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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
MARCH 23, 1998
FAC REALTY TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
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MARYLAND 001-11998 56-1819372
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(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification
Incorporation) No.)
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11000 REGENCY PARKWAY, SUITE 300
CARY, NORTH CAROLINA 27511
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (919) 462-8787
FAC REALTY, INC.
(Former Name or Former Address if Changed Since Last Report)
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ITEM 1(B): CHANGES IN CONTROL OF REGISTRANT.
THE INITIAL PURCHASE
On March 23, 1998, FAC Realty Trust, Inc. (the "Company") sold
2,350,000 shares of Common Stock to Prometheus Southeast Retail, LLC, (the
"Investor"), an affiliate of Lazard Freres Real Estate Investors, LLC, at $9.50
per share, for an aggregate purchase price of $22,325,000 (the "Initial
Purchase"). The Initial Purchase was the Investor's first investment in the
Company and currently represents approximately 16.5% of the Company's
outstanding Common Stock.
THE STOCK PURCHASE AGREEMENT
The Initial Purchase was made pursuant to an Amended and Restated Stock
Purchase Agreement between the Company and the Investor dated as of March 23,
1998 (the "Stock Purchase Agreement") and the following additional agreements,
which are exhibits to the Stock Purchase Agreement: the Stockholders Agreement,
the Contingent Value Right Agreement and the Registration Rights Agreement. Each
of these agreements is included as an exhibit hereto and is incorporated herein
by reference. The summary contained herein of the material terms of these
agreements is qualified in its entirety by reference to the agreements.
Assuming shareholder approval of the transactions (collectively, the
"Transaction") contemplated by the Stock Purchase Agreement and the related
agreements, the Initial Purchase would be the first part of a $200 million
investment by the Investor for an aggregate of 21,052,632 shares (the "Shares")
of Common Stock of the Company at a purchase price of $9.50 per share. Proceeds
from the sale of the Shares are expected to be used to repay certain
indebtedness and to fund the acquisition and development of additional community
shopping center properties primarily in the southeastern United States. There
can be no assurance, however, that the Company will be able to use the funds for
such purposes.
Assuming approval of the Transaction by the shareholders of the
Company at its 1998 annual meeting, the Stock Purchase Agreement
provides that the Company sell 18,702,632 additional shares of Common
Stock from time to time to the Investor at a price of $9.50 per share,
in exchange for $177,675,000 (the "Remaining Equity Commitment"). Of the
Remaining Equity Commitment, the Company would sell 8,176,316 shares by
September 30, 1998 (the "Second Closing"), with the remaining 10,526,316
shares to be sold in subsequent closings (the "Subsequent Closings") by
March 30, 2000. If the Investor acquired all of the shares represented
by the Remaining Equity Commitment (and assuming no other change in the
number of outstanding shares), the Investor would own approximately 63%
of the outstanding Common Stock.
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THE STOCKHOLDERS AGREEMENT
The Investor and the Company have entered into the Stockholders
Agreement, which grants certain rights to and imposes certain restrictions on
the Investor with respect to the shares purchased by it pursuant to the Stock
Purchase Agreement. Many of these rights terminate when the value of the Common
Stock held by the Investor plus the dollar amount yet to be purchased under the
Stock Purchase Agreement is less than $10 million. These rights and restrictions
include the following:
MANAGEMENT OF THE COMPANY; REPRESENTATION ON THE BOARD. Under the
Stockholders Agreement, three Investor nominees would be elected to a
nine-member Board of Directors of the Company (the "Board") as soon as
practicable following stockholder approval of the Transaction. Two of the
Investor nominees would be chosen at the sole discretion of Investor; the third
would be subject to the reasonable approval of the Company.
At each annual or special meeting of stockholders of the Company with
respect to which any class of directors is to be elected, the Investor would
have the right (but not the obligation) to nominate directors, such that the
Investor would have on the Board:
(i) three representatives, two of which would be chosen at the
sole discretion of the Investor and one of which would be subject to
the reasonable approval of the Company, until the date (the
"Preliminary Threshold Date") that the fair market value of the number
of shares of Common Stock purchased (the "Purchased Shares") and the
shares of Common Stock still to be acquired (the "Acquisition Shares")
by the Investor pursuant to the Stock Purchase Agreement is less than
$50 million; provided that if the total size of the Board increases at
any time before the Preliminary Threshold Date, the Investor would be
entitled to designate its proportionate one-third share of the Board;
(ii) two representatives or, in the event that the size of the
Board exceeds nine members, two-ninths of the number of members of the
Board, if the Investor does not meet the ownership criteria of clause
(i) above, but the value of the Purchased Shares and the Acquisition
Shares is $25 million or more;
(iii) one representative or, in the event that the size of the
Board exceeds nine members, one-ninth of the number of members of the
Board, if the Investor does not meet the ownership criteria in either
of clause (i) or (ii) above, but the value of the Purchased Shares and
the Acquisition Shares is $10 million or more; and
(iv) no representatives, if the Investor does not meet any of
the ownership criteria in any of clauses (i), (ii) or (iii) above.
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In the event that the Board does not include the requisite number of
directors nominated by the Investor, the Company would be subject to certain
limitations on its operations unless it receives the prior written consent of
the Investor.
PARTICIPATION RIGHTS. As part of the Transaction, the Company has
granted certain participation rights (the "Participation Rights") to the
Investor. The Stock Purchase Agreement provides that until the Preliminary
Threshold Date, in the event that the Company issues or sells shares of capital
stock (including any security convertible into or redeemable for securities of
capital stock of the Company or any of its subsidiaries), the Investor would be
entitled to a participation right to purchase or subscribe for that proportion
of the total number of securities to be issued equal to the Investor's
proportionate holdings of Common Stock outstanding (assuming the purchase of
21,052,632 shares pursuant to the Stock Purchase Agreement). The Investor has no
right, however, to participate in the issuance by the Company of any of its
capital stock issued to any of the Company's subsidiaries or pursuant to
options, warrants or other securities outstanding on the date of the Stock
Purchase Agreement. The Participating Rights also enable the Investor to
purchase one share of Common Stock for each limited partnership interest (a
"Unit") subsequently issued by FAC Properties, L.P., the operating partnership
of the Company; such shares, however, would be required to be voted in the same
manner and proportion as the votes cast by other stockholders of the Company.
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PROHIBITIONS ON CERTAIN CORPORATE ACTIONS. Until the date on which the
Investor owns (or is obligated to purchase) less than 15% of the value of all
Common Stock and Units (excluding Units held by the Company), the Company would
be subject to certain prohibitions on its operations unless the prior approval
of over 67% of the directors is first obtained, including restrictions relating
to (i) the acquisition of any business or assets having an aggregate purchase
price in excess of 25% of the Company's total asset value or total market
capitalization (the "Total Enterprise Value") or the acquisition of an aggregate
of businesses and assets having an aggregate purchase price in excess of the 50%
of the Total Enterprise Value during a fiscal year; (ii) the sale or disposition
of any assets or stock during any fiscal year having an aggregate value in
excess of 25% of the Total Enterprise Value; (iii) the incurrence of additional
indebtedness such that the ratio of the Company's total indebtedness to the
Total Enterprise Value exceeds 65%; (iv) issuances of capital stock or options,
rights or warrants or other commitments to purchase or other convertible
securities into shares of Common Stock, including Units, in excess of 50% of all
shares of capital stock outstanding, on a fully diluted basis; (v) the amendment
of any provision of the Articles of Incorporation of the Company or the By-laws
of the Company in a manner that would be materially adverse to the Investor;
(vi) the commencement of any voluntary case in bankruptcy, the consent to the
entry of an order for relief against it in an involuntary case, the consent to
the appointment of a custodian of it or for all or substantially all of its
property, or a general assignment for the benefit of its creditors; (vii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which would be that any person, other than the
Investor, became the beneficial owner, directly or indirectly, of stock having
more than 15% of the voting power of the Company; (viii) taking certain actions
with, or for the benefit of, any of the Company's affiliates; and (ix)
termination of the federal income tax status of the Company as a REIT.
CONTINGENT VALUE RIGHT
If the stockholders approve the Transaction, the Investor would have
the right, pursuant to the Contingent Value Right Agreement, to receive on
January 1, 2004 payment of an aggregate amount equal to the lesser of (a)(i) the
greater of (A) the 15% IRR Amount (defined below) or (B) the $19 Amount (defined
below) less (ii) the fair market value of the number of shares of Common Stock
purchased pursuant to the Stock Purchase Agreement and (b) 4,500,000 multiplied
by the fair market value on such date.
Such contingent value rights ("CVRs") expire upon completion of an
offer to purchase as described in the following paragraph or upon the Investor's
refusal to accept such offer. The CVRs also terminate if, during the three
months prior to January 1, 2004, the fair market value of the Purchased Shares
equals or exceeds (A) $21.00 multiplied by the number of Purchased Shares less
(B) the aggregate amount of cash dividends paid on the Purchased Shares
following the Initial Purchase.
At any time prior to December 31, 2003, the Company could make an
irrevocable offer to purchase from the Investor all shares of Common Stock
acquired pursuant to the Transaction. The per share offer price would be the
greater of (A) $19.00 less all dividends paid to the Investor with respect to
such share and (B) the dollar amount that allows the Investor to realize a 15%
internal rate of return on the price paid for such share on a compounded,
annualized basis (inclusive of all dividends paid with respect to such share).
Such price is referred to herein as the "$19 Amount" or the "15% IRR Amount."
REGISTRATION RIGHTS AGREEMENT
The Company and the Investor have also entered into the Registration
Rights Agreement, pursuant to which the Company is obligated to file up to four
demand registration statements (no more than two of which may be requested in
any two-year period) under the Securities Act for the resale by the Investor of
all or a portion of the Company securities acquired in the Transaction.
The right to a demand registration is further limited in that (i) it
may be invoked in each instance only with respect to a number of shares having a
fair market value equal to or greater than $10 million, and (ii) the Company has
the right from time to time to require the Investor not to sell under the demand
registration statement or to postpone or suspend the effectiveness thereof in
certain circumstances. The Investor also will have the right, with respect to
most registrations of Common Stock by the Company for its own account, to
require the Company to include its Company securities in such registration.
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NO SOLICITATION OF COMPETING TRANSACTIONS
Unless and until the Stock Purchase Agreement is terminated in
accordance with its terms, the Company may not initiate, solicit or encourage
any inquiries involving (i) the acquisition of 15% or more of the Company's
equity securities (excluding Units) by any person or group or (ii) the merger,
consolidation, liquidation or other action out of the ordinary course of
business of the Company. The Company must notify the Investor of all of the
relevant details relating to all inquiries that the Company may receive relating
to any such matters. However, the Board may comply with Rule 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer or take such
other actions as may be required to comply with its fiduciary obligations. If
the Board determines with the advice of counsel that failure to do so could be
held to violate its fiduciary duties, it may provide information in response to
an unsolicited proposal.
LIMITED PUT OPTION
In the event that the Second Closing does not occur by September 30,
1998 or the Stock Purchase Agreement is terminated prior to the Second Closing
(other than as a result of the Investor's material breach of the Stock Purchase
Agreement), the Investor has an option under the Stock Purchase Agreement to
require that the Company repurchase the shares of Common Stock acquired in the
Initial Purchase at a price equal to the purchase price thereof, together with
any accrued dividends (the "Put Option"). The Put Option must be exercised
within two months after the earlier to occur of the date that the Company fails
to receive stockholder approval, the date the Stock Purchase Agreement is
terminated prior to the Second Closing and August 31, 1998. The Company does not
have the right to require the Investor to exercise the Put Option. Therefore, in
the event that stockholder approval of the Transaction is not obtained and the
Investor does not exercise the Put Option, the shares of Common Stock issued to
the Investor in the Initial Purchase will remain outstanding.
CONDITIONS TO CLOSING
Each of the Company's and the Investor's obligations to effect the
Second Closing and the Subsequent Closings are subject to various mutual and
unilateral conditions, including, without limitation, the following: (i)
stockholder approval of the Transaction; (ii) the continued qualification of the
Company as a REIT for federal income tax purposes; (iii) the receipt of an
opinion of counsel to the effect that the Company is a "domestically controlled"
REIT; (iv) the continuing correctness of the representations and warranties in
the Stock Purchase Agreement, (v) the receipt of any consents necessary for the
Transaction, and (vi) various other customary conditions. In addition, the
Investor is not obligated to fund more than $100 million of the Transaction
unless the Company consummates a significant portion of the Company's previously
announced pending acquisitions.
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On March 30 and 31, 1998, the Company concluded the acquisition of
seven community shopping centers located in North Carolina and Virginia from Roy
O. Rodwell, Chairman and co-founder of Atlantic Real Estate Corporation, Mr.
John M. Kane, Chairman of Kane Realty Corporation, and their affiliates. The
acquired centers encompass 824,525 square feet and are 96% leased.
The aggregate purchase price for the acquired shopping centers was
$47,500,000, consisting of the assumption of $38,500,000 of fixed-rate
indebtedness and the issuance of 646,167 limited partnership interests ("Units")
of FAC Properties, L.P. Up to 269,242 additional Units will be issued on a
delayed or contingent basis. The contingencies include the attainment of certain
property performance thresholds and the sale, lease or development of certain
outparcels. The purchase price for the acquisition was determined as a result of
arms-length negotiation between the Company and the sellers, with the Units
being valued at $9.50 per share.
The Company acquired the properties by causing the Company's operating
entity, FAC Properties, L.P., to acquire title to five of the properties and the
membership interests of the two limited liability companies that own the other
two properties in exchange for the consideration discussed above.
ITEM 7: FINANCIAL STATEMENTS.
a) Financial statements of businesses acquired.
The financial statements and pro forma financial information required
with regard to the acquisitions reported under Item 2 will be filed by an
amendment to this Form 8-K by June 15, 1998.
b) Pro forma financial information.
See Item 7(a).
c) Exhibits.
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Number Exhibit
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10.1 Amended and Restated Stock Purchase Agreement, dated as of March 23, 1998, between the
Company and the Investor.
10.2 Stockholders Agreement, dated February 24, 1998, among the Company and the Investor.
10.3 Registration Rights Agreement, dated February 24, 1998, between the Company and the
Investor.
10.4 Contingent Value Right Agreement, dated February 24, 1998, among the Company and the
Investor.
10.5 First Amendment to the Master and Exchange Option Agreement, dated as of March 16, 1998,
by and among the Company, FAC Realty, L.P. and the Contributors listed therein.
10.6 Assignment of Interest in Master Agreement and Exchange Option Agreement, and Consent of
Limited Partners dated December 22, 1997.
10.7 Exchange Option Agreement dated as of October 1, 1997, by and among Carolina FAC,
Limited Partnership., FAC Realty, Inc. and the Owners of the Properties and Interests
listed therein.
10.8 Master Agreement, dated as of October 1, 1997, by and among
FAC Realty, Inc., Carolina FAC, Limited Partnership, and the
other signatories listed therein.
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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.
FAC REALTY TRUST, INC.
Date: April 7, 1998 By: /s/ Linda M. Swearingen
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Name: Linda M. Swearingen
Title: Senior Vice President, Finance/Investor
Relations
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AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
by and between
FAC REALTY TRUST, INC.
and
PROMETHEUS SOUTHEAST RETAIL LLC
dated as of
March 23, 1998
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THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this
"Agreement"), dated as of March 23, 1998, is made by and between FAC Realty
Trust, Inc., a Maryland corporation (the "Company") and Prometheus Southeast
Retail LLC ("Buyer"), an affiliate of Lazard Freres Real Estate Investors, LLC,
a Delaware limited liability company ("LFREI").
RECITALS:
WHEREAS, the Company and Buyer entered into that certain stock purchase
agreement, dated as of February 24, 1998 (the "First Agreement");
WHEREAS, the Company and Buyer desire to amend and restate in its
entirety the First Agreement as set forth herein;
WHEREAS, the First Agreement, as amended and restated as set forth
herein shall be referred to as the "Agreement";
WHEREAS, Buyer wishes to purchase from the Company, and the Company
wishes to sell to Buyer, (i) an aggregate of 21,052,632 shares of the Company's
common stock, par value $0.01 per share (the "Company Common Stock"), at a
purchase price of $9.50 per share and (ii) contingent value rights (the
"Contingent Value Rights") of the Company as further described in the Contingent
Value Right Agreement (as defined herein); and
WHEREAS, the Company and Buyer believe that the combination in a
strategic alliance of the leadership, expertise and experience in retail
development and operations of the Company and the proven investment and capital
markets expertise and access to capital of Buyer and its affiliates will
significantly enhance the Company's ability to pursue its growth and operating
strategies;
NOW, THEREFORE, in consideration of the promises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
Section 1.1 "Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any Government Authority.
Section 1.2 "ADA" shall have the meaning set forth in Section 3.11(e).
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Section 1.3 "Affiliate" shall have the meaning ascribed thereto in Rule
12b-2 promulgated under the Exchange Act, and as in effect on the date hereof.
Section 1.4 "Agreement" shall mean this Stock Purchase Agreement as
amended and restated, together with all schedules and exhibits referenced
herein.
Section 1.5 "Army Corps of Engineers" shall have the meaning set forth
in Section 3.11(d).
Section 1.6 "Benefit Arrangements" shall have the meaning set forth in
Section 3.13(h).
Section 1.7 "Blue Sky Laws" shall have the meaning set forth in Section
3.4(e).
Section 1.8 "Board" shall mean the Board of Directors of the Company.
Section 1.9 "Break-up Fee" shall have the meaning set forth in Section
9.3(b).
Section 1.10 "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which the New York Stock Exchange is closed.
Section 1.11 "Buyer" shall have the meaning set forth in the first
paragraph hereof.
Section 1.12 "Capital Expenditure Budget and Schedule" shall have the
meaning set forth in Section 3.11(i).
Section 1.13 "CERCLA" shall have the meaning set forth in Section
3.12(e).
Section 1.14 "Claim" shall have the meaning set forth in Section
3.12(g)(i).
Section 1.15 "Closing" shall mean the consummation of any Stock
Purchase.
Section 1.16 "Closing Date" shall mean, with respect to the
consummation of any Stock Purchase, the date on which the conditions set forth
herein with respect thereto shall be satisfied or duly waived, or if the Company
and Buyer mutually agree on a different date, the date upon which they have
mutually agreed.
Section 1.17 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto, including all of the rules and regulations
promulgated thereunder.
Section 1.18 "Commitment" shall have the meaning set forth in Section
3.7.
Section 1.19 "Company" shall have the meaning set forth in the first
paragraph hereof.
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Section 1.20 "Company Charter" shall mean the Amended and Restated
Articles of Incorporation of FAC Realty Trust, Inc. and any amendment or
supplement thereto, as in effect on the date hereof.
Section 1.21 "Company Common Stock" shall have the meaning set forth in
the second paragraph hereof.
Section 1.22 "Company Environmental Reports" shall have the meaning set
forth in Section 3.12(f).
Section 1.23 "Company Excess Stock" shall have the meaning set forth in
Section 3.3(a).
Section 1.24 "Company Leases" shall have the meaning set forth in
Section 3.11(f).
Section 1.25 "Company Plans" shall have the meaning set forth in
Section 3.13(b).
Section 1.26 "Company Preferred Stock" shall have the meaning set forth
in Section 3.3(a).
Section 1.27 "Company Properties" shall have the meaning set forth in
Section 3.11(a).
Section 1.28 "Company Registration Statement" shall have the meaning
set forth in Section 3.5(a).
Section 1.29 "Company Reports" shall have the meaning set forth in
Section 3.5(a).
Section 1.30 "Company Stock" shall mean, collectively, the Company
Common Stock and any other shares of capital stock of the Company.
Section 1.31 "Company Stock Equivalents" shall have the meaning set
forth in Section 5.3(e).
Section 1.32 "Competing Transaction" shall mean (i) any acquisition in
any manner, directly or indirectly (including through any option, right to
acquire or other beneficial ownership), of more than 15% of the equity
securities, on a Fully Diluted basis, of the Company by a single person or a
group of related persons, or assets representing a material portion of the
assets of the Company, other than any of the transactions contemplated by this
Agreement or (ii) any merger, consolidation, sale of assets, share exchange,
recapitalization, other business combination, liquidation, or other action out
of the ordinary course of business of the Company (it being understood that
acquisitions of real property in exchange for OP Units is in the ordinary course
of business), other than any of the transactions contemplated by this Agreement.
Section 1.33 "Contingent Value Rights" shall have the meaning set forth
in the first paragraph of the recitals hereto.
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Section 1.34 "Contingent Value Right Agreement" shall have the meaning
set forth in Section 2.6(a).
Section 1.35 "Controlled Group Liability" shall have the meaning set
forth in Section 3.13(h).
Section 1.36 "Debt Instruments" shall mean all notes, loan agreements,
mortgages, deeds of trust or similar instruments which evidence or secure any
indebtedness owing by the Company or any of its Subsidiaries.
Section 1.37 "Development Budget and Schedule" shall have the meaning
set forth in Section 3.11(j).
Section 1.38 "Development Properties" shall have the meaning set forth
in Section 3.11(j).
Section 1.39 "Employee Benefit Plans" shall have the meaning set forth
in Section 3.13(h).
Section 1.40 "Employees" shall have the meaning set forth in Section
3.13(h).
Section 1.41 "Employment Agreements" shall have the meaning set forth
in Section 3.13(a).
Section 1.42 "Environmental Claim" shall have the meaning set forth in
Section 3.12(g)(ii).
Section 1.43 "Environmental Laws" shall have the meaning set forth in
Section 3.12(g)(iii).
Section 1.44 "Environmental Permits" shall have the meaning set forth
in Section 3.12(a).
Section 1.45 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, and any successor thereto.
Section 1.46 "ERISA Affiliates" shall mean any entity which is under
"common control" with the Company, within the meaning of Section 4001(b)(1) of
ERISA.
Section 1.47 "Exchange Act" shall have the meaning set forth in Section
3.4(e).
Section 1.48 "Fair Market Value" shall have the meaning given to it in
the Stockholders Agreement.
Section 1.49 "Final Schedules" shall have the meaning set forth in
Section 5.7.
Section 1.50 "Fully Diluted" shall mean, with respect to the Company
Stock, the total number of outstanding shares of Company Stock (for such
purposes, treating as outstanding Company Stock all options or warrants to
purchase and securities convertible into (or exchangeable
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or redeemable for) Company Stock including, without limitation, OP Units),
outstanding as of the relevant measurement date, assuming exercise, conversion,
exchange or redemption of such other securities.
Section 1.51 "GAAP" shall have the meaning set forth in Section 3.5(b).
Section 1.52 "Governing Documents" shall mean this Agreement, the
Registration Rights Agreement, the Stockholders Agreement and the Contingent
Value Right Agreement.
Section 1.53 "Government Authority" shall mean any government or state
(or any subdivision thereof) of or in the United States, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal.
Section 1.54 "Ground Leases" shall have the meaning set forth in
Section 3.11(k).
Section 1.55 "Indemnified Party" shall mean Buyer or the Company, as
the context may require.
Section 1.56 "Initial Closing" shall mean the first Closing, which
shall occur on the Target Date.
Section 1.57 "Initial Number of Shares" shall mean the number of shares
of Company Common Stock equal to 19.9% of the aggregate number of outstanding
shares of Company Common Stock on the date of the Initial Closing (prior to the
issuance of the Initial Number of Shares of Company Common Stock).
Section 1.58 "Initial Public Offering" shall mean the initial public
offering of the common stock of FAC Realty, Inc.
Section 1.59 "Insurance Policies" shall have the meaning set forth in
Section 3.16.
Section 1.60 "Investor" shall have the meaning giving to it in the
Stockholders Agreement.
Section 1.61 "Investor Nominee" shall have the meaning given to such
term in the Stockholders Agreement.
Section 1.62 "IRS" shall mean the Internal Revenue Service.
Section 1.63 "Kane" shall mean Kane Realty Corporation.
Section 1.64 "Kane and Konover Properties" shall mean the properties to
be purchased after the date hereof by the Company pursuant to the Kane Purchase
Agreement and the Konover Purchase Agreement.
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Section 1.65 "Kane and Konover Schedules" shall have the meaning set
forth in Section 5.8.
Section 1.66 "Kane Purchase Agreement" shall mean, collectively, those
certain Exchange Option Agreements, Master Agreements and other related
documents by and among FAC Realty Trust, Inc., FAC Properties, L.P., Carolina
FAC L.P., Roy O. Rodwell, Carolyn E. Martin, John M. Kane, Clifford Clark, Mark
E. Pitney, Atlantic Realty LLC, Effell Pembroke, LLC, Park Place FAC LLC and
Atlantic RealVest LLC relating to the acquisition by FAC Properties, L.P. of the
partnership or other ownership interests in the entities which own title to
and/or the shopping center real properties and improvements located at (i)
Celebration, Raleigh, NC, (ii) Shoreside, Kitty Hawk, NC, (iii) Stanton,
Greenville, NC, (iv) Parkwest, Durham, NC, (v) Brookneal, Brookneal, VA, and
(vi) Keysville, Keysville, VA.
Section 1.67 "Konover" shall mean Konover Associates South, Inc.
Section 1.68 "Konover Purchase Agreement" shall mean that certain
Master Agreement and other related documents by and among FAC Realty Trust,
Inc., FAC Properties, L.P. and the owners of the properties and interests listed
therein relating to the acquisition by FAC Properties, L.P. of the title to the
shopping center real properties and improvements located at (i) Mobile Festival
Centre, Mobile, AL, (ii) The Plaza Shopping Center, Davie, FL, (iii) Square One
Plaza, Stuart, FL, (iv) Durham Festival Centre, Durham, NC, (v) Hollywood
Festival Centre, Hollywood, FL, (vi) Lenoir Festival Centre, Lenoir, NC, (vii)
Oakland Park Festival Centre, Oakland Park, FL, (viii) Tampa Festival Centre,
Tampa, FL, (ix) Food Lion Plaza, Petersburg, VA and (x) South Cobb Festival
Centre, Smyrna, GA, and of certain management and leasing agreements of Konover
Management South.
Section 1.69 "Kick Out Properties" shall have the meaning set forth in
Section 5.8.
Section 1.70 "Liabilities" shall mean, as to any person, all debts,
adverse claims, liabilities and obligations, direct, indirect, absolute or
contingent of such person, whether known or unknown, accrued, vested or
otherwise, whether in contract, tort, strict liability or otherwise and whether
or not actually reflected, or required by GAAP to be reflected, in such person's
or entity's balance sheets or other books and records, including without
limitation (i) obligations arising from non-compliance with any law, rule or
regulation (including Environmental Laws) of any Government Authority or imposed
(including, without limitation, under any Environmental Laws or in connection
with Environmental Claims) by any court or any arbitrator of any kind, (ii) all
indebtedness or liability of such person for borrowed money, or for the purchase
price of property or services (including trade obligations), (iii) all
obligations of such person as lessee under leases, capital or other, (iv)
liabilities of such person in respect of plans covered by Title IV of ERISA, or
otherwise arising in respect of plans for Employees or former Employees or their
respective families or beneficiaries, (v) reimbursement obligations of such
person in respect of letters of credit, (vi) all obligations of such person
arising under acceptance facilities, (vii) all liabilities of other persons or
entities, directly or indirectly, guaranteed, endorsed (other than for
collection or deposit in the ordinary course of business) or discounted with
recourse by such person or with respect to which the person in question
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is otherwise directly or indirectly liable, (viii) all obligations secured by
any Lien on property of such person, whether or not the obligations have been
assumed, and (ix) all other items which have been, or in accordance with GAAP
would be, included in determining total liabilities on the liability side of the
balance sheet.
Section 1.71 "LFREI" shall have the meaning set forth in the first
paragraph hereof.
Section 1.72 "Liens" shall mean all liens, mortgages, deeds of trust,
deeds to secure debt, security interests, pledges, claims, charges, easements
and other encumbrances of any nature whatsoever.
Section 1.73 "Loss and Expenses" shall have the meaning set forth in
Section 8.2(a).
Section 1.74 "Material Adverse Effect" shall mean a material adverse
effect on the financial condition, results of operations, business or prospects
of the Company and its Subsidiaries (to the extent of the Company's interests
therein) taken as a whole.
Section 1.75 "Material Company Leases" shall have the meaning set forth
in Section 3.11(f).
Section 1.76 "Materials of Environmental Concern" shall have the
meaning set forth in Section 3.12(g)(iv).
Section 1.77 "19.9% Sale Transaction" shall mean the sale by Investor
of the Initial Number of Shares to a person in connection with a Competing
Transaction entered into on any date on or prior to the one year anniversary of
the date this Agreement is terminated.
Section 1.78 "19.9% Sale Transaction Profit" shall mean, on any date,
the dollar amount equal to (i) the Initial Number of Shares MULTIPLIED BY the
price per share actually paid in cash by another person for the shares of
Company Common Stock pursuant to a 19.9% Sale Transaction, LESS (ii) $9.50
MULTIPLIED BY the Initial Number of Shares.
Section 1.79 "1998 and 1999 Preliminary Capital Expenditure Budgets and
Schedules" shall have the meaning set forth in Section 3.11(i).
Section 1.80 "OP Units" shall mean the limited partnership interests in
FAC Properties, L.P.
Section 1.81 "Other Filings" shall have the meaning set forth in
Section 5.1(b).
Section 1.82 "Pension Plans" shall have the meaning set forth in
Section 3.13(h).
Section 1.83 "Per Share Purchase Price" shall mean the price of $9.50
per share for the Company Common Stock.
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Section 1.84 "Permitted Liens" shall mean (i) Liens (other than Liens
imposed under ERISA or any Environmental Law or in connection with any
Environmental Claim) for taxes or other assessments or charges of Government
Authorities that are not yet delinquent or that are being contested in good
faith by appropriate proceedings, in each case, with respect to which adequate
reserves are being maintained by the Company or its Subsidiaries to the extent
required by GAAP, (ii) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other Liens (other than Liens imposed under ERISA or
any Environmental Law or in connection with any Environmental Claim) imposed by
law and created in the ordinary course of business for amounts not yet overdue
or which are being contested in good faith by appropriate proceedings, in each
case, with respect to which adequate reserves or other appropriate provisions
are being maintained by the Company or its Subsidiaries to the extent required
by GAAP and which, to the extent same do not relate to work or materials
provided for in the Capital Expenditure Budget and Schedule, the 1998 and 1999
Preliminary Capital Expenditure Budgets and Schedules or the Development Budget
and Schedule, do not exceed $300,000 in the aggregate (excluding from such
calculation, any amounts disclosed in writing by the Company to Buyer which (a)
are fully covered by insurance held by the Company under which the Company
reasonably expects full recovery of such amounts, or (b) for which an adequate
escrow has been established and is, at the relevant time, maintained), (iii) the
Company Leases and any leases entered into after December 31, 1997 in the
ordinary course of business on commercially reasonable terms, (iv) easements,
rights-of-way, covenants, restrictions and other similar matters which are
customary and typical for properties similar to the Company Properties and which
do not (x) interfere materially with the ordinary conduct of any Company
Property or the business of the Company and its Subsidiaries as a whole or (y)
detract materially from the value or usefulness of the Company Properties to
which they apply, (v) the Liens which were granted by the Company or any of its
Subsidiaries to lenders pursuant to credit agreements in existence on the date
hereof which are described in either Schedule 3.9(c) or the Company Reports,
(vi) the other Liens, if any, described in Schedule 1.84, and (vii) such
imperfections of title and encumbrances, if any, as would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 1.85 "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, other form of business or legal entity or Government Authority.
Section 1.86 "Pro Forma Balance Sheet" shall have the meaning set forth
in Section 3.5(c).
Section 1.87 "Projects" shall have the meaning set forth in Section
3.11(j).
Section 1.88 "Property Restrictions" shall have the meaning set forth
in Section 3.11(a).
Section 1.89 "Proxy Statement" shall have the meaning set forth in
Section 5.1(b).
Section 1.90 "Purchase Price" shall mean the Per Share Purchase Price
multiplied by the number of shares of Company Common Stock to be purchased and
sold at a particular Closing.
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Section 1.91 "Purchased Shares" shall have the meaning set forth in
Section 2.1.
Section 1.92 "Registration Rights Agreement" shall have the meaning set
forth in Section 2.6(a).
Section 1.93 "Regulatory Filings" shall have the meaning set forth in
Section 3.4(e).
Section 1.94 "Repurchase Payment" shall have the meaning set forth in
Section 2.9(a).
Section 1.95 "REIT" shall have the meaning set forth in Section 3.8(b).
Section 1.96 "Release" shall have the meaning set forth in Section
3.12(g)(v).
Section 1.97 "Remaining Equity Ownership" shall mean, for any person
and on any date, the sum of (i) product of (A) the number of shares of Company
Stock held by such person and (B) the Fair Market Value of the Company Stock on
such date and (ii) the product of (A) the number of OP Units held by such person
and (B) the Fair Market Value of the OP Units on such date.
Section 1.98 "Rent Roll" shall have the meaning set forth in Section
3.11(f).
Section 1.99 "SEC" shall have the meaning set forth in Section 3.5(a).
Section 1.100 "Second Closing" shall mean the Closing as soon as
practicable following Stockholder Approval.
Section 1.101 "Securities" means the Purchased Shares and the
Contingent Value Rights.
Section 1.102 "Securities Act" shall have the meaning set forth in
Section 3.4(e).
Section 1.103 "Securities Laws" shall have the meaning set forth in
Section 3.5(a).
Section 1.104 "Stock Purchase" shall have the meaning set forth in
Section 2.1.
Section 1.105 "Stockholder Approval" shall have the meaning set forth
in Section 7.2(b).
Section 1.106 "Stockholders Agreement" shall have the meaning set forth
in Section 2.6(a).
Section 1.107 "Subsequent Closing" shall mean each Closing of a
Subsequent Purchase.
Section 1.108 "Subsequent Purchase Price" shall mean the Per Share
Purchase Price multiplied by the number of Purchased Shares purchased by Buyer
in a Subsequent Purchase.
Section 1.109 "Subsequent Purchases" shall have the meaning set forth
in Section 2.5(a).
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Section 1.110 "Subsidiaries" shall mean with respect to any person, any
corporation, partnership, limited liability company, joint venture, business
trust or other entity, of which such person, directly or indirectly, owns or
controls 50% or more of the securities or other interests entitled to vote in
the election of directors or others performing similar functions with respect to
such corporation or other organization, or to otherwise control such
corporation, partnership, limited liability company, joint venture, business
trust or other entity.
Section 1.111 "Target Date" shall mean any date within forty five days
of February 24, 1998, provided, the "Target Date" may, at the sole discretion of
the Company, mean any date within seventy five days of February 24, 1998.
Section 1.112 "Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
The term "Tax" also includes any amounts payable pursuant to any tax sharing
agreement to which any relevant entity is liable as a successor or pursuant to
contract.
Section 1.113 "Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
Section 1.114 "Title Policies" shall have the meaning set forth in
Section 3.11(a).
Section 1.115 "Topping Fee" shall have the meaning set forth in Section
9.3(b).
Section 1.116 "Total Equity Commitment" shall mean the amount of
$200,000,000.00.
Section 1.117 "Total Enterprise Value" shall mean, on any date, the
greater of (A) total asset value of the Company (as measured in accordance with
GAAP) and (B) total market capitalization of the Company (based on the Fair
Market Value of the outstanding Common Stock and OP Units and the outstanding
indebtedness of the Company and its Subsidiaries).
Section 1.118 "Transaction Documents" shall have the meaning set forth
in Section 7.1(e).
Section 1.119 "Updated Schedules" shall have the meaning set forth in
Section 5.7.
Section 1.120 "Welfare Plans" shall have the meaning set forth in
Section 3.13(h).
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ARTICLE 2
PURCHASE AND SALE OF SHARES; CLOSING
Section 2.1 Purchase and Sale. Subject to the terms and conditions
hereof, from time to time after the date hereof, at the Closings, the Company
will sell, convey, assign, transfer, and deliver, and Buyer will purchase and
acquire from the Company, up to an aggregate of 21,052,632 shares of Company
Common Stock (the "Purchased Shares"). Each Closing at which Buyer purchases any
Purchased Shares is herein referred to as a "Stock Purchase."
Section 2.2 Consideration. Subject to the terms and conditions hereof,
at each Closing, Buyer shall deliver to the Company the Purchase Price with
respect to the number of shares of Company Common Stock to be purchased and sold
at such Closing by wire transfer of immediately available funds in U.S. dollars
to the account or accounts specified by the Company.
Section 2.3 Initial Closing. Subject to the terms and conditions
hereof, at the Initial Closing, at which time the applicable conditions set
forth in Sections 7.1, 7.3 and 7.4 shall have been satisfied or duly waived,
Buyer will purchase and acquire from the Company, and the Company will sell,
convey, assign, transfer and deliver to Buyer, the Initial Number of Shares of
Company Common Stock, and Buyer will pay to the Company the Purchase Price for
such shares of Company Common Stock. Concurrently with the Initial Closing, the
Buyer shall be issued the Contingent Value Rights which shall vest in the
amounts, and on the terms, set forth in the Contingent Value Right Agreement.
Section 2.4 Second Closing. Subject to the terms and conditions hereof,
on or before September 30, 1998, at which time the applicable conditions set
forth in Sections 7.2, 7.3 and 7.4 shall have been satisfied or duly waived,
Buyer will purchase and acquire from the Company, and the Company will sell,
convey, assign, transfer and deliver to Buyer, a number of shares of Company
Common Stock equal to the difference between 10,526,316 shares of Company Common
Stock and the Initial Number of Shares, and Buyer will pay to the Company the
Purchase Price for such shares of Company Common Stock.
Section 2.5 Subsequent Purchases and Sales.
(a) Subject to the terms and conditions hereof, following the
Second Closing, the Company shall have the right to require, subject to
satisfaction or waiver of the applicable conditions set forth in Sections 7.3
and 7.4, Buyer to purchase from the Company from time to time at one or more
Subsequent Closings, an aggregate of 10,526,316 Purchased Shares (each referred
to as a "Subsequent Purchase" and, together, the "Subsequent Purchases").
Subject to the terms and conditions hereof, the Closing of any Subsequent
Purchase shall occur as soon as possible following the date on which the
applicable conditions set forth in Section 7.3 and 7.4 shall have been satisfied
or duly waived.
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(b) At least 20 Business Days prior to a Subsequent Purchase,
the Company shall notify (which notice shall be in writing and irrevocable)
Buyer of the anticipated date of the Subsequent Closing and the number of
Purchased Shares the Company is requiring Buyer to purchase, which shall not be
fewer than 1,052,631 Purchased Shares (except the final Subsequent Purchase).
(c) If fewer than 3,508,772 of the Purchased Shares shall have
been issued and sold at all Subsequent Closings prior to six months after the
Second Closing, then Buyer shall, subject to the satisfaction or waiver of the
applicable conditions set forth in Sections 7.3 and 7.4, make a Subsequent
Purchase of the number of Purchased Shares equal to 3,508,772 less the number of
Purchased Shares purchased after the Second Closing but prior to such date, from
the Company (and the Company shall sell to Buyer such number of shares) on or
before the date six months after the date of the Second Closing, or as soon
thereafter as all conditions to the parties' obligations to effect the
Subsequent Purchase hereunder shall have been satisfied or waived.
(d) If fewer than 7,017,544 of the Purchased Shares shall have
been issued and sold at all Subsequent Closings prior to twelve months after the
Second Closing, then Buyer shall, subject to the satisfaction or waiver of the
applicable conditions set forth in Sections 7.3 and 7.4, make a Subsequent
Purchase of the number of Purchased Shares equal to 7,017,544 less the number of
Purchased Shares purchased after the Second Closing but prior to such date, from
the Company (and the Company shall sell to Buyer such number of shares) on or
before the date twelve months after the date of Second Closing, or as soon
thereafter as all conditions to the parties' obligations to effect the
Subsequent Purchase hereunder shall have been satisfied or waived.
(e) If fewer than all Purchased Shares shall have been issued
and sold at any and all Closings on or before eighteen months after the Second
Closing, then Buyer shall, subject to the satisfaction or waiver of the
applicable conditions set forth in Sections 7.3 and 7.4, make a Subsequent
Purchase of all such remaining shares from the Company (and the Company shall
sell to Buyer such number of shares) on or before eighteen months after the
Second Closing, or as soon thereafter as all conditions to Buyer's obligation to
effect the Subsequent Purchase hereunder shall have been satisfied or waived.
(f) If the condition set forth in Section 7.3(e) is not
satisfied (which determination shall be made by Buyer, based upon the written
advice of Buyer's counsel, and the cause of such determination is not cured by
the Company prior to the relevant Closing) or waived at any time when a Closing
would otherwise occur, the relevant Closing will be effected as to the number of
Purchased Shares, if any, as will not result in such condition failing to be
satisfied, and Buyer shall acquire any remaining Purchased Shares as soon
thereafter as such condition to Buyer's obligation to effect the Subsequent
Purchase shall have been, as determined in Buyer's sole discretion, satisfied or
waived.
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Section 2.6 Additional Agreements and Closing Deliveries.
(a) On February 24, 1998, the Company and Buyer entered into a
registration rights agreement substantially in the form attached as Exhibit A
(the "Registration Rights Agreement"), a stockholders agreement substantially in
the form attached as Exhibit B (the "Stockholders Agreement") and a contingent
value right agreement substantially in the form attached as Exhibit C (the
"Contingent Value Right Agreement").
(b) In addition to the other things required to be done
hereby, at each Closing, the Company shall deliver, or cause to be delivered, to
Buyer the following: (i) certificates representing the number of shares of
Company Common Stock to be issued and delivered at such Closing, free and clear
of all Liens, with all necessary share transfer and other documentary stamps
attached, (ii) a certificate, dated the relevant Closing Date and validly
executed on behalf of the Company, as contemplated by Section 7.1(a), as to the
Initial Closing only, by Section 7.2(a), as to the Second Closing only, and by
Section 7.3(a) as to other Subsequent Closings, (iii) evidence or copies of any
consents, approvals, orders, qualifications or waivers required pursuant to
Section 7.1(c), as to the Initial Closing only, and pursuant to Section 7.2(c),
as to the Second Closing, (iv) all certificates and other instruments and
documents required by this Agreement to be delivered by the Company to Buyer at
or prior to each Closing, and (v) such other instruments reasonably requested by
Buyer, as may be necessary or appropriate to confirm or carry out the provisions
of this Agreement.
(c) In addition to the delivery of the Purchase Price and the
other things required to be done hereby, at each Closing, Buyer shall deliver,
or cause to be delivered, to the Company the following: (i) a certificate, dated
the relevant Closing Date and validly executed by Buyer, as contemplated by
Section 7.4(a), (ii) if not previously delivered to the Company, all other
certificates, documents, instruments and writings required pursuant hereto to be
delivered by or on behalf of Buyer at or before each Closing, and (iii) such
other instruments reasonably requested by the Company, as may be necessary or
appropriate to confirm or carry out the provisions of this Agreement.
Section 2.7 Time and Place of Closings. Each Closing shall take place
at 9:00 a.m. New York City time on the relevant Closing Date at Latham &
Watkins, 885 Third Avenue, Suite 1000, New York, New York or at such other place
and time as the Company and Buyer shall mutually agree.
Section 2.8 Right to Assign. Buyer may assign its rights and delegate
its obligations created hereby to purchase Company Common Stock in accordance
with the provisions of Section 10.5.
Section 2.9 Limited Put Option.
(a) In the event that the Second Closing does not occur by
September 30, 1998 or this Agreement is terminated at any time prior to the
Second Closing (other than as a result of Buyer's material breach of any of its
obligations hereunder), Buyer will have the right to require the Company to
repurchase all or any part of the Initial Number of Shares pursuant to the terms
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described below at a price in cash equal to the Purchase Price thereof plus
accrued but unpaid dividends, if any, thereon to the date of purchase (the
"Repurchase Payment"). On any date within two months after the earlier to occur
of (i) the date that the Company fails to receive Stockholder Approval, (ii)
August 31, 1998 and (iii) the date this Agreement is terminated prior to the
Second Closing, Buyer may, at its sole option, exercise such right to cause the
Company to repurchase all or any part of the Initial Number of Shares by
surrendering to the Company the certificates for the shares it is causing the
Company to repurchase.
(b) If Buyer chooses to cause the Company to repurchase some
or all of the Initial Number of Shares, the Company will pay Buyer the
Repurchase Payment within six months after the date on which Buyer exercises its
rights pursuant to Section 2.9(a) of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer as follows:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland. The
Company has all requisite corporate power and authority to own, operate, lease
and encumber its properties and carry on its business as now conducted, and to
enter into this Agreement, the Registration Rights Agreement, the Contingent
Value Right Agreement and the Stockholders Agreement and to perform its
obligations hereunder and thereunder.
(b) Each of the Subsidiaries of the Company is a corporation,
partnership or limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, and has the corporate, partnership or limited liability company
power and authority to own its properties and to carry on its business as it is
now being conducted.
(c) Each of the Company and its Subsidiaries is duly qualified
to do business and in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification,
except for any failures to be so qualified or to be in good standing as would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
(d) Schedule 3.1(d) sets forth the name of each Subsidiary of
the Company (whether owned, directly or indirectly, through one or more
intermediaries). All of the outstanding shares of capital stock of, or other
equity interest in, each of the Subsidiaries owned by the Company are duly
authorized, validly issued, fully paid and nonassessable, and are owned,
directly or
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indirectly, by the Company free and clear of all Liens, except as set forth in
Schedule 3.1(d). The following information for each Subsidiary is set forth in
Schedule 3.1(d), if applicable: (i) its name and jurisdiction of incorporation
or organization, (ii) the type of and percentage interest held by the Company in
the Subsidiary and the names of and percentage interest held by the other
interest holders, if any, in the Subsidiary, and (iii) any loans from the
Company to, or priority payments due to the Company from, the Subsidiary, and
the rate of return thereon. Except as contemplated hereby and as set forth on
Schedule 3.1(d), there are no existing options, warrants, calls, subscriptions,
convertible securities or other rights, agreements or commitments which obligate
the Company or any of the Subsidiaries to issue, transfer or sell any shares of
capital stock or equity interests in any of the Subsidiaries.
Section 3.2 Authority Relative to Agreements; Approvals.
(a) The execution, delivery and performance of this Agreement,
the Registration Rights Agreement, the Contingent Value Right Agreement and the
Stockholders Agreement have been duly and validly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
issuance of Company Common Stock pursuant to this Agreement and the Company
Charter by the Company's stockholders. This Agreement, the Registration Rights
Agreement, the Contingent Value Right Agreement and the Stockholders Agreement
have been duly executed and delivered by the Company for itself and constitute
the valid and legally binding obligations of the Company, enforceable against
the Company in accordance with their terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights or
general principles of equity.
(b) The Board has, as of the date hereof, approved this
Agreement, the Registration Rights Agreement, the Stockholders Agreement, the
Contingent Value Right Agreement and the transactions contemplated hereby and
thereby, and the Board has determined to recommend that the stockholders of the
Company vote in favor of and approve the issuance of Company Common Stock
pursuant to this Agreement, subject to the fiduciary duty provisions of Section
5.4.
(c) The shares of Company Common Stock to be acquired pursuant
to this Agreement have been duly authorized and reserved for issuance, and upon
issuance will be duly and validly issued, fully paid and nonassessable and not
subject to any preemptive or similar rights.
(d) The issue and sale of the shares of Company Common Stock
hereunder will not give any stockholder of the Company the right to demand
payment for its shares under Maryland law or give rise to any preemptive or
similar rights.
Section 3.3 Capital Stock.
(a) The authorized capital stock of the Company as of the date
hereof consists of 45,000,000 shares of Company Common Stock, 25,000,000 shares
of excess stock, par value $0.01 per share (the "Company Excess Stock"), and
5,000,000 shares of preferred stock, par value $25.00 per share (the "Company
Preferred Stock"). As of the date hereof, there are 12,298,891 shares of
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Company Common Stock issued and outstanding; to the Company's knowledge, no
shares of Company Excess Stock issued and outstanding; and the shares of Company
Preferred Stock issued and outstanding as described in the most recent Company
Report. All such issued and outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive or
similar rights. Except as set forth on Schedule 3.3(a), the Company has no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities the holders of which have the right to vote) with the stockholders of
the Company on any matter. As of the date hereof, except as set forth in
Schedule 3.3(a) to this Agreement, there are no existing options, warrants,
calls, subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company to issue, transfer or sell any shares of
capital stock or other equity interests of the Company.
(b) Except for interests in the Subsidiaries of the Company
and except as set forth in Schedule 3.3(b), neither the Company nor any of its
Subsidiaries owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, limited liability company,
joint venture, business, trust or entity (other than investments in short-term
investment securities).
Section 3.4 No Conflicts; No Defaults; Required Filings and Consents.
Neither the execution and delivery by the Company hereof nor the consummation by
the Company of the transactions contemplated hereby in accordance with the terms
hereof, will:
(a) conflict with or result in a breach of any provisions of
the Company Charter or by-laws of the Company;
(b) result in a breach or violation of, a default under, or
the triggering of any payment or other obligations pursuant to, or, except as
set forth in Schedule 3.9(g), accelerate vesting under, any compensation plan or
any grant or award made under any of the foregoing;
(c) violate or conflict with in any material respect any
material statute, regulation, judgment, order, writ, decree or injunction
applicable to the Company or its Subsidiaries;
(d) subject to the Company obtaining the third party consents
set forth in Schedule 3.4(d)-A (with respect to the Initial Closing), Schedule
3.4(d)-B (with respect to the Second Closing) and Schedule 3.4(d)-C (with
respect to each Subsequent Closing), violate or conflict with or result in a
breach of any provision of, or constitute a default (or any event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the creation of any material Lien upon
any of the properties of the Company or its Subsidiaries under, or result in
being declared void, voidable or without further binding effect, any of the
terms, conditions or provisions of any material note, bond, mortgage, indenture
or deed of trust or any material license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which the Company or
its Subsidiaries is a party, or by which the Company or its Subsidiaries or any
of their properties is bound or affected; or
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(e) require any material consent, approval or authorization
of, or declaration, filing or registration with, any Government Authority, other
than any filings required under the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or state securities laws ("Blue Sky Laws") (collectively, the
"Regulatory Filings"), and any material filings required to be made with the
Secretary of State of Maryland or any national securities exchange on which the
Company Common Stock is listed.
Section 3.5 SEC and Other Documents; Financial Statements; Undisclosed
Liabilities.
(a) The Company has delivered or made available to Buyer the
registration statement of the Company filed with the Securities and Exchange
Commission ("SEC") in connection with the Initial Public Offering, and all
exhibits, amendments and supplements thereto (collectively, the "Company
Registration Statement"), and each registration statement, report, proxy
statement or information statement and all exhibits thereto prepared by it or
relating to its properties since the effective date of the Company Registration
Statement up through the date hereof, each of which are set forth in Schedule
3.5(a) and are in the form (including exhibits and any amendments thereto) filed
with the SEC (collectively, the "Company Reports"). Except as set forth in
Schedule 3.5(a), the Company Reports were filed with the SEC in a timely manner
and constitute all forms, reports and documents required to be filed by the
Company under the Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder (the "Securities Laws"). As of their respective dates,
the Company Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. There is no
unresolved violation asserted by any Government Authority with respect to any of
the Company Reports.
(b) Each of the balance sheets included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
fairly presented the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations, stockholders'
equity (deficit) and cash flows included in or incorporated by reference into
the Company Reports (including any related notes and schedules) fairly presented
the results of operations, stockholders' equity (deficit) or cash flows, as the
case may be, of the entity or entities to which it relates for the periods set
forth therein, in each case in accordance with United States generally accepted
accounting principles ("GAAP") consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, normal recurring year-end adjustments which would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
(c) The Company has delivered to Buyer a balance sheet, dated
as of January 1, 1998, adjusted to give effect to the transactions contemplated
by this Agreement, the Kane Purchase Agreement and the Konover Purchase
Agreement as if such transactions had occurred on January 1, 1998 (the "Pro
Forma Balance Sheet"). The Pro Forma Balance Sheet is based on the consolidated
balance sheets of the Company and its Subsidiaries as of December 31, 1997 which
the
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Company believes have been prepared in accordance with GAAP; provided, that the
columns labeled "Kane" and "Konover" on the Pro Forma Balance Sheet are based on
the terms of the Kane Purchase Agreement and the Konover Purchase Agreement,
respectively, and, where applicable, financial statements prepared by management
of Kane and Konover, respectively. The Pro Forma Balance Sheet fairly presents
the pro forma financial position of the Company as of its date in accordance
with GAAP consistently applied.
(d) Except as and to the extent set forth in the Company
Reports and the Company's financial statements filed with the SEC or in any
Schedule hereto, none of the Company or any of its Subsidiaries has any
Liabilities (nor do there exist any circumstances) that would, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 3.6 Litigation; Compliance With Law.
(a) Except as set forth on Schedule 3.6, there are no Actions
pending or, to the Company's knowledge, threatened against the Company or any of
its Subsidiaries that would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, or which question the validity
hereof or any action taken or to be taken in connection herewith. Except as
disclosed in Schedule 3.6(a), there are no continuing orders, injunctions or
decrees of any Government Authority to which the Company or any of its
Subsidiaries is a party or by which any of its properties or assets are bound.
(b) None of the Company or its Subsidiaries is in violation of
any statute, rule, regulation, order, writ, decree or injunction of any
Government Authority or any body having jurisdiction over them or any of their
respective properties which, if enforced, would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed
in the Company Reports filed with the SEC prior to the date hereof or in
Schedule 3.7, since November 15, 1997 the Company and each of its Subsidiaries
has conducted its business only in the ordinary course and has acquired real
estate and entered into financing arrangements in connection therewith only in
the ordinary course of such business, and there has not been (a) any change,
circumstance or event that would reasonably be expected to result in a Material
Adverse Effect, (b) any declaration, setting aside or payment of any dividend or
other distribution with respect to the Company Common Stock, except in
accordance with Section 5.3, (c) any material commitment, contractual
obligation, borrowing, capital expenditure or transaction (each, a "Commitment")
entered into by the Company or any of its Subsidiaries or (d) any material
change in the Company's accounting principles, practices or methods.
Section 3.8 Tax Matters; REIT and Partnership Status.
(a) The Company and each of its Subsidiaries has timely filed
with the appropriate taxing authority all Tax Returns required to be filed by it
or has timely requested extensions and any such request has been granted and has
not expired. Each such Tax Return is
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complete and accurate in all respects. All Taxes shown as owed by the Company or
any of its Subsidiaries on any Tax Return have been paid or accrued, except for
Taxes being contested in good faith and for which adequate reserves have been
taken. The Company and each of its Subsidiaries has properly accrued all Taxes
for such periods subsequent to the periods covered by such Tax Returns as
required by GAAP. None of the Company or any of its Subsidiaries has executed or
filed with the IRS or any other taxing authority any agreement now in effect
extending the period for assessment or collection of any Tax. Except as set
forth in Schedule 3.8(a), none of the Company or any of its Subsidiaries is
being audited or examined by any taxing authority with respect to any Tax or is
a party to any pending action or proceedings by any taxing authority for
assessment or collection of any Tax, and no claim for assessment or collection
of any Tax has been asserted against it. True and complete copies of all
federal, state and local income or franchise Tax Returns filed by the Company
and each of its Subsidiaries for 1995 and 1996 and all written communications
relating thereto have been delivered to Buyer or made available to
representatives of Buyer prior to the date hereof. No claim has been made in
writing or, to the Company's knowledge, otherwise by an authority in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. Except as
set forth in Schedule 3.8(a), there is no dispute or claim concerning any Tax
liability of the Company or any of its Subsidiaries, (i) claimed or raised by
any taxing authority in writing or (ii) as to which the Company or any of its
Subsidiaries has knowledge. As of the date hereof, the Company is a domestically
controlled REIT within the meaning of Section 897(h)(4)(B) of the Code. To the
Company's knowledge, except as set forth in Schedule 3.8(a), no person or entity
which would be treated as an "individual" for purposes of Section 542(a)(2) of
the Code (as modified by Section 856(h) of the Code) owns or would be considered
to own (taking into account the constructive ownership rules of Section 544 of
the Code, as modified by Section 856(h) of the Code) in excess of 9.8% of the
value of the outstanding equity interests in the Company. Except as contemplated
by this Agreement or as set forth in Schedule 3.8(a), the Board has not exempted
any person from the Ownership Limit or otherwise waived any of the provisions of
Article IV of the Company Charter (as all capitalized terms used in this
sentence are defined in the Company Charter). The Ownership Limit (as such term
is defined in the Company Charter) has not been modified. Except as set forth on
Schedule 3.8(a), each ownership interest that the Company and each of its
Subsidiaries has in an entity formed as a partnership (or which files federal
income tax returns as a partnership) qualifies, and since the date of its
formation qualified, to be treated as a partnership for federal income tax
purposes or as a "qualified REIT subsidiary" within the meaning of Section
856(i)(2) of the Code.
(b) The Company (i) intends in its federal income tax return
for the tax year that will end on December 31, 1997 to be taxed as a real estate
investment trust within the meaning of Section 856 of the Code ("REIT") and has
complied (or will comply) with all applicable provisions of the Code relating to
a REIT, for 1997, (ii) has operated, and intends to continue to operate, in such
a manner as to qualify as a REIT for 1997, (iii) has not taken or omitted to
take any action which would reasonably be expected to result in a challenge to
its status as a REIT, and, to the Company's knowledge, no such challenge is
pending or threatened, and (iv) to the Company's knowledge, and assuming the
accuracy of Buyer's representations in Sections 4.8 and 4.10 (disregarding the
qualification relating to Buyer's knowledge and assuming no exceptions are set
forth in Schedule
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4.10-B), will not be rendered unable to qualify as a REIT for federal income tax
purposes as a consequence of the transactions contemplated hereby.
(c) Except as set forth on Schedule 3.8(c), any amount or
other entitlement that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated hereby
by any person who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) with respect to the Company or
any of its Affiliates would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
(d) Except as set forth on Schedule 3.8(d), the disallowance
of a deduction under Section 162(m) of the Code for employee remuneration will
not apply to any amount paid or payable by the Company or any of its
Subsidiaries under any contract, stock plan, program, arrangement or
understanding currently in effect.
(e) The Company was eligible to and did validly elect to be
taxed as a REIT for federal income tax purposes for calendar year 1993 and all
subsequent taxable periods and was in compliance with the Code and all
applicable rules and regulations of the Code necessary to permit it to be taxed
as a REIT for all such periods. Each Subsidiary of the Company organized as a
partnership (and any other Subsidiary that files Tax Returns as a partnership
for federal income tax purposes) was and continues to be classified as a
partnership for federal income tax purposes or as a "qualified REIT subsidiary"
within the meaning of Section 856(i)(2) of the Code.
Section 3.9 Compliance with Agreements; Material Agreements.
(a) Neither the Company nor any of its Subsidiaries is in
default under or in violation of any provision of the Company Charter, the
by-laws of the Company (or equivalent documents) or any partnership agreement,
operating agreement, joint venture agreement or any other organization or
formation documents to which the Company or any of its Subsidiaries is a party.
(b) The Company and each of its Subsidiaries have filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file with
any Government Authority and all other material reports and statements required
to be filed by them, including any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, and have paid
all fees or assessments due and payable in connection therewith, except for such
failures to file or pay which would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. Except as set
forth on Schedule 3.9(b), there is no unresolved violation asserted by any
regulatory agency with respect to any report or statement relating to an
examination of the Company or any of its Subsidiaries which, if resolved in a
manner unfavorable to the Company or such Subsidiary, would, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
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(c) The Company Reports or Schedule 3.9(c) set forth (i) a
description of all material indebtedness of the Company and each of its
Subsidiaries, whether unsecured, or secured or collateralized by mortgages,
deeds of trust or other security interests in the Company Properties or any
other assets of the Company and each of its Subsidiaries, or otherwise and (ii)
each Commitment entered into by the Company or any of its Subsidiaries
(including any guarantees of any third party's debt or any obligations in
respect of letters of credit issued for the Company's or any of its Subsidiary's
account) which may result in total payments or liabilities in excess of
$300,000, excluding Commitments made in the ordinary course of business with a
maturity of less than one year or that are terminable on 30 days or less notice.
True and complete copies of the documents relating to the foregoing have been
delivered or made available to Buyer prior to the date hereof. Neither the
Company nor any of its Subsidiaries is in default, and, to the Company's
knowledge, no event has occurred which, with the giving of notice or the lapse
of time or both, would constitute a material default, under any of the documents
described in clause (i) or (ii) of this paragraph or in respect of any payment
obligations thereunder. All joint venture and partnership agreements to which
the Company or any of its Subsidiaries is a party as of the date hereof are set
forth in Schedule 3.1(d), all of which are in full force and effect as against
the Company or such Subsidiary and, to the Company's knowledge, as against the
other parties thereto, and none of the Company or any of its Subsidiaries is in
default, and, to the Company's knowledge, no event has occurred which, with the
giving of notice or the lapse of time or both, would constitute a default, with
respect to any obligations thereunder. To the Company's knowledge, the other
parties to such agreements are not in breach of any of their respective
obligations thereunder. To the Company's knowledge, no event has occurred nor is
the Company aware of the existence of any facts with respect to the Company's
Subsidiaries (including with respect to the partnership agreements for the
Company's Subsidiaries that are partnerships and operating agreements for the
Company's Subsidiaries that are limited liability companies) that would,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(d) Except as disclosed in the Company Reports, Schedule
3.9(d) sets forth a complete and accurate list of all material agreements
entered into by the Company or any of its Subsidiaries as of the date hereof
relating to the development or construction of, additions or expansions to, or
management or leasing services for retail shopping centers or other real
properties which are currently in effect and under which the Company or any of
its Subsidiaries currently has, or expects to incur, obligations in excess of
$300,000. True and complete copies of such agreements will be made available to
Buyer.
(e) Except as disclosed in the Company Reports and except for
(i) agreements made in the ordinary course of business with a maturity of one
year or less or that are terminable on 30 days or less notice, (ii) agreements
the breach or non-fulfillment of which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect and
(iii) agreements under which the Company's total benefit or obligations do not
exceed $300,000, Schedule 3.9(e) sets forth a complete and accurate list of all
material agreements entered into by the Company as of the date hereof,
including, without limitation, material Debt Instruments. Each agreement set
forth in Schedule 3.9(e) is in full force and effect as against the Company and,
to the Company's knowledge, as against the other parties thereto, no payments,
if any, thereunder are
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delinquent, the Company is not in default, in any material respect, thereunder,
and no notice of default thereunder has been sent or received by the Company or
any of its Subsidiaries. To the Company's knowledge, no event has occurred
which, with notice or lapse of time or both, would constitute a default, in any
material respect, by the Company under any agreement set forth in Schedule
3.9(e). To the Company's knowledge, the other parties to such agreements are not
in breach of their respective obligations thereunder, except as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. True and complete copies of each such agreement have been made
available to Buyer prior to the date hereof.
(f) Schedule 3.9(f) sets forth a complete and accurate list of
all agreements and policies of the Company in effect on the date hereof relating
to transactions with affiliates and potential conflicts of interest. Each
agreement or arrangement set forth in Schedule 3.9(f) is in full force and
effect, and the Company, each of its Subsidiaries, and, to the Company's
knowledge, the other parties thereto are in compliance with such agreements and
policies, or such compliance has been waived by the Board as set forth in
Schedule 3.9(f). True and complete copies of each such agreement or arrangement
were made available to Buyer.
(g) Except as set forth on Schedule 3.9(g), there are no
change of control or similar provisions in any employment, severance, stock
option, stock incentive, Company Plans or similar agreement or arrangement which
would be triggered by the transactions contemplated by this Agreement. Schedule
3.9(g) identifies the obligations to employees (including any payment or other
obligation, forgiveness of debt, other release from obligations, or acceleration
of vesting) which are created, accelerated or triggered by the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.10 Financial Records; Company Charter and By-laws; Corporate
Records.
(a) The books of account and other financial records of the
Company and each of its Subsidiaries are in all material respects true and
complete, have been maintained in accordance with good business practices, and
are accurately reflected in all material respects in the financial statements
included in the Company Reports.
(b) The Company has previously delivered or made available to
Buyer true and complete copies of the Company Charter and the by-laws of the
Company, as amended to date, and the charter, by-laws, organizational documents,
partnership agreements and joint venture agreements of its Subsidiaries, and all
amendments thereto. All such documents are listed in Schedule 3.10(b).
(c) The minute books and other records of corporate or
partnership proceedings of the Company and each of its Subsidiaries have been
made available to Buyer and its representatives and contain in all material
respects accurate records of all meetings and accurately reflect in all material
respects all other corporate actions of the stockholders and directors and any
committees of the Board and the board of directors of its Subsidiaries which are
corporations and all material actions of the partners of its Subsidiaries which
are partnerships, except for
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documentation of discussions relating to or in connection with the transactions
contemplated hereby or matters related hereto.
Section 3.11 Properties.
(a) Schedule 3.11(a) sets forth a complete and accurate list
and the address of all real property owned or leased by the Company or any of
its Subsidiaries or otherwise used by the Company or its Subsidiaries in the
conduct of their business or operations (collectively, and together with the
land at each address referenced in Schedule 3.11(a) and all buildings,
structures and other improvements and fixtures located on or under such land and
all easements, rights and other appurtenances to such land, the "Company
Properties"). The Company and each of its Subsidiaries own insurable fee simple
title (or, if so indicated in Schedule 3.11(a), leasehold title) to each of the
Company Properties, free and clear of any Liens, title defects, contractual
restrictions or covenants, laws, ordinances or regulations affecting use or
occupancy (including zoning regulations and building codes) or reservations of
interests in title (collectively, "Property Restrictions"), except for (i)
Permitted Liens and (ii) Property Restrictions imposed or promulgated by law or
by any Government Authority which are customary and typical for similar
properties. None of the matters described in clauses (i) and (ii) of the
immediately preceding sentence materially interferes with, materially impairs,
or is violated by, the existence of any building or other structure or
improvement which constitutes a part of, or the present use, occupancy or
operation of, the Company Properties taken as a whole, and such matters do not,
individually or in the aggregate, have a Material Adverse Effect. American Land
Title Association policies of title insurance (or marked title insurance
commitments having the same force and effect as title insurance policies or
binding irrevocable escrow instructions to issue such title insurance policies
or endorsements to existing title insurance policies) have been issued by
national title insurance companies insuring the fee simple or leasehold, as
applicable, title of the Company or its Subsidiaries, as applicable, to each of
the Company Properties in, to the Company's knowledge, sufficient amounts to
avoid co-insurance statutes, subject only to the matters set forth therein (the
"Title Policies"), and, to the Company's knowledge, the Title Policies are valid
and in full force and effect and no claim has been made under any such policy.
The Company will make available to Buyer true and complete copies of all such
policies and of the most recent surveys of the Company Properties, and true and
complete copies of all material exceptions referenced in such policies and the
most recent title reports for and surveys (to the extent not previously
delivered or made available to Buyer) of each of the Company Properties
available to the Company or any of its Subsidiaries for inspection by Buyer or
its representatives within five Business Days of Buyer's request therefor.
(b) Except as set forth in Schedule 3.11(b), and except for
matters which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or to materially and adversely affect
the use or occupancy of the applicable Company Property, to the Company's
knowledge, there are no (i) certificates, permits or licenses that are currently
required (including building permits and certificates of occupancy for tenant
spaces) from any Government Authority having jurisdiction over any Company
Property or agreements, easements or other rights which are necessary to permit
the lawful use, occupancy or operation of the existing buildings, structures or
other improvements which constitute a part of any of the Company Properties or
to
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permit the lawful use and operation of utility service to any Company Property
or of any existing driveways, roads or other means of egress and ingress to and
from any of the Company Properties that have not been obtained or that are not
in full force and effect, or any pending modification or cancellation of any of
same, or (ii) violations by any Company Property of any federal, state or
municipal law, ordinance, order, regulation or requirement, including any
applicable zoning law or building code, as a result of the use or occupancy of
such Company Property or otherwise. Except as set forth in Schedule 3.11(b), the
Company has no knowledge of any uninsured physical damage to any Company
Property in excess of $300,000 in the aggregate. To the Company's knowledge,
except for repairs identified in the Capital Expenditure Budget and Schedule or
in any engineering or structural report reviewed by Buyer or its consultants,
each Company Property, (i) is in good operating condition and repair and is
structurally sound and free of defects, with no material alterations or repairs
being required thereto under applicable law or insurance company requirements,
and (ii) consists of sufficient land, parking areas, driveways and other
improvements and lawful means of access and utility service and capacity to
permit the use thereof in the manner and for the purposes to which it is
presently devoted, except, in each such case, to the extent that failure to meet
such standards would not materially and adversely affect the use or occupancy of
the applicable Company Property. The Company will make available to Buyer true
and complete copies of all engineering reports, inspection reports, maintenance
plans and other documents relating to the condition of any Company Property
prepared for or by the Company since the Initial Public Offering.
(c) Except as set forth in Schedule 3.11(c), there is no (i)
condemnation, eminent domain or rezoning proceeding pending or, to the Company's
knowledge, threatened with respect to any of the Company Properties, (ii) road
widening or change of grade of any road adjacent to any Company Property
currently underway or that, to the Company's knowledge, has been proposed, (iii)
proposed change in the assessed valuation of any Company Property other than
customarily scheduled revaluations, (iv) special assessment that has been made
or, to the Company's knowledge, threatened against any Company Property, or (v)
Company Property subject to any so-called "impact fee" or to any agreement with
any Government Authority to pay for sewer extensions, oversizing utilities,
lighting or like expenses or charges for work or services by such Government
Authority, except, in the case of each of the foregoing, to the extent that same
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or to materially and adversely affect the use or
occupancy of the applicable Company Property.
(d) Each of the Company Properties is an independent unit
which does not rely on any facilities located on any property not included in
such Company Property to fulfill any municipal or governmental requirement or
for the furnishing to such Company Property of any essential building systems or
utilities, other than facilities the benefit of which inures to the Company
Properties pursuant to one or more valid easements or parking agreements. Each
of the Company Properties is served by public water and sanitary or septic
systems and all other utilities, and each of the Company Properties has lawful
access to public roads, in all cases sufficient for the current use and
occupancy of each Company Property. To the Company's knowledge or as set forth
in the surveys, all parcels of land included in each Company Property that
purport to be contiguous are contiguous and are not separated by strips or
gores. Except as set forth in Schedule 3.11(d) or
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any surveys or Environmental Reports relating to any Company Property prepared
for or by the Company since the Initial Public Offering, no portion of any
Company Property includes any wetlands or vegetation or species protected by any
applicable laws or, in event that such surveys or Environmental Reports disclose
the existence of such wetlands or protected vegetation or species, such items
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the use or occupancy of the applicable Company
Property. Except as set forth on Schedule 3.11(d) or the Title Policies or
surveys, none of the Company Properties lies in any 100-year flood plain area,
as established by the U.S. Army Corps of Engineers (the "Army Corps of
Engineers"). With respect to the improvements on each Company Property which lie
in a flood plain area, if any, the Company or its Subsidiaries carry and
presently maintain in full force and effect flood insurance in connection with
such Company Properties as required by applicable law and as accurately
described in Schedule 3.11(d). The improvements on each Company Property comply
in all material respects with all applicable building codes and other relevant
laws and regulations. No improvements constituting a part of any Company
Property encroach on real property not constituting a part of such Company
Property or such encroachments would not, individually or in the aggregate, have
a Material Adverse Effect or materially and adversely affect the use or
occupancy of the applicable Company Property.
(e) Schedule 3.11(e) contains a complete and accurate list of
each survey, study or report prepared by or for the Company or any of its
Subsidiaries since the Initial Public Offering, in connection with any Company
Property's compliance or non-compliance with the requirements of the Americans
with Disabilities Act (the "ADA"), other than routine correspondence or
memoranda. Except for matters addressed in the Capital Expenditure Budget and
Schedule, no Company Property fails to comply with the requirements of the ADA
except for such non-compliance as the Company believes will not, individually or
in the aggregate, have a Material Adverse Effect.
(f) The Company has provided to Buyer an accurate rent roll
for each Company Property as of February 19, 1998 (the "Rent Roll"), which
accurately describes each lease of space in each Company Property (collectively,
the "Company Leases"). The Company has delivered to Buyer profiles of the
Company Leases (the "Lease Profiles"), which have been prepared in the ordinary
course of business. The Company will make available to Buyer a true and complete
copy of each Company Lease, including all amendments and modifications thereto.
With respect to each Company Lease for premises larger than 10,000 square feet
of rentable space (collectively, the "Material Company Leases"), except as set
forth in Schedule 3.11(f), (i) each of the Material Company Leases is valid and
subsisting and in full force and effect as against the Company or the
Subsidiary, as applicable, and, to the Company's knowledge, as against the
tenant, and the information on the Rent Roll with respect to the Material
Company Leases is accurate, (ii) except as otherwise set forth on the Rent Roll,
the tenant under each of the Material Company Leases is in actual possession of
the premises leased thereunder, (iii) except as otherwise set forth on the Rent
Roll, no tenant under any Material Company Lease is more than 30 days in arrears
in the payment of rent, (iv) neither the Company nor any of its Subsidiaries has
received any written notice from any tenant under any Material Company Lease of
its intention to vacate, (v) neither the Company nor any of its Subsidiaries has
collected payment of rent under any Material Company Lease (other than
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security deposits) accruing for a period which is more than one month in
advance, (vi) no notice of default has been sent or received by the landlord
under any Material Company Lease which remains uncured as of the date hereof, no
default has occurred under any Material Company Lease by the landlord thereunder
and, to the Company's knowledge, no default has occurred under any Material
Company Lease by the tenant thereunder and, to the Company's knowledge, no event
has occurred and is continuing which, with notice or lapse of time or both,
would constitute a default under any Material Company Lease, (vii) except as
disclosed on the Lease Profiles or Schedule 3.11(f), no tenant under any of the
Material Company Leases has any purchase options or kick-out rights or is
entitled to any concessions, allowances, abatements, setoffs, rebates or
refunds, (viii) none of the Material Company Leases and none of the rents or
other amounts payable thereunder has been mortgaged, assigned, pledged or
encumbered by any party thereto or otherwise, except in connection with
financing secured by the applicable Company Property which is described in
Schedule 3.9(c) or the Company Reports, (ix) (A) as of the date hereof, except
as set forth in Schedule 3.11(f), no brokerage or leasing commission or other
compensation is due or payable to any person with respect to or on account of
any of the Material Company Leases or any extensions or renewals thereof
incurred after the date hereof, and (B) any brokerage or leasing commission or
other compensation due or payable to any person with respect to or on account of
any of the Material Company Leases or any extensions or renewals thereof have
been incurred in the ordinary course of business of the Company consistent with
past practice and market terms, (x) no space occupied under any Material Company
Lease in any Company Property is occupied by a tenant not paying base and/or
percentage rent, (xi) no tenant under any of the Material Company Leases has
asserted any claim in writing or, to the Company's knowledge, orally, which is
likely to affect the collection of rent from such tenant, (xii) other than as
would be customary or consistent with commercially reasonable retail leasing
business practices, no tenant under any of the Material Company Leases has any
right to remove material improvements or fixtures that have at any time been
affixed to the premises leased thereunder, (xiii) each tenant under the Material
Company Leases is required thereunder to maintain or to cause to be maintained,
at its cost and expense, public liability and property damage insurance with
liability limits in amounts at least equal to that maintained by commercially
prudent owners of properties similar to the Company Property to which such
Material Company Lease relates, or in the alternative, consistent with
commercially reasonable prudent retail leasing business practices, tenants may
self-insure or the Company may provide such coverage to tenants and (xiv) the
landlord under each Material Company Lease has fulfilled all of its obligations
thereunder in respect of tenant improvements and capital expenditures consistent
with commercially reasonable prudent retail leasing business practices. Other
than the tenants identified in the Rent Roll and parties to easement agreements
which constitute Permitted Liens, no third party has any right to occupy or use
any portion of any Company Property. Budgets for all material tenant
improvements and similar material work required to be made by the lessor under
each of the Material Company Leases is incorporated in Schedule 3.11(i).
(g) Schedule 3.11(g) sets forth a complete and accurate list
of all material commitments, letters of intent or similar written understandings
made or entered into by the Company or any of its Subsidiaries as of the date
hereof (x) to lease any space larger than 10,000 rentable square feet at any of
the Company Properties, (y) to sell, mortgage, pledge or hypothecate any Company
Property or Properties, which, individually or in the aggregate, are material,
or to
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otherwise enter into a material transaction in respect of the ownership or
financing of any Company Property, or (z) to purchase or to acquire an option,
right of first refusal or similar right in respect of any real property, which,
individually or in the aggregate, are material, which, in any such case, has not
yet been reduced to a written lease or contract, and sets forth with respect to
each such commitment, letter of intent or other understanding the principal
terms thereof. The Company will make available to Buyer a true and complete copy
of each such commitment, letter of intent or other understanding. Schedule
3.11(g) also sets forth a complete and accurate list of all agreements to
purchase real property to which the Company or any of its Subsidiaries is a
party.
(h) Except as set forth in Schedule 3.11(h), none of the
Company Properties is subject to any outstanding purchase options nor has the
Company or any of its Subsidiaries entered into any outstanding contracts with
others for the (i) lease or sublease of space in excess of 10,000 square feet of
rentable space in any Company Property; or (ii) sale, mortgage, pledge,
hypothecation or other transfer of all or any part of any Company Property, and
no person has any right or option to acquire, or right of first refusal with
respect to, the Company's or any of its Subsidiaries' interest in any Company
Property or any part thereof. Except as set forth in Schedule 3.11(h) or
3.11(g), none of the Company or any of its Subsidiaries has any outstanding
options or rights of first refusal or has entered into any outstanding contracts
with others for the purchase of any real property.
(i) Schedule 3.11(i) sets forth the Company's or any of its
Subsidiary's capital expenditure budget and schedule for each Company Property,
which describes the capital expenditures which the Company or such Subsidiary
has budgeted for such Company Property for the period running through December
31, 1997 (the "Capital Expenditure Budget and Schedule"), and the Company's or
any of its Subsidiary's preliminary capital expenditure budget and schedule for
each Company Property, which describes the capital expenditures which the
Company or such Subsidiary has budgeted for such Company Property for the period
commencing January 1, 1998 and running through December 31, 1999 (the "1998 and
1999 Preliminary Capital Expenditure Budgets and Schedules"). Each of the
Capital Expenditure Budget and the 1998 and 1999 Preliminary Capital Expenditure
Budgets and Schedules also describes other capital expenditures as are
necessary, to the Company's knowledge, in order to bring the applicable Company
Property into material compliance with applicable laws, ordinances, codes,
health and safety regulations and insurance requirements (including in respect
of fire sprinklers, compliance with the ADA (except to the extent that (x) a
tenant under any Company Lease is contractually responsible and liable for such
ADA compliance under its Company Lease or (y) with respect to shopping center
properties, any work required to cause such compliance is not material and the
related expenditures are, in the aggregate with all other such expenditures,
less than $300,000), and asbestos containing material) or which the Company
otherwise plans or expects to make in order to cure or remedy any construction,
electrical, mechanical or other defects, to renovate, rehabilitate or modernize
such Company Property, or otherwise, excluding, however, any tenant improvements
required to be made under any Company Lease. To the Company's knowledge, the
costs and time schedules for 1998 and 1999 set forth in the 1998 and 1999
Preliminary Capital Expenditure Budgets and Schedules are reasonable estimates
and projections based upon information available to the Company at the time that
the 1998 and 1999 Preliminary Capital Expenditure Budgets and Schedules were
prepared, and, nothing has come to the attention of the Company since such time
which would indicate that the
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1998 and 1999 Preliminary Capital Expenditure Budgets and Schedules are
inaccurate or misleading in any material respect. Except as set forth in
Schedule 3.11(i), there are no outstanding or, to the Company's knowledge,
threatened requirements by any insurance company which has issued an insurance
policy covering any Company Property, or by any board of fire underwriters or
other body exercising similar functions, requiring any repairs or alterations to
be made to any Company Property that would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(j) Schedule 3.11(j) contains a list of each Company Property
which consists of or includes undeveloped land or which is in the process of
being developed or redeveloped (collectively, the "Development Properties") and
a brief description of the development or redevelopment intended by the Company
or any of its Subsidiaries to be carried out or completed thereon (collectively,
the "Projects"), including any budget and development schedule therefor prepared
by or for the Company or any of its Subsidiaries (collectively, the "Development
Budget and Schedule"). Except as disclosed in Schedule 3.11(j), each Development
Property is zoned for the lawful development or redevelopment thereon of the
applicable Project, and the Company or its Subsidiaries have obtained all
permits, licenses, consents and authorizations required for the lawful
development or redevelopment thereon of such Project, except only for such
failure to meet the foregoing standards as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect. Except as
set forth in Schedule 3.11(j), all of the existing improvements or structures
located on any of the Development Properties comply in all material respects
with all applicable building codes, laws, rules or regulations. Except as set
forth in Schedule 3.11(j), to the Company's knowledge, there are no material
impediments to or constraints on the development or redevelopment of any Project
in all material respects within the time frame and for the cost set forth in the
Development Budget and Schedule applicable thereto. Except as disclosed in
Schedule 3.11(j), each Development Property consists of sufficient land, parking
areas, driveways and other improvements, and lawful means of access and utility
and service and capacity to permit the development and operation of the Project
as intended to be carried out or completed thereon. Except as set forth on
Schedule 3.11(j), the Development Properties are free and clear of any Property
Restrictions, encroachments or other matters (including, any condemnation,
eminent domain or rezoning proceedings (proposed or threatened), special
assessments, taxes or so-called "impact fees") which would individually, or in
the aggregate, be reasonably expected to have a Material Adverse Effect on the
development of the related Development Property. In the case of each Project the
development of which has commenced, to the Company's knowledge, the costs and
expenses incurred in connection with such Project and the progress thereof are,
except as set forth in Schedule 3.11(j), consistent and in compliance in all
material respects with the Development Budget and Schedule applicable thereto.
The Company will make available to Buyer all feasibility studies, soil tests,
due diligence reports and other studies, tests or reports performed by or for
the Company at any time since the Initial Public Offering, which relate to the
Development Properties or the Projects.
(k) The ground leases underlying the leased Company Properties
referenced in Schedule 3.11(a) (collectively, the "Ground Leases") are
accurately described in Schedule 3.11(k). Each of the Ground Leases is valid,
binding and in full force and effect as against the Subsidiary and, to the
Company's knowledge, as against the other party thereto. Except as indicated in
Schedule
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3.11(k) and except for any Company Leases and Permitted Liens affecting the
same, none of the Ground Leases is subject to any mortgage, pledge, Lien,
sublease, assignment, license or other agreement granting to any third party any
interest therein, collateral or otherwise, or any right to the use or occupancy
of any premises leased thereunder. True and complete copies of the Ground Leases
(including all amendments, modifications and supplements thereto) have been
delivered to Buyer prior to the date hereof. To the Company's knowledge, except
as set forth in Schedule 3.11(k), there is no pending or threatened proceeding
which is reasonably likely to interfere with the quiet enjoyment of the tenant
under any of the Ground Leases. Except as set forth in Schedule 3.11(k), as of
the last day of the month preceding the date hereof and as of the last day of
the month preceding the date of the Initial Closing, no payments under any
Ground Lease are delinquent and no notice of default under any Ground Lease has
been sent or received by the Company or any of its Subsidiaries. There does not
exist under any of the Ground Leases any default, and, to the Company's
knowledge, no event has occurred which, with notice or lapse of time or both,
would constitute such a default.
(l) The Company and each of its Subsidiaries have good and
sufficient title to all the personal and non-real properties and assets
reflected in their books and records as being owned by them (including those
reflected in the balance sheets of the Company and its Subsidiaries as of
December 31, 1997, except as since sold or otherwise disposed of in the ordinary
course of business), free and clear of all Liens, except for Permitted Liens
which are not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect.
(m) The Company has provided to Buyer historical operating
expense information (the "Historical Expense Information") for each of the last
three years, which has been prepared in the ordinary course of business. The
Historical Expense Information is accurate in all material respects.
(n) Except as set forth on Schedule 3.11(n), neither the
Company nor any of its Subsidiaries is a party to any material third-party
property management or leasing agreements pursuant to which the Company or any
of its Subsidiaries receives a fee or other compensation from a third party for
managing or leasing real property.
Section 3.12 Environmental Matters.
(a) To the Company's knowledge, each of the Company and its
Subsidiaries has obtained, and now maintains as currently valid and effective,
all permits, certificates of financial responsibility and other governmental
authorizations required to be obtained by the Company or any of its Subsidiaries
under the Environmental Laws (the "Environmental Permits") in connection with
the operation of its businesses and properties. Except as disclosed in the
Company Environmental Reports or the Company Reports, each of the Company and
its Subsidiaries and each Company Property is and has been in compliance with
all terms and conditions of the Environmental Permits and all Environmental
Laws, except only to an extent which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect. The
Company has no
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knowledge of any circumstances or conditions that may prevent or interfere with
such compliance in the future.
(b) Each of the Company and its Subsidiaries has provided or
made available to Buyer all formal written communications (whether from a
Government Authority, citizens' group, employee or other person), which the
Company has received regarding (x) alleged or suspected noncompliance of any of
the Company Properties with any Environmental Laws or Environmental Permits or
(y) alleged or suspected Liability of the Company or its Subsidiaries under any
Environmental Law, which noncompliance or Liability would, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
(c) To the Company's knowledge, there are no liens or
encumbrances on any of the Company Properties which arose pursuant to or in
connection with any Environmental Law or Environmental Claim and, to the
Company's knowledge, no government actions have been taken or threatened to be
taken or are in process which are reasonably likely to subject any Company
Property to such liens or other encumbrances.
(d) Except as disclosed in Schedule 3.12(d) or in the Company
Reports (none of which matters would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect), or set forth in the
Company Environmental Reports, no Environmental Claims have been asserted or, to
the Company's knowledge, threatened that, individually or in the aggregate, may
result in liabilities exceeding $300,000 with respect to the operations or the
businesses of the Company or its Subsidiaries, or with respect to the Company
Properties. To the Company's knowledge, except as set forth on the Company
Environmental Reports or in the Company Reports, no circumstances, past or
present actions, conditions, events or incidents exist with respect to the
Company or any of its Subsidiaries or the Company Properties that would
reasonably be expected to result in the assertion of any Environmental Claims
that, individually or in the aggregate, may result in liabilities exceeding
$300,000, in any such case, against (i) the Company or any of its Subsidiaries,
or (ii) to the Company's knowledge, any person whose liability for any
Environmental Claims the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law.
(e) Except as disclosed in Schedule 3.12(e) (none of which
matters would, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect), or set forth in the Company Environmental Reports or
the Company Reports, (i) none of the Company or its Subsidiaries has been
notified or anticipates being notified of potential responsibility in connection
with any site that has been placed on, or proposed to be placed on, the National
Priorities List or its state or foreign equivalents pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or analogous state laws, (ii) no Materials of
Environmental Concern are present on, in or under any Company Property in a
manner or condition that is reasonably likely to give rise to Environmental
Claims which, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect, (iii) none of the Company or its
Subsidiaries has Released or arranged for the Release of any Materials of
Environmental Concern at any location to an extent or in a manner which would
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reasonably be expected to result in a Material Adverse Effect, (iv) no
underground storage tanks, surface impoundments, disposal areas, pits, ponds,
lagoons, open trenches or disused industrial equipment is present at any Company
Property in a manner or condition that is reasonably likely to give rise to one
or more Environmental Claims which, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect, (v) no
transformers, capacitors or other equipment containing fluid with more than 50
parts per million polychlorinated biphenyls are present at any Company Property
in a manner or condition that is reasonably likely to give rise to one or more
Environmental Claims which, individually or in the aggregate, would reasonably
be expected to result in a Material Adverse Effect, except for any such
transformers, capacitors or other equipment owned by any utility company, and
(vi) to the Company's knowledge, no friable asbestos and no friable
asbestos-containing material is present at any Company Property and, to the
Company's knowledge, no Employee, agent, contractor or subcontractor of the
Company or its Subsidiaries or any other person is now or has in the past been
exposed to friable asbestos at any Company Property, except, in the case of each
of the matters set forth in this subpart (vi), for such matters as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(f) Schedule 3.12(f) contains a list of each environmental
report, audit, summary, or similar document prepared for or by the Company or
any of its Subsidiaries or otherwise in the possession of any of them with
respect to the environmental condition of any Company Property (collectively,
the "Company Environmental Reports"). The Company has previously delivered or
made available to Buyer true and complete copies of each Company Environmental
Report. None of the matters disclosed by the Company Environmental Reports
would, individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect. The Company has no knowledge of any facts or circumstances
relating to the environmental condition of any property owned, leased or
otherwise held by the Company that is not a Company Property that are reasonably
likely to result in a Material Adverse Effect.
(g) For purposes hereof, the terms listed below shall have the
following meanings:
(i) "Claim" shall mean all actions, causes of action, suits,
judgments, executions, claims, Liabilities and demands whatsoever, in
law or equity.
(ii) "Environmental Claim" shall mean any Claim investigation
or notice by any person alleging potential liability (including
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries or fatalities, or penalties) arising out of,
based on or resulting from (A) the presence, generation,
transportation, treatment, use, storage, disposal or Release of
Materials of Environmental Concern or the threatened Release of
Materials of Environmental Concern at any location, or (B) activities
or conditions forming the basis of any violation, or alleged violation
of, or liability or alleged liability under, any Environmental Law.
(iii) "Environmental Laws" shall mean federal, state, and
local laws, ordinances, common law, orders, statutes, and regulations
relating to the pollution or protection of the
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environment or of flora or fauna or their habitat or of human health
and safety, or to the cleanup or restoration of the environment,
including, without limitation, CERCLA, the Toxic Substances Control
Act, as amended, the Hazardous Materials Transportation Act, as
amended, the Resource Conservation and Recovery Act, as amended, the
Clean Water Act, as amended, the Safe Drinking Water Act, as amended,
the Clean Air Act, as amended, the Occupational Safety and Health Act,
as amended, and all analogous laws promulgated or issued by any state
or other Government Authority.
(iv) "Materials of Environmental Concern" shall mean all
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum or any fraction thereof, petroleum products and hazardous
substances or solid or hazardous wastes as now defined and regulated
under any Environmental Laws.
(v) "Release" shall mean any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration.
Section 3.13 Employees and Employee Benefit Plans.
(a) Schedule 3.13(a) sets forth a complete and accurate list
of all employment agreements (the "Employment Agreements") between the Company
or any of its Subsidiaries and any employees of the Company or any of its
Subsidiaries. Except for the employees of the Company or its Subsidiaries who
are parties to such Employment Agreements, all of the employees of the Company
and each of its Subsidiaries are employed on an at-will basis (except for
restrictions or limitations on the at-will basis of such employees imposed by
law or equity or general principles of law or equity), other than such employees
party to Employment Agreements that are not, in the aggregate, material to the
Company.
(b) The Company Reports or Schedule 3.13(b) set forth a
complete and accurate list of all material Employee Benefit Plans and all
material Benefit Arrangements which cover Employees of the Company or any of its
Subsidiaries with respect to their employment relationship with the Company or
any of its Subsidiaries (the "Company Plans"). With respect to each Company
Plan, the Company has made available to Buyer true and complete copies of: (i)
the plans and related trust documents and all amendments thereto, (ii) the most
recent summary plan descriptions, if any, and the most recent annual report, if
any, (iii) the most recent actuarial valuation (to the extent applicable), and
(iv) the most recent determination letter issued by the IRS with respect to any
Company Plan intended to be qualified under Section 401(a) of the Code.
(c) With respect to each Company Plan, (i) the Company and
each of its Subsidiaries is, and has been since the date of adoption of each
Company Plan, in compliance in all material respects with the terms of each such
Company Plan and with the requirements prescribed by all applicable statutes,
orders or governmental rules or regulations, (ii) the Company and each of its
Subsidiaries has contributed to each Pension Plan included in the Company Plans
not less than the amounts accrued for such plan for all plan periods for which
payment is due, and (iii) neither the Company nor any of its Subsidiaries has
any funding commitment or other accrued liabilities except
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as set forth on Schedule 3.13(c) or as reserved for in the financial statements
in or incorporated by reference into the Company Reports, and in the case of
each of clauses (i), (ii), and (iii), except for such matters as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(d) Except as set forth on Schedule 3.13(d), none of the
Company or any of its Subsidiaries has made any commitment to establish any new
Employee Benefit Plan or Benefit Arrangement, to modify any Employee Benefit
Plan or Benefit Arrangement, or to increase benefits or compensation of
Employees of the Company or any of its Subsidiaries (except for normal increases
in compensation consistent with past practices), and, to the Company's
knowledge, no intention to do so has been communicated to Employees of the
Company or any of its Subsidiaries.
(e) Except as set forth on Schedule 3.13(e), there are no
pending or, to the Company's knowledge, anticipated government audits or claims
(excluding claims for benefits incurred in the ordinary course of Company Plan
activities) against or otherwise involving any of the Company Plans or any
fiduciaries thereof with respect to their duties to the Company Plans and no
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of Company Plan activities) has been brought against or with
respect to any such Company Plans.
(f) Neither the Company nor any of the ERISA Affiliates has,
at any time after September 25, 1980, contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Sections 3(37) and
4001(a)(3) of ERISA).
(g) Except as required by the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code or
requirements of state law and regulations and except as set forth on Schedule
3.13(g), the Company and its Subsidiaries do not maintain or contribute to any
plan or arrangement which provides or has any liability to provide life
insurance, medical or other employee welfare benefits described in Section 3(1)
of ERISA to any Employee or former Employee following his retirement or
termination of employment and, to the Company's knowledge, the Company and its
Subsidiaries have never represented, promised or contracted (whether in oral or
written form) to any Employee or former Employee that such benefits would be
provided.
(h) For purposes hereof, "Employee Benefit Plans" means each
and all "employee benefit plans" as defined in Section 3(3) of ERISA maintained
or contributed to by the Company or a Subsidiary or in which the Company or a
Subsidiary participates or participated and which provides benefits to
Employees, including (i) any such plans that are "employee welfare benefit
plans" as defined in Section 3(1) of ERISA, including retiree medical and life
insurance plans ("Welfare Plans"), and (ii) any such plans that constitute
"employee pension benefit plans" as defined in Section 3(2) of ERISA ("Pension
Plans"). "Benefit Arrangements" means life and health insurance,
hospitalization, savings, bonus, deferred compensation, incentive compensation,
holiday, vacation, severance pay, sick pay, sick leave, disability, tuition
refund, service award, company car, scholarship, relocation, patent award,
fringe benefit, individual employment, consultancy or severance contracts and
other polices or practices of the Company or a Subsidiary providing
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employee or executive compensation or benefits to Employees maintained or
contributed to by the Company or a Subsidiary, other than Employee Benefit
Plans. "Employees" mean all current employees, former employees and retired
employees of the Company or any of its Subsidiaries, including employees on
disability, layoff or leave status. "Controlled Group Liability" means any and
all liabilities (other than such liabilities that arise solely out of, or relate
solely to, the Company Plans) of the ERISA Affiliates (other than the Company
and its Subsidiaries) under (i) Title IV of ERISA, (ii) Section 302 of ERISA,
(iii) Sections 412 and 4971 of the Code, (iv) the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, and
(v) corresponding or similar provisions of foreign laws or regulations.
(i) To the Company's knowledge, with respect to each Company
Plan that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971
of the Code: (i) there does not exist any accumulated funding deficiency within
the meaning of Section 412 of the Code or Section 302 of ERISA, whether or not
waived, (ii) the fair market value of the assets of such plan equals or exceeds
the actuarial present value of all accrued benefits under such plan, on a
termination basis, (iii) no reportable event within the meaning of Section
4043(c) of ERISA has occurred, with respect to which notice has not been waived,
and the consummation of the transactions contemplated by this Agreement will not
result in the occurrence of any such reportable event, and (iv) all premiums due
to the Pension Benefit Guaranty Corporation have been timely paid in full.
(j) There does not now exist, nor do any circumstances exist
that could result in, any Controlled Group Liability that would be a liability
of the Company following the Closing. Without limiting the generality of the
foregoing, neither the Company nor any ERISA Affiliate has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
(k) Neither the execution and delivery of this Agreement, the
Kane Purchase Agreement, the Konover Purchase Agreement nor the consummation of
the transactions contemplated hereby or thereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
employee of the Company, except as set forth in Schedule 3.13(k) or any
automatic extension of the term of any Employment Agreement.
(l) To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any plan fiduciary of any Company Plan has engaged in any
transaction in violation of Sections 404 or 406 of ERISA or any "prohibited
transaction," as defined in Section 4975(c)(1) of the Code, for which no
exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the
Code, or has otherwise violated the provisions of Part 4 of Title I, Subtitle B
of ERISA. Neither the Company nor any Subsidiary has knowingly participated in a
violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of any
Company Plan and has not been assessed any civil penalty under Section 502(l) of
ERISA.
(m) Schedule 3.13 (m) sets forth a complete and accurate list
of all amounts paid annually pursuant to short-term or long-term disability
benefits under any Company Plan and the number of Employees receiving such
payments, as well as any Employees, to the Company's
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knowledge, who are participating in, or may become eligible to participate in,
any Company Plan who are suffering from serious illness or disease.
Section 3.14 Labor Matters. Except as set forth in Schedule 3.14, none
of the Company or any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. Except for the matters set forth
in Schedule 3.14 (none of which matters would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect), there is no unfair
labor practice or labor arbitration proceeding pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries. To the
knowledge of the Company, there are no organizational efforts with respect to
the formation of a collective bargaining unit presently being made or threatened
involving employees of the Company or any of its Subsidiaries.
Section 3.15 Affiliate Transactions. Schedule 3.15 sets forth a
complete and accurate list of all transactions, series of related transactions
or currently proposed transactions or series of related transactions entered
into by the Company or any of its Subsidiaries since January 1, 1997 which are
of the type required to be disclosed by the Company pursuant to Item 404 of
Regulation S-K of the Securities Laws that are not otherwise disclosed in the
Company Reports. A true and complete copy of all agreements or contracts
relating to any such transaction will be made available to Buyer prior to the
date hereof.
Section 3.16 Insurance. The Company maintains insurance policies,
including liability policies, covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company and
each of its Subsidiaries (collectively, the "Insurance Policies"), which are of
a type and in amounts customarily carried by persons conducting businesses
similar to those of the Company. There is no material claim by the Company or
any of its Subsidiaries pending under any of the material Insurance Policies as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies.
Section 3.17 Proxy Statement. The Proxy Statement and all of the
information included or incorporated by reference therein (other than any
information supplied or to be supplied by Buyer for inclusion or incorporation
by reference therein) will not, as of the date such Proxy Statement is first
mailed to the stockholders of the Company and as of the time of the meeting of
the stockholders of the Company in connection with the transactions contemplated
hereby, contain any untrue statement of a material fact or omit 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 are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder.
Section 3.18 Vote Required. The affirmative vote of the holders of a
majority (including Buyer and its Controlled Affiliates (as defined in the
Stockholders Agreement) for purposes of determining a quorum, but not for
purposes of determining a majority) of the outstanding shares of Company Common
Stock entitled to vote hereon and duly present in person or by proxy at a
meeting duly called to vote hereon (and with each share of Company Common Stock
entitled to one vote per
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share) is the only vote of the holders of any class or series of Company Stock
necessary to approve this Agreement, the Registration Rights Agreement, the
Contingent Value Right Agreement, the Stockholders Agreement and the
transactions contemplated hereby and thereby.
Section 3.19 Brokers or Finders. Except as set forth in Schedule 3.19,
no agent, broker, investment banker or other firm or person, including any of
the foregoing that is an Affiliate of the Company, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee from the Company
in connection with this Agreement or any of the transactions contemplated hereby
for which Buyer or any of its Affiliates will be responsible.
Section 3.20 Maryland Takeover Law. The terms of Sections 3-602 and
3-702 of the Maryland General Corporation Law will not apply to Buyer, any Stock
Purchase or any other transaction contemplated hereby. The resolutions in the
form of Exhibit D hereto have been adopted by the Company and have not been
rescinded and revoked.
Section 3.21 Kane and Konover Properties. The Company hereby makes the
same representations and warranties with respect to the Kane and Konover
Properties as are made by the sellers under the Kane Purchase Agreement and the
Konover Purchase Agreement to the Company, subject to the knowledge and other
qualifications expressly set forth therein (i.e., for the purpose of this
Section 3.21, the Company's knowledge shall be limited to the knowledge, without
further inquiry, of the individuals named in the Kane Purchase Agreement and the
Konover Purchase Agreement).
Section 3.22 Knowledge Defined. As used herein, the phrase "to the
Company's knowledge" (or words of similar import) means the actual knowledge of
C. Cammack Morton, Patrick M. Miniutti, William H. Neville, Linda M. Swearingen
and Michaela M. Twomey after due inquiry of persons likely to have knowledge of
any relevant facts or circumstances and includes any facts, matters or
circumstances set forth in any written notice from any Government Authority or
any other material written notice received by the Company or any of its
Subsidiaries, and also including any matter of which Buyer informs the Company
in writing.
Section 3.23 Accuracy of Information Furnished. To the Company's
knowledge, no representation or warranty by the Company contained in this
Agreement or the exhibits, schedules, lists or other documents delivered to
Buyer by the Company and referred to herein, and no statement contained in any
certificate furnished or to be furnished by or on behalf of the Company pursuant
hereto, or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact that is necessary to make the statements contained
herein or therein not misleading.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company as follows:
Section 4.1 Organization. Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite corporate power and authority to own, operate,
lease and encumber its properties and to carry on its business as now conducted,
and to enter into this Agreement, the Registration Rights Agreement, the
Contingent Value Right Agreement and the Stockholders Agreement and to perform
its obligations hereunder and thereunder.
Section 4.2 Due Authorization. The execution, delivery and performance
of this Agreement, the Registration Rights Agreement, the Contingent Value Right
Agreement and the Stockholders Agreement have been duly and validly authorized
by all necessary corporate action on the part of Buyer. This Agreement, the
Registration Rights Agreement, the Contingent Value Right Agreement and the
Stockholders Agreement have been duly executed and delivered by Buyer and
constitute the valid and legally binding obligations of Buyer, enforceable
against Buyer in accordance with their terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights or
general principles of equity.
Section 4.3 Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement nor the consummation by Buyer of the
transactions contemplated hereby in accordance with the terms hereof, will
conflict with, result in a breach of the terms, conditions or provisions of,
constitute a default under, result in the creation of any mortgage, security
interest, encumbrance, lien or charge of any kind upon any of the properties or
assets of Buyer pursuant to, or require any consent, approval or other action by
or any notice to or filing with any Government Authority pursuant to, the
organizational documents or agreements of Buyer or any agreement, instrument,
order, judgment, decree, statute, law, rule or regulation by which Buyer is
bound, except for filings after any Closing under Section 13(d) or Section 16 of
the Exchange Act.
Section 4.4 Acquisition for Investment; Sophistication; Source of
Funds.
(a) Buyer is acquiring the Securities for its own account for
the purpose of investment and not with a view to or for sale in connection with
any distribution thereof, and Buyer has no present intention or plan to effect
any distribution of shares of Company Common Stock, provided that the
disposition of Company Common Stock owned by Buyer shall at all times be and
remain within its control, subject to the provisions of this Agreement and the
Registration Rights Agreement. The certificate(s) representing the Securities
shall bear a prominent legend with respect to the restrictions on transfer under
the Securities Act and under applicable state securities laws. Prior to any
proposed transfer of the Securities, unless such transfer is made pursuant to an
effective registration statement under the Securities Act, Buyer will deliver to
the Company an opinion of counsel, reasonably satisfactory in form and substance
to the Company, to the effect that the
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Securities may be sold or otherwise transferred without registration under the
Securities Act. The Company will remove the legend relating to Securities Act
restrictions from any Securities at any time two years after issuance if Buyer
delivers to the Company an opinion of counsel, reasonably satisfactory in form
and substance to the Company, to the effect that such Securities are no longer
subject to transfer restrictions under the Securities Act. Upon original
issuance thereof, and until such time as the same shall have been registered
under the Securities Act or sold pursuant to Rule 144 promulgated thereunder (or
any similar rule or regulation), each stock certificate for the Securities shall
bear any restricted securities legend required pursuant to the Stockholders
Agreement, unless such legend is no longer required thereunder. Buyer is able to
bear the economic risk of the acquisition of Company Common Stock pursuant
hereto and can afford to sustain a total loss on such investment, and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment.
(b) Buyer is an "accredited investor" as such term is defined
in Regulation D promulgated under the Securities Act.
(c) Buyer has previously delivered to the Company an audited
balance sheet for Buyer as of December 31, 1996, which was certified by an
officer of Buyer and which fairly presented the financial position of Buyer as
of its date in accordance with GAAP. Such balance sheet discloses either on its
face or by footnote, all material liabilities of Buyer required to be disclosed
under GAAP. The Company agrees to keep such information confidential to the same
extent that Buyer is obligated to keep information confidential pursuant to
Section 5.2(b).
Section 4.5 Resources. Buyer has requisite cash, cash equivalents,
equity commitments or other sources of financing available to consummate the
transactions contemplated hereby.
Section 4.6 Proxy Statement. None of the information supplied or to be
supplied by Buyer for inclusion or incorporation by reference in the Proxy
Statement will, as of the date the Proxy Statement is first mailed to the
stockholders of the Company and as of the time of the meeting of the
stockholders of the Company in connection with the transactions contemplated
hereby, contain any untrue statement of a material fact or omit 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 are made, not
misleading.
Section 4.7 Brokers or Finders. No agent, broker, investment banker or
other firm or person, including any of the foregoing that is an Affiliate of
Buyer is or will be entitled to any broker's or finder's fee or any other
commission or similar fee from Buyer in connection with this Agreement or any of
the transactions contemplated hereby for which the Company or any of its
Affiliates will be responsible.
Section 4.8 REIT Qualification Matters. To Buyer's knowledge, no person
who would be treated as an "individual" for purposes of Section 542(a)(2) of the
Code (as modified by Section 856(h) of the Code) and who owns, directly or
indirectly, equity interests in Buyer will own actually or beneficially
(determined through the application of the constructive ownership rules of
Section
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544 of the Code, as modified by Section 856(h)(1)(B) of the Code), in excess of
9.8% of the value of the outstanding equity interests in Company as of the date
of the applicable Closing.
Section 4.9 Investment Company Matters. Buyer is not, and after giving
effect to the purchase of Company Common Stock contemplated hereby will not be,
an "investment company" or an entity "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.
Section 4.10 Ownership of Tenants. To Buyer's knowledge and except as
set forth in Schedule 4.10-B, Buyer does not own, as of the date of the
applicable Closing, actually or constructively (determined through the
application of the constructive ownership rules of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code), any stock, securities, or other
ownership interest in any of the tenants of the Company, as set forth in
Schedule 4.10-A. Capitalized terms used but not defined in this Section 4.10
shall have the meaning assigned to them in the Company Charter. The Company
shall advise Buyer within a reasonable period of time before any Closing of any
material changes to Schedule 4.10-A. The Company may update Schedule 4.10-A
from time to time, and Buyer agrees to promptly notify the Company, to its
knowledge, as to its actual and constructive ownership (determined through the
application of the constructive ownership rules of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code) of any additional tenants of the
Company, as may be set forth on such updated schedule.
ARTICLE 5
COVENANTS RELATING TO CLOSINGS
Section 5.1 Taking of Necessary Action.
(a) Each party hereto agrees to use its commercially
reasonable best efforts promptly to take or cause to be taken all action and
promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, the Registration Rights Agreement,
the Contingent Value Right Agreement and the Stockholders Agreement, subject to
the terms and conditions hereof and thereof, including all actions and things
necessary to cause all conditions precedent set forth in Article 7 to be
satisfied. Each party acknowledges that the Company's stockholders' meeting at
which the stockholders will vote on, among other things, the transactions
contemplated hereby is anticipated to occur on May 12, 1998.
(b) As promptly as practicable after the date hereof (it being
understood that the relevant stockholders' meeting is anticipated to occur on
May 12, 1998), the Company shall prepare and file with the SEC a preliminary
proxy statement (the "Proxy Statement") by which the Company's stockholders will
be asked to approve, among other things, the issuance of shares of Company
Common Stock contemplated hereby. The Proxy Statement as initially filed with
the SEC, as it may be amended and refiled with the SEC and as it may be mailed
to the Company's
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stockholders, shall be in form and substance reasonably satisfactory to Buyer.
The Company shall use its reasonable efforts to respond to any comments of the
SEC, and to cause the Proxy Statement to be mailed to the Company's stockholders
at the earliest practicable time. As promptly as practicable after the date
hereof, the Company shall prepare and file any other filings required of the
Company or its Subsidiaries under the Exchange Act, the Securities Act or any
other federal, state or local laws relating to this Agreement and the
transactions contemplated hereby, and state takeover laws (the "Other Filings").
The Company and Buyer will notify each other promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff or
any other government officials for amendments or supplements to the Proxy
Statement or any Other Filing or for additional information and will supply each
other with copies of all correspondence between each of them or any of their
respective representatives, on the one hand, and the SEC or its staff or any
other government officials, on the other hand, with respect to the Proxy
Statement or any Other Filing. The Proxy Statement and any Other Filing shall
comply in all material respects with all applicable requirements of law. Buyer
shall provide the Company all information about Buyer required to be included or
incorporated by reference in the Proxy Statement or any Other Filing and shall
otherwise cooperate with the Company in taking the actions described in this
paragraph. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement or any Other Filing, the Company
or Buyer, as the case may be, shall promptly inform the other party of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of the Company, such
amendment or supplement. Subject to the provisions of Section 5.4, the Proxy
Statement shall include the recommendation of the Board that the stockholders of
the Company vote in favor of and approve the issuance of Company Common Stock
pursuant to this Agreement.
(c) The Company shall call a meeting of its stockholders to be
held as promptly as practicable for the purpose of voting upon the transactions
(including the issuance of Company Common Stock) contemplated hereby; provided
that should a quorum not be obtained at such meeting of the stockholders, the
meeting of the stockholders shall be postponed or adjourned in order to permit
additional time for soliciting and obtaining additional proxies or votes.
(d) The Company shall use its commercially reasonable best
efforts to obtain the consents set forth in each of Schedules 3.4(d)-A, 3.4(d)-B
and 3.4(d)-C.
Section 5.2 Public Announcements; Confidentiality.
(a) Subject to each party's disclosure obligations imposed by
law and any stock exchange or similar rules and the confidentiality provisions
contained in Section 5.2(b), the Company and Buyer will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement, the Registration Rights
Agreement, the Contingent Value Right Agreement, the Stockholders Agreement and
any of the transactions contemplated hereby or thereby. If a party is required
by law or any stock exchange or similar rule to issue a news release or other
public announcement, it shall advise the other party in advance thereof and use
reasonable best efforts to cause a mutually agreeable release or announcement to
be issued.
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(b) Buyer agrees that all information provided to Buyer or any
of its representatives pursuant to this Agreement shall be kept confidential,
and Buyer shall not (x) disclose such information to any persons other than the
directors, officers, employees, financial advisors, investors, lenders, legal
advisors, accountants, consultants and affiliates of Buyer who reasonably need
to have access to the confidential information and who are advised of the
confidential nature of such information or (y) use such information in a manner
which would be detrimental to the Company; provided, however, the foregoing
obligation of Buyer shall not (i) relate to any information that (1) is or
becomes generally available other than as a result of unauthorized disclosure by
Buyer or by persons to whom Buyer has made such information available, (2) is or
becomes available to Buyer on a non-confidential basis from a third party that
is not, to Buyer's knowledge, bound by any other confidentiality agreement with
the Company, or (ii) prohibit disclosure of any information if required by law,
rule, regulation, court order or other legal or governmental process.
Section 5.3 Conduct of the Business. Except for transactions
contemplated hereby, during the period from the date hereof to the sooner to
occur of (A) the date on which the Investor Nominees (as defined in the
Stockholders Agreement) first become members of the Board, and (B) if the
Stockholder Approval vote fails, the date of the stockholder meeting at which
the Stockholder Approval failed, each of the Company and each of its
Subsidiaries, except as otherwise consented to or approved by Buyer in writing
or as permitted or required hereby, (x) has conducted and will conduct the
business and has engaged and will engage in transactions only in the ordinary
course consistent with past practice, and (y) will not:
(a) acquire, whether by merger, consolidation, purchase of
stock or assets or other business combination, (i) in a single
transaction or group of related transactions, any business or assets
having an aggregate purchase price in excess of twenty-five percent
(25%) of Total Enterprise Value as measured at the beginning of the
fiscal year in which such acquisition is consummated, or (ii) during
any one fiscal year, businesses or assets having an aggregate purchase
price in excess of fifty percent (50%) of Total Enterprise Value as
measured at the beginning of such fiscal year;
(b) sell or dispose of any assets, whether by merger,
consolidation, sale of stock or assets or other business combination,
during any one fiscal year, having an aggregate value in excess of
twenty-five percent (25%) of Total Enterprise Value as measured at the
beginning of such fiscal year;
(c) directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to, any indebtedness if, after
giving pro forma effect to such indebtedness, the Company's ratio of
(i) total indebtedness to (ii) Total Enterprise Value, expressed as a
percentage, would be greater than 65%;
(d) make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property
or assets from, or enter into or make or
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amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any of its Affiliates;
(e) issue Company Stock or options, rights or warrants or
other commitments to purchase or securities convertible into (or
exchangeable or redeemable for) shares of Company Stock, including,
without limitation, OP Units (such options, rights, warrants, other
commitments or securities, "Company Stock Equivalents"); provided,
however, Buyer's consent shall not be required for any issuance of
Company Stock or Company Stock Equivalents as long as the sum of (i)
all shares of Company Stock issued by the Company during the applicable
fiscal year and (ii) shares of Company Stock into which Company Stock
Equivalents issued by the Company and each of its Subsidiaries during
the applicable fiscal year are convertible, does not exceed fifty
percent (50%) of all shares of Company Stock outstanding, on a Fully
Diluted basis, on the first day of such fiscal year; provided, further,
that in connection with any issuance by the Company of Company Stock or
issuance by the Company or any of its Subsidiaries of any Company Stock
Equivalents, Investor shall be entitled, to the extent so provided in
Section 4.1 of the Stockholders Agreement, to a participation right on
the terms set forth in Section 4.1 of the Stockholders Agreement.
Notwithstanding the first sentence of this Section 5.3(e), (i) Company
Stock issued to the Company or a wholly owned Subsidiary thereof and
(ii) Company Stock and Company Stock Equivalents issued to directors or
employees of the Company or a Subsidiary of the Company in connection
with any employee benefit plan approved by the shareholders of the
Company, shall not be subject to Buyer's consent;
(f) change or amend any provision of the Company Charter or
the by-laws of the Company in a manner that would be materially adverse
to Investor;
(g) pursuant to or within the meaning of any bankruptcy law:
(i) commence a voluntary case, (ii) consent to the entry of an order
for relief against it in an involuntary case, (iii) consent to the
appointment of a custodian of it or for all or substantially all of its
property, (iv) make a general assignment for the benefit of its
creditors;
(h) in the case of the Company, (1) terminate its eligibility
for treatment as a real estate investment trust, as defined in the
Code, or (2) take any action or fail to take any action which would
reasonably be expected to, alone or in conjunction with any other
factors, result in the loss of such eligibility, unless in the case of
a failure to take action, such action is initiated within thirty days
and such action is completed within the period required under the Code
in order to maintain such eligibility; or
(i) subject to the right of the Company to terminate this
Agreement pursuant to Section 9.1(b)(iii) hereof, allow the
consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than Buyer, becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of stock having more than 15% of the
voting power of the Company.
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Section 5.4 No Solicitation of Transactions. Unless and until this
Agreement is terminated in accordance with its terms, neither the Company nor
its Subsidiaries shall, directly or indirectly, through any officer, director,
agent or otherwise, initiate, solicit or knowingly encourage (including by way
of furnishing non-public information or assistance), or take any other action to
facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or enter into or maintain or continue discussions or negotiate with
any person or entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
knowingly permit any of the officers, directors or employees of such party or
any of its Subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by such party or any of such party's
Subsidiaries to take any such action, and the Company shall notify Buyer orally
(within one Business Day) and in writing (as promptly as practicable) of all of
the relevant details relating to all inquiries and proposals which any officer
or director of the Company may receive relating to any of such matters and if
such inquiry or proposal is in writing, the Company shall deliver to Buyer a
copy of such inquiry or proposal; provided, however, that nothing contained in
this Section shall prohibit the Board from complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer or prohibit the
Board from taking such other actions as may be required to comply with its
fiduciary obligations. If the Board determines with the advice of counsel that
failure to do so could be held to violate its fiduciary duties, it may provide
information in response to an unsolicited proposal. If the Company receives a
bona fide proposal for a Competing Transaction that the Board determines in good
faith (based on the advice of a nationally recognized financial advisor) may
provide greater value to the Company and its stockholders than this Agreement,
it may enter into negotiations with respect to such proposal. The Company will
notify Buyer of any such superior proposal not less than two Business Days prior
to entering into any definitive agreement with respect to a Competing
Transaction; provided, however, that in no event shall the Company enter into a
definitive agreement with respect to a Competing Transaction less than five
Business Days after the Company's initial notification to Buyer of an inquiry or
proposal relating to a Competing Transaction. Within the two-Business-Day or
five-Business-Day period referred to above, Buyer may propose an improved
transaction.
Section 5.5 Information and Access. From the date hereof until the date
on which the Remaining Equity Ownership of Buyer shall be less than
$10,000,000.00, (i) the Company and its Subsidiaries shall afford to Buyer and
Buyer's accountants, counsel and other representatives full and reasonable
access during normal business hours (and at such other times as the parties may
mutually agree) to its properties, books, contracts, commitments, records and
personnel and, during such period, shall furnish promptly to Buyer (1) a copy of
each report, schedule and other document filed or received by it pursuant to the
requirements of the Securities Laws, and (2) all other information concerning
their businesses, personnel and the Company Properties as Buyer may reasonably
request, and (ii) without limiting the generality of the foregoing, Buyer shall
have the right to (1) conduct or cause to be conducted an environmental,
physical, structural, electrical, mechanical and other inspection and review of
any Company Properties, for which inspection Buyer will and hereby does
indemnify and hold the Company harmless from any and all damages whatsoever
caused by such inspection, or (2) request that the Company update any existing
reports, reviews or inspections thereof, in which case the Company shall
promptly so update its reports, reviews and inspections and
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cause them to be certified to Buyer by the firm or person who prepared such
report or conducted such review or inspection. Buyer shall pay the expenses of
any outside professional employed by Buyer in connection with Buyer's exercise
of its rights under this Section 5.5. Buyer and its accountants, counsel and
other representatives shall, in the exercise of the rights described in this
Section, not unduly interfere with the operation of the businesses of the
Company or its Subsidiaries.
Section 5.6 Notification of Certain Matters. Each of Buyer and the
Company shall use its good faith efforts to notify the other party in writing of
its discovery of any matter that would render any of such party's or the other
party's representations and warranties contained herein untrue or incorrect in
any material respect, but the failure of either party to so notify the other
party shall not be deemed a breach of this Agreement.
Section 5.7 Delivery of Final Schedules and the Purchase Agreements.
The Company and Buyer acknowledge that, as of the date hereof, not all of the
Schedules referred to in this Agreement have been completed and that the final
Kane Purchase Agreement and the final Konover Purchase Agreement have not been
delivered to Buyer. The Company shall deliver to Buyer within ten Business Days
of the date hereof final Schedules to this Agreement (the "Final Schedules") and
the final Kane Purchase Agreement and the final Konover Purchase Agreement (to
be attached hereto as Exhibits E and F). Following the delivery of the Final
Schedules, if Buyer does not exercise its right to terminate this Agreement
pursuant to 9.1(b)(iv), Buyer shall be deemed to have accepted the Final
Schedules. The Company will provide updates to the Schedules within five (5)
Business Days prior to each Closing to reflect new acquisitions or other
material matters (other than the acquisition of the Kane and Konover Properties,
which is governed by Section 5.8 below) arising since completion of the Final
Schedules (the "Updated Schedules"). Except as provided in Section 9.1(b)(vi)
with respect to the Kane and Konover Properties, information relating to new
acquisitions approved by the Board and set forth on Updated Schedules shall not
constitute a failure of a condition to closing as set forth in Article 7, except
to the extent that such new information would result in a Material Adverse
Effect on the Company. Following delivery of any Updated Schedules, if Buyer
does not elect to terminate this Agreement pursuant to 9.1(b)(v) and consummates
the applicable Closing, Buyer shall be deemed to have accepted such Updated
Schedules (and shall not be permitted to seek indemnification for
representations and warranties that were true and correct when made but are
rendered untrue as a result of new information set forth in such Updated
Schedules relating to events occurring since the date Buyer was deemed to have
accepted the Final Schedules).
Section 5.8 Delivery of Konover and Kane Schedules. For purposes of
this Agreement, all properties acquired under the Kane Purchase Agreement as of
the date hereof have been included in the Final Schedules to the same extent and
with the same force and effect as all other properties currently owned by the
Company. With respect to the Kane and Konover Properties, the Company shall
make, on the date of the Second Closing, all representations and warranties set
forth herein with respect to the Kane and Konover Properties as if the Company
owned such Kane and Konover Properties as of the date of the Second Closing,
such that the Company shall be deemed as of the Second Closing to (a) own all of
the real and personal property, (b) have assumed any contracts, other
agreements, liabilities or other obligations related to such real and personal
property and (c)
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own any entities, if applicable, to be transferred to the Company or an
Affiliate thereof pursuant to the Kane Purchase Agreement and the Konover
Purchase Agreement. Fifteen (15) Business Days prior to the date of the Second
Closing, the Company shall provide Buyer with schedules (the "Kane and Konover
Schedules") relating to all representations and warranties with respect to the
Kane and Konover Properties to be made on the date of the Second Closing
pursuant to this Section 5.8. The parties hereto agree that the Company may
elect prior to the Second Closing to not acquire up to an aggregate of three
properties (the "Kick Out Properties") pursuant to the terms of the Kane
Purchase Agreement and/or the Konover Purchase Agreement, as applicable, if the
Company is released from its obligations to purchase such properties under the
terms of the Kane Purchase Agreement or the Konover Purchase Agreement, as
applicable, and in such case, if the Company has elected not to purchase such
properties: (i) any representations and warranties made pursuant to this Section
5.8 shall be deemed not to include any representations and warranties with
respect to the Kick Out Properties, (ii) the Company shall not have breached its
representations and warranties hereunder to the extent it does not close on the
Kick Out Properties and (iii) the failure to close on the Kick Out Properties
shall not by itself constitute a Material Adverse Effect or a failure of a
closing condition under Article 7 hereof (it being understood that if, prior to
the Second Closing, the Company elects not to acquire four or more of the Kane
and Konover Properties, such failure will constitute a Material Adverse Effect
and the failure of a closing condition under Article 7 hereof, and it being
further understood that the failure of the Company to acquire the Kane and
Konover Properties other than the Kick Out Properties, if any, will constitute a
Material Adverse Effect and the failure of a closing condition under Article 7
hereof as to all Subsequent Closings after the Second Closing).
ARTICLE 6
CERTAIN ADDITIONAL COVENANTS
Section 6.1 Resale. Buyer acknowledges and agrees that the Company
Common Stock that Buyer will acquire in any Stock Purchase will not be
registered under the Securities Act and may only be sold or otherwise disposed
of in one or more transactions registered under the Securities Act and, where
applicable, relevant state securities laws or as to which an exemption from the
registration requirements of the Securities Act and, where applicable, such
state securities laws is available, and Buyer agrees that the certificates
representing such Company Common Stock shall bear a legend to that effect and a
legend as to its status as restricted securities.
Section 6.2 REIT Compliance. Buyer will make available to the Company
information known to Buyer regarding the ownership of interests in Buyer as
requested by the Company and reasonably necessary for the Company to review the
accuracy of the representations set forth in Sections 4.8 and 4.10.
Section 6.3 REIT Status. From and after the date hereof and so long as
Buyer owns 10% or more of the outstanding Company Common Stock unless the
Directors on the Board nominated by the Buyer consent to doing otherwise, the
Company will elect to be taxed as a REIT in its federal income tax returns, will
comply with all applicable laws, rules and regulations of the Code relating to a
REIT, and will not take any action or fail to take any action which would
reasonably be expected
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to, alone or in conjunction with any other factors, result in the loss of its
status as a REIT for federal income tax purposes.
Section 6.4 Ownership of Assets. From and after the date hereof and as
long as Buyer or an Affiliate thereof owns any Company Common Stock, the Company
shall not own, directly or indirectly, 20% or more of its assets, in the
aggregate, through Persons that are not Subsidiaries.
ARTICLE 7
CONDITIONS TO CLOSINGS
Section 7.1 Conditions of Purchase at Initial Closing. The obligation
of Buyer to purchase and pay for the Purchased Shares at the Initial Closing is
subject to satisfaction or waiver of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall have been
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the date of the Initial Closing
(including, without limitation, the Schedules hereto), with the same effect as
though such representations and warranties had been made on and as of the date
of the Initial Closing (except for representations and warranties that speak as
of a specific date or time other than the date of the Initial Closing (which
need only be true and correct in all respects as of such date or time)), other
than, in all such cases, such failures to be true and/or correct as would not in
the aggregate reasonably be expected to have a Material Adverse Effect;
provided, however, that if any of the representations and warranties is already
qualified in any respect by materiality or as to Material Adverse Effect for
purposes of this Section 7.1(a) such materiality or Material Adverse Effect
qualification will be in all respects ignored (but subject to the overall
standard as to Material Adverse Effect set forth immediately prior to this
proviso). The covenants and agreements of the Company to be performed on or
before the date of the Initial Closing in accordance with this Agreement shall
have been duly performed in all respects. The Company shall have delivered to
Buyer at the Initial Closing a certificate of an appropriate officer in form and
substance reasonably satisfactory to Buyer dated the date of the Initial Closing
to such effect.
In making any determination as to Material Adverse Effect
under this Section 7.1(a), the matters set forth in such Section shall be
aggregated and considered together.
(b) No Material Adverse Change. Since the date hereof, there
shall not have been any change, circumstance or event which has had or would
reasonably be expected to have a Material Adverse Effect.
(c) Consents. The Company shall have obtained the consents set
forth in Schedule 3.4(d)-A.
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(d) Ownership Limit Waiver. Buyer's ownership of up to the
Initial Number of Shares shall have been exempted on a continuing basis subject
to continuing validity of the representations and warranties of the Buyer in
Article 4 hereof (disregarding the qualification in Sections 4.8 and 4.10
relating to Buyer's knowledge and assuming no exceptions are set forth in
Schedule 4.10-B) and provided such exemption does not otherwise jeopardize the
Company's tax status as a REIT, from the ownership limit provisions of Article
IV of the Company Charter and the Board shall have taken such action provided
for under Article IV of the Company Charter to grant such exemption to Buyer.
For purposes of this paragraph (d), references to Buyer, shall also be deemed to
be references to any person who would be an Investor within the meaning of the
Stockholders Agreement, provided such person has made the representations and
warranties of the Buyer in Article 4 hereof.
(e) Employment Agreements. Waivers in connection with each
Employment Agreement shall have been entered into to the extent necessary to
provide (i) that the transactions contemplated by this Agreement, the Kane
Purchase Agreement and the Konover Purchase Agreement (together with this
Agreement and the Kane Purchase Agreement, the "Transaction Documents") will not
trigger any actual or contingent obligation under such Employment Agreement
(including any payment or other obligation, forgiveness of debt, other release
from obligation or acceleration of vesting of restricted stock, stock options or
other awards, but excluding any automatic extension of the term of any
Employment Agreement); and (ii) that the transactions contemplated by the
Transaction Documents will not be taken into account in determining whether any
subsequent transaction or event will trigger any such obligation.
(f) Restricted Stock Plan. Waivers in connection with The
Factory Stores of America, Inc. 1996 Restricted Stock Plan (the "Restricted
Stock Plan") and any award agreements thereunder shall have been entered into to
the extent necessary to provide (i) that the transactions contemplated by the
Transaction Documents will not trigger, directly or indirectly, the acceleration
of vesting of any restricted stock granted under the Restricted Stock Plan; and
(ii) that the transactions contemplated by the Transaction Documents will not be
taken into account in determining whether any subsequent transaction or event
will trigger any such acceleration of vesting.
(g) Stock Option Plan. Waivers in connection with The Factory
Stores of America, Inc. Amended and Restated 1993 Employee Stock Incentive Plan
(the "Stock Incentive Plan") and any award agreements thereunder shall have been
entered into to the extent necessary to provide (i) that the transactions
contemplated by the Transaction Documents will not result in the acceleration of
vesting of any stock options granted under the Stock Incentive Plan; and (ii)
that the transactions contemplated by the Transaction Documents will not be
taken into account in determining whether any subsequent transaction or event
will trigger any such acceleration of vesting.
(h) Title Policies. The Company shall deliver updates of all
Title Policies dated the date of the Initial Closing, in form and substance
consistent in all material respects with the representations and warranties set
forth in Section 3.11(a) of this Agreement.
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(i) NYSE Approval. On or prior to the date of the Initial
Closing, the New York Stock Exchange shall have approved, with respect to
Buyer's ownership of up to the Initial Number of Shares at the Initial Closing,
this Agreement, the Registration Rights Agreement, the Stockholders Agreement,
the Contingent Value Right Agreement and the transactions contemplated hereby
and thereby.
Section 7.2 Conditions to Purchase at Second Closing. The obligations
of Buyer to purchase and pay for the Purchased Shares at the Second Closing are
subject to satisfaction or waiver of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall have been
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the date of the Second Closing
(including, without limitation, the Schedules hereto), with the same effect as
though such representations and warranties had been made on and as of the date
of the Second Closing (except for representations and warranties that speak as
of a specific date or time other than the date of the Second Closing (which need
only be true and correct in all respects as of such date or time)), other than,
in all such cases, such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a Material Adverse Effect; provided,
however, that if any of the representations and warranties is already qualified
in any respect by materiality or as to Material Adverse Effect for purposes of
this Section 7.2(a) such materiality or Material Adverse Effect qualification
will be in all respects ignored (but subject to the overall standard as to
Material Adverse Effect set forth immediately prior to this proviso). The
covenants and agreements of the Company to be performed on or before the date of
the Second Closing in accordance with this Agreement shall have been duly
performed in all respects. The Company shall have delivered to Buyer at the
Second Closing a certificate of an appropriate officer in form and substance
reasonably satisfactory to Buyer dated the date of the Second Closing to such
effect.
(b) Stockholder Approval. The issuance of Company Common Stock
pursuant to this Agreement, the election of three Investor Nominees to the Board
and the amendment of the Company Charter as set forth in Section 3.4 of the
Stockholders Agreement shall have been approved by the majority vote of the
Company's stockholders other than Buyer (the "Stockholder Approval").
(c) Consents. The Company shall have obtained the consents set
forth in Schedule 3.4(d)-B.
(d) Estoppel Certificates. The Company shall have delivered
estoppel certificates for 50% of the tenants at the properties listed on
Schedule 7.2(d), in form and substance satisfactory to Buyer.
(e) Title Policies. The Company shall deliver updates of all
Title Policies with respect to the Kane and Konover Properties.
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(f) NYSE Approval. On or prior to the date of the Second
Closing, the New York Stock Exchange shall have approved this Agreement, the
Registration Rights Agreement, the Stockholders Agreement, the Contingent Value
Right Agreement and the transactions contemplated hereby and thereby.
(g) Opinion of Counsel. Buyer shall have received an opinion
of Alston & Bird LLP, substantially in the form of Exhibit G hereto, that (i)
commencing with the Company's taxable year ending December 31, 1993, the Company
has been organized in conformity with the requirements for qualifications as a
REIT and its proposed method of operation, as described in certain
representations of the Company, will enable the Company to meet the requirements
for qualification and taxation as a REIT under the Code, and (ii) to the extent
the Company has met qualifications as a REIT, it has been a "domestically
controlled" REIT.
(h) Filing of Tax Return. The Buyer and each of its
Subsidiaries shall have filed with the appropriate taxing authority all Tax
Returns required to be filed by it for the year ended December 31, 1997.
Section 7.3 Conditions of Purchase at All Closings. The obligations of
Buyer to purchase and pay for the Purchased Shares at each Closing (including
the Initial Closing, the Second Closing and any Subsequent Closing, except where
otherwise indicated) are subject to satisfaction or waiver of each of the
following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall have been
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the relevant Closing Date (including,
without limitation, the Schedules hereto), with the same effect as though such
representations and warranties had been made on and as of such Closing Date
(except for representations and warranties that speak as of a specific date or
time other than such Closing Date (which need only be true and correct in all
respects as of such date or time)), other than, in all such cases, such failures
to be true and/or correct as would not in the aggregate reasonably be expected
to have a Material Adverse Effect; provided, however, that if any of the
representations and warranties is already qualified in any respect by
materiality or as to Material Adverse Effect for purposes of this Section 7.3(a)
such materiality or Material Adverse Effect qualification will be in all
respects ignored (but subject to the overall standard as to Material Adverse
Effect set forth immediately prior to this proviso). The covenants and
agreements of the Company to be performed on or before the relevant Closing Date
in accordance with this Agreement shall have been duly performed in all
respects. The Company shall have delivered to Buyer at the relevant Closing a
certificate of an appropriate officer in form and substance reasonably
satisfactory to Buyer dated the relevant Closing Date to such effect.
(b) No Material Adverse Change. Since the date of the
immediately preceding Closing, there shall not have been any change,
circumstance or event which has had or would reasonably be expected to have a
Material Adverse Effect.
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(c) No Material Breach. The Company shall be in compliance in
all material respects with its covenants and other obligations under this
Agreement, the Stockholders Agreement, the Contingent Value Right Agreement and
the Registration Rights Agreement. The Company shall have satisfied the
conditions of (i) Section 7.1(a) at the Initial Closing, (ii) Section 7.2(a) at
the Second Closing, and (iii) Section 7.3(a) at all Closings.
(d) No Injunction. There shall not be in effect any final
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby and
there shall be no pending Actions which would reasonably be expected to have a
material adverse effect on the ability of the Company to consummate the
transactions contemplated hereby or to issue the Purchased Shares.
(e) REIT Status. The Company shall have elected to be taxed as
a REIT in its most recent federal income tax return, and shall be in compliance
with all applicable laws, rules and regulations, including the Code, necessary
to permit it to be taxed as a REIT, unless the Investor Nominees (as defined in
the Stockholders Agreement) shall have consented to changing such election. The
Company shall not have taken any action or have failed to take any action which
would reasonably be expected to, alone or in conjunction with any other factors,
result in the loss of its status as a REIT for federal income tax purposes,
unless the Investor Nominees (as defined in the Stockholders Agreement) shall
have consented to taking or omitting to take such action.
(f) Domestically Controlled REIT. To the Company's knowledge,
the Company is, and after giving effect to the relevant Closing will be, a
"domestically-controlled" REIT within the meaning of Section 897(h)(4)(B) of the
Code.
(g) Asset Test. The Board shall have determined that the
Company satisfied the "5% asset test" of Section 856(c)(5) of the Code, or such
successor provision as may be applicable, for the most recently ended calendar
quarter as required by the Code.
(h) Consents. On each Closing other than the Initial Closing
and the Second Closing, the Company shall have obtained the consents, if
required, set forth in Schedule 3.4(d)-C.
(i) Opinion of Counsel. On or prior to the date of each
Closing, the Company shall have delivered to Buyer the opinions of Alston & Bird
LLP, counsel for the Company, in form and substance reasonably acceptable to
Buyer.
Section 7.4 Conditions of Sale. The obligation of the Company to issue
and sell any Purchased Shares at any Closing (including the Initial Closing, the
Second Closing and each Subsequent Closing, except where otherwise indicated
below) is subject to satisfaction or waiver of each of the following conditions
precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of Buyer contained herein shall have been true
and correct in all respects on and as of the date hereof, and shall be true and
correct in all respects on and as of the relevant Closing Date with
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the same effect as though such representations and warranties had been made on
and as of the relevant Closing Date (except for representations and warranties
that speak as of a specific date or time other than such Closing Date (which
need only be true and correct in all respects as of such date or time)), other
than, in all such cases, such failures to be true and/or correct as would not in
the aggregate reasonably be expected to have a Material Adverse Effect on the
Company or Buyer's ability to consummate the transactions contemplated hereby;
provided, however, that if any of the representations and warranties is already
qualified in any respect by materiality or as to Material Adverse Effect for
purposes of this Section 7.4(a) such materiality or Material Adverse Effect
qualification will be in all respects ignored (but subject to the overall
standard as to Material Adverse Effect set forth immediately prior to this
proviso). The covenants and agreements of Buyer to be performed on or before the
relevant Closing Date in accordance with this Agreement shall have been duly
performed in all respects, other than (except for Buyer's obligation to pay the
relevant Purchase Price at the relevant Closing as to which the proviso set
forth in this other-than clause shall not apply) for such failures to have been
performed as would not in the aggregate reasonably be expected to have a
Material Adverse Effect on the Company's or Buyer's ability to consummate the
transactions contemplated hereby; provided, however, that if any such covenant
or agreement is already qualified in any respect by materiality or as to
Material Adverse Effect for purposes of determining whether this condition has
been satisfied, such materiality or Material Adverse Effect qualification will
be in all respects ignored and such covenant or agreement shall have been
performed in all respects without regard to such qualification (but subject to
the overall exception as to Material Adverse Effect set forth immediately prior
to this proviso). Buyer shall have delivered to the Company at the relevant
Closing a certificate of an appropriate officer in form and substance reasonably
satisfactory to the Company dated the relevant Closing Date to such effect.
(b) Stockholder Approval. Except in the case of the Initial
Closing, the issuance of the Company Common Stock pursuant to this Agreement
shall have received Stockholder Approval.
(c) No Injunction. There shall not be in effect any final
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby and
there shall be no pending Actions which would reasonably be expected to have a
material adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby or to acquire the Purchased Shares.
(d) Consents. The Company shall have obtained the consents set
forth in Schedule 3.4(d)-A in the case of the Initial Closing, in Schedule
3.4(d)-B in the case of the Second Closing, and in Schedule 3.4(d)-C in the case
of each other Subsequent Closing.
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ARTICLE 8
SURVIVAL; INDEMNIFICATION
Section 8.1 Survival. Other than the representations contained in
Sections 4.8 and 4.10 (which shall survive for as long as the Buyer owns
Purchased Shares), the representations contained in Sections 3.2 and 3.3(a)
(which shall survive indefinitely), the representations contained in Section
3.12 (which shall survive until the sixth anniversary of the date of the Initial
Closing) and the representations contained in 3.8 and 3.13 (which shall survive
for a period equal to the applicable statute of limitations for any taxes or
penalties imposed and payable in breach of such representations and warranties),
all representations, warranties and (except as provided by the last sentence of
this Section 8.1) covenants and agreements of the parties contained herein,
including indemnity or indemnification agreements contained herein, or in any
Schedule or Exhibit hereto, or any certificate, document or other instrument
delivered in connection herewith shall survive the Initial Closing, the Second
Closing, any Subsequent Closing and the termination of this Agreement pursuant
to Section 9.1 hereof (notwithstanding the exercise of Buyer's put option
pursuant to Section 2.9 hereof) until the twelve month anniversary of the latest
of the Initial Closing, the Second Closing, any Subsequent Closing and the
termination of this Agreement pursuant to Section 9.1 hereof; provided, however,
that there shall be no termination with respect to any representation and
warranty as to which either (a) a bona fide claim has been asserted prior to
such date or (b) the Company had actual knowledge of any breach thereof prior to
any Closing Date. No Action or proceeding may be brought with respect to any of
the representations and warranties, or any of the covenants or agreements which
survive until such twelve month anniversary, unless written notice thereof,
setting forth in reasonable detail the claimed misrepresentation or breach of
warranty or breach of covenant or agreement, shall have been delivered to the
party alleged to have breached such representation or warranty or such covenant
or agreement prior to such twelve month anniversary; provided, however, that, if
Buyer shall have complied with this Section 8.1, the damages for breach by the
Company of any of the representations and warranties, or any of the covenants or
agreements which survive until such twelve month anniversary, shall be measured
with respect to all of Buyer's purchases of Company Common Stock hereunder and
not with respect only to Buyer's purchases hereunder made prior to such twelve
month anniversary, but such measurement shall not in any event include any
shares of Company Stock that Buyer may have purchased other than from the
Company. Those covenants or agreements that contemplate or may involve actions
to be taken or obligations in effect after the Initial Closing shall survive in
accordance with their terms.
Section 8.2 Indemnification by Buyer or the Company.
(a) Subject to Section 8.1, from and after any Closing Date,
Buyer shall indemnify and hold harmless the Company, its Affiliates and its
Subsidiaries and its and their respective directors, officers, employees,
stockholders, partners, members and representatives, and their respective
successors and assigns, from and against any and all damages, claims, losses,
expenses, costs, obligations, and liabilities, including liabilities for all
reasonable attorneys' fees and expenses (including attorney and expert fees and
expenses incurred to enforce the terms of this
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Agreement) (collectively, "Loss and Expenses") suffered, directly or indirectly,
by the Company by reason of, or arising out of, (i) any breach as of the date
made or deemed made or required to be true of any representation or warranty
made by Buyer in or pursuant to this Agreement, or (ii) any failure by Buyer to
perform or fulfill any of its covenants or agreements set forth herein.
Notwithstanding any other provision of this Agreement to the contrary, in no
event shall Loss and Expenses include a party's incidental or consequential
damages.
(b) Subject to Section 8.1, from and after any Closing Date,
the Company shall indemnify and hold harmless Buyer, its Affiliates and its
Subsidiaries and its and their respective directors, officers, employees,
stockholders, partners, members and representatives, and their respective
successors and assigns (each, an "Indemnified Party"), from and against any and
all Loss and Expenses, suffered, directly or indirectly, by Buyer by reason of,
or arising out of, (i) any breach as of the date made or deemed made or required
to be true of any representation or warranty made by the Company in or pursuant
to this Agreement and any statements made in any certificate delivered pursuant
to this Agreement, or (ii) any failure by the Company to perform or fulfill any
of its covenants or agreements set forth herein. Notwithstanding any other
provision of this Agreement to the contrary, in no event shall Loss and Expenses
include a party's incidental or consequential damages. Separate and apart from
the Company's obligation to indemnify Buyer pursuant to the terms of this
Section 8.2(b), the Company shall purchase on Buyer's behalf insurance against
Environmental Liabilities in the amount of $2,000,000 annually per each
occurrence and $10,000,000 per annum (exclusive of legal defense costs) of
coverage, and shall pay any deductible applicable thereto, and shall maintain
such insurance on Buyer's behalf for a period of seven years. For purposes
hereof, "Environmental Liabilities" shall include any liability, loss cost or
expense arising under Environmental Laws or from Environmental Claims,
including, without limitation, costs of investigation, cleanup, remedial or
response action, the costs associated with posting financial assurances for the
completion of response, remedial or corrective actions, the preparation of any
closure or other necessary or required plans or analyses, or other reports or
analyses submitted to or prepared by regulating agencies, including the cost of
health assessments, epidemiological studies and the like, retention of engineers
and other expert consultants, legal counsel, capital improvements, operation and
maintenance testing counsel, capital improvements, operation and maintenance
testing and monitoring costs, power and utility costs and pumping taxes or fees,
and administrative costs incurred by governmental agencies.
(c) In the event that (i) the closing condition set forth in
Section 7.2(g)(ii) hereof is not satisfied and, notwithstanding the failure of
such closing condition, the Second Closing has occurred, (ii) Buyer has not
exercised its put option pursuant to Section 2.9 hereof and (iii) the Company
indemnifies an Indemnified Party pursuant to the terms of Section 8.2(b) hereof
in connection with the failure of the Company to qualify as a "domestically
controlled REIT" (any payments payable under clause (iii) upon occurrence of the
events set forth in clauses (i) - (iii), the "Indemnified Taxes"), the Company
will be obligated to pay to such Indemnified Party, in addition to any
Indemnified Taxes, an additional amount equal to the sum of (i) the product of
(A) the amount of the Indemnified Taxes and (B) a fraction, the numerator of
which equals the percentage of the outstanding Company Common Stock owned by
Investor as of the date such indemnification arises (expressed as a percentage)
(the "Investor Ownership Percentage") and the denominator of which
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equals the difference between the number one (1) and the Investor Ownership
Percentage and (ii) any Taxes imposed on such Indemnified Party in connection
with the receipt of payments pursuant to this Section 8.2(c) (including any
amounts paid under this clause (ii)). For the avoidance of doubt, this in the
event the closing condition set forth in Section 7.2(g)(ii) hereof is satisfied,
this Section 8.2(c) shall not be applicable.
(d) Notwithstanding the foregoing, (i) neither Buyer nor the
Company shall be responsible for any Loss and Expenses as provided by paragraphs
(a) and (b) (except with respect to the Indemnified Taxes and any amounts
payable pursuant to Section 8.2(c) hereof, which shall not be subject to any
minimum threshold), respectively, of this Section 8.2 until the cumulative
aggregate amount of such Loss and Expenses suffered by Buyer or the Company, as
the case may be, exceeds $500,000, in which case Buyer or the Company, as the
case may be, shall then be liable for all such Loss and Expenses, and (ii) the
cumulative aggregate indemnity obligation of each of Buyer and the Company under
this Section 8.2 shall in no event exceed the actual aggregate amount paid by
Buyer for the shares of Company Common Stock and the Contingent Value Rights
purchased by it from the Company pursuant to this Agreement. Except with respect
to third-party claims being defended in good faith or claims for indemnification
with respect to which there exists a good faith dispute, the indemnifying party
shall satisfy its obligations hereunder within 30 days of receipt of a notice of
claim under this Article 8.
Section 8.3 Third-Party Claims. If a claim by a third party is made
against an Indemnified Party and if such Indemnified Party intends to seek
indemnity with respect thereto under this Article, such Indemnified Party shall
promptly notify the indemnifying party in writing of such claims setting forth
such claims in reasonable detail; provided, however, the foregoing
notwithstanding, the failure of any Indemnified Party to give any notice
required to be given hereunder shall not affect such Indemnified Party's right
to indemnification hereunder except to the extent the indemnifying party from
whom such indemnity is sought shall have been prejudiced in its ability to
defend the claim or action for which such indemnification is sought by reason of
such failure. The indemnifying party shall have 20 days after receipt of such
notice to undertake, through counsel of its own choosing and at its own expense,
the settlement or defense thereof, and the Indemnified Party shall cooperate
with it in connection therewith; provided, however, that the Indemnified Party
may participate in such settlement or defense through counsel chosen by such
Indemnified Party, provided that the fees and expenses of such counsel shall be
borne by such Indemnified Party. The Indemnified Party shall not pay or settle
any claim which the indemnifying party is contesting. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay or settle any such
claim, provided that in such event it shall waive any right to indemnity
therefor by the indemnifying party. If the indemnifying party does not notify
the Indemnified Party within 20 days after the receipt of the Indemnified
Party's notice of a claim of indemnity hereunder that it elects to undertake the
defense thereof, the Indemnified Party shall have the right to contest, settle
or compromise the claim but shall not thereby waive any right to indemnity
therefor pursuant to this Agreement.
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ARTICLE 9
TERMINATION
Section 9.1 Termination. (a) This Agreement may be terminated prior to
the Initial Closing by:
(i) the mutual consent of the Company and Buyer at any time;
(ii) Buyer at any time (if it is not in breach of any of its
material obligations hereunder) in the event of a breach or failure by
the Company that is material in the context of the transactions
contemplated hereby of any representation, warranty, covenant or
agreement by the Company contained herein which has not been, or cannot
be, cured within 30 Business Days after written notice of such breach
is given to the Company;
(iii) the Company at any time (if it is not in breach of any
of its material obligations hereunder) in the event of a breach or
failure by Buyer that is material in the context of the transactions
contemplated hereby of any representation, warranty, covenant or
agreement by Buyer contained herein which has not been, or cannot be,
cured within 30 Business Days after written notice of such breach is
given to Buyer; or
(iv) either the Company or Buyer at any time, if the Initial
Closing shall not occur on a Target Date, unless the failure of such
occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe any material covenant or
agreement set forth herein required to be performed or observed by such
party on or before the date of the Initial Closing.
(b) This Agreement may be terminated at any time by:
(i) either the Company or Buyer, in the event that the
stockholders of the Company vote upon and fail to approve the issuance
of Company Common Stock contemplated hereby (it being understood that
the Initial Closing shall have occurred prior to the date of the
meeting of holders of shares of Company Stock to so approve);
(ii) Buyer, (1) if the Board shall have withdrawn, modified or
failed to make or refrained from making its recommendation that the
stockholders of the Company approve the issuance of Company Common
Stock pursuant to this Agreement as provided for in Section 3.2(b) and
Section 5.1(b) or (2) if the Board at any time refuses to reaffirm, at
Buyer's request, such recommendation and its determination to make such
recommendation to the stockholders of the Company, except, in each
case, as permitted by Section 5.4, or (3) if no meeting at which the
stockholders of the Company are asked to vote upon the transactions
contemplated by this Agreement shall have duly occurred on or prior to
August 31, 1998;
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(iii) the Company, if the Board in compliance with Section 5.4
hereof determines in good faith to terminate in favor of a Competing
Transaction, subject to the Company's obligation to pay Buyer certain
fees pursuant to Section 9.3 hereof;
(iv) Buyer on or before five Business Days following the date
on which the Final Schedules, the Kane Purchase Agreement (with
completed schedules) and the Konover Purchase Agreement (with completed
schedules) have been delivered by the Company to Buyer if Buyer, in its
sole discretion, believes that the Final Schedules, the Kane Purchase
Agreement or the Konover Purchase Agreement disclose facts that are
material and adversely affect the Company;
(v) Buyer on or before five Business Days following the date
any Updated Schedules have been delivered by the Company to Buyer if
Buyer, in its sole discretion, believes that the Updated Schedules
disclose facts that are material and adversely affect the Company;
(vi) Buyer on or before five Business Days following the date
on which the Kane and Konover Schedules have been delivered by the
Company to Buyer, if Buyer reasonably believes that the Kane and
Konover Schedules disclose facts that have a material adverse effect on
the value of the Kane and Konover Properties to the Company; or
(vii) Buyer if the Second Closing does not occur by September
30, 1998 (other than as a result of a material breach by Buyer of its
obligations under this Agreement).
Notwithstanding anything to the contrary in this Agreement, no
provision of this Agreement shall be construed to permit the Company to prevent
Buyer from purchasing the Initial Number of Shares (other than if the Company
terminates this Agreement prior to the date of the Initial Closing pursuant to
Section 9.1(a)(iii)).
Section 9.2 Procedure and Effect of Termination. In the event of
termination of this Agreement by either or both of the Company and Buyer
pursuant to Section 9.1, written notice thereof shall forthwith be given by the
terminating party to the other party hereto, and this Agreement shall thereupon
terminate and become void and have no effect, and the transactions contemplated
hereby shall be abandoned without further action by the parties hereto (other
than the right of Buyer to purchase the Initial Number of Shares as set forth in
the last paragraph of Section 9.1 of this Agreement), except that the provisions
of Sections 5.2 (Public Announcements; Confidentiality), 9.3 (Expenses), 10.2
(Governing Law), and 10.4 (Notices), and, in the event of any termination
following any Closing hereunder, the provisions of Article 8 (Survival;
Indemnification), and any related definitional, interpretive or other provisions
necessary for the logical interpretation of such provisions, shall survive the
termination of this Agreement; provided, however, that such termination shall
not relieve any party hereto of any liability for any breach of this Agreement.
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Section 9.3 Expenses.
(a) Whether or not any Stock Purchase is consummated, all
reasonable out-of-pocket legal and other costs and expenses incurred by Buyer in
connection with this Agreement and the transactions contemplated hereby shall be
reimbursed by the Company as of the date hereof (by wire transfer of same day
funds); provided that Buyer shall not have breached any of its representations
and warranties in any material respect. In addition, the Company shall promptly
reimburse Buyer for all reasonable out-of-pocket legal and other costs and
expenses incurred after the date hereof in connection with Buyer (i) monitoring
the Company and the performance of the Purchased Shares and (ii) performing its
duties under each of the Governing Documents.
(b) At any time prior to the Initial Closing or, if the
Initial Closing has occurred, at any time prior to the Second Closing, if this
Agreement is terminated, the Company shall pay Buyer a fee in the amount of
$2,250,000 (the "Break-up Fee"); provided, that Buyer is not in material default
under this Agreement, that Buyer has not breached any of its representations and
warranties in any material respect, and that Buyer has satisfied in all material
respects its covenants relating to the Initial Closing and contemplated by the
terms hereof to be performed at or prior to the time of the Company's
stockholders' meeting. In addition, in the event the Board, prior to the
stockholders meeting referenced in Section 5.1(b) of this Agreement, is
contacted by another person regarding a Competing Transaction or has information
relating to a Competing Transaction to be proposed by another person, and the
Company enters into a Competing Transaction with such person or any Affiliate of
such person on or prior to the one year anniversary of the date this Agreement
is terminated, the Company shall pay Buyer an additional fee in the amount of
$3,000,000 (the "Topping Fee"). Notwithstanding the foregoing, in the event a
Topping Fee is paid to Buyer and the amount of cash received by Buyer pursuant
to (i) the Break-up Fee PLUS (ii) the Topping Fee PLUS (iii) the 19.9% Sale
Transaction Profit exceeds $7,750,000, Buyer shall refund to the Company the
amount of such excess within thirty days.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each party hereto and delivered to the other party. Copies of executed
counterparts transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section, provided receipt of copies of such counterparts is confirmed.
Section 10.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE CHOICE OF LAW PRINCIPLES THEREOF.
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Section 10.3 Entire Agreement. This Agreement (including agreements
incorporated herein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein. This Agreement is
not intended to confer upon any person not a party hereto (and their successors
and assigns) any rights or remedies hereunder.
Section 10.4 Notices. All notices and other communications hereunder
shall be sufficiently given for all purposes hereunder if in writing and
delivered personally, sent by documented overnight delivery service or, to the
extent receipt is confirmed, telecopy, telefax or other electronic transmission
service to the appropriate address or number as set forth below. Notices to the
Company shall be addressed to:
FAC Realty Trust, Inc.
11000 Regency Parkway, 3rd fl.
East Tower
Cary, NC 27511
Attention: C. Cammack Morton
Telecopy: (919) 462-8799
with a copy to:
Alston & Bird LLP
310 UCS Plaza
3605 Glenwood Ave.
P.O. Drawer 31107
Raleigh, North Carolina 27622-1107
Attention: Brad S. Markoff, Esq.
Telecopy: (919) 881-3175
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
Lazard Freres Real Estate Investors, LLC
Thirty Rockefeller Plaza, 63rd Floor
New York, NY 10020
Attention: Arthur P. Solomon and Murry N. Gunty
Telecopy Number: (212) 632-6052
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with a copy to:
Latham & Watkins
885 Third Avenue
New York, NY 10022
Attention: R. Ronald Hopkinson, Esq.
Telecopy Number: (212) 751-4864
Section 10.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors. Except as specifically provided hereby, Buyer shall not be permitted
to assign any of its rights hereunder to any third party, other than to one or
more Affiliates of LFREI, a majority of the voting power and the economic
interests of which are Beneficially Owned (as that term is defined in the
Stockholders Agreement) by LFREI, provided that such Affiliates make the
representations set forth in Article 4 hereof and agree to be bound hereby and
by the Stockholders Agreement, and provided that Buyer shall remain liable
hereunder, and provided that any bona fide financial institution to which Buyer
or any permitted transferee has Transferred (as that term is used in the
Stockholders Agreement) (including upon foreclosure of a pledge) shares of
Company Stock for the purpose of securing bona fide indebtedness of Buyer or
such permitted transferee and which has agreed to be bound by this Agreement and
the Stockholders Agreement shall also be entitled to enforce the rights of Buyer
hereunder.
Section 10.6 Headings. The Section, Article and other headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 10.7 Amendments and Waivers. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Either
party hereto may, only by an instrument in writing, waive compliance by the
other party hereto with any term or provision hereof on the part of such other
party hereto to be performed or complied with. The waiver by any party hereto of
a breach of any term or provision hereof shall not be construed as a waiver of
any subsequent breach.
Section 10.8 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one gender shall be
held to include the other gender as the context requires, (ii) the terms
"hereof", "herein", and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole (including
all of the Schedules and Exhibits hereto) and not to any particular provision of
this Agreement, and Article, Section, paragraph, Exhibit and Schedule references
are to the Articles, Sections, paragraphs, Exhibits and Schedules to this
Agreement unless otherwise specified, (iii) the word "including" and words of
similar import when used in this Agreement shall mean "including, without
limitation," unless the
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context otherwise requires or unless otherwise specified, (iv) the word "or"
shall not be exclusive, and (v) provisions shall apply, when appropriate, to
successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
Section 10.9 Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
Section 10.10 Further Assurances. The Company and Buyer agree that,
from time to time, whether before, at or after any Closing Date, each of them
will execute and deliver such further instruments of conveyance and transfer and
take such other action as may be necessary to carry out the purposes and intents
hereof.
Section 10.11 Specific Performance. Buyer and the Company each
acknowledge that, in view of the uniqueness of the parties hereto, the parties
hereto would not have an adequate remedy at law for money damages in the event
that this Agreement were not performed in accordance with its terms, and
therefore agree that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.
Section 10.12 Interpretation of Schedules. Any matter set forth on any
Schedule shall be deemed to be referred to on all other Schedules to which such
matter logically relates and where such reference would be appropriate and can
reasonably be inferred from the matters disclosed on the first Schedule as if
set forth on such other Schedules.
[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
PROMETHEUS SOUTHEAST RETAIL LLC
By: LF Strategic Realty Investor II, L.P.,
its sole member
By: Lazard Freres Real Estate Investors, LLC,
its general partner
By: _______________________
Name: _________________________
Title: _________________________
FAC REALTY TRUST, INC.
By: ________________________
Name: C. Cammack Morton
Title: Chief Executive Officer
<PAGE>
-----------------------------------------------------------------------
STOCKHOLDERS AGREEMENT
by and between
PROMETHEUS SOUTHEAST RETAIL LLC
and
FAC REALTY TRUST, INC.
dated as of
February 24, 1998
-----------------------------------------------------------------------
<PAGE>
THIS STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of
February 24, 1998 is made by and between Prometheus Southeast Retail LLC
("Buyer"), an affiliate of Lazard Freres Real Estate Investors, LLC ("LFREI"),
and FAC Realty Trust, Inc., a Maryland corporation (the "Company"). Capitalized
terms not otherwise defined herein have the meaning ascribed to them in the
Stock Purchase Agreement (as hereinafter defined).
RECITALS:
WHEREAS, the Company and Buyer have entered into a Stock
Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"), pursuant to which the Company has agreed to sell, and Buyer has
agreed to purchase, certain shares of common stock, par value $0.01 per share,
of the Company (the "Company Common Stock"), together with Contingent Value
Rights, upon the terms and subject to the conditions set forth therein;
WHEREAS, it is a condition to the transactions contemplated by
the Stock Purchase Agreement and the parties believe it to be in their best
interests that they enter into this Agreement and provide for certain rights and
restrictions with respect to the investment by Investor (as hereinafter defined)
in the Company and the corporate governance of the Company;
WHEREAS, the Company and Buyer believe that the combination in
a strategic partnership of the leadership, expertise and experience in retail
development and operations of the Company and the investment and capital markets
expertise and access to capital of Buyer and its Affiliates will significantly
enhance the Company's ability to pursue its growth and operating strategies; and
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1 "Affiliate" shall have the meaning ascribed
thereto in Rule 12b-2 promulgated under the 1934 Act, and as in effect on the
date hereof.
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<PAGE>
Section 1.2 "Aggregate Purchase Price" shall mean, on any
date, the amount equal to the aggregate consideration paid by Buyer on and prior
to such date in connection with the purchase of the Purchased Shares pursuant to
the Stock Purchase Agreement.
Section 1.3 "Agreement" shall have the meaning set forth in
the first paragraph hereof.
Section 1.4 "Approval Rights Termination Date" shall mean the
first date on which the ratio (expressed as a percentage) of (i) the sum of (A)
the remaining Investment of Investor (and any transferee or assignee of Investor
or any group of transferees or assignees) on such date and (B) the remaining
Commitment to Invest of Investor (or any transferee or assignee of Investor or
group of transferees or assignees) on such date to (ii) the sum of (A) the Fair
Market Value of all Company Stock outstanding, as measured on such date, and (B)
the Fair Market Value of all OP Units outstanding, as measured on such date, is
less than 15%.
Section 1.5 "Beneficially Own" shall mean, with respect to any
security, having direct or indirect (including through any Subsidiary or
Affiliate) "beneficial ownership" of such security, as determined pursuant to
Rule 13d-3 under the 1934 Act, including pursuant to any agreement, arrangement
or understanding, whether or not in writing; provided, however, that all of the
shares of Company Common Stock which Buyer has agreed to purchase under the
Stock Purchase Agreement but which have not yet been purchased shall be deemed
to be Beneficially Owned by Investor until the Remaining Equity Ownership is
zero.
Section 1.6 "Board" shall mean the board of directors of the
Company.
Section 1.7 "Buyer" shall have the meaning set forth in the
first paragraph hereof.
Section 1.8 "Code" shall mean the Internal Revenue Code of
1986, as amended, and any successor thereto, including all of the rules and
regulations promulgated thereunder.
Section 1.9 "Commitment to Invest" shall mean, for any person
and on any date, the product of (A) the number of shares of Company Common Stock
such person is committed to purchase from the Company under the Stock Purchase
Agreement on or after such date and (B) the Fair Market Value of the Company
Common Stock on such date.
Section 1.10 "Company" shall have the meaning set forth in the
first paragraph hereof.
Section 1.11 "Company Charter" shall have the meaning set
forth in the Stock Purchase Agreement.
Section 1.12 "Company Common Stock" shall have the meaning set
forth in the second paragraph hereof.
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Section 1.13 "Company Stock" shall mean, collectively, the
Company Common Stock and other shares of capital stock of the Company.
Section 1.14 "Company Stock Equivalents" shall have the
meaning set forth in Section 3.2(e).
Section 1.15 "Control" shall mean with respect to any person,
the power to direct the management and policies of such person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise. "Controlled" shall have a correlative meaning.
Section 1.16 "Declaration Date" shall have the meaning set
forth in Section 3.3(b).
Section 1.17 "Director" shall mean a member of the Board.
Section 1.18 "Eligible Securities" shall have the meaning set
forth in Section 3.3.
Section 1.19 "Executive Committee" shall mean the five-member
executive committee of the Board.
Section 1.20 "Exercise Notice" shall have the meaning set
forth in Section 4.1(c).
Section 1.21 "Fair Market Value" shall mean, with respect to
Company Stock on any day, the average of the last reported sales price for such
Company Stock for 60 consecutive calendar days before such date, and, with
respect to OP Units on any day, the average of the last reported sales price for
Company Common Stock for 60 consecutive calendar days before such date. In the
event the "Fair Market Value" for such Company Stock or OP Units cannot be
determined as aforesaid, the "Fair Market Value" for such Company Stock or OP
Units, as applicable, shall be determined by the Independent Directors of the
Company as they, in good faith, consider appropriate. Such determination may be
challenged in good faith by the Investor, and any dispute shall be resolved at
the Company's cost, by an investment banking firm of recognized national
standing selected by the Company and acceptable to Investor and shall be made in
good faith and be conclusive absent manifest error.
Section 1.22 "15% IRR Amount" shall mean, on any day, an
aggregate dollar amount that allows Buyer to realize a 15% internal rate of
return on the Aggregate Purchase Price paid by Buyer as of such date, on a
compounded, annualized basis (inclusive of all cash dividends paid to Buyer with
respect to the Purchased Shares (not including any special fees, expenses or
other consideration payable to Investor, but not to all other stockholders of
the Company)).
Section 1.23 "Final Threshold Date" shall mean the first date
on which the sum of (A) the remaining Investment of Investor (and any transferee
or assignee of Investor or any group of transferees or assignees) on such date
and (B) the remaining Commitment to Invest of Investor (or any transferee or
assignee of Investor or group of transferees or assignees) on such date, is less
than $10,000,000.00.
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<PAGE>
Section 1.24 "Fully Diluted" shall mean, with respect to the
Company Stock, the total number of outstanding shares of Company Stock (for such
purposes, treating as outstanding Company Stock all options or warrants to
purchase and securities convertible into (or exchangeable or redeemable for)
Company Stock, including, without limitation, OP Units), outstanding as of the
relevant measurement date, assuming exercise, conversion, exchange or redemption
of such other securities.
Section 1.25 "Government Authority" shall mean any government
or state (or any subdivision thereof) of or in the United States, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal.
Section 1.26 "Group" shall mean a "group" as such term is used
in Section 13(d)(3) of the 1934 Act.
Section 1.27 "Independent Directors" shall have the meaning
set forth in Section 2.1(d).
Section 1.28 "Initial Investor Nominees" shall have the
meaning set forth in Section 2.1(a).
Section 1.29 "Investment" shall mean, for any person and on
any date, the sum of (i) product of (A) the number of shares of Company Stock
held by such person and (B) the Fair Market Value of the Company Stock on such
date and (ii) the product of (A) the number of OP Units held by such person and
(B) the Fair Market Value of the OP Units on such date.
Section 1.30 "Investor" shall mean Buyer, and shall also
include any Affiliate of LFREI, a majority or more of the voting power and
economic interests of which is Beneficially Owned by LFREI, or, for purposes
only of the provisions of the Registration Rights Agreement, any bona fide
financial institution to which any Investor has transferred (including upon
foreclosure of a pledge) shares of Company Stock for the purpose of securing
bona fide indebtedness of any Investor and which has agreed to be bound by this
Agreement.
Section 1.31 "Investor Nominees" shall have the meaning set
forth in Section 2.1(a).
Section 1.32 "Key Committees" shall have the meaning set forth
in Section 2.2(a).
Section 1.33 "1933 Act" shall mean the Securities Act of 1933,
as amended.
Section 1.34 "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
Section 1.35 "Offer Period" shall have the meaning set
forth in Section 3.3(a).
Section 1.36 "Offer Price" shall have the meaning set forth in
Section 3.3.
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Section 1.37 "Offer to Purchase" shall have the meaning set
forth in Section 3.3.
Section 1.38 "Participation Notice" shall have the meaning set
forth in Section 4.1(c).
Section 1.39 "Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, other form of business or legal entity or Government Authority.
Section 1.40 "Preliminary Threshold Date" shall mean the first
date on which the sum of (A) the remaining Investment of Investor (and any
transferee or assignee of Investor or any group of transferees or assignees) on
such date and (B) the remaining Commitment to Invest of Investor (or any
transferee or assignee of Investor or group of transferees or assignees) on such
date, is less than $50,000,000.00.
Section 1.41 "Purchase Date" shall have the meaning set forth
in Section 3.3(a).
Section 1.42 "Purchased Shares" shall have the meaning set
forth in the Stock Purchase Agreement.
Section 1.43 "Registrable Securities" shall have the meaning
set forth in the Registration Rights Agreement.
Section 1.44 "Registration Rights Agreement" shall mean the
Registration Rights Agreement, dated as of the date hereof, by and between the
Company and Buyer.
Section 1.45 "Securities Filings" shall have the meaning set
forth in Section 3.1(a)(iii).
Section 1.46 "Stockholder Approval" shall have the meaning set
forth in the Stock Purchase Agreement.
Section 1.47 "Stockholder Approval Date" shall mean the date
on which a duly called and held meeting of shareholders of the Company is held
at which meeting (i) a quorum is present and (ii) Stockholder Approval is
obtained.
Section 1.48 "Stock Purchase Agreement" shall have the meaning
set forth in the second paragraph hereof.
Section 1.49 "Supermajority Board Approval" shall have the
meaning set forth in Section 3.2.
Section 1.50 "Second Threshold Date" shall mean the first date
on which the sum of (A) the remaining Investment of Investor (and any transferee
or assignee of Investor or any group
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<PAGE>
of transferees or assignees) on such date and (B) the remaining Commitment to
Invest of Investor (or any transferee or assignee of Investor or group of
transferees or assignees) on such date, is less than $25,000,000.00.
Section 1.51 "Total Enterprise Value" shall have the meaning
given to it in the Stock Purchase Agreement.
Section 1.52 "Transfer Agent" shall have the meaning set forth
in Section 3.3(c).
ARTICLE 2
BOARD OF DIRECTORS
Section 2.1 Members of the Board
(a) From and after the Stockholder Approval Date, if any, and
until the Preliminary Threshold Date, the Company and Investor shall
take all actions necessary to cause the Board to be structured to
consist of no less than nine members, of which three members will be
designees of Investor (the "Investor Nominees"), two of which shall be
chosen at the sole discretion of Investor (the "Initial Investor
Nominees") and one of which shall be subject to the reasonable approval
of the Company, and the Company and Investor will take all actions
necessary to cause such nominees to become members of the Board as soon
as practicable after the Stockholder Approval Date. If necessary to
effectuate the placement of the Investor Nominees on the Board, the
Company shall solicit the resignations of the appropriate number of
Directors to the extent necessary to permit the Investor Nominees to
serve. The Initial Investor Nominees are expected to be Art Solomon and
Murry Gunty; provided, that Investor may at any time appoint any other
person, subject to the provisions of Section 2.1(d) of this Agreement,
as an Initial Investor Nominee without the consent of the Company. At
any time before the Preliminary Threshold Date, if the total size of
the Board is increased, the number of Investor Nominees shall also be
increased such that at least one-third of the members of the Board
shall be Investor Nominees.
(b) From and after the Preliminary Threshold Date and until
the Second Threshold Date, the Company and Investor shall take all
actions necessary to cause the Board to be structured to consist of no
less than nine members, of which at least two members will be Investor
Nominees, and the Company and Investor will take all actions necessary
to cause such nominees to become, or continue to be, members of the
Board as soon as practicable after the Preliminary Threshold Date. At
any time before the Second Threshold Date, if the total size of the
Board is increased, the number of Investor Nominees shall also be
increased such that at least two-ninths of the members of the Board
shall be Investor Nominees.
(c) From and after the Second Threshold Date and until the
Final Threshold Date, the Company and Investor shall take all actions
necessary to cause the Board to be structured
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to consist of no less than nine members, of which at least one member
will be an Investor Nominee, and the Company and Investor will take all
actions necessary to cause such nominee(s) to become, or continue to
be, member(s) of the Board as soon as practicable after the Second
Threshold Date. At any time before the Final Threshold Date, if the
total size of the Board is increased, the number of Investor Nominees
shall also be increased such that at least one-ninth of the members of
the Board shall be Investor Nominees.
(d) Investor will not name any person as an Investor Nominee
if (i) such person is not reasonably experienced in business, financial
or real estate matters, (ii) such person has been convicted of, or has
pled nolo contendere to, a felony, (iii) the election of such person
would violate any law, or (iv) any event required to be disclosed
pursuant to Item 401(f) of Regulation S-K of the 1934 Act has occurred
with respect to such person. Investor shall use its reasonable efforts
to afford the independent directors of the Company (the "Independent
Directors") a reasonable opportunity to meet any individual that
Investor is considering naming as an Investor Nominee.
(e) The Company will support the nomination of and the
election of each Investor Nominee to the Board, and the Company will
exercise all authority under applicable law to cause each Investor
Nominee to be elected to the Board. Without limiting the generality of
the foregoing, with respect to each meeting of shareholders of the
Company at which Directors are to be elected, the Company shall use its
reasonable efforts to solicit from the shareholders of the Company
eligible to vote in the election of Directors proxies in favor of each
Investor Nominee.
Section 2.2 Committee Representation; Subsidiary Boards
(a) The Company shall amend its by-laws to (i) establish the
Executive Committee, which shall be delegated the authority to the
maximum extent permitted by law to approve any matter permissible under
law for authorization by an executive committee, and (ii) provide that
each of the Executive Committee, the compensation committee, the audit
committee, any special committee(s) of the Board, and any other
committees which shall be charged with exercising substantial authority
on behalf of the Board (other than any committee charged with the
approval of the transactions contemplated by the Stock Purchase
Agreement or this Agreement, or any committee charged with evaluating
any Competing Transaction) (the foregoing, the "Key Committees") shall
(A) until the Preliminary Threshold Date, be comprised of members, at
least one-third of whom are Investor Nominees, (B) until the Second
Threshold Date, be comprised of members, at least two-ninths of whom
are Investor Nominees, and (C) until the Final Threshold Date, be
comprised of members, at least one-ninth of whom are Investor Nominees.
Notwithstanding the foregoing, if none of the Directors who
are Investor Nominees would be considered "independent" of the Company,
"disinterested," "non-employee directors" and "outside directors" (i)
for purposes of any applicable rule of the New York Stock Exchange or
any other securities exchange or other self-regulating organization
(such
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as the National Association of Securities Dealers) requiring that
members of the audit committee of the Board be independent of the
Company, (ii) for purposes of any law or regulation that requires, in
order to obtain or maintain favorable tax, securities, corporate law or
other material legal benefits with respect to any plan or arrangement
for employee compensation or benefits, that the members of the
committee of the Board charged with responsibility for such plan or
arrangement be "independent" of the Company, "disinterested,"
"non-employee directors" or "outside directors," or (iii) for purposes
of any special committee formed in connection with any transaction or
potential transaction involving the Company and any of Investor, its
Affiliates or any Group of which Investor is a member or such other
transaction or potential transaction which would involve an actual or
potential conflict of interest on the part of the Directors who are
Investor Nominees, then a Director who is an Investor Nominee shall not
be required to be appointed to any such committee; provided, however,
that the committees of the Board shall be organized such that, to the
extent practicable, the only items to be considered by a Key Committee
on which no Director who is an Investor Nominee may serve will be those
items which prevent the Director who is an Investor Nominee from
serving on such Key Committee. Any members of any Key Committee who are
Investor Nominees shall, in the event of any vacancy in such
membership, be replaced by a Director who is an Investor Nominee
elected by a majority of the Directors who are Investor Nominees.
(b) Until the Final Threshold Date, at least one Director who
is an Investor Nominee shall serve as a member of the board of
directors or comparable governing body of each Subsidiary of the
Company, if any, that is a corporation or other person with a board of
directors or board of trustees.
Section 2.3 Vacancies. In the event that any Investor Nominee
shall cease to serve as a Director for any reason other than the fact that
Investor no longer has a right to nominate a Director, the vacancy resulting
thereby shall be filled by an Investor Nominee designated by Investor; provided,
however, that any Investor Nominee so designated shall satisfy the qualification
requirements set forth in Section 2.1(b).
ARTICLE 3
COVENANTS; TRANSFER PROVISIONS
Section 3.1 Operating Statements; Public Company Status
(a) From and after the date of this Agreement until the Final
Threshold Date, if any, the Company will:
(i) deliver to Investor, as soon as practicable after
the end of each month or other reporting period, any operating
and financial statements and management reports (x) of the
Company, and (y) of each Subsidiary of the Company not
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consolidated with the Company, which are regularly provided to
the senior management of the Company, each as, at and for the
end of such month or other reporting period, and such other
statements or reports as are reasonably requested by Investor,
all in such form as are prepared by the Company for internal
use by management (including, as applicable, by e-mail);
(ii) deliver to Investor copies of all other
information distributed by the Company to the Board, any other
equity investor in the Company or any of the Company's
partners in joint ventures;
(iii) deliver to Investor, as promptly as practicable
following filing, a copy of each report, schedule or other
document filed by the Company pursuant to the requirements of
any federal or state securities laws (collectively, the
"Securities Filings"); and
(iv) continue to comply in all material respects with
the reporting requirements of Section 13 or 15(d) of the 1934
Act.
(b) Until the Final Threshold Date, the Company and Investor
will afford one another a reasonable opportunity to review any
Securities Filing, any other filing with a Government Authority and any
press release or similar public announcement which refers to, describes
or mentions such other party or any Affiliate of such other party prior
to the time that such filing is filed with or sent to the applicable
Government Authority or such announcement is disseminated.
Section 3.2 Conduct of Actions. From and after the Stockholder
Approval Date until the Approval Rights Termination Date, if any,
notwithstanding the fact that a vote of the Board or the Executive Committee may
not be required under applicable law, the Company shall not, and shall not
permit any of its Subsidiaries without the affirmative vote of over sixty-seven
percent (67%) of all of the Directors ("Supermajority Board Approval") to:
(a) acquire, whether by merger, consolidation, purchase of
stock or assets or other business combination, (i) in a single
transaction or group of related transactions, any business or assets
having an aggregate purchase price in excess of twenty-five percent
(25%) of Total Enterprise Value as measured at the beginning of the
fiscal year in which such acquisition is consummated, or (ii) during
any one fiscal year, businesses or assets having an aggregate purchase
price in excess of fifty percent (50%) of Total Enterprise Value as
measured at the beginning of such fiscal year;
(b) sell or dispose of any assets, whether by merger,
consolidation, sale of stock or assets or other business combination,
during any one fiscal year, having an aggregate value in excess of
twenty-five percent (25%) of Total Enterprise Value as measured at the
beginning of such fiscal year;
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(c) directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to, any indebtedness if, after
giving pro forma effect to such indebtedness, the Company's ratio of
(i) total indebtedness to (ii) Total Enterprise Value, expressed as a
percentage, would be greater than 65%;
(d) make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property
or assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of,
any of its Affiliates;
(e) issue Company Stock or options, rights or warrants or
other commitments to purchase or securities convertible into (or
exchangeable or redeemable for) shares of Company Stock, including,
without limitation, OP Units (such options, rights, warrants, other
commitments or securities, "Company Stock Equivalents"); provided,
however, that Supermajority Board Approval shall not be required for
any issuance of Company Stock or Company Stock Equivalents as long as
the sum of (i) all shares of Company Stock issued by the Company during
the applicable fiscal year and (ii) shares of Company Stock into which
Company Stock Equivalents issued by the Company and each of its
Subsidiaries during the applicable fiscal year are convertible, does
not exceed fifty percent (50%) of all shares of Company Stock
outstanding, on a Fully Diluted basis, on the first day of such fiscal
year; provided, further, that in connection with any issuance by the
Company of Company Stock or issuance by the Company or any of its
Subsidiaries of any Company Stock Equivalents, Investor shall be
entitled, to the extent so provided in Section 4.1 of this Agreement,
to a participation right on the terms set forth in Section 4.1 of this
Agreement. Notwithstanding the first sentence of this Section 3.2(e),
(i) Company Stock issued to the Company or a wholly owned Subsidiary
thereof and (ii) Company Stock and Company Stock Equivalents issued to
directors or employees of the Company or a Subsidiary of the Company in
connection with any employee benefit plan approved by the shareholders
of the Company, shall not be subject to Supermajority Board Approval;
(f) change or amend any provision of the Company Charter or
the by-laws of the Company in a manner that would be materially adverse
to Investor;
(g) pursuant to or within the meaning of any bankruptcy law:
(i) commence a voluntary case, (ii) consent to the entry of an order
for relief against it in an involuntary case, (iii) consent to the
appointment of a custodian of it or for all or substantially all of its
property, (iv) make a general assignment for the benefit of its
creditors;
(h) in the case of the Company, (1) terminate its eligibility
for treatment as a real estate investment trust, as defined in the
Code, or (2) take any action or fail to take any action which would
reasonably be expected to, alone or in conjunction with any other
factors, result in the loss of such eligibility, unless in the case of
a failure to take action, such action is
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initiated within thirty days and such action is completed within the
period required under the Code in order to maintain such eligibility;
or
(i) subject to the right of the Company to terminate the Stock
Purchase Agreement pursuant to Section 9.1(b)(iii) thereof, allow the
consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than Buyer, becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of stock having more than 15% of the
voting power of the Company.
Section 3.3 Offer to Purchase. At any time prior to December
31, 2003 (after completion of the purchase of all of the Purchased Shares
pursuant to the Stock Purchase Agreement), the Company may make an irrevocable
offer to purchase (the "Offer to Purchase") to all holders of shares of Company
Common Stock that are Registrable Securities (such shares, "Eligible
Securities") all (and not less than all) outstanding shares of Eligible
Securities at a per share offer price (the "Offer Price") in cash equal to (i)
the greater of (A) $19.00 MULTIPLIED BY the number of outstanding shares of
Purchased Shares on such date LESS the aggregate amount of cash dividends paid
(not including any special fees, expenses or other consideration payable to
Investor, but not to all other stockholders of the Company) on the Purchased
Shares between the date of the Initial Closing and such date and (B) the 15% IRR
Amount on such date, DIVIDED BY (ii) the number of outstanding shares of
Purchased Shares on such date. In making an Offer to Purchase, the Company shall
follow the procedures set forth below:
(a) The Offer to Purchase shall remain open for a period of 20
Business Days following its commencement and no longer, except to the
extent that a longer period is required by applicable law (the "Offer
Period"). No later than five Business Days after the termination of the
Offer Period (the "Purchase Date"), the Company shall purchase all
shares of Eligible Securities tendered in response to the Offer to
Purchase. Payment for any Eligible Securities so purchased shall be
made in the same manner as dividends are paid.
(b) If the Purchase Date is on or after the date on which
dividends are declared (the "Declaration Date"), any accrued or unpaid
dividends shall be paid to the person in whose name the applicable
Eligible Security is registered at the close of business on the
Declaration Date, and no additional dividends shall be payable to
holders of Eligible Securities pursuant to the Offer to Purchase.
(c) Upon the commencement of an Offer to Purchase, the
Company, within five days of such commencement, shall send, by first
class mail, a notice to the transfer agent for Company Common Stock
(the "Transfer Agent") and each holder of Eligible Securities. The
notice shall contain all instructions and material necessary to enable
such holders to tender Eligible Securities pursuant to the Offer to
Purchase. The Offer to Purchase shall be made to all holders of
Eligible Securities. The notice, which shall govern the terms of the
Offer to Purchase, shall state:
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<PAGE>
(i) that the Offer to Purchase is being made pursuant
to Section 3.3 hereof and the length of time the Offer to
Purchase shall remain open;
(ii) the Offer Price and the Purchase Date;
(iii) that any Eligible Securities not tendered shall
remain outstanding;
(iv) that, unless the Company fails to make the
applicable payment, any Eligible Securities tendered will
cease to be outstanding;
(v) that holders of Eligible Securities electing to
have any shares purchased shall be required to surrender such
shares, with a validly executed certificate of transfer, or
transfer by book-entry transfer, to the Company or the
Transfer Agent at the address specified in the notice at least
three days before the Purchase Date; and
(vi) that holders of Eligible Securities shall be
entitled to withdraw their election if the Company or the
Transfer Agent, as the case may be, receives, not later than
the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the
holder, the number of shares the holder delivered for purchase
and a statement that such holder is withdrawing his election
to have such shares purchased.
For the avoidance of doubt, neither Investor nor any of its
assignees are required to accept an Offer to Purchase. The provisions governing
an Offer to Purchase are set forth in this Agreement for the purpose of
clarifying the terms of the Contingent Value Right Agreement.
Section 3.4 Amendment of Documents. The Company shall take all
actions necessary to amend the Company Charter and the Company's by-laws in
order to give effect to Article 2 and Section 3.2 of this Agreement. Such
amendments to the Company Charter and the Company's by-laws shall be in form and
substance reasonably satisfactory to Buyer and otherwise consistent with the
terms of this Agreement.
Section 3.5 Voting. On any matter that requires a vote of the
stockholders of the Company under the Company's Charter or by-laws or under any
applicable law, Buyer shall vote any Company Common Stock acquired by it
pursuant to Section 4.1(b) hereof pro rata based on the votes of the other
stockholders of the Company.
Section 3.6 Mergers. For a period of five years following the
date of the Initial Closing, Buyer shall not take any action to cause the
Company to consolidate or merge with or into another person if, pursuant to the
terms of such consolidation or merger, the stockholders of the Company (other
than Buyer) shall receive consideration in a form, or in an amount, different
from Buyer. In addition, if on any date Buyer shall, in one or a series of
related transactions, transfer a number of shares of Company Common Stock
greater than 50% of the aggregate number of shares
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<PAGE>
of Company Common Stock outstanding on such date to a person (other than an
Affiliate of Buyer) and such person's Affiliates, such person shall be subject
to the limitations set forth in this Section 3.6 as if such person were a party
to this Agreement.
ARTICLE 4
PARTICIPATION RIGHTS
Section 4.1 (a) Right to Participate. From and after the date
hereof until the Preliminary Threshold Date, if any, Investor shall be entitled
to a participation right to purchase or subscribe for up to that number of
additional shares of capital stock (including as "capital stock" for purposes of
this Section, any security, option, warrant, call, commitment, subscription,
right to purchase or other agreement of any character that is convertible into
or exchangeable or redeemable for shares of capital stock of the Company or any
of its Subsidiaries, including, without limitation, OP Units (and all references
in this Section to capital stock shall, as appropriate, be deemed to be
references to any such securities), and also including additional shares of
capital stock to be issued pursuant to the conversion, exchange or redemption of
any security, option, warrant, call, commitment, subscription, right to purchase
or other agreement of any character that is convertible into or exchangeable or
redeemable for shares of capital stock, including, without limitation, OP Units,
as if the price at which such additional shares of capital stock is issued
pursuant to any such conversion, exchange or redemption were the market price on
the date of such issuance) to be issued or sold by the Company which represents
the same proportion of the total number of shares of capital stock to be issued
or sold by the Company (including the shares of capital stock to be issued to
Investor upon exercise of its participation rights hereunder; it being
understood and agreed that the Company will accordingly be required to either
increase the number of shares of capital stock to be issued or sold so that
Investor may purchase additional shares to maintain its proportionate interest,
or to reduce the number of shares of capital stock to be issued or sold to
Persons other than Investor) as is represented by the number of shares of
Company Stock and OP Units owned by Investor prior to such sale or issuance (and
including for this purpose any shares of Company Common Stock to be acquired
pursuant to the Stock Purchase Agreement, but not yet issued) relative to the
number of shares of Company Stock and OP Units outstanding prior to such sale or
issuance (and including for this purpose any shares of Company Common Stock to
be acquired pursuant to the Stock Purchase Agreement, but not yet issued);
provided, however, that the provisions of this Section shall not apply to the
issuance or sale by the Company of any of its capital stock issued to the
Company or any of its Subsidiaries or pursuant to options, rights or warrants or
other commitments or securities in effect or outstanding on the date of the
Stock Purchase Agreement (including, without limitation, any options issued or
to be issued pursuant to the Employment Agreements).
(b) Issuance of OP Units. Upon exercise of its participation
rights under this Section 4.1 by Buyer in connection with the issuance by the
Company of OP Units, Buyer shall have the right to purchase, and, upon such
exercise, the Company will be required to issue to Buyer, the number of shares
of Company Common Stock equal to the number of OP Units Buyer is entitled to
purchase under Section 4.1(a) hereof. Such shares of Company Common Stock shall
be issued by
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<PAGE>
the Company in lieu of such number of OP Units Buyer would otherwise be entitled
to purchase under Section 4.1(a) hereof.
(c) Notice. In the event the Company proposes to issue or sell
any shares of capital stock in a transaction giving rise to the participation
rights provided for in this Section, the Company shall send a written notice
(the "Participation Notice") to Investor setting forth the number of shares of
such capital stock of the Company that the Company proposes to sell or issue,
the price (before any commission or discount) at which such shares are proposed
to be issued (or, in the case of an underwritten or privately placed offering in
which the price is not known at the time the Participation Notice is given, the
method of determining such price and an estimate thereof), and all other
relevant information as to such proposed transaction as may be necessary for
Investor to determine whether or not to exercise the rights granted in this
Section. At any time within 20 days after its receipt of the Participation
Notice, Investor may exercise its participation rights to purchase or subscribe
for shares of such shares of capital stock, as provided for in this Section, by
so informing the Company in writing (an "Exercise Notice"). Each Exercise Notice
shall state the percentage of the proposed sale or issuance that the Investor
elects to purchase. Each Exercise Notice shall be irrevocable, subject to the
conditions to the closing of the transaction giving rise to the participation
right provided for in this Section.
(d) Abandonment of Sale or Issuance. The Company shall have
the right, in its sole discretion, at all times prior to consummation of any
proposed sale or issuance giving rise to the participation right granted by this
Section, to abandon, rescind, annul, withdraw or otherwise terminate such sale
or issuance, whereupon all participation rights in respect of such proposed sale
or issuance pursuant to this Section shall become null and void, and the Company
shall have no liability or obligation to Investor or any Affiliate thereof who
has acquired shares of Company Stock pursuant to the Stock Purchase Agreement or
from Investor with respect thereto by virtue of such abandonment, rescission,
annulment, withdrawal or termination.
(e) Terms of Sale. The purchase or subscription by Investor or
an Affiliate thereof, as the case may be, pursuant to this Section shall be on
the same price and other terms and conditions, including the date of sale or
issuance, as are applicable to the purchasers or subscribers of the additional
shares of capital stock of the Company whose purchases or subscriptions give
rise to the participation rights (except that the price to Investor to make such
purchase or subscription shall be net of an amount equal to fifty percent (50%)
of any underwriting, placement agent or similar fee associated with such
purchase or subscription paid or to be paid in connection with such purchase or
subscription), which price and other terms and conditions shall be substantially
as stated in the relevant Participation Notice (which standard shall be
satisfied if the price, in the case of a negotiated transaction, is not greater
than 110% of the estimated price set forth in the relevant Participation Notice
or, in the case of an underwritten or privately placed offering, is not greater
than the greater of (i) 110% of the estimated price set forth in the relevant
Participation Notice, and (ii) the most recent closing price on or prior to the
date of the pricing of the offering); provided, however, that in the event the
purchases or subscriptions giving rise to the participation rights are effected
by an offering of securities registered under the 1933 Act and in which offering
it is not
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<PAGE>
legally permissible for the securities to be purchased by Investor to be
included, such securities to be purchased by Investor will be purchased in a
concurrent private placement.
(f) Timing of Sale. If, with respect to any Participation
Notice, Investor fails to deliver an Exercise Notice within the requisite time
period, the Company shall have 120 days after the expiration of the time in
which the Exercise Notice is required to be delivered in which to sell not more
than 110% of the number of shares of capital stock of the Company described in
the Participation Notice (plus, in the event such shares are to be sold in an
underwritten public offering, an additional number of shares of capital stock of
the Company, not in excess of 15% of 110% of the number of shares of capital
stock of the Company described in the Participation Notice, in respect of any
underwriters overallotment option) and not less than 90% of the number of shares
of capital stock of the Company described in the Participation Notice at a price
of not less than 90% of the estimated price set forth in the Participation
Notice. If, at the end of 120 days following the expiration of the time in which
the Exercise Notice is required to be delivered, the Company has not completed
the sale or issuance of capital stock of the Company in accordance with the
terms described in the Participation Notice (or at a price which is at least 90%
of the estimated price set forth in the Participation Notice), or in the event
of any contemplated sale or issuance within such 120-day period but outside such
price parameters, the Company shall again be obligated to comply with the
provisions of this Section with respect to, and provide the opportunity to
participate in, any proposed sale or issuance of shares of capital stock of the
Company; provided, however, that notwithstanding the foregoing, if the price at
which such capital stock is to be sold in an underwritten offering (or a
privately placed offering in which the price is not less than 97% of the most
recent closing price at the time of the pricing of the offering) is not at least
90% of the estimated price set forth in the Participation Notice, the Company
may inform Investor of such fact and Investor shall be entitled to elect, by
written notice delivered within five Business Days following such notice from
the Company, to participate in such offering in accordance with the provisions
of this Section.
ARTICLE 5
MISCELLANEOUS
Section 5.1 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party. Copies of
executed counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed counterparts for
purposes of this Section, provided receipt of copies of such counterparts is
confirmed.
Section 5.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT
REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
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Section 5.3 Entire Agreement. This Agreement (including
agreements incorporated herein) and the Schedules and Exhibits hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and there are no agreements, understandings, representations or
warranties between the parties other than those set forth or referred to herein.
This Agreement is not intended to confer upon any person not a party hereto (and
their successors and assigns) any rights or remedies hereunder.
Section 5.4 Expenses. All legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid as set forth in the Stock Purchase Agreement. Without
limiting the foregoing, the Company shall pay all costs and expenses incurred in
connection with the solicitation of votes of shareholders of the Company to
approve the transactions contemplated by the Stock Purchase Agreement.
Section 5.5 Notices. All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in writing
and delivered personally, sent by documented overnight delivery service or, to
the extent receipt is confirmed, telecopy, telefax or other electronic
transmission service to the appropriate address or number as set forth below.
Notices to the Company shall be addressed to:
FAC Realty Trust, Inc.
11000 Regency Parkway, 3rd fl.
East Tower
Cary, NC 27511
Attention: C. Cammack Morton
Telecopy: (919) 462-8799
with a copy to:
Alston & Bird LLP
310 UCS Plaza
3605 Glenwood Ave.
P.O. Drawer 31107
Raleigh, North Carolina 27622-1107
Attention: Brad S. Markoff, Esq.
Telecopy: (919) 881-3175
or at such other address and to the attention of such other person as the
Company may designate by written notice to Investor. Notices to Buyer or
Investor shall be addressed to:
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Lazard Freres Real Estate Investors, LLC
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
Attention: Murry Gunty
Telecopy: (212) 632-6060
with a copy to:
Latham & Watkins
885 Third Ave, Suite 10000
New York, NY 10022
Attention: R. Ronald Hopkinson, Esq.
Telecopy: (212) 751-4864
Section 5.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors. Neither party shall be permitted to assign any of its rights
hereunder to any third party without the prior written consent of the other
party, except that any Investor may, without such consent, assign its rights
hereunder, in whole or in part, to the same extent as Buyer is permitted to
assign its rights under the Stock Purchase Agreement, provided that such person
agrees to be bound by this Agreement.
Section 5.7 Headings. The Section, Article and other headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 5.8 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought. Any party hereto may, only by an instrument in writing, waive compliance
by another party hereto with any term or provision hereof on the part of such
other party hereto to be performed or complied with. The waiver by any party
hereto of a breach of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.
Section 5.9 Interpretation; Absence of Presumption
(a) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one gender
shall be held to include the other gender as the context requires, (ii)
the terms "hereof", "herein", and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules and Exhibits
hereto) and not to any particular provision of this Agreement, and
Article, Section, paragraph, Schedule and Exhibit references are to the
Articles, Sections, paragraphs, Schedules and Exhibits to this
Agreement unless otherwise specified, (iii) the word "including" and
words of similar import when used in this
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Agreement shall mean "including, without limitation," unless the
context otherwise requires or unless otherwise specified, (iv) the word
"or" shall not be exclusive, and (v) provisions shall apply, when
appropriate, to successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against
the party drafting or causing any instrument to be drafted.
Section 5.10 Severability. Any provision hereof which is
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability, without affecting in any way the remaining provisions
hereof.
Section 5.11 Further Assurances. The Company and Investor
agree that, from time to time, each of them will, and will cause their
respective Affiliates to, execute and deliver such further instruments and take
such other action as may be necessary to carry out the purposes and intents
hereof.
Section 5.12 Specific Performance. The Company and Investor
each acknowledge that, in view of the uniqueness of arrangements contemplated by
this Agreement, the parties hereto would not have an adequate remedy at law for
money damages in the event that this Agreement were not performed in accordance
with its terms, and therefore agree that the parties hereto shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which the parties hereto may be entitled at law or in equity.
Section 5.13 Investor Breach. In the event Investor shall have
breached (i) its obligation to effect a purchase of Company Common Stock
pursuant to the Stock Purchase Agreement which breach is neither cured nor
desisted from within 30 days of receipt of written notice of such breach, or
(ii) any of its obligations under this Agreement which breach is neither cured
nor desisted from within 30 days of receipt of written notice of such breach and
which would reasonably be expected to materially adversely affect the Company,
the Company shall no longer be required to perform any of its obligations
hereunder.
Section 5.14 Confidentiality. Buyer and Investor agree that
all information provided to any of them or any of their representatives pursuant
to this Agreement shall be kept confidential, and such parties shall not (x)
disclose such information to any persons other than the directors, officers,
employees, financial advisors, legal advisors, accountants, consultants and
affiliates of such parties who reasonably need to have access to the
confidential information and who are advised of the confidential nature of such
information or (y) use such information in a manner which would be detrimental
to the Company; provided, however, the foregoing obligation of such parties
shall not (a) relate to any information that (i) is or becomes generally
available other than as a result of unauthorized disclosure by such parties or
by persons to whom such parties have made such information available, (ii) is or
becomes available to such parties on a non-confidential basis from a third party
that is not, to such parties' knowledge, bound by any other confidentiality
agreement
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<PAGE>
with the Company, or (b) prohibit disclosure of any information if required by
law, rule, regulation, court order or other legal or governmental process.
Section 5.15 Public Releases and Announcements. The Company
agrees that until a Termination Event, it shall endeavor to provide to Investor
advance copies of, or, in the case of oral announcements, advance notice of, any
public release or announcement concerning the Company to be issued, released or
made by the Company or any of its Affiliates, in each case, if possible, at
least one Business Day prior to such release or announcement.
Section 5.16 Termination. In the event the Stockholder
Approval Date does not occur prior to August 31, 1998, this Agreement shall
terminate.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
PROMETHEUS SOUTHEAST RETAIL LLC
By: LF Strategic Realty Investor II, L.P.,
its sole member
By: Lazard Freres Real Estate Investors, LLC,
its general partner
By: ________________________
Name: ___________________________
Title: __________________________
FAC REALTY TRUST, INC.
By: ________________________
Name: C. Cammack Morton
Title: Chief Executive Officer
<PAGE>
REGISTRATION RIGHTS AGREEMENT
by and between
FAC REALTY TRUST, INC.
and
PROMETHEUS SOUTHEAST RETAIL LLC
dated as of
February 24, 1998
<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as
of February 24, 1998, by and between FAC Realty Trust, Inc., a Maryland
corporation (the "Company") and Prometheus Southeast Retail LLC ("Buyer"), an
affiliate of Lazard Freres Real Estate Investors, LLC ("LFREI"). Capitalized
terms not otherwise defined herein have the meaning ascribed to them in the
Stock Purchase Agreement (as herein after defined).
WHEREAS, the Company and Buyer have entered into a Stock
Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"), that provides for the purchase by Buyer and sale by the Company to
Buyer of shares of Company Common Stock and Contingent Value Rights; and
WHEREAS, in order to induce Buyer to enter into the Stock
Purchase Agreement, the Company has agreed to provide the registration rights
set forth herein;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
Section 1. Definitions. As used herein, the following terms
shall have the following meanings:
(a) "Agreement" shall have the meaning set forth in
the first paragraph hereof.
(b) "Buyer" shall mean Buyer, and shall also include any
Affiliate of LFREI, a majority or more of the voting power and of the economic
interests of which is Beneficially Owned by LFREI.
(c) "Commencement Date" shall mean the date of the Initial
Closing.
(d) "Commission" shall mean the Securities and Exchange
Commission, and any successor thereto.
(e) "Company" shall have the meaning set forth in the first
paragraph hereof.
(f) "Company Registration Expenses" shall mean the fees and
disbursements of counsel and independent public accountants for the Company
incurred in connection with the Company's performance of or compliance with this
Agreement, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, and any
premiums and other costs of policies of insurance obtained by the Company
against liabilities arising out of the sale of any securities.
(g) "Contingent Value Right Agreement" means that certain
Contingent Value Right Agreement, dated as of the date hereof, between the
Company and Buyer.
(h) "Demand Registration" shall have the meaning set forth
in Section 2(a).
<PAGE>
(i) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and any successor thereto, and the rules and regulations
thereunder.
(j) "NASD" shall mean the National Association of
Securities Dealers, Inc.
(k) "Registrable Securities" shall mean (i) any and all
shares of Company Common Stock acquired by Buyer pursuant to the Stock Purchase
Agreement, (ii) any and all securities acquired by Buyer pursuant to Section 4.2
of the Stockholders Agreement, (iii) any and all shares of Company Common Stock
issued, if any, by the Company pursuant to its payment obligations under the
Contingent Value Right Agreement, and (iv) any securities issued or issuable
with respect to any Company Common Stock or other securities referred to in
clause (i), (ii) or (iii) by way of conversion, exchange, stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (A) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (B) such securities shall have been sold in accordance with Rule 144
(or any successor provision) under the Securities Act or (C) such securities are
eligible to be resold pursuant to Rule 144(k).
(l) "Registration Expenses" shall mean all registration,
filing and stock exchange or NASD fees, all fees and expenses of complying with
securities or blue sky laws, all printing expenses, messenger and delivery
expenses, any fees and disbursements of any separate counsel retained by Buyer,
and transfer taxes, if any, and any premiums and other costs of policies of
insurance obtained by Buyer against liabilities arising out of the public
offering of securities, including Company Registration expenses, but
specifically excludes any fees and disbursements of underwriters customarily
paid by sellers of securities who are not the issuers of such securities and all
underwriting discounts and commissions.
(m) "Registration Suspension Period" shall have the meaning
set forth in Section 2(b).
(n) "Securities Act" shall mean the Securities Act of 1933,
as amended, and any successor thereto, and the rules and regulations thereunder.
(o) "Stock Purchase Agreement" shall have the meaning set
forth in the second paragraph hereof.
(p) "Suspension Notice" shall have the meaning set forth in
Section 2(b).
(q) "Underwritten/Placed Offering" shall mean a sale of
securities of the Company to an underwriter or underwriters for reoffering to
the public or on behalf of a person other than the Company through an agent for
sale to the public.
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Section 2. Demand Registration
(a) Obligation to File. At any time following the
Commencement Date, promptly upon the written request of Buyer, the Company will
use its best efforts to file with the Commission a registration statement under
the Securities Act for the offering of all of the Registrable Securities which
Buyer requests to be registered (the "Demand Registration"). The Demand
Registration shall be on an appropriate form and the Demand Registration and any
form of prospectus included therein shall reflect such plan of distribution or
method of sale as Buyer notifies the Company, including the sale of some or all
of the Registrable Securities in a public offering or, if requested by Buyer,
subject to receipt by the Company of such information (including information
relating to purchasers) as the Company reasonably may require, (i) in a
transaction constituting an offering outside the United States which is exempt
from the registration requirements of the Securities Act in which the seller
undertakes to effect registration after the completion of such offering in order
to permit such shares to be freely tradeable in the United States, (ii) in a
transaction constituting a private placement under Section 4(2) of the
Securities Act in connection with which the seller undertakes to effect a
registration after the conclusion of such placement to permit such shares to be
freely tradeable by the purchasers thereof, or (iii) in a transaction under Rule
144A of the Securities Act in connection with which the seller undertakes to
effect a registration after the conclusion of such transaction to permit such
shares to be freely tradeable by the purchasers thereof. The Company shall use
its best efforts to cause the Demand Registration to be declared effective by
the Commission within 60 days from the date of receipt of the written request,
and, upon the request of Buyer, keep the Demand Registration effective for up to
90 days, unless the distribution of securities registered thereunder has been
earlier completed; provided, however, that if such Demand Registration will
require the Company to prepare or file audited financial statements with respect
to any fiscal year by a date prior to the date on which the Company would
otherwise be required to prepare and file such audited financial statements,
then Buyer must notify the Company at least 30 days in advance of the date upon
which such audited financial statements will be required to be filed. During the
period during which the Demand Registration is effective, the Company shall
supplement or make amendments to the Demand Registration, if required by the
Securities Act or if reasonably requested by Buyer or an underwriter of
Registrable Securities, including to reflect any specific plan of distribution
or method of sale, and shall use its best efforts to have such supplements and
amendments declared effective, if required, as soon as practicable after filing.
(b) Black-Out Periods of Buyer. Notwithstanding anything
herein to the contrary, (i) the Company shall have the right from time to time
to require Buyer not to sell under the Demand Registration or to suspend the
effectiveness thereof during the period starting with the date 30 days prior to
the Company's good faith estimate, as certified in writing by an executive
officer of the Company to Buyer, of the proposed date of filing of a
registration statement or a preliminary prospectus supplement relating to an
existing shelf registration statement, in either case, pertaining to an
underwritten public offering of equity securities of the Company for the account
of the Company, and ending on the date 75 days following the effective date of
such registration statement or the date of filing of the final
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prospectus supplement, and (ii) the Company shall be entitled to require Buyer
not to sell under the Demand Registration or to suspend the effectiveness
thereof (but not for a period exceeding 75 days in any calendar year), if the
Company determines, in its good faith judgment, that such offering or continued
effectiveness would interfere with any material financing, acquisition,
disposition, corporate reorganization or other material transaction involving
the Company or any of its subsidiaries or public disclosure thereof would be
required prior to the time such disclosure might otherwise be required, or when
the Company is in possession of material information that it deems advisable not
to disclose in a registration statement.
Once any registration statement filed pursuant to this
Section 2 or in which Registrable Securities are included pursuant to Section 3
has been declared effective, any period during which the Company fails to keep
such registration statement effective and usable for resale of Registrable
Securities for the period required by Section 4(b) shall be referred to as a
"Registration Suspension Period." A Registration Suspension Period shall
commence on and include the date that the Company gives written notice to Buyer
of its determination that such registration statement is no longer effective or
usable for resale of Registrable Securities (the "Suspension Notice") to and
including the date when the Company notifies Buyer that the use of the
prospectus included in such registration statement may be resumed for the
disposition of Registrable Securities.
(c) Number of Demand Registrations. The Company shall be
obligated to effect, under this Section 2, only four Demand Registrations (no
more than two of which may be requested in any two-year period). A Demand
Registration shall not be deemed to have been effected, nor shall it be
sufficient to reduce the number of Demand Registrations available to Buyer under
this Section 2, if such registration cannot be used by Buyer for more than 60
days as a result of any stop order, injunction or other order of the Commission
or other Government Authority for any reason other than an act or omission of
Buyer and all the Registerable Securities registered thereunder are not sold.
(d) Size of Demand Registration. The Company shall not be
required to effect a Demand Registration of less than a fair market value, based
on the closing market price on the trading day immediately prior to the date of
notice (as reported in the Wall Street Journal), of $10,000,000, except that if
the fair market value, based on the closing market price on the trading day
immediately prior to the date of notice (as reported in the Wall Street
Journal), of the Registrable Securities outstanding is less than $10,000,000,
then the Company shall be required to effect a Demand Registration of all of the
remaining Registrable Securities outstanding.
(e) Notice. The Company shall give Buyer prompt notice in
the event that the Company has suspended sales of Registrable Securities under
Section 2(b).
(f) Expenses. All Registration Expenses incurred in
connection with the Demand Registrations which may be requested under this
Section 2 shall be borne by the Company, with Buyer only paying underwriting
fees and discounts.
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(g) Selection of Underwriters. Any and all underwriters or
other agents involved in any sale of Registrable Securities pursuant to a
registration statement contemplated by this Section 2 shall include such
underwriter(s) or other agent(s) as selected by Buyer and approved of by the
Company, which approval shall not be unreasonably withheld; provided that any
Affiliate of Buyer shall in all events be approved by the Company.
Section 3. Incidental Registrations
(a) Notification and Inclusion. If the Company proposes to
register any of its common equity securities under the Securities Act (other
than a registration relating solely to the sale of securities to participants in
a dividend reinvestment plan, a registration on Form S-4 relating to a business
combination or similar transaction permitted to be registered on such Form S-4,
a registration on Form S-8 relating solely to the sale of securities to
participants in a stock or employee benefit plan, a registration permitted under
Rule 462 under the Securities Act registering additional securities of the same
class as were included in an earlier registration statement for the same
offering, and declared effective, or a shelf registration statement under the
Securities Act covering common equity securities with an aggregate offering
price of less than $50.0 million), whether or not for sale for its own account,
the Company shall, at each such time after the Commencement Date until Buyer no
longer holds Registerable Securities, promptly give written notice of such
registration to Buyer. Upon the written request of Buyer given within 10 days
after receipt of such notice by Buyer, the Company shall seek to include in such
proposed registration such Registrable Securities as Buyer shall request be so
included and shall use its reasonable best efforts to cause a registration
statement covering all of the Registrable Securities that Buyer has requested to
be registered to become effective under the Securities Act. The Company shall be
under no obligation to complete any offering of securities it proposes to make
under this Section 3 and shall incur no liability to Buyer for its failure to do
so. If, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to Buyer and, thereupon,
(i) in the case of a determination not to register, the Company shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses incurred in connection therewith) and (ii) in the case of a
determination to delay registering, the Company shall be permitted to delay
registering any Registrable Securities for the same period as the delay in
registering such other securities.
(b) Cut-back Provisions. If a registration pursuant to this
Section 3 involves an Underwritten/Placed Offering of the securities so being
registered, whether or not solely for sale for the account of the Company, which
securities are to be distributed by or through one or more underwriters of
recognized standing under underwriting terms customary for such transaction, and
the underwriter or the managing underwriter, as the case may be, of such
Underwritten/Placed Offering shall inform the Company of its belief that the
amount of securities requested to be included in such registration or offering
exceeds the amount which
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can be sold in (or during the time of) such offering without delaying or
jeopardizing the success of the offering (including the price per share of the
securities to be sold), then the Company will include in such registration (i)
first, all the securities of the Company which the Company proposes to sell for
its own account or the account of others (other than Buyer) requesting inclusion
in such registration pursuant to rights to registration on request, and (ii)
second, to the extent of the amount which the Company is so advised can be sold
in (or during the time of) such offering, Registrable Securities and other
securities requested to be included in such registration, pro rata among Buyer
and others exercising incidental registration rights, on the basis of the shares
of Company Common Stock owned by all such persons.
(c) Expenses. The Company shall bear and pay all Company
Registration Expenses incurred in connection with any registration of
Registrable Securities pursuant to this Section 3 for Buyer, and all
Registration Expenses incurred in connection with any registration of any
securities for the Company's own account referred to in the first sentence of
Section 3(a), and Buyer shall bear and pay all underwriting fees and discounts
incurred in connection with any registration of Registrable Securities pursuant
to this Section 3 for Buyer.
(d) Duration of Effectiveness. At the request of Buyer, the
Company shall, subject to Section 2(b), use its reasonable best efforts to keep
any registration statement for which Registrable Securities are included under
this Section 3 effective and usable for up to 90 days (subject to extension for
the length of any Registration Suspension Period), unless the distribution of
securities registered thereunder has been earlier completed; provided, however,
that in no event will the Company be required to prepare or file audited
financial statements with respect to any fiscal year by a date prior to the date
on which the Company would be so required to prepare and file such audited
financial statements if such registration statement were no longer effective and
usable.
Section 4. Registration Procedures. In connection with the
filing of any registration statement as provided in Section 2 or 3, the Company
shall use its reasonable best efforts to, as expeditiously as reasonably
practicable:
(a) prepare and file with the Commission the requisite
registration statement (including a prospectus therein) to effect such
registration and use its reasonable best efforts to cause such registration
statement to become effective, provided that before filing such registration
statement or any amendments or supplements thereto, the Company will furnish to
the counsel selected by Buyer copies of all such documents proposed to be filed,
which documents will be subject to the review of such counsel before any such
filing is made, and the Company will comply with any reasonable request made by
such counsel to make changes in any information contained in such documents
relating to Buyer;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness of such
registration and to comply with the
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provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until the earlier of such time
as all of such securities have been disposed of and the date which is 90 days
after the date of initial effectiveness of such registration statement;
(c) furnish to Buyer such number of conformed copies of
such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
contained in such registration statements (including each complete prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, including documents incorporated by reference, as
Buyer may reasonably request;
(d) register or qualify all Registrable Securities under
such other securities or blue sky laws of such jurisdictions as Buyer shall
reasonably request, to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable Buyer to consummate the
disposition in such jurisdictions of the securities owned by Buyer, except that
the Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this paragraph be obligated to be so qualified, or
to consent to general service of process in any such jurisdiction, or to subject
the Company to any material tax in any such jurisdiction where it is not then so
subject;
(e) cause all Registrable Securities covered by such
registration statement to be registered with or approved by such other
Government Authority as may be reasonably necessary to enable Buyer to
consummate the disposition of such Registrable Securities;
(f) furnish to Buyer a signed counterpart, addressed to
Buyer (and the underwriters, if any), of
(i) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), reasonably satisfactory in form and substance to
Buyer, and
(ii) to the extent permitted by then applicable rules
of professional conduct, a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have certified the
Company's financial statements included in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the accountants' letter,
with respect to events subsequent to the date of such financial statements, all
as are customarily covered in opinions of issuer's counsel and in
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accountants' letters delivered to the underwriters in underwritten public
offerings of securities;
(g) immediately notify Buyer at any time when the Company
becomes aware that a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, and at
the request of Buyer promptly prepare and furnish to Buyer a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made;
(h) comply or continue to comply in all material respects
with the Securities Act and the Exchange Act and with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least 12 months, but not more than 18 months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and not file any amendment or supplement to such registration
statement or prospectus to which Buyer shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act, having been furnished with
a copy thereof at least five Business Days prior to the filing thereof;
(i) provide a transfer agent and registrar for all
Registrable Securities covered by such registration statement not later than the
effective date of such registration statement; and
(j) list all Company Common Stock covered by such
registration statement on any securities exchange on which any of the Company
Common Stock is then listed.
Buyer shall furnish in writing to the Company such information regarding Buyer
(and any of its affiliates), the Registrable Securities to be sold, the intended
method of distribution of such Registrable Securities, and such other
information requested by the Company as is necessary for inclusion in the
registration statement relating to such offering pursuant to the Securities Act
and the rules of the Commission thereunder. Such writing shall expressly state
that it is being furnished to the Company for use in the preparation of a
registration statement, preliminary prospectus, supplementary prospectus, final
prospectus or amendment or supplement thereto, as the case may be.
Buyer agrees by acquisition of the Registrable Securities that upon
receipt of any notice from the Company of the happening of any event of the kind
described in paragraph (g) of this Section 4, Buyer will forthwith discontinue
its disposition of Registrable Securities pursuant to the
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registration statement relating to such Registrable Securities until Buyer's
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (g) of this Section 4.
Section 5. Requested Underwritten Offerings. If
requested by the underwriters for any underwritten offerings by Buyer, under a
registration requested pursuant to Section 2(a), the Company will enter into a
customary underwriting agreement with such underwriters for such offering, to
contain such representations and warranties by the Company and such other terms
as are customarily contained in agreements of this type, including indemnities
to the effect and to the extent provided in Section 7. Buyer shall be a party to
such underwriting agreement and may, at its option, require that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of Buyer.
Buyer shall not be required to make any representations or warranties to or
agreement with the Company or the underwriters other than representations,
warranties or agreements regarding Buyer and Buyer's intended method of
distribution and any other representation or warranty required by law.
Section 6. Preparation: Reasonable Investigation. In
connection with the preparation and filing of the registration statement under
the Securities Act, the Company will give Buyer, its underwriters, if any, and
their respective counsel, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers, its counsel and the independent
public accountants who have certified its financial statements as shall be
necessary, in the opinion of Buyer's and such underwriters' respective counsel,
to conduct a reasonable investigation within the meaning of the Securities Act.
Section 7. Indemnification
(a) Indemnification by the Company. In the event of any
registration of any Registrable Securities of the Company under the Securities
Act, the Company will, and hereby does, indemnify and hold harmless (i) Buyer
and each other person who participates as an underwriter in the offering or sale
of such securities, (ii) each person, if any, who controls (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) Buyer or
any another person referenced in clause (i) above (any of the persons referred
to in this clause (ii) being hereinafter referred to as a "controlling person")
and (iii) the respective officers, directors, partners, employees,
representatives and agents of Buyer or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as a
"Buyer Indemnitee"), against any losses, claims, damages or liabilities, joint
or several, to which any Buyer Indemnitee may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registrable Securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the
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statements therein, in light of the circumstances under which they were made,
not misleading, and the Company will reimburse such Buyer Indemnitee for any
reasonable legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, liability, action or
proceedings; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by a Buyer
Indemnitee specifically stating that it is for use in the preparation thereof;
and provided, further, that the Company shall not be liable to any person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other person, if any, who controls such underwriter within the meaning of
the Securities Act in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such person's failure to send or give a copy of the final prospectus or
supplement to the persons asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such person if such
statement or omission was corrected in such final prospectus or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any Buyer Indemnitee and shall survive the transfer of
such securities by Buyer.
(b) Indemnification by Buyer. The Buyer will, and hereby
does, indemnify and hold harmless (in the same manner and to the same extent as
set forth in paragraph (a) of this Section 7) the Company, each director of the
Company, each officer of the Company and each other person, if any, who controls
the Company within the meaning of the Securities Act, and each other person who
participates as an underwriter in the offering or sale of such securities and
each other person who controls any such underwriter within the meaning of the
Securities Act, with respect to any untrue statement or alleged untrue statement
of a material fact in or omission or alleged omission to state a material fact
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by Buyer specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer, or controlling person and
shall survive the transfer of such securities by Buyer.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party
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to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs of this Section 7, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Section 7 (with appropriate
modifications) shall be given by the Company and Buyer with respect to any
required registration or other qualification of securities under any federal or
state law or regulation of Governmental Authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required
by this Section 7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(f) Contribution. If, for any reason, the foregoing
indemnity is unavailable, or is insufficient to hold harmless an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of the expense, loss, damage or
liability, (i) in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified party on the
other (determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission), or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law or provides a lesser sum
to the indemnified party than the amount hereinafter calculated, in the
proportion as is appropriate to reflect not only the relative fault of the
indemnifying party and the indemnified party, but also the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other, as well as any other relevant equitable considerations. No
indemnified party guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
indemnifying party who was not guilty of such fraudulent misrepresentation.
Section 8. Covenants Relating to Rule 144. The Company will
file in a timely manner (taking into account any extensions granted by the
Commission), information, documents and reports in compliance with the Exchange
Act and will, at its expense, forthwith upon the request
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of Buyer, deliver to Buyer a certificate, signed by the Company's principal
financial officer, stating (a) the Company's name, address and telephone number
(including area code), (b) the Company's Internal Revenue Service identification
number, (c) the Company's Commission file number, (d) the number of shares of
Company Common Stock and the number of shares of Company Preferred Stock
outstanding as shown by the most recent report or statement published by the
Company, and (e) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least 90 days prior to the date of
such certificate and in addition has filed the most recent annual report
required to be filed thereunder. If at any time the Company is not required to
file reports in compliance with either Section 13 or Section 15(d) of the
Exchange Act, the Company will, at its expense, forthwith upon the written
request of Buyer, make available adequate current public information with
respect to the Company within the meaning of paragraph (c)(2) of Rule 144 of the
General Rules and Regulations promulgated under the Securities Act.
Section 9. Miscellaneous.
(a) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party. Copies of executed
counterparts transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section 9(a), provided receipt of copies of such counterparts is confirmed.
(b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE CHOICE OF LAW PRINCIPLES THEREOF.
(c) Entire Agreement. This Agreement (including agreements
incorporated herein) contains the entire agreement between the parties with
respect to the subject matter hereof and there are no agreements or
understandings between the parties other than those set forth or referred to
herein. This Agreement is not intended to confer upon any person not a party
hereto (and their successors and assigns) any rights or remedies hereunder.
(d) Notices. All notices and other communications hereunder
shall be sufficiently given for all purposes hereunder if in writing and
delivered personally, sent by documented overnight delivery service or, to the
extent receipt is confirmed, telecopy, telefax or other electronic transmission
service to the appropriate address or number as set forth below. Notices to the
Company shall be addressed to:
FAC Realty Trust, Inc.
11000 Regency Parkway, 3rd Fl.
East Tower
Cary, NC 27511
Attention: C. Cammack Morton
Telecopy: (919) 462-8799
12
<PAGE>
with a copy to:
Alston & Bird LLP
310 UCS Plaza
3605 Glenwood Ave.
P.O. Drawer 31107
Raleigh, North Carolina 27622-1107
Attention: Brad S. Markoff, Esq.
Telecopy: (919) 881-3175
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
Lazard Freres Real Estate Investors, LLC
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
Attention: Murry Gunty
Telecopy: (212) 632-6060
with a copy to:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Attention: R. Ronald Hopkinson, Esq.
Telecopy: (212) 751-4864
(e) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors. Neither party shall be permitted to assign any of its rights
hereunder to any third party, except that if Buyer transfers any or all
Registrable Securities to another person, such transferee shall be considered an
intended beneficiary hereof and may exercise all rights of Buyer hereunder
(provided that any transferee that holds less than 50% of all outstanding
Registrable Securities shall not be entitled to request a Demand Registration
pursuant to Section 2 hereof).
(f) Headings. The Section and other headings contained in
this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or other headings contained herein mean Sections or other headings of
this Agreement unless otherwise stated.
(g) Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought. Either party hereto may, only by an instrument in writing, waive
compliance by the other party hereto with any term
13
<PAGE>
or provision hereof on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision hereof shall not be construed as a waiver of any subsequent breach.
(h) Interpretation; Absence of Presumption. For the
purposes hereof, (i) words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other gender
as the context requires, (ii) the terms "hereof", "herein", and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of this Agreement,
and Section, paragraph or other references are to the Sections, paragraphs, or
other references to this Agreement unless otherwise specified, (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires or unless
otherwise specified, (iv) the word "or" shall not be exclusive, and (v)
provisions shall apply, when appropriate, to successive events and transactions.
This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
(i) Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
[Signature Page Follows]
14
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
PROMETHEUS SOUTHEAST RETAIL LLC
By: LF Strategic Realty Investor II, L.P.,
its sole member
By: Lazard Freres Real Estate Investors, LLC,
its general partner
By: ________________________
Name: ___________________________
Title: __________________________
FAC REALTY TRUST, INC.
By: ________________________
Name: C. Cammack Morton
Title: Chief Executive Officer
<PAGE>
CONTINGENT VALUE RIGHT AGREEMENT
THIS CONTINGENT VALUE RIGHT AGREEMENT, dated as of
February 24, 1998 (this "Agreement"), is made by and between Prometheus
Southeast Retail LLC ("Buyer"), an affiliate of Lazard Freres Real Estate
Investors, LLC, and FAC Realty Trust, Inc., a Maryland corporation (the
"Company"). Capitalized terms not otherwise defined herein have the meaning
ascribed to them in the Stock Purchase Agreement (as hereinafter defined):
RECITALS:
WHEREAS, the Company and Buyer have entered into a Stock
Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"), pursuant to which the Company has agreed to sell, and Buyer has
agreed to purchase, certain shares of common stock, par value $0.01 per share,
of the Company (the "Company Common Stock"), upon the terms and subject to the
conditions set forth therein; and
WHEREAS, it is a condition to the transactions contemplated by
the Stock Purchase Agreement and the parties believe it to be in their best
interests that they enter into this Agreement and provide for certain contingent
value rights for the benefit of Buyer;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
SECTION 1.
DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1 - Adjustment Number
"Adjustment Number" shall mean the number equal to (i) the Make-Whole
Amount DIVIDED BY (ii) the Fair Market Value on the Determination Date.
<PAGE>
Section 1.2 - Affiliate
"Affiliate" with respect to any entity, shall mean a person or entity
directly or indirectly controlling, controlled by, or under common control with,
such entity, where "control" has the meaning given such term under Rule 405 of
the Securities Act of 1933.
Section 1.3 - Approval Rights Termination Date
"Approval Rights Termination Date" shall have the meaning given to it
in the Stockholders Agreement.
Section 1.4 - Board
"Board" shall mean the board of directors of the Company.
Section 1.5 - Board Member Default
"Board Member Default" shall mean (i) on any day prior to the
Preliminary Threshold Date, the failure of at least one-third of the members of
the Board to consist of Investor Nominees, (ii) on any day prior to the Second
Threshold Date, the failure of at least two-ninths of the members of the Board
to consist of Investor Nominees, and (iii) on any day prior to the Final
Threshold Date, the failure of at least one-ninth of the members of the Board to
consist of Investor Nominees.
Section 1.6 - Contingent Value Right.
"Contingent Value Right" shall mean the right granted under this
Agreement to receive the payments set forth in Section 2.2 hereof, subject to
the limitations and conditions provided in this Agreement.
Section 1.7 - Default Date
"Default Date" shall have the meaning given to it in Section 4.2.
Section 1.8 - Determination Date
"Determination Date" shall mean January 1, 2004.
Section 1.9 - Fair Market Value
"Fair Market Value" shall have the meaning given to it in the
Stockholders Agreement.
Section 1.10 - 15% IRR Amount
- ------------- --------------
2
<PAGE>
"15% IRR Amount" shall have the meaning given to it in the Stockholders
Agreement.
Section 1.11 - Final Threshold Date
"Final Threshold Date" shall have the meaning given to it in the
Stockholders Agreement.
Section 1.12 - Investment Value
"Investment Value" shall mean the amount equal to (i) the number of
Purchased Shares MULTIPLIED BY (ii) the Fair Market Value on the Determination
Date.
Section 1.13 - Investor Nominee
"Investor Nominee" shall have the meaning given to it in the
Stockholders Agreement.
Section 1.14 - Make-Whole Amount
"Make-Whole Amount" shall mean, on the Determination Date, a dollar
amount, never less than 0, equal to the lesser of (a) (i) the greater of (A) the
15% IRR Amount on the Determination Date or (B) the $19.00 Amount on the
Determination Date LESS (ii) the Investment Value on the Determination Date and
(b) 4,500,000 MULTIPLIED BY the Fair Market Value on the Determination Date.
Section 1.15 - $19.00 Amount
"$19.00 Amount" shall mean, on any day, the amount equal to (i) $19.00
MULTIPLIED BY the number of Purchased Shares on such date LESS (ii) the
aggregate amount of cash dividends paid (not including any special fees,
expenses or other consideration payable to Investor, but not to all stockholders
of the Company) on the Purchased Shares between the date of the Initial Closing
and such date.
Section 1.16 - Offer to Purchase
"Offer to Purchase" shall have the meaning given to it in the
Stockholders Agreement.
Section 1.17 - Payment Date
"Payment Date" shall have the meaning given to it in Section 2.2(b).
3
<PAGE>
Section 1.18 - Preliminary Threshold Date
"Preliminary Threshold Date" shall have the meaning given to it in the
Stockholders Agreement.
Section 1.19 - Purchased Shares
"Purchased Shares" shall have the meaning given to it in the Stock
Purchase Agreement.
Section 1.20 - Second Threshold Date
"Second Threshold Date" shall have the meaning given to it in the
Stockholders Agreement.
Section 1.21 - Stockholders Agreement
"Stockholders Agreement" shall mean that certain Stockholders
Agreement, dated the date hereof, by and between Buyer and the Company.
Section 1.22 - Termination Event
"Termination Event" shall mean the occurrence of (i) the completion of
an Offer to Purchase, (ii) the notification by Buyer to the Company that it will
not accept the Offer to Purchase, (iii) a date, on or after September 1, 2003,
but prior to December 31, 2003, on which the amount equal to (A) the Fair Market
Value on such date MULTIPLIED BY (B) the number of Purchased Shares equals or
exceeds the amount equal to (A) $21.00 MULTIPLIED BY the number of Purchased
Shares on such date LESS (B) the aggregate amount of cash dividends paid (not
including any special fees, expenses or other consideration payable to Investor,
but not to all other stockholders of the Company) on the Purchased Shares
between the date of the Initial Closing and the Determination Date, (iv) the
failure to secure Stockholder Approval by August 31, 1998 and (v) the date
immediately following the Payment Date.
Section 1.23 - Total Enterprise Value
"Total Enterprise Value" shall have the meaning given to it in the
Stockholders Agreement.
4
<PAGE>
SECTION 2.
GRANT OF CONTINGENT VALUE RIGHTS
Section 2.1 - Grant of Contingent Value Rights
In consideration of the investment by Buyer in the Company pursuant to
the Stock Purchase Agreement and for other good and valuable consideration, on
the date hereof the Company grants to Buyer, subject to the terms and conditions
set forth in this Agreement, the Contingent Value Rights.
Section 2.2 - Determination and Method of Payment
(a) Subject to the provisions herein, the Contingent Value Rights shall
entitle Buyer to receive payment of an aggregate amount equal to the Make-Whole
Amount.
(b) The Make-Whole Amount shall be paid within ten days after the
Determination Date (the "Payment Date"), at the election of the Company, either
(i) in cash or (ii) in shares of Company Common Stock. In the event the Company
elects to satisfy its payment obligations under this Agreement in shares of
Company Common Stock, the Company shall issue to Buyer such number of shares of
Company Common Stock equal to the Adjustment Number.
SECTION 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.1 - Representations and Warranties
The Company represents and warrants to Buyer that:
(a) the Company has full corporate power and authority to issue, sell
and deliver the Contingent Value Rights to Buyer as provided in this Agreement
and the Stock Purchase Agreement and to carry out all the terms and provisions
to be performed by the Company herein and therein;
(b) the Contingent Value Rights have been duly authorized by the
Company for issuance to Buyer pursuant to this Agreement and the Stock Purchase
Agreement; and
(c) the execution and delivery of this Agreement and the Stock Purchase
Agreement by the Company, the issuance of the Contingent Value Rights to Buyer
pursuant to this Agreement and the Stock Purchase Agreement and the performance
of the obligations of the Company under this Agreement and the Stock Purchase
Agreement do not: (i) violate any federal or Maryland statute,
5
<PAGE>
rule or regulation applicable to the Company, (ii) violate the provisions of the
Company's Charter or by-laws, (iii) result in the breach of or a default under
this Agreement, the Stock Purchase Agreement, the Registration Rights Agreement,
the Stockholders Agreement or any other material agreement to which the Company
is a party or any court order which would materially impair the ability of Buyer
to receive the benefits of the Contingent Value Rights or (iv) require any
consents, approvals, authorizations, registrations, declarations or filings by
the Company under any federal or Maryland statute, rule or regulation applicable
to the Company which would materially impair the ability of Buyer to receive the
benefits of the Contingent Value Rights.
Section 3.2 - Covenants
The Company covenants and agrees with Buyer that, from the date hereof
until the occurrence of a Termination Event, it will not enter into any
indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or
other similar financing agreement or instrument or other agreement or instrument
by which the Company, any of its Subsidiaries or any of the property or assets
of the Company or any of its Subsidiaries would be bound that would materially
impair the ability of the Company to fulfill its obligations under this
Agreement.
SECTION 4
TERMINATION
Section 4.1 - Termination
Following a Termination Event, all Contingent Value Rights and this
Agreement shall terminate.
SECTION 5
APPROVAL RIGHTS
Section 5.1 - Approval Rights
From and after the Stockholder Approval Date until the Approval Rights
Termination Date, in the event a Board Member Default occurs, the Company shall
not, and shall not permit any of its Subsidiaries, without the written consent
of Buyer (or any transferee of Buyer that succeeds Buyer in its rights and
obligations under the Stockholders Agreement), to:
(a) acquire, whether by merger, consolidation, purchase of stock or
assets or other business combination, (i) in a single transaction or group of
related transactions, any business or
6
<PAGE>
assets having an aggregate purchase price in excess of twenty-five percent (25%)
of Total Enterprise Value as measured at the beginning of the fiscal year in
which such acquisition is consummated, or (ii) during any one fiscal year,
businesses or assets having an aggregate purchase price in excess of fifty
percent (50%) of Total Enterprise Value as measured at the beginning of such
fiscal year;
(b) sell or dispose of any assets, whether by merger, consolidation,
sale of stock or assets or other business combination, during any one fiscal
year, having an aggregate value in excess of twenty-five percent (25%) of Total
Enterprise Value as measured at the beginning of such fiscal year;
(c) directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise, with
respect to, any indebtedness if, after giving pro forma effect to such
indebtedness, the Company's ratio of (i) total indebtedness to (ii) Total
Enterprise Value, expressed as a percentage, would be greater than 65%;
(d) make any payment to, or sell, lease, transfer or otherwise dispose
of any of its properties or assets to, or purchase any property or assets from,
or enter into or make or amend any contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any of its Affiliates;
(e) issue Company Stock or options, rights or warrants or other
commitments to purchase or securities convertible into (or exchangeable or
redeemable for) shares of Company Stock, including, without limitation, OP Units
(such options, rights, warrants, other commitments or securities, "Company Stock
Equivalents"); provided, however, that Buyer's consent shall not be required for
any issuance of Company Stock or Company Stock Equivalents as long as the sum of
(i) all shares of Company Stock issued by the Company during the applicable
fiscal year and (ii) shares of Company Stock into which Company Stock
Equivalents issued by the Company and each of its Subsidiaries during the
applicable fiscal year are convertible, does not exceed fifty percent (50%) of
all shares of Company Stock outstanding, on a Fully Diluted basis, on the first
day of such fiscal year; provided, further, that in connection with any issuance
by the Company of Company Stock or issuance by the Company or any of its
Subsidiaries of any Company Stock Equivalents, Investor shall be entitled, to
the extent so provided in Section 4.1 of the Stockholders Agreement, to a
participation right on the terms set forth in Section 4.1 of the Stockholders
Agreement. Notwithstanding the first sentence of this Section 5.1(e), (i)
Company Stock issued to the Company or a wholly owned Subsidiary thereof and
(ii) Company Stock and Company Stock Equivalents issued to directors or
employees of the Company or a Subsidiary of the Company in connection with any
employee benefit plan approved by the shareholders of the Company, shall not be
subject to the consent of Buyer;
(f) change or amend any provision of the Company Charter or the by-laws
of the Company in a manner that would be materially adverse to Investor;
7
<PAGE>
(g) pursuant to or within the meaning of any bankruptcy law: (i)
commence a voluntary case, (ii) consent to the entry of an order for relief
against it in an involuntary case, (iii) consent to the appointment of a
custodian of it or for all or substantially all of its property, (iv) make a
general assignment for the benefit of its creditors;
(h) in the case of the Company, (1) terminate its eligibility for
treatment as a real estate investment trust, as defined in the Code, or (2) take
any action or fail to take any action which would reasonably be expected to,
alone or in conjunction with any other factors, result in the loss of such
eligibility, unless in the case of a failure to take action, such action is
initiated within thirty days and such action is completed within the period
required under the Code in order to maintain such eligibility; or
(i) subject to the right of the Company to terminate the Stock Purchase
Agreement pursuant to Section 9.1(b)(iii) thereof, allow the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than Buyer,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly, of stock having more than
15% of the voting power of the Company.
SECTION 6
MISCELLANEOUS
Section 6.1 - Date of Effectiveness
This Agreement shall be effective upon the date of the Initial Closing.
Section 6.2 - Notices
All notices and other communications hereunder shall be sufficiently
given for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to the Company shall be addressed
to:
FAC Realty Trust, Inc.
11000 Regency Parkway, 3rd fl.
East Tower
Cary, NC 27511
Attention: C. Cammack Morton
Telecopy: (919) 462-8799
8
<PAGE>
with a copy to:
Alston & Bird LLP
310 UCS Plaza
3605 Glenwood Ave.
P.O. Drawer 31107
Raleigh, North Carolina 27622-1107
Attention: Brad S. Markoff, Esq.
Telecopy: (919) 881-3175
or at such other address and to the attention of such other person as the
Company may designate by written notice to Investor. Notices to Buyer or
Investor shall be addressed to:
Lazard Freres Real Estate Investors, LLC
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
Attention: Murry Gunty
Telecopy: (212) 632-6060
with a copy to:
Latham & Watkins
885 Third Ave, Suite 10000
New York, NY 10022
Attention: R. Ronald Hopkinson, Esq.
Telecopy: (212) 751-4864
Section 6.3 - Severability
Any provision hereof which is invalid or unenforceable shall be
ineffective to the extent of such invalidity or unenforceability, without
affecting in any way the remaining provisions hereof.
Section 6.4 - Amendments and Waivers
This Agreement may not be modified or amended except by an instrument
or instruments in writing signed by the party against whom enforcement of any
such modification or amendment is sought. Any party hereto may, only by an
instrument in writing, waive compliance by another party hereto with any term or
provision hereof on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision hereof shall not be construed as a waiver of any subsequent breach.
Section 6.5 - Counterparts
9
<PAGE>
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party. Copies of executed counterparts transmitted by
telecopy, telefax or other electronic transmission service shall be considered
original executed counterparts for purposes of this Section, provided receipt of
copies of such counterparts is confirmed.
Section 6.6 - Assignment
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors. The Company shall not be
permitted to assign any of its rights hereunder to any third party without the
prior written consent of Buyer. Buyer may, upon written notice to the Company,
assign all, or a portion, of its rights hereunder to any third party without the
prior consent of the Company.
Section 6.7 - Headings
The Section and other headings contained in this Agreement are inserted
for convenience of reference only and will not affect the meaning or
interpretation of this Agreement. All references to Sections contained herein
mean Sections of this Agreement unless otherwise stated.
Section 6.8 - Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW
PRINCIPLES THEREOF.
Section 6.9 - Entire Agreement
This Agreement (including agreements incorporated herein) contain the
entire agreement between the parties with respect to the subject matter hereof
and there are no agreements, understandings, representations or warranties
between the parties other than those set forth or referred to herein. This
Agreement is not intended to confer upon any person not a party hereto (and
their successors and assigns) any rights or remedies hereunder.
Section 6.10 - Expenses
All legal and other costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid as set forth in
the Stock Purchase Agreement. Without limiting the foregoing, the Company shall
pay all costs and expenses incurred in connection with the solicitation of votes
of shareholders of the Company to approve the transactions contemplated by the
Stock Purchase Agreement.
10
<PAGE>
Section 6.11 - Interpretation; Absence of Presumption
(a) For the purposes hereof, (i) words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other gender as the context requires, (ii) the terms "hereof",
"herein", and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement, (iii) the word "including" and words of
similar import when used in this Agreement shall mean "including, without
limitation," unless the context otherwise requires or unless otherwise
specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall
apply, when appropriate, to successive events and transactions.
(b) This Agreement shall be construed without regard to any presumption
or rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.
[signature page follows]
11
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
PROMETHEUS SOUTHEAST RETAIL LLC
By: LF Strategic Realty Investor II, L.P.,
its sole member
By: Lazard Freres Real Estate Investors, LLC,
its general partner
By: ________________________
Name: ___________________________
Title: __________________________
FAC REALTY TRUST, INC.
By: ________________________
Name: C. Cammack Morton
Title: Chief Executive Officer
FIRST AMENDMENT TO MASTER AGREEMENT
AND
EXCHANGE OPTION AGREEMENT
THIS FIRST AMENDMENT TO MASTER AGREEMENT AND EXCHANGE OPTION AGREEMENT
(the "First Amendment" or "Agreement") is made as of the 16th day of March, 1998
by and among FAC REALTY TRUST, INC. ("FAC"), FAC PROPERTIES, L.P. (the
"Operating Partnership") and the other signatories to this First Amendment
(collectively, the "Contributors").
RECITALS
A. FAC, the Operating Partnership and Contributors are parties to a
certain Master Agreement dated as of October 1, 1997 (the "Master Agreement")
and a certain Exchange Option Agreement dated as of October 1, 1997 (the
"Exchange Option Agreement"), as the interests of the predecessor to the
Operating Partnership were assigned to the Operating Partnership and the Master
Agreement and Exchange Option Agreement were modified pursuant to that certain
Assignment of Interest in Master Agreement and Exchange Option Agreement, and
Consent of Limited Partners, dated as of December 22, 1997, relating to the
prospective contribution to the Operating Partnership by Contributors of all of
their interests in certain Properties and Constituent Partnerships (as such
terms are defined in Master Agreement) to the Operating Partnership.
B. The parties have elected to amend the Exchange Option Agreement and
the Master Agreement in order to extend the outside closing date specified
thereunder, to change the number of Units to be issued in respect of the
Property commonly known as Stanton Square, to otherwise modify the number of
Units to be issued in respect of intervening developments with respect to the
Properties and to make such other modifications and amendments to the Master
Agreement and Exchange Option Agreement as are more particularly hereinafter
described.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agreed as follows:
1. All parties hereby acknowledge and agree that the Outside Date for
Closing under and as defined in the Exchange Option Agreement and Master
Agreement shall hereby be extended through and including March 31, 1998.
2. In Paragraph 4.A of the Exchange Option Agreement, (i) the words
"Two (2) years after the Closing" are hereby deleted and the words "October 1,
1999" are hereby
<PAGE>
substituted in their place, and (ii) the number of Withheld Units for Mark E.
Pitney referenced therein shall be amended from "8,831" to "8,006."
3. The table contained in Schedule B of the Exchange Option Agreement
listing the number of units to be issued to each Contributor (exclusive of Units
held back pursuant to Paragraph 4 of the Exchange Option Agreement) is hereby
amended to read as follows:
Owners Total Units to be
Received at Closing
Roy O. Rodwell* 659,476
John M. Kane* 199,940
Clifford Clark 22,202
Carolyn Martin 8,759
Mark E. Pitney* 0
* This Schedule excludes Partnership Units held back and not
issued pursuant to, and subject to future issuance as and to
the extent provided under, Paragraph 4 of the Agreement.
4. Each of the parties hereto further agrees that the 199,940 and
22,202 Units to be issued at Closing to John M. Kane and Clifford Clark,
respectively, in respect of the Properties commonly known as Stanton Square,
University Mall and Towne Square shall be issued upon the Closing of Stanton
Square, irrespective of the matters referred to hereinafter in this paragraph.
The Units to be issued to Roy O. Rodwell and Carolyn Martin in respect of all of
the Properties as to which they are Contributors shall be issued upon the last
Closing to occur with respect to such Properties other than Park West Crossing
Shopping Center; provided that if Roy O. Rodwell shall have entered into an
escrow agreement with FAC and the Operating Partnership which is mutually
acceptable to such parties, the Operating Partnership shall issue the 244,210
Units relating to Park West Crossing Shopping Center at the time of the last
Closing otherwise taking place hereunder, and deposit such Units into escrow for
delivery to Roy O. Rodwell upon recordation of the deed to the Operating
Partnership for such Property and assumption or repayment of the Outstanding
Debt Financing encumbering such shopping center, in accordance with such escrow
agreement.
5. FAC, the Operating Partnership and each Contributor hereby agrees
and acknowledges that the following amounts of net operating income of the
Properties, as such amounts may have been reflected in the adjustments appearing
in the settlement statements relating to the Closing of each such Property as
relating to the period between the "Adjustment Closing Date," as defined in the
Master Agreement, and Closing, shall be treated as income to the Operating
Partnership in the nature of asset management fees for the Properties: (i) the
net operating income of each of the Properties from October 1, 1997 through the
earlier to occur of the Closing with respect to such Property or December 31,
1997, after consideration of the management fee payable to the third party
property manager, and (ii) the net operating income of
<PAGE>
each of the Properties (exclusive of University Mall and Town Square) from
January 1, 1998 through the Closing of such Property.
6. All terms not otherwise defined in this Agreement shall mean as
defined in the Exchange Option Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date and year first hereinabove written.
FAC PROPERTIES, L.P.
By: FAC Realty Trust, Inc.
a Maryland corporation
By: ________________________
Name: ________________________
Title: ________________________
FAC REALTY TRUST, INC.
By: _________________________________
Name: _________________________________
Title: _________________________________
------------------------------------------
ROY O. RODWELL
-----------------------------------------
CAROLYN E. MARTIN
-----------------------------------------
JOHN M. KANE
-----------------------
CLIFFORD CLARK
-----------------------
MARK E. PITNEY
<PAGE>
ASSIGNMENT OF INTEREST IN MASTER AGREEMENT AND
EXCHANGE OPTION AGREEMENT, AND CONSENT OF
LIMITED PARTNERS
THIS ASSIGNMENT OF INTEREST IN MASTER AGREEMENT AND EXCHANGE OPTION
AGREEMENT, AND CONSENT OF LIMITED PARTNERS (the "Assignment and Consent") is
made as of the 22nd day of December, 1997 by and among CAROLINA FAC LIMITED
PARTNERSHIP ("Carolina"), FAC REALTY TRUST, INC. ("FAC") (successor by merger to
FAC Realty, Inc.), FAC PROPERTIES, L.P. (the "Operating Partnership") and the
other signatories to this Assignment and Consent (collectively, the "Limited
Partners").
RECITALS
A. Carolina is a limited partnership formed under the laws of
the State of Delaware with the purpose of, among other things, owning and
operating retail properties in Virginia and North Carolina. Carolina was formed
pursuant to a certain Certificate of Limited Partnership filed with the Delaware
Secretary of State and is governed by that certain Agreement of Limited
Partnership dated as of October 1, 1997 (the "Carolina Partnership Agreement").
FAC is the general partner of Carolina. Limited Partners are the limited
partners in Carolina.
B. Carolina, FAC and the Limited Partners have entered into a
certain Master Agreement dated as of October 1, 1997 (the "Master Agreement")
and a certain Exchange Option Agreement dated as of October 1, 1997 (the
"Exchange Option Agreement") relating to the prospective contribution to
Carolina by Limited Partners of all of their interests in certain Properties and
Constituent Partnerships (as such terms are defined in the Master Agreement) to
Carolina.
C. FAC has elected to conduct its operations as a so-called
UPREIT. Under the terms of the Carolina Partnership Agreement, it was envisioned
that the limited partnership interests of the limited partners would be
exchanged for units in the Operating Partnership when the Operating Partnership
was formed. However, the Operating Partnership has been formed and the UPREIT
created prior to the Closing under the Master Agreement and Exchange Option
Agreement; and the parties desire that at Closing the Limited Partners shall
contribute their Constituent Partnership interests and Properties directly to
the Operating Partnership in exchange for limited partnership units in the
Operating Partnership.
D. Accordingly, Carolina hereby assigns its interest in the
Exchange Option Agreement and Master Agreement to the Operating Partnership, and
the Limited Partners hereby consent to such assignment and transfer, with the
effect that, among other things, at Closing, the Limited Partners will be
awarded units in the Operating Partnership, and the Properties or Constituent
Partnerships, as applicable, shall be contributed directly to the Operating
Partnership.
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NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Carolina hereby conveys, sets over and assigns unto the
Operating Partnership all of its right, title and interest in and to (i) the
Exchange Option Agreement and (ii) the Master Agreement. The Operating
Partnership agrees to assume any and all obligations, liabilities and covenants
of Carolina to be performed or arising from and after the date hereof under the
Master Agreement and the Exchange Option Agreement.
2. FAC and the Limited Partners each and all acknowledge and
consent to the assignment and assumption by the Operating Partnership of the
right, title, interest, liabilities and obligations of Carolina pursuant to
Paragraph 1 hereof. In particular, but without limitation, Limited Partners
hereby acknowledge and agree that (i) the Operating Partnership is and hereafter
shall be a party to the Exchange Option Agreement and Master Agreement in the
place and stead of Carolina and entitled to enforce such agreements as a party
thereto as if the Operating Partnership had been an original signatory thereto,
(ii) all references in the Exchange Option Agreement or Master Agreement to
Carolina shall be deemed references to the Operating Partnership, and (iii) each
and all of the covenants, representations and warranties by the Limited Partners
shall be for the benefit of the Operating Partnership. Each Limited Partner
hereby remakes as of the date hereof his or her representations and warranties
set forth in Paragraph 5.D of the Exchange Option Agreement with respect to the
Operating Partnership and the limited partnership units therein. All references
in the Master Agreement or Exchange Option Agreement to "Units" or "Partnership
Units" shall be deemed to mean limited partnership units in the Operating
Partnership rather than units in Carolina and all references to the "Closing"
shall be deemed references to the closing of the transaction whereunder the
Properties or Constituent Partnerships, as applicable, are transferred to the
Operating Partnership in exchange for limited partnership units in the Operating
Partnership.
3. All parties hereby acknowledge and agree that the outside
date for the Closing under the Exchange Option Agreement and Master Agreement
shall hereby be extended through and including January 12, 1998.
4. FAC hereby represents and warrants to the Limited Partners
that the copy of the Agreement of Limited Partnership of the Operating
Partnership (the "OP Agreement") attached hereto as Exhibit A is true, accurate
and complete. All references in the Master Agreement in the Carolina Partnership
Agreement shall be deemed to mean the OP Agreement.
5. The parties acknowledge and agree that Closing on all of
the Properties or Constituent Partnerships may take place simultaneously or
that, with the consent of FAC and all Limited Partners entitled to receive Units
from a particular Closing on certain Properties or Constituent Partnerships,
such Closing may precede Closing on other Properties or Constituent Partnerships
as to which conditions of Closing have not yet been satisfied, and that, in the
latter
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event, the number of Operating Partnership units issued to the Limited Partners
in respect of such Properties or Constituent Partnerships as to which Closing
has occurred, shall be in accordance with the parties' separate agreement in
respect thereof, and that the failure of Closing to take place with respect to
any Properties or Constituent Partnerships shall not impair or affect Closing(s)
which shall have taken place with respect to other Properties or Constituent
Partnerships.
6. All parties hereby agree that Schedule B to the Exchange
Option Agreement is hereby amended to substitute "____________" for "733,392" as
the total number of Units that Roy O. Rodwell is to receive at Closing and to
substitute "____________" for "11,921" as the number of Units that Carolyn
Martin is to receive at Closing.
7. All capitalized terms not otherwise defined in this
Assignment and Consent shall mean as defined in the Exchange Option Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have duly executed this Assignment and
Consent as of the date and year first above written.
CAROLINA FAC LIMITED PARTNERSHIP
By: FAC Realty Trust, Inc.,
General Partner
By:
---------------------
Name:
-------------------
Title:
------------------
FAC PROPERTIES, L.P.
By: FAC Realty Trust, Inc.,
a Maryland corporation
By:
----------------
Name:
-------------
Title:
------------
FAC REALTY TRUST, INC. (successor by
merger to FAC Realty, Inc.)
By:
--------------------------
Name:
----------------------
Title:
----------------------
----------------------------------------
ROY O. RODWELL
--------------------------------------
CAROLYN E. MARTIN
-------------------------------------
JOHN M. KANE
------------------------------------
CLIFFORD CLARK
------------------------------------
MARK E. PITNEY
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EXCHANGE OPTION AGREEMENT
BY AND AMONG
CAROLINA FAC LIMITED PARTNERSHIP,
FAC REALTY, INC.,
AND THE OWNERS OF
THE PROPERTIES AND INTERESTS LISTED HEREIN
DATED AS OF OCTOBER 1, 1997
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
DOCUMENT USED IN CONNECTION WITH THE OFFERING AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO THE REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE
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REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page
1. Contribution of Interests................................................................................1
2. Payment of the Consideration.............................................................................2
A. Units Issued....................................................................................2
B. The Lock-Up.....................................................................................2
3. The Closing..............................................................................................2
A. Conditions to Closing - Generally...............................................................2
B. Closing; Condition to Obligations...............................................................2
C. Default.........................................................................................3
D. Documents to be Delivered at Closing............................................................3
E. Documents Required to be Delivered by Carolina and the REIT at Closing..........................5
4. Holdback of Units........................................................................................5
A. Stanton Lease Commencement......................................................................5
B. Stanton Outparcel...............................................................................6
C. Bolling Creek Outparcel.........................................................................7
5. Representations and Warranties of Owners.................................................................7
A. Existence and Power.............................................................................7
B. Authorization: No Contravention.................................................................7
C. Pending Actions.................................................................................8
D. Investment Representations and Warranties.......................................................8
E. NASD Affiliation...............................................................................10
F. Foreign Person.................................................................................10
6. Representations and Warranties of Carolina and the REIT.................................................10
7. Other Provisions........................................................................................11
A. Counterparts...................................................................................11
B. Entire Agreement...............................................................................11
C. Construction...................................................................................11
D. Applicable Law.................................................................................11
E. Severability...................................................................................11
F. Waiver of Covenants, Conditions and Remedies...................................................11
G. Schedules......................................................................................11
H. Amendment and Assignment.......................................................................11
I. Relationship of Parties........................................................................12
J. Further Acts...................................................................................12
K. Notice.........................................................................................12
L. Consent to Transfer of Interests...............................................................13
SCHEDULES........................................................................................................20
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EXCHANGE OPTION AGREEMENT
THIS EXCHANGE OPTION AGREEMENT (the "Agreement") made and entered into
this the 1st day of October, 1997, by and among each of the persons whose names
are set forth on SCHEDULE A hereof (each being hereinafter called an "Owner" and
collectively the "Owners"), CAROLINA FAC LIMITED PARTNERSHIP, a Delaware limited
partnership ("Carolina") and its general partner, FAC REALTY, INC., a Delaware
corporation (the "REIT").
W I T N E S S E T H:
WHEREAS, Carolina is a Delaware limited partnership having the REIT as
its sole general partner and the REIT has elected to be qualified as a real
estate investment trust under the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the "Code");
and
WHEREAS, each Owner owns an interest in one or more of the
partnerships, the limited liability companies and/or the properties listed on
SCHEDULE B attached hereto and incorporated herein by reference (such schedule
is herein referred to as such Owner's "Acquisition Schedule"); and
WHEREAS, Carolina desires to acquire from each Owner, and each Owner
desires to transfer to Carolina, on the terms and conditions set forth herein,
all interests owned by such Owner and set forth in such Owner's Acquisition
Schedule and any other direct or indirect equity interests such Owner may have,
whether now owned or hereinafter acquired, in the partnerships and/or limited
liability companies (collectively the "Acquired Partnerships" or "Partnerships")
or the properties (the "Properties") listed on SCHEDULE B attached hereto, and
each such direct or indirect equity interest of an Owner in such Acquired
Partnerships or Properties is referred to individually as an "Interest" and,
collectively, as such Owner's "Interests"; and
WHEREAS, the Owners have agreed to contribute their Interests to
Carolina in exchange for limited partnership interests in Carolina (the
"Partnership Units" or "Units") and Carolina has agreed to acquire the Interests
and to issue to each Owner Partnership Units in Carolina in exchange for the
contribution of each Owner's Interest; and
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and conditions herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties do hereby agree as follows:
1. Contribution of Interests. Subject to the terms and provisions
hereof and of the Master Agreement (as defined below), each Owner does hereby
agree to contribute to Carolina its Interests and Carolina does hereby agree to
accept such Interests and issue to each Owner, in exchange for such
contribution, the Partnership Units as provided in Paragraph 2 and on SCHEDULE B
hereof. Anything to the contrary in this Agreement or the Master Agreement
notwithstanding, Carolina shall at all times have the irrevocable right and
option to require the Owners of all of the interests in a Property to either
convey to Carolina such ownership interests or, in lieu thereof, fee
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simple title to the Property. All such contributions and issuances at a Closing
shall otherwise be in accordance with this Agreement.
2. Payment of the Consideration.
A. Units Issued. The consideration for each Owner's Interests
shall be the number of Units as set forth in such Owner's Acquisition
Schedule, subject to the provisions of Paragraph 4 below. The number of
such Units is subject to adjustment at Closing due to principal
payments on any mortgage loan, prorations and post-closing adjustments
as provided in the Master Agreement (as defined below).
For the first fiscal year (or other period over which
distributions are paid) of Carolina ending after the date of Closing,
partnership distributions, if any, attributable to such year (or other
period) payable by Carolina to Owner pursuant to Section 5.1 of the
Partnership Agreement (as defined at Paragraph 3.E(i) below) shall be
prorated to take into account the period of time during such year (or
other period) that the Owner or its successors in interest to the Units
is a limited partner in Carolina. The Owner shall receive,
contemporaneously with receipt by the other limited partners in
Carolina of their respective distributions for such year (or other
period), that portion of a full distribution otherwise attributable to
its Units determined by multiplying the amount of such full
distribution by a fraction the numerator of which is the number of days
during such year (or other period) that the Owner is a limited partner
in Carolina and the denominator of which is the number of days in such
year (or other period). In the event that the Owner receives a full
cash distribution for such period, it shall reimburse Carolina the
prorated portion of such distribution within five (5) days of receipt.
B. The Lock-Up. Each Owner hereby agrees that without the
prior written consent of the REIT, he will not, directly or indirectly,
sell, offer or contract to sell, grant any option for the sale of, seek
redemption of or otherwise dispose of or transfer (collectively,
"dispose of"), any Partnership Units received hereby except as set
forth at SCHEDULE E hereof.
3. The Closing.
A. Conditions to Closing - Generally. The Closing is
conditioned upon satisfaction of the terms and conditions for closing
of the Master Agreement dated as of even date herewith by and among
Carolina, the REIT and the Owners (the "Master Agreement").
B. Closing; Condition to Obligations. Subject to the
foregoing, Carolina will specify a closing date, which date shall be no
later than December 4, 1997, for the closing (the "Closing") of the
exchange contemplated hereby which Closing shall take place at the
offices of the REIT. At or before Closing, Carolina and Owner will
execute all closing documents (the "Closing Documents") required by
Carolina in accordance with Paragraph 3.D. and deposit the same in
escrow with the REIT or other escrow agent to be selected by the REIT
(the "Closing Agent").
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If the Closing occurs:
(i) With respect to each Partnership or Property (or
portion thereof) acquired, Carolina shall cause to be
delivered to the Closing Agent for the benefit of each Owner
the number of Units set forth on each Owner's Acquisition
Schedule, as adjusted pursuant to the terms hereof and the
Master Agreement;
(ii) Upon receipt of the consideration set forth in
clause (i) above, the Closing Agent will release the Closing
Documents to Carolina; and
(iii) The transactions described or otherwise
contemplated herein or in the Closing Documents will thereupon
be deemed to have been consummated.
Notwithstanding the above, Carolina may, in its sole discretion, elect
not to complete the acquisition of Interests of any Owner with an
identified breach of (and failure to cure within any relevant grace or
cure period) or other exception with respect to Paragraph 5 hereof or
that has otherwise breached (and failed to cure) this Agreement (any
such Owner being hereafter referred to as a "Non-Complying Owner"), in
which case Carolina shall, in lieu of the delivery with respect to such
Owner pursuant to clause (i) above, notify the Closing Agent of such
election and direct the Closing Agent to return such Owner's Closing
Documents and any other agreements or instruments executed in
connection with the transactions contemplated thereby (the "Ancillary
Agreements") to such Owner. The election of Carolina not to acquire the
Interests of a particular Non-Complying Owner shall not affect the
obligations of any other Owner hereunder, including any other
Non-Complying Owner. If because of such an election, Carolina would not
acquire all of the Interests in any one Partnership or Property, then
Carolina may elect not to purchase any of the Interests in such
Partnership or Property and none of the Owners in such Partnership or
Property shall contribute its respective Interest in such Partnership
or Property to Carolina.
If the Closing of a Partnership or Property does not occur as a result
of a Non-Complying Owner within the time provided by Paragraph 3.B.,
then the Closing Agent will be directed to destroy such Closing
Documents and Ancillary Agreements it holds and return to Carolina the
consideration delivered by Carolina to the Closing Agent with respect
to such Partnership or Property in accordance with the previous
paragraph.
C. Default. If any party hereto defaults with respect to its
obligations under this Agreement, the other party shall be entitled to
exercise any and all remedies provided at law or in equity, including
but to limited to, the right to specific performance. Except as
otherwise provided herein, no default by any Owner hereunder shall in
any way limit or affect the obligations of any other Owner hereunder.
D. Documents to be Delivered at Closing. At or prior to the
Closing, each Owner which is a party hereto shall execute, acknowledge
where deemed desirable or necessary by Carolina, and deliver to the
Closing Agent, in addition to any other documents mentioned elsewhere
herein, the following:
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(i) As to Interests for which Carolina has elected in
its sole discretion to accept an assignment of partnership
interests constituting such Interests at Closing, three duly
executed Assignments of Interest (the "Assignment"), which
assignments shall be in a form as attached at SCHEDULE D and
shall contain a warranty of title that such Owner owns such
Owner's Interests free and clear of all encumbrances.
(ii) As to Interests for which Carolina has elected
in its sole discretion to accept a transfer of fee simple
title to the Property in lieu of a transfer of all of the
ownership interests therein, a general warranty deed, bill of
sale and assignments of leases, contracts and intangibles.
(iii) Any other documents reasonably necessary to
assign, transfer and convey such Owner's Interests and
effectuate the transactions contemplated hereby, including any
affidavits or indemnities required by the title insurers
insuring Carolina's title to a Property or the Interests.
(iv) If requested by Carolina, a certified copy of
all appropriate corporate, limited liability company or
partnership actions authorizing the execution, delivery and
performance by Owner of this Agreement, the Closing Documents
and the Ancillary Documents.
(v) Mortgage releases or consents of mortgagees, as
applicable, to Carolina's acquisition and ownership of its
Interest in such Partnership or Property, without personal
liability of Carolina or the REIT.
(vi) A settlement statement with respect to the
Closing, duly executed by such Owner.
(vii) If requested by Carolina in the case of any
Owner which is a corporation, partnership, trust or other
entity, an opinion from counsel for such Owner in form and
content reasonably acceptable to Carolina substantially to the
effect that such Owner is duly organized, validly existing and
in good standing under the laws of the state of its
organization, had and has all applicable corporate or
partnership power and authority to enter into, deliver and
perform this Agreement, the Closing Documents and the
Ancillary Documents, the execution, delivery and performance
of which Agreement, Closing Documents and Ancillary Documents,
and the transactions contemplated hereby and thereby, do not
and will not constitute a breach or a violation of Owner's
partnership agreement, operating agreement, declaration of
trusts, charter or bylaws, if applicable; and that all
applicable action necessary for such Owner to execute and
deliver this Agreement, the Closing Documents and the
Ancillary Documents has been taken and that the same have been
validly executed and delivered and are the valid and binding
obligations of such Owner enforceable against it, subject to
creditors rights and other normal and customary exceptions, in
accordance with their terms.
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E. Documents Required to be Delivered by Carolina and the REIT
at Closing. Carolina and the REIT shall deliver to the Owners at the
Closing, the following:
(i) A copy of the Agreement of Limited Partnership of
Carolina dated as of even date herewith, as amended (the
"Partnership Agreement").
(ii) The amendment to the Partnership Agreement (the
"Amendment"), duly executed by the REIT and all other
necessary parties, to evidence admission of the Owners to
Carolina as limited partners.
(iii) A settlement statement with respect to the
Closing, duly executed by Carolina.
(iv) Such other documents and instruments as may be
reasonably necessary to consummate the transactions with the
Owners under this Agreement.
4. Holdback of Units. Owners hereby acknowledge and agree that certain
circumstances exist, as described in more detail below, in light of which
Carolina has withheld issuance of certain Partnership Units (the "Withheld
Units") from certain of the Owners, provided that if such Owners strictly
satisfy certain conditions enumerated below, Carolina shall issue such Units as
to which said conditions have been satisfied. However, the Owners hereby
expressly acknowledge that (i) their contribution of their Interests is in
consideration of the issuance of the Units listed in their respective
Acquisition Schedules and such contribution is not dependent or contingent in
any way upon the issuance of any of the Withheld Units and (ii) the Units shall
not be issued unless and until the conditions associated with the issuance of
such Units have been strictly satisfied, and unless the conditions below are
strictly satisfied within the time periods set forth below, the Partnership
Units associated with such conditions will not be issued.
A. Stanton Lease Commencement. Within thirty (30) days after
the earlier to occur of (i) two (2) years after the Closing or (ii)
Rent Commencement (as hereinafter defined) in respect of that certain
rentable area consisting of 29,010 square feet which is vacant on the
date of this Agreement at the Property listed on the Acquisition
Schedule as "Stanton," which vacant space is identified on SCHEDULE C
attached hereto as the "Stanton Vacant Space," Carolina shall issue
163,848 Partnership Units to John Kane and 8,831 Partnership Units to
Mark E. Pitney. The term "Rent Commencement" shall mean, with respect
to vacant space at a Property, the date upon which the Owner of such
Property has provided to Carolina and the REIT satisfactory evidence
that such vacant space is under lease to a tenant and on terms
acceptable to Carolina and FAC (with such tenant being unaffiliated
with the Owner) for an initial term of not less than three years and at
an effective base rent, inclusive of CAM charges and other items
commonly considered "additional rent" of not less than $5.00 per
rentable square foot over the term of the Lease, exclusive of renewal
options, and such tenant has accepted the demised premises and is in
occupancy and paying rent. Such evidence shall include, without
limitation, the following items which shall be satisfactory to the REIT
and Carolina in their sole discretion: (i) current tenant estoppel
certifying as to the amount and location of space demised under the
lease, that the tenant has
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accepted the premises and is in occupancy and paying rent, detailing
the rent payable and any rent concessions or unfulfilled landlord
construction obligations or allowances, the existence or non-existence
of defaults, the term of the lease and any other matters reasonably
required by the REIT or Carolina, (ii) a certificate of occupancy
covering the entire vacant space, duly issued by applicable
governmental authorities, and authorizing the use and occupancy by the
tenant of the demised premises for the uses contemplated under the
lease, (iii) final lien waivers from all contractors of all mechanics'
or other lien rights associated with tenant improvements construction
and (iv) a current report of title disclosing no mechanics' or other
liens have been filed in connection with the construction of such
tenant improvements.
B. Stanton Outparcel.
(i) Within 30 days after the earliest to occur of (x)
the Sale for not less than $267,631 (as such amount may be
adjusted by mutually agreed upon appraisal) or (y) Development
or (z) Ground Leasing (as such terms are hereinafter defined)
for an annual base ground rent in an amount not less than
$27,000 of that certain outparcel(s) located at the Stanton
Property and identified on SCHEDULE C as the Stanton
Outparcel, Carolina shall issue 33,454 Units to John Kane. The
term "Sale" of an outparcel of a Property shall mean the
closing of a sale of such outparcel to a third party
unaffiliated with the Owner of such Property for cash, as
evidenced by a settlement statement and such other
documentation as is reasonably requested by Carolina. The term
"Development" of an outparcel of a Property shall mean the
receipt of a building permit which has been duly issued by
appropriate governmental authorities with respect to the
development of such outparcel following the execution of a
lease with a tenant for the occupancy of the improvements on
such outparcel, with such lease being on terms approved by and
otherwise satisfactory to the REIT and Carolina. The term
"Ground Leasing" of an outparcel of a Property shall mean the
occurrence of the rent commencement date under an executed
ground lease of such outparcel and receipt of the first
regular monthly installment of ground rent from the ground
lessor thereunder.
(ii) On each Earn Date (hereinafter defined), John
Kane shall qualify for release of (i.e., "earn") one-third of
the Units listed below (rounded to the nearest whole Unit) for
each of the management agreements listed below, provided that
, in each case, such management agreement shall not
theretofore have expired (without renewal on the same terms),
been modified on terms materially less favorable to the REIT
as the manager thereunder, or been terminated. Once earned,
Units shall be issued to John Kane on the next following Award
Date (hereinafter defined). If a management agreement shall
have so expired or been terminated or modified prior to an
Earn Date, John Kane shall not be entitled to earn any
additional Units with respect to such management agreement,
but the same shall not affect his right to Units (i) already
earned with respect to management agreement before its
termination, modification or expiration or (ii) in respect of
other such management agreements which shall not have been so
terminated or modified or expired.
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The management agreements which shall have been
assigned to the REIT, and the number of Units associated
therewith are as follows:
Management Agreement Units
1. KMart Plaza 13,449
2. NC Trust Office 26,668
3. TS&H Building 5,067
The term "Earn Date" shall mean (i) that date which
is one day after the Closing and (ii) each of the next two
succeeding anniversaries of such date.
The term "Award Date" shall mean the later to occur
of (i) the date upon which the Withheld Units under Paragraph
4B(i) of this Agreement in respect of the Stanton Outparcel
are issued in accordance with the terms thereof or (ii) the
first anniversary of the Closing and each of the next two
succeeding anniversaries thereof; provided that if John Kane
shall not have qualified for issuance of the Units withheld
under Paragraph 4B(i) of this Agreement by that date which is
three years from the date of Closing, then the Award Date
shall be that date which is three years and 30 days after the
Closing (whether or not the Units withheld under Paragraph
4B(i) of this Agreement have then qualified for release).
C. Bolling Creek Outparcel. Within 30 days after the earlier
to occur of the Sale for not less than $150,000 or Development of that
certain outparcel(s) located at the Property known as Bolling Creek and
identified on SCHEDULE C as the Bolling Creek Outparcel, Carolina shall
issue 18,750 Units to Roy O. Rodwell.
5. Representations and Warranties of Owners. Each Owner as to his or
its Interests represents and warrants to Carolina severally as follows:
A. Existence and Power. Owner or, if Owner is a partnership or
a limited liability company, any of Owner's partners or members which
are not individuals have been duly formed and are validly existing.
Each Owner which is not an individual has all necessary power and
authority to enter into this Agreement and to enter into and deliver
the documents required to be executed by it pursuant to the terms
hereof and to perform its obligations hereunder and thereunder.
B. Authorization: No Contravention. Each Owner represents that
the execution and delivery of this Agreement and the documents required
to be executed by such Owner, and the performance of such Owner's
obligations under this Agreement and the documents required to be
executed by each such Owner, will have been duly authorized by all
requisite action, and this Agreement will have been duly executed and
delivered by such Owner. This Agreement and the documents executed by
each such Owner will constitute the valid and binding obligation of
such Owner, subject, however, to bankruptcy and similar laws affecting
the rights and remedies of creditors generally. Execution of this
Agreement and performance
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of its terms will not violate any term of any agreement, order or
decree to which such Owner is a party or by which such Owner is bound.
C. Pending Actions. To each Owner's actual knowledge, there is
no existing or threatened legal action or governmental proceedings of
any kind involving such Owner, which, if determined adversely to such
Owner, would interfere with such Owner's ability to execute or deliver,
or perform its obligations under this Agreement or the documents
required to be executed by such Owner.
D. Investment Representations and Warranties.
(i) Such Owner will be acquiring the Units to be
received by him for his own account and not with the view to
the sale or distribution of the same or any part thereof in
violation of the Securities Act of 1933, as amended (the
"Act");
(ii) Such Owner understands that the Units (or shares
of common stock of the REIT (the "Common Stock") issued upon
exchange of the Units) to be issued to the Owner will not be
registered under the Act, or the securities laws of any state
("Blue Sky Laws") by reason of a specific exemption or
exemptions from registration under the Act and applicable Blue
Sky Laws and that the REIT's and that Carolina's reliance on
such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of Owner;
(iii) Such Owner understands that, for the reasons
set forth in subparagraph (ii) above, the Units (or shares of
common stock issued upon exchange of the Units) may not be
offered, sold, transferred, pledged, or otherwise disposed of
by Owner except (i) pursuant to an effective registration
statement under the Act and any applicable Blue Sky Laws, (ii)
pursuant to a no-action letter issued by the Securities and
Exchange Commission (the "SEC") to the effect that a proposed
transfer of the Units (or shares of Common Stock issued upon
exchange of the Units) may be made without registration under
the Act, together with either registration or an exemption
under applicable Blue Sky Laws, or (iii) upon Carolina or the
REIT, as the case may be, receiving an opinion of counsel
knowledgeable in securities law matters and reasonably
acceptable to Carolina or the REIT, as the case may be, to the
effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue
Sky Laws, and that, accordingly, Owner must bear the economic
risk of an investment in the Units (and the shares of Common
Stock issued upon exchange of the Units) for an indefinite
period of time;
(iv) Such Owner is an "accredited investor" within
the meaning of Rule 501(a) promulgated under the Act (the
standards for being "Accredited Investor" will vary depending
upon the legal form of the Owner, but Accredited Investor
includes, for individuals, any natural person whose individual
net worth, or joint net worth with that person's spouse, at
the time of the purchase exceeds $1,000,000 or who had an
individual income in excess of $200,000 in each of the two
most recent years or
8
<PAGE>
joint income with that person's spouse in excess of $300,000
in each of those years and has a reasonable expectation of
reaching the same income level in the current year);
(v) Such Owner understands that an investment in
Carolina and the REIT involves substantial risks; and such
Owner has had the opportunity to review all documents and
information which it has requested concerning its investment
in Carolina and the REIT and has had the opportunity to ask
questions of the management of Carolina and the REIT, which
questions, if any, were answered to its satisfaction; and
(vi) Such Owner understands that any document that
evidences the Units (and any unregistered shares of Common
Stock issued upon exchange of the Units) will bear a legend
substantially to the effect of the following:
The securities represented by this document have not
been registered under the Securities Act of 1933, as
amended (the "Act"), or the securities laws of any
state. The securities may not be offered, sold,
transferred, pledged or otherwise disposed of without
an effective registration statement under the Act and
under any applicable state securities laws, receipt
of a no-action letter issued by the Securities and
Exchange Commission (together with either
registration or an exemption under applicable state
securities laws) or an opinion of counsel acceptable
to Carolina FAC Limited Partnership that the proposed
transaction will be exempt from registration under
the Act and applicable state securities laws.
and that Carolina or the REIT, as the case may be, reserves
the right to place a stop order against the transfer of the
Units (and any unregistered shares of Common Stock issued upon
exchange of the Units), and to refuse to effect any transfers
thereof, in the absence of satisfying the conditions contained
in the foregoing legend.
(vii) The address set forth under such Owner's name
in SCHEDULE A is the address of the Owner's principal
residence or principal place of business, and such Owner has
no present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in
which such principal residence or principal place of business
is situated.
(viii) The Owners acknowledge and agree that they
have consulted their own corporate and tax advisors and have
made their investment decisions based upon the advice of their
own consultants and advisors, and that the number of units to
which any Owner is entitled hereunder shall be determined with
reference to SCHEDULE B irrespective of any tax consequences
of the transactions contemplated by this Agreement or
otherwise or the falsity or unreliability of any assumptions
9
<PAGE>
made by such Owner or anyone else, for tax purposes or
otherwise, with respect to the valuation or worth of the Units
or the Interests.
E. NASD Affiliation. Each Owner represents severally that (I)
neither he nor any affiliate of such Owner is a member or person
affiliated with a member of the National Association of Securities
Dealers, Inc. ("NASD"); and (II) neither he nor any affiliate of such
Owner owns any stock or other securities of any NASD member not
purchased in the open market, or has made any outstanding subordinated
loans to an NASD member. (A company or natural person is presumed to
control a member of the NASD and is therefor presumed to constitute an
affiliate of such a member if the company or person is the beneficial
owner of 10% or more of the outstanding securities of a member which is
a corporation. Additionally, a natural person is presumed to control a
member of the NASD and is therefore presumed to constitute an affiliate
of such a member if such person has the power to direct or cause the
direction of the management or policies of such member.)
F. Foreign Person. Each Owner represents that he is not a
"foreign person" within the meaning of Section 1445 of the Code.
6. Representations and Warranties of Carolina and the REIT. Carolina
and the REIT hereby represent and warrant to each Owner as follows:
A. Each of Carolina and the REIT has been duly formed and is
validly existing and is duly qualified to do business in all
jurisdictions where such qualification is necessary to carry on its
business as now conducted and is duly qualified or in the process of
becoming duly qualified in all jurisdictions where the ownership of its
property would necessitate such qualification. Each of Carolina and the
REIT has all power and authority under its enabling documents to enter
into this Agreement and to enter into and deliver all of the documents
and instruments required to be executed and delivered by each such
party and to perform its respective obligations hereunder and
thereunder.
B. The execution and delivery of this Agreement and the
documents required to be executed by Carolina and the REIT hereunder,
and the performance of their obligations under this Agreement, have
been duly authorized, and this Agreement and such documents will on the
Closing date have been, duly executed and delivered by Carolina and the
REIT. This Agreement does and will, and the documents executed by
Carolina and the REIT will, constitute the valid and binding obligation
of each of them enforceable in accordance with their terms, subject to
bankruptcy and similar laws affecting the remedies or recourse of
creditors generally.
10
<PAGE>
C. The Partnership Agreement delivered to the Owner is a true
and correct copy of the agreement of Carolina. The Partnership
Agreement is in full force and effect.
7. Other Provisions.
A. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which, taken together, shall constitute one and the same instrument.
B. Entire Agreement. Except as stated herein, this Agreement
contains the entire agreement between the parties and supersedes all
prior and contemporaneous understandings and agreements, whether oral
or in writing, between the parties respecting the subject matter
hereof. Except as stated herein, there are no representations,
agreements, arrangements or understandings, oral or in writing, between
or among the parties to this Agreement relating to the subject matter
of this Agreement which are not fully expressed in this Agreement.
C. Construction. The provisions of this Agreement shall be
construed as to their fair meaning, and not for or against any party
based upon any attribution to such party as the source of the language
in question. Headings used in this Agreement are for convenience of
reference only and shall not be used in construing this Agreement.
D. Applicable Law. This Agreement shall be governed by the
laws of the State of Delaware. Time is of the essence in the Closing of
this transaction.
E. Severability. If any term, covenant, condition or provision
of this Agreement, or the application thereof to any person or
circumstance, shall to any extent be held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
terms, covenants, conditions or provisions of this Agreement, or the
application thereof to any person or circumstance, shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated thereby.
F. Waiver of Covenants, Conditions and Remedies. The waiver by
one party of the performance of any covenant, condition or promise
under this Agreement shall not invalidate this Agreement nor shall it
be considered a waiver by it of any other covenant, condition or
promise under this Agreement. The waiver by either or both parties of
the time for performing any act under this Agreement shall not
constitute a waiver of the time for performing any other act or an
identical act required to be performed at a later time.
G. Schedules. All schedules to which reference is made in this
Agreement are deemed incorporated into this Agreement and made a part
hereof, whether or not actually attached.
H. Amendment and Assignment. This Agreement may be amended at
any time by Carolina and the REIT, in their sole discretion, without
the consent of any Owners, except that this Agreement shall not be
amended without the consent of the Owners if such
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<PAGE>
amendment would convert the Owners' Units into general partnership
interests or amend this Paragraph 7.H. All amendments, changes,
revisions and discharges of this Agreement, in whole or in part, and
from time to time, shall be binding upon the parties despite any lack
of legal consideration, so long as the same shall be in writing and
executed by the parties hereto. No Owner may assign this Agreement or
any interest herein without the prior written approval of all other
parties.
I. Relationship of Parties. The parties agree nothing
contained herein shall constitute either party the agent or legal
representative of the other for any purpose whatsoever, nor shall this
Agreement be deemed to create any form of business organization between
the parties hereto, nor is either party granted any right or authority
to assume or create any obligations or responsibility on behalf of the
other party, nor shall either party be in any way liable for any debt
of the other.
J. Further Acts. Each party agrees to perform any further acts and to execute,
acknowledge and deliver any documents which may be reasonably necessary to carry out the
provisions of this Agreement.
K. Notice. All notices and demands which either party is
required or desires to give to the other shall be given in writing by
personal delivery, express courier service, certified mail, return
receipt requested, or by telecopy to the address or telecopy number set
forth below for the respective parties. If notice is by deposit or with
an express courier service, it shall be effective on the next business
day following such deposit or, if notice is sent by certified mail,
return receipt requested, it shall be effective upon receipt.
OWNERS: At the address and telecopy number
set forth under such Owner's name in
SCHEDULE A hereto.
Carolina: Carolina FAC Limited Partnership
11000 Regency Parkway
Suite 300
Cary, N.C. 27511
Telecopy No.: (919) 462-8799
With copy to: Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Keith J. Willner
Telecopy No.: (202) 861-0473
12
<PAGE>
REIT: FAC Realty, Inc.
11000 Regency Parkway
Suite 300
Cary, N.C. 27511
Attn: Patrick M. Miniutti
Telecopy No.: (919) 462-8799
L. Consent to Transfer of Interests. Owners agree to and
hereby do amend the partnership agreements or operating agreements for
each of the Acquired Partnerships to allow for the transactions
contemplated hereby and each Owner consents to the transfer by the
other Owners of the Interests as herein contemplated.
13
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement by
their hands and under seal affixed hereto as of the date and year first above
written.
CAROLINA FAC LIMITED PARTNERSHIP
By: FAC Realty, Inc.,
General Partner
By:
------------------------
Name:
--------------------
Title:
---------------------
FAC REALTY, INC.
By:
--------------------
Name:
-----------------
Title:
----------------
14
<PAGE>
OWNER SIGNATURE PAGE
The undersigned, desiring to become one of the within-named Owners to
that certain Exchange Option Agreement by and among Carolina FAC Limited
Partnership and such Owners, dated as of October 1, 1997, hereby becomes a party
to such Exchange Option Agreement and agrees to the terms and conditions thereof
and makes the representations, warranties and covenants contained therein. The
undersigned agrees that this signature page may be attached to any counterpart
of said Exchange Option Agreement.
(SEAL)
------------------
ROY O. RODWELL
15
<PAGE>
OWNER SIGNATURE PAGE
The undersigned, desiring to become one of the within-named Owners to
that certain Exchange Option Agreement by and among Carolina FAC Limited
Partnership and such Owners, dated as of October 1, 1997, hereby becomes a party
to such Exchange Option Agreement and agrees to the terms and conditions thereof
and makes the representations, warranties and covenants contained therein. The
undersigned agrees that this signature page may be attached to any counterpart
of said Exchange Option Agreement.
(SEAL)
---------------------------
CAROLYN E. MARTIN
16
<PAGE>
OWNER SIGNATURE PAGE
The undersigned, desiring to become one of the within-named Owners to
that certain Exchange Option Agreement by and among Carolina FAC Limited
Partnership and such Owners, dated as of October 1, 1997, hereby becomes a party
to such Exchange Option Agreement and agrees to the terms and conditions thereof
and makes the representations, warranties and covenants contained therein. The
undersigned agrees that this signature page may be attached to any counterpart
of said Exchange Option Agreement.
(SEAL)
---------------------
JOHN M. KANE
17
<PAGE>
OWNER SIGNATURE PAGE
The undersigned, desiring to become one of the within-named Owners to
that certain Exchange Option Agreement by and among Carolina FAC Limited
Partnership and such Owners, dated as of October 1, 1997, hereby becomes a party
to such Exchange Option Agreement and agrees to the terms and conditions thereof
and makes the representations, warranties and covenants contained therein. The
undersigned agrees that this signature page may be attached to any counterpart
of said Exchange Option Agreement.
(SEAL)
-------------------------
CLIFFORD CLARK
18
<PAGE>
OWNER SIGNATURE PAGE
The undersigned, desiring to become one of the within-named Owners to
that certain Exchange Option Agreement by and among Carolina FAC Limited
Partnership and such Owners, dated as of October 1, 1997, hereby becomes a party
to such Exchange Option Agreement and agrees to the terms and conditions thereof
and makes the representations, warranties and covenants contained therein. The
undersigned agrees that this signature page may be attached to any counterpart
of said Exchange Option Agreement.
(SEAL)
---------------------------
MARK E. PITNEY
19
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SCHEDULES
Schedule A List of Owners
Schedule B Acquired Partnerships or Properties
Schedule C Description of Stanton Vacant Space, Stanton
Outparcel and Bolling Creek Outparcel
Schedule D Assignment of Interests
Schedule D-1 Ownership Interests Assigned As Provided By The
Assignment To Which This Schedule D-1 Is Attached
Schedule E Partnership Unit Lock-Up Terms
20
<PAGE>
Schedule A
LIST OF OWNERS
Roy O. Rodwell
c/o Atlantic Real Estate Corporation
100 Capitola Drive, Suite 309
Durham, NC 27713-4411
Telephone: (919) 544-7445
Telefax: (919) 544-9503
Carolyn E. Martin
c/o Atlantic Real Estate Corporation
100 Capitola Drive, Suite 309
Durham, NC 27713-4411
Telephone: (919) 544-7445
Telefax: (919) 544-9503
John M. Kane
816 Lakestone Drive
Raleigh, NC 27609
Telephone: (919) 787-3716
Telefax: (919) 787-3716
Clifford Clark
1806 Banbury Road
Raleigh, NC 27608
Telephone: (919) 781-1742
Telefax: (919) 781-1742
Mark E. Pitney
8865 Six Forks Road
Raleigh, NC 27615
Telephone: (919) 787-4450
Telefax: (919) -
A-1
</TABLE>
<PAGE>
MASTER AGREEMENT
----------------------------
by and among
FAC Realty, Inc.,
Carolina FAC Limited Partnership,
and the other
signatories to this
Master Agreement
hereinafter contained
Dated as of October 1, 1997
----------------------
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
DOCUMENT USED IN CONNECTION WITH THE OFFERING AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO THE REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS...............................................................................................1
ARTICLE II THE TRANSACTIONS..........................................................................................4
2.1 General...................................................................................................4
2.2 Exchange Option Agreement.................................................................................4
2.3 Closing...................................................................................................4
ARTICLE III CONSIDERATION.............................................................................................5
3.1 Contribution Price........................................................................................5
3.2 Terms of Payment..........................................................................................5
3.3 Additional Closing Adjustments............................................................................5
3.4 Fluctuation...............................................................................................6
ARTICLE IV COVENANTS AND AGREEMENTS..................................................................................7
4.1 Operation of Business.....................................................................................7
4.2 No Brokers................................................................................................7
4.3 Section 754 Elections.....................................................................................7
4.4 Termination of Contracts..................................................................................7
4.5 Contributions of Assets...................................................................................7
4.6 Assignment of Warranties..................................................................................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS - GENERALLY................................................8
5.1 Consents..................................................................................................8
5.2 Disclosure................................................................................................8
5.3 Absence of Conflicts......................................................................................8
5.4 Certification of Constituent Financial Statements.........................................................8
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS............................................................9
6.1 Power and Authority of Contributors and Constituent Partnerships..........................................9
6.2 Rent Roll and Leases......................................................................................9
6.3 No Contracts.............................................................................................10
6.4 Liabilities; Indebtedness................................................................................10
6.5 Insurance................................................................................................10
6.6 Personal Property........................................................................................10
6.7 Claims or Litigation.....................................................................................10
6.8 Hazardous Substances.....................................................................................10
6.9 Compliance with Laws.....................................................................................11
6.10 Employees................................................................................................11
6.11 Condemnation and Moratoria...............................................................................11
6.12 Condition of Improvements................................................................................11
6.13 Taxes....................................................................................................12
6.14 Management Agreements....................................................................................12
6.15 Operating Agreements.....................................................................................12
6.16 Absence of Certain Changes...............................................................................12
6.17 Tradename................................................................................................13
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<CAPTION>
<S> <C>
6.18 Title....................................................................................................13
6.19 Certain Liens............................................................................................13
ARTICLE VII CONDITIONS TO CLOSING AND DUE DILIGENCE INVESTIGATION....................................................13
7.1 Conditions to Closing of Properties.....................................................................13
7.2 Carolina Investigation/Due Diligence Period..............................................................14
7.3 Closing Documents........................................................................................15
ARTICLE VIII INDEMNITY................................................................................................16
8.1 Representations and Warranties of each of the Contributors...............................................16
8.2 Arbitration..............................................................................................16
ARTICLE IX MISCELLANEOUS............................................................................................16
9.1 Notices..................................................................................................16
9.2 Counterparts.............................................................................................16
9.3 Severability.............................................................................................16
9.4 Assigns..................................................................................................16
9.5 Public Announcement......................................................................................17
9.6 Confidentiality..........................................................................................17
9.7 Remedies.................................................................................................17
9.8 Captions.................................................................................................17
9.9 Exhibits and Schedules...................................................................................17
9.10 Merger Clause............................................................................................17
9.11 Amendments and Waiver....................................................................................17
9.12 Governing Laws...........................................................................................18
LIST OF SCHEDULES AND EXHIBITS..........................................................................................24
ii
<PAGE>
MASTER AGREEMENT
This MASTER AGREEMENT (the "Master Agreement") is made as of the 1st day
of October, 1997, by and among FAC REALTY, INC., a Delaware corporation ("FAC"),
CAROLINA FAC LIMITED PARTNERSHIP, a Delaware limited partnership ("Carolina"),
and the other signatories to this Agreement hereinafter contained (each a
"Contributor" and collectively the "Contributors").
WHEREAS, Carolina is a Delaware limited partnership having FAC as its
sole general partner and FAC has elected to be qualified as a real estate
investment trust under the Code; and
WHEREAS, Contributors own the direct and indirect interests in certain
Properties and other real property, improvements, appurtenances and other
rights, interests and privileges appertaining thereto, set forth with more
particularity on Schedule 1 hereto and, as applicable, in certain partnerships,
limited liability companies or other ownership entities which own interests in
the Properties, as also set forth on Schedule 1;
WHEREAS, Carolina and the Contributors have entered into an Exchange
Option Agreement (as defined below), pursuant to which such Contributors have
irrevocably agreed to sell, transfer and assign to Carolina their interests;
NOW, THEREFORE, in consideration of the premises herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following capitalized terms shall have the following meanings for all
purposes of this Master Agreement and such meanings are equally applicable to
the singular and plural forms of the terms defined. The terms "hereof",
"hereto", "herein", "hereunder" and comparable terms refer to the entire
agreement with respect to which such terms are used and not to any particular
section, subsection, paragraph or other subdivision thereof.
"ADJUSTMENT CLOSING DATE" means October 1, 1997.
"AFFILIATE" means, as to any Person (as defined below), each of the
Persons (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control
with such Person; or (ii) which beneficially owns or holds 10% or more of
any class of the outstanding voting stock (or in the case of a Person
which is not a corporation, 10% or more of the equity interest) of such
Person; or (iii) 10% or more of any class of the outstanding voting stock
(or in the case of a Person which is not a corporation, 10% or more of
the equity interest) of which is beneficially owned or held by such
Person. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether by ownership of voting stock, by contract,
by close family relationships (i.e., parent, spouse, child or sibling) or
otherwise.
"BRINGDOWN CERTIFICATE" means a certificate executed by the Contributors
attesting and certifying as to the continuing truth and accuracy as of
the date of Closing of each and all of the representations and warranties
of the Contributors and the Constituent Parties under this Master
Agreement and Exchange Option Agreement.
<PAGE>
"CAROLINA PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of Carolina FAC Limited Partnership, as amended through the
date hereof, including the amendment to admit the Contributors as
partners therein.
"CLOSING" means the closing and consummation of the transactions
contemplated by this Master Agreement relating to the Properties.
"CLOSING DATE" means the date upon which all the conditions for closing
and consummation of the transactions contemplated by this Master
Agreement relating to the Properties shall have been satisfied, which
date shall be no later than December 4, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSTITUENT FINANCIAL STATEMENTS" means the periodic income statement
and balance sheets provided to Carolina (including the schedules attached
thereto) for the Contributors or Constituent Partnerships, and the
Properties.
"CONSTITUENT PARTIES" means collectively Contributors and the
Constituent Partnerships, without duplication.
"CONSTITUENT PARTNERSHIPS" means, as to those Properties, if any, which
are owned by partnerships, limited liability companies or other entities
which are in turn owned by certain of the Contributors, such
partnerships, limited liability companies or other entities which may be
so owned by certain of the Contributors.
"CONTRIBUTION PRICE" means the consideration to be paid by Carolina to
the Contributors for their Interests in the Properties as set forth in
Section 3.1.
"ENVIRONMENTAL LAW" means any and all federal, state and local laws,
regulations, ordinances and other requirements relating to pollution or
protection of the environment, including, without limitation, laws,
regulations and requirements relating to the ownership, possession,
storage and control of the Properties (as defined below) and to
emissions, discharges, releases or threatened releases of storm water,
pollutants, contaminants, toxic or hazardous substances, or solid or
hazardous wastes into the environment (including without limitation
ambient air, surface water, groundwater or land), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, toxic or
hazardous substances, or solid or hazardous wastes. The Environmental
Laws include, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE OPTION AGREEMENT" means the agreement dated as of even date
herewith between Carolina, FAC and the Contributors pursuant to which
Units are to be exchanged for all of the Interests, as defined therein.
"IMPROVEMENTS" means all buildings, structures, streets, furnishings,
parking lots, landscaping, walls, ponds, culverts, fixtures, utilities,
fences, driveways, loading docks, security systems and other physical
features constructed or assembled on, at, upon or beneath any of the
Properties (whether finished or unfinished).
2
<PAGE>
"INDEBTEDNESS" means, without duplication, any obligations for borrowed
money and all obligations to trade creditors, whether heretofore, now or
hereafter owing, arising, due or payable to any person and howsoever
evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise and whether matured or
unmatured. Without in any way limiting the generality of the foregoing,
Indebtedness specifically includes the following: (a) all obligations or
liabilities of any person that are secured by any lien, claim,
encumbrance or security interest upon property; (b) all obligations or
liabilities created or arising under any capital lease of real or
personal property, or conditional sale or other title retention agreement
with respect to property, even though the rights and remedies of the
lessor, seller or lender thereunder are limited to repossession of such
property; (c) all unfunded pension fund, employee medical or welfare
obligations and liabilities; (d) deferred taxes; and (e) all obligations
under any indemnification agreements, guaranty agreements, letters of
credit or other documents creating such contingent liabilities.
"INDEPENDENT DIRECTOR" shall have the meaning set forth in the charter of
FAC, as it may be amended from time to time.
"INTERESTS" shall mean as defined in the Exchange Option Agreement.
"LIEN" means any interest in property securing an obligation owed to, or
a claim by, a person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including
but not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust
receipt or a lease consignment or bailment for security purposes. The
term Lien shall include reservations, exceptions, defects of any kind or
nature, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances
affecting property.
"NYSE" means the New York Stock Exchange.
"OUTSTANDING DEBT FINANCING" means the Indebtedness of the Properties as
described on SCHEDULE 3.2(I) attached hereto including any
indemnifications and guarantees related thereto.
"PERMITTED LIEN" means (i) liens for 1997 ad valorem taxes not yet due
and payable; (ii) restrictions, easements, covenants, reservations and
rights of way of record as do not detract from the value or interfere
with the present use of a parcel of property; (iii) zoning ordinances,
restrictions and other requirements imposed by governmental authority as
do not detract from the value or interfere with the present use of a
parcel of property; and (iv) such imperfections of title, liens and
encumbrances, if any, as do not detract from the value or interfere with
the present use of a parcel of property and which do not secure
obligations for borrowed money or the deferred purchase price of
property.
"PERSON" means any individual, joint venture, corporation, company,
voluntary association, partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of
entity.
"PROPERTY" or "PROPERTIES" shall mean, individually, the real property
together with any Improvements thereon and all personal property and
rights, privileges and interests appurtenant thereto and all of the
ownership interests therein owned by a Contributor or by a Constituent
Partnership or, collectively, by all of the Constituent Partnerships,
including but not limited to as more particularly described on SCHEDULE
1.
"REDEMPTION SHARES" means the shares of Common Stock of FAC into which
Units received by the Contributors in connection with the transactions
contemplated hereby are convertible into under
3
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certain circumstances at the election of FAC upon their tender for
redemption as provided in the Carolina Partnership Agreement.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES LAWS" means the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder.
"SHARES" means the duly authorized common stock of FAC.
"UNIT" means an undivided limited partnership interest of Carolina, which
is exchangeable by the Unit holder for either cash or Shares, whichever
may be elected by FAC, after one year from the Closing Date in accordance
with the Carolina Partnership Agreement and the Exchange Option
Agreement.
ARTICLE II
THE TRANSACTIONS
2.1 General. Subject to the terms, conditions, provisions and limitations
in this Master Agreement, on the Closing Date the parties shall cause the
transactions contemplated hereby to be consummated (the "Transactions"),
including, but not limited to:
(a) The closing under the Exchange Option Agreement, as described in Section 2.2 below;
(b) At the discretion of Carolina, the dissolution of the
Constituent Partnerships and any other partnerships or other entities
which are wholly-owned by the Contributors and all of the interests in
which shall have been contributed to Carolina, and, at FAC's option, the
transfer of the Properties to Carolina by deed or by operation of law.
2.2 Exchange Option Agreement. Carolina shall tender the consideration to
each Contributor as required by the Exchange Option Agreement such that each
"Closing," as defined in the Exchange Option Agreement, occurs under the terms
thereof.
2.3 Closing.
(a) The closing of the transactions contemplated by this Master
Agreement (the "Closing") shall take place at the offices of FAC on or
before the Closing Date, unless otherwise agreed in writing by Carolina.
The closing under the Exchange Option Agreement shall take place
simultaneously with and only if the Closing hereunder occurs.
(b) Carolina or FAC may terminate this Master Agreement without
liability and without waiving any of its rights at law or in equity by
giving notice to the Contributors at any time prior to the Closing:
(i) If any one of the Constituent Parties is in breach of
any representation, warranty, or covenant contained in
this Master Agreement or in the Exchange Option Agreement
in any material respect;
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(ii) If the Closing shall not have occurred on or before
the Closing Date by reason of any condition precedent in
this Master Agreement not being fulfilled or in the
Exchange Option Agreement (unless the failure results from
Carolina itself breaching any representation, warranty or
covenant contained in this Master Agreement or in the
Exchange Option Agreement); or
(iii) Pursuant to the terms of Section 7.2 hereof.
ARTICLE III
CONSIDERATION
3.1 Contribution Price. As consideration for the contribution of the
Properties, Carolina shall deliver to the Contributors the number of limited
partnership units ("Units") in Carolina provided in the Exchange Option
Agreement.
3.2 Terms of Payment.
(a) Generally. At the Closing, each Contributor shall receive the
number of Units allocated to such Contributor under the Exchange Option
Agreement in respect of the Properties to be acquired, subject to pro
rata adjustment for any changes in the amount of the Outstanding Debt
Financing as of the applicable Closing Date from the amounts projected to
be outstanding as of such dates as reflected on SCHEDULE 3.2 attached
hereto;
(b) Pro Rata Expenses. Each Contributor shall be responsible for
payment of his pro rata portion of legal fees associated with this
transaction, any contract termination fees and any prorations chargeable
to the Contributors under Section 3.3 hereof.
3.3 Additional Closing Adjustments.
(a) Generally. All real estate taxes, charges and assessments
affecting a Property, all charges for water, sewer, electricity, gas and
all other utilities and operating expenses with respect to a Property, to
the extent not paid or payable by tenants under the Leases (as defined in
Section 6.2 below and as described on SCHEDULE 6.2A attached hereto),
shall be apportioned on a per diem basis as of midnight on the date
immediately preceding the Adjustment Closing Date. All such expenses for
the period preceding the Adjustment Closing Date shall be deemed expenses
of the applicable Contributors and all such expenses commencing as of the
Adjustment Closing Date with respect to such Property shall be deemed to
be expenses of Carolina. Amounts owed under this paragraph shall be paid
to the party to whom they are owed in cash at the Closing or in the
Post-Closing Adjustment Period (as defined below) in the same manner as
if the underlying real property were being sold. If any real estate
taxes, charges or assessments have not been finally assessed as of the
Closing Date for a Property for the then current calendar tax year, they
shall be adjusted at the Closing based upon the greater of (i) the most
recently issued bills therefor or (ii) the best reasonable estimate
therefor after consultations with the appropriate taxing officials.
(b) Rent. Except for delinquent rent, all rent under leases and
other income attributable to a Property shall be apportioned on a per
diem basis as of midnight on the date immediately preceding the
Adjustment Closing Date. All such rent and other income, including
commissions earned, for the period preceding the Adjustment Closing Date
shall be deemed to be property of the applicable Contributors, and all
rent and other income for any period commencing as of the Adjustment
Closing Date and thereafter shall be the property of Carolina for the
purpose of making the adjustments set
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forth herein. Amounts owed under this paragraph shall be paid to the
party to whom they are owed in cash at the Closing or during the
Post-Closing Adjustment Period. Delinquent rent shall not be prorated,
but shall be deemed the property of the appropriate Contributors.
Payments received by Carolina from tenants from and after the Closing
with respect to a Property shall be applied first to rents and other
amounts then due Carolina from such tenant and then to such tenant's
delinquent rent as of the time of apportionment. Carolina shall use
reasonable efforts to collect delinquent rents for the benefit of the
Contributors but in no event shall be obligated to evict or sue any
tenants in order to collect such rents and shall cooperate with the
Contributors in the collection of any delinquent amounts; provided,
however, that the Contributors shall not have any rights to evict such
tenants for such delinquent amounts. Any amounts received by Contributors
on account of rent or other income for the period after the Adjustment
Closing Date with respect to the Property and the related personal
property shall be turned over to Carolina for application in accordance
with the terms of this paragraph. All accounts receivable, notes, cash
and bank accounts of the Constituent Parties existing as of the
Adjustment Closing Date and relating to the Properties shall be
transferred at Closing to Carolina.
(c) Preclosing Expenses and Liabilities. The parties acknowledge
that not all invoices for expenses incurred with respect to the
Properties prior to the Adjustment Closing Date will be received by the
Closing and that a mechanism needs to be in place so that such invoices
can be paid as received. All of the prorations referred to above will be
done on an interim basis at the Closing and will be subject to final
adjustment in accordance with the provisions hereof within 90 days or
such other agreed upon period of time following Adjustment Closing Date
(the "Post-Closing Adjustment Period"). Upon receipt by Carolina after
Closing of an invoice for a Property's expenses which are attributable in
whole or in part to a period prior to the Adjustment Closing Date and
which were not apportioned at Closing, Carolina shall submit for the
Contributors a copy of such invoice with such additional supporting
information as Contributors shall reasonably request. Within 10 days of
receipt of such copy, each of the Contributors shall pay to Carolina
their pro rata share of an amount equal to the portion of such invoice
attributable to the period ending as of midnight on the date immediately
preceding the Adjustment Closing Date apportioned on a per diem basis.
(d) Security Deposits/Tenant Inducements. With respect to the
Property or Properties to be acquired at any Closing, the Constituent
Parties shall pay to Carolina in cash at such Closing an amount equal to
the sum of (i) the security deposits, if any, required to be held by the
landlord pursuant to the Leases, and (ii) any other deposits or advances
received by the Constituent Parties relating to services yet to be
provided by the Constituent Parties.
(e) Adjustment Closing Date. The parties acknowledge that,
irrespective of the fact that the Closing may take place substantially
later than the Adjustment Closing Date, the adjustment of all income,
revenues, costs, expenses and expenditures shall be made as of the
Adjustment Closing Date. The Adjustment Closing Date shall be a day of
income and expense for Carolina.
3.4 Fluctuation. EACH OF THE CONTRIBUTORS AND CAROLINA ACKNOWLEDGES AND
AGREES THAT AFTER THE EXECUTION OF THE EXCHANGE OPTION AGREEMENT, THE MARKET
VALUE OF THE FAC COMMON STOCK WHICH IS CURRENTLY OUTSTANDING MAY INCREASE OR
DECREASE IN VALUE AS THE RESULT OF MARKET FLUCTUATIONS, AND THAT ANY SUCH
FLUCTUATIONS MAY AFFECT THE VALUE OF THE UNITS. NOTWITHSTANDING THESE
FLUCTUATIONS, Carolina WILL NOT BE REQUIRED TO INCREASE THE NUMBER OF UNITS TO
BE ISSUED TO ANY CONTRIBUTOR IN THE EVENT OF A DECREASE IN THE MARKET VALUE OF
FAC COMMON STOCK PRIOR TO THIS AGREEMENT AND THE CLOSING. LIKEWISE, EACH
CONTRIBUTOR WHOSE PURCHASE PRICE IS BEING PAID IN UNITS WILL BE ENTITLED TO THAT
NUMBER OF UNITS SET FORTH
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IN THE EXCHANGE OPTION AGREEMENT NOTWITHSTANDING ANY INCREASE IN VALUE OF FAC
COMMON STOCK PRIOR TO THE CLOSING.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Operation of Business. Between the date hereof and the Closing Date,
each Contributor shall, and shall cause each Constituent Partnership to,
maintain and operate the Properties in a manner consistent with first-class
retail shopping centers, provided that they shall not enter into, or cause or
permit any Constituent Partnership to enter into, any contracts or other such
arrangements that would be binding upon Carolina or the Properties after the
Closing Date, unless such contract is terminable without payment of any
termination fee or other penalty on thirty (30) days' notice or less. Between
the date hereof and the Closing Date, neither any Contributor nor any
Constituent Partnership shall consent to any zoning changes or enter into any
covenants or other agreements that would be binding on Carolina or the
Properties. Between the date hereof and the Closing Date, the Contributors will
advise Carolina of any written notice from any governmental authority relating
to the violation of any law or ordinance regulating the condition or use of the
Properties and the Contributors shall notify Carolina of any violation of any
such law or ordinance of which the Contributors become aware.
4.2 No Brokers. Each of the Contributors covenants, represents and
warrants to Carolina and FAC that no broker or finder or agent has been involved
or engaged by it in connection with the transactions contemplated hereby and,
each hereby agrees to indemnify and hold harmless Carolina and FAC from and
against any and all broker's or finder's fees, commissions or similar charges
incurred or alleged to have been incurred by the Contributors in connection with
the transactions contemplated hereby and any and all loss, liability, cost or
expense (including without limitation reasonable fees of counsel satisfactory to
Carolina) arising out of any claim that the indemnifying party incurred any such
fees, commissions or charges.
4.3 Section 754 Elections. Each of the Contributors agrees with respect
to such Constituent Parties as are being dissolved at Carolina's direction and
as to which Carolina has so requested, (i) to cause an election under Section
754 of the Code to be included in the closing federal partnership tax returns of
each of the Constituent Parties indicating Carolina as a partner; (ii) to
prepare, at their expense, and timely file closing partnership tax returns for
the period ending on the Closing Date for each of the Constituent Parties; and
(iii) to present such tax returns to Carolina for its approval, which shall not
be unreasonably withheld, sufficiently in advance of the filing of such returns.
4.4 Termination of Contracts. Unless otherwise specified by Carolina in
writing, all management, development, leasing or other contracts with respect to
any Property, if any, must be terminated as of the date of Closing with respect
to such Property so that Carolina or its designee shall have the exclusive right
to manage and lease such Property.
4.5 Contributions of Assets. All personal property used in the operation
and management of the Properties including but not limited to that listed on
SCHEDULE 4.6 will be transferred to Carolina in conjunction with the Closing and
as partial consideration for the transactions otherwise contemplated by this
Agreement.
4.6 Assignment of Warranties. Contributors agree, and shall cause the
Constituent Partnerships, to assign all warranties with respect to the
Properties to Carolina and will use their best efforts to cause the maker of
such warranties to consent to such assignment if necessary for such assignment
to be valid.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
CONTRIBUTORS - GENERALLY
To induce Carolina and FAC to enter into this Master Agreement and the
transactions contemplated hereby, unless otherwise indicated, each of the
Contributors represents and warrants that the statements contained in Article V
and Article VI are true, correct and complete on the date hereof and will be
true, correct and complete on the Closing Date. It is the express intention and
agreement of each of the Contributors that the representations and warranties
set forth in Article V and Article VI shall survive the consummation of the
transactions contemplated in this Master Agreement.
5.1 Consents. To the best knowledge of each Contributor, (i) no consents,
approvals, waivers, notifications, acknowledgments or permissions which have not
been obtained are required in order for any of the Constituent Parties to fully
perform its or his respective obligations under this Master Agreement or which,
if left unobtained at Closing and thereafter, would have a material adverse
affect on the value, operation, occupation, use or development of any Property,
and (ii) the execution and delivery of this Master Agreement by the Contributors
and the consummation of the transactions contemplated hereby, including without
limitation the execution of any related agreements, will not require the consent
of, or any prior filing with or notice to or payment to, any governmental
authority or other Person.
5.2 Disclosure. To the best knowledge of each of the Contributors, the
representations and warranties contained in this Master Agreement (including
Schedules and Exhibits and documents or instruments delivered in connection
herewith) or in any information, statement, certificate or agreement furnished
or to be furnished to Carolina by any of the Constituent Parties in connection
with the Closing pursuant to this Master Agreement or the Exchange Option
Agreement, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements and information
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
5.3 Absence of Conflicts. To the best knowledge of each Contributor, the
execution, delivery and performance of this Master Agreement by the Contributors
and the consummation of the transactions contemplated hereby, including without
limitation, the execution and delivery by the Contributors or the Constituent
Partnerships, as applicable, of any documents, instruments or agreements
contemplated hereby, will not (after a lapse of time, due notice or otherwise)
(a) conflict with, violate or result in any breach or default under (i) any
provision of any partnership agreement, operating agreement or certificate of
any of the Constituent Parties; (ii) any law, statute, rule or regulation of any
administrative agency or governmental body, or any judgment, order, writ,
stipulation, injunction, award or decree of any court, arbiter, administrative
agency or governmental body to which the Constituent Parties or the Properties
are subject; or (iii) any indenture, agreement, instrument or other contract to
which the Constituent Parties may be bound or relating to or affecting their
assets; or (b) result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under or result
in the creation or imposition of any Lien on the Properties or related assets in
accordance with the terms of this Master Agreement under any indenture,
mortgage, contract, agreement, lease, sublease, license, sublicenses, franchise,
permit, instrument of indebtedness, security agreement or other undertaking or
instrument to which the Constituent Parties may be bound or affected.
5.4 Certification of Constituent Financial Statements. The Constituent
Financial Statements are true, correct and complete in all material respects,
are prepared in accordance either with generally acceptable accounting
principles or federal income tax principles, consistently applied, and fairly
present the financial condition of each of the applicable Constituent Parties.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF CONTRIBUTORS AS TO THE
CONSTITUENT PARTNERSHIPS
Each of the Contributors jointly and severally represents and warrants to
Carolina and FAC as follows:
6.1 Power and Authority of Contributors and Constituent Partnerships.
Each of the Contributors and Constituent Partnerships, which is not an
individual, is a limited partnership or limited liability company, as the case
may be, duly formed and validly existing under the laws of the State of North
Carolina. To the best knowledge of each Contributor, each partner or member of
the Contributors and Constituent Partnerships which is not an individual has
been duly formed and is validly existing. All partnership interests in each
Contributor and Constituent Partnership, which is not an individual, have been
validly issued and fully paid. True, correct and complete copies of each of the
partnership agreements, operating agreements and other organizational documents,
as applicable, of the Contributors and Constituent Partnerships and all
amendments thereto, and the minutes of any meetings of the partners of the
Contributors and Constituent Partnerships, have been submitted to Carolina prior
to the date of this Master Agreement. Each of the documents and instruments
contemplated hereby and other instruments and documents to be executed and
delivered by the Contributors and Constituent Partnerships, as applicable,
hereunder will, when executed, constitute the legal, valid and binding
obligations of the Contributors and Constituent Partnerships, respectively,
enforceable against them in accordance with their respective terms. To the best
knowledge of each of the Contributors, the Closing of the Exchange Option
Agreement, and the Master Agreement will effectuate the transfer of all of the
ownership interests of each of the Constituent Parties in and to the Properties.
6.2 Rent Roll and Leases. The schedule of leases attached hereto as
SCHEDULE 6.2A (the "Schedule of Leases") is a true, correct and complete
schedule of all leases, subleases and rights of occupancy in effect with respect
to each of the Properties, respectively (the "Leases"), and there have been no
material changes to the Leases. Except as set forth on the Schedule of Leases,
there are no other leases, subleases, tenancies or other rights of occupancy in
effect with respect to the Properties other than the Leases. True, correct and
complete copies of the Leases, together with all amendments and supplements
thereto and all other documents and correspondence relating thereto, have been
delivered or made available to Carolina and its agents. SCHEDULE 6.2A includes
the rent roll information and is, as of the date shown thereon, true and correct
in all material respects. To the best knowledge of each of the Contributors, the
Schedule of Leases sets forth, as of such date, (i) a list of all tenants under
the Leases, (ii) all arrearages owing from such tenants under such Leases
(listed on delinquency and default reports attached to and made a part thereof),
(iii) the expiration date of the term of such Leases, (iv) the rent the tenant
under such Lease is currently obligated to pay, (v) the amount of any concession
given in connection with any such Lease at any time, (vi) the current
outstanding balances of any security deposits held pursuant to any Leases, (vi)
any prepayments of rent by any tenant under any Lease of more than one (1) month
in advance (excluding security deposits which are delineated on the list
attached to the Schedule of Leases and made a part thereof) and (viii) each
Contributor represents that to his best knowledge, there are no rental
concessions or abatements under a Lease applicable to any period subsequent to
the Closing. Except as set forth on the Schedule of Leases, to the best
knowledge of the Contributors, all such Leases are valid and enforceable and
presently in full force and effect, and none of the Leases have been assigned.
Except as set forth on SCHEDULE 6.2B attached hereto, none of the Constituent
Parties, or to the best knowledge of each Contributor, any lessee under any
Lease, is in default under such Lease, and to the best knowledge of each
Contributor, there is no event which, but for the passage of time or the giving
of notice, or both, would constitute a default under such Leases, except such
defaults that would not have a material adverse effect on the condition,
financial or otherwise or on the earnings, business affairs or business
prospects of
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any of the Constituent Parties or the Properties. Except as disclosed on
SCHEDULE 6.2B attached hereto, to the best knowledge of each of the
Contributors, the consummation of the transactions contemplated by this Master
Agreement will not give rise to any breach, default or event of default under
any of the Leases. Each of the Leases is assignable by the applicable
Constituent Party and, except as disclosed on SCHEDULE 6.2C attached hereto,
none of the Leases requires the consent or approval of any party in connection
with the transactions contemplated by this Master Agreement.
6.3 No Contracts. No agreements, undertakings or contracts (the
"Contracts") affecting the Properties or the Constituent Parties, written or
oral, will be in existence as of the Closing, except as has been disclosed to
Carolina in writing.
6.4 Liabilities; Indebtedness. Except for the Outstanding Debt Financing
and the Leases, and those liabilities disclosed to Carolina in writing on
SCHEDULE 6.4 hereto, the Constituent Parties have not incurred any Indebtedness
related to the Properties except in each instance for trade payables and any
other customary and ordinary expenses in the ordinary course of business that
will be paid and discharged in full by the Constituent Parties, respectively, as
of the Closing.
6.5 Insurance. Each of the Constituent Parties currently maintains or
causes to be maintained all of the public liability, casualty and other
insurance coverage with respect to the Properties and their respective
businesses as has been disclosed to Carolina and FAC, and such insurance is
adequate for the full coverage of the Properties. All such insurance coverage
shall be maintained in full force and effect through the Closing and all
premiums due and payable thereunder have been, and shall be, fully paid when
due.
6.6 Personal Property. All equipment, fixtures and personal property
located at or on any of the Properties, respectively, which is owned or leased
by Contributors or the Constituent Partnerships shall remain at the Properties
and shall not be removed prior to the Closing, except for equipment that becomes
obsolete or unusable, which may be disposed of or replaced in the ordinary
course of business. The personal property of Contributors or the Constituent
Partnerships is not subject to any Liens except for Permitted Liens.
6.7 Claims or Litigation. Except as set forth on SCHEDULE 6.7 attached
hereto, none of the Contributors or Constituent Parties has received notice of
any claim, demand, suit or unfiled lien against the Contributors or Constituent
Parties or the Properties nor to any of the Contributors' best knowledge has any
proceeding or litigation of any kind, pending or outstanding, been filed before
any court or administrative, governmental or regulatory authority, agency or
body, domestic or foreign, and, to the best knowledge of any of the
Contributors, no order, judgment, injunction or decree of any court, tribunal or
other governmental authority has been filed against any of the Constituent
Parties or any of the Properties or, to the best knowledge of any of the
Contributors, threatened, or likely to be made or instituted, which would have a
materially adverse affect on the business or financial condition of any of the
Constituent Parties or any of the Properties or in any way be binding upon
Carolina or affect or limit Carolina's full use and enjoyment of any of the
Properties.
6.8 Hazardous Substances. Each of the Contributors represents, to his
best knowledge, that (x) as of the date hereof and (y) except as set forth in
the environmental audit reports provided to Carolina by the Constituent Parties,
as of the Closing Date, the Constituent Parties have not generated, stored,
released, discharged or disposed of hazardous substances or hazardous wastes at,
upon or from any of the Properties in violation of any Environmental Law, order,
judgment or decree or permit, or in connection with which remedial action would
be required under any Environmental Law, order, judgment, decree or permit. To
the best knowledge of each of the Contributors, (x) as of the date hereof and
(y) except as set forth in the environmental audit reports provided to Carolina
by the Constituent Parties, as of the Closing Date, no
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hazardous substances or hazardous wastes have otherwise been generated, stored,
released, discharged or disposed of from, at or upon any of the Properties in
violation of any Environmental Law. To the best knowledge of each of the
Contributors, (x) as of the date hereof and (y) except as set forth in the
environmental audit reports provided to Carolina by the Constituent Parties, as
of the Closing Date, no underground storage tanks are located on any of the
Properties. As used in this Master Agreement, the terms "hazardous substances"
and "hazardous wastes" shall have the meanings set forth in the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and the
regulations thereunder, the Resource Conservation and Recovery Act, as amended,
and the regulations thereunder, and the Federal Clean Water Act, as amended, and
the regulations thereunder, and such terms shall also include asbestos,
petroleum products, radioactive materials and any regulated substances under any
Environmental Law, regulation or ordinance.
6.9 Compliance with Laws. The Constituent Parties possess such
certificates, authorities or permits issued by the appropriate state or federal
regulatory agencies or bodies necessary to conduct the business to be conducted
by them (other than any environmental certification, authorities or permits
required by state or federal agencies to be obtained by tenants of the
Properties) and none of the Constituent Parties has received any written notice
of proceedings relating to the revocation or modification of any such
certificate, authority or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the earnings,
business affairs or business prospects of any of the Constituent Parties or any
of the Properties, as applicable. Except as otherwise disclosed to Carolina in
writing, to the best knowledge of each of the Contributors, there is no existing
violation of any federal, state, county or municipal law, ordinance, order,
code, regulation or requirement affecting any of the Constituent Parties or the
Properties that would have a material, adverse effect on the financial
condition, business or prospects of any of the Constituent Parties. Except as
otherwise disclosed to Carolina in writing, to the best knowledge of each of the
Contributors, there has been no material misstatement of a fact or
misrepresentation of a fact herein or in any other written document submitted by
any of the Constituent Parties to Carolina. Except as otherwise disclosed to
Carolina in writing, to the best knowledge of each of the Contributors, there
are no zoning, environmental or other land use regulation proceedings instituted
against any of the Properties. To the best knowledge of each of the
Contributors, each of the Constituent Parties has obtained all material
licenses, permits, certificates and authorization necessary to conduct its
business.
6.10 Employees. None of the Constituent Parties presently has any
employees nor have any of the Constituent Parties ever had any such employees.
6.11 Condemnation and Moratoria. Except as set forth on SCHEDULE 6.11, to
the best knowledge of each of the Contributors, there are (i) no pending or
threatened condemnation or eminent domain proceedings, or negotiations for
purchase in lieu of condemnation, which affect or would affect any portion of
any of the Properties; (ii) no pending or threatened moratoria on utility or
public sewer hook-ups or the issuance of permits, licenses or other inspections
or approvals necessary in connection with the construction or reconstruction of
improvements, including without limitation tenant improvements, which affect or
would affect any portion of any of the Properties; and (iii) no pending or
threatened proceeding to change adversely the existing zoning classification as
to any portion of any of the Properties. No portion of any of the Properties is
a designated historic property or located within a designated historic area or
district, and to the best knowledge of each of the Contributors, there are no
graveyards or burial grounds located within any of the Properties. Carolina
shall be entitled to all compensation received from any governmental authority
relating to the proceedings or negotiations described on SCHEDULE 6.11.
6.12 Condition of Improvements. To the best knowledge of each of the
Contributors after reasonable inquiry, (x) as of the date hereof and (y) except
as otherwise disclosed to Carolina during the due diligence process related to
the Properties by its independent engineers or others conducting such due
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diligence, as of any Closing Date, there is no material defect in the condition
of (i) any of the Properties, (ii) the improvements thereon, (iii) the roof,
foundation, load-bearing walls or other structural elements thereof, (iv) any
drainage or soil condition of any nature, or (v) the mechanical, electrical,
plumbing and safety systems therein, nor any material damage from casualty or
other cause, nor any soil condition of any nature that will not support all of
the Improvements currently thereon without the need for unusual or new
subsurface excavations, fill, footings, caissons or other installations.
6.13 Taxes. Except as set forth on SCHEDULE 6.13 attached hereto and the
ad valorem taxes assessed on the Properties, (i) all tax or information returns
required to be filed on or before the date hereof by or on behalf of the
Constituent Parties or the Properties have been filed and all such tax or
information returns required to be filed hereafter will be filed on or before
the date due in accordance with all applicable laws prior to the incurrence of
any penalties or interest thereon and all taxes shown to be due on any returns
have been paid or will be paid when due; and (ii) to the best knowledge of each
of the Contributors, there is no action, suit or proceeding pending against or
threatened with respect to any Constituent Party or any of the Properties in
respect of any tax, nor is any claim for additional tax asserted by any taxing
authority. None of the Constituent Parties nor any of their respective federal,
state and local income or franchise tax returns are the subject of any audit or
examination by any taxing authority. None of the Constituent Parties has
executed or filed with the Internal Revenue Service or any other taxing
authority any agreement now in effect extending the period for assessment or
collection of any income or other taxes.
6.14 Management Agreements. All management, leasing, development or
service and similar agreements in effect relating to the Properties and certain
other properties owned or controlled by Contributors and which have been
specified by FAC or Carolina (collectively, the "Management and Leasing
Agreements") shall be terminated as of the Closing Date and thereafter shall be
void and of no further force and effect.
6.15 Operating Agreements. True, complete and correct copies of all
agreements pertaining to the operation of the Properties as of the date hereof
(collectively, the "Existing Operating Agreements") have been provided or made
available to Carolina. The Existing Operating Agreements are, to the best
knowledge of each of the Contributors, in full force and effect, no Constituent
Party is in default of any of its material obligations under any of such
Existing Operating Agreements, and except for those set forth on SCHEDULE 6.15
attached hereto, all Existing Operating Agreements are terminable on not more
than thirty (30) days prior written notice and without payment of any penalty.
At the Closing with respect to each of the Properties, true, complete and
correct copies of such Existing Operating Agreements shall have been provided or
made available to Carolina and, to the best knowledge of each of the
Contributors, the Existing Operating Agreements shall be, unless otherwise
described in writing to Carolina or except as otherwise provided herein, (i) in
full force and effect and (ii) free from any default by the appropriate
Constituent Party of any of its material obligations under any of them. The
Contributors shall advise Carolina immediately of any default by any party to an
Existing Operating Agreement. Carolina does not assume any obligation under any
Existing Operating Agreement for acts or omissions which occur prior to Closing.
6.16 Absence of Certain Changes. Since December 31, 1996, except as
otherwise set forth in this Master Agreement, to the best knowledge of each of
the Contributors, there has not been with respect to itself or any of the
Constituent Partnerships:
(a) any material adverse change in the financial condition of any
of such Constituent Parties;
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(b) any adverse change in the condition of the property, business
or liabilities of any of such Constituent Parties except normal and usual
changes in the ordinary course of business which have not been materially
adverse;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business
of any of the Constituent Parties;
(d) any sale, abandonment or other disposition by any of the
Constituent Parties of any interest in the Properties, or of any personal
property owned by a Constituent Party, other than in the ordinary course
of such Constituent Party's business;
(e) any change in the accounting methods or practices by any of the
Constituent Parties or in depreciation or amortization policies
theretofore used or adopted;
(f) any material contractual liability incurred by any of the
Constituent Parties, contingent or otherwise, other than for operating
expenses, obligations under executory contracts incurred for fair
consideration and taxes accrued with respect to operations during such
period, all incurred in the ordinary course of business; or
(g) any other material adverse change in the business, operations
or liabilities of any of the Constituent Parties or any of the
Properties.
6.17 Tradename. There have never been any Liens or pending or threatened
third-party claims for infringement or unlawful use of the tradename used by any
Constituent Party, and to the best knowledge of each of the Contributors each of
the Constituent Parties has the right to sell, transfer, assign and convey the
Tradename to Carolina, provided, however, no party has filed for any protection
under federal or state trademark laws and no Constituent Party has taken any
steps other than use to secure any common law proprietary interest in the
Tradename.
6.18 Title. The Contributors or Constituent Partnerships, as applicable,
have good and marketable fee simple title to the Properties, and as of Closing
there will be no mechanics' liens, contractors' claims, unpaid bills for
material or labor pertaining to the Properties, nor any other similar liens
which might adversely affect such Contributors' or Constituent Partnerships'
title to the Properties, except for current ad valorem real estate taxes.
6.19 Certain Liens. All labor and services performed and materials
furnished to the Properties have been paid for in full and to the best of the
Contributors' knowledge, there exists no basis for which a mechanic's,
materialman's or similar lien can properly be claimed against the Properties or
any part thereof.
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ARTICLE VII
CONDITIONS TO CLOSING AND
DUE DILIGENCE INVESTIGATION
7.1 Conditions to Closing of Properties. In addition to the other
pre-conditions detailed herein, each of the following shall be a condition as
described below to the obligation to close the transactions contemplated hereby
with respect to the Properties:
(a) FAC Shareholder Approval. If it is determined by FAC that the
completion of the transactions contemplated hereby requires the approval
of FAC's shareholders, then (i) such approval shall be a condition to
close the transaction contemplated hereby and (ii) FAC agrees that it
shall in good faith promptly begin the process of preparing and filing
with the SEC any necessary proxy material and will call for and hold a
shareholder meeting as soon as is reasonably practicable to vote on such
matter. If such approval is required and the shareholders of FAC do not
approve the transactions contemplated hereby, this Agreement shall be
terminated.
(b) Refinancing of Loans. Carolina shall have no obligation to
close the transactions contemplated hereby if Carolina determines that it
is unable to obtain the consent of the holders of the Outstanding Debt
Financing to the assignment of the Interests or sale of the Properties on
terms reasonably acceptable to the Board of Directors of FAC, including
non-recourse provisions satisfactory to FAC in FAC's sole discretion.
(c) Termination of Management Contracts. Carolina shall have no
obligation to close the transactions contemplated hereby if Carolina does
not have the unconditional right, as of the Closing Date, to manage all
of the Properties and such other properties owned or controlled by
Contributors as Carolina and FAC shall require. Any costs associated with
terminating any existing contracts shall be at the Contributors' expense.
(d) No Material Adverse Change to Properties. Carolina shall have
no obligation to close the transactions contemplated hereby if there has
been a material adverse change in the condition, financial or otherwise,
of any of the Properties, or the business prospects of any of the
Properties from the date hereof.
(e) Title and Survey. Carolina shall have no obligation to close
the transactions contemplated hereby if the Contributors do not convey
good and marketable title to the Properties, which shall be free and
clear of all liens, defects and encumbrances, except "Permitted Liens."
Carolina shall be responsible for ordering the ALTA survey at Carolina's
cost. Additionally, Carolina and the Contributors are each responsible
for their respective legal fees. Any fees associated with the assumption,
consent or assignment or the prepayment or retirement of debt encumbering
any of the Properties, property transfer and documentary taxes, all other
costs related to the transfer of the Properties and escrow fees shall be
paid by the Contributors.
(f) Opinion to Carolina. Carolina shall have no obligation to close
the transactions contemplated hereby if Carolina and FAC have not
received an opinion of counsel to the Contributors and Constituent
Parties which is satisfactory to Carolina and FAC in form and substance.
(o) Zoning. No actual or threatened easement, zoning ordinance or
use regulation, statute, ordinance, law, juridical decision, official or
unofficial policy, restriction or reservation or proposed shall prohibit
or impair (and there shall be no pending or threatened litigation which
may prohibit or impair) Carolina's use and operation of the Properties.
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(p) Representations and Warranties. All of the representations and
warranties of the parties hereto shall be true and correct in all
material respects as of the Closing Date and the Contributors shall have
delivered to Carolina and FAC the Bringdown Certificate in respect
thereof.
7.2 Carolina Investigation/Due Diligence Period. For a period commencing
upon the execution date of this Agreement and continuing through and including
the Closing Date ("Investigation/Due Diligence Period"), Carolina, at its own
expense, shall have the right, but not the obligation, to perform due diligence
on the Properties and the Constituent Parties, including but not limited to the
following procedures:
(a) Physical. Inspect all physical aspects of the Properties,
including inspections of all apartment units at each Property and
including all systems, components and service contracts. Contributor
agrees to supply Carolina with "as-built" plans, specifications and
surveys with respect to all Properties.
(b) Regulatory. Investigate all zoning, code and governmental
requirements, including the review of certificates of occupancy and
licenses, all which shall be provided by the Constituent Parties.
(c) Environmental. Review and perform Phase I and Phase II audits
and other environmental studies.
(d) Title. Review preliminary title reports and surveys.
(e) Lease and Tenant Information. Review copies of leases, rental
agreements and contracts, together with any modifications or amendments
therein pertaining to the operation of the Properties.
(f) Books and Records. Obtain the Constituent Financial Statements;
verify financial information from all accounting books and records since
the inception of the Contributors' ownership; review any other
information and documents in the Contributors' possession or control and
pertaining to the Contributors' ownership and operation of the Properties
including all tax records (collectively, the "Records").
Each Contributor covenants and agrees that it shall provide Carolina with
access to all Records in the Constituent Parties' possession and control.
Carolina shall conduct all of its property inspections in a manner intended to
accommodate the tenants or to the operation of the Properties.
After its investigation, if Carolina, in its sole discretion determines
that any Property or Interests are not satisfactory for purchase or operation,
then Carolina may terminate this Master Agreement as to such Property or
Interests. Such termination shall have no effect upon the parties' respective
obligations with respect to Properties or Interests as to which this Master
Agreement has not been so terminated.
The Constituent Parties and each Contributor will cooperate with Carolina
before and after Closing in providing such information as Carolina may
reasonably require to prepare its proxy material and Form 8-K filings and such
other reports and filings as may be required by any governmental authority, NYSE
or applicable exchange.
7.3 Closing Documents. At Closing the Contributors and, as applicable,
the Constituent Partnerships shall execute and deliver the following documents
to Carolina:
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(a) Title Insurance Affidavit. Any affidavit required by the title
company to remove the standard printed exceptions from the title policy
and the loan policy. Additionally, Constituent Parties shall discharge in
full any and all indebtedness underlying such exceptions at or before the
Closing.
(b) Letters to Tenants. Letters addressed to the Tenants and signed
by the Contributors or, if applicable, the Constituent Partnerships,
advising the Tenants of the Closing of the Transactions and Carolina's
right to receive the rents under their respective Leases.
(c) Bringdown Certificate. The Bringdown Certificate.
(d) Other Documents. Such other documents as may be reasonably
required to close the Transactions contemplated by this Master Agreement.
ARTICLE VIII
INDEMNITY
8.1 Representations and Warranties of each of the Contributors. Each of
the Contributors hereby agrees, for himself and his successors and assigns, to
indemnify, defend and hold both Carolina and FAC harmless from and against any
and all damage, cause of action, action, proceeding, expense, loss, cost, claim
or liability (each a "Claim") suffered or incurred by either Carolina or FAC as
a result of any of the following: any untruth, inaccuracy or breach of any of
the representations, warranties or covenants made by himself or any Constituent
Party controlled by such Contributor in this Master Agreement, or in the
Exchange Option Agreement, the Bringdown Certificate or any other document,
certificate or exhibit delivered in connection therewith. It is the express
intention and agreement of the parties that the foregoing indemnity shall
survive the consummation of the transactions contemplated in this Master
Agreement.
8.2 Arbitration. Any dispute, claim or controversy between Carolina and
any Contributor as to liability of any Contributor above shall be settled by
arbitration in accordance with this Section. Each of Carolina and the
Contributors (by a vote of majority thereof) shall appoint an arbitrator, and
the two arbitrators so appointed shall promptly select a third arbitrator.
Within thirty (30) days of the completion of such appointments, the parties
shall submit to arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The place of arbitration shall be Cary,
North Carolina. Notwithstanding anything to the contrary herein, the arbitrators
are not empowered to award damages in excess of compensatory damages and each
party hereby irrevocably waives any right to recover such damages with respect
to any dispute or controversy resolved by arbitration under this Section.
Judgment on the award rendered by the arbitrators may be entered in any court of
competent jurisdiction and shall be binding upon the parties.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices and demands which any party is required or
desires to give to the other shall be given in the manner and at the addresses
set forth in the Exchange Option Agreement.
9.2 Counterparts. This Master Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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9.3 Severability. Any provision of this Master Agreement which is
prohibited or unenforceable in any jurisdiction shall as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision on any other jurisdiction.
9.4 Assigns. This Master Agreement shall be binding upon and inure to the
benefit of any and all successors, assigns, or other successors in interest of
FAC and Carolina. This Master Agreement shall be binding upon and inure to the
benefit of any and all respective successors, assigns, personal representatives,
executors, or other successors in interest of the Contributors; provided,
however, that none of the Contributors shall assign its rights or delegate its
obligations hereunder without the prior written consent of Carolina, which may
be withheld for any reason. This Master Agreement shall not confer any rights or
remedies upon any person or entity other than Carolina, FAC, the Contributors
and their respective successors and permitted assigns.
9.5 Public Announcement. Except as otherwise required by law, the
Contributors shall not make public announcements with respect to the
transactions contemplated by this Master Agreement without the approval of the
other parties, which approval may be withheld for any reason.
9.6 Confidentiality Each party hereto shall ensure that all confidential
information which such party or any of its respective officers, directors,
employees, counsel, agents or accountants may now possess or may hereafter
create or obtain relating to the financial condition, results of operations,
business, properties, assets, liabilities or future prospects of the other
party, any Affiliate or subsidiary of the other party or any tenant, customer or
supplier of such other party, or any such Affiliate or subsidiary, shall not be
published, disclosed or made accessible by any of them to any other person or
entity at any time or used by any of them, in each case without the prior
written consent of the other party; provided, however, that the restrictions of
this sentence shall not apply: (i) to the extent that disclosure may otherwise
be required by law; (ii) to the extent such information shall have otherwise
become publicly available; or (iii) to disclosure by or on its behalf to its
lender(s) for the purpose of obtaining financing in connection with the
acquisition of the Properties. In the event this Master Agreement is terminated,
each party promptly will deliver or certify destruction to the other party all
documents, work papers and other material (and any reproductions thereof)
obtained by each party or on its behalf from such other party or its Affiliates
or subsidiaries in connection with the subject transaction, whether so obtained
before or after the execution hereof, and will itself not use any information so
obtained and will use its good faith and diligent efforts to have any
information so obtained kept confidential and not used in any way detrimental to
such other party, subject to the limitations set forth in this Section above.
9.7 Remedies. In the event that any party defaults or fails to perform
any of the conditions or obligations of such party under this Master Agreement
or any other agreement, document or instrument executed in connection with this
Master Agreement, or in the event that any such party's representations or
warranties contained herein or in any such other agreement, document or
instrument are not true and correct as of the date hereof and as of the Closing
Date, any other party shall be entitled to exercise any and all rights and
remedies available to it by or pursuant to this Master Agreement, documents or
instruments contemplated hereby or at law (statutory or common) or in equity
subject to the limitation on liability set forth herein; provided, however, that
in the event of a Closing of the transactions contemplated by this Master
Agreement, the rights and remedies of each party shall be limited to the rights
contained in Article X of this Master Agreement.
9.8 Captions. The captions and headings set forth in this Master
Agreement are for convenience of reference only and shall not be construed as a
part of this Master Agreement.
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9.9 Exhibits and Schedules. All exhibits and schedules referred to in
this Master Agreement and attached hereto shall be deemed and construed as part
of this Master Agreement and for all purposes all such exhibits and schedules
are hereby specifically incorporated herein by reference.
9.10 Merger Clause. This Master Agreement and the Exchange Option
Agreement contain the final, complete and exclusive statement of the agreement
among the parties with respect to the transactions contemplated herein and
therein, and all prior or contemporaneous oral and all prior written agreements
with respect to the subject matter hereof are merged herein.
9.11 Amendments and Waiver. No change, amendment, qualification,
cancellation or termination hereof shall be effective unless in writing and duly
executed by each of the parties hereto. No failure of any party to enforce any
provisions hereof or to resort to any remedy or to exercise any one or more of
alternate remedies and no delay in enforcing, resorting to or exercising any
remedy shall constitute a waiver by that party of its right subsequently to
enforce the same or any other provision hereof or to resort to any one or more
of such rights or remedies on account of any such ground then existing or which
may subsequently occur.
9.12 Governing Laws. This Master Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware and of
the United States of America.
IN WITNESS WHEREOF, the parties have duly executed this Agreement by
their hands and under seal affixed hereto as of the date and year first above
written.
FAC REALTY, INC.
By:
-------------------------------------
Name:
---------------------------------
Title:
--------------------------------
CAROLINA FAC LIMITED PARTNERSHIP
By: FAC Realty, Inc.,
General Partner
By:
-----------------------
Title:
----------------------
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Separate signature page to Master Agreement.
[SEAL]
---------------------------
ROY O. RODWELL
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Separate signature page to Master Agreement.
[SEAL]
----------------------
CAROLYN E. MARTIN
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Separate signature page to Master Agreement.
[SEAL]
--------------------------
JOHN M. KANE
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Separate signature page to Master Agreement.
[SEAL]
-------------------------
CLIFFORD CLARK
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Separate signature page to Master Agreement.
[SEAL]
------------------------------
MARK E. PITNEY
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LIST OF SCHEDULES AND EXHIBITS
Schedule 1 Properties and Constituent Partnerships
Schedule 3.2 Outstanding Debt Financing
Schedule 4.6 Personal Property of Constituent Parties
Schedule 6.2A Schedule of Leases
Schedule 6.2B Lease Defaults
Schedule 6.2C Lease Consents
Schedule 6.4 Liabilities
Schedule 6.7 Claims or Litigation
Schedule 6.11 Condemnation and Moratoria
Schedule 6.13 Taxes
Schedule 6.15 Operating Agreements - Exceptions to Termination
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