwriters or such
Holder reasonably requests to be included therein, including, without
limitation, with respect to the Registrable Securities being sold by
such Holder to such underwriter or underwriters, the purchase price
being paid therefor by such underwriter or underwriters and with
respect to any other terms of an underwritten offering of the
Registrable Securities to be sold in such offering, and promptly make
all required filings of such Prospectus supplement or post-effective
amendment.
(j) The Company shall deliver a copy of each document
incorporated by reference into a Registration Statement (in the form
in which it was incorporated) to each Holder as promptly as
practicable after filing such documents with the Commission.
(k) The Company shall cooperate with the Holders and the
managing underwriter or underwriters, if any, 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 a Registration Statement, and enable such
securities to be in such denominations and registered in such names as
the Holders and the managing underwriter or underwriters, if any,
reasonably 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.
(l) The Company shall enter into such customary agreements
(including, if applicable, an underwriting agreement in customary
form) and take such other actions as the Holders, or the underwriters,
if any, retained by the Holders participating in an underwritten
public offering, if any, reasonably may request in order to expedite
or facilitate the disposition of Registrable Securities.
(m) The Company promptly shall make available to each
Holder, any underwriter participating in any disposition pursuant to a
Registration Statement, and any attorney, accountant or other agent or
representative retained by any such Holder 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 reasonably requested by any such Inspector in connection
with such Registration Statement; provided that, unless the disclosure
of such Records is necessary to avoid or correct a misstatement or
omission in such 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 paragraph if (i) the Company believes,
after consultation with counsel for the Company and counsel for the
Holders, that to do so would cause the Company to forfeit an
attorney-client privilege that was applicable to such information or
(ii) either (A) the Company has requested and been granted from the
Commission confidential treatment of such information contained in any
filing with the Commission or documents provided supplementally or
otherwise or (B) 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 (A) or (B), such Holder requesting such information agrees to enter
into a confidentiality agreement in customary form and subject to
customary exceptions reasonably acceptable to the Company; and,
provided, further, that each Holder 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.
(n) In the case of any underwritten offering, the Company
shall furnish to each Holder and to each underwriter, if any, a signed
counterpart, addressed to such Holder or underwriter, of (i) an
opinion or opinions of counsel to the Company, and (ii) 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 managing underwriter therefor reasonably requests.
(o) The Company shall cause the Registrable Securities to be
authorized for quotation and/or listing, as applicable, on such
exchange or quotation system as the Common Stock is listed or quoted.
(p) The Company shall provide a CUSIP number for all
Registrable Securities covered by a Registration Statement not later
than the effective date of such Registration Statement.
(q) The Company shall cooperate with each Holder and each
underwriter participating in the disposition of Registrable Securities
and their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers, Inc.
("NASD").
(r) During the period when the Prospectus is required to be
delivered under the Securities Act, the Company promptly shall file
all documents required to be filed with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
(s) The Company shall appoint a transfer agent and registrar
for all the shares of Common Stock covered by a Registration Statement
not later than the effective date of such Registration Statement.
(t) In connection with an underwritten offering, the Company
will participate, to the extent reasonably requested by the managing
underwriter for the offering or the Holders, in customary efforts to
sell the securities under the offering, including without limitation,
participating in "road shows."
Each Selling Holder shall provide the Company with such information
about the Selling Holder and its intended manner of distribution of the
Registrable Securities, and otherwise shall cooperate with the Company and the
underwriters, if any, as may be needed or helpful to complete any obligation of
the Company hereunder.
Section 5. LIMITATIONS ON SALES.
(a) Suspension Period. Each Holder, upon receipt of any
notice (a "Suspension Notice") from the Company of the happening of
any event of the kind described in Section 4(f)(v), forthwith shall
discontinue disposition of the Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(f) 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, or
will request the managing underwriter or underwriters, if any, to
deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of
receipt of such notice; provided, however, that the Company shall not
give a Suspension Notice until after the Registration Statement has
been declared effective. In the event that the Company shall give any
Suspension Notice, (i) the Company shall use its reasonable best
efforts and take such actions as are reasonably necessary to end the
Suspension Period as promptly as practicable and (ii) immediately
following expiration of the Suspension Period, the Company shall, to
the extent necessary, prepare and file with the Commission and furnish
a supplement or amendment to such Prospectus so that, as thereafter
deliverable to the purchasers of such Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Lock-up. If on any occasion of registration in which the
Company proposes to file a registration statement under the Securities
Act with respect to the proposed sale of Common Stock pursuant to a
fully-underwritten public offering, and the managing underwriter or
underwriters shall request an agreement by each Holder not to sell any
of the Registrable Securities so held by such Holder for a period of
90 days after the date of the underwriting agreement in order to
effect an orderly public distribution thereof, then so long as (i) the
Holder and its Affiliates own five percent (5%) or more of the
Company's outstanding securities or the Holder has a representative on
the Company's Board of Directors and (ii) the Holder is deemed to be
an Affiliate of the Company for purposes of the Securities Act, each
Holder shall enter into and execute such an agreement with such
managing underwriter or underwriters and the Company pertaining to a
restriction on the transfer of any equity securities of the Company
during such period. Each Holder further agrees, upon request of the
managing underwriter or underwriters, to enter into and execute an
agreement with such managing underwriter or underwriters and the
Company pursuant to the terms of which such Holder will agree not to
transfer any securities of the Company during the seven-day period
immediately preceding the effectiveness of such registration statement
to the extent necessary to avoid violation of the Exchange Act.
Section 6. HOLDER INFORMATION. If any Registration Statement refers to
any Holder by name or otherwise as the holder of any securities of the Company,
then such Holder shall have the right, to the extent permitted by law, to
require (a) the insertion therein of language, in form and substance reasonably
satisfactory to such Holder, to the effect that the holding by such Holder of
such securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (b) in the event that such reference
to such Holder by name or otherwise is not required by the Securities Act or any
similar Federal or state "blue sky" statute and the rules and regulations
thereunder then in force, the deletion of the reference to such Holder.
Section 7. REGISTRATION EXPENSES. Any and all expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation all Commission and securities exchange, NASDAQ or NASD registration
and filing fees, all fees and reasonable expenses incurred in connection with
compliance with state securities or "blue sky" laws (including reasonable fees
and disbursements of one counsel for all underwriters in connection with "blue
sky" qualifications of the Registrable Securities), printing expenses, messenger
and delivery expenses, internal expenses of the Company (including, without
limitation, all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), all reasonable expenses for word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the performance of
and compliance with this Agreement, the fees and expenses incurred in connection
with the listing of the Registrable Securities, the fees and disbursements of
counsel for the Company and of the independent certified public accountants of
the Company (including the expenses of any special audit or comfort letters),
Securities Act liability insurance (if the Company elects to obtain such
insurance), the fees and expenses of any special experts or other Persons
retained by the Company in connection with any registration (all such expenses
being herein called "Registration Expenses"), will be borne by the Company
whether or not the Registration Statement to which such expenses relate becomes
effective; provided, however, that Registration Expenses shall not include
underwriting fees, discounts or commissions attributable to the sale or
disposition of Registrable Securities or the fees and expenses of legal counsel
and accountants retained by the Holders.
Section 8. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law,
each Holder, its partners, officers, directors, trustees,
stockholders, employees, agents and investment advisers, and each
Person who controls such Holder within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act, or is
under common control with, or is controlled by, such Holder, together
with the partners, officers, directors, trustees, stockholders,
employees and agents of such controlling Person (collectively, the
"Controlling Persons"), from and against all losses, claims, damages,
liabilities and expenses (including without limitation any reasonable
legal or other fees and expenses actually incurred in connection with
defending or investigating any action or claim in respect thereof,
provided, however, that such legal fees shall be limited to those
incurred by one individual counsel for all indemnified parties under
this paragraph (a), together with any appropriate or necessary local
counsel, if any) (collectively, the "Damages") to which such Holder,
its partners, officers, directors, trustees, stockholders, employees,
agents and investment advisers, and any such Controlling Person may
become subject under the Securities Act, insofar as such Damages (or
proceedings in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of material fact contained in any
Registration Statement or Prospectus (or any amendment thereto)
pursuant to which Registrable Securities were registered under the
Securities Act, including all documents incorporated therein by
reference, or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading,
or caused by any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented
if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading,
except insofar as such Damages arise out of or are based upon any such
untrue statement or omission based upon information relating to such
Holder furnished in writing to the Company by such Holder (or by a
Person authorized to provide such information on behalf of such
Holder) expressly for use therein.
The Company shall also indemnify underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, their officers, directors, agents,
employees and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) to the same extent as provided with respect to the
indemnification of the Holders.
(b) Indemnification by the Holders. Each Holder agrees,
severally and not jointly, to indemnify and hold harmless, to the
fullest extent permitted by law the Company, its directors, officers,
stockholders, employees, agents, attorneys, and investment advisers
and each Person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, or is under common control with, or is controlled by,
the Company, together with its Controlling Person, from and against
all Damages to which the Company and any Controlling Persons may
become subject under the Securities Act insofar as such Damages (or
proceedings in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Registrable Securities were registered under the Securities Act
(including all documents incorporated therein by reference), or caused
by any omission or alleged omission to state therein a material fact
necessary to make the statements therein in light of the circumstances
under which they were made not misleading, or caused by any untrue
statement or alleged untrue statement of a material fact contained in
any Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact
necessary to make the statements therein in light of the circumstances
under which they were made not misleading, to the extent, but only if
and to the extent that such Damages arise out of or are based upon any
such untrue statement or alleged untrue statement or omission or
alleged omission based upon information relating to such Holder
furnished in writing to the Company by such Holder (or by a Person
authorized to provide such information on behalf of such Holder)
expressly for inclusion therein; provided, however, that (i) such
selling Holder shall not be liable in any such case to the extent that
such Damages result from the failure of the Company to promptly amend
or take action to correct or supplement any such Registration
Statement or Prospectus on the basis of corrected or supplemental
information provided in writing by such selling Holder to the Company
expressly for such purpose and (ii) the total amount for which a
Holder shall be liable hereunder shall not in any event exceed the
aggregate proceeds received by such Holder from the sale of
Registrable Securities in such registration.
(c) Indemnification Procedures. In case any proceeding
(including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought
pursuant to either paragraph (a) or (b) above, such Person (the
"indemnified party") promptly shall notify the Person against whom
such indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party shall retain counsel reasonably satisfactory to
the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceedings and
shall pay the reasonable fees and disbursements of such counsel
relating to such proceeding; provided, however, that (i) in the case
of any proceeding in respect of which indemnity may be sought pursuant
to both paragraphs (a) and (b) above, a Holder shall not be required
to assume the defense thereof and the fees and expenses of such
counsel shall be at the expense of the Company and (ii) the Company
shall not be obligated to pay the fees and expenses of more than one
individual counsel (together with any appropriate or necessary local
counsel, if any) for all indemnified parties, including the Company.
In any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel, or (ii) the indemnifying
party fails promptly to assume the defense of such proceeding or fails
to employ counsel reasonably satisfactory to such indemnified party or
parties, or (iii) (A) the named parties to any such proceeding
(including any impleaded parties) include both such indemnified party
or parties and any indemnifying party or an Affiliate of such
indemnified party or parties or of any indemnifying party, (B) there
may be one or more legal defenses available to such indemnified party
or parties or such Affiliate of such indemnified party or parties that
are different from or additional to those available to any
indemnifying party or such Affiliate of any indemnifying party and (C)
such indemnified party or parties shall have been advised by such
counsel that there may exist a legal conflict of interest between or
among such indemnified party or parties or such Affiliate of such
indemnified party or parties and any indemnifying party or such
Affiliate of any indemnifying party, in which case, if such
indemnified party or parties notifies the indemnifying party or
parties in writing that it elects to employ separate counsel of its
choice at the reasonable expense of the indemnifying parties, the
indemnifying parties shall not have the right to assume the defense
thereof and such counsel shall be at the reasonable expense of the
indemnifying parties, it being understood, however, that unless there
exists a conflict among indemnified parties, the indemnifying parties
shall not, in connection with any one such proceeding or separate but
substantially similar or related proceedings in the same jurisdiction,
arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of
attorneys at any time for such indemnified party or parties. The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent (which will not be
unreasonably withheld) but, if settled with such consent or if there
be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party or parties from and against any
loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent (which
will not be unreasonably withheld) of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of
which such indemnified party is a party, and indemnity could have been
sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) Contribution. To the extent that the indemnification
provided for in paragraph (a) or (b) of this Section 8 is unavailable
to an indemnified party or insufficient in respect of any Damages,
then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of
such Damages in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the Holders on the
other hand in connection with the statements or omissions that
resulted in such Damages, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and
of the Holders on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the
Holders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
Notwithstanding the provisions of this Section 8(d), no Holder shall
be required to contribute any amount in excess of the amount at which the net
sale proceeds from the Registrable Securities to such Holder exceeds the amount
of any damages which such Holder has otherwise been required to pay by reason of
such untrue statement or omission. Each Holder's obligation to contribute
pursuant to this Section 8(d) is several in the proportion that the proceeds of
the offering received by such Holder bears to the total proceeds of the offering
received by all the Holders and not joint.
If indemnification is available under paragraph (a) or (b) of this
Section 8, the indemnifying parties shall indemnify each indemnified party to
the full extent provided in such paragraphs without regard to the relative fault
of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 8(d).
The Company and each Holder agrees that it would not be just or
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to herein. The amount paid or payable
by an indemnified party as a result of the Damages referred to in this Section 8
shall be deemed to include, subject to the limitations set forth above, any
reasonable legal or other expenses incurred (and not otherwise reimbursed) by
such indemnified party in connection with investigating or defending any such
action or claim. 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 remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(e) Survival. The parties' indemnification and contribution
obligations pursuant to this Section 8 shall survive the sale,
transfer, assignment or other disposition of any Registrable
Securities and shall survive any termination of this Agreement.
Section 9. AVAILABLE INFORMATION.
(a) Rule 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the
Exchange Act (or, if the Company is not required to file such reports,
it will, upon the request of any Holder, make publicly available other
information so long as necessary to permit sales under Rule 144 under
the Securities Act, as such rule may be amended from time to time or
any similar rule or regulation hereafter adopted by the Commission
("Rule 144"), and it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions
provided by Rule 144. Upon the request of any Holder, the Company will
deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) Rule 144A. Upon the request of any Holder, the Company
shall deliver to such holder within 20 days following receipt by the
Company of such request, the information required by Section (d)(4) of
Rule 144A under the Securities Act, as such rule may be amended from
time to time or any similar rule or regulation hereafter adopted by
the Commission ("Rule 144A"), and will take such further action as any
Holder may reasonably request, all to the extent required from time to
time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitations or the
exemptions provided by Rule 144A. All information shall be "reasonably
current" as defined in Rule 144A.
Section 10. MISCELLANEOUS.
(a) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the
Company has obtained the written consent of the Holders of a majority
in interest of the Registrable Securities then outstanding.
(b) Notices. All notices, requests and other communications
provided for herein shall be given or made in writing:
if to the Company: Kennedy-Wilson, Inc.
530 Wilshire Blvd., #101
Santa Monica, California 90401
Attention: William J. McMorrow
Fax No.: (310) 314-8510
with copies to: Kulik, Gottesman & Mouton, LLP
1880 Century Park East, Suite 1150
Los Angeles, California 90067
Attention: Kent Mouton, Esq.
Fax No.: (310) 557-0224
and
White & Case LLP
633 West Fifth Street
Los Angeles, California 90071-2007
Attention: Richard K. Smith, Jr., Esq.
Fax No.: (213) 687-0758
if to Purchaser: Colony Investors III, L.P.
c/o Colony Capital, Inc.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Attention: Richard Ekleberry, Esq.
Fax No.: (817) 871-4088
with a copy to: Skadden, Arps, Slate, Meagher & Flom
LLP
300 South Grand Avenue
Los Angeles, California 90071
Attention: Jonathan H. Grunzweig, Esq.
Fax No.: (213) 687-5600
if to any other person who is a registered Holder, to the
address for such Holder as it appears in the stock or warrant ledger
of the Company; or, in the case of any Holder, at such other address
as shall be designated by such party in a notice to the Company; or,
in the case of the Company, at such other address as the Company may
designate in a notice to the Holders.
All such notices, requests and other communications shall
be: (i) personally delivered, sent by courier guaranteeing overnight
delivery or sent by registered or certified mail, return receipt
requested, postage prepaid, in each case given or addressed as
aforesaid; and (ii) effective upon receipt.
(c) Successors and Assigns. Subject to restrictions on the
transfer of Common Stock set forth in the Company's Certificate of
Incorporation and the Investor's Agreement of even date herewith
between the Company and Purchaser, this Agreement shall inure to the
benefit of and be binding only upon (i) Purchaser, (ii) the general
and limited partners of Purchaser, and (iii) assigns of the Purchaser
(so long as the Registrable Securities are not acquired in violation
of the Investor's Agreement and the Company's Certificate of
Incorporation).
(d) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without
regard to principles of conflicts of law.
(f) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(g) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof
is validly asserted as a defense, the successful party shall, to the
extent permitted by applicable law, be entitled to recover reasonable
attorneys' fees and expenses in addition to any other available
remedy.
(h) Further Assurances. Each party shall cooperate and take
such action as may be reasonably requested by another party in order
to carry out the provisions and purposes of this Agreement and the
transactions contemplated hereby.
(i) Remedies. In the event of a breach or a threatened
breach by the Company of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to
specific performance of its rights under this Agreement or to
injunctive relief, in addition to being entitled to exercise all
rights granted by law. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the
parties that the remedy at law, including monetary damages, is
inadequate and that any objection in any action for specific
performance or injunctive relief that a remedy at law would be
adequate is waived.
<PAGE>
KENNEDY-WILSON, INC.
By______________________________
Name:
Title:
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By______________________________
Name:
Title:
EXHIBIT 10.1
$21,000,000
BRIDGE LOAN AGREEMENT
dated as of
July 16, 1998
among
KENNEDY-WILSON, INC.,
as Borrower,
KENNEDY-WILSON INTERNATIONAL,
K-W PROPERTIES
and
KENNEDY-WILSON PROPERTIES, LTD.,
as Guarantors,
and
COLONY K-W, LLC,
as Lender
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Definitions.........................................................1
Section I.1 Defined Terms............................................1
Section I.2 Terms Generally.........................................10
Section I.3 Accounting Terms........................................11
ARTICLE II The Bridge Loan....................................................11
Section II.1 Bridge Loan............................................11
Section II.2 Funding of Borrowings..................................11
Section II.3 Notes..................................................11
Section II.4 Repayment of Loan on Maturity Date.....................12
Section II.5 Optional Prepayment of Loan............................12
Section II.6 Interest...............................................12
Section II.7 Fees...................................................13
Section II.8 Taxes..................................................13
Section II.9 Payments Generally.....................................13
ARTICLE III Guarantee.........................................................14
Section III.1 The Guarantee.........................................14
Section III.2 Obligations Unconditional.............................15
Section III.3 Reinstatement.........................................16
Section III.4 Subrogation...........................................16
Section III.5 Remedies..............................................16
Section III.6 Continuing Guarantee..................................16
Section III.7 General Limitation on Guarantee Obligations...........16
ARTICLE IV Representations and Warranties....................................17
Section IV.1 Borrower's Representations and Warranties..............17
ARTICLE V Conditions..................................................18
Section V.1 Conditions to Obligations of Lender.....................18
ARTICLE VI Affirmative Covenants..............................................20
Section VI.1 Financial Statements and Other Information.............20
Section VI.2 Inspection of Properties and Books.....................22
Section VI.3 Payment of Taxes and Claims............................23
Section VI.4 Maintenance of Properties, Records and Corporate
Existence..............................................23
Section VI.5 Insurance..............................................24
Section VI.6 Pension and Benefit Plan Covenants.....................24
Section VI.7 Use of Proceeds........................................25
Section VI.8 Further Assurances.....................................25
ARTICLE VII Negative Covenants................................................25
Section VII.1 Restriction on Debt...................................25
Section VII.2 Restrictions on Liens.................................26
Section VII.3 Limitation on Sale and Leasebacks.....................27
Section VII.4 Consolidation, Merger or Disposition of Assets........28
Section VII.5 Conduct of Permitted Business.........................28
Section VII.6 Restricted Payments...................................28
Section VII.7 Issuance of Capital Stock.............................29
Section VII.8 Transactions with Affiliates..........................29
Section VII.9 Termination of Pension Plans..........................29
Section VII.10 Limitation on Dividend Restrictions Affecting
Subsidiaries.........................................29
Section VII.11 No Amendment of Charter, By-Laws.....................29
Section VII.12 Acquisition of Margin Securities.....................30
ARTICLE VIII Default..........................................................30
Section VIII.1 Events of Default....................................30
Section VIII.2 Suits for Enforcement................................32
Section VIII.3 Remedies Cumulative..................................32
Section VIII.4 Remedies Not Waived..................................32
ARTICLE IX Miscellaneous......................................................33
Section IX.1 Notices.................................................33
Section IX.2 Waivers; Amendments.....................................34
Section IX.3 Expenses................................................34
Section IX.4 Successors and Assigns..................................34
Section IX.5 Survival................................................34
Section IX.6 Counterparts; Integration; Effectiveness................35
Section IX.7 Marshalling; Recapture..................................35
Section IX.8 Severability............................................35
Section IX.9 Indemnification.........................................35
Section IX.10 Governing Law; Jurisdiction; Consent to Service of
Process................................................36
Section IX.11 Headings...............................................37
ARTICLE X Subordination.......................................................37
Section X.1 Subordination Terms......................................37
Section X.2 Subordination Terms Not to Affect Collateral.............38
RECITALS......................................................................28
SCHEDULES AND EXHIBITS*
Schedule 7.1 Debt [OMITTED]
Schedule 7.2 Liens [OMITTED]
Exhibit A Bridge Note
Exhibit B Opinion of White & Case LLP, Counsel to the Borrower
[OMITTED]
Exhibit C Pledge Agreement [OMITTED]
* The Company agrees to file supplementally a copy of any of the above
omitted schedules and exhibits to the Commission upon request.
<PAGE>
BRIDGE LOAN AGREEMENT dated as of July 16, 1998, among KENNEDY-WILSON,
INC., a Delaware corporation (the "Borrower"), KENNEDY-WILSON INTERNATIONAL, a
California corporation ("KWI"), KENNEDY-WILSON PROPERTIES, LTD., a Delaware
corporation ("KW Properties"), and K-W PROPERTIES, a California corporation
("KWP" and, collectively with KWI and KW Properties, the "Guarantors"), and
COLONY K-W, LLC, a Delaware limited liability company (together with its
successors and assigns, the "Lender").
WHEREAS, the Borrower desires to borrow the Loan (as defined herein)
from the Lender, pursuant to the terms hereof.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Definitions
Section I.1 Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"Accountants" has the meaning specified in Section 6.1.
"Acquisition Agreement" means that certain Stock Purchase Agreement by
and between the Borrower and Heitman Financial Ltd., dated as of the date
hereof.
"Additional Permitted Debt" means any additional Debt (other than
Existing Senior Debt, Debt referred to in clause (b) of the definition of
"Senior Debt" and Debt incurred pursuant to Section 7.1(d)) incurred by the
Borrower or any of its Subsidiaries after the date hereof; provided that (i) the
aggregate outstanding principal amount of Additional Permitted Debt shall not at
any time exceed $10,000,000 and (ii) Additional Permitted Debt may be, but is
not required to be, Senior Debt.
"Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agreement" means this Bridge Loan Agreement, as amended, restated,
supplemented or otherwise modified from time to time.
"Bankruptcy Code" means Title 11 of the United States Code entitled
Bankruptcy, as now or hereafter in effect.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrower" means Kennedy-Wilson, Inc., a Delaware corporation.
"Bridge Note" has the meaning assigned to such term in Section 2.3(a).
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in Los Angeles, California are authorized or
required by law to remain closed.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Capital Stock" means and includes any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, withing limitation, shares of preferred or
preference stock.
"Change in Control" means any transaction or event as a direct or
indirect result of which:
(a) any Person is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 51% of the outstanding shares of Voting Stock of the Borrower;
(b) during any period of 12 consecutive months (whether
commencing before or after the Closing Date), individuals who on the first day
of such period constituted the Board of Directors of the Borrower (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Borrower was approved by a vote of a
majority of the directors of the Borrower then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Borrower then in office; or
(c) William McMorrow is no longer employed by the Borrower as its
Chief Executive Officer.
"Closing Date" means the date on which the conditions in Section 5.1
are satisfied.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" means the collateral identified in the Pledge Agreement.
"Company Reports" means (a) the Borrower's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, (b) the Borrower's Annual Report to
stockholders for the fiscal year ended December 31, 1997, (c) the Borrower's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998, and
(d) the Borrower's definitive Proxy Statement distributed to its stockholders in
connection with its 1998 annual meeting of stockholders, each as filed with the
SEC.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise;
provided that beneficial ownership of 10% or more of the voting stock or equity
interests of a Person will be deemed to be Control of such Person. "Controlling"
and "Controlled" have meanings correlative thereto.
"Debt" of any Person means, without duplication, (a) all obligations
of such Person for borrowed money, whether or not evidenced by bonds,
debentures, notes or similar instruments, (b) all Capital Lease Obligations of
such Person, (c) all obligations of such Person to pay the deferred purchase
price of Property or services (other than current accounts payable in the
ordinary course of business), (d) all indebtedness secured by a Lien on the
Property of such Person, whether or not such indebtedness shall have been
assumed by such Person (it being understood that if such Person has not assumed
or otherwise become personally liable for any such indebtedness, the amount of
the Debt of such Person in connection therewith shall be limited to the lesser
of the face amount of such indebtedness or the Fair Market Value of all Property
of such Person securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person, (f)
all Suretyship Liabilities of such Person, (g) all other obligations of such
Person upon which interest charges are customarily paid (other than accounts
payable in the ordinary course of business which are not more than 90 days past
due), (h) all obligations of such Person under conditional sale or other title
retention agreements relating to Property acquired by such Person, (i) all net
obligations, contingent or otherwise, of such Person with respect to any Hedging
Agreement, (j) all obligations of such Person to redeem, purchase or otherwise
retire or extinguish any of its Capital Stock at a fixed or determinable date
(whether by operation of a sinking fund or otherwise), at another's option or
upon the occurrence of a condition not solely within the control of such Person
(e.g., redemption from future earnings), and (k) all Debt (as defined above) of
any partnership in which such Person is a general partner (except to the extent
such Debt is not recourse to such Person).
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Default Rate" has the meaning assigned such term in Section 2.6(b).
"Disqualified Capital Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event (other than customary
change of control or asset sale provisions), matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, prior to the Maturity
Date.
"dollars" or "$" refers to lawful money of the United States of
America.
"Environmental Laws" means all laws, Statutes, ordinances, judgments,
injunctions, decrees, writs, regulations, notice requirements, rules or Orders
of any court or Governmental Authority relating to pollution or the protection
of human health or the environment or to emissions, discharges, releases or
threatened releases of any Hazardous Materials into the environment (including
without limitation ambient air, surface water, ground water, or land), or
otherwise relating to the manufacture, processing, distribution, generation,
treatment, storage, disposal, transport or handling of any Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means with respect to any Person, any other Person
that is a member of such Person's controlled group, or under common control with
such Person, within the meaning of Section 414(b) or (c) of the Code, and
includes any trade or business whether or not incorporated, that together with
such Person would be deemed a "single employer" within the meaning of Section
4001 of ERISA.
"ERISA Event" means (a) any "reportable event", as defined in Section
4043(c) of ERISA or the regulations issued thereunder with respect to a Pension
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Pension Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Pension Plan; (d) the incurrence by the Borrower or
any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Pension Plan; (e) the receipt by the Borrower
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Pension Plan or Pension Plans or Multiemployer Plan or
Multiemployer Plans or to appoint a trustee by the PBGC to administer any Plan;
(f) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower of any notice, or the
receipt by any Multiemployer Plan from the Borrower 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.
"Event of Default" has the meaning assigned to such term in Section
8.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Senior Debt" means (i) the Debt of the Borrower and its
Subsidiaries outstanding as of the Closing Date or that may be incurred
subsequent to the Closing Date pursuant to (a) the Loan Agreement dated March
12, 1996 between the Borrower and East-West Bank, as amended and (b) the Loan
Agreement dated May 27, 1997 between the Borrower and Hawthorne Savings Bank and
(ii) other Debt of the Borrower and its Subsidiaries that is designated as
Existing Senior Debt on Schedule 7.1, which is outstanding as of the Closing
Date or that may be incurred subsequent to the Closing Date pursuant to
agreements referenced on Schedule 7.1.
"Fair Market Value" means what a willing buyer would pay to a willing
seller in an arm's-length transaction.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"Funding Notice" means the notice provided by the Borrower to Lender,
setting forth the requested Closing Date and the Persons and bank accounts to
which the proceeds of the Loan will be disbursed.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America, applied on a consistent basis
both as to classification of items and amounts.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guaranteed Obligations" has the meaning assigned to such term in
Section 3.1 hereof.
"Guarantors" means, collectively, Kennedy-Wilson International,
Kennedy-Wilson Properties, Ltd. and K-W Properties.
"Hazardous Materials" means any regulated quantity of asbestos in any
form, urea formaldehyde, lead-based paint, PCBs, radon gas, crude oil or any
fraction thereof, all regulated forms of natural gas, petroleum products or
by-products, any regulated radioactive substance, any regulated toxic,
infectious, reactive, corrosive, ignitable or flammable chemical or chemical
compound and any other regulated hazardous substance, material or waste (as
defined in or for purposes of any Environmental Law), whether solid, liquid or
gas.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Interest Payment Date" means the last day of each calendar month.
"Internal Revenue Service" means the United States Internal Revenue
Service and any successor or similar agency performing similar functions.
"Investment" when used with reference to any investment of the
Borrower or any of its Subsidiaries means any investment so classified under
GAAP, and, whether or not so classified, includes (a) any Debt owed by any
Person to the Borrower or to any such Subsidiary, (b) any Suretyship Liability
or contingent obligation of the Borrower or any such Subsidiary of Debt or other
obligations of any Person, and (c) any Capital Stock of, partnership interest
in, or other ownership or similar interest in any Person held by the Borrower or
any of its Subsidiaries; and the amount of any Investment shall be the original
principal or capital amount thereof less all cash returns of principal or equity
thereof (and without adjustment by reason of the financial condition of such
other Person).
"Investor's Agreement" means that certain Investor's Agreement by and
between Borrower and Colony Investors III, L.P., dated as of the date hereof.
"Issuer" means Heitman Properties Ltd., an Illinois corporation, which
is expected to be renamed "Kennedy-Wilson Properties Ltd." following the Closing
Date.
"Lender" means Colony K-W, LLC, a Delaware limited liability company,
and its successors and assigns hereunder.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
Capital Lease Obligation having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, the Bridge Note and the Pledge
Agreement.
"Loan" has the meaning assigned to such term in Section 2.1(a).
"Margin Stock" shall have the meaning provided such term in Regulation
U of the Board.
"Material Adverse Effect" means a material adverse effect on (i) the
financial position, results of operations, revenues, assets, liabilities or
business of the Borrower and its Subsidiaries, taken as a whole, (ii) the
ability of the Borrower or the Guarantors or any of their respective Affiliates
to perform their material obligations hereunder or under any other Loan Document
or (iii) the validity or enforceability of this Agreement or any other Loan
Document.
"Maturity Date" means January 15, 2000.
"Multiemployer Plan" means the Borrower or its Subsidiaries, on any
date, a multiemployer plan defined as such in Section 3(37) of ERISA to which
contributions have been made at any time during the six-year period ending on or
prior to such date, by the Borrower or its Subsidiaries or any of their ERISA
Affiliates and that is covered by Title IV of ERISA.
"Obligations" means all obligations, liabilities and indebtedness of
every nature of the Borrower from time to time owing to Lender under or in
connection with any Loan Documents.
"Officer's Certificate" means, with respect to any corporation, a
certificate signed by the Chief Executive Officer, the President, one of the
Vice Presidents, or the Chief Financial Officer of the specified corporation.
"Order" means any order, writ, injunction, decree, judgment, award,
determination or written direction or demand of any arbitrator or Governmental
Authority.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Pension Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA, covered by Title IV of ERISA excluding any Multiemployer
Plans, maintained by or contributed to by the Borrower or any of its ERISA
Affiliates.
"Permitted Lien" means any of the Liens permitted to be incurred under
Section 7.2.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Pledge Agreement" means that certain Pledge Agreement, dated as of
the date hereof, in substantially the form of Exhibit C hereto, executed by the
Borrower in favor of Lender.
"Property" with respect to any Person, means any interest in any kind
of property or asset, whether real, personal or mixed, tangible or intangible,
of such Person.
"Registration Rights Agreement" means that certain Registration Rights
by and between Borrower and Colony Investors III, L.P., dated as of the date
hereof.
"Restricted Payment" means, with respect to any Person,
(a) the declaration or payment of any dividend or other
distribution on, or the incurrence of any liability to make any other payment in
respect of, Capital Stock of such Person (other than any thereof payable solely
in Capital Stock, other than Disqualified Capital Stock),
(b) any payment or distribution by such Person on account of the
purchase, redemption, defeasance (including in-substance or legal defeasance) or
other retirement of any Capital Stock of such Person, or of any warrant, option
or other right to acquire such Capital Stock (whether directly or indirectly,
and including, without limitation, any purchase or other acquisition of such
Capital Stock, or of any warrant, option or other right to acquire such Capital
Stock, by any Subsidiary of such Person),
(c) any other payment or distribution by such Person in respect
of its Capital Stock whether directly or indirectly or through any Subsidiary of
such Person (other than any thereof payable solely in Capital Stock, other than
Disqualified Capital Stock), and
(d) any payment or distribution by such Person on account of the
principal or prepayment charges, if any, or interest or other amounts, with
respect to any Debt of the Company or any of its Subsidiaries which is
subordinated in right of payment to the prior payment of the Bridge Note.
The amount of any Restricted Payment made in the form of Property
shall be deemed to be the greater of the Fair Market Value or the net book value
of such Property. Notwithstanding anything to the contrary set forth in this
definition, the term "Restricted Payment" shall not include the declaration or
payment of any dividend by, or any other payment or distribution in respect of
the Capital Stock of, any Wholly-owned Subsidiary of the Company which is
payable and paid solely to the Company and/or one or more other Wholly-owned
Subsidiaries of the Company.
"SEC" means the United States Securities and Exchange Commission and
any successor agency, authority, commission or Governmental Authority.
"Securities Act" means as of any date the Securities Act of 1933, as
amended, or any similar federal Statute then in effect, and a reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar federal Statute.
"Senior Debt" means (a) the Existing Senior Debt, (b) the principal
amount of any and all extensions, renewals, refundings or refinancings, in whole
or in part, of the Existing Senior Debt (which shall not exceed the outstanding
principal of Existing Senior Debt immediately prior to such extension, renewal,
refunding or refinancing and which shall be Debt only of the Persons obligated
with respect to the Existing Senior Debt being extended, renewed, refunded or
refinanced), interest accrued thereon (including, without limitation, interest
accruing after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Borrower or
any of its Subsidiaries, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), prepayment premiums payable with
respect thereto, and fees, costs, expenses, indemnities and other amounts
payable with respect thereto and (c) any Additional Permitted Debt that by its
terms is senior to the Obligations; provided that Senior Debt shall not include
Debt owed to Affiliates or employees of the Borrower or its Subsidiaries.
"Solvent" as to any Person, as of any date, means (a) that sum of the
assets of such Person, at present fair salable value, will exceed its
liabilities, including contingent liabilities as they become absolute and
matured, (b) such Person has, in its reasonable judgment, sufficient capital
with which to conduct its business as presently conducted and (c) such Person
has not incurred debts, and does not intend to incur debts, beyond its ability
to pay such debts as they mature. For purposes of this definition, "debt" means
any liability on a claim, and "claim" means (x) a right to payment, whether or
not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, legal, equitable, secured or unsecured, or (y) a right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured,
or unsecured. With respect to any contingent liabilities, such liabilities shall
be computed at the amount which, in light of all the facts and circumstances
existing at the time, represents the amount which can reasonably be expected to
become an actual or matured liability.
"Statute" means any statute, ordinance, code, treaty, directive, law,
rule or regulation of any Governmental Authority.
"Stock Purchase Agreement" means the Stock Purchase Agreement dated as
of the date hereof between the Borrower and Colony Investors III, L.P.
"Subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which are required to be consolidated with those of
the parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as,
with respect to any Person, any Person of which such Person and/or its
Subsidiaries own, directly or indirectly, such number of outstanding shares (or
similar equity interest) as have more than 50% of the ordinary voting power for,
in the case of a corporation, the election of directors or, in all other cases,
the management of such Person.
"Suretyship Liability" means any agreement, undertaking or other
contractual arrangement by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to or
otherwise to invest in a debtor, or otherwise to assure a creditor against loss)
any Debt of any other Person (other than by endorsements of instruments in the
course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. The amount of any Person's
obligation under any Suretyship Liability shall (subject to any limitation set
forth therein) be deemed to be the principal amount of the indebtedness,
obligation or other liability guaranteed thereby.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Transaction Documents" means the Acquisition Agreement, the
Investor's Agreement, the Loan Documents, the Registration Rights Agreement, the
Stock Purchase Agreement and the Warrant Agreement.
"Transactions" means the execution, delivery and performance by the
Borrower and the Guarantors of this Agreement and the other Transaction
Documents and the borrowing of the Loan and the use of the proceeds thereof.
"Unfunded Current Liability" of any Pension Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Pension Plan as of the close of its most recent plan year,
determined in accordance with Statement of Financial Accounting Standards No.
35, based upon the actuarial assumptions used by the Pension Plan's actuary in
the most recent annual valuation of the Pension Plan, exceeds the fair market
value of the assets allocable thereto, determined in accordance with Treasury
Regulations Sections l.412(c)(2)-l(c)(1).
"Voting Stock" with respect to any Person shall mean Capital Stock of
such Person of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of members of the
Board of Directors (or Persons performing similar functions) of such Person.
"Warrant Agreement" means that certain Warrant Agreement by and
between Borrower and Colony Investors III, L.P. dated as of the date hereof,
together with the Warrant Certificate, dated as of the date hereof, executed by
Borrower.
"Wholly-owned Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person all of the shares of Capital Stock (and all rights and
options to purchase such shares) of which, other than directors' qualifying
shares, are owned, beneficially and of record, by such Person and/or one or more
Wholly-owned Subsidiaries of such Person.
"Withdrawal Liability" means 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 Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) unless otherwise indicated, all references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement and
(e) the words "asset" and "property" shall be construed to have the same meaning
and effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.
Section I.3 Accounting Terms. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time.
ARTICLE II
The Bridge Loan
Section II.1 Bridge Loan. (a) Subject to the terms and conditions set
forth herein, Lender agrees to make a term loan (the "Loan") to the Borrower on
the Closing Date, which Loan shall equal, and shall at no time exceed,
$21,000,000 in aggregate principal amount at any time outstanding. To the extent
prepaid or repaid, such Loan may not be reborrowed.
(b) The Loan shall mature on and be payable in full on the
Maturity Date, without further action on the part of the Lender. The Loan is
subject to voluntary prepayment, in part, only as provided in Section 2.5.
Section II.2 Funding of Borrowings. Subject to the terms hereof,
Lender shall make the Loan by wire transfer of immediately available funds by
2:00 p.m., Los Angeles time, on the Closing Date to the accounts specified in
the Funding Notice.
Section II.3 Notes. (a) The Loan shall be evidenced by a promissory
note in the form of Exhibit A (the "Bridge Note"). The Bridge Note shall be
dated the Closing Date and mature on the Maturity Date.
(b) Lender is hereby authorized, at its option, either (i) to
endorse on the schedule attached to the Bridge Note (or on a continuation of
such schedule attached to such Bridge Note and made a part thereof) an
appropriate notation evidencing the date and amount of the Loan evidenced
thereby and the date and amount of each principal and interest payment in
respect thereof, or (ii) to record such Loan and such payments in its books and
records. Such schedule or such books and records, as the case may be, shall
constitute prima facie evidence of the accuracy of the information contained
therein; provided that any errors with respect to such schedule, books or
records shall not affect the Borrower's obligations to repay amounts owing
hereunder.
Section II.4 Repayment of Loan on Maturity Date. The Borrower hereby
unconditionally promises to pay to Lender the then unpaid principal amount of
the Loan, all accrued and unpaid interest thereon, and all other Obligations on
the Maturity Date.
Section II.5 Optional Prepayment of Loan. (a) The Borrower shall have
the right at any time and from time to time after January 15, 1999 and prior to
July 16, 1999, to prepay up to $7,000,000 in principal of the Loan subject to
prior notice as provided and otherwise in accordance with Section 2.5 (d) for an
amount equal to (i) the outstanding principal amount thereof (which shall not
exceed $7,000,000) plus (ii) all accrued and unpaid interest on such principal
amount plus (iii) 2% of the principal amount so prepaid.
(b) The Borrower shall have the right at any time and from time
to time after July 15, 1999 to prepay principal of the Loan in an amount not to
exceed (i) $14,000,000 minus (ii) any principal amounts prepaid pursuant to
Section 2.5(a), subject to prior notice as provided and otherwise in accordance
with paragraph (d) of this Section, for an amount equal to (i) the outstanding
principal amount thereof (which shall not exceed $14,000,000 minus any principal
amounts prepaid pursuant to Section 2.5(a)) plus (ii) all accrued and unpaid
interest on such principal amount plus (iii) 1% of the principal amount prepaid.
(c) Except as provided in clauses (a) or (b) of this Section, the
Loan may not be prepaid, without the express written consent of Lender (which
may be withheld in its sole and absolute discretion).
(d) Any prepayment made under this Section 2.5 may be made only
on an Interest Payment Date. The Borrower shall notify Lender in writing of any
prepayment hereunder not later than 10:00 a.m., Los Angeles time, five Business
Days before the Interest Payment Date on which the prepayment will be made. Each
such notice shall be irrevocable and shall specify the prepayment date and the
principal amount of the Loan or portion thereof to be prepaid. Each partial
prepayment of principal of the Loan shall be in an amount of at least $1,000,000
or an integral multiple of $500,000 in excess thereof.
Section II.6 Interest. (a) The Loan shall bear interest at an annual
rate of interest equal to 14% per annum.
(b) Notwithstanding the foregoing, following any Default or Event
of Default, all Obligations payable by the Borrower hereunder not paid when due,
whether at stated maturity, upon acceleration or otherwise, shall bear interest,
after as well as before judgment, at a rate per annum equal to 2% plus the rate
otherwise applicable to the Loan as provided in the preceding paragraph of this
Section (the "Default Rate").
(c) Accrued interest on the Loan shall be payable in arrears on
each Interest Payment Date for the Loan and upon termination of this Agreement;
provided that (i) interest accrued pursuant to paragraph (b) of this Section
shall be payable on demand and (ii) in the event of any repayment or prepayment
of the Loan, accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment.
(d) All interest hereunder shall be computed on the basis of a
year of 360 days of twelve 30-day months, provided, however, that in the case of
a payment on any day other than an Interest Payment Date, interest shall be
payable for the actual number of days elapsed since the last Interest Payment
Date (including the first day but excluding the last day).
Section II.7 Fees. On the Closing Date, the Borrower shall pay Lender
a closing fee of $315,000 plus any amounts payable under Section 9.3(a).
Section II.8 Taxes. (a) Any and all payments by or on account of any
Obligation of the Borrower or the Guarantors hereunder shall be made free and
clear of and without deduction for any Taxes, excluding taxes based on the net
income of Lender (such non-excluded Taxes, "Covered Taxes").
(b) In addition, the Borrower and the Guarantors agree to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made under this
Agreement or the Bridge Note or from the execution, delivery, enforcement or
registration of, or otherwise with respect to, this Agreement or the Bridge Note
(hereinafter referred to as "Other Taxes").
(c) The Borrower and the Guarantors will indemnify Lender for the
full amount of Covered Taxes or Other Taxes imposed by any jurisdiction and paid
by the Borrower with respect to any amounts payable pursuant to this Section
2.8, and any liability (including penalties, additions to tax, interest and
expenses) arising therefrom or with respect thereto, whether or not such Covered
Taxes or Other Taxes were correctly asserted. This indemnification shall be made
within 90 days from the date such holder makes written demand therefor (which
demand shall identify the nature and amount of Covered Taxes or Other Taxes for
which indemnification is being sought and shall include a copy of the relevant
portion of any written assessment from the relevant taxing authority demanding
payment of such Covered Taxes or Other Taxes).
(d) Within 30 days after the date of any payment of Covered Taxes
or Other Taxes, the Borrower will furnish to Lender the original or a certified
copy of any receipt furnished by the relevant taxing authority evidencing
payment thereof.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.8
shall survive the payment in full of the Obligations.
Section II.9 Payments Generally. (a) The Borrower shall make each
payment required to be made by it hereunder (whether of principal, interest, or
otherwise) prior to 10:00 a.m. Los Angeles time, on the date when due, by wire
transfer, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date shall be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the account of Lender
specified below or to such other account designated by Lender in a written
notice to the Borrower prior to the date such amount is due:
Bank Name: Wells Fargo Bank
ABA No.: 121000248
Bank Address: 155 Fifth Street
San Francisco, CA
Account Name: Colony K-W, LLC
Account No.: 4311-788194
Contact Name: Joan Radell (213) 253-6130
(b) If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in United States dollars.
ARTICLE III
Guarantee
Section III.1 The Guarantee. Each Guarantor hereby jointly and
severally guarantees to Lender (a) the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the principal and interest
payable on the Loan, (b) the payment of all other Obligations (including,
without limitation, indemnities, fees and interest thereon and all Obligations
which, but for the automatic stay under Section 362(a) of the Bankruptcy Code
and the operation of Sections 502(b) and 506(b) of the Bankruptcy Code would
become due, and all interest accruing on the Obligations after the filing of a
petition by or against the Borrower or any of its Subsidiaries under the
Bankruptcy Code, in accordance with and at the rate (including the Default Rate)
specified in this Agreement whether or not the claim for such interest is
allowed as a claim after such filing in any proceeding under the Bankruptcy
Code) of the Borrower now existing or hereafter incurred under, arising out of,
or in connection with any of the Loan Documents, (c) the due performance and
compliance by the Borrower with all of the terms, conditions and agreements
contained in any of the Loan Documents, (d) the payment of all sums advanced by
Lender under or pursuant hereto, with interest thereon from the due date
thereof, until paid, at the applicable rate specified in Section 2.6 and (e) all
renewals, extensions, amendments and changes of, or substitutions or
replacements for, all or any part of the foregoing (all such principal,
interest, obligations, indebtedness, performance, compliance and payments,
collectively, the "Guaranteed Obligations"). Each Guarantor hereby jointly and
severally further agrees that if the Borrower shall fail to pay in full when due
(after giving effect to any cure periods) (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, such Guarantor
will promptly pay the same, without any demand or notice whatsoever. Each
Guarantor's guarantee provided herein is a guarantee of payment and not of
collection.
Section III.2 Obligations Unconditional. The joint and several
obligations of the Guarantors under Section 3.1 are absolute and unconditional,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Borrower under this Agreement or any other agreement
or instrument referred to herein or therein, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law and subject
to Section 3.7 hereof, irrespective of any other circumstance whatsoever that
might otherwise constitute a legal or equitable discharge or defense of a surety
or guarantor, it being the intent of this Section that the joint and several
obligations of the Guarantors hereunder shall be absolute and unconditional
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of any Guarantor hereunder, which shall
remain absolute and unconditional as described above:
(a) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;
(b) any of the acts mentioned in any of the provisions of this
Agreement or any other agreement or instrument referred to herein shall be done
or omitted;
(c) any invalidity, irregularity or unenforceability of all or
part of the Guaranteed Obligations or of any security therefor;
(d) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement or any
other agreement or instrument referred to herein shall be waived or any other
guarantee of any of the Guaranteed Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with;
(e) any lien or security interest granted to, or in favor of,
Lender as security for any of the Guaranteed Obligations shall fail to be
perfected or shall be released;
(f) the bankruptcy or insolvency of the Borrower; or
(g) any of the Guaranteed Obligations or any security therefor
shall be settled, compromised or released.
Each Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that Lender
exhaust any right, power or remedy or proceed against the Borrower under this
Agreement or any other agreement or instrument referred to herein, or against
any other Person under any other guarantee of, or security for, any of the
Guaranteed Obligations.
Section III.3 Reinstatement. If claim is ever made upon Lender for
repayment or recovery of any amount or amounts received in payment or on account
of any of the Guaranteed Obligations and Lender repays all or part of said
amount by reason of any judgment, decree or order of any court or administrative
body having jurisdiction over such payee or any of its property or by any
settlement or compromise of any such claim effected by Lender with any such
claimant (including the Borrower), then and in such event each Guarantor jointly
and severally agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon it, notwithstanding any revocation hereof or
the cancellation of this Agreement or other instrument evidencing any liability
of the Borrower, and each Guarantor shall be and remain jointly and severally
liable to Lender hereunder for the amount so repaid or recovered to the same
extent as if such amount had never originally been received by Lender.
Section III.4 Subrogation. Each Guarantor hereby agrees that until the
Maturity Date and the payment and satisfaction in full of all Guaranteed
Obligations, it shall not exercise any right or remedy arising by reason of any
performance by its guarantee in Section 3.1, whether by subrogation or
otherwise, against the Borrower or any other guarantor of any of the Guaranteed
Obligations or any security for any of the Guaranteed Obligations.
Section III.5 Remedies. Each Guarantor agrees that, as between it and
Lender, the obligations of the Borrower under this Agreement may be declared to
be forthwith due and payable as provided in Article VIII (and shall be deemed to
have become automatically due and payable as provided in Article VIII) for
purposes of Section 3.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Borrower) shall forthwith become due and payable by such Guarantor for purposes
of Section 3.1.
Section III.6 Continuing Guarantee. The guarantee in this Article is a
continuing guarantee and shall apply to all Guaranteed Obligations whenever
arising.
Section III.7 General Limitation on Guarantee Obligations. Each
Guarantor confirms that it is the intention of all parties to this Agreement
that neither the guarantee by such Guarantor nor any liability or payment by it
hereunder shall (a) render such Guarantor "insolvent," or (b) constitute a
fraudulent transfer or conveyance, or (c) constitute a transaction at an
undervalue or preference, or (d) give rise to any similar or analogous event,
thing or circumstance, in each case, for purposes of the Bankruptcy Code, the
Uniform Fraudulent Conveyances Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law. To effectuate the foregoing intention, Lender and
each Guarantor hereby irrevocably agree that the Guaranteed Obligations shall be
limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other guarantor in
respect of the Guaranteed Obligations, result in the Guaranteed Obligations of
such Guarantor hereunder neither rendering such Guarantor "insolvent" nor
constituting such fraudulent transfer or conveyance, such transaction at an
undervalue or preference or such other event, thing or circumstance, in each
case, under any such law.
ARTICLE IV
Representations and Warranties
Section IV.1 Borrower's Representations and Warranties. The Borrower
represents and warrants to Lender as of the date hereof and as of the Closing
Date:
(a) Representations and Warranties in Stock Purchase Agreement.
Each of the Borrower's representations and warranties contained in Section 2.1
of the Stock Purchase Agreement is true and correct on and as of the date hereof
and on and as of the Closing Date.
(b) Use of Proceeds; Margin Regulations. All proceeds of the Loan
will be used by the Borrower to acquire the stock of Heitman Properties Ltd. No
part of the proceeds of the Loan will be used by the Borrower to purchase or
carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock. Neither the making of the Loan nor the
use of the proceeds thereof will violate or be inconsistent with the provisions
of Regulations U or X of the Board.
(c) Security Interest. The security interests created in favor of
Lender under the Pledge Agreement constitute first priority perfected security
interests in the Collateral, subject to no security interests of any other
Person. No filings or recordings are required in order to perfect (or maintain
the perfection or priority of) the security interests created in the Collateral
and the proceeds thereof.
(d) Solvency. On the Closing Date and after giving effect to the
Transactions, each of the Borrower and the Guarantors will be Solvent.
(e) The proceeds of the Loan plus $1,200,000 of Senior Debt to be
incurred by the Borrower on the Closing Date will be utilized (i) to acquire all
of the Capital Stock of Issuer, pursuant to the Acquisition Agreement, for an
amount not to exceed $21,200,000 and (ii) to pay transaction costs related to
such acquisition, in an amount not to exceed $1,000,000.
ARTICLE V
Conditions
Section V.1 Conditions to Obligations of Lender. The Lender's
Obligations hereunder shall be subject to the satisfaction or waiver by it of
the following conditions:
(a) Lender shall have received from each party hereto and thereto
a counterpart of each of the Transaction Documents signed on behalf of such
party.
(b) Lender shall have received a favorable written opinion
(addressed to Lender and dated the Closing Date) of White & Case LLP, counsel
for the Borrower and the Guarantors, substantially in the form of Exhibit B
hereto, and of Kulik, Gottesman & Mouton, LLP, substantially in the form of
Exhibit E to the Stock Purchase Agreement. The Borrower and the Guarantors
hereby request such counsel to deliver such opinion.
(c) Lender and its counsel shall have received copies of the
following documents:
(i) the Certificate of Incorporation of each of the Borrower
and each of the Guarantors, certified as of a recent date by the Secretary
of State of the state of where such Person is incorporated, and a
certificate of such authority dated as of a recent date as to the due
incorporation and good standing of the Borrower and each Guarantor and
listing all documents of the Borrower and each Guarantor on file with said
authority;
(ii) a certificate of the Secretary or an Assistant
Secretary of each of the Borrower and each of the Guarantors dated the
Closing Date certifying: (A) that attached thereto is a true and complete
copy of the Bylaws of the Borrower and each Guarantor as in effect on the
date of such certification; (B) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors of the
Borrower and each Guarantor authorizing the execution, delivery and
performance of the Transaction Documents, and that all such resolutions are
in full force and effect and are all the resolutions adopted in connection
with the Transaction Documents; (C) that the Certificate of Incorporation
of the Borrower and the Guarantors has not been amended since the date of
the last amendment referred to in the certificate delivered pursuant to
clause (i) above; (D) that the Bylaws have not been amended since the date
of the last amendment referred to in such certificate pursuant to subclause
(ii)(A) above; and (E) that each officer of the Borrower and the Guarantors
executing this Agreement and the other Transaction Documents and any
agreement, certificate or instrument furnished pursuant hereto, was, at the
respective times of such execution and delivery of such documents, duly
elected or appointed, qualified and acting as such officer, and the
signatures of such persons appearing on such documents are their genuine
signatures or true facsimiles thereof; and
(iii) such additional supporting documents as Lender may
reasonably request.
(d) Lender shall have received a certificate from the Borrower
and each Guarantor, dated the Closing Date and executed on behalf of the
Borrower and each Guarantor by the President or Chief Executive Officer and, a
Vice President or a Financial Officer of the Borrower and each Guarantor,
respectively, confirming compliance with the conditions set forth in paragraphs
(h), (i) and (j) of this Article V.
(e) Lender shall have received acknowledgment copies (or other
evidence of filing) of each filed UCC-1 financing statement signed by the
Borrower as debtor naming Lender as secured party. Such UCC-1 financing
statements shall have been filed in each jurisdiction as may be necessary or, in
the reasonable opinion of Lender, desirable to perfect the security interests
created by the Pledge Agreement.
(f) Lender shall have received the original stock certificates
evidencing the stock pledged pursuant to the Pledge Agreement, together with
undated stock powers duly executed in blank in connection therewith.
(g) The Closing Date shall occur on or prior to July 17, 1998.
(h) The representations and warranties of the Borrower set forth
in Article IV shall be true and correct on and as of the date hereof and on and
as of the Closing Date and after giving effect to the Loan (other than those, if
any, which by their terms specifically relate only to a different date). The
Borrower shall have performed and complied in all material respects with all
agreements, covenants and conditions contained in this Agreement and the other
Transaction Documents that are required to be performed or complied with by it
on or prior to the Closing Date.
(i) At the time of and immediately after giving effect to the
Loan, no Default or Event of Default shall have occurred and be continuing.
(j) From March 31, 1998 through the Closing Date, no Material
Adverse Effect shall have occurred.
(k) All conditions to the obligations of Lender contained in
Section 3.1 of the Stock Purchase Agreement shall be satisfied.
(j) Lender shall have received the Funding Notice, which shall be
satisfactory in all respects to Lender.
The Loan shall be deemed to constitute a representation and warranty by the
Borrower on the Closing Date as to the matters specified in paragraphs (h), (i),
(j) and (k) of this Article V.
ARTICLE VI
Affirmative Covenants
From the Closing Date until the Maturity Date and the repayment in
full of the principal of and interest on the Loan and all other Obligations
payable hereunder, the Borrower covenants and agrees with Lender that:
Section VI.1 Financial Statements and Other Information. The Borrower
will furnish to the Lender:
(a) Quarterly Financial Statements; Compliance Certificates. As
soon as available and in any event within 45 days after the end of each
quarterly accounting period (other than the fourth quarterly accounting period)
in each fiscal year of the Borrower,
(i) copies of the Borrower's Quarterly Report on Form 10-Q
promulgated by the SEC, or any successor form thereto, and
(ii) an Officer's Certificate of the Chief Financial Officer
of the Borrower stating whether or not as at the end of such fiscal quarter
there exists any breach or violation of the provisions of Sections 7.1,
7.6, 7.7 and 7.12.
(b) Annual Financial Statements; Compliance Certificates. As soon
as available and in any event within 90 days after the end of each fiscal year
of the Borrower,
(i) for any year in which the Borrower is not subject to the
reporting requirements of the Exchange Act, copies of the audited
consolidated balance sheets of the Borrower and its Subsidiaries, as of the
end of such fiscal year together with the related audited consolidated
statements of operations, stockholders' equity and cash flows for such
fiscal year, and the notes thereto, all in reasonable detail and stating in
comparative form (A) the respective audited consolidated figures as of the
end of and for the previous fiscal year and (B) the corresponding figures
from the consolidated budget of the Borrower and its Subsidiaries for such
fiscal year, accompanied by a report thereon of Deloitte & Touche LLP, or
other independent public accountants of recognized national standing
selected by the Borrower and reasonably acceptable to the Lender (the
"Accountants"), which report shall be unqualified as to going concern and
scope of audit and shall state that such consolidated financial statements
present fairly, in all material respects, the consolidated financial
position of the Borrower and its Subsidiaries as at the end of such fiscal
year and their consolidated results of operations, stockholders' equity and
cash flows for such fiscal year in conformity with GAAP and that the
examination by the Accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards, and
(ii) an Officer's Certificate of the Chief Financial Officer
of the Borrower stating whether or not as at the end of such fiscal year
there exists any Default or Event of Default and if any Default or Event of
Default exists, specifying the nature and status thereof,
(c) Owner's Compliance Certificates. Concurrently with the
reports or financial statements furnished pursuant to subsections (a) and (b) of
this Section 6.1 an Officer's Certificate of the Chief Financial Officer of the
Borrower stating that, based upon such examination or investigation and review
of this Agreement as in the opinion of the Chief Financial Officer is necessary
to enable the Chief Financial Officer to express an informed opinion with
respect thereto, no Default or Event of Default exists or has existed during
such period or, if such a Default or Event of Default shall exist or have
existed, the nature and period of existence thereof and what action the Borrower
has taken, is taking or proposes to take with respect thereto;
(d) Stockholder Reports; SEC Filings. Promptly after the same are
available and in any event within 10 days thereof, copies of all such proxy
statements, financial statements, notices and other reports as the Borrower
shall send or make available generally to its stockholders, and copies of all
regular and periodic reports, registration statements and other documents which
the Borrower shall file with the SEC;
(e) Events of Default. Promptly (and in any event within 5 days)
after becoming aware of (i) the existence of any Default or Event of Default on
the part of the Borrower, an Officer's Certificate of the Borrower specifying
the nature and period of existence thereof and what action the Borrower is
taking or proposes to take with respect thereto; or (ii) any Debt of the
Borrower or any of its Subsidiaries being declared due and payable before its
expressed maturity, or any holder of such Debt having the right to declare such
Debt due and payable before its expressed maturity, because of the occurrence of
any default (or any event which, with notice and/or the lapse of time, shall
constitute any such default) under such Debt, an Officer's Certificate of the
Borrower describing the nature and status of such matters and what action the
Borrower or such Subsidiary is taking or proposes to take with respect thereto;
(f) ERISA Matters. Promptly and in any event within 15 days after
the Borrower knows that an ERISA Event with respect to any Pension Plan has
occurred, that any Pension Plan or that any Multiemployer Plan is or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA or has any unfunded vested benefits within the meaning of Section 4213(c)
of ERISA, or that the Borrower or any of its Subsidiaries or ERISA Affiliates
will or may incur any material liability to or on account of a Pension Plan or
Multiemployer Plan under Title IV of ERISA or any other material liability under
ERISA has been asserted against the Borrower or any of its Subsidiaries or ERISA
Affiliates, or that any Pension Plan has in Unfunded Current Liability in excess
of $50,000, an Officer's Certificate of the Borrower setting forth information
as to such occurrence and what action, if any, the Borrower or such Subsidiary
is required or proposes to take with respect thereto, together with any notices
concerning such occurrences which are (i) required to be filed by the Borrower
or such Subsidiary with the Internal Revenue Service or the PBGC, or (ii)
received by the Borrower or such Subsidiary from any Multiemployer Plan;
(g) Material Adverse Effect. Promptly after becoming aware of any
Material Adverse Effect with respect to which notice is not otherwise required
to be given pursuant to this Article VI, an Officer's Certificate of the
Borrower setting forth the details of such Material Adverse Effect and stating
what action the Borrower or any of its Subsidiaries has taken or proposes to
take with respect thereto;
(h) Litigation and Proceedings. Promptly (and in any event within
15 days) after the Borrower knows of (i) the institution of, or threat of, any
action, suit, proceeding, governmental investigation or arbitration against or
affecting the Borrower or any of its Subsidiaries or any Property of any of
them, or (ii) any material development in any such action, suit, proceeding,
governmental investigation or arbitration, which, in either case, if adversely
determined, is likely to have a Material Adverse Effect, an Officer's
Certificate of the Borrower describing the nature and status of such matter in
reasonable detail;
(i) Annual Budget. Not later than 30 days after the beginning of
each fiscal year of the Borrower (and not later than five Business Days
following the Closing Date, with respect to the budget for the 1998 fiscal
year), a copy of a consolidated operating budget of the Borrower and its
Subsidiaries prepared by the Borrower for such fiscal year, which shall include
at minimum a projected balance sheet and a projected statement of operations and
cash flows for each month in such fiscal year;
(j) Notices to Senior Lenders. Copies of all notices, reports,
certificates and other information furnished to the holders of Senior Debt or to
any agent or representative of such holders, in each case promptly after the
same are so furnished; and
(k) Other Information. Any other information including financial
statements and computations, relating to the performance of obligations arising
under this Agreement and/or the affairs of the Borrower or any of its
Subsidiaries that the Lender may from time to time reasonably request and which
is capable of being obtained, produced or generated by the Borrower or such
Subsidiary.
Section VI.2 Inspection of Properties and Books. The Lender shall have
the right to visit and inspect any of the Properties of the Borrower and its
Subsidiaries, to examine their books of account and records, to make copies and
extracts therefrom at the expense of the Borrower or a Subsidiary, as the case
may be, and to discuss their affairs, finances and accounts with, and to be
advised as to the same by, their officers and management and their independent
public accountants (and by this provision the Borrower authorizes the
Accountants to discuss their affairs, finances and accounts and those of its
Subsidiaries and agrees to make such Accountants available to the Lender for
such discussions together with such officers of the Borrower and its
Subsidiaries as the Lender may desire to be present), all at such reasonable
time and intervals during normal business hours as the Lender may desire and
upon reasonable prior notice. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the exercise of
its rights under this Section 6.2 at any time when a Default or Event of Default
shall have occurred and be continuing. The Lender, through its representatives,
shall be entitled to meet with the senior management of the Borrower at least
once during each fiscal quarter of the Borrower to discuss the Borrower's and
its Subsidiaries' financial statements, business, assets, operations and
prospects.
Section VI.3 Payment of Taxes and Claims. The Borrower will, and will
cause each of its Subsidiaries to, pay before they become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon the Borrower or any of its Subsidiaries (or any other Subsidiaries
of the Borrower which are part of any affiliated group, within the meaning of
Section 1504(a)(1) of the Code, with the Borrower or any of its Subsidiaries) or
their income or profits or upon their Property, real, personal or mixed, or upon
any part thereof;
(b) all claims for labor, materials and supplies which, if
unpaid, would result in the creation of a Lien upon Property of the Borrower or
any of its Subsidiaries; and
(c) all claims, contributions, assessments or levies required to
be paid by the Borrower or any of its Subsidiaries pursuant to any Plan or any
agreement, contract, Statute or Order governing or relating to any Plan;
provided, that the taxes, assessments, claims, contributions, charges
and levies described in Section 6.3 (a), (b) and (c) need not be paid while
being diligently contested in good faith and by appropriate proceedings so long
as (i) adequate book reserves have been established with respect thereto in
accordance with GAAP and (ii) neither the Borrower's nor any such Subsidiary's
title to and right to use its Property is adversely affected by such nonpayment.
The Borrower will timely file, and will cause its Subsidiaries to file, all tax
returns required to be filed in connection with the payment of taxes required by
this Section 6.3. If an Event of Default shall have occurred and be continuing
and any such contested items shall have resulted in a Lien or claim upon any of
the Borrower's or any of its Subsidiaries' Property, the Lender may, at its
election (but shall not be obligated to), (a) procure the release and discharge
of any such Lien or claim and any judgment or decree thereon, without inquiring
into or investigating the amount, validity or enforceability of such Lien or
claim and (b) effect any settlement or compromise of the same, and any amounts
expended by the Lender in connection therewith, including premiums paid or
security furnished in connection with the issuance of any surety company bonds,
shall be reimbursed by the Borrower within five Business Days of demand therefor
by the Lender, with interest accrued thereon at the Default Rate from the date
such funds are expended by the Lender.
Section VI.4 Maintenance of Properties, Records and Corporate
Existence. The Borrower will, and will cause each of its Subsidiaries to:
(a) maintain their respective Properties in good condition,
reasonable wear and tear excepted, and make all renewals, repairs, replacements,
additions, betterments, and improvements thereto;
(b) keep books of records and accounts in which full and correct
entries will be made of all their respective business transactions and will
reflect in their financial statements adequate accruals and appropriations to
reserves, all in accordance with GAAP at the time in effect and consistently
applied;
(c) maintain the same fiscal year during and after the current
fiscal year ending December 31, 1998, provided, however, that the Borrower shall
be able to change its fiscal year with the prior written consent of the Lender,
which consent shall not be unreasonably withheld;
(d) except as permitted by Section 7.4(a), do or cause to be done
all things necessary to preserve and keep in full force and effect their
respective corporate existence, rights, powers and franchises including, without
limitation, any necessary qualification or licensing in any foreign jurisdiction
except where the failure to do so would not have a Material Adverse Effect;
(e) continue to engage in business of real estate services and
investments;
(f) comply with all applicable Statutes, Orders, franchises,
authorizations, licenses and permits of, and all applicable restrictions imposed
by, any Governmental Authority, in respect of the conduct of its business and
the ownership of its Properties (including, without limitation, all
Environmental Laws and all applicable Statutes, Orders, franchises,
authorizations, licenses and permits relating to fair labor standards, equal
employment opportunities and occupational health and safety), except for such
matters as in the aggregate would not have a Material Adverse Effect; and
(g) keep any Property owned or operated by it free of Hazardous
Materials and any other potentially materially harmful chemical or physical
conditions.
Section VI.5 Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.
Section VI.6 Pension and Benefit Plan Covenants. The Borrower will:
(a) take or cause to be taken all necessary steps to ensure that
the representations and warranties set forth under Section 2.1(m) of the Stock
Purchase Agreement continue to be true and correct in all material respects, as
if the same were made on a continuing basis, on and with effect as of each date
while the Loan is outstanding, and
(b) not, and will ensure that its Subsidiaries will not, amend
any Plan or establish or adopt any Plan that would have the effect of materially
adversely affecting the financial condition of such Plan or of causing a
Material Adverse Effect, except for such amendments as may be required by
applicable law or any Governmental Authority.
Section VI.7 Use of Proceeds. The proceeds of the Loan will be used
solely to acquire capital stock of Heitman Properties Ltd. No part of the
proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations U and X.
Section VI.8 Further Assurances. The Borrower will, and will cause
each of its Subsidiaries to, cooperate with Lender and shall execute and pay for
the filing of all such further instruments and documents, including UCC
financing statements and other security documents, as Lender shall reasonably
deem appropriate in order to effectuate the grant of the Liens and security
interests to Lender contemplated by the Pledge Agreement.
ARTICLE VII
Negative Covenants
From the Closing Date until the Maturity Date and the repayment in
full of the principal of and interest on each Loan and all other Obligations
payable hereunder, the Borrower covenants and agrees with Lender that:
Section VII.1 Restriction of Debt. The Borrower will not, and will not
permit any of its Subsidiaries to, incur, create, assume, guarantee or in any
way become liable for, or permit to exist, Debt other than:
(a) Debt incurred pursuant to this Agreement and the Bridge Note;
(b) Senior Debt;
(c) Debt of the Company and its Subsidiaries existing on the
Closing Date and described on Schedule 7.1 hereto;
(d) Debt secured by Liens permitted pursuant to Section 7.2 (m)
hereto; and
(e) Additional Permitted Debt;
provided that the aggregate principal amount of Debt at any time outstanding
pursuant to clauses (b), (c) and (e) shall not exceed $54,000,000.
Section VII.2 Restrictions of Liens. The Borrower will not, and will
not permit any of its Subsidiaries directly or indirectly to, create, assume or
suffer to exist any Lien upon any of their respective Properties whether now
owned or hereafter acquired, except for:
(a) Liens for taxes, assessments or governmental charges or
claims the payment of which is not at the time required by Section 6.3;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law incurred in
the ordinary course of business, in each case for sums the payment of which is
not at the time required by Section 6.3;
(c) Liens (other than any Lien imposed by ERISA and other than
any Lien securing an obligation for the payment of borrowed money) incurred or
deposits made in the ordinary course of business in connection with obligations
not due or delinquent with respect to workers' compensation, unemployment
insurance and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other similar
obligations; provided, that no such Lien shall be permitted to the extent it
encumbers any real Property of the Borrower or its Subsidiaries;
(d) any attachment or judgment Lien (including judgment or appeal
bonds) which shall, within 30 days after the entry thereof, have been discharged
or execution thereof stayed pending appeal, or shall have been discharged within
30 days after the expiration of any such stay; provided that any such Liens
shall not in any event exceed the equivalent of U.S. $100,000 in -------- the
aggregate at any time outstanding;
(e) normal and customary rights of set-off upon deposits of cash
in favor of banks or other depositary institutions;
(f) zoning restrictions, easements, rights-of-way, servitudes or
other similar rights in land (including, without restriction, rights-of-way and
servitudes for railways, sewers, drains, gas and oil pipelines, gas and water
mains, electric lights and power and telephone or telegraph or cable television
conduits, poles, wires and cables) granted to or reserved by other Persons none
of which individually or in the aggregate materially and adversely impair the
usefulness in the operation of the business of the Borrower or any of its
Subsidiaries of the Property subject to such restrictions, easements,
rights-of-way, servitudes or other similar rights in land granted to or reserved
by other Persons;
(g) the right reserved to or vested in any municipality or
governmental or other public authority by the terms of any lease, license,
franchise, grant or permit acquired by the Borrower or any of its Subsidiaries
or by any statutory provision, to terminate any such lease, license, franchise,
grant or permit, or to require annual or other payments as a condition to the
continuance thereof;
(h) Liens given to a public utility or any municipality or
governmental or other public authority when required by such utility,
municipality or other authority in connection with the operations of the
Borrower and its Subsidiaries, all in the ordinary course of its business;
(i) Liens securing Debt of a Wholly-owned Subsidiary of the
Borrower to the Borrower or to another Wholly-owned Subsidiary of the Borrower;
(j) Liens (including Liens created pursuant to Capitalized
Leases) existing on the date hereof and described in Schedule 7.2 hereto;
(k) Liens securing Senior Debt;
(l) Liens securing Additional Permitted Debt;
(m) Liens (including Liens created pursuant to Capitalized
Leases) in respect of Property acquired, constructed or improved by the Company
or any of its Subsidiaries after the date hereof, which Liens exist or are
created at the time of acquisition or completion of construction or improvement
of such Property or within six months thereafter, to secure Debt which is
assumed or incurred to finance all or any part of the purchase price or cost of
acquisition or construction or improvement of such Property, but any such Lien
shall cover only the Property so acquired or constructed and any improvements
thereto (and any real Property on which such Property is located, if such
Property is a building, improvement or fixture), and may not exceed the lesser
of (x) the Fair Market Value of such Property at the time of its acquisition,
construction or improvement or (y) the purchase price or cost of such
acquisition, construction or improvement;
(n) the extension, renewal or replacement of any Lien permitted
by this Section 7.2, but only if the extension, renewal or replacement of the
Debt secured thereby is not prohibited under Section 7.1 hereof and the
principal amount of the Debt secured by such Lien immediately prior to such
extension, renewal or replacement is not increased and the Lien is not extended
to other Property;
(o) Liens which arise by operation of law under Article 2 of the
Uniform Commercial Code in favor of unpaid sellers of goods, or liens in any
items or any accompanying documents or proceeds of either arising by operation
of law under Article 4 of the Uniform Commercial Code in favor of a collecting
bank; or
(p) Liens consisting of precautionary UCC-1 filings in respect of
operating leases;
provided that, notwithstanding the foregoing, no Liens upon the Collateral shall
be permitted except those in favor of Lender.
Section VII.3 Limitation on Sale and Leasebacks. The Borrower will
not, and will not permit any of its Subsidiaries to, enter into any arrangement
whereby the Borrower or any such Subsidiary shall sell or transfer any Property
owned by the Borrower or any of its Subsidiaries (or cause any other Person to
sell or transfer any Property) to any Person other than the Borrower or a
Subsidiary of the Borrower and thereupon the Borrower or such Subsidiary shall
lease or intend to lease, as lessee, the same Property.
Section VII.4 Consolidation, Merger of Disposition of Assets. (a) The
Borrower will not, and will cause each of the Guarantors not to, consolidate
with or merge with any other Person or convey, transfer or lease substantially
all of its assets in a single transaction or series of transactions to any
Person unless:
(i) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance, transfer
or lease substantially all of the assets of the Borrower or any of the
Guarantors as an entirety, as the case may be, shall be a Solvent
corporation organized and existing under the laws of the United States or
any State thereof (including the District of Columbia), and, if the
Borrower or any of the Guarantors is not such survivor corporation, (i)
such corporation (A) shall have executed and delivered to Lender its
assumption of the due and punctual performance and observance of each
covenant and condition of this Agreement and the other Transaction
Documents and (ii)(B) shall have caused to be delivered to Lender an
opinion of independent counsel reasonably satisfactory to the Lender to the
effect that all agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the terms
hereof; and
(ii) immediately after giving effect to such transactions,
no Default or Event of Default shall have occurred and be continuing.
(b) The Borrower will not sell, transfer, assign or otherwise
dispose of any of the Collateral.
(c) The Borrower will cause the Issuer not to consolidate with or
merge with any other Person or convey, transfer or lease all or substantially
all of its assets, in a single transaction or series of transactions.
Section VII.5 Conduct of Permitted Business. The Borrower will not,
and will not permit any of its Subsidiaries to, engage in any business, other
than (i) the business of the general character engaged in by each of them on the
date hereof as described in the Company Reports and any businesses or activities
reasonably related thereto and (ii) the business of the general character
engaged in by the Issuer on the date hereof and any businesses or activities
reasonably related thereto.
Section VII.6 Restricted Payments. The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, make any Restricted
Payment. Notwithstanding the foregoing, (i) in any 12 month period the Borrower
shall be allowed to repurchase or redeem up to 5% of its outstanding common
stock provided that the total cost of such redemption shall not exceed 50% of
the Borrower's net income for such 12 month period and (ii) the Borrower or its
Subsidiaries may repurchase or redeem Capital Stock of the Borrower or its
Subsidiaries or warrants, options or other rights to acquire Capital Stock of
the Borrower or its Subsidiaries held by employees or officers of the Borrower
or its Subsidiaries, for an amount not to exceed $500,000 in the aggregate, in
connection with the termination of the employment of such employee or officer or
the death or disability of such employee or officer; provided that any such
repurchases or redemptions pursuant to this clause (ii) shall reduce the amount
that may be utilized to make repurchases or redemptions pursuant to clause (i).
Section VII.7 Issuance of Capital Stock. The Borrower will not permit
any Subsidiary of the Borrower to, issue, sell or otherwise dispose of any
shares of Capital Stock or any warrants, options, conversion rights, exchange
rights or other rights to subscribe for, purchase or acquire such Capital Stock,
except to the Borrower or to a Wholly-owned Subsidiary of the Borrower (except
for directors' qualifying shares).
Section VII.8 Transactions with Affiliates. Except in the case of
transactions between or among the Borrower and its Wholly-owned Subsidiaries,
and except for this Agreement and the other Transaction Documents, the Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any Property or the
rendering of any service), with any Affiliate or director, officer or employee
of the Borrower or its Subsidiaries unless such transaction is otherwise not
prohibited under this Agreement, is in the ordinary course of the Borrower's or
such Subsidiary's business and is on fair and reasonable terms that are not less
favorable to the Borrower or such Subsidiary, as the case may be, than those
that would be obtainable at the time in any arm's length transaction with a
Person who is not such an Affiliate or director, officer or employee.
Section VII.9 Termination of Pension Plans. The Borrower will not, and
will not permit any of its Subsidiaries to, permit any Plan maintained by the
Borrower or any such Subsidiary to be terminated in a manner which could
reasonably be expected to result in the imposition of a Lien on any Property of
the Borrower or any Subsidiary of the Borrower pursuant to Section 4068 of
ERISA.
Section VII.10 Limitation on Dividend Restrictions Affecting
Subsdiaries. Except pursuant to the Loan Documents, the Borrower will not permit
any of its Subsidiaries directly or indirectly to create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
which by its terms restricts the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on such Subsidiary's Capital Stock,
(b) pay any Debt owed to the Borrower or any other Subsidiary of the Borrower,
(c) make any loans or advances to the Borrower or any other Subsidiary of the
Borrower or (d) transfer any of its Property or assets to the Borrower or any
other Subsidiary of the Borrower.
Section VII.11 No Amendment of Charter, By-Laws. The Borrower will not
effect any amendment to or modification of its charter documents or by-laws, and
will not permit any of its Subsidiaries to effect any amendment to or
modification of their charter documents or by-laws, if any such amendment or
modification would adversely affect the rights or remedies of Lender under this
Agreement or the other Transaction Documents.
Section VII.12 Acquisition of Margin Securities. The Borrower will
not, and will not permit any of its Subsidiaries to, own, purchase or acquire
(or enter into any contract to purchase or acquire) any "margin security" as
defined by any regulation of the Board as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, the Borrower shall have received an opinion of
counsel satisfactory to the Lender to the effect that such purchase or
acquisition will not cause this Agreement or the Bridge Note to be in violation
of Regulation U or any other regulation of such Board then in effect.
ARTICLE VIII
Default
Section VIII.1 Events of Default. If any of the following events
("Events of Default") shall occur (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or by operation of law or
otherwise):
(a) the Borrower shall default in the due and punctual payment of
all or any part of the principal of the Loan when and as the same shall become
due and payable, whether at stated maturity, by acceleration, by notice of
prepayment or otherwise;
(b) the Borrower shall default in the due and punctual payment or
prepayment of any interest on the Loan or any other Obligation (other than as
set forth in subsection (a)) when and as such interest or other Obligation shall
become due and payable, and such default shall continue for a period of five
days;
(c) the Borrower shall default in the performance or observance
of any of the covenants, agreements or conditions contained in Section 7 of this
Agreement;
(d) the Borrower shall default in the performance or observance
of any of the covenants, agreements or conditions contained in this Agreement or
the other Loan Documents (other than those referred to in any subsection of this
Section 8.1 other than this subsection (d)), and such default shall continue for
a period of 30 days after any officer of the Borrower or its Subsidiaries shall
have notice or knowledge thereof;
(e) (i) any Debt of the Borrower, which individually or in the
aggregate exceeds $250,000 ("Material Debt"), shall be declared to be due and
payable or required to be prepaid, redeemed, purchased or defeased, or an offer
to prepay, redeem, purchase or defease Material Debt shall be required to be
made, in each case prior to the stated maturity thereof, or the maturity of any
or all of Material Debt is otherwise accelerated, or (ii) the Borrower or any of
its Subsidiaries shall fail to pay all or any portion of its Material Debt in
full upon the final stated maturity of such respective Material Debt (including
any extension thereof);
(f) (i) the Borrower or any of its Subsidiaries shall fail to pay
any principal of, premium or interest on or any other amount payable in respect
of Material Debt of such Person when the same becomes due and payable (whether
at scheduled maturity, or by required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Material Debt;
or (ii) any other event shall occur or condition shall exist under any agreement
or instrument relating to any Material Debt and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to permit the acceleration of the
maturity of such Material Debt (whether or not such acceleration occurs);
(g) the Borrower or any of its Subsidiaries shall (i) apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its Property, (ii) be generally unable to pay its debts as such debts become
due, (iii) make a general assignment for the benefit of its creditors, (iv)
commence a voluntary case under the Bankruptcy Code or the foreign equivalent
thereof, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) fail to controvert in a timely or
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code or the foreign equivalent thereof,
(vii) admit in writing its inability to pay its debts generally as such debts
become due, (viii) take any action under the laws of its jurisdiction of
organization analogous to any of the foregoing, or (ix) take any requisite
action for the purpose of effecting any of the foregoing;
(h) a proceeding or case shall be commenced, without the
application or consent of the Borrower or its Subsidiaries in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding up of the Borrower or any of its Subsidiaries or
composition or readjustment of the Debt of any of them, (ii) the appointment of
a trustee, receiver, custodian, liquidator or the like of the Borrower or any of
its Subsidiaries or of all or any substantial part of the assets of any of them,
or (iii) similar relief in respect of the Borrower or any of its Subsidiaries
under any law providing for the relief of debtors, and such proceeding or case
shall continue undismissed, or unstayed and in effect, for a period of 60 days;
or an order for relief shall be entered in an involuntary case under the
Bankruptcy Code, against the Borrower or any of its Subsidiaries; or action
under the laws of the jurisdiction of organization of any of the Borrower or any
of its Subsidiaries analogous to any of the foregoing shall be taken with
respect to any of the Borrower or any of its Subsidiaries and shall continue
undismissed, or unstayed and in effect, for a period of 60 days;
(i) a final judgment for the payment of money shall be rendered
by a court of competent jurisdiction against the Borrower or any of its
Subsidiaries, and the Borrower or such Subsidiary, as the case may be, shall not
discharge or bond the same or provide for its discharge or bonding in accordance
with its terms, or procure a stay of execution thereof, within 45 days from the
date of entry thereof and within said period of 45 days, or such longer period
during which execution of such judgment shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal, and such
judgment together with all other such judgments shall exceed in the aggregate
$250,000;
(j) any representation or warranty made by or on behalf of the
Borrower in this Agreement or any Officer's Certificate or other certificate or
notice now or hereafter delivered pursuant to or in connection with any
provision of this Agreement (including, without limitation, any Officer's
Certificate or other certification delivered pursuant to Section 6 hereof),
shall prove to be false, incorrect or breached in any material respect on the
date as of which it was made; or
(k) a Change in Control shall have occurred;
then (i) upon the occurrence of any Event of Default described in subsection (g)
or (h), the unpaid principal amount of the Loan, together with all interest
accrued thereon and all other Obligations payable under this Agreement or the
Bridge Note shall automatically become immediately due and payable, without
presentment, demand, notice, declaration, protest or other requirements of any
kind, all of which are hereby expressly waived, or (ii) upon the occurrence of
any other Event of Default, Lender may, by written notice to the Borrower,
declare the unpaid principal amount of the Loan to be, and the same shall
forthwith become, immediately due and payable, together with the interest
accrued thereon, and all other Obligations payable under this Agreement or the
Bridge Note, all without presentment, demand, notice, protest or other
requirements of any kind, all of which are hereby expressly waived.
Section VIII.2 Suits for Enforcement. If any Event of Default shall
have occurred and be continuing, Lender may proceed to protect and enforce its
respective rights either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant or agreement contained in this
Agreement or in aid of the exercise of any power granted in this Agreement, and
may proceed to enforce the payment of all sums due upon the Loans and all other
Obligations and such further amounts as shall be sufficient to cover the costs
and expenses of collection (including, without limitation, reasonable counsel
fees and disbursements), or to enforce any other legal or equitable right of
Lender.
Section VIII.3 Remedies Cumulative. No remedy conferred in this
Agreement or the other Loan Documents upon the Lender is intended to be
exclusive of any other remedy and each and every such remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or otherwise.
Section VIII.4 Remedies Not Waived. No course of dealing between the
Borrower and Lender and no delay or failure in exercising any rights hereunder
or under any other Loan Document shall operate as a waiver of any of the rights
of Lender.
ARTICLE IX
Miscellaneous
Section IX.1 Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered in person or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to Lender, to: Colony K-W, LLC
c/o Colony Capital, Inc.
1999 Avenue of the Stars, Suite 1200
Los Angeles, California 90067
Telecopier No.: (310) 843-0206
Attention: Mr. Mark M. Hedstrom
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90067
Telecopier No.: (213) 687-5600
Attention: Jonathan H. Grunzweig, Esq.
If to the Borrower, to: Kennedy-Wilson, Inc.
530 Wilshire Blvd., #101
Santa Monica, California 90401
Telecopier No.: (310) 314-8510
Attention: William J. McMorrow
with a copy to: Kulik, Gottesman & Mouton, LLP
1880 Century Park East,
Suite 1150
Los Angeles, CA 90067
Telecopier No.: 310-357-0224
Attention: Kent Mouton, Esq.
and
White & Case LLP
633 West Fifth Street
Los Angeles, CA 90071
Telecopier No.: 213-687-0758
Attention: Neil Rust, Esq.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others. All notices, requests,
consents and other communications hereunder shall be deemed to have been duly
given or served on the date on which personally delivered or on the date
actually received, with receipt acknowledged. It is understood and agreed that
the delivery of copies of notices to counsel as set forth above is for courtesy
purposes only and any failure to deliver such copy shall not constitute failure
with respect to any obligation to provide notices hereunder.
Section IX.2 Waivers; Amendments. Neither this Agreement nor any terms
hereof may be changed, waived, discharged, or terminated, nor any Collateral
released, unless such change, waiver, discharge, termination or release is in
writing signed by Lender. No failure or delay by Lender in exercising any right
or power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of Lender hereunder are cumulative and are not exclusive of any
rights or remedies that Lender would otherwise have. A waiver of any provision
of this Agreement or consent to any departure by the Borrower or any Guarantor
therefrom shall be effective only in the specific instance and for the specific
purpose for which given. Without limiting the generality of the foregoing, the
making of the Loan shall not be construed as a waiver of any Default or Event of
Default regardless of whether Lender may have had notice or knowledge of such
Default or Event of Default at the time.
Section IX.3 Expenses. The Borrower shall pay (a) all reasonable
out-of-pocket expenses incurred by Lender and Colony Investors III, L.P.,
including the reasonable fees, charges and disbursements of counsel for Lender,
in connection with the Transaction Documents and any amendments, modifications
or waivers of the provisions thereof and (b) all out-of-pocket expenses
reasonably incurred by Lender, including the fees, charges and disbursements of
any counsel for Lender, in connection with the enforcement or protection of its
rights in connection with the Transaction Documents, including its rights under
this Section, or in connection with the Loan made hereunder, including all such
out-of-pocket expenses reasonably incurred during any workout, restructuring or
negotiations in respect of such Loan.
Section IX.4 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that neither the
Borrower nor any Guarantor may assign, encumber or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of Lender (and
any attempted assignment or transfer by the Borrower or any Guarantor without
such consent shall be null and void). Lender may assign or otherwise transfer
any of its rights and obligations to any other Person without the consent of the
Borrower unless, so long as no Default or Event of Default has occurred and is
continuing, such assignment or transfer would result in the payment by the
Borrower of additional amounts under Section 2.8. The Borrower shall, promptly
following a request therefor by Lender, exercise such additional or replacement
Bridge Notes as may be requested in connection with any such permitted
assignment or transfer. Nothing in this Agreement, expressed or implied, shall
be construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
Section IX.5 Survival. All covenants, agreements, representations and
warranties made by the Borrower and the Guarantors herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by Lender and shall
survive the execution and delivery of this Agreement and the making of the Loan,
regardless of any investigation made by Lender or on its behalf and
notwithstanding that Lender may have had notice or knowledge of any Default or
Event of Default or incorrect representation or warranty at the time any credit
is extended hereunder, and shall continue in full force and effect through the
Maturity Date as long as the principal of or any accrued interest on the Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid. The provisions of Sections 2.8 and 9.3 shall survive and remain in full
force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loan or the termination of this Agreement or any
provision hereof.
Section IX.6 Counterparts; Integration; Effectiveness. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and the other
Transaction Documents constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. All
Schedules and Exhibits hereto are hereby expressly incorporated herein by
reference. Delivery of an executed counterpart of a signature page of this
Agreement by facsimile shall be as effective as delivery of a manually executed
counterpart of this Agreement.
Section IX.7 Marshalling; Recapture. Lender shall not be under any
obligation to marshal any assets in favor of the Borrower or any of the
Guarantors or any other party or against or in payment of any or all of the
obligations, liabilities and indebtedness of every nature of the Borrower or any
of the Guarantors from time to time owing to Lender under or in connection with
this Agreement or the other Loan Documents. To the extent Lender receives any
payment by or on behalf of the Borrower or any of the Guarantors, which payment
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to such Borrower or Guarantors
or its estate, trustee, receiver, custodian or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such payment or repayment, the obligation or part thereof which has
been paid, reduced or satisfied by the amount so repaid shall be reinstated by
the amount so repaid and shall be included within the liabilities of the
Borrower and the Guarantors to Lender as of the date such initial payment,
reduction or satisfaction occurred.
Section IX.8 Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section IX.9 Indemnification. In consideration of the execution and
delivery of this Agreement by Lender, the Borrower hereby agrees to defend,
indemnify, exonerate and hold harmless the Lender and its respective officers,
directors, stockholders, affiliates, trustees, employees and agents, and each
other Person, if any, controlling such Lender or any of its Affiliates (herein
collectively called the "Indemnitees") from and against any and all liabilities,
obligations, losses, damages, claims, actions, suits, proceedings, judgments,
costs and expenses, including, without limitation, legal fees and other expenses
incurred in the investigation, defense, appeal and settlement of claims,
actions, suits and proceedings (herein collectively called the "Indemnified
Liabilities"), incurred by the Indemnitees or any of them as a result of, or
arising out of or relating to:
(a) the execution, delivery, performance or enforcement of this
Agreement, the Bridge Note, any other Loan Document or any other instrument or
document contemplated hereby or thereby by any of the Indemnitees, or any act,
event or transaction related or attendant thereto or contemplated hereby or
thereby, or any action or inaction by any Indemnitee under or in connection
therewith, or
(b) any violation or alleged violation by the Borrower or any of its
Subsidiaries of any Environmental Law or the actual or alleged existence, or
release by the Borrower or any of its Subsidiaries, of any Hazardous Material
that affects the Borrower, any of its Subsidiaries, or their respective
operations or Properties,
except for any such Indemnified Liabilities that are finally judicially
determined (or acknowledged by the respective Indemnitee in writing) to have
resulted from the respective Indemnitee's gross negligence or willful
misconduct, and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The obligations of the
Borrower under this Section 9.9 shall be in addition to any liability that the
Borrower may otherwise have and shall survive the payment or prepayment in full
or transfer of the Bridge Note and the enforcement of any provision hereof.
Section IX.10 Governing Law; Jurisdiction; Consent to Service of
Process.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF
THE NEW YORK GENERAL OBLIGATIONS LAW AND SECTION 327(b) OF THE NEW YORK CIVIL
PRACTICE LAWS AND RULES.
(b) Any legal action or proceeding with respect to this Agreement and
any action for enforcement of any judgment in respect thereof may be brought in
any state or federal court sitting in the County of New York, State of New York,
and, by execution and delivery of this Agreement, each of the Borrower and the
Guarantors hereby accepts for itself and in respect of its Property, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
any appellate courts from any thereof. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that Lender
may otherwise have to bring any action or proceeding relating to this Agreement
against the Borrower, any Guarantor or their properties in the courts of any
jurisdiction.
(c) Each of the Borrower and each Guarantor hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
(e) EACH OF THE BORROWER, THE GUARANTORS AND LENDER HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I)
ARISING UNDER THIS AGREEMENT, THE BRIDGE NOTE, ANY OTHER LOAN DOCUMENT, OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM IN RESPECT OF THIS AGREEMENT, THE
BRIDGE NOTE, ANY OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS
RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE BORROWER AND LENDER
HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHTS TO
TRIAL BY JURY.
Section IX.11 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
ARTICLE X
Subordination
Section X.1 Subordination Terms. The Borrower, the Guarantors and
Lender agree, for the benefit of holders of Senior Debt, that the payment of the
obligations by the Borrower or the payment of the Guaranteed Obligations by the
Guarantors shall be subordinated to the prior payment in full of all Senior Debt
as provided herein. Subject to Section 10.2, upon the maturity of any Senior
Debt of the Borrower or any of the Guarantors (by lapse of time, acceleration or
otherwise) all Senior Debt of such Persons which has so matured and is then due
and payable shall first be paid in full, or such payment shall be duly provided
for in a manner satisfactory to all holders of such Senior Debt, before any
payment is made on account of the Obligations or the Guaranteed Obligations.
Upon any distribution of assets of the Borrower or any Guarantor in any
dissolution, winding up, liquidation or reorganization for the benefit of
creditors of the Borrower or any Guarantor (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise):
(a) the holders of all Senior Debt of such Person subject to such
dissolution, winding up, liquidation or reorganization shall first be entitled
to receive payments in full of all Senior Debt (including, without limitation,
interest accruing after the commencement of any such proceeding at the rate
specified in the documentation governing the terms of such Senior Debt in cash
or in a manner satisfactory to all of its holders before Lender is entitled to
receive any payment from the Borrower on account of the Obligations or the
Guaranteed Obligations;
(b) in the event that notwithstanding the foregoing provisions of this
Section 10.1, any payment or distribution of assets of the Borrower or any
Guarantor of any kind or character, whether in cash, property or securities,
shall be received by Lender on account of the Obligations or the Guaranteed
Obligations before all Senior Debt of such Person subject to such dissolution,
winding up, liquidation or reorganization is paid in full, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid forthwith over and delivered to the holders of such Senior Debt
remaining unpaid or unprovided for or their representative under the credit or
other agreement under which such Senior Debt may have been issued (pro rata on
the basis of such unpaid Senior Debt held by such holders), for application to
the payment of such Senior Debt until all such Senior Debt shall have been paid
in full, after giving effect to any concurrent payment or distribution or
provision therefor to the holders of such Senior Debt, except that Lender shall
be entitled to receive securities that are subordinated to Senior Debt at least
the same extent as the Obligations and the Guaranteed Obligations.
Section X.2 Subordination Terms Not to Affect Collateral. Nothing in
this Article X shall affect or limit in any manner Lender's rights under the
Pledge Agreement, including without limitation, Lender's rights to exercise
remedies with respect to the Collateral, it being understood that Lender's
rights and interests in the Collateral are not subordinated in any respect to
the Senior Debt.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
KENNEDY-WILSON, INC.,
as Borrower
By:_________________________________
Name:
Title:
KENNEDY-WILSON INTERNATIONAL,
as Guarantor
By:_________________________________
Name:
Title:
K-W PROPERTIES,
as Guarantor
By:_________________________________
Name:
Title:
KENNEDY-WILSON PROPERTIES, LTD.,
as Guarantor
By:_________________________________
Name:
Title:
COLONY K-W, LLC,
as Lender
By: Colony Investors III, L.P.,
a Delaware limited partnership,
its sole and managing member
By: Colony Capital III, L.P.,
a Delaware limited partnership,
its general partner
By: Colony GP III, Inc.,
a Delaware corporation,
its general partner
By:_________________________________
Name:
Title:
<PAGE>
Exhibit A
BRIDGE NOTE
Los Angeles, California July 16, 1998
$21,000,000
FOR VALUE RECEIVED, Kennedy-Wilson, Inc., a Delaware corporation (the
"Borrower") promises to pay to Colony K-W, LLC (the "Payee") on the Maturity
Date (as defined in the Bridge Loan Agreement), the principal sum of Twenty-One
Million United States Dollars ($21,000,000) or, if less, the aggregate unpaid
principal amount of the Loan (as defined in the Bridge Loan Agreement).
The Borrower also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at the
times which shall be determined in accordance with the provisions of that
certain Bridge Loan Agreement, dated as of July 16, 1998 (as amended, restated,
supplemented or otherwise modified from time to time, the "Bridge Loan
Agreement"; the terms defined therein and not otherwise defined herein being
used herein as therein defined), by and among the Borrower, the Guarantors
identified therein and the Payee.
This Bridge Note is the promissory note referred to in Section 2.3(a)
of the Bridge Loan Agreement and is issued pursuant to and entitled to the
benefits of the Bridge Loan Agreement, to which reference is hereby made for a
more complete statement of the terms and conditions under which the Loan
evidenced hereby was made and is to be repaid. Payment under this Bridge Note
shall be subordinated to the extent provided in the Bridge Loan Agreement.
All payments of principal and interest in respect of this Bridge Note
shall be made in lawful money of the United States of America in same day funds
at such place as shall be designated in writing for such purpose in accordance
with the terms of the Bridge Loan Agreement. Unless and until this Bridge Note
has been assigned pursuant to Section 9.4 of the Bridge Loan Agreement, the
Borrower shall be entitled to deem and treat the Payee as the owner and holder
of this Bridge Note and the Loan evidenced hereby. The Payee hereby agrees, by
its acceptance hereof, that before disposing of this Bridge Note or any part
hereof it will make a notation hereon of all principal payments previously made
hereunder and of the date to which interest hereon has been paid; provided,
however, that the failure to make a notation of any payment made on this Bridge
Note shall not limit or otherwise affect the obligations of the Borrower
hereunder with respect to payments of principal of or interest on this Bridge
Note.
Whenever any payment on this Bridge Note shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Bridge Note.
THE BRIDGE LOAN AGREEMENT AND THIS BRIDGE NOTE SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, INCLUDING WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW AND SECTION 327(B) OF THE NEW YORK CIVIL PRACTICE
LAWS AND RULES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Bridge Note, together with all accrued and unpaid
interest thereon, may become, or may be declared to be, due and payable in the
manner, upon the conditions and with the effect provided in the Bridge Loan
Agreement.
The terms of this Bridge Note are subject to amendment only in the
manner provided in the Bridge Loan Agreement.
No reference herein to the Bridge Loan Agreement and no provision of
this Bridge Note or the Bridge Loan Agreement shall alter or impair the
obligations of the Borrower, which are absolute and unconditional, to pay the
principal of and interest on this Bridge Note at the place, at the respective
times, and in the currency herein prescribed.
The Borrower promises to pay all reasonable costs and expenses
incurred by the Payee, including the reasonable fees, charges and disbursements
of counsel for the Payee, all as provided in Section 9.3 of the Bridge Loan
Agreement, incurred in the collection and enforcement of this Bridge Note. The
Borrower and any endorsers of this Bridge Note hereby consent to renewals and
extensions of time at or after the maturity hereof, without notice, and hereby
waive diligence, presentment, protest, demand and notice of every kind and, to
the full extent permitted by law, the right to plead any statute of limitations
as a defense to any demand hereunder.
This Bridge Note and the Payee's rights hereunder may not be assigned
or otherwise transferred by the Payee, or any interest of any sort whatsoever
transferred, directly or indirectly, to any person or entity other than the
Payee, in whole or in part, except in compliance with Section 9.4 of the Bridge
Loan Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Bridge Note to be
duly executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.
KENNEDY-WILSON, INC.
By:__________________________
Name:
Title:
<PAGE>
TRANSACTIONS
ON
NOTE
<TABLE>
<CAPTION>
Outstanding
Amount of Amount of Principal
Interest Paid Principal Paid Balance Notation
Date This Date This Date This Date Made By
- - - - ---- ------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
</TABLE>
EXHIBIT 10.2
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of July 16, 1998,
is entered into by Kennedy-Wilson Properties, Ltd., a Delaware corporation
("Pledgor"), in favor of Colony K-W, LLC, a Delaware limited liability company
("together with its successors and assigns, "Lender").
RECITALS
WHEREAS, Pledgor, Kennedy-Wilson International and K-W Properties, as
guarantors, Kennedy-Wilson, Inc., as borrower, and Lender are parties to that
certain Bridge Loan Agreement, dated as of the date hereof (as the same shall be
amended, restated, supplemented or otherwise modified from time to time in
accordance with its terms, the "Bridge Loan Agreement");
WHEREAS, it is a condition precedent to the making of loans under the
Bridge Loan Agreement that the Pledgor shall have entered into this Agreement
and granted the pledges provided herein;
WHEREAS, Pledgor wishes to grant pledges and security interests in
favor of Lender and will derive substantial benefit from the loan made pursuant
to the Bridge Loan Agreement; and
WHEREAS, Pledgor is the legal and beneficial owner of the shares of
capital stock listed opposite the name of Pledgor in Schedule I hereto
(collectively, the "Pledged Shares"), which shares constitute all of the issued
and outstanding shares of capital stock or similar equity securities of Heitman
Properties Ltd., an Illinois corporation, to be renamed Kennedy-Wilson
Properties, Ltd. ("Issuer").
NOW, THEREFORE, in consideration of the premises set forth herein and
in order to induce Lender to make Loans under the Bridge Loan Agreement, Pledgor
hereby agrees with Lender as follows:
SECTION 1. Certain Defined Terms. Capitalized terms used herein
without definition herein shall have the meanings provided in the Bridge Loan
Agreement. The following terms as used herein shall have the following meanings:
"Agreement" means this Pledge Agreement, as amended, restated or
supplemented or otherwise modified from time to time in accordance with its
terms.
"Bridge Loan Agreement" shall have the meaning set forth in the first
WHEREAS clause of this Agreement.
"Indemnitee" shall have the meaning set forth in Section 16.
"Issuer" means Kennedy-Wilson Properties, Ltd., an Illinois
corporation, formerly known as Heitman Properties Ltd.
"Lender" means Colony K-W, LLC and its successors and assigns,
pursuant to the terms of the Bridge Loan Agreement.
"Pledge Amendment" shall have the meaning set forth in Section 7.
"Pledged Collateral" means:
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and, subject to Section 8, all
dividends, cash, warrants, rights, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the Pledged Shares;
(b) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase, stock (whether certificated or
uncertificated and now existing or hereafter created) of any issuer of the
Pledged Shares from time to time acquired by Pledgor in any manner (which shares
shall be deemed to be part of the Pledged Shares), the certificates or other
instruments representing such additional shares, securities, warrants, options
or other rights and any interest of Pledgor in the entries on the books of any
financial intermediary pertaining to such additional shares, and, subject to
Section 8, all dividends, cash, warrants, rights, instruments and other property
or proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such additional shares, securities,
warrants, options or other rights;
(c) to the extent not covered above, all Proceeds of the Pledged
Collateral described in clauses (a) and (b).
"Pledged Shares" shall have the meaning set forth in the fourth
WHEREAS clause of this Agreement.
"Pledgor" shall mean Kennedy-Wilson, Inc., a Delaware corporation.
"Proceeds" shall have the meaning assigned that term under the Uniform
Commercial Code (the "Code") as in effect in any relevant jurisdiction or under
relevant law and, in any event, shall include, but not be limited to, any and
all (i) proceeds of any indemnity or guaranty payable to Pledgor from time to
time with respect to any of the Pledged Collateral and (ii) any other amounts
from time to time paid or payable under or in connection with any of the Pledged
Collateral or otherwise receivable or received when the Pledged Collateral is or
proceeds thereof are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary.
"Secured Obligations" shall have the meaning set forth in Section 3.
"Securities Act" means the Securities Act of 1933, as from time to
time amended.
"Underlying Debt" shall have the meaning set forth in Section 3.
SECTION 2. Pledge of Security. Pledgor hereby pledges to Lender and
grants to Lender a first priority security interest in the Pledged Collateral.
SECTION 3. Security for Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, (i) the prompt payment and
performance in full when due, whether at stated maturity, by acceleration or
otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code and
the operation of Sections 502(b) and 506(b) of the Bankruptcy Code or any
successor provision thereto, and all interest accruing on the Obligations after
the filing of a petition by or against the Pledgor or any of its Subsidiaries
under the Bankruptcy Code, in accordance with and at the rate (including the
Default Rate) specified in the Bridge Loan Agreement whether or not the claim
for such interest is allowed as a claim after such filing in any proceeding
under the Bankruptcy Code), of all obligations of Pledgor under the Loan
Documents, whether now existing or hereafter arising, voluntary or involuntary,
whether or not jointly owed with others, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later increased, created or incurred and all or
any portion of such obligations that are paid to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Lender as a
preference, fraudulent transfer or otherwise (all such obligations being the
"Underlying Debt") and (ii) all obligations or liabilities of every nature of
Pledgor now or hereafter existing under this Agreement (all such obligations of
Pledgor, together with the Underlying Debt, being the "Secured Obligations").
SECTION 4. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Lender pursuant hereto and shall be in suitable
form for transfer by delivery, or, as applicable, shall be accompanied by
Pledgor's endorsement, where necessary, or duly executed instruments of transfer
or assignment in blank, all in form and substance satisfactory to Lender. If an
Event of Default shall have occurred and be continuing, Lender shall have the
right, at any time in its discretion and without notice to Pledgor, to transfer
to or to register in the name of Lender or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable rights specified in Section
8(a) hereof. In addition, if an Event of Default shall have occurred and be
continuing, Lender shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 5. Representations and Warranties. Pledgor represents and
warrants as follows:
(a) Pledged Collateral. All of the Pledged Shares pledged by Pledgor
have been duly authorized and validly issued and are fully paid and
nonassessable. The Pledged Shares constitute all of the issued and outstanding
shares of the Issuer and there are no outstanding options, warrants, rights to
subscribe, stock purchase rights or other agreements outstanding with respect
to, or property that is now or hereafter convertible into, or that requires the
issuance or sale of, any Pledged Shares.
(b) Ownership of Pledged Collateral. Pledgor is the sole legal, record
and beneficial owner of the Pledged Collateral pledged by Pledgor free and clear
of any Lien except for the security interest created by this Agreement.
(c) Consents. No consent of any other party (including, without
limitation, stockholders or creditors of Pledgor or any Person under any
contractual obligation of Pledgor) and no consent, authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (i) for the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
interest granted hereby or for the execution, delivery or performance of this
Agreement by Pledgor or (ii) for the exercise by Lender of the voting or other
rights provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement (except (x) those which have been obtained
or made and (y) as may be required in connection with a disposition of Pledged
Collateral by laws affecting the offering and sale of securities generally or
the disposition of collateral generally).
(d) Neither the execution and delivery of this Agreement by the
Pledgor nor the consummation of the transactions herein contemplated nor the
fulfillment of the terms hereof (i) violate the Pledgor's or the Issuer's,
charter or bylaws, (ii) violate the terms of any agreement, indenture, mortgage,
deed of trust, equipment lease, instrument or other document to which the
Pledgor or the Issuer, is a party, or by which any of them may be bound or to
which any of their properties or assets may be subject, which violation or
conflict would have a material adverse effect on the financial condition,
business, assets or liabilities of the Pledgor and the Issuer taken as a whole,
or on the value of the Pledged Collateral or a material adverse effect on the
security interests hereunder, or (iii) conflict with any law, order, rule or
regulation applicable to the Pledgor or the Issuer, of any court or any
government, regulatory body or administrative agency or other governmental body
having jurisdiction over the Pledgor or the Issuer or its or their properties,
or (iv) result in or require the creation or imposition of any Lien (other than
the Lien contemplated hereby in favor of Lender), upon or with respect to any of
the property now owned or hereafter acquired by the Pledgor or the Issuer, which
violation or conflict would have a material adverse effect on the financial
condition, business, assets or liabilities of the Pledgor and the Issuer taken
as a whole, or on the value of the Pledged Collateral or a material adverse
effect on the security interests hereunder.
(e) Perfection. The pledge and delivery to Lender of the Pledged
Collateral pursuant to this Agreement creates a valid and perfected first
priority security interest of Lender in the Pledged Collateral of Pledgor,
securing the payment and performance of the Secured Obligations, subject to no
Liens other than Permitted Liens, and all actions necessary or desirable to
perfect and protect such security interest have been duly taken.
(f) Regulations T, U and X. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulations T, U or X of the Board
of Governors of the Federal Reserve System.
SECTION 6. Certain Covenants. Pledgor hereby covenants that, until the
Secured Obligations have been indefeasibly paid in full and the Bridge Loan
Agreement has been terminated, Pledgor will:
(a) not, (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral pledged hereunder by Pledgor, (ii) create or permit to exist any Lien
upon or with respect to any of the Pledged Collateral, except for the security
interest under this Agreement or (iii) permit the Issuer to merge or consolidate
with any Person;
(b) (i) cause the Issuer not to issue any stock or other securities or
membership interests in addition to or in substitution for the Pledged Shares
issued by the Issuer, except to Pledgor, (ii) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all additional shares
of stock, membership interests or other securities of each issuer of Pledged
Shares, and (iii) pledge hereunder, immediately upon its acquisition (directly
or indirectly) thereof, any and all shares of stock or membership interests of
any Person which, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of Pledgor;
(c) promptly deliver to Lender all written notices received by it with
respect to the Pledged Collateral; and
(d) cause the Issuer to maintain its existence as an Illinois
corporation.
SECTION 7. Further Assurances; Pledge Amendments.
(a) Pledgor agrees that at any time and from time to time, at the
expense of Pledgor, Pledgor shall promptly execute and deliver all further
instruments and documents, and take all further actions, that may be necessary
or appropriate, or that Lender may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Lender to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of stock, membership interests or other securities required to be pledged
hereunder, promptly (and in any event within ten days) deliver to Lender a
Pledge Amendment, duly executed by Pledgor, in substantially the form of
Schedule II hereto (a "Pledge Amendment"), in respect of the additional shares
of stock or membership interests to be pledged pursuant to this Agreement.
Pledgor hereby authorizes Lender to attach each Pledge Amendment to this
Agreement and agrees that all Pledged Shares listed on any Pledge Amendment
delivered to Lender shall for all purposes hereunder be considered Pledged
Collateral.
SECTION 8. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default (as defined below) shall have
occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not in violation of the terms of any of the Loan
Documents. It is understood, however, that neither (A) the voting by
Pledgor of any Pledged Shares for or Pledgor's consent to the election of
directors at a regularly scheduled annual or other meeting of stockholders
or with respect to incidental matters at any such meeting nor (B) Pledgor's
consent to or approval of any action otherwise permitted under each of the
Loan Documents shall be deemed inconsistent with the terms of any of the
Loan Documents within the meaning of this Section 8(a)(i), and no notice of
any such voting or consent need be given to Lender.
(ii) to the extent not prohibited under the Bridge Loan
Agreement, Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends and
other distributions paid in respect of the Pledged Collateral; provided,
however, that any and all dividends, interest and other distributions paid
or payable in additional equity securities, or warrants, options or similar
rights to acquire additional equity securities shall be, and shall
forthwith be delivered to Lender to hold as, Pledged Collateral and shall,
if received by Pledgor, be received in trust for the benefit of Lender, be
segregated from the other property or funds of Pledgor and be forthwith
delivered to Lender as Pledged Collateral in the same form as so received
(with all necessary endorsements).
(iii) Lender shall promptly execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and
other consensual rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends, principal or interest
payments which it is authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) Upon written notice from Lender to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 8(a)(i) shall cease,
and all such rights shall thereupon become vested in Lender who shall
thereupon have the right to exercise such voting and other consensual
rights.
(ii) All rights of Pledgor to receive the dividends, interest and
other payments which it would otherwise be authorized to receive and retain
pursuant to Section 8(a)(ii) shall cease, and all such rights shall
thereupon become vested in Lender who shall thereupon have the right to
receive and hold as Pledged Collateral such dividends, interest and other
payments which shall, upon written notice from Lender, be paid to Lender.
(iii) All dividends, interest and other payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 8(b) shall be received in trust for the benefit of Lender, shall be
segregated from other funds of Pledgor and shall forthwith be paid over to
Lender as Pledged Collateral in the same form as so received (with any
necessary endorsements).
(c) In order to permit Lender to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) hereof and to receive all dividends and other distributions which it may
be entitled to receive under Section 8(a)(ii) hereof or Section 8(b)(ii) hereof,
Pledgor shall promptly execute and deliver (or cause to be executed and
delivered) to Lender all such proxies, dividend payment orders and other
instruments as Lender may from time to time reasonably request.
SECTION 9. Lender Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints Lender as Pledgor's attorney-in-fact, with full authority
in the place and stead of Pledgor and in the name of Pledgor or otherwise, from
time to time, during the continuation of an Event of Default, in Lender's
reasonable discretion to take any action and to execute any instrument,
including but not limited to financing and continuation statements, which Lender
may deem necessary or advisable, subject to the terms and conditions of this
Agreement, to accomplish the purposes of this Agreement, including, without
limitation, (a) to receive, endorse and collect all instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same, and (b) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Pledged Collateral, and to file
any claims or take any action or institute any proceedings which Lender may deem
necessary or desirable for the collection of any of the Pledged Collateral or to
enforce the rights of Lender with respect to any of the Pledged Collateral.
SECTION 10. Lender May Perform. If Pledgor fails to perform any
agreement contained herein, then, during an Event of Default, Lender may itself
perform, or cause performance of, such agreement, and the expenses of Lender
incurred in connection therewith shall be payable by Pledgor under Section 16(b)
hereof.
SECTION 11. Standard of Care. The powers conferred on Lender hereunder
are solely to protect its interest in the Pledged Collateral and shall not
impose on it any duty to exercise such powers. Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equivalent to that which Lender accords its own property
consisting of negotiable securities, it being understood that Lender shall have
no responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not Lender has or is deemed to have knowledge of
such matters, (b) taking any necessary steps (other than steps taken in
accordance with the standard of care set forth above to maintain possession of
the Pledged Collateral) to preserve rights against any parties with respect to
any Pledged Collateral, (c) taking any necessary steps to collect or realize
upon the Secured Obligations or any guarantee therefor, or any part thereof, or
any of the Pledged Collateral or (d) initiating any action to protect the
Pledged Collateral against the possibility of a decline in market value.
SECTION 12. Events of Default. The occurrence of any "Event of
Default" as defined in the Bridge Loan Agreement shall constitute an Event of
Default under this Agreement.
SECTION 13. Remedies upon Default. If any Event of Default shall have
occurred and be continuing:
(a) Lender may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code as in effect in the State of New York (or any other
state with jurisdiction over the Pledged Collateral) at that time, and Lender
may also in its sole discretion, without notice (except as specified below),
sell the Pledged Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker's board or at any of Lender's offices
or elsewhere, for cash, on credit or for future delivery, at such time or times
and at such price or prices and upon such other terms as are commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Pledged Collateral. Lender may be the purchaser of any or all of the Pledged
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Pledged Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price of any Pledged
Collateral payable by Lender at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
Pledgor, and Pledgor hereby waives (to the extent permitted by law) all rights
of redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Lender shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Lender may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Pledgor hereby waives any claims
against Lender arising by reason of the fact that the price at which any Pledged
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if Lender accepts the
first offer received and does not offer such Pledged Collateral to more than one
offeree. If the proceeds of any sale or other disposition of the Pledged
Collateral are insufficient to pay all the Secured Obligations, Pledgor shall be
liable for the deficiency and the fees of any attorneys employed by Lender to
collect such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Lender may
be compelled, with respect to any sale of all or any part of the Pledged
Collateral conducted without prior registration or qualification of such Pledged
Collateral under the Securities Act and/or such state securities laws, to limit
purchasers to those who will agree, among other things, to acquire the Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges that any such private sales
may be at prices and on terms less favorable to Lender than those obtainable
through a public sale without such restrictions (including, without limitation,
a public offering made pursuant to a registration statement under the Securities
Act) and, notwithstanding such circumstances, Pledgor agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that Lender shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
(c) If Lender, in its sole discretion, determines that it is necessary
or advisable to effect a public registration of all or part of the Pledged
Collateral pursuant to the Securities Act, then Pledgor shall cause the issuers
of the Pledged Shares to execute and deliver, and cause the directors and
officers of such issuers to execute and deliver, all at Pledgor's expense, all
such instruments and documents, and to do or cause to be done all such other
acts and things as may be necessary or, in the reasonable judgment of Lender,
advisable to register such shares under the provisions of the Securities Act and
to cause the registration statement relating thereto to become effective and to
remain effective for a period of twelve (12) months from the initial effective
date thereof, and to make all amendments thereto or to the related prospectus or
both that, in the reasonable judgment of Lender, are necessary or advisable, all
in conformity with the requirements of the Securities Act and the rules and
regulations promulgated thereunder. Pledgor agrees to cause such issuers to (i)
comply with the provisions of the securities or "Blue Sky" laws of any
jurisdiction designated by Lender and (ii) make available to its security
holders, as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act. All expenses incurred in
complying with this Section 13(c), including without limitation, all
registration and filing fees (including all expenses incident to filing with the
National Association of Securities Dealers, Inc.), printing expenses, fees and
disbursements of counsel for Pledgor or for such issuers, the reasonable fees
and expenses of not more than one counsel (together with appropriate local
counsel) for Lender, expenses of any special audits incident to or required by
any such registration and expenses or complying with the securities or "Blue
Sky" laws of any jurisdictions, shall be paid by Pledgor.
(d) If Lender determines to exercise its right to sell any or all of
the Pledged Collateral, upon written request, Pledgor shall and shall cause each
issuer of any Pledged Shares to be sold hereunder from time to time to furnish
to Lender all such information as Lender may reasonably request in order to
facilitate such sale.
SECTION 14. Application of Proceeds. All Proceeds received by Lender
in respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral may, in the discretion of Lender, be held by
Lender as Pledged Collateral for, and/or then or at any time thereafter applied
in whole or in part by Lender against the Secured Obligations in the following
order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, and all expenses, liabilities and advances
made or incurred by Lender in connection therewith and all amounts for
which Lender is entitled to indemnification and reimbursement hereunder and
all advances made by Lender hereunder for the account of the Pledgor or for
the payment of all costs and expenses paid or incurred by Lender in
connection with the exercise of any right or remedy hereunder, all in
accordance with Section 16 hereof;
SECOND: To the payment in full of all Secured Obligations in
accordance with the Bridge Loan Agreement; and
THIRD: To the payment to or upon the order of Pledgor, or to whosoever
may be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining from such proceeds.
SECTION 15. Actions by Lender. During the continuation of an Event of
Default, Lender shall have the right hereunder, in its sole discretion, to make
demands, to give notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking any action with respect to the Pledged Collateral
(including, without limitation, the release or substitution of Pledged
Collateral).
SECTION 16. Indemnity and Expenses.
(a) Pledgor agrees to indemnify Lender and each of the officers,
directors, agents, employees and affiliates of Lender (each an "Indemnitee"),
from and against any and all claims, losses and liabilities in any way relating
to, growing out of or resulting from this Agreement and the Transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting from the gross
negligence or willful misconduct of the Indemnitee seeking indemnification.
(b) Pledgor will upon demand pay to Lender the amount of any and all
reasonable costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which Lender may incur in connection with
(i) the administration of this Agreement, (ii) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the Pledged
Collateral, (iii) the exercise or enforcement of any of the rights of Lender
hereunder or (iv) the failure by Pledgor to perform or observe any of the
provisions hereof.
SECTION 17. Waivers of Pledgor.
(a) Pledgor hereby waives any right to require Lender to: (i) proceed
against Pledgor, any guarantor of any of the Secured Obligations or any other
person or entity; (ii) proceed against or exhaust any other security held from
Pledgor or any other person or entity; (iii) give notice to Pledgor of the
terms, time and place of any public or private sale of the Pledged Collateral or
any other security, or otherwise comply with Section 9504 of the Uniform
Commercial Code (except as set forth in Section 13(a)(i)); (iv) pursue any other
remedy in Lender's power; or (v) make or give any presentments, demands for
performance, notices of nonperformance, protests, notices of protest or notices
of dishonor in connection with any obligations or evidences of indebtedness
which constitute in whole or in part the Secured Obligations or in connection
with the creation of new or additional Secured Obligations;
(b) Pledgor waives any defense arising by reason of: (i) any
disability or other defense of Pledgor or any other entity, including, without
limitation, any defense based on or arising out of the unenforceability of any
of the Secured Obligations, legal or equitable discharge of the Secured
Obligations or this Agreement or any statute of limitations affecting Pledgor's
liability hereunder; (ii) the cessation from any cause whatsoever, other than
payment in full, of the Secured Obligations or the release or substitution of
any sureties or guarantors of the Secured Obligations; (iii) any act or omission
(other than as a result of the gross negligence or willful misconduct of the
Lender) by Lender which directly or indirectly results in or aids the discharge
of Pledgor or any of the Secured Obligations by operation of law or otherwise;
(iv) the release of any other collateral securing the Secured Obligations or the
failure by Lender to perfect or maintain the perfection of any such other
collateral; (v) any modification of the Secured Obligations, in any form
whatsoever, including, but not limited to the renewal, extension, acceleration
or other change in the time for payment of the Secured Obligations, and any
change in the terms of the Secured Obligations, including, but not limited to,
any increase or decrease of the rate of interest on the Secured Obligations; and
(vi) any law limiting the liability of or exonerating guarantors or sureties;
and
(c) until all the Secured Obligations shall have been paid in full,
Pledgor waives any right to enforce any remedy which Lender now has or may
hereafter have against any person or entity guaranteeing or securing the Secured
Obligations, and waives any benefit of, or any right to participate in any
security whatsoever now or hereafter held by Lender for the Secured Obligations.
SECTION 18. Continuing Security Interest; Transfer of Indebtedness.
This Agreement shall create a continuing security interest in the Pledged
Collateral and shall, unless released and/or terminated pursuant to the Bridge
Loan Agreement, (a) remain in full force and effect until indefeasible payment
in full of all Secured Obligations, (b) be binding upon Pledgor, its successors
and assigns, and (c) inure, together with the rights and remedies of Lender
hereunder, to the benefit of Lender and its successors, and permitted
transferees and assigns. Without limiting the generality of the foregoing clause
(c), upon any assignment by Lender of any Debt of the Borrower held by it to any
other person or entity, such other person or entity shall thereupon become
vested with all the benefits in respect thereof granted to Lender herein or
otherwise. Upon the date upon which the Secured Obligations have been
indefeasibly paid and performed in full and the Bridge Loan Agreement has
terminated, this Agreement shall automatically terminate and (x) Pledgor shall
be entitled to the return, upon its request and at its expense, against receipt
and without recourse to Lender, of such of the Pledged Collateral pledged by
Pledgor hereunder as shall not have been sold or otherwise applied pursuant to
the terms hereof prior to such request, (y) Lender's security interest in and
lien on such Pledged Collateral shall be simultaneously released upon the making
of such request and (z) Lender shall, at Pledgor's expense, execute and/or
deliver such documents as Pledgor shall reasonably request to evidence such
release.
SECTION 19. No Waiver by Lender; Authority of Pledgor. No failure on
the part of Lender to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by Lender of any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein provided are
cumulative to the fullest extent permitted by law and are not exclusive of any
remedies provided by law. It is not necessary for Lender to inquire into the
powers of Pledgor or the officers, directors or agents acting or purporting to
act on behalf of Pledgor.
SECTION 20. Amendment, Etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
SECTION 21. Addresses for Notices. Unless otherwise specifically
provided herein, any notice or other communication herein required or permitted
to be given shall be given as provided under Section 9.1 of the Bridge Loan
Agreement.
SECTION 22. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF NEW YORK
GENERAL OBLIGATIONS LAW AND SECTION 327(b) OF NEW YORK CIVIL PRACTICE LAWS.
EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein, terms defined in Article 9 of the Code are used herein as
therein defined.
SECTION 23. Severability. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdictions,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 24. Consent to Jurisdiction and Service of Process. (a) Any
legal action or proceeding with respect to this Agreement and any action for
enforcement of any judgment in respect thereof may be brought in the courts of
the State of New York or of the United States of America for the Southern
District of New York, and, by execution and delivery of this Agreement, each of
Pledgor and Lender hereby accepts for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of the aforesaid
courts and any appellate courts from any thereof. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that Lender may otherwise have to bring any action or proceeding relating
to this Agreement against Pledgor or its properties in the courts of any
jurisdiction.
(b) Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (a) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 21 hereof. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 25. Marshaling; Payments Set Aside. Lender shall not be under
any obligation to marshal any assets in favor of Pledgor or any other party or
against or in payment of any or all of the Secured Obligations. To the extent
that Pledgor makes a payment or payments to Lender or Lender enforces its
security interests or exercises its rights of setoff, and such payment or
payments or proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
SECTION 26. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement or be given any substantive effect.
SECTION 27. Counterparts. This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which together shall constitute one and the same Agreement.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be
duly executed and delivered by its officers thereunto duly authorized as of the
date first above written.
"PLEDGOR"
KENNEDY-WILSON PROPERTIES, LTD.
By:___________________________
Name:
Title:
"LENDER"
COLONY K-W, LLC,
By: Colony Investors III, L.P.,
a Delaware limited partnership,
its sole and managing member
By: Colony Capital III, L.P.,
a Delaware limited partnership,
its general partner
By: ColonyGP III, Inc.,
a Delaware corporation,
its general partner
By: _____________________
Name:
Title:
<PAGE>
SCHEDULE I
to the Pledge Agreement
Attached to and forming a part of the Pledge Agreement dated as of
July 16, 1998 between Pledgor and Lender.
Pledgor: Kennedy-Wilson Properties, Ltd.
<TABLE>
<CAPTION>
Percent of
Class Stock Number Shares Issued
Stock Issuer of Stock Certificate Nos. of Shares and Outstanding
------------ -------- ---------------- --------- ---------------
<S> <C> <C> <C> <C>
Heitman Properties Ltd. (to be
renamed Kennedy-Wilson Properties, Common 24 39,763 100
Ltd.)
</TABLE>
<PAGE>
SCHEDULE II
to the Pledge Agreement
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated _______ __, ____, is delivered pursuant
to Section 8 of the Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Pledge Agreement dated
as of July 16, 1998, between Kennedy-Wilson Properties, Ltd. and Lender (the
"Pledge Agreement"; capitalized terms defined therein being used herein as
therein defined) and that the Pledged Shares listed on this Pledge Amendment
shall be deemed to be part of the Pledged Shares and shall become part of the
Pledged Collateral and shall secure the Secured Obligations as provided in the
Pledge Agreement.
KENNEDY-WILSON PROPERTIES, LTD.
By:______________________
Name:
Title:
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated July 16, 1998,
is by and between Kennedy-Wilson, Inc., a Delaware corporation (the "Company"),
and Colony Investors III, L.P., a Delaware limited partnership ("Purchaser").
W I T N E S S E T H:
WHEREAS, the Company wishes to issue and sell to Purchaser (i) certain
shares of the Company's common stock, $.01 par value per share (the "Common
Stock"), and (ii) warrants to acquire additional shares of Common Stock for an
aggregate purchase price of $5,232,610 (the "Purchase Price"); and
WHEREAS, Purchaser wishes to purchase the such securities on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
SECTION 2. THE SECURITIES
SECTION 2.2 ISSUANCE, SALE AND PURCHASE OF THE SECURITIES. In reliance
upon the representations and warranties made herein and subject to the
satisfaction or waiver of the conditions set forth herein, the Company agrees to
issue and sell to Purchaser, and Purchaser agrees to purchase from the Company,
for the Purchase Price, (i) 440,085 shares (the "Common Shares") of Common Stock
and (ii) warrants (the "Warrants" and, collectively with the Common Shares, the
"Securities"), exercisable for seven years (as provided in the Warrant Agreement
dated the date hereof between the Company and Purchaser, a form of which is
attached hereto as Exhibit A (the "Warrant Agreement")), to acquire an
additional 132,026 shares (the "Warrant Shares") of Common Stock at an initial
exercise price of $15.00 per share, subject to adjustment as provided in the
Warrant Agreement.
SECTION 2.4 OTHER AGREEMENTS. Concurrently with the Closing referred
to below, the Company will acquire 100% of the outstanding capital stock of
Heitman Properties Ltd. pursuant to that certain Stock Purchase Agreement
between the Company and Heitman Financial Ltd. dated as of the date hereof (the
"Acquisition Agreement"). Concurrently with the execution of this Agreement, the
Company will enter into the Warrant Agreement, an Investor's Agreement with
Purchaser in the form attached as Exhibit B hereto (the "Investor's Agreement"),
a Bridge Loan Agreement (including the pledges and guaranties thereunder and all
exhibits thereto) with Purchaser in the form attached hereto as Exhibit C and a
Registration Rights Agreement with Purchaser in the form attached as Exhibit D
hereto (the "Registration Rights Agreement" and, collectively with the Warrant
Agreement, the Investor's Agreement, a Bridge Loan Agreement (including the
pledges and guaranties thereunder and all exhibits thereto) and the Acquisition
Agreement, the "Other Documents").
SECTION 2.6 CLOSING. The closing (the "Closing") shall take place at
the time of execution and delivery hereof at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los Angeles, California 90071
or at such other location, date and time as may be agreed upon between Purchaser
and the Company. At the Closing, the Company shall issue and deliver to
Purchaser stock and warrant certificates in definitive form, registered in the
name of Purchaser or its designee, representing the Securities. As payment in
full for the Securities, and against delivery of the certificates therefor at
the Closing, Purchaser shall initiate a wire transfer in immediately available
United States funds in accordance with the Company's instructions in the amount
of the Purchase Price. Each certificate representing the Securities shall bear
the following legend in addition to any other legend that may be required from
time to time under applicable law or pursuant to any other contractual
obligation:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
(A "TRANSFER") EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF AN INVESTOR'S
AGREEMENT DATED JULY 16, 1998. SUCH SECURITIES ARE ALSO SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT DATED JULY 16, 1998. ANY TRANSFEREE OF THESE
SECURITIES TAKES SUBJECT TO THE TERMS OF SUCH AGREEMENTS, A COPY OF EACH OF
WHICH IS ON FILE WITH THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
STATE SECURITIES LAWS AND NO SALE OR TRANSFER OF THESE SECURITIES MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, OR (B) PURSUANT TO AN EXEMPTION THEREFROM WITH RESPECT TO WHICH THE
COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF COUNSEL FOR
THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE ACT
AND APPLICABLE STATE SECURITIES LAWS.
SECTION 4. REPRESENTATIONS AND WARRANTIES
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Purchaser as follows:
(b) Each of the Company and its subsidiaries (collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation, trust or partnership, as the case may be, (in the case of corporate
subsidiaries) in good standing under the laws of the jurisdiction in which it is
organized, with full corporate power and authority to own or lease and occupy
its properties and conduct its business, and is duly qualified to do business,
and (in the case of corporate subsidiaries) is in good standing, in each
jurisdiction which requires such qualification, except where the failure to so
qualify would not, individually or in the aggregate, have or be reasonably
likely to result in a material adverse effect on the business, operations,
business prospects, earnings, assets, liabilities or condition (financial or
otherwise) of the Company (a "Material Adverse Effect"). All of the outstanding
shares of capital stock of each of the Subsidiaries have been duly authorized
and validly issued, are fully paid and nonassessable, and, except as disclosed
in the Company's reports, proxy statements, forms, and other documents with the
Securities and Exchange Commission (the "SEC") filed during the 1998 and
publicly available prior to the date hereof (the "1998 SEC Documents"), are
owned by the Company, directly, or indirectly through another Subsidiary, free
and clear of any lien, adverse claim, security interest or other encumbrance.
(d) The Company and each of the Subsidiaries have all requisite
power and authority, and all necessary material authorizations, approvals,
orders, licenses, certificates and permits of and from all regulatory or
governmental officials, bodies and tribunals, to own or lease their respective
properties and to conduct their respective businesses as now being conducted,
except as would not have a Material Adverse Effect on the Company or such
Subsidiary; all such authorizations, approvals, licenses, certificates and
permits are in full force and effect, except where the failure to be in full
force and effect would not have a Material Adverse Effect on the Company or such
Subsidiary; and the Company and each of the Subsidiaries are in compliance with
all applicable laws, the violation of which could have a Material Adverse Effect
on the Company and the Subsidiaries taken as a whole or on the Issuer and the
Guarantors (as such terms are defined under the Bridge Loan Agreement) taken as
a whole, as the case may be (collectively, a "Company Material Adverse Effect").
(f) Except as disclosed in the 1998 SEC Documents, (i) the
Company and each Subsidiary have good and marketable title to their properties
and assets (or a valid first lien as to mortgaged properties) owned (or
mortgaged) by them, free and clear of all material liens, charges and
encumbrances and equities of record; (ii) no person or entity, other than
tenants under the leases or guarantors thereof pursuant to which the Company and
its Subsidiaries lease all or a portion of their properties, has an option or
right of first refusal or any other right to purchase any of such properties;
(iii) each of the properties of the Company and its Subsidiaries, at the time
such property was acquired or at the time the loan by the Company with respect
to such property was made, had access to public rights of way, either directly
or through insured easements, except as would not have a Company Material
Adverse Effect; (iv) each of such properties is served by all public utilities
necessary for the current operations on such property in sufficient quantities
for such operations, except as would not have a Company Material Adverse Effect;
(v) each of such properties complies with all applicable codes and zoning and
subdivision laws and regulations, except for such failures to comply which would
not have a Company Material Adverse Effect; (vi) the real property leases and
equipment leases, if any, relating to each of such properties are in full force
and effect, except where the failure to be in full force and effect would not
have a Company Material Adverse Effect; and (vii) there is no pending or (to the
Company's best knowledge) threatened condemnation, zoning change, or other
proceeding or action that will in any manner affect the size of, use of,
improvements on construction on or access to the properties of the Company and
its Subsidiaries, except such proceedings or actions which would not have a
Company Material Adverse Effect.
(h) The Company and each Subsidiary maintains adequate insurance
for the conduct of their respective business.
(j) The Company, either directly or through the Subsidiaries,
owns or licenses or otherwise has the right to use all patents, trademarks,
trade names and trade secrets material to the Company's business; other than
routine proceedings which if adversely determined would not result in a Company
Material Adverse Effect, no claims have been asserted by any person with respect
to the use of any such patents, trademarks, trade names or trade secrets or
challenging or questioning the validity or effectiveness of any such patents,
trademarks, trade names or trade secrets; to the best knowledge of the Company,
the use, in connection with the business and operations of the Company and the
Subsidiaries of such patents, trademarks and trade names does not infringe on
the rights of any person.
(l) The Company's authorized and outstanding capitalization
(including all securities exercisable for, or convertible or exchangeable into,
Common Stock) is as set forth in Schedule 1(f) hereto. The outstanding shares of
Common Stock have been duly and validly authorized and issued in compliance with
all Federal and state securities laws, and are fully paid and nonassessable; the
Common Shares have been duly and validly authorized and, when issued and
delivered pursuant to this Agreement, will be fully paid and nonassessable; and
the holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights to subscribe for the Common Shares.
(n) There is no pending or, to the best knowledge of the Company,
threatened, action, suit, proceeding or investigation before any court,
governmental agency, authority or body or arbitrator involving the Company or
any of the Subsidiaries or any of their respective officers (in their capacities
as officers) or any of their respective properties, assets or rights which, if
determined adversely, could have a Company Material Adverse Effect.
(p) The Company and each of the Subsidiaries party thereto has
full corporate power and authority to enter into and perform its obligations
under this Agreement and the Other Documents and to issue, sell and deliver the
Securities; all of the representations and warranties of the parties to the
Acquisition Agreement made in the Acquisition Agreement (the "Acquisition
Representations") are true and correct in all material respects as if made on
and as of the date hereof; this Agreement and the Other Documents have been duly
authorized, executed and delivered by the Company and each of the Subsidiaries
party thereto and, when so executed, will each constitute a valid and binding
obligation of the Company and each of the Subsidiaries party thereto,
enforceable against the Company and each of the Subsidiaries party thereto in
accordance with its terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereinafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether a
proceeding is considered at law or in equity).
(r) No consent, approval, authorization or order of any court or
governmental agency, authority or body is required (and has not been received)
for the execution by the Company and each of the Subsidiaries party thereto of
this Agreement and the Other Documents, the performance by the Company and each
of the Subsidiaries party thereto or their respective obligations hereunder and
thereunder or the consummation by the Company and each of the Subsidiaries party
thereto of the transactions contemplated herein and therein.
(t) Neither the Company nor any or the Subsidiaries is in
violation of, in conflict with, in breach of or in default under (and the
Company does not know of an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default under) its
charter or by-laws (and the Company does not know of an event which with the
giving of notice or the lapse of time or both would be reasonably likely to
constitute a violation), and neither the Company nor any Subsidiary is in
default in the performance of any obligation, agreement or condition contained
in any loan, note or other evidence of indebtedness or in any indenture,
mortgage, deed of trust or any other material agreement by which it or its
properties are bound, except for such defaults as would not, individually or in
the aggregate, have a Company Material Adverse Effect.
(v) Neither the Company nor any of the Subsidiaries has violated
any environmental, safety or similar law or regulation applicable to its
business relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants, nor has
the Company nor any of the Subsidiaries violated any Federal, state or local law
relating to discrimination in the hiring, promotion, pay or terms or conditions
of employment of employees nor any applicable wage or hour laws, nor has the
Company nor any of the Subsidiaries engaged in any unfair labor practice, which
in each case could reasonably be expected, individually or in the aggregate, to
have a Company Material Adverse Effect.
(x) Neither the issue and sale of the Securities nor the
consummation by the Company and the Subsidiaries of any of the other
transactions contemplated herein or in the Other Documents nor the fulfillment
of the terms hereof and thereof will conflict with, result in a breach or
violation of; or constitute a default under any law or the charter or bylaws of
the Company or any of the Subsidiaries or the terms of any indenture or other
agreement or instrument to which the Company or any of the Subsidiaries is a
party or is bound or (except as would not have a Company Material Adverse
Effect) any judgment, order or decree applicable to the Company or any of the
Subsidiaries of any court, regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over the Company or any of the
Subsidiaries.
(z) The Company has fulfilled its obligations, if any, under the
minimum funding standards of Section 302 of the Employee Retirement Income
Security Act or 1974, as amended ("ERISA"), and the regulations and published
interpretations thereunder with respect to each "pension plan" (as defined in
ERISA and such regulations and published interpretations) in which employees of
the Company are eligible to participate and each such plan is in compliance in
all material respects with the presently applicable provisions of ERISA and such
regulations and published interpretations (except for such failure to so comply
that would not have, singularly or in the aggregate with all other such failures
to comply, a Company Material Adverse Effect), and has not incurred any unpaid
liability to the Pension Benefit Guaranty Corporation (other than for the
payment of premiums in the ordinary course) or to any such plan under Title IV
of ERISA.
(ab) Except as disclosed in the 1998 SEC Documents, other than
the Warrants and grants of options to purchase an aggregate of 815,000 shares of
Common Stock pursuant to the 1992 Incentive and Nonstatutory Stock Option Plan
of the Company, as amended, and a warrant to acquire 30,000 shares of Common
Stock, there are no outstanding warrants or options to purchase any shares of
capital stock of the Company and there are no restrictions upon the voting or
transfer of, or the declaration or payment of any dividend or distribution on,
any shares of capital stock of the Company pursuant to the certificate or
incorporation or by-laws of the Company, any agreement or other instrument to
which the Company is a party or by which the Company is bound, or any order,
law, rule, regulation or determination of any court, governmental agency or body
(including, without limitation, any banking or insurance regulatory agency or
body), or arbitrator having jurisdiction over the Company.
(ad) There are no registration or other rights entitling any
person to registration by the Company under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the issued capital stock of the
Company (other than pursuant to the Registration Rights Agreement), or to
purchase or subscribe for capital stock of the Company (other than pursuant to
the Investor's Agreement).
(af) The Company files and has filed all required reports, proxy
statements, forms, and other documents with the SEC since January 1, 1995 (the
"SEC Documents"). True and complete copies of all 1998 SEC Documents have been
delivered to Purchaser. As of their respective dates, (i) the SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Securities Exchange Act of 1934, as amended, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and (ii) none of the SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any SEC Document has been revised or superseded by
a later filed SEC Document filed and publicly available prior to the date of
this Agreement, none of the SEC Documents contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as of their respective
dates, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved and fairly
present the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and the absence of
footnotes). Except for liabilities and obligations incurred in the ordinary
course of business, consistent with past practices, since the date of the most
recent consolidated balance sheet included in the 1998 SEC Documents (the "Base
Balance Sheet"), neither the Company nor any of the Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by generally accepted accounting principles to be set
forth on a consolidated balance sheet of the Company and its consolidated
Subsidiaries or in the notes thereto.
(ah) Except as disclosed in 1998 SEC Documents, since the date of
the Base Balance Sheet, the Company and the Subsidiaries have conducted their
respective businesses only in the ordinary course of business in accordance with
past practices, and there has not been (i) any material adverse change in the
Company, (ii) any split, combination or reclassification of any of its capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iii) any damage, destruction or loss, whether or not covered by
insurance, that has or reasonably could be expected to have a Company Material
Adverse Effect or (iv) any change in accounting methods, principles or practices
by the Company materially affecting its assets, liabilities or business.
(aj) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that in all material
respects (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(al) To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any employee or agent of the Company or any Subsidiary has
made any payment of funds of the Company or any Subsidiary or received or
retained any funds in violation of any law, rule or regulation.
(an) The Company and each of the Subsidiaries have filed all tax
returns required to be filed (except to the extent extensions have been timely
filed related thereto), which returns are complete and correct in all material
respects, and neither the Company nor any Subsidiary is in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
(ap) To the best of the Company's knowledge, no labor disturbance
by the employees of the Company or the Subsidiaries exists or is imminent that
would, individually or in the aggregate, have a Company Material Adverse Effect.
No collective bargaining agreement exists with any of the Company's employees
and, to the best of the Company's knowledge, no such agreement is imminent.
(ar) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the 1940 Act and such rules and regulations.
(at) The Company agrees that neither it, nor anyone acting on its
behalf, will offer any of the Securities so as to bring the issuance and sale of
the Securities within the provisions of Section 5 of the Securities Act, or
offer any similar securities for issuance or sale to, or solicit any offer to
acquire any of the same from, or otherwise approach or negotiate with respect
thereto with, anyone if the sale of any of the Securities or any such similar
securities would be integrated as a single offering for the purposes of the
Securities Act, including, without limitation, Regulation D thereunder.
(av) Except as set forth in Section 4(c) hereof, the Company has
not retained, directly or indirectly, any broker or finder or incurred any
liability or obligation for any brokerage fees or finder's fees with respect to
this Agreement or the transactions contemplated hereby.
(ax) All the Company's representations and warranties herein
(other than the Acquisition Representations, unless and to the extent the
Company knows any such representation is untrue or incorrect) shall survive
until ninety (90) days following the delivery to the Company of its signed,
audited financial statements for the year ending December 31, 1998.
SECTION 4.4 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to the Company that:
(b) Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite power and authority under such laws to own or lease and operate
its properties and to carry on its business as now conducted.
(d) Purchaser has the power and authority to execute, deliver and
perform this Agreement and the Other Documents. All action on the part of
Purchaser necessary for the authorization, execution and delivery of this
Agreement and the other Documents and the performance of all obligations of
Purchaser hereunder and thereunder have been taken or will be taken prior to the
Closing. This Agreement and the Other Documents have been duly authorized,
executed and delivered by Purchaser and each constitutes a valid and legally
binding obligation of Purchaser, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
enforcement is sought by proceedings in equity or at law).
(f) The execution and delivery by Purchaser of this Agreement and the
Other Documents and the performance by Purchaser of its obligations hereunder
and thereunder will not violate any provision of law, rule or regulation, the
organizational documents governing Purchaser or any order or decree of any court
or other agency of government, or conflict with, result in a breach of or
constitute (with notice or lapse of time or both) a default under any indenture,
agreement or other instrument by which Purchaser or any of its properties or
assets is bound, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever known to Purchaser
upon any of the properties or assets of Purchaser.
(h) The Securities will be acquired for investment for Purchaser's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the same.
Purchaser further represents that it does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
SECTION 6. CLOSING CONDITIONS
SECTION 6.2 CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of
Purchaser to purchase the Securities shall be subject to satisfaction or waiver
by it of the following conditions at or before the Closing:
(b) The representations and warranties of the Company contained
in Section 2.1 hereof that are qualified as to materiality shall be true and
accurate, and those not so qualified shall be true and accurate in all material
respects.
(d) The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained herein that are
required to be performed or complied with by it at or before the Closing and the
Acquisition Agreement shall have been consummated in accordance with its terms.
(f) The Company shall have entered into the Other Documents,
Purchaser shall have been exempted from Section 203 of the Delaware General
Corporation Law by Company Board of Director action so that Purchaser shall not
be an "interested stockholder" thereunder despite any additional share purchases
not in violation of the Investor's Agreement, and Purchaser's designee shall
have been appointed to the board of director positions pursuant to the
Investor's Agreement.
(h) Purchaser shall have received a certificate, dated the
Closing date and signed by the Chief Executive Officer and the Chief Financial
Officer of the Company, certifying that the conditions in Sections 3.1(a) and
(b) are satisfied on and as of such date.
(j) Purchaser and its counsel shall have received copies of the
following documents:
(ii) the Certificate of Incorporation, certified as of a
recent date by the Secretary of State of the State of Delaware, and a
certificate of such authority dated as of a recent date as to the due
incorporation and good standing of the Company and listing all documents of
the Company on file with said authority;
(iv) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing date certifying: (A) that
attached thereto is a true and complete copy of the Bylaws of the Company
as in effect on the date of such certification; (B) that attached thereto
is a true and complete copy of all resolutions adopted by the Board of
Directors authorizing the execution, delivery and performance of this
Agreement and the Other Documents and the issuance, sale and delivery of
the Securities, and that all such resolutions are in full force and effect
and are all the resolutions adopted in connection with the transactions
contemplated by this Agreement; (C) that the Certificate of Incorporation
of the Company has not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to clause (i) above; (D)
that the Bylaws have not been amended since the date of the last amendment
referred to in such certificate pursuant to subclause (ii)(A) above; and
(E) that each officer of the Company executing this Agreement and the Other
Documents, the certificates representing the Securities and any agreement,
certificate or instrument furnished pursuant hereto, was, at the respective
times of such execution and delivery of such documents, duly elected or
appointed, qualified and acting as such officer, and the signatures of such
persons appearing on such documents are their genuine signatures or true
facsimiles thereof; and
(vi) such additional supporting documents as Purchaser may
reasonably request.
(l) Purchaser shall have received an opinion (satisfactory to
Purchaser and its counsel), dated the Closing date, from Kulik, Gottesman &
Mouton, LLP in substantially the form of Exhibit E hereto.
SECTION 6.4 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
Company's obligation to sell the Securities shall be subject to the satisfaction
or waiver by it of the following conditions at or before the Closing:
(b) The representations and warranties of Purchaser contained in
Section 2.2 of this Agreement that are qualified as to materiality shall be true
and accurate, and those not so qualified shall be true and accurate in all
material respects.
(d) Purchaser shall have performed and complied in all material
respects with all agreements and conditions contained herein that are required
to be performed or complied with by it at or before the Closing, including
without limitation, payment of the Purchase Price.
(c) Purchaser shall have entered into the Other Documents.
SECTION 8. MISCELLANEOUS
(b) The Company agrees to pay all of the expenses in connection
with the transactions contemplated hereby (including without limitation the
reasonable fees and expenses of counsel for Purchaser), whether or not such
transactions shall be consummated.
(d) Except as otherwise provided herein, covenants, agreements,
representations and warranties made in this Agreement, or any certificate or
instrument delivered pursuant to or in connection therewith shall survive the
execution and delivery of this Agreement.
(f) Each party hereto represents and warrants to the other that
it has had no dealing with any broker or finder in connection with this
Agreement or the transactions contemplated hereby other than a fee to Prudential
Securities Incorporated to be paid by the Company. Each party hereto will
indemnify and hold harmless the other against and in respect of any claim for
brokerage or other commissions relative to this Agreement or to the transactions
contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third
party.
(h) All representations, covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not; provided that Purchaser shall not assign its rights
in this Agreement to any unrelated third party without first obtaining the prior
written consent of the Company, and provided further that, notwithstanding the
above provision, Purchaser may assign its rights in this Agreement to any party
under its control.
(j) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person or mailed by
certified or registered mail; return receipt requested, addressed as follows:
If to Purchaser, to: Colony Investors III, L.P.
c/o Colony Capital, Inc.
201 Main Street, Suite 2400
Fort Worth, Texas 76102
Attention: Richard Ekleberry, Esq.
Fax No.: (817) 871-4088
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90067
Telecopier No.: (213) 687-5600
Attention: Jonathan H. Grunzweig, Esq.
If to the Company, to: Kennedy-Wilson, Inc.]
530 Wilshire Blvd., #101
Santa Monica, California 90401
Telecopier No.: (310) 314-8510
Attention: William J. McMorrow
with copies to: Kulik, Gottesman & Mouton, LLP
1880 Century Park East, Suite 1150
Los Angeles, California 90067
Attention: Kent Mouton, Esq.
Fax No.: (310) 557-0224
and
White & Case LLP
633 West Fifth Street
Los Angeles, California 90071-2007
Attention: Richard K. Smith, Jr., Esq.
Fax No.: (213) 687-0758
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others. All notices, requests,
consents and other communications hereunder shall be deemed to have been duly
given or served on the date on which personally delivered or on the date
actually received, with receipt acknowledged.
(l) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of laws provisions thereof.
(n) This Agreement and the Other Documents constitute the sole
and entire agreement of the parties with respect to the subject matter hereof
and supersedes any and all prior or contemporaneous agreements, discussions,
representations, warranties or other communications. All Schedules and Exhibits
hereto are hereby incorporated herein by reference.
(p) This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(r) As used in this Agreement, knowledge shall mean, with respect
to any person, actual, conscious knowledge of such person (without imputing any
knowledge to such person), if an individual, or of any executive officer of such
person, if not an individual.
(t) This Agreement may not be amended or modified without the
written consent of the Company and Purchaser, nor shall any waiver be effective
against any party unless in a writing executed on behalf of such party.
(v) If any provision of this Agreement shall be declared void or
unenforceable by any judicial or administrative authority, the validity of any
other provision and of the entire Agreement shall not be affected thereby.
(x) The titles and subtitles used in this Agreement are for
convenience only and are not to be considered in construing or interpreting any
term or provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company and Purchaser have caused this
Agreement to be executed and delivered by the undersigned duly authorized
officers as of the day and year first above written.
KENNEDY-WILSON, INC.
By:_________________________________
Name:
Title:
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By:_________________________________
Name:
Title:
EXHIBIT 10.4
WARRANT AGREEMENT
This Warrant Agreement (the "Agreement"), dated as of July 16, 1998, is by
and between Kennedy-Wilson, Inc., a corporation duly organized and validly
existing under the laws of Delaware (the "Company"), and Colony Investors III,
L.P. (the "Holder").
WITNESSETH:
WHEREAS, the Company wishes to issue and sell to the Holder (i) certain
shares of the Company's common stock, $.01 par value per share (the "Stock"),
pursuant to the Stock Purchase Agreement dated as of the date hereof, between
the Company and the Holder, and (ii) warrants to acquire additional shares of
Stock for an aggregate purchase price of $5,232,610, and may issue certain
additional warrants in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS, ACCOUNTING TERMS AND DETERMINATIONS
As used herein:
"Additional Warrants" has the meaning set forth in Section 3.3 of the
Investor's Agreement.
"Board" means the Board of Directors of the Company.
"Bylaws" means the Amended and Restated Bylaws of the Company as adopted on
April 2, 1992.
"Certificate of Incorporation" means the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of Delaware on
March 27, 1992, as amended through and including April 30, 1998.
"Commission" means the Securities and Exchange Commission or any other
similar or successor agency of the Federal government administering the
Securities Act and/or the Securities Exchange Act of 1934, as amended from time
to time (the "Exchange Act").
"Date of Issuance" shall mean July 16, 1998.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled (whether through
ownership of securities or other ownership interests, by contract or otherwise)
by any of the foregoing.
"Holder" shall have the meaning set forth at the head of this Agreement and
each other Person who acquires the original Warrant Certificate or any Warrant
Certificate issued upon transfer, division, combination, partial exercise of
Warrants or in replacement or substitution therefor or who acquires Warrant
Shares pursuant to the provisions of this Agreement.
"Include" and "Including" shall be construed as if followed by the phrase
"without being limited to."
"Investor's Agreement" means that certain Investor's Agreement between the
Company and the initial Holder dated of even date herewith.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or a Governmental Authority.
"Registration Rights Agreement" means the Registration Rights Agreement of
even date herewith between the Company and the Holder relating to the
registration of the Registrable Securities (as defined therein) under and
pursuant to the Securities Act, as said Registration Rights Agreement shall be
modified and supplemented in accordance with its terms and in effect from time
to time.
"Restricted Securities" means the Warrants, any Additional Warrants and any
Warrant Shares or other securities which have been issued or are issuable upon
the exercise of such Warrants until such time as any such Restricted Securities
(a) have been sold pursuant to an effective registration statement under the
Securities Act or (b) are distributed pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act and, if it has so requested,
the Company has received an opinion of counsel (either its own counsel or, if
the Company so requests, counsel to the holders of such Restricted Securities)
reasonably acceptable to the Company that such Restricted Securities may be so
transferred without registration or pursuant to an exemption under the
Securities Act, and in each such instance the Company has delivered new Warrant
Certificates not bearing the legend prescribed by Section 2.03 hereof.
"Rule 144" means Rule 144 promulgated by the Commission under the
Securities Act (as such rule may be amended from time to time or any successor
or similar rule then in force).
"Securities Act" means at any time the Securities Act of 1933, as amended,
or any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Stockholder" means any Person (excluding any Holder) who owns any shares
of common or preferred stock of the Company (or any successor thereto).
"Transfer" means, unless the context otherwise requires, any disposition of
any Restricted Securities, or of any interest in any thereof, which would
constitute an offer or sale thereof within the meaning of the Securities Act.
"Warrants" shall have the meaning assigned to such term in Section 2.01.
"Warrant Certificate" shall have the meaning assigned to such term in
Section 2.01.
"Warrant Shares" means (a) the shares of Stock purchased or purchasable by
the Holder upon the exercise of the originally issued Warrant or any Additional
Warrants, including any Stock into which such Stock may thereafter be changed or
converted, and (b) if required hereunder, any additional shares of Stock issued
or distributed by way of a dividend, stock split or other distribution in
respect of the Stock referred to in clause (a) above, or acquired by way of any
rights offering or similar offering made in respect of the Stock referred to in
clause (a) above.
Except as otherwise may be expressly provided herein, all accounting terms
used herein shall be interpreted in accordance with generally accepted
accounting principles consistently applied. All calculations made for the
purposes of determining compliance with the terms of this Agreement and the
Warrants shall be made by application of United States generally accepted
accounting principles consistently applied (except as otherwise may be expressly
provided herein).
ARTICLE II
ISSUANCE AND EXECUTION OF WARRANTS
Section 2.01. AUTHORIZATION AND ISSUANCE OF SHARES AND WARRANTS. The
Company has authorized: (a) the issuance of warrant certificates substantially
in the form of Annex 1 to this Agreement (each, a "Warrant Certificate"), each
evidencing warrants to purchase shares of Stock (such Warrant Certificate issued
on the Date of Issuance, other Warrant Certificates issued in connection with
Additional Warrants or upon transfer, partial exercise, division or combination
of, or in substitution or replacement for any Warrant Certificate or the rights
to purchase Stock evidenced by each of the foregoing, is, as the context
requires, sometimes referred to herein as a "Warrant" or "Warrants"); and (b)
the issuance of such number of shares of Stock as shall permit the compliance by
the Company with its obligations to issue Stock pursuant to the Warrants. In
addition, each Warrant Certificate may have such letters, numbers or other marks
of identification or designation and such legends, summaries, or endorsements
stamped, printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as, in any particular case, may be required to comply with any law or with
any rule or regulation of any regulatory authority or agency, or to conform to
customary usage; provided, however, that no such change shall be made which
affects the duties or obligations of the Company without the consent of the
Company.
Section 2.02. EXECUTION AND DELIVERY OF WARRANT CERTIFICATE. Each Warrant
Certificate shall be executed on behalf of the Company by the Chairman of the
Board or the Company's President or any Vice President and attested to by its
Secretary or Assistant Secretary, either manually or by facsimile signature
printed thereon. In case any authorized officer of the Company who shall have
signed any Warrant Certificate shall cease to be such officer of the Company
either before or after delivery thereof by the Company to the Holder, the
signature of such person on such Warrant Certificate shall be valid nevertheless
and such Warrant Certificate may be issued and delivered to the person entitled
to receive the Warrants represented thereby with the same force and effect as
though the person who signed such Warrant Certificate had not ceased to be such
officer of the Company. The Warrant Certificate originally issued to the Holder
shall be delivered on the Date of Issuance. The Company shall maintain books
(the "Warrant Register") for the registration of Warrants and the registration
of transfers and exchanges of Warrants.
Section 2.03. TRANSFER AND EXCHANGE OF WARRANTS.
(a) Warrant Certificates evidencing Restricted Securities (and only
such Warrant Certificates) will bear a legend in substantially the
following form:
NEITHER THE EXERCISE OF THE WARRANTS EVIDENCED BY THIS CERTIFICATE NOR THE
ISSUANCE OF SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
PURSUANT TO THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH TRANSFER IS PURSUANT TO (i) A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE
SECURITIES ACT AND THE RULES AND REGULATIONS THEREUNDER OR (ii) AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND, IF IT HAS SO REQUESTED, THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL (EITHER ITS OWN COUNSEL OR, IF THE
COMPANY SO REQUESTS, COUNSEL TO THE HOLDERS OF SUCH SECURITIES) REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH SECURITIES MAY BE SO TRANSFERRED.
FURTHERMORE, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN THE COMPANY'S
CERTIFICATE OF INCORPORATION AND IN A REGISTRATION RIGHTS AGREEMENT AND AN
INVESTOR'S AGREEMENT, BOTH DATED JULY 16, 1998.
(b) In connection with the transfer or exchange of a Restricted
Security or Securities (other than pursuant to an effective registration
statement under the Securities Act) the transferor of such Restricted
Security or Securities, upon request of the Company, shall deliver to the
Company an opinion of counsel, in substance reasonably satisfactory to the
Company, to the effect that such Restricted Security to be issued upon such
transfer or exchange may be so issued without the foregoing legend;
provided that such Restricted Security nonetheless shall contain a legend
referencing the restrictions contained in the Investor's Agreement of even
date herewith.
(c) Subject to paragraphs (a) and (b) above, the Company shall
register the transfer of all or any whole number of Warrants covered by any
outstanding Warrant Certificate in the Warrant Register upon surrender to
the Company of Warrant Certificates accompanied by a written instrument or
instruments of transfer, in form reasonably satisfactory to the Company,
duly executed by the registered Holder or his attorney duly authorized in
writing. Upon any such registration of transfer a new Warrant Certificate
shall be issued to the transferee and the surrendered Warrant Certificate
promptly shall be canceled by the Company. Warrant Certificates may be
exchanged at the option of the Holder thereof, upon surrender, properly
endorsed by the registered Holders, at the Company, with written
instructions, for other Warrant Certificates evidencing in the aggregate a
like number of Warrants. The Company may require the payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any such exchange or transfer.
Section 2.04. TRANSFER AND EXCHANGE OF WARRANTS. All the restrictions
imposed by this Article II upon the transferability of the Restricted Securities
shall cease and terminate as to any particular Restricted Security when such
Restricted Security shall have been effectively registered under the Securities
Act and applicable state securities laws and sold by the Holder thereof in
accordance with such registration or sold under and pursuant to Rule 144.
Whenever the restrictions imposed by this Article II shall terminate as to any
Restricted Security as herein above provided, the Holder thereof shall be
entitled to receive from the Company, without expense (other than payment by the
Holder of any tax or governmental charge that may be imposed), a new certificate
evidencing such Restricted Security not bearing the restrictive legend otherwise
required to be borne by a certificate evidencing such Restricted Security.
ARTICLE III
COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Holder as follows:
Section 3.01. EXISTENCE; QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
Section 3.02. CORPORATE ACTION. The Company has all necessary corporate
power and authority to execute, deliver and perform its obligations under this
Agreement, the Warrants and the Registration Rights Agreement; the execution,
delivery and performance by the Company of this Agreement, the Warrants and the
Registration Rights Agreement have been duly authorized by all necessary
corporate action on the part of the Company; this Agreement has been duly
executed and delivered by the Company and constitutes, and the Registration
Rights Agreement when executed and delivered by the Company will constitute, the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, or (b) general principles
of equity (regardless of whether such enforcement is considered in a proceeding
in equity or at law); the Warrants and any Additional Warrants, when executed,
issued and delivered pursuant to this Agreement, will constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except to the extent that enforcement thereof may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally, or (ii) general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law); the Warrant
Shares initially covered by the Warrants and any Additional Warrants will be
duly and validly authorized and reserved for issuance and when paid for, issued
and delivered in accordance with the Warrants, shall be duly and validly issued,
fully paid and nonassessable and free and clear of any Liens; and none of the
Warrant Shares issued pursuant to the terms hereof or the Warrants or Additional
Warrants shall be in violation of any preemptive rights of any Stockholder.
Section 3.03. APPROVALS. Except as contemplated by the Registration Rights
Agreement, no authorizations, approvals or consents of, and no filings or
registrations with, any Governmental Authority or any other Person which shall
not have been obtained on or prior to the Date of Issuance are necessary for the
execution, delivery or performance by the Company of this Agreement, the
Warrants or the Registration Rights Agreement or for the validity or
enforceability thereof.
Section 3.04. CAPITALIZATION. As of the Date of Issuance of the original
Warrant to Holder, the capitalization of the Company consists solely of Stock
and options and warrants to acquire Stock.
ARTICLE IV
HOLDER'S REPRESENTATIONS AND WARRANTIES
The Holder represents and warrants to the Company as follows:
Section 4.01. PURCHASE ENTIRELY FOR OWN ACCOUNT. The Warrant is being
acquired and, if such Warrant is exercised, the Stock issuable upon such
exercise will be acquired, for investment for the Holder's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof in violation of the federal or state securities laws.
Section 4.02. INVESTMENT EXPERIENCE. The Holder represents that it can bear
the economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Warrant and the Stock issuable upon exercise
thereof. The Holder also represents it has not been organized solely for the
purpose of acquiring the Warrant or the Stock issuable upon exercise thereof.
Section 4.03. RESTRICTED SECURITIES. The Holder understands that the
Warrant and the Stock issuable upon exercise of such Warrant are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public
offering and have not been registered under the Securities Act nor qualified
under applicable state securities laws and that under such laws and applicable
regulations such securities may not be resold without registration under the
Securities Act, except in certain limited circumstances. In this connection, the
Holder represents that it is familiar with Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
Section 4.04. ACCREDITED INVESTOR. The Holder is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
ARTICLE V
HOLDERS; RIGHTS
Section 5.01. DELIVERY EXPENSES. If any Holder surrenders any Warrant
Certificate or Warrant Shares to the Company or a transfer agent of the Company
for exchange for instruments of other denominations or registered in another
name or names, the Company shall cause such new instruments to be issued and
shall deliver, in each case at the cost of the Holder, from the office of such
Holder or from or to the Company or its transfer agent, the surrendered
instrument and any new instruments issued in substitution or replacement for the
surrendered instrument.
Section 5.02. TAXES. The Company shall pay all transfer taxes which may be
payable in connection with the execution and delivery of this Agreement or the
Registration Rights Agreement or the issuance of the Warrants and Warrant Shares
hereunder or in connection with any modification of this Agreement, the
Registration Rights Agreement or the Warrants and shall hold each Holder
harmless without limitation as to time against any and all liabilities with
respect to all such taxes. The Company shall not, however, be required to pay:
(i) federal, state or local income tax; (ii) any intangible personal property,
franchise or similar tax; or (iii) any transfer tax which may be payable in
respect of any transfer of a Warrant or any transfer involved in the issue and
delivery of shares of Stock in a name other than that in which a Warrant is
registered, and no such issue or delivery shall be made unless and until the
Person requesting such issue has established, to the satisfaction of the
Company, that such tax has been paid. The obligations of the Company under this
Section 5.02 shall survive any termination of this Agreement or the Registration
Rights Agreement, and any cancellation or termination of the Warrants.
Section 5.03. REPLACEMENT OF INSTRUMENTS. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any certificate or instrument evidencing any
Warrants or Warrant Shares, and (a) in the case of loss, theft or destruction,
of indemnity reasonably satisfactory to it, or (b) in the case of mutilation,
upon surrender or cancellation, thereof, the Company, at the Holder's expense,
shall execute, register and deliver, in lieu thereof, a new certificate or
instrument for (or evidencing the right to purchase) an equal number of Warrants
or Warrant Shares.
Section 5.04. CERTAIN RESTRICTIONS. The Company shall not at any time enter
into an agreement or other instrument, and has not entered into an agreement
currently in effect, making performance hereunder or the issuance of shares of
Stock upon the exercise of any Warrant a default under any such agreement or
instrument.
Section 5.05. INDEMNIFICATION. Each party hereto hereby irrevocably
indemnifies the other and saves it harmless against any and all reasonable out
of pocket losses, expenses or liabilities, including judgments, costs and
reasonable counsel fees and expenses arising out of or in connection with a
breach of this Agreement, except as a direct result of the gross negligence, bad
faith or willful misconduct of such other party.
ARTICLE VI
MISCELLANEOUS
Section 6.01. WAIVER. No failure on the part of any Holder to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement, the Warrants or the Registration Rights
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement, the Warrants or
the Registration Rights Agreement preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
Section 6.02. NOTICES.
(a) All notices, requests and other communications provided for herein
and in the Warrants (including any waivers or consents under, this
Agreement and the Warrants) shall be given or made in writing:
if to the Company: Kennedy-Wilson, Inc.
503 Wilshire Blvd, #101
Santa Monica, California 90401
Attention: William J. McMorrow
Fax No.: (310) 314-8510
with copies to: Kulik, Gottesman & Mouton, LLP
1880 Century Park East, Suite 1150
Los Angeles, California 90067
Attention: Kent Mouton, Esq.
Fax No.: (310) 557-0224
and
White & Case LLP
633 West Fifth Street
Los Angeles, California 90071-2007
Attention: Richard K. Smith, Jr., Esq.
Fax No.: (213) 687-0758
if to the initial Holder: Colony Investors III, L.P.
c/o Colony Capital, Inc.
201 Main Street, Suite 2400
Fort Worth, Texas 76102
Attention: Richard Ekleberry, Esq.
Fax No.: (817) 871-4088
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Attention: Jonathan H. Grunzweig, Esq.
Fax No.: (213) 687-5600
if to any other person who is the registered Holder of any Warrants or
Warrant Shares, to the address for such Holder as it appears in the stock
or warrant ledger of the Company; or, in the case of any Holder, at such
other address as shall be designated by such party in a notice to the
Company; or, in the case of the Company, at such other address as the
Company may designate in a notice to the Holders.
(b) All such notices, requests and other communications shall be: (i)
personally delivered, sent by courier guaranteeing overnight delivery or
sent by registered or certified mail, return receipt requested, postage
prepaid, in each case given or addressed as aforesaid; and (ii) effective
upon receipt.
Section 6.03. AMENDMENTS, ETC. Any provision of this Agreement may be
amended or modified only by an instrument in writing signed by (a) the Company
and (b) the Holders of at least a majority of the Warrant Shares issued or
issuable upon exercise of the Warrants; provided, however, that no such
amendment or waiver, without the written consent of all Holders of such shares
and Warrants at the time outstanding, shall amend this Section 6.03.
Section 6.04. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
Section 6.05. SURVIVAL.
(a) All representations and warranties made by the Company herein or
in any certificate or other instrument delivered by it or on its behalf
under this Agreement or the Registration Rights Agreement shall be
considered to have been relied upon by each Holder and shall survive the
issuance of the Warrants or the Warrant Shares regardless of any
investigation made by or on behalf of any Holder. All statements in any
such certificate or other instrument so delivered shall constitute
representations and warranties by the Company hereunder.
(b) All representations and warranties made by the Holders herein
shall be considered to have been relied upon by the Company and shall
survive the issuance to the Holders of the Warrants or the Warrant Shares
regardless of any investigation made by the Company or on its behalf.
Section 6.06. CAPTIONS. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 6.07. COUNTERPARTS. This Agreement may be executed on counterpart
signature pages or in any number of counterparts, all of which taken together
shall constitute one and the same instrument and any of the parties hereto may
execute this Agreement by signing any such counterpart signature page or
counterpart.
Section 6.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be fully performed in such State.
Section 6.9. SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
Section 6.10. DEFECTS IN NOTICE. Failure to file any certificate or notice
or to mail any notice, or any defect in any certificate or notice pursuant to
this Agreement shall not affect in any way the rights of any registered Holder
of a Warrant Certificate or the legality or validity of any adjustment made
pursuant to the provisions of the Warrant, or any transaction giving rise to any
such adjustment, or the legality or validity of any action taken or to be taken
by the Company.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
KENNEDY-WILSON, INC.
By: ____________________________
Name:
Title:
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By: ____________________________
Name:
Title:
EXHIBIT 10.5
INVESTOR'S AGREEMENT
This Investor's Agreement (the "Agreement") is made and entered into
on July 16, 1998, by and between Kennedy-Wilson, Inc., a Delaware corporation
(the "Company"), and Colony Investors III, L.P., a Delaware limited partnership
(the "Purchaser").
RECITALS
The Purchaser has, upon the terms and subject to the conditions of a
Stock Purchase Agreement, dated the date hereof (the "Stock Purchase
Agreement"), by and between the Company and the Purchaser, agreed to acquire
440,085shares of Common Stock, $0.01 par value per share, of the Company
("Common Stock"), and warrants (the "Warrants") to purchase an additional
132,026 shares of Common Stock.
The Purchaser and the Company each desire to enter into this Agreement
for the purpose of regulating certain aspects of their relationship with regard
to the Company.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the Purchaser and the
Company agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the terms below shall have the following meanings. Any
such term, unless the context otherwise requires, may be used in the singular or
plural, depending upon reference.
"Affiliate" shall mean, with respect to any Person, (i) any Person or
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person, (ii) any spouse or non-adult child
(including by adoption) of any natural person described in clause (i) above,
(iii) any relative other than a spouse or non-adult child (including by
adoption) who has the same principal residence of any natural person described
in clause (i) above, (iv) any trust in which any such Persons described in
clause (i), (ii) or (iii) above has a beneficial interest and (v) any
corporation, partnership, limited liability company or other organization of
which any such Persons described in clause (i), (ii) or (iii) above collectively
own more than fifty percent (50%) of the equity of such entity. For purposes of
this definition, beneficial ownership of more than ten percent (10%) of the
voting common equity of a Person shall be deemed to be control of such Person.
"Fully Diluted Common Stock" shall mean all of the Common Stock of the
Company, assuming conversion, exercise or exchange of all outstanding
convertible or exchangeable securities, options, rights, warrants and similar
instruments into or for Common Stock (regardless of whether such convertible
securities, options, warrants or similar securities are then convertible or
exercisable), except for compensatory stock options which shall not be deemed
outstanding unless they have vested. As provided in Section 4.4, all such
calculations shall be appropriately adjusted for stock splits, stock dividends
and other similar events as described therein.
"Person" shall mean an individual, partnership, limited liability company,
joint venture, corporation, trust or unincorporated organization or any other
similar entity.
"Restricted Securities" shall mean any securities of the Company issued and
sold to the Purchaser pursuant to the Stock Purchase Agreement.
ARTICLE II
CORPORATE GOVERNANCE
2.1 Board of Directors. Upon the execution of this Agreement, and
until such time as the Purchaser and its Affiliates no longer collectively
beneficially own at least 50% of the Restricted Securities, the Company hereby
agrees (a) to take all action necessary such that from and after the date hereof
until the regularly scheduled 2001 annual meeting of the Company's stockholders,
the Board of Directors of the Company (the "Board") shall include one Class III
director designated by the Purchaser, and (b) thereafter to use its best efforts
to cause a person designated by the Purchaser to be included in each slate of
proposed Class III directors put forth by the Company to its stockholders and
recommended for election in any proxy solicitation materials disseminated by the
Company; provided, however, that the identity of any nominee so designated by
the Purchaser other than Thomas J. Barrack, Jr. and Kelvin L. Davis shall be
reasonably acceptable to the Company; and provided, further, that if at any time
the nominee so designated by the Purchaser shall not be serving on the Board,
(i) the Purchaser shall have the continuing right to receive copies of all
materials distributed to members of the Board, (ii) the nominee designated by
the Purchaser shall have the right to participate substantially in all meetings
of the Board on a non-voting basis, and (iii) the Company shall grant the
Purchaser such other rights as may be necessary for the Purchaser's investment
in the Restricted Securities to continue to qualify as a "venture capital
investment" within the meaning of 29 C.F.R. ' 2510.3-101(d). The Company further
agrees to cause the nominee designated by the Purchaser in accordance with the
foregoing to serve on the Board of Directors of each subsidiary of the Company
as the Purchaser may from time to time request. Upon the death, resignation or
removal of a nominee designated by the Purchaser, the Company will use its best
efforts to have the vacancy filled by a person designated by the Purchaser.
Board members designated by the Purchaser shall be fully covered by any
directors' and officers' liability insurance maintained from time to time on the
same terms as the other members, shall be entitled to the benefit of any
indemnification arrangements applicable to the other members and shall have the
right to receive all fees paid and options and other awards granted and expenses
reimbursed to non-employee directors generally.
ARTICLE III
CERTAIN PURCHASE RIGHTS AND RESTRICTIONS
3.1. General. If, at any time when the Purchaser and its Affiliates
collectively own in excess of 5% of the Fully Diluted Common Stock, the Company
proposes to issue for cash any of its Common Stock or other securities
exercisable for, or convertible or exchangeable into, Common Stock
(collectively, the "Securities"), other than as provided in Section 3.2, then
the Company shall, no later than 30 days prior to the consummation of such
issuance, give written notice to the Purchaser of such proposed issuance. Such
notice shall describe the proposed issuance, and contain an offer to sell to the
Purchaser, at the same price and for the same consideration to be paid by the
proposed purchasers (but net of any underwriting or similar fees, discounts or
commissions), up to the Purchaser's pro rata portion (which shall be a
percentage equal to the percentage of the Fully Diluted Common Stock held by the
Purchaser and its Affiliates) of the Securities to be sold. Subject to the
foregoing, if Common Stock is being issued with other Securities as a unit and
such Common Stock may only be purchased in connection therewith as a part of
such unit, the Purchaser must purchase such unit in order for such acceptance to
be valid. If the Purchaser fails to accept such offer by written notice within
20 days after its receipt of the Company's notice, the Company may proceed with
such proposed issuance, free of any right on the part of the Purchaser under
this Section 3.1 in respect thereof.
3.2. Exceptions. The purchase right granted by Section 3.1 shall not
apply to: (i) compensatory issuances to employees, directors or consultants or
pursuant to related employee benefit or stock option plans approved by the Board
of Directors; (ii) Securities distributed or set aside to all holders of Common
Stock on a per share equivalent basis; (iii) derivative securities (e.g.,
warrants) issued as customary "yield enhancement" in connection with (a) the
arrangement of bank credit or (b) the issuance of debt securities or redeemable,
non-convertible preferred stock; (iv) any issuance of Securities upon the
conversion, exercise or exchange of derivative equity securities contemplated by
or issued in accordance with this Agreement; and (v) any issuance of Common
Stock to the Purchaser on the date hereof and any subsequent issuance of
Additional Warrants (as hereinafter defined).
3.3 Warrant Adjustment. In the event that, prior to January 16, 1999,
(a) the Company completes an offering of its Common Stock or (b) announces (by
the filing of any registration statement with the Securities and Exchange
Commission, by press release or otherwise) an offering of its Common Stock and
completes such an offering prior to July 16, 1999 (any such offering a
"Subsequent Equity Offering"), the Company shall, upon each Subsequent Equity
Offering, issue warrants to the Purchaser (the "Additional Warrants") initially
exercisable for the number of shares necessary to maintain the aggregate amount
of Common Stock issuable pursuant to the Warrants and the Additional Warrants at
3.0% of the Fully Diluted Common Stock. The Additional Warrants shall have terms
substantially identical to the Warrants and shall have the same registration
rights.
3.4. Standstill Agreement. After acquiring the Restricted Securities
and except as further permitted under Section 3.1 or 3.3, the Purchaser agrees
not to acquire beneficial ownership of any other Securities prior to July 15,
2001, without the prior written consent of the Company, unless (after giving
effect to such additional beneficial ownership) Purchaser and its Affiliates do
not collectively own in excess of 20% of the Fully Diluted Common Stock.
ARTICLE IV
MISCELLANEOUS
4.1. Transfer Restrictions. The Purchaser agrees that it will not
transfer, sell or assign (other than transfers, sales or assignments to an
Affiliate of the Purchaser) any of the Restricted Securities prior to July 15,
1999 without the express written consent of the Company. Restricted Securities
sold to the public pursuant to an effective registration statement or pursuant
to Rule 144 promulgated under the Securities Act of 1933 shall no longer be
subject to any of the provisions of this Agreement.
4.2. Successors, Assigns and Transferees. This Agreement shall be
binding upon and all rights hereto shall inure to the benefit of the parties
hereto and their respective legal representatives, heirs, legatees, successors
and permitted assigns subject to the terms of this Agreement.
4.3. Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to another party hereto shall be in writing,
shall be deemed to have been duly given or delivered when delivered personally
or telecopied (receipt confirmed, with a copy sent by reputable overnight
courier), or one business day after delivery to a reputable overnight courier,
postage prepaid, to the address of the party set forth below such person's
signature on this Agreement or to such address as the party to whom notice is to
be given may provide in a written notice to each of the other parties to this
Agreement, a copy of which written notice shall be on file with the Secretary of
the Company.
4.4. Recapitalizations, etc. The provisions of this Agreement
(including any calculation of share ownership) shall apply, except to the extent
specifically set forth herein with respect to the Restricted Securities, to any
and all shares of capital stock of the Company or any capital stock, partnership
units or any other security evidencing ownership interests in any successor or
assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) that may be issued in respect of, in exchange for, or in substitution
of the Common Stock by reason of any stock dividend, split, reverse split,
combination, recapitalization, liquidation, reclassification, merger,
consolidation or otherwise.
4.5. Inspection and Compliance with Law. Copies of this Agreement will
be available for inspection or copying by any holder of Restricted Securities at
the offices of the Company through the Secretary of the Company. The Company
shall take all reasonable action to insure that the provisions of Delaware law
relating to agreements similar to this Agreement are promptly complied with.
4.6. Choice of Law. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND
THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF).
4.7. Entire Agreement; Amendments and Waivers. This Agreement and the
Other Documents (as defined in the Stock Purchase Agreement) embody the entire
agreement and understanding of the parties hereto pertaining to the subject
matter hereof. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
4.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.9. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the fullest extent permitted by law.
4.10. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.11. Cumulative Remedies. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
4.12. Term. Unless earlier terminated by an instrument in writing
amending this Agreement pursuant to Section 4.7, this Agreement shall terminate
upon the tenth anniversary of the effective date of this Agreement.
Notwithstanding the foregoing, this Agreement shall in any event terminate with
respect to the Purchaser when the Purchaser and its Affiliates no longer own any
shares of Restricted Securities.
IN WITNESS WHEREOF, the parties hereto have caused this Investor's
Agreement to be duly executed as of the date first above written.
KENNEDY-WILSON, INC.
By: __________________________
Name:
Title:
Address: 530 Wilshire Blvd., #101
Santa Monica, California 90401
Telecopy: (310) 315-8510
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By: __________________________
Name:
Title:
Address: c/o Colony Capital, Inc.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Telecopy: (817) 871-4088
