SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
FRANCHISE FINANCE CORPORATION OF AMERICA
(Name of Issuer)
Common Stock, $.01 par value per share
(Title of Class of Securities)
351807102
(CUSIP Number of Class of Securities)
John E. Viola
Colony SB, LLC
1999 Avenue of the Stars
Los Angeles, California 90067
(310) 282-8820
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
with a copy to:
Jonathan H. Grunzweig, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071-3144
(213) 687-5000
March 13, 1998
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box:
____
/ /
CUSIP No. 351807102 13D
_________________________________________________________________
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
THOMAS J. BARRACK, JR.
###-##-####
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
___
(a)/ /
___
(b)/ X/
(3) SEC USE ONLY
(4) SOURCE OF FUNDS*
BK & WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) ___
/ /
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
: (7) SOLE VOTING POWER
:
: -0-**
:
NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING
OWNED BY EACH REPORTING : 5,269,020**
PERSON WITH :
: (9) SOLE DISPOSITIVE
: -0-**
:
:(10) SHARED DISPOSITIVE
: 5,269,020**
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,269,020
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) ___
EXCLUDES CERTAIN SHARES* / /**
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
11.2%**
(14) TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
**SEE ITEMS 4 AND 5
CUSIP No. 351807102 13D
_________________________________________________________________
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
KELVIN L. DAVIS
###-##-####
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
___
(a)/ /
___
(b)/ X/
(3) SEC USE ONLY
(4) SOURCE OF FUNDS*
BK & WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) ___
/ /
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
: (7) SOLE VOTING POWER
:
: -0-**
:
NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING
OWNED BY EACH REPORTING : 5,269,020**
PERSON WITH :
: (9) SOLE DISPOSITIVE
: -0-**
:
:(10) SHARED DISPOSITIVE
: 5,269,020**
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,269,020
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) ___
EXCLUDES CERTAIN SHARES* / /**
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
11.2%**
(14) TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
**SEE ITEMS 4 AND 5
CUSIP No. 351807102 13D
_________________________________________________________________
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
COLONYGP III, INC.
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
___
(a)/ /
___
(b)/ X/
(3) SEC USE ONLY
(4) SOURCE OF FUNDS*
BK & WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) ___
/ /
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
: (7) SOLE VOTING POWER
:
: -0-**
:
NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING
OWNED BY EACH REPORTING : 5,269,020**
PERSON WITH :
: (9) SOLE DISPOSITIVE
: -0-**
:
:(10) SHARED DISPOSITIVE
: 5,269,020**
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,269,020
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) ___
EXCLUDES CERTAIN SHARES* / /**
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
11.2%**
(14) TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
**SEE ITEMS 4 AND 5
CUSIP No. 351807102 13D
_________________________________________________________________
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
COLONY CAPITAL III, L.P.
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
___
(a)/ /
___
(b)/ X/
(3) SEC USE ONLY
(4) SOURCE OF FUNDS*
BK & WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) ___
/ /
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
: (7) SOLE VOTING POWER
:
: -0-**
:
NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING
OWNED BY EACH REPORTING : 5,269,020**
PERSON WITH :
: (9) SOLE DISPOSITIVE
: -0-**
:
:(10) SHARED DISPOSITIVE
: 5,269,020**
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,269,020
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) ___
EXCLUDES CERTAIN SHARES* / /**
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
11.2%**
(14) TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
**SEE ITEMS 4 AND 5
CUSIP No. 351807102 13D
_________________________________________________________________
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
COLONY INVESTORS III, L.P.
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
___
(a)/ /
___
(b)/ X/
(3) SEC USE ONLY
(4) SOURCE OF FUNDS*
BK & WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) ___
/ /
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
: (7) SOLE VOTING POWER
:
: -0-**
:
NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING
OWNED BY EACH REPORTING : 5,269,020**
PERSON WITH :
: (9) SOLE DISPOSITIVE
: -0-**
:
:(10) SHARED DISPOSITIVE
: 5,269,020**
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,269,020
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) ___
EXCLUDES CERTAIN SHARES* / /**
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
11.2%**
(14) TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
**SEE ITEMS 4 AND 5
CUSIP No. 351807102 13D
_________________________________________________________________
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
COLONY SB, LLC
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
___
(a)/ /
___
(b)/ X/
(3) SEC USE ONLY
(4) SOURCE OF FUNDS*
BK & WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) ___
/ /
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
: (7) SOLE VOTING POWER
:
: -0-**
:
NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING
OWNED BY EACH REPORTING : 5,269,020**
PERSON WITH :
: (9) SOLE DISPOSITIVE
: -0-**
:
:(10) SHARED DISPOSITIVE
: 5,269,020**
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,269,020
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) ___
EXCLUDES CERTAIN SHARES* / /**
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
11.2%**
(14) TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
**SEE ITEMS 4 AND 5
ITEM 1. SECURITY AND ISSUER
This Statement on Schedule 13D (the "Schedule 13D") relates to
shares of Common Stock, $.01 par value per share (the "Shares") and
warrants ("Warrants") to acquire additional Shares (the "Shares" and
"Warrants", collectively the "Securities"), of Franchise Finance
Corporation of America, a Delaware corporation (the "Issuer"). The
principal executive offices of the Issuer are located at The Perimeter
Center, 17207 North Perimeter Drive, Scottsdale, Arizona 85255.
The information set forth in the Exhibits attached hereto is
hereby expressly incorporated herein by reference and the response to each
item of this statement is qualified in its entirety by the provisions of
such Exhibits.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed on behalf of ColonyGP III, Inc., a
Delaware corporation ("GP"), Colony Capital III, L.P., a Delaware limited
partnership ("Colony Capital"), Colony Investors III, L.P., a Delaware
limited partnership ("Colony Investors"), Colony SB, LLC, a Delaware
limited liability company ("Colony"), Thomas J. Barrack, Jr. and Kelvin L.
Davis (collectively, the "Reporting Persons"). The Reporting Persons are
making this joint filing because they may be deemed to constitute a "group"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Act"), although neither the fact of this filing nor
anything contained herein shall be deemed to be an admission by the
Reporting Persons that such a group exists.
Colony is the registered owner of the Securities. The sole and
managing member of Colony is Colony Investors. The general partner of
Colony Investors is Colony Capital. The general partner of Colony Capital
is GP. Mr. Barrack and Mr. Davis are the sole stockholders of GP and have
agreed to jointly control GP. Mr. Barrack holds a 60% interest and Mr.
Davis holds a 40% interest in GP. GP, on behalf of Colony Capital, on
behalf of Colony Investors is the signatory to the agreements referenced in
Items 3 and 4.
Colony's principal business is to be the registered owner of
certain securities purchased by Colony Investors. Colony Investor's
principal business is the acquisition, management and sale of primarily
real estate-related investments. Colony Capital and GP's principal business
is to make and hold investments.
Mr. Barrack is the Chief Executive Officer, Mr. Davis is the
President, Secretary, and Treasurer, Richard A. Ekleberry is a Vice-
President and Mark M. Hedstrom is a Vice-President of GP. GP has no other
executive officers. Mr. Barrack and Mr. Davis are also the sole directors
of GP.
Mr. Barrack is the Chief Executive Officer and President, Mr.
Davis is the Executive Vice President and Secretary, Mark M. Hedstrom is a
Vice President and the Treasurer, John E. Viola is a Vice President and Joy
Mallory is the Assistant Secretary of Colony. Colony has no other officers
and has no directors.
The principal occupation of Mr. Barrack is serving as Chairman
and Chief Executive Officer of each of Colony Capital, Inc. ("Capital") and
Colony Advisors, Inc. ("Advisors".) The principal occupation of Mr. Davis
is serving as President and Chief Operating Officer of each of Capital and
Advisors. The principal occupation of Mr. Ekleberry is serving as a Vice-
President of each of Capital and Advisors. The principal occupation of Mr.
Hedstrom is serving as Chief Financial Officer and Treasurer of each of
Capital and Advisors, as well as a Vice-President of Advisors. The
principal occupation of Mr. Viola is serving as a Vice President of
Capital. The principal occupation of Ms. Mallory is serving as Assistant
Secretary of Advisors. Each of Advisors and Capital is an affiliate of GP.
The principal business address of each of the Reporting Persons,
Mr. Hedstrom, Mr. Viola and Ms. Mallory is 1999 Avenue of the Stars, Suite
1200, Los Angeles, California 90067. The principal business address of
Mr. Ekleberry is 201 Main Street, Suite 2420, Fort Worth, Texas 76102.
None of the Reporting Persons nor any other person disclosed in
response to this Item 2 has, during the last five years, been (i) convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
Federal or State securities laws or finding any violation with respect to
such laws.
Each of Mr. Barrack, Mr. Davis, Mr. Ekleberry, Mr. Hedstrom, Mr.
Viola and Ms. Mallory is a citizen of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The aggregate amount of funds required to purchase the 3,792,112
Shares and the Warrants to acquire an additional 1,476,908 Shares
beneficially owned by the Reporting Persons is $100,000,000.
Pursuant to the Stock Purchase Agreement, dated February 13, 1998
and the Warrant Agreement, dated March 13, 1998, copies of which are
attached hereto as Exhibits 1 and 4, the Reporting Persons purchased (a)
3,792,112 Shares, and (b) Warrants to purchase an additional 1,476,908
Shares for an aggregate purchase price of $100,000,000.
The funds to be used to purchase such Securities were obtained
from two sources, $60.0 million was obtained from a capital call from the
limited partners of Colony Investors, and $40.0 million was drawn from a
$50.0 million credit facility entered into by Colony Investors and The
Chase Manhattan Bank.
ITEM 4. PURPOSE OF TRANSACTION.
Colony Investors has entered into an Investor's Agreement, dated
March 13, 1998 (the "Investor's Agreement"), by and between Colony
Investors and the Issuer, a copy of which is attached hereto as Exhibit 2,
pursuant to which Issuer has agreed, during the term of the Investor's
Agreement and subject to the provisions thereof (including the continued
ownership of a specified minimum number of Shares, as set forth in the
Investor's Agreement), among other things, to take all action necessary
such that the Board of Directors of the Issuer shall include one director
by Colony Investors and thereafter use its best efforts to cause a person
designated by Colony Investors to be included in each slate of proposed
directors put forth by Issuer and its stockholders and recommended for
election in any proxy solicitation materials disseminated by the Issuer.
Pursuant to the Investor's Agreement, Issuer has concurrently
with the closing of the purchase of the Securities by Colony Investors,
formed a Corporate Acquisition Task Force consisting of three members
appointed by the chairman of the board and two persons (reasonably
acceptable to the chairman of the board) appointed by the nominee elected
by Colony Investors (which may include the nominee elected by Colony
Investors). The Corporate Acquisitions Task Force will advise Issuer and
the board with respect to corporate acquisitions, and will be one of
several avenues pursuant to which Colony Investors will actively assist
Issuer in connection with a corporate acquisitions program and with growth
strategies generally.
With certain exceptions as described in the Investor's Agreement,
the Reporting Persons have a preemptive purchase right to maintain their
beneficial ownership percentage for so long as their investment continues
to represent at least 5% of the Issuer, as discussed in the Investor's
Agreement.
Pursuant to the Investors Agreement, Colony Investors has agreed
that, for a period of five years after the date of such Investors
Agreement, without the prior written consent of the Issuer, among other
things, subject to certain exceptions Colony Investors will not and will
not cause each of its Affiliates (as defined in the Investors Agreement) to
a) acquire any additional Securities, except (i) pursuant to the Warrants,
(ii) pursuant to the Issuer's dividend reinvestment plan, (iii) if
ownership of Colony Investors and its Affiliates (as defined in the
Investors Agreement) falls below 5%, or (iv) by way of stock dividends,
stock splits, reorganization, recapitalization, merger, consolidation or
like distributions made by the Issuer, b) make or participate in any
solicitation of proxies by other than the Issuer with respect to the
Securities, c) initiate, or otherwise solicit, or participate in the
solicitation of stockholders for the approval of stockholder proposals with
respect to the Issuer, d) participate in or encourage the formation of any
group that seeks control of the Issuer, and e) take other specified
actions. The Reporting Persons have also agreed not to sell or transfer
any of the Securities beneficially owned for a period of six months from
the date of the Investor's Agreement, except to certain affiliates of the
Reporting Persons.
The above discussion is qualified in its entirety by reference to
the Investor's Agreement. A copy of the Investor's Agreement is attached
hereto as Exhibit 2 and is incorporated herein by reference.
In connection with the purchase of the Securities, Colony
Investors entered into a Registration Rights Agreement with Issuer dated
March 13, 1998 (the "Registration Rights Agreement"), by and between Colony
Investors and Issuer, a copy of which is attached hereto as Exhibit 3, as
incorporated herein by reference. Pursuant to the Registration Rights
Agreement the Securities beneficially owned by the Reporting Persons will
be entitled to customary demand and piggyback registration rights, subject
to a general six-month restriction on sales of its shares without board
approval.
Subject to the foregoing, the Reporting Persons have purchased
the Shares to which this Statement on Schedule 13D relates for investment
purposes, and, depending upon its evaluations of the Issuer's business and
prospects, future development, market conditions and other factors, the
Reporting Persons may from time to time purchase additional Shares, or sell
or cause to be sold all or a portion of the Shares over which the Reporting
Persons exercise voting and dispositive power, either in open market or
privately negotiated transactions or otherwise.
Except as disclosed in this Item 4, the Reporting Persons have no
current plans or proposals which relate to or would result in any of the
events described in Items (a) through (j) of the instruction to Item 4 of
Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The Reporting Persons may be deemed to be the beneficial
owners of the 3,792,112 Shares owned by them and the 1,476,908 Shares that
they have a right to acquire through the exercise of immediately
exercisable Warrants to purchase 1,476,908 Shares at an exercise price of
$31.64 per Share. Accordingly, the Reporting Persons may be deemed to be
the beneficial owners of 5,269,020 Shares, or approximately 11.2% of the
Shares outstanding. The percentage of Shares outstanding reported as
beneficially owned by the Reporting Persons herein, on the date hereof, is
based upon the 41,703,423 Shares outstanding as reported in the Issuer's
Form 10-Q for the quarterly period ended September 30, 1997, as filed with
the Securities and Exchange Commission, and assumes the exercise of the
Warrants.
(b) Mr. Barrack and Mr. Davis as the sole stockholders of GP,
acting as general partner of and on behalf of Colony Capital, acting as
general partner of and on behalf of Colony Investors, acting as managing
member of and on behalf of Colony, have shared power to vote, or to direct
the vote, and the shared power to dispose of, or direct the disposition of,
the Securities beneficially owned by the Reporting Persons.
(c) There have been no transactions in the Shares of Issuer
effected during the past 60 days by the Reporting Persons or any other
person or entity disclosed in Item 2.
(d) No other person is known by the Reporting Persons to have
the right to receive or the power to direct the receipt of dividends from,
or the proceeds from the sale of, the Shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
The responses to Items 3 and 4 are incorporated herein by this
reference.
Pursuant to the Investor's Agreement, the Issuer has taken all
action necessary to include Mr. Davis to the Board of Directors and will
use its best efforts to cause Mr. Davis to be included in each slate of
proposed directors put forth by the Issuer and its stockholders and
recommended for election in any proxy solicitation materials disseminated
by the Issuer, so long as the Reporting Persons beneficially own at least
1,896,056 Shares. The foregoing is qualified in its entirety by reference
to the Investor's Agreement. A copy of the Investor's Agreement is attached
hereto as Exhibit 2 and is incorporated herein by reference.
Except as set forth above and as described in Items 3 and 4, none
of the Reporting Persons nor any other person disclosed in Item 2 has any
contract, arrangement, understanding, or relationship (legal or otherwise)
with any person with respect to any securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 Stock Purchase Agreement, dated February 13, 1998, by
and between Colony Investors and Issuer.
Exhibit 2 Investor's Agreement, dated March 13, 1998, by and
between Colony Investors and Issuer.
Exhibit 3 Registration Rights Agreement, dated March 13, 1998, by
and between Colony Investors and Issuer.
Exhibit 4 Warrant Agreement, dated March 13, 1998, between Colony
Investors and the Issuer.
Exhibit 5 Joint Filing Agreement
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: March 23, 1998
By: /s/ THOMAS J. BARRACK, JR.
____________________________
Thomas J. Barrack, Jr.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: March 23, 1998
By: /s/ KELVIN L. DAVIS
_________________________
Kelvin L. Davis
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: March 23, 1998
COLONYGP III, Inc.,
a Delaware corporation,
By: /s/ KELVIN L. DAVIS
_______________________
Kelvin L. Davis
President
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: March 23, 1998
COLONY CAPITAL III, L.P.,
a Delaware limited partnership,
By: ColonyGP III, Inc.,
a Delaware corporation,
its general partner
By: /s/ KELVIN L. DAVIS
_______________________
Kelvin L. Davis
President
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: March 23, 1998
COLONY INVESTORS III, L.P.,
a Delaware limited partnership,
By: Colony Capital III, L.P.,
a Delaware limited partnership,
its general partner
By: ColonyGP III, Inc.,
a Delaware corporation,
its general partner
By: /s/ KELVIN L. DAVIS
________________________
Kelvin L. Davis
President
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: March 23, 1998
COLONY SB, LLC,
a Delaware limited liability company
By: Colony Investors III, L.P.,
a Delaware limited partnership,
its sole and managing member
By: Colony Capital III, L.P.,
a Delaware limited partnership,
its general partner
By: ColonyGP III, Inc.,
a Delaware corporation,
its general partner
By: /s/ KELVIN L. DAVIS
_________________________
Kelvin L. Davis
President
EXHIBIT INDEX
Page No.
Exhibit 1 Stock Purchase Agreement, dated February 13, 1998,
by and between Colony Investors and Issuer.
Exhibit 2 Investor's Agreement, dated March 13, 1998, by and between
Colony Investors and Issuer.
Exhibit 3 Registration Rights Agreement, dated March 13, 1998, by and
between Colony Investors and Issuer.
Exhibit 4 Warrant Agreement, dated March 13, 1998, between Colony
Investors and the Issuer.
Exhibit 5 Joint Filing Agreement
EXHIBIT 1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated February
13, 1998, is by and between Franchise Finance Corporation of America, a
real estate investment trust and a Delaware corporation (the "Company"),
and Colony Investors III, L.P., a Delaware limited partnership
("Purchaser").
W I T N E S S E T H:
WHEREAS, the Company wishes to issue and sell to Purchaser (i)
certain shares of the Company's common stock, $.01 par value per share (the
"Common Stock"), and warrants (the "Warrants") to acquire additional shares
of Common Stock for an aggregate purchase price of $100,000,000 (the
"Purchase Price") on the terms and subject to the conditions set forth
herein and in the Other Documents (as defined herein); and
WHEREAS, Purchaser wishes to purchase such securities on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
SECTION 1. THE SECURITIES
Section 1.1 ISSUANCE, SALE AND PURCHASE OF THE SECURITIES. In
reliance upon the representations and warranties made herein and subject to
the satisfaction or waiver of the conditions set forth herein, the Company
agrees to issue and sell to Purchaser, and Purchaser agrees to purchase
from the Company, for the Purchase Price, (i) 3,792,112 shares (the "Common
Shares" and, collectively with the Warrants, the "Securities") of Common
Stock and (ii) the Warrants, exercisable for seven years (except as
provided in a customary Warrant Agreement relating thereto to be entered
into between the Company and Purchaser (the "Warrant Agreement")), to
acquire an additional 1,476,908 shares (the "Warrant Shares") of Common
Stock at an initial exercise price of $31.64 per share, subject to
adjustment as provided in the Warrant Agreement.
Section 1.2 OTHER AGREEMENTS. Concurrently with the Closing (as
hereinafter defined), the Company will enter into (a) the Warrant Agreement
in form and substance reasonably satisfactory to the parties, (b) the
Investor's Agreement with Purchaser in substantially the form attached as
Exhibit A hereto (the "Investor's Agreement") and (c) a Registration Rights
Agreement in favor of Purchaser and its permitted assignees (the "Holders")
in form and substance reasonably satisfactory to the parties providing for
(i) three "demand" registrations in favor of the Holders (one of which may,
at the election of the Holders, be a "resale shelf registration" having a
duration of four years, (ii) customary "piggyback" registrations in favor
of the Holders and (iii) such other reasonable provisions as the parties
negotiate in good faith (the "Registration Rights Agreement" and,
collectively with the Warrant Agreement and the Investor's Agreement, the
"Other Documents").
Section 1.3 CLOSING. The closing (the "Closing") shall take place
at the offices of the Company, The Perimeter Center, 17207 North Perimeter
Drive, Scottsdale, Arizona 85255, on the tenth business day after the
satisfaction or waiver of the conditions set forth in Section 3 below, or
at such other location, date and time as may be agreed upon between
Purchaser and the Company (such date and time being called the "Closing
Date"). At the Closing, the Company shall issue and deliver to Purchaser
stock and warrant certificates in definitive form, registered in the name
of Purchaser or its designee, representing the Securities. As payment in
full for the Securities, and against delivery of the certificates therefor
at the Closing, Purchaser shall initiate a wire transfer in immediately
available United States funds in accordance with the Company's instructions
in the amount of the Purchase Price. Each certificate representing the
Securities shall bear the following legend in addition to any other legend
that may be required from time to time under applicable law or pursuant to
any other contractual obligation:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF (A "TRANSFER") EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
AN INVESTOR'S AGREEMENT DATED THE CLOSING DATE. SUCH SECURITIES ARE
ALSO SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED THE CLOSING
DATE. ANY TRANSFEREE OF THESE SECURITIES TAKES SUBJECT TO THE TERMS
OF SUCH AGREEMENTS, A COPY OF EACH OF WHICH IS ON FILE WITH THE
COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR STATE
SECURITIES LAWS AND NO TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT
(A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR
(B) PURSUANT TO AN EXEMPTION THEREFROM WITH RESPECT TO WHICH THE
COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF
THE ACT.
Section 1.4 FURTHER ACTION. During the period from the date hereof
to the Closing Date, each of the Company and Purchaser shall use their best
efforts to take all action necessary or appropriate to satisfy the closing
conditions contained in Section 3 hereof (including without limitation
using all reasonable efforts to finalize the Warrant Agreement and the
Registration Rights Agreement in the most expeditious manner practicable)
and to cause its respective representations and warranties contained in
Section 2 to be complete and correct as of the Closing Date, after giving
effect to the transactions contemplated by this Agreement, as if made on
and as of such date.
SECTION 2. REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to Purchaser as follows:
(a) Each of the Company and its subsidiaries (collectively,
the "Subsidiaries") has been duly organized and is validly existing as a
corporation, trust or partnership, as the case may be, in good standing
under the laws of the jurisdiction in which it is organized, with full
power and authority to own or lease and occupy its properties and conduct
its business, and is duly qualified to do business, and is in good
standing, in each jurisdiction which requires such qualification, except
where the failure to so qualify would not, individually or in the
aggregate, have or be reasonably likely to result in a material adverse
effect on the business, operations, business prospects, earnings, assets,
liabilities or condition (financial or otherwise) (a "Material Adverse
Effect") of the Company. All of the outstanding shares of capital stock or
other equivalent interests of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable, and,
except as disclosed in the Company's reports, proxy statements, forms, and
other documents with the SEC filed and publicly available during the twelve
months ended February 13, 1998 (the "Current SEC Documents"), are owned by
the Company, directly, or indirectly through another Subsidiary, free and
clear of any lien, adverse claim, security interest, mortgage, pledge,
equity or other encumbrance. None of the outstanding shares of capital
stock or other equivalent interests of the Subsidiaries was issued in
violation of the preemptive or similar rights of any stockholder or other
holder of interests of such Subsidiary arising by operation of law, under
the charter, by-laws or other organizational document of any Subsidiary or
under any agreement to which the Company or any Subsidiary is a party. The
Company does not own, directly or indirectly through a "qualified REIT
subsidiary" (within the meaning of section 856(i) of the Internal Revenue
Code of 1986, as amended (the "Code")), partnership, limited liability
company, association or other entity, any shares of stock or any other debt
or equity securities of, or other interests in, any corporation, firm,
partnership, limited liability company, association or other entity, other
than (1) stock of a corporation or equity of an entity that the Company has
been advised by its legal counsel qualifies as a "qualified REIT
subsidiary" within the meaning of section 856(i) of the Code, (2) stock or
other debt (excluding for this purpose any debt obligation that constitutes
a real estate asset within the meaning of section 856(c)(5)(B) of the Code)
or equity securities of any issuer (other than a partnership or limited
liability company, the ownership of which is governed by (3) below) where
(i) the Company has been advised by legal counsel that such ownership would
not constitute ownership of more than 9.8% of the voting securities of such
issuer (within the meaning of section 856(c) (5) of the Code) and (ii) the
Company has determined in good faith that the fair market value of the
stock and securities of any one such issuer does not exceed 4.8% of the
value of the total assets of the Company (within the meaning of section
856(c)(5) of the Code), or (3) interests in a partnership or limited
liability company where (i) the Company has received a written opinion of
its legal counsel that such partnership or limited liability company is
subject to tax as a partnership, and not an association subject to tax as a
corporation or a publicly traded partnership subject to tax as a
corporation, for United States federal income tax purposes and (ii) such
partnership or limited liability company does not itself own debt or equity
securities of any issuer that could cause the Company to violate the
representation contained in clause (2) above.
(b) The Company and each of the Subsidiaries have all
requisite power and authority, and all necessary material authorizations,
approvals, orders, licenses, certificates and permits (collectively,
"Governmental Licenses"), of and from the appropriate Federal, state,
local or foreign regulatory or governmental agencies, officials, bodies and
tribunals, necessary to own or lease their respective properties and to
conduct their respective businesses as now being conducted, except where
the failure to possess any such Government Licenses would not have a
Material Adverse Effect on the Company or such Subsidiary, as the case may
be; all such Governmental Licenses are in full force and effect, except
where the failure to be in full force and effect would not have a Material
Adverse Effect on the Company or such Subsidiary, as the case may be; and
the Company and each of the Subsidiaries are in compliance with all
applicable laws and Governmental Licenses, except where the failure to
comply would not have a Material Adverse Effect on the Company or such
Subsidiary, as the case may be.
(c) Except as otherwise disclosed in the Current SEC
Documents or as would not have a Material Adverse Effect on the Company or
such Subsidiary, as the case may be, (i) the Company and the Subsidiaries
have good and marketable title to all properties and assets described in
the Current SEC Documents as being owned by them, or reflected in the Base
Balance Sheet (as hereinafter defined), other than properties and assets
conveyed or pledged in customary asset securitization transactions (as to
which no representation is made); (ii) all liens, charges, claims,
restrictions or encumbrances on or affecting the properties and assets of
the Company or any of the Subsidiaries which are required to be disclosed
in the Current SEC Documents are disclosed therein; (iii) each of the
properties of the Company and the Subsidiaries, at the time such property
was acquired or at the time the loan by the Company with respect to such
property was made, had access to public rights of way, either directly or
through insured easements; (iv) each of such properties, at the time such
property was acquired or at the time the loan by the Company with respect
to such property was made, was served by all public utilities necessary for
the current operations on such property in sufficient quantities for such
operations; (v) each of such properties complies with all applicable codes
and zoning and subdivision laws and regulations; (vi) the real property
leases and equipment leases, if any, relating to each of such properties
are in full force and effect; and (vii) there is no pending or threatened
condemnation, eminent domain, zoning change, or other proceeding or action
that will in any manner affect the size of, use of, improvements on,
construction on or access to the properties of the Company and the
Subsidiaries.
(d) Except as would not have a Material Adverse Effect on
the Company or any of the Subsidiaries, each of the mortgage loans held by
the Company or the Subsidiaries (the "Mortgage Loans") is (i) secured by a
valid lien on the property pledged as security for each such Mortgage Loan,
(ii) insured by a nationally recognized title insurance company for the
amount of each such applicable Mortgage Loan, (iii) evidenced by loan
documents which are valid and enforceable against the borrower under each
such Mortgage Loan, (iv) in good standing, without defaults or, to the
Company's knowledge, offsets or counterclaims which could be validly
asserted by any borrower under any of the Mortgage Loans, (v) is documented
by loan documents substantially in the form of the Company's standard loan
documents, and (vi) except in the case of loans which have been sold,
assigned or conveyed in connection with an asset securitization thereof, is
currently owned and held by the Company and/or the Subsidiaries and has not
been assigned or pledged to any third party.
(e) The Company and the Subsidiaries have title insurance
on all real property described in the Current SEC Documents as being owned
(or held under a ground lease) or financed by any of them in an amount at
least equal to the cost of acquisition of such property or the original
principal amount of the loan provided by any of them, as the case may be,
and there are in effect for such properties and assets insurance policies
covering risks and in amounts that are commercially reasonable for such
types of properties and assets and that are consistent with the types and
amounts of insurance typically maintained by prudent owners of similar
properties or assets or required by commercial lenders with respect to
similar properties or assets and all such insurance is in full force and
effect.
(f) To the extent applicable, the Company and the
Subsidiaries own or possess, or can acquire on reasonable terms, the
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "patent and
proprietary rights") presently employed by them in connection with the
business now operated by them, and neither the Company nor any of the
Subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any patent or proprietary rights or of any facts or circumstances which
would render any patent and proprietary rights invalid or inadequate to
protect the interest of the Company or any of Subsidiaries therein, and
which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, either singly or in the
aggregate, would result in any Material Adverse Change (as defined herein).
(g) The Company's authorized and outstanding capitalization
(including all securities exercisable for, or convertible or exchangeable
into, Common Stock) is as set forth in Schedule 2.1(g) hereto. The
outstanding shares of Common Stock have been duly and validly authorized
and issued in compliance with all Federal and state securities laws, and
are fully paid and nonassessable; the Common Shares have been duly and
validly authorized and, when issued and delivered pursuant to this
Agreement, will be fully paid and nonassessable; and the holders of
outstanding shares of capital stock of the Company are not entitled to
preemptive or other rights to subscribe for the Common Shares.
(h) There is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any of the Subsidiaries,
which is required to be disclosed in the Current SEC Documents, or which
might reasonably be expected to result in any Material Adverse Change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company or the Subsidiaries, whether or not
arising in the ordinary course of business ("Material Adverse Change"), or
which might reasonably be expected to have a Material Adverse Effect on the
Company or such Subsidiary or materially and adversely affect the
consummation of this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any Subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Current SEC Documents, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Change.
(i) The Company has full corporate power and authority to
enter into and perform its obligations under this Agreement and the Other
Documents and to issue, sell and deliver the Securities; this Agreement and
the Other Documents have been or will, at or prior to the Closing, be duly
authorized, executed and delivered by the Company and, when so executed,
will each constitute a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether a proceeding is
considered at law or in equity).
(j) No consent, approval, authorization or order of any
court or governmental agency, authority or body is required (and has not
been received) for the execution by the Company of this Agreement and the
Other Documents, the performance by the Company or its obligations
hereunder and thereunder or the consummation by the Company of the
transactions contemplated herein and therein.
(k) Neither the Company nor any or the Subsidiaries is in
violation of, in conflict with, in breach of or in default under (and none
of them know of an event which with the giving of notice or the lapse of
time or both would be reasonably likely to constitute a default under) its
charter or by-laws (and none of them know of an event which with the giving
of notice or the lapse of time or both would be reasonably likely to
constitute a violation), and neither the Company nor any Subsidiary is in
default in the performance of any obligation, agreement or condition
contained in any loan, note or other evidence of indebtedness or in any
indenture, mortgage, deed of trust or any other material agreement by which
it or its properties are bound, except for such defaults as would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company or such Subsidiary, as the case may be.
(l) Except as described in the Current SEC Documents, (A)
neither the Company nor the Subsidiaries is in violation of any Federal,
state, local or foreign laws or regulations relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
Laws"), except where the Company or the Subsidiaries has obtained one or
more policies of environmental insurance to cover such risks, with
deductible amounts, loss limits and aggregate liability limitations which
were deemed reasonably appropriate by the Company under the circumstances,
and except for such violations as would not have a Material Adverse Effect
on the Company or such Subsidiary, as the case may be, and (B) there are no
events or circumstances that could form the basis of an order for clean-up
or remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of the
Subsidiaries relating to any Hazardous Materials or the violation of any
Environmental Laws, which, either individually or in the aggregate, would
have a Material Adverse Effect on the Company or such Subsidiary, as the
case may be.
(m) Neither the issuance and sale of the Securities nor the
consummation of any of the other transactions contemplated herein or in the
Other Documents nor the fulfillment of the terms hereof and thereof will
conflict with, result in a breach or violation of or constitute a default
under any law or the charter or bylaws of the Company or any of the
Subsidiaries or the terms of any indenture or other agreement or instrument
to which the Company or any of the Subsidiaries is a party or is bound or
any judgment, order or decree applicable to the Company or any of the
Subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company or any
of the Subsidiaries. To enable Purchaser to purchase the Securities
without violating Article IV of the Company's Certificate of Incorporation,
the Board of Directors of the Company will have adjusted the ownership
limitations contained therein to the extent necessary to permit Purchaser's
purchase of the Securities (including, without limitation, the exercise
from time to time of the Warrants) and the transactions contemplated hereby
and by the Other Documents at or prior to the Closing.
(n) Each employee benefit or compensation plan, program,
policy, agreement or arrangement of any type sponsored, maintained,
contributed to or required to be contributed by the Company or any ERISA
Affiliate for the benefit of any current or former employee or director of
the Company or any of the Subsidiaries (the "Company Plans") has been
operated and administered in all material respects in accordance with its
terms and all applicable law, including without limitation ERISA (as
defined below) and the Code. There are no actions, suits or claims
pending, other than routine claims for benefits, with respect to the
Company Plans or their operation, administration or maintenance. Neither
the Company nor any ERISA Affiliate has at any time sponsored, maintained,
contributed to or been required to contribute to any "pension plan" (within
the meaning of Section 3(2) of ERISA) subject to Title IV of ERISA,
including without limitation any multiemployer plan, and neither the
Company nor any ERISA Affiliate has at any time incurred or can expect to
incur any liability under Title IV of ERISA. Each Company Plan intended to
qualify under section 401(a) of the Code is so qualified, and the Company
has timely applied for and received a currently effective determination
letter from the Internal Revenue Service with respect to each such Company
Plan. The consummation of the transactions contemplated hereunder will not
result in the payment, vesting, acceleration or enhancement of any benefit
under any Company Plan. Except as required under Sections 601-609 of
ERISA, no Company Plan provides medical benefits to participants following
retirement or other termination of employment or service. For purposes of
this Agreement, "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended; and "ERISA Affiliate" means any entity that, together
with the Company or any subsidiary would be deemed a "single employer" for
purposes of section 4001(b)(1) of ERISA.
(o) Except as disclosed in the Current SEC Documents, other
than the Warrants and grants of options to purchase an aggregate of
740,000, 22,230 and 233,000 shares of Common Stock issued in January 1997,
May 1997 and January 1998, respectively, and restricted stock awards
representing 29,887 shares of Common Stock issued in January 1998, there
are no outstanding warrants or options to purchase any shares of capital
stock of the Company and there are no restrictions upon the voting or
transfer of, or the declaration or payment of any dividend or distribution
on, any shares of capital stock of the Company pursuant to the certificate
of incorporation or by-laws of the Company, any agreement or other
instrument to which the Company is a party or by which the Company is
bound, or any order, law, rule, regulation or determination of any court,
governmental agency or body (including, without limitation, any banking or
insurance regulatory agency or body), or arbitrator having jurisdiction
over the Company.
(p) There are no registration or other rights entitling any
person to registration by the Company under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the issued capital stock of
the Company (other than pursuant to the Registration Rights Agreement), or
to purchase or subscribe for capital stock of the Company (other than
pursuant to understandings to issue Common Stock representing an aggregate
purchase price of up to $70 million in two separate underwritten
transactions to one or more unit investment trusts and the Investor's
Agreement).
(q) The Company has qualified as a "real estate investment
trust" ("REIT") under section 856 of the Code from its inception and it has
operated and intends to continue to operate in a manner so as to qualify as
a REIT. The Company has not taken any action or omitted to take any action
that would reasonably be expected to result in a challenge to its status as
a REIT, and no such challenge is pending or, to the Company's knowledge,
threatened.
(r) Each of FFCA Acquisition Corporation, FFCA
Institutional Advisors, Inc., FFCA Secured Assets Corporation, FFCA
Residual Interest Corporation and FFCA Secured Lending Corporation has been
(at all times during the period each such corporation has been in
existence) and is subject to tax as a corporation for United States federal
income tax purposes and the Company has owned 100% of the stock of each
such corporation at all times during the period each such corporation has
been in existence. Each such entity is a qualified REIT subsidiary, as
described in section 856(i) of the Code.
(s) FFCA Co-Investment Limited Partnership has been (at all
times on and after June 1, 1994) and is subject to tax as a partnership,
and not as an association taxable as a corporation or a publicly traded
partnership subject to tax as a corporation, for United States federal
income tax purposes.
(t) The Company files and has filed all required reports,
proxy statements, forms, and other documents with the SEC since January 1,
1995 (including all information incorporated therein by reference, the "SEC
Documents"). True and complete copies of all such SEC Documents have been
made available to Purchaser. As of their respective dates, (i) the SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended, as the
case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and (ii) except to the extent
that information contained in any SEC Document has been revised or
superseded by a later filed SEC Document filed and publicly available prior
to the date of this Agreement, none of the SEC Documents contains any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved and fairly present the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-
end audit adjustments). Except for liabilities and obligations incurred in
the ordinary course of business, consistent with past practices, since the
date of the most recent consolidated balance sheet included in the SEC
Documents filed and publicly available prior to the date of this Agreement
(the "Base Balance Sheet"), neither the Company nor any of the Subsidiaries
has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet of
the Company and its consolidated Subsidiaries or in the notes thereto.
(u) Except as disclosed in Current SEC Documents, since the
date of the Base Balance Sheet, the Company and the Subsidiaries have
conducted their respective businesses only in the ordinary course of
business in accordance with past practices, and there has not been (i) any
Material Adverse Change in the Company, (ii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of the capital stock of the Company,
(iii) any damage, destruction or loss, whether or not covered by insurance,
that has or reasonably could be expected to have a Material Adverse Effect
on the Company or any Subsidiary, as the case may be, or (iv) any change in
accounting methods, principles or practices by the Company materially
affecting its assets or liabilities or that otherwise has or reasonably
could be expected to have a Material Adverse Effect on the Company or any
Subsidiary, as the case may be and (v) except for regular quarterly
dividends (including a quarterly dividend increase of $.02 declared January
30, 1998) on the Common Stock, there has been no dividend or distribution
of any kind declared, paid or made by the Company on any class of its
capital stock.
(v) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that in all material
respects (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(w) To the Company's knowledge, neither the Company nor any
of the Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary
or received or retained any funds in violation of any law, rule or
regulation.
(x) The Company and each of the Subsidiaries have (i) duly
filed with the appropriate tax authorities all tax returns required to be
filed by them, and such tax returns are true, correct and complete in all
material respects, and (ii) duly paid in full or made provision in
accordance with generally accepted accounting principles for the payment of
all material taxes ending through the date hereof.
(y) No labor disturbance by the employees of the Company or
the Subsidiaries exists or (to the best of the Company's knowledge) is
imminent that would, individually or in the aggregate, have a Material
Adverse Effect. No collective bargaining agreement exists with any of the
Company's employees and, to the best of the Company's knowledge, no such
agreement is imminent.
(z) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future to conduct, its affairs in such a manner as to ensure that it will
not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the 1940 Act and such rules and
regulations.
(aa) The Company agrees that neither it, nor anyone acting
on its behalf, will offer any of the Securities so as to bring the issuance
and sale of the Securities within the provisions of Section 5 of the
Securities Act, or offer any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, or otherwise approach or
negotiate with respect thereto with, anyone if the sale of any of the
Securities or any such similar securities would be integrated as a single
offering for the purposes of the Securities Act, including, without
limitation, Regulation D thereunder.
(ab) The Company has not retained, directly or indirectly,
any broker or finder or incurred any liability or obligation for any
brokerage fees or finder's fees with respect to this Agreement or the
transactions contemplated hereby.
(ac) All the Company's representations and warranties herein
shall survive until ninety (90) days following the delivery to the Company
of its signed, audited financial statements for the year ending December
31, 1998.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to the Company that:
(a) Purchaser has been duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has all
requisite power and authority under such laws to own or lease and operate
its properties and to carry on its business as now conducted.
(b) Purchaser has the power and authority to execute,
deliver and perform this Agreement and the Other Documents. All action on
the part of Purchaser necessary for the authorization, execution and
delivery of this Agreement and the Other Documents and the performance of
all obligations of Purchaser hereunder and thereunder have been taken or
will be taken prior to the Closing. This Agreement and the Other Documents
have been duly authorized, executed and delivered by Purchaser and each
constitutes a valid and legally binding obligation of Purchaser,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity (whether enforcement is sought by
proceedings in equity or at law).
(c) The execution and delivery by Purchaser of this
Agreement and the Other Documents and the performance by Purchaser of its
obligations hereunder and thereunder will not violate any provision of law,
the organizational documents governing Purchaser or any order of any court
or other agency of government, or conflict with, result in a breach of or
constitute (with notice or lapse of time or both) a default under any
indenture, agreement or other instrument by which Purchaser or any of its
properties or assets is bound, or result in the creation or imposition of
any lien, charge, restriction, claim or encumbrance of any nature
whatsoever known to Purchaser upon any of the properties or assets of
Purchaser.
(d) The Securities will be acquired for investment for
Purchaser's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. Purchaser further represents that it does not
presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any
third person, with respect to any of the Securities. Purchaser (i) has
such knowledge and experience in financial and business matters, including
investments of the type represented by the Securities, as to be capable of
evaluating the merits of investment in the Company; (ii) has not been
furnished with or relied upon any oral representation, warranty or
information in connection with the offering of the Securities; and (iii) is
an "Accredited Investor" as such term is defined in Rule 501 of the rules
and regulations promulgated under the Securities Act. Purchaser and its
agents, attorneys and advisors have been provided full and complete access
to all of the books, records, financial statements, accounts, places of
business, and any other information reasonably related to the conduct of
the business of Company, and has been afforded the opportunity to conduct
an independent investigation of all of those matters and has satisfied
itself as to all of the risks of the business of the Company, and has
satisfied itself that it has obtained, or been offered access to all of the
information and descriptions of reasonable risks associated with the
transaction contemplated hereby that a reasonably prudent investor would
wish to obtain.
(e) The Company will not have any liability or obligation
for any brokerage fees or finder's fees with respect to this Agreement or
the transactions contemplated hereby as a result of any action taken by
Purchaser in connection herewith and therewith.
(f) After giving effect to the constructive ownership rules
of section 544 of the Code (as modified by section 856(h) of the Code), no
member of Purchaser (each a "Member") (i) owns more than 9.8% of the Common
Stock or (ii) owns directly or indirectly 25% or more of Purchaser.
(g) After giving effect to the constructive ownership rules
under section 318 of the Code (as modified by section 856(d)(5) of the
Code), Purchaser does not directly or indirectly own the stock of any
person that is a tenant under any lease with the Company and will not
directly or indirectly acquire stock in any such tenant if, upon and as a
direct consequence of such acquisition, the rents to be derived by the
Company under such lease would fail to qualify as rent from real property
pursuant to section 856(d)(2) of the Code.
(h) Purchaser is a newly formed fund that is its own
ultimate parent as that term is defined in the rules and regulations
promulgated under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), does not have and will not have a regularly
prepared balance sheet at the Closing Date, and at the Closing Date will
not have assets or net sales of $10 million or more other than the cash
that will be used as consideration for the acquisition and expenses
incidental to the transactions contemplated hereunder and as a result such
transactions are not subject to the notification and waiting period
requirements of the HSR Act pursuant to 16 C.F.R. Section 801.11(e).
SECTION 3. CLOSING CONDITIONS
Section 3.1 CONDITIONS TO OBLIGATION OF PURCHASER. The obligation
of Purchaser to purchase the Securities shall be subject to satisfaction or
waiver by it of the following conditions on or before the Closing Date:
(a) The representations and warranties of the Company
contained in Section 2.1 hereof that are qualified as to materiality shall
be true and accurate, and those not so qualified shall be true and accurate
in all material respects at and as of the Closing Date as if made on the
date hereof.
(b) The Company shall have performed and complied in all
material respects with all agreements, covenants and conditions contained
herein that are required to be performed or complied with by it on or
before the Closing Date.
(c) The Company shall have received all consents, permits,
approvals and other authorizations that may be required from, and made all
such filings and declarations that may be required with, any person
pursuant to any law, statute, regulation or rule (federal, state, local and
foreign), or pursuant to any agreement, order or decree by which the
Company or any of its assets is bound, in connection with the transactions
contemplated by this Agreement, except for (i) notice requirements which
may be fulfilled subsequent to the Closing Date and (ii) consents, permits,
approvals, authorizations, filings and declarations the failure to obtain
or to undertake which will not adversely affect the Company's ability to
perform its obligations under this Agreement or any agreement executed in
accordance herewith.
(d) Purchaser shall have received a certificate, dated the
Closing Date and signed by the President and the Chief Financial Officer of
the Company, certifying that the conditions in Sections 3.1(a), (b) and (c)
are satisfied on and as of such date.
(e) The Company shall have entered into the Other
Documents, and Purchaser's designee shall have been appointed to the Board
of Directors of the Company pursuant to the Investor's Agreement.
(f) Purchaser and its counsel shall have received copies of
the following documents:
(i) the Certificate of Incorporation,
certified as of a recent date by the Secretary of State of the
State of Delaware, and a certificate of such authority dated as
of a recent date as to the due incorporation and good standing of
the Company and listing all documents of the Company on file with
said authority;
(ii) a certificate of the Secretary or an
Assistant Secretary of the Company dated the Closing Date
certifying: (A) that attached thereto is a true and complete copy
of the Bylaws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete
copy of all resolutions adopted by the Board of Directors
authorizing the execution, delivery and performance of this
Agreement and the Other Documents and the issuance, sale and
delivery of the Securities, and that all such resolutions are in
full force and effect and are all the resolutions adopted in
connection with the transactions contemplated by this Agreement;
(C) that the Certificate of Incorporation of the Company has not
been amended since the date of the last amendment referred to in
the certificate delivered pursuant to clause (i) above; (D) that
the Bylaws have not been amended since the date of the last
amendment referred to in such certificate pursuant to subclause
(ii)(A) above; and (E) that each officer of the Company executing
this Agreement and the Other Documents, the certificates
representing the Securities and any agreement, certificate or
instrument furnished pursuant hereto, was, at the respective
times of such execution and delivery of such documents, duly
elected or appointed, qualified and acting as such officer, and
the signatures of such persons appearing on such documents are
their genuine signatures or true facsimiles thereof; and
(iii) such additional supporting documents
as Purchaser may reasonably request.
(g) Purchaser shall have received an opinion (satisfactory
to Purchaser and its counsel), dated the Closing Date, from Kutak Rock in
substantially the form of Exhibit B hereto.
(h) The Board of Directors of the Company shall have
adjusted the ownership limitations contained in the Company's certificate
of incorporation to the extent necessary to permit Purchaser's purchase of
the Securities (including, without limitation, the exercise from time to
time of the Warrants) and the transactions contemplated hereby and the
Other Documents.
Section 3.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
Company's obligation to sell the Securities shall be subject to the
satisfaction or waiver by it of the following conditions on or before the
Closing:
(a) The representations and warranties of Purchaser
contained in Section 2.2 of this Agreement that are qualified as to
materiality shall be true and accurate, and those not so qualified shall be
true and accurate in all material respects at and as of the Closing Date as
if made on the date hereof.
(b) Purchaser shall have performed and complied in all
material respects with all agreements and conditions contained herein that
are required to be performed or complied with by it on or before the
Closing Date, including without limitation, payment of the Purchase Price.
(c) Purchaser shall have received all consents, permits,
approvals and other authorizations that may be required from, and made all
such filings and declarations that may be required with, any person
pursuant to any law, statute, regulation or rule (federal, state, local and
foreign), or pursuant to any agreement, order or decree by which Purchaser
or any of its assets is bound, in connection with the transactions
contemplated by this Agreement, except for (i) notice requirements which
may be fulfilled subsequent to the Closing Date and (ii) consents, permits,
approvals, authorizations, filings and declarations the failure to obtain
or to undertake which will not adversely affect Purchaser's ability to
perform its obligations under this Agreement or any agreement executed in
accordance herewith.
(d) The Company shall have received a certificate, dated
the Closing Date and signed by the President of the general partner of
Purchaser, certifying that the conditions in Sections 3.2(a), (b) and (c)
are satisfied on and as of such date.
(e) The Company shall have received an opinion (reasonably
satisfactory to the Company and its counsel), dated the Closing Date, from
outside counsel to Purchaser in substantially the form of Exhibit C hereto.
SECTION 4. MISCELLANEOUS
(a) Each party hereto shall pay its own expenses
(including, without limitation, counsel fees) in connection with the
transactions contemplated hereby, whether or not such transactions shall be
consummated. The Company and the Purchaser shall share all joint filing
fees and related expenses equally.
(b) Except as otherwise provided herein, covenants,
agreements, representations and warranties made in this Agreement, or any
certificate or instrument delivered pursuant to or in connection therewith
shall survive the execution and delivery of this Agreement.
(c) All representations, covenants and agreements contained
in this Agreement by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not; provided that Purchaser shall
not assign its rights in this Agreement to any unrelated third party
without first obtaining the prior written consent of the Company, and
provided further that, notwithstanding the above provision, Purchaser may
assign its rights in this Agreement to any 50% or greater controlled
Affiliate of Colony Capital, Inc.
(d) All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in
person, sent by facsimile or mailed by certified or registered mail; return
receipt requested, addressed as follows:
If to Purchaser, to: Colony Investors III, L.P.
c/o Colony Capital, Inc.
1999 Avenue of the Stars, Suite 1200
Los Angeles, California 90067
Telecopier No.: (310) 282-8813
Attention: Mr. Kelvin L. Davis
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Telecopier No.: (213) 687-5600
Attention: Jonathan H. Grunzweig, Esq.
If to the Company, to: Franchise Finance Corporation of America
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telecopier No.: (602) 585-2225
Attention: Mr. M.H. Fleischer
with a copy to: Franchise Finance Corporation of America
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telecopier No.: (602) 585-2226
Attention: Dennis L. Ruben, Esq.
with a copy to: Kutak Rock
717 Seventeenth Street, Suite 2900
Denver, Colorado 80202
Telecopier No.: (303) 292-7799
Attention: Paul E. Belitz , Esq.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others. All notices, requests,
consents and other communications hereunder shall be deemed to have been
duly given or served on the date on which personally delivered or on the
date actually received, with receipt acknowledged.
(e) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof.
(f) This Agreement and the Other Documents constitute the
sole and entire agreement of the parties with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous agreements,
discussions, representations, warranties or other communications. All
Schedules and Exhibits hereto are hereby incorporated herein by reference.
(g) This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(h) As used in this Agreement, knowledge shall mean, with
respect to any person, actual knowledge of such person (without imputing
any knowledge to such person), if an individual, or of any executive
officer of such Person, if not an individual.
(i) This Agreement may not be amended or modified without
the written consent of the Company and Purchaser, nor shall any waiver be
effective against any party unless in a writing executed on behalf of such
party.
(j) If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted
as if such provision were so excluded and shall be enforceable in
accordance with its terms to the fullest extent permitted by law.
(k) The titles and subtitles used in this Agreement are for
convenience only and are not to be considered in construing or interpreting
any term or provisions of this Agreement.
IN WITNESS WHEREOF, the Company and Purchaser have caused this
Agreement to be executed and delivered by the undersigned duly authorized
officers as of the day and year first above written.
FRANCHISE FINANCE CORPORATION OF AMERICA
By: /s/ MORTON H. FLEISCHER
------------------------------------
Name: Morton H. Fleischer
Title: President and Chief Executive
Officer
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By: /s/ KELVIN L. DAVIS
-------------------------------
Name: Kelvin L. Davis
Title: President and Chief
Executive Officer
EXHIBIT 2
INVESTOR'S AGREEMENT
This Investor's Agreement (the "Agreement") is entered into on
March 13, 1998, by and between Franchise Finance Corporation of America, a
real estate investment trust and a Delaware corporation (the "Company"),
and Colony Investors III, L.P., a Delaware limited partnership (the
"Purchaser").
RECITALS
The Purchaser has, upon the terms and subject to the conditions
of a Stock Purchase Agreement, dated February 13, 1998 (the "Stock Purchase
Agreement"), by and between the Company and the Purchaser, agreed to
acquire 3,792,112 shares of Common Stock, $0.01 par value per share, of the
Company ("Common Stock"), and warrants (the "Warrants") to purchase an
additional 1,476,908 shares of Common Stock.
The Purchaser and the Company each desire to enter into this
Agreement for the purpose of regulating certain aspects of their
relationship with regard to the Company.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the Purchaser and
the Company agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the terms below shall have the following meanings.
Any such term, unless the context otherwise requires, may be used in the
singular or plural, depending upon reference.
"Affiliate" shall mean, with respect to any Person, (i) any Person
or entity directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person, (ii) any spouse or
non-adult child (including by adoption), (iii) any relative other than a
spouse or non-adult child (including by adoption) who has the same
principal residence of any natural person described in clause (i) above,
(iv) any trust in which any such Persons described in clause (i), (ii) or
(iii) above has a beneficial interest and (v) any corporation, partnership,
limited liability company or other organization of which any such Persons
described in clause (i), (ii) or (iii) above collectively own more than
fifty percent (50%) of the equity of such entity. For purposes of this
definition, beneficial ownership of more than ten percent (10%) of the
voting common equity of a Person shall be deemed to be control of such
Person.
"Fully Diluted Common Stock" shall mean all of the Common Stock of
the Company, assuming conversion, exercise or exchange of all outstanding
convertible or exchangeable securities, options, rights, warrants and
similar instruments into or for Common Stock (regardless of whether such
convertible securities, options, warrants or similar securities are then
convertible or exercisable), except for compensatory stock options which
shall not be deemed outstanding unless they have vested. As provided in
Section 4.4, all such calculations shall be appropriately adjusted for
stock splits, stock dividends and other similar events as described
therein.
"Person" shall mean an individual, partnership, limited liability
company, joint venture, corporation, trust or unincorporated organization
or any other similar entity.
"Related Party" shall mean with respect to any Person: (i) any
parent, controlling shareholder, fifty percent (50%) (or more) owned
subsidiary, or spouse or ex-spouse or immediate family member (in the case
of an individual) of such Person; (ii) a trust, corporation, partnership,
limited liability company or other entity, the beneficiaries, shareholders,
partners, owners or persons holding a fifty percent (50%) (or more)
controlling interest of which consist of such Person and/or such other
persons or entities referred to in the immediately preceding clause (i); or
(iii) the equity owners of any Person.
"Restricted Securities" shall mean any securities of the Company
issued and sold to the Purchaser pursuant to the Stock Purchase Agreement.
ARTICLE II
CORPORATE GOVERNANCE
2.1 Board of Directors. Upon the execution of this Agreement, and
until such time as the Purchaser and its Affiliates no longer collectively
beneficially own Common Stock representing at least 50% of the number of
shares of Common Stock issued and sold to the Purchaser pursuant to the
Stock Purchase Agreement (exclusive of shares issuable upon exercise of the
Warrants), the Company hereby agrees (a) to take all action necessary such
that from and after the date hereof until the next regularly scheduled
meeting of the Company's stockholders, the Board of Directors of the
Company (the "Board") shall include one director designated by the
Purchaser, and (b) thereafter to use its best efforts to cause a person
designated by the Purchaser to be included in each slate of proposed
directors put forth by the Company to its stockholders and recommended for
election in any proxy solicitation materials disseminated by the Company;
provided, however, that the identity of any nominee so designated by the
Purchaser other than Thomas J. Barrack, Jr. and Kelvin L. Davis shall be
reasonably acceptable to the Company; and provided, further, that if at any
time the nominee so designated by the Purchaser shall not be serving on the
Board, (i) the Purchaser shall have the continuing right to receive copies
of all materials distributed to members of the Board, (ii) the nominee
designated by the Purchaser shall have the right to participate
substantially in all meetings of the Board on a non-voting basis, and (iii)
the Company shall grant the Purchaser such other rights as may be
reasonably necessary for the Purchaser's investment in the Restricted
Securities to continue to qualify as a "venture capital investment" within
the meaning of 29 C.F.R. Section 2510.3-101(d). The Company agrees to provide
such information as the Purchaser may reasonably request in connection with
the Purchaser's desire to ascertain the Company's continuing status as an
"operating company" or a "real estate operating company" within the
meaning of 29 C.F.R. Section 2510.3-101, and to consult routinely with the
Purchaser as to the Company's activities, giving due consideration to the
views expressed by the Purchaser in the course of conducting the business
of the Company. The Company further agrees to cause the nominee designated
by the Purchaser in accordance with the foregoing to serve on the Board of
Directors of such subsidiaries of the Company as the Purchaser may
reasonably request from time to time. Upon the death, resignation or
removal of a nominee designated by the Purchaser, the Company will use its
best efforts to have the vacancy filled by a person designated by the
Purchaser. Board members designated by the Purchaser shall be fully
covered by any directors' and officers' liability insurance maintained from
time to time on the same terms as the other members, shall be entitled to
the benefit of any indemnification arrangements applicable to the other
members and shall have the right to receive all fees paid and options and
other awards granted and expenses reimbursed to non-employee directors
generally.
2.2 Acquisitions Task Force. The Company shall promptly form a
Corporate Acquisitions Task Force consisting of three members (the "Company
Nominees") appointed by the chairman of the Board and two persons (the
"Purchaser Nominees") appointed by the person designated by the Purchaser
under Section 2.01 (which appointees shall be reasonably acceptable to the
chairman of the Board). Such Purchaser appointees may include the person
designated by the Purchaser under Section 2.01 (and such person shall be
deemed reasonably acceptable to the chairman of the Board). The Corporate
Acquisitions Task Force will exist for an initial term of two years
(subject to extension by mutual agreement of the Company and the Purchaser)
and will provide non-binding advice to the Company and the Board with
respect to corporate acquisitions. The meeting, quorum, voting and other
procedures of the Corporate Acquisitions Task Force will be established by
mutual agreement of the Company Nominees and the Purchaser Nominees. The
Purchaser will be reimbursed for its reasonable expenses allocable to (a)
consummated transactions reviewed as aforementioned or (b) such other
assistance provided by Purchaser or its Affiliates to the Company as may be
agreed upon from time to time.
ARTICLE III
CERTAIN PURCHASE RIGHTS AND RESTRICTIONS
3.1 General. If, at any time when the Purchaser and its
Affiliates collectively own in excess of 5% of the Fully Diluted Common
Stock, the Company proposes to issue for cash any of its Common Stock or
other securities exercisable for, or convertible or exchangeable into,
Common Stock (collectively, "Securities"), other than as provided in
Section 3.2, then the Company shall, no later than 30 days prior to the
consummation of such issuance, give written notice to the Purchaser of such
proposed issuance. Such notice shall describe the proposed issuance, and
contain an offer to sell to the Purchaser, at the same price and for the
same consideration to be paid by the proposed purchasers (but net of any
underwriting or similar fees, discounts or commissions), up to the
Purchaser's pro rata portion (which shall be a percentage equal to the
percentage of the Fully Diluted Common Stock held by the Purchaser and its
Affiliates) of the Securities to be sold. Subject to the foregoing, if
Common Stock is being issued with other Securities as a unit and such
Common Stock may only be purchased in connection therewith as a part of
such unit, the Purchaser must purchase such unit in order for such
acceptance to be valid. If the Purchaser fails to accept such offer by
written notice within 20 days after its receipt of the Company's notice,
the Company may proceed with such proposed issuance, free of any right on
the part of the Purchaser under this Section 3.1 in respect thereof.
3.2 Exceptions. The purchase right granted by Section 3.1 shall
not apply to: (i) compensatory issuances to employees, directors or
consultants or pursuant to related employee benefit, 401(k), employee stock
purchase or stock option plans approved by the Board of Directors; (ii)
Securities distributed or set aside to all holders of Common Stock on a per
share equivalent basis; (iii) derivative securities (e.g., warrants) issued
as customary "yield enhancement" in connection with (a) the arrangement of
bank credit or (b) the issuance of debt securities (including trust
receipts or similar obligations treated as debt of the Company for United
States federal income tax purposes) or redeemable, non-convertible
preferred stock; (iv) any issuance of Securities upon the conversion,
exercise or exchange of derivative equity securities issued in accordance
with Section 3.1 of this Agreement; (v) the issuance of Securities to unit
investment trusts in accordance with reasonable commercial practices; and
(vi) the issuance of Securities pursuant to the Company's dividend
reinvestment plan. In the case of any issuance pursuant to clause (v) of
this Section 3.2, the Company shall, no later than 5 business days
following the consummation of each such issuance, give written notice to
the Purchaser of such prior issuance on substantially the same terms
provided for notices under Section 3.1 and thereby offer to sell to the
Purchaser, at the same price and for the same consideration paid in such
prior issuance (but net of any underwriting or similar fees, discounts or
commissions), up to that number of Securities that will permit the
percentage of the Fully Diluted Common Stock held by the Purchaser and its
Affiliates to be restored to the percentage so held immediately before such
prior issuance. If the Purchaser fails to accept such offer by written
notice within 10 business days after its receipt of the Company's notice,
the purchase right on the part of the Purchaser under this Section 3.2 in
respect of such prior issuance shall terminate.
3.3 Standstill Agreement. Except as otherwise permitted in this
Agreement, the Purchaser covenants that, for a period of five years after
the date hereof, without the prior written consent of the Company, the
Purchaser will not, and will cause each of its Affiliates not to, singly or
as part of a "partnership, limited partnership, syndicate or other group"
(as those terms are used within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
meanings shall apply for all purposes of this Agreement), directly or
indirectly, through one or more intermediaries or otherwise:
(a) acquire, offer or propose to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise (other than as may be
otherwise permitted in this Section 3.3), any Securities, except (i)
pursuant to the Warrants, (ii) pursuant to the Company's dividend
reinvestment plan, (iii) if (after giving effect to such purchase) the
Purchaser and its Affiliates collectively own less than 5% of the Fully
Diluted Common Stock or (iv) by way of stock dividends, stock splits,
reorganization, recapitalization, merger, consolidation or like
distributions made available to holders of the Common Stock generally;
(b) make, or in any way participate, directly or indirectly, in,
any "solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A of the Exchange Act) by Persons other than the Company with
respect to Securities (including by the execution of actions by written
consent), become a "participant" in any "election contest" (as such terms
are defined or used in Rule 14a-11 of the Exchange Act) with respect to the
Company other than in concurrence with actions initiated or supported by
the Board;
(c) initiate, propose or otherwise solicit, or participate in the
solicitation of, stockholders for the approval of one or more stockholder
proposals with respect to the Company as described in Rule 14a-8 under the
Exchange Act or induce any other individual or entity to initiate any
stockholder proposal relating to the Company;
(d) directly or indirectly participate in or encourage the
formation of any group that seeks control of the Company (other than as
may be otherwise permitted in this Section 3.3) or for the purpose of
circumventing any provision of this Agreement;
(e) other than in connection with a competing proposal in respect
of any such action taken by a third party without the direct or indirect
assistance of the Purchaser or its Affiliates, solicit, seek or offer to
effect with any third party, or make any statement or proposal, whether
written or oral, either alone or in concert with others, with respect to
any form of business combination or transaction involving the Company or
any subsidiary thereof, including, without limitation, a merger, exchange
offer or liquidation of the Company's assets, or instigate or encourage any
third party to do any of the foregoing;
(f) deposit any Securities into a trust or subject any Securities
to any arrangement or agreement with respect to the voting thereof or take
any action by written consent in lieu of a meeting, in any such case that
seeks control of the Company (except as may be otherwise permitted in this
Section 3.3) or for the purpose of circumventing any provision of this
Agreement; or
(g) other than in connection with a competing proposal in respect
of any such action taken by a third party without the direct or indirect
assistance of the Purchaser or its Affiliates, otherwise act, directly or
indirectly, alone or in concert with others (including by providing
financing for another party) to seek or offer to acquire control of the
Company.
3.4 Certain Dispositions of Securities. Without the prior written
consent of the Company, the Purchaser agrees and covenants that until six
months from the date hereof it will not sell or transfer any of the
Securities beneficially owned by the Purchaser, except to an Affiliate or a
Related Party of the Purchaser or as may be reasonably necessary or
advisable in order to avoid rents to be derived by the Company from a
tenant failing to qualify as rents from real property as described in
section 856(d)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Purchaser further agrees and covenants that on or after six
months from the date hereof, without the consent of the Company, it will
not sell or transfer any of the Securities beneficially owned by the
Purchaser, except to an Affiliate or a Related Party of the Purchaser, if
the Securities to be included in any such disposition to any one Person or
group of related Persons by the Purchaser represent in excess of 5% of the
Fully Diluted Common Stock. Sales and transfers to a Related Party or
Affiliate of Securities representing in excess of 5% of the Fully Diluted
Common Stock shall be permitted hereunder only so long as any such Related
Party or Affiliate agrees in writing to be bound by the terms of this
Agreement as if such Related Party or Affiliate were a signatory to this
Agreement. The Purchaser shall, and shall cause its Affiliates to, give
the Company prompt notice upon the sale or transfer hereunder of any
Securities beneficially owned by the Purchaser. Securities acquired by any
person in violation of this Section 3.4 shall remain subject to this
Agreement as though such Securities were still owned by the Purchaser.
3.5 Voting and Dissenter's Rights. The Purchaser agrees that so
long as the Purchaser and its Affiliates collectively own in excess of 5%
of the Fully Diluted Common Stock, it will use reasonable best efforts to,
and to cause each of its Affiliates to, (a) be present, in person or
represented by proxy, at all stockholder meetings of the Company so that
all of the Common Stock beneficially owned by the Purchaser and its
Affiliates may be counted for the purpose of determining the presence of a
quorum at such meetings and (b) not exercise any statutory dissenter's
rights in connection with any merger, consolidation, reorganization or sale
of all or substantially all of the assets of the Company to the extent the
exercise of such rights would materially and adversely affect the
transaction's qualifying as a pooling of interests for accounting and
financial reporting purposes.
3.6 Public Offering Lock-Up. The Purchaser agrees and covenants
that in connection with an underwritten public offering of Securities by
the Company, it will agree if requested by the underwriter(s) to not offer,
sell or otherwise dispose of its Securities for a period not to exceed 90
days after the date of the underwriting agreement, without the prior
consent of the underwriter(s).
3.7 Certain Ownership Adjustments. In the event that the Company
proposes to take an action (an "Action") which would result in the
Purchaser or its Affiliates acquiring ownership of equity securities of
another Person that is or is reasonably expected within the first 30 days
following the Action to become a tenant of real property owned by the
Company (a "Tenant"), and (solely as a consequence of such ownership upon
consummation of such Action by the Company) the rents to be derived by the
Company from such Tenant would fail to qualify as rents from real property
as described in section 856(d)(2) of the Code, then the Company and the
Purchaser agree to cooperate in good faith to enable the Purchaser (i) to
participate to 98% of the maximum extent in the distribution of equity
securities in the Action so that immediately after the consummation of the
Action, the Purchaser's ownership of equity securities of the Company and
the Tenant will not cause the rents to be derived by the Company from such
Tenant to fail to qualify as rents from real property pursuant to section
856(d)(2)(B) of the Code, and (ii) to the extent that the Purchaser must
forego equity securities pursuant to clause (i) of this sentence ("Foregone
Securities"), the Purchaser will be entitled to receive Common Stock having
a value equal to the aggregate value of all Foregone Securities (each such
value to be determined pursuant to reasonable procedures to be agreed upon
by the parties in good faith at the time of the Action; provided that if no
such agreement can be reached, then the Company and the initial Holder
shall mutually select a nationally recognized investment bank to determine
such terms and procedures, which determination shall be binding on the
parties). As a condition precedent to the Company's consummating such
Action, the Company shall use its reasonable best efforts to cause the
Tenant to, and the Purchaser shall, enter into all agreements necessary to
provide that the Purchaser and the Tenant shall substantially replicate, to
the extent practicable under the circumstances, the same rights and
responsibilities as are provided hereunder in respect of the Company,
except (i) as may otherwise be mutually agreed by the Company and the
Purchaser, (ii) as would create an incident of tax for the Company in a
material amount, which tax would not otherwise have been due, or (iii) as
would adversely impact the Company's qualification as a real estate
investment trust under the Code.
3.8 Purchaser Member Limitations. The Purchaser agrees and
covenants that no member of the Purchaser may own directly or indirectly
25% or more of the Purchaser as determined under section 856(d)(5) of the
Code.
ARTICLE IV
MISCELLANEOUS
4.1 Confidentiality. (a) As used herein, "Confidential Material"
means, with respect to either party hereto (the "Providing Party"), all
information, whether oral, written, or otherwise, furnished to the other
party hereto (the "Receiving Party") or such Receiving Party's directors,
officers, partners, Affiliates, employees, agents or representatives
(collectively, "Representatives"), and all reports, analyses, compilations,
studies and other materials prepared by the Receiving Party or its
Representatives (in whatever form maintained, whether documentary, computer
storage or otherwise) containing, reflecting or based upon, in whole or in
party, any such information. The term "Confidential Material" does not
include information which (i) is or becomes generally available to the
public other than a result of a disclosure by the Receiving Party, its
Representatives or anyone to whom the Receiving Party or any of its
Representatives transmit any Confidential Material in violation of this
Agreement, or (ii) is or becomes known or available to the Receiving Party
on a non-confidential basis from a source (other than the Providing Party
or one of its Representatives) who is not, to the knowledge of the
Receiving Party after reasonable inquiries, prohibited from transmitting
the information to the Receiving Party or its Representatives by
contractual legal, fiduciary or other obligation.
(b) Subject to paragraph (c) below or except as required by law,
the Confidential Material will be kept confidential and will not, without
prior written consent of the Providing Party, be disclosed by the Receiving
Party or its Representatives, in whole or in part, and will not be used by
the Receiving Party or its Representatives, directly or indirectly, for any
purpose other than in connection with the Stock Purchase Agreement, this
Agreement or with respect to the matters contemplated therein. Moreover,
each Receiving Party agrees to transmit Confidential Material to its
Representatives only if and to the extent that such Representatives need to
know the Confidential Material for purposes of such transaction and are
informed by such Receiving Party of the confidential nature of the
Confidential Material and of the terms of this Section 4.1. In any event,
each Receiving Party will be responsible for any actions by its
Representatives which are not in accordance with the provisions hereof.
(c) In the event that Receiving Party, its Representatives or
anyone to whom such Receiving Party or its Representatives supply
Confidential Material is requested or required (by oral questionnaires,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any informal or formal investigation by any
government or governmental agency authority or otherwise in connection
with legal processes) to disclose any Confidential Material, such Receiving
Party agrees (i) to immediately notify the Providing Party of the
existence, terms and circumstances surrounding such request, (ii) to
consult with the Providing Party on the advisability of taking legally
available steps to resist or narrow such request and (iii) if disclosure
of such information is required, to furnish only that portion of the
Confidential Material which, in the opinion of such Receiving Party's
counsel, such Receiving Party is legally compelled to disclose and to
cooperate with any action by the Providing Party to obtain an appropriate
protective order or other reliable assurance that confidential treatment
will be accorded the Confidential Material (it being agreed that the
Providing Party shall reimburse the Receiving Party for all reasonable
out-of-pocket expenses incurred by the Receiving Party in connection
with such cooperation.)
(d) In the event of the termination of this Agreement in accordance
with its terms, promptly upon request from either Providing Party, the
Receiving Party shall, except to the extent prevented by law, redeliver to
the Providing Party or destroy all tangible Confidential Material and will
not retain any copies, extracts or other reproductions thereof in whole or
in part. Any such destruction shall be certified in writing to the
Providing Party by an authorized officer of the Receiving Party supervising
the same. Notwithstanding the foregoing, each Receiving Party and one
Representative designated by each Receiving Party shall be permitted to
retain one permanent file copy of each document constituting Confidential
Material.
4.2 Successors, Assigns and Transferees. This Agreement shall be
binding upon and all rights hereto shall inure to the benefit of the
parties hereto and their respective legal representatives, heirs, legatees,
successors and permitted assigns subject to the terms of this Agreement.
4.3 Notices. Any notice, request, instruction or other document
to be given hereunder by any party hereto to another party hereto shall be
in writing, shall be deemed to have been duly given or delivered when
delivered personally or telecopied (receipt confirmed, with a copy sent by
reputable overnight courier), or one business day after delivery to a
reputable overnight courier, postage prepaid, to the address of the party
set forth below such person's signature on this Agreement or to such
address as the party to whom notice is to be given may provide in a written
notice to each of the other parties to this Agreement, a copy of which
written notice shall be on file with the Secretary of the Company.
4.4 Recapitalizations, etc. The provisions of this Agreement
(including any calculation of share ownership) shall apply, except to the
extent specifically set forth herein with respect to the Restricted
Securities, to any and all shares of capital stock of the Company or any
capital stock, partnership units or any other security evidencing ownership
interests in any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) that may be issued in respect
of, in exchange for, or in substitution of the Common Stock by reason of
any stock dividend, split, reverse split, combination, recapitalization,
liquidation, reclassification, merger, consolidation or otherwise.
4.5 Inspection and Compliance with Law. Copies of this Agreement
will be available for inspection or copying by any holder of Restricted
Securities at the offices of the Company through the Secretary of the
Company. The Company shall take all reasonable action to insure that the
provisions of Delaware law relating to agreements similar to this Agreement
are promptly complied with.
4.6 Choice of Law. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED
AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS
THEREOF).
4.7 Entire Agreement; Amendments and Waivers. This Agreement
embodies the entire agreement and understanding of the parties hereto
pertaining to the subject matter hereof, and supercedes that certain
Confidentiality Agreement among the parties. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
4.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms to the fullest extent permitted by law.
4.10 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.11 Cumulative Remedies. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
4.12 Term. Unless earlier terminated by an instrument in writing
amending this Agreement pursuant to Section 4.7, this Agreement shall
terminate upon the tenth anniversary of the effective date of this
Agreement. Notwithstanding the foregoing, this Agreement shall in any
event terminate with respect to the Purchaser when the Purchaser and its
Affiliates no longer own any shares of Restricted Securities.
4.13 Specific Performance. The Company and the Purchaser
acknowledge and agree that in the event of any breach of this Agreement,
the non-breaching party would be irreparably and immediately harmed and
could not be made whole by monetary damages. It is accordingly agreed that
the non-breaching party, in addition to any other remedy to which it may be
entitled at law or in equity, shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and/or
to compel specific performance of this Agreement in any action, provided
that any such action shall take place in a state court of Delaware (a
"Delaware Court").
4.14 Jurisdiction. The Company and the Purchaser hereby agree
that any suit, claim, action or proceeding relating to or arising under
this Agreement shall be brought in a Delaware Court. The Company and the
Purchaser hereby consent to personal jurisdiction in any such action
brought in any such Delaware Court, consent to service of process upon it,
and waive any objection it may have to venue in any such Delaware Court or
to any claim that any such Delaware Court is an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have caused this Investor's
Agreement to be duly executed as of the date first above written.
FRANCHISE FINANCE CORPORATION OF AMERICA
By: /s/ MORTON H. FLEISCHER
-------------------------------------
Name: Morton H. Fleischer
Title: President and Chief Executive
Officer
Address: The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telecopy: (602) 585-2226
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By: /s/ KELVIN L. DAVIS
------------------------------------
Name: Kelvin L. Davis
Title: President and Chief Executive
Officer
Address: c/o Colony Capital, Inc.
1999 Avenue of the Stars, Suite 1200
Los Angeles, California 90067
Telecopy: (310) 282-8813
EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
Franchise Finance Corporation of America, a Delaware corporation (the
"Company"), hereby grants to Colony Investors III, L.P. ("Purchaser") and
any permitted assignee, the registration rights provided for herein.
Section 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings:
"Advice" has the meaning set forth in Section 5.
"Affiliate" means, with respect to any Person, (a) any Person or
entity directly or indirectly controlling or controlled by or under direct
or indirect common control with such Person, (b) any spouse or non-adult
child (including by adoption), (c) any relative other than a spouse or
non-adult child (including by adoption) who has the same principal
residence of any natural person described in clause (a) above, (d) any
trust in which any such Persons described in clause (a), (b) or (c) above
has a beneficial interest and (e) any corporation, partnership, limited
liability company or other organization of which any such Persons described
in clause (a), (b) or (c) above collectively own more than fifty percent
(50%) of the equity of such entity. For purposes of this definition,
beneficial ownership of more than ten percent (10%) of the voting common
equity of a Person shall be deemed to be control of such Person.
"Agreement" means this Registration Rights Agreement, dated as of
March 13, 1998.
"Business Day" means any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"Certificate of Incorporation" means the Second Amended and Restated
Certificate of Incorporation of the Company as filed with the Secretary of
State of the State of Delaware on May 7, 1997.
"Commission" means the Securities and Exchange Commission or any other
similar or successor agency of the Federal government administering the
Securities Act and/or the Securities Exchange Act of 1934, as amended from
time to time.
"Common Shares" means the shares of Common Stock issued pursuant to
that certain Stock Purchase Agreement, dated February 13, 1998, between the
Company and Purchaser.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" has the meaning set forth in the first paragraph hereof and
shall include the Company's successors by merger, acquisition,
reorganization or otherwise.
"Controlling Persons" has the meaning set forth in Section 8(a).
"Effective Period" has the meaning set forth in Section 4(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, and the rules and regulations
of the Commission promulgated thereunder.
"Holders" means the registered holders of Registrable Securities.
"Inspectors" has the meaning set forth in Section 4(m).
"Market Value" means the number of shares of Common Stock to be
registered (or issuable upon the conversion or exchange of other securities
to be registered) pursuant to the demand for registration provided in
Section 2 below multiplied by the then Per Share Price of the Common Stock.
"NASD" has the meaning set forth in Section 4(q).
"Objecting Party" has the meaning set forth in Section 4(a).
"Per Share Price" means the daily closing price of the Common Stock on
the New York Stock Exchange on the trading day before the Company receives
the written demand for registration.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
"Piggy-Back Registration" has the meaning set forth in Section 3(a).
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms of
the offering of any portion of the Registrable Securities covered by a
Shelf Registration Statement, and by all other amendments and supplements
to the prospectus, including post-effective amendments, and in each case
including all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"Records" has the meaning set forth in Section 4(m).
"Registrable Securities" means, collectively, the Common Shares, the
Warrants, the Warrant Shares and any other shares of Common Stock acquired
by Purchaser or its permitted assigns (so long as not acquired in violation
of that certain Investor's Agreement dated of even date herewith between
Purchaser and the Company (the "Investor's Agreement")), unless (in the
case of any such securities) such securities have been (a) effectively
registered under Section 5 of the Securities Act and disposed of pursuant
to an effective Registration Statement, or (b) such securities have been
transferred pursuant to Rule 144 under the Securities Act or any successor
rule such that, after any such transfer referred to in this clause (b),
such securities may be freely transferred without restriction under the
Securities Act.
"Registration Expenses" has the meaning set forth in Section 7.
"Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, and all amendments and supplements to any
such registration statement, including post-effective amendments, in each
case including the Prospectus, all exhibits, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Rule 144" has the meaning set forth in Section 9(a).
"Rule 144A" has the meaning set forth in Section 9(b).
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor statute, and the rules and regulations of
the Commission promulgated thereunder.
"Suspension Notice" has the meaning set forth in Section 5(a).
"Suspension Period" means the period from the date on which the
Holders receive a Suspension Notice to the date on which any Holder
receives either the Advice or copies of the supplemented or amended
Prospectus contemplated by Section 4(f).
"Warrants" means the warrants to acquire shares of Common Stock,
issued pursuant to that certain Warrant Agreement, dated of even date
herewith, between the Company and Purchaser.
"Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the Warrants.
Section 2. DEMAND REGISTRATION.
(a) Demand for Registration. The Holders may, at their option,
at any time after the date hereof, require the Company to use its best
efforts to effect a registration of Registrable Securities under the
Securities Act (the "Demand Registration"); provided, however, that
(i) the Company shall not be required to effect such Demand
Registration unless the Company is requested to do so with respect to
Registrable Securities having a Market Value of not less than
$30,000,000; (ii) at its option, the Company shall not be required to
effect such registration prior to three (3) months immediately
following the date on which an underwritten public offering of equity
securities (pursuant to an effective registration statement under the
Securities Act) is commenced, if such public offering is commenced
prior to the date of a request for the Demand Registration; provided,
further, that, if in the opinion of an independent investment banking
firm of national reputation such registration, if not deferred,
materially and adversely would affect a proposed business or financial
transaction of substantial importance to the Company's financial
condition, the Company may defer such registration for a single period
(specified in such notice) of not more than 120 days; and (iii) the
Company shall not be required to use its best efforts to effect a
registration of Registrable Securities under this Section 2 more than
three times. At the election of Holders requesting a Demand
Registration, such registration statement shall be filed under
Rule 415 promulgated under the Securities Act (a "Resale Registration
Statement"), and the Company shall use its best efforts to keep a
Resale Registration Statement continuously effective until the earlier
of four (4) years and the date on which there are no more Registration
Securities unsold thereunder. The Company shall promptly cause a
Resale Registration Statement to be amended to remove a Holder's
Registrable Securities upon notice to the Company from such Holder.
The Company shall not be required to file and effect more than one (1)
Resale Registration Statement pursuant to this Section 2(a). If,
after a Demand Registration becomes effective, the offering of
securities thereunder is or becomes subject to any stop order,
injunction or other order or requirement of the Commission that
prevents or limits the sale of securities thereunder for a period of
more than five (5) Business Days, then such Demand Registration shall
be deemed not to have been effected for purposes of this Section 2(a).
(b) Underwritten Offerings. If underwritten, the underwriter
must be reasonably acceptable to the Company. In connection with any
Demand Registration in which more than one Holder participates, in the
event that such Demand Registration involves an underwritten offering
and the managing underwriter or underwriters participating in such
offering advise in writing the Holders of Registrable Shares to be
included in such offering that the total number of Registrable Shares
to be included in such offering exceeds the amount that can be sold in
(or during the time of) such offering without delaying or jeopardizing
the success of such offering (including the price per share of the
Registrable Shares to be sold), then the amount of Registrable Shares
to be offered for the account of such Holders shall be reduced pro
rata on the basis of the number of Registrable Shares to be registered
by each such Holder. Except to the extent required by the Purchase
Agreement dated as of February 12, 1998, between the Company and Smith
Barney Inc., the Company shall not include any securities that are not
Registrable Securities in any Registration Statement filed pursuant to
this Section 2 without the prior written consent of the Holders of a
majority in number of the Registrable Securities covered by such
Registration Statement.
Section 3. PIGGY-BACK REGISTRATION.
(a) Request for Registration. Each time the Company proposes to
file a registration statement under the Securities Act with respect to
an offering by the Company for its own account or for the account of
any of its securityholders of any class of equity security (except,
(i) a registration statement on Form S-4 or S-8 (or any substitute
form that is adopted by the Commission), (ii) a registration statement
filed in connection with a dividend reinvestment plan, stock option
plan or unit investment trusts, or (iii) a registration statement
filed in connection with an exchange offer or offering of securities
solely to the Company's existing securityholders), and the form of
registration statement to be used permits the registration of
Registrable Securities, then the Company shall give written notice of
such proposed filing to the Holders as soon as reasonably practicable
(but in no event less than 20 days before the anticipated filing date
and no less than 30 days before the anticipated effective date), and
such notice shall offer the Holders the opportunity to register such
Registrable Securities as the Holders may request (which request shall
specify the Registrable Securities intended to be disposed of by the
Holders and the intended method of distribution thereof) up to 20 days
before the anticipated effective date (a "Piggy-Back Registration").
The Company shall cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the Registrable Securities
requested to be included in a Piggy-Back Registration to be included
on substantially the same terms and conditions as any similar
securities of the Company or any other securityholder included therein
and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution
thereof. Any Holder shall have the right to withdraw such Holder's
request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 3 by giving written
notice to the Company of such withdrawal no later than two Business
Days prior to the anticipated effective date. The Company may
withdraw a Piggy-Back Registration at any time prior to the time it
becomes effective, provided that the Company shall give prompt notice
of such withdrawal to the other Holders, if any, requested to be
included in such Piggy-Back Registration.
(b) Reduction of Offering. If the managing underwriter or
underwriters of an underwritten offering with respect to which
Piggy-Back Registration has been requested as provided in Section 3(a)
hereof shall have informed the Company, in writing, that in the
opinion of such underwriter or underwriters the total number of shares
which the Company, the Holders and any other Persons participating in
such registration intend to include in such offering is such as to
materially and adversely affect the success of such offering
(including without limitation any material decrease in the proposed
public offering price), then the number of shares to be offered for
the account of all Persons and Holders (other than the Company)
participating in such registration shall be reduced or limited (to
zero if necessary) pro rata in proportion to the respective number of
shares requested to be registered by such Persons to the extent
necessary to reduce the total number of shares requested to be
included in such offering to the number of shares, if any, recommended
by such managing underwriter or underwriters.
(c) Underwriting. In the case of a Piggy-Back Registration, if
the Company has determined to enter into an underwriting agreement in
connection therewith, all Registrable Securities to be included in
such Registration Statement shall be subject to such underwriting
agreement, and no Holder may participate in such Registration unless
such Holder agrees to sell its Registrable Securities on the basis
provided for in such underwriting arrangements approved by the Company
and completes and/or executes all reasonable and customary
questionnaires, powers of attorney, indemnities, underwriting
agreements and other reasonable documents which must be executed under
the terms of such underwriting arrangements.
Section 4. REGISTRATION PROCEDURES. In connection with the
obligations of the Company to effect or cause the registration of any
Registrable Securities pursuant to the terms and conditions of this
Agreement, the Company shall use its best efforts to effect the
registration and sale of such Registrable Securities in accordance with the
terms of this agreement as quickly as reasonably practicable, and in
connection therewith:
(a) Prior to filing a Registration Statement or Prospectus or
any amendments or supplements thereto, excluding for purposes of this
Section 4(a) documents incorporated by reference after the initial
filing of the Registration Statement, the Company will furnish to the
Holders covered by such Registration Statement (the "Selling Holders")
and the underwriters, if any, draft copies of all such documents
proposed to be filed at least ten Business Days prior thereto, which
documents will be subject to the reasonable review of the Holders and
the underwriters, if any, and the Company will not, unless required by
law, file any Registration Statement or amendment thereto or any
Prospectus or any supplement thereto to which Selling Holders of at
least a majority in interest of the Registrable Securities (the
"Objecting Party") shall reasonably object pursuant to notice given to
the Company prior to the filing of such amendment or supplement (the
"Objection Notice") and no later than five Business Days after receipt
of the documents to which the Objection Notice relates. The Objection
Notice shall set forth the objections and the specific areas in the
draft documents where such objections arise. The Company shall have
five Business Days after receipt of the Objection Notice to correct
such deficiencies to the reasonable satisfaction of the Objecting
Party, and will notify each Selling Holder of any stop order issued or
threatened by the Commission in connection therewith and take all
reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
(b) The Company promptly shall prepare and file with the
Commission such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration
Statement effective for a period of not more than 60 days or (in the
case of a Resale Registration Statement) up to four (4) years (as
applicable, the "Effective Period"); shall cause the Prospectus to be
supplemented by any required Prospectus supplements, and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities
Act; and shall comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all Registrable
Securities covered by such Registration Statement during the Effective
Period in accordance with the intended methods of disposition by the
Holders set forth in such Registration Statement or supplement to the
Prospectus.
(c) The Company promptly shall furnish to any Holder and the
underwriters, if any, without charge, such reasonable number of
conformed copies of each Registration Statement and any post-effective
amendment thereto and such number of copies of the Prospectus
(including each preliminary Prospectus) and any amendments or
supplements thereto, any documents incorporated by reference therein
and such other documents as such Holder or underwriter reasonably may
request in order to facilitate the public sale or other disposition of
the Registrable Securities being sold by such Holder.
(d) The Company shall, (i) on or prior to the date on which a
Registration Statement is declared effective, use its reasonable best
efforts to register or qualify the Registrable Securities covered by
such Registration Statement under such other securities or "blue sky"
laws of such states of the United States as any Holder or underwriter
requests; (ii) do any and all other acts and things which may be
reasonably necessary to enable such Holder to consummate the
disposition of such Registrable Securities owned by such Holder; and
(iii) use its reasonable best efforts to keep each such registration
or qualification (or exemption therefrom) effective during the
Effective Period; provided, however, that the Company shall not be
required (A) to qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
Section 4(d) or (B) to file any general consent to service of process.
(e) The Company shall cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be reasonably
necessary by virtue of the business and operations of the Company to
enable the Holders to consummate the disposition of such Registrable
Securities.
(f) The Company promptly shall notify each Holder and any
underwriter in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed and, with
respect to a Registration Statement or any post-effective amendment,
when the same has become effective, (ii) of any request by the
Commission or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the issuance
by any state securities commission or other regulatory authority of
any order suspending the qualification or exemption from qualification
of any of the Registrable Securities under state securities or "blue
sky" laws or the initiation of any proceedings for that purpose, and
(v) of the happening of any event which makes any statement made in a
Registration Statement or related Prospectus untrue or which requires
the making of any changes in such Registration Statement or Prospectus
so that they will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Company shall make generally available to the Holders an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 45 days (90 days in the event it relates
to a fiscal year) after the end of the 12-month period beginning with
the first day of the Company's first fiscal quarter commencing after
the effective date of a Registration Statement, which earnings
statement shall cover said 12-month period, and which requirement will
be deemed to be satisfied if the Company timely files complete and
accurate information on forms 10-Q, 10-K and 8-K under the Exchange
Act and otherwise complies with Rule 158 under the Securities Act.
(h) The Company promptly shall use its reasonable best efforts
to prevent the issuance of any order suspending the effectiveness of a
Registration Statement, and in the event a stop order is issued, use
its reasonable best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the
earliest possible moment.
(i) If requested by the managing underwriter or underwriters, if
any, or any Holder, the Company promptly shall incorporate in a
Prospectus supplement or post-effective amendment such information as
such managing underwriter or underwriters or such Holder reasonably
requests to be included therein, including, without limitation, with
respect to the Registrable Securities being sold by such Holder to
such underwriter or underwriters, the purchase price being paid
therefor by such underwriter or underwriters and with respect to any
other terms of an underwritten offering of the Registrable Securities
to be sold in such offering, and promptly make all required filings of
such Prospectus supplement or post-effective amendment.
(j) The Company shall deliver a copy of each document
incorporated by reference into a Registration Statement (in the form
in which it was incorporated) to each Holder as promptly as
practicable after filing such documents with the Commission.
(k) The Company shall cooperate with the Holders and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (which shall not bear any
restrictive legends unless required under applicable law) representing
securities sold under a Registration Statement, and enable such
securities to be in such denominations and registered in such names as
the Holders and the managing underwriter or underwriters, if any,
reasonably may request and keep available and make available to the
Company's transfer agent prior to the effectiveness of such
Registration Statement a supply of such certificates.
(l) The Company shall enter into such customary agreements
(including, if applicable, an underwriting agreement in customary
form) and take such other actions as the Holders, or the underwriters,
if any, retained by the Holders participating in an underwritten
public offering, if any, reasonably may request in order to expedite
or facilitate the disposition of Registrable Securities.
(m) The Company promptly shall make available to each Holder,
any underwriter participating in any disposition pursuant to a
Registration Statement, and any attorney, accountant or other agent or
representative retained by any such Holder or underwriter
(collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection
with such Registration Statement; provided that, unless the disclosure
of such Records is necessary to avoid or correct a misstatement or
omission in such Registration Statement or the release of such Records
is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, the Company shall not be required to provide
any information under this paragraph if (i) the Company believes,
after consultation with counsel for the Company and counsel for the
Holders, that to do so would cause the Company to forfeit an
attorney-client privilege that was applicable to such information or
(ii) either (A) the Company has requested and been granted from the
Commission confidential treatment of such information contained in any
filing with the Commission or documents provided supplementally or
otherwise or (B) the Company reasonably determines in good faith that
such Records are confidential and so notifies the Inspectors in
writing unless, prior to furnishing any such information with respect
to (A) or (B), such Holder requesting such information agrees to enter
into a confidentiality agreement in customary form and subject to
customary exceptions reasonably acceptable to the Company; and,
provided, further, that each Holder agrees that it will, upon learning
that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its
expense, to undertake appropriate action and to prevent disclosure of
the Records deemed confidential.
(n) In the case of any underwritten offering, the Company shall
furnish to each Holder and to each underwriter, if any, a signed
counterpart, addressed to such Holder or underwriter, of (i) an
opinion or opinions of counsel to the Company, and (ii) a comfort
letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the
type customarily covered by opinions or comfort letters, as the case
may be, as the managing underwriter therefor reasonably requests.
(o) The Company shall cause the Registrable Securities to be
authorized for quotation and/or listing, as applicable, on such
exchange or quotation system as the Common Stock is listed or quoted.
(p) The Company shall provide a CUSIP number for all Registrable
Securities covered by a Registration Statement not later than the
effective date of such Registration Statement.
(q) The Company shall cooperate with each Holder and each
underwriter participating in the disposition of Registrable Securities
and their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers, Inc.
("NASD").
(r) During the period when the Prospectus is required to be
delivered under the Securities Act, the Company promptly shall file
all documents required to be filed with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
(s) The Company shall appoint a transfer agent and registrar for
all the shares of Common Stock covered by a Registration Statement not
later than the effective date of such Registration Statement.
(t) In connection with an underwritten offering, the Company
will participate, to the extent reasonably requested by the managing
underwriter for the offering or the Holders, in customary efforts to
sell the securities under the offering, including without limitation,
participating in "road shows."
Each Selling Holder shall provide the Company with such information
about the Selling Holder and its intended manner of distribution of the
Registrable Securities, and otherwise shall cooperate with the Company and
the underwriters, if any, as may be needed or helpful to complete any
obligation of the Company hereunder.
Section 5. LIMITATIONS ON SALES.
(a) Suspension Period. Each Holder, upon receipt of any notice
(a "Suspension Notice") from the Company of the happening of any event
of the kind described in Section 4(f)(v), forthwith shall discontinue
disposition of the Registrable Securities pursuant to the Resale
Registration Statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(f) or until it is advised in
writing (the "Advice") by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the
Prospectus, and, if so directed by the Company, such Holder will, or
will request the managing underwriter or underwriters, if any, to
deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of
receipt of such notice; provided, however, that the Company shall not
give a Suspension Notice until after the Resale Registration Statement
has been declared effective. In the event that the Company shall give
any Suspension Notice, (i) the Company shall use its reasonable best
efforts and take such actions as are reasonably necessary to end the
Suspension Period as promptly as practicable and (ii) immediately
following expiration of the Suspension Period, the Company shall, to
the extent necessary, prepare and file with the Commission and furnish
a supplement or amendment to such Prospectus so that, as thereafter
deliverable to the purchasers of such Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Lock-up. If on any occasion of registration in which the
Company proposes to file a registration statement under the Securities
Act with respect to the proposed sale of Common Stock pursuant to a
fully-underwritten public offering, and the managing underwriter or
underwriters shall request an agreement by each Holder not to sell any
of the Registrable Securities so held by such Holder for a period of
90 days after the date of the underwriting agreement in order to
effect an orderly public distribution thereof, then so long as (i) the
Holder and its Affiliates own five percent (5%) or more of the
Company's outstanding securities or the Holder has a representative on
the Company's Board of Directors and (ii) the Holder is no longer
deemed to be an Affiliate of the Company for purposes of the
Securities Act, each Holder shall enter into and execute such an
agreement with such managing underwriter or underwriters and the
Company pertaining to a restriction on the transfer of any equity
securities of the Company during such period. Each Holder further
agrees, upon request of the managing underwriter or underwriters, to
enter into and execute an agreement with such managing underwriter or
underwriters and the Company pursuant to the terms of which such
Holder will agree not to transfer any securities of the Company during
the seven-day period immediately preceding the effectiveness of such
registration statement to the extent necessary to avoid violation of
the Exchange Act.
Section 6. HOLDER INFORMATION. If any Registration Statement refers
to any Holder by name or otherwise as the holder of any securities of the
Company, then such Holder shall have the right, to the extent permitted by
law, to require (a) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the
holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the
Company, or (b) in the event that such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal or
state "blue sky" statute and the rules and regulations thereunder then in
force, the deletion of the reference to such Holder.
Section 7. REGISTRATION EXPENSES. Any and all expenses incident to
the Company's performance of or compliance with this Agreement, including
without limitation all Commission and securities exchange, NASDAQ or NASD
registration and filing fees, all fees and reasonable expenses incurred in
connection with compliance with state securities or "blue sky" laws
(including reasonable fees and disbursements of one counsel for all
underwriters in connection with "blue sky" qualifications of the
Registrable Securities), printing expenses, messenger and delivery
expenses, internal expenses of the Company (including, without limitation,
all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), all reasonable expenses for word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, the fees and expenses
incurred in connection with the listing of the Registrable Securities, the
fees and disbursements of counsel for the Company and of the independent
certified public accountants of the Company (including the expenses of any
special audit or comfort letters) Securities Act liability insurance (if
the Company elects to obtain such insurance), the fees and expenses of any
special experts or other Persons retained by the Company in connection with
any registration (all such expenses being herein called "Registration
Expenses"), will be borne by the Company whether or not the Registration
Statement to which such expenses relate becomes effective; provided,
however, that Registration Expenses shall not include underwriting fees,
discounts or commissions attributable to the sale or disposition of
Registrable Securities.
Section 8. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law,
each Holder, its partners, officers, directors, trustees,
stockholders, employees, agents and investment advisers, and each
Person who controls such Holder within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act, or is
under common control with, or is controlled by, such Holder, together
with the partners, officers, directors, trustees, stockholders,
employees and agents of such controlling Person (collectively, the
"Controlling Persons"), from and against all losses, claims, damages,
liabilities and expenses (including without limitation any reasonable
legal or other fees and expenses actually incurred in connection with
defending or investigating any action or claim in respect thereof,
provided, however, that such legal fees shall be limited to those
incurred by one individual counsel for all indemnified parties under
this paragraph (a), together with any appropriate or necessary local
counsel, if any) (collectively, the "Damages") to which such Holder,
its partners, officers, directors, trustees, stockholders, employees,
agents and investment advisers, and any such Controlling Person may
become subject under the Securities Act, insofar as such Damages (or
proceedings in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of material fact contained in any
Registration Statement or Prospectus (or any amendment thereto)
pursuant to which Registrable Securities were registered under the
Securities Act, including all documents incorporated therein by
reference, or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading,
or caused by any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented
if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading,
except insofar as such Damages arise out of or are based upon any
such untrue statement or omission based upon information relating to
such Holder furnished in writing to the Company by such Holder (or by
a Person authorized to provide such information on behalf of such
Holder) expressly for use therein.
The Company shall also indemnify underwriters, selling brokers,
dealer managers and similar securities industry professionals
participating in the distribution, their officers, directors, agents,
employees and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) to the same extent as provided with respect to the
indemnification of the Holders.
(b) Indemnification by the Holders. Each Holder agrees,
severally and not jointly, to indemnify and hold harmless, to the
fullest extent permitted by law the Company, its directors, officers,
stockholders, employees, agents, attorneys, and investment advisers
and each Person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, or is under common control with, or is controlled by,
the Company, together with its Controlling Person, from and against
all Damages to which the Company and any Controlling Persons may
become subject under the Securities Act insofar as such Damages (or
proceedings in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Registrable Securities were registered under the Securities Act
(including all documents incorporated therein by reference), or caused
by any omission or alleged omission to state therein a material fact
necessary to make the statements therein in light of the circumstances
under which they were made not misleading, or caused by any untrue
statement or alleged untrue statement of a material fact contained in
any Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact
necessary to make the statements therein in light of the circumstances
under which they were made not misleading, to the extent, but only if
and to the extent that such Damages arise out of or are based upon any
such untrue statement or alleged untrue statement or omission or
alleged omission based upon information relating to such Holder
furnished in writing to the Company by such Holder (or by a Person
authorized to provide such information on behalf of such Holder)
expressly for inclusion therein; provided, however, that (i) such
selling Holder shall not be liable in any such case to the extent that
such Damages result from the failure of the Company to promptly amend
or take action to correct or supplement any such Registration
Statement or Prospectus on the basis of corrected or supplemental
information provided in writing by such selling Holder to the Company
expressly for such purpose and (ii) the total amount for which a
Holder shall be liable hereunder shall not in any event exceed the
aggregate proceeds received by such Holder from the sale of
Registrable Securities in such registration.
(c) Indemnification Procedures. In case any proceeding
(including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought
pursuant to either paragraph (a) or (b) above, such Person (the
"indemnified party") promptly shall notify the Person against whom
such indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party shall retain counsel reasonably satisfactory to
the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceedings and
shall pay the reasonable fees and disbursements of such counsel
relating to such proceeding; provided, however, that (i) in the case
of any proceeding in respect of which indemnity may be sought pursuant
to both paragraphs (a) and (b) above, a Holder shall not be required
to assume the defense thereof and the fees and expenses of such
counsel shall be at the expense of the Company and (ii) the Company
shall not be obligated to pay the fees and expenses of more than one
individual counsel (together with any appropriate or necessary local
counsel, if any) for all indemnified parties, including the Company.
In any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel, or (ii) the indemnifying
party fails promptly to assume the defense of such proceeding or fails
to employ counsel reasonably satisfactory to such indemnified party or
parties, or (iii) (A) the named parties to any such proceeding
(including any impleaded parties) include both such indemnified party
or parties and any indemnifying party or an Affiliate of such
indemnified party or parties or of any indemnifying party, (B) there
may be one or more legal defenses available to such indemnified party
or parties or such Affiliate of such indemnified party or parties that
are different from or additional to those available to any
indemnifying party or such Affiliate of any indemnifying party and (C)
such indemnified party or parties shall have been advised by such
counsel that there may exist a legal conflict of interest between or
among such indemnified party or parties or such Affiliate of such
indemnified party or parties and any indemnifying party or such
Affiliate of any indemnifying party, in which case, if such
indemnified party or parties notifies the indemnifying party or
parties in writing that it elects to employ separate counsel of its
choice at the reasonable expense of the indemnifying parties, the
indemnifying parties shall not have the right to assume the defense
thereof and such counsel shall be at the reasonable expense of the
indemnifying parties, it being understood, however, that unless there
exists a conflict among indemnified parties, the indemnifying parties
shall not, in connection with any one such proceeding or separate but
substantially similar or related proceedings in the same jurisdiction,
arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of
attorneys at any time for such indemnified party or parties. The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent (which will not be
unreasonably withheld) but, if settled with such consent or if there
be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party or parties from and against any
loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent (which
will not be unreasonably withheld) of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of
which such indemnified party is a party, and indemnity could have been
sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) Contribution. To the extent that the indemnification
provided for in paragraph (a) or (b) of this Section 8 is unavailable
to an indemnified party or insufficient in respect of any Damages,
then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of
such Damages in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the Holders on the
other hand in connection with the statements or omissions that
resulted in such Damages, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and
of the Holders on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the
Holders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
Notwithstanding the provisions of this Section 8(d), no Holder shall
be required to contribute any amount in excess of the amount at which the
net sale proceeds from the Registrable Securities to such Holder exceeds
the amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue statement or omission. Each Holder's
obligation to contribute pursuant to this Section 8(d) is several in the
proportion that the proceeds of the offering received by such Holder bears
to the total proceeds of the offering received by all the Holders and not
joint.
If indemnification is available under paragraph (a) or (b) of this
Section 8, the indemnifying parties shall indemnify each indemnified party
to the full extent provided in such paragraphs without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 8(d).
The Company and each Holder agrees that it would not be just or
equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the Damages referred
to in this Section 8 shall be deemed to include, subject to the limitations
set forth above, any reasonable legal or other expenses incurred (and not
otherwise reimbursed) by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for
in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law
or in equity.
(e) Survival. The parties' indemnification and contribution
obligations pursuant to this Section 8 shall survive the sale,
transfer, assignment or other disposition of any Registrable
Securities and shall survive any termination of this Agreement.
Section 9. AVAILABLE INFORMATION.
(a) Rule 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the
Exchange Act (or, if the Company is not required to file such reports,
it will, upon the request of any Holder, make publicly available other
information so long as necessary to permit sales under Rule 144 under
the Securities Act, as such rule may be amended from time to time or
any similar rule or regulation hereafter adopted by the Commission
("Rule 144"), and it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions
provided by Rule 144. Upon the request of any Holder, the Company
will deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) Rule 144A. Upon the request of any Holder, the Company
shall deliver to such holder within 20 days following receipt by the
Company of such request, the information required by Section (d)(4) of
Rule 144A under the Securities Act, as such rule may be amended from
time to time or any similar rule or regulation hereafter adopted by
the Commission ("Rule 144A"), and will take such further action as any
Holder may reasonably request, all to the extent required from time to
time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitations or the
exemptions provided by Rule 144A. All information shall be
"reasonably current" as defined in Rule 144A.
Section 10. MISCELLANEOUS.
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained
the written consent of the Holders of a majority in interest of the
Registrable Securities then outstanding.
(b) Notices. All notices, requests and other communications
provided for herein shall be given or made in writing:
if to the Company: Franchise Finance Corporation of America
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Attention: Mr. Morton H. Fleischer
Fax No.: (602) 585-2225
with a copy to: Franchise Finance Corporation of America
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Attention: Dennis L. Ruben, Esq.
Fax No.: (602) 585-2226
with a copy to: Kutak Rock
717 17th Street; Suite 2900
Denver, Colorado 80202
Attention: Paul E. Belitz, Esq.
Fax No.: (303) 292-7799
if to Purchaser: Colony Investors III, L.P.
c/o Colony Capital, Inc.
1999 Avenue of the Stars, Suite 1200
Los Angeles, California 90067
Attention: Mr. Kelvin L. Davis
Fax No.: (310) 282-8813
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Attention: Jonathan H. Grunzweig, Esq.
Fax No.: (213) 687-5600
if to any other person who is a registered Holder, to the address
for such Holder as it appears in the stock or warrant ledger of the
Company; or, in the case of any Holder, at such other address as shall
be designated by such party in a notice to the Company; or, in the
case of the Company, at such other address as the Company may
designate in a notice to the Holders.
All such notices, requests and other communications shall be:
(i) personally delivered, sent by courier guaranteeing overnight
delivery or sent by registered or certified mail, return receipt
requested, postage prepaid, in each case given or addressed as
aforesaid; and (ii) effective upon receipt.
(c) Successors and Assigns. Subject to restrictions on the
transfer of Common Stock set forth in the Company's Certificate of
Incorporation and the Investor's Agreement of even date herewith
between the Company and Purchaser, this Agreement shall inure to the
benefit of and be binding only upon (i) Purchaser, (ii) the general
and limited partners of Purchaser, and (iii) assigns of the Purchaser
(so long as the Registrable Securities are not acquired in violation
of the Investor's Agreement and the Company's Certificate of
Incorporation).
(d) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without
regard to principles of conflicts of law.
(f) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(g) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof
is validly asserted as a defense, the successful party shall, to the
extent permitted by applicable law, be entitled to recover reasonable
attorneys' fees and expenses in addition to any other available
remedy.
(h) Further Assurances. Each party shall cooperate and take
such action as may be reasonably requested by another party in order
to carry out the provisions and purposes of this Agreement and the
transactions contemplated hereby.
(i) Remedies. In the event of a breach or a threatened breach
by the Company of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive
relief, in addition to being entitled to exercise all rights granted
by law. The parties agree that the provisions of this Agreement shall
be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, is inadequate and that any
objection in any action for specific performance or injunctive relief
that a remedy at law would be adequate is waived.
[Remainder of page intentionally left blank]
FRANCHISE FINANCE CORPORATION OF AMERICA
By: /s/ MORTON H. FLEISCHER
Name: Morton H. Fleischer
Title: President and Chief Executive Officer
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By: /s/ KELVIN L. DAVIS
Name: Kelvin L. Davis
Title: President and Chief Executive Officer
EXHIBIT 4
WARRANT AGREEMENT
This Warrant Agreement (the "Agreement"), dated as of March 13, 1998,
is by and between FRANCHISE FINANCE CORPORATION OF AMERICA, a corporation
duly organized and validly existing under the laws of Delaware (the
"Company") and Colony Investors III, L.P. (the "Holder").
WHEREAS, the Company wishes to issue and sell to the Holder (i)
certain shares of the Company's common stock, $.01 par value per share (the
"Stock"), pursuant to the Stock Purchase Agreement dated as of February 13,
1998, between the Company and the Holder, and (ii) warrants to acquire
additional shares of Stock for an aggregate purchase price of $100,000,000;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
DEFINITIONS, ACCOUNTING TERMS AND DETERMINATIONS
As used herein:
"Board" means the Board of Directors of the Company.
"Bylaws" means the Amended and Restated Bylaws of the Company as
adopted by the Board on February 4, 1994.
"Certificate of Incorporation" means the Second Amended and Restated
Certificate of Incorporation of the Company as filed with the Secretary of
State of the State of Delaware on May 7, 1997.
"Commission" means the Securities and Exchange Commission or any other
similar or successor agency of the Federal government administering the
Securities Act and/or the Securities Exchange Act of 1934, as amended from
time to time (the "Exchange Act").
"Date of Issuance" shall mean March 13, 1998.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled (whether through ownership of securities or other ownership
interests, by contract or otherwise) by any of the foregoing.
"Holder" shall have the meaning set forth at the head of this
Agreement and each other Person who acquires the original Warrant
Certificate or any Warrant Certificate issued upon transfer, division,
combination, partial exercise of Warrants or in replacement or substitution
therefor or who acquires Warrant Shares pursuant to the provisions of this
Agreement.
"Include" and "Including" shall be construed as if followed by the
phrase "without being limited to."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or a Governmental Authority.
"Registration Rights Agreement" means the Registration Rights
Agreement of even date herewith between the Company and the Holder relating
to the registration of the Registrable Securities (as defined therein)
under and pursuant to the Securities Act, as said Registration Rights
Agreement shall be modified and supplemented in accordance with its terms
and in effect from time to time.
"Restricted Securities" means the Warrants and any Warrant Shares or
other securities which have been issued or are issuable upon the exercise
of such Warrants until such time as any such Restricted Securities (a) have
been sold pursuant to an effective registration statement under the
Securities Act or (b) are distributed pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act and, if it has so
requested, the Company has received an opinion of counsel (either its own
counsel or, if the Company so requests, counsel to the holders of such
Restricted Securities) reasonably acceptable to the Company that such
Restricted Securities may be so transferred without registration or
pursuant to an exemption under the Securities Act, and in each such
instance the Company has delivered new Warrant Certificates not bearing the
legend prescribed by Section 2.03 hereof.
"Rule 144" means Rule 144 promulgated by the Commission under the
Securities Act (as such rule may be amended from time to time or any
successor or similar rule then in force).
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Stockholder" means any Person (excluding any Holder) who owns any
shares of common or preferred stock of the Company (or any successor
thereto).
"Transfer" means, unless the context otherwise requires, any
disposition of any Restricted Securities, or of any interest in any
thereof, which would constitute an offer or sale thereof within the meaning
of the Securities Act.
"Warrant" shall have the meaning assigned to such term in
Section 2.01.
"Warrant Certificate" shall have the meaning assigned to such term in
Section 2.01.
"Warrant Shares" means (a) the shares of Stock purchased or
purchasable by the Holder upon the exercise of the Warrant, including any
Stock into which such Stock may thereafter be changed or converted, and
(b) if required hereunder, any additional shares of Stock issued or
distributed by way of a dividend, stock split or other distribution in
respect of the Stock referred to in clause (a) above, or acquired by way of
any rights offering or similar offering made in respect of the Stock
referred to in clause (a) above.
Except as otherwise may be expressly provided herein, all accounting
terms used herein shall be interpreted in accordance with generally
accepted accounting principles consistently applied. All calculations made
for the purposes of determining compliance with the terms of this Agreement
and the Warrants shall be made by application of generally accepted
accounting principles consistently applied (except as otherwise may be
expressly provided herein).
ARTICLE II
ISSUANCE AND EXECUTION OF WARRANT
Section 2.01. AUTHORIZATION AND ISSUANCE OF SHARES AND WARRANTS. The
Company has authorized: (a) the issuance of a warrant certificate
substantially in the form of Annex 1 to this Agreement (the "Warrant
Certificate") evidencing warrants to purchase shares of Stock (such Warrant
Certificate, other Warrant Certificates issued upon transfer, partial
exercise, division or combination of, or in substitution or replacement for
any Warrant Certificate or the rights to purchase Stock evidenced by each
of the foregoing, is, as the context requires, sometimes referred to herein
as a "Warrant" or "Warrants"); and (b) the issuance of such number of
shares of Stock as shall permit the compliance by the Company with its
obligations to issue Stock pursuant to the Warrants. In addition, the
Warrant Certificate may have such letters, numbers or other marks of
identification or designation and such legends, summaries, or endorsements
stamped, printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as, in any particular case, may be required to comply with
any law or with any rule or regulation of any regulatory authority or
agency, or to conform to customary usage; provided, however, that no such
change shall be made which affects the duties or obligations of the Company
without the consent of the Company.
Section 2.02. EXECUTION AND DELIVERY OF WARRANT CERTIFICATE. The
Warrant Certificate shall be executed on behalf of the Company by the
Chairman of the Board or the Company's President or any Vice President and
attested to by its Secretary or Assistant Secretary, either manually or by
facsimile signature printed thereon. In case any authorized officer of the
Company who shall have signed any Warrant Certificate shall cease to be
such officer of the Company either before or after delivery thereof by the
Company to the Holder, the signature of such person on such Warrant
Certificate shall be valid nevertheless and such Warrant Certificate may be
issued and delivered to the person entitled to receive the Warrants
represented thereby with the same force and effect as though the person who
signed such Warrant Certificate had not ceased to be such officer of the
Company. The Warrant Certificate originally issued to Holder shall be
delivered on the Date of Issuance. The Company shall maintain books (the
"Warrant Register") for the registration of Warrants and the registration
of transfers of Warrants.
Section 2.03. TRANSFER AND EXCHANGE OF WARRANTS.
(a) Warrant Certificates evidencing Restricted Securities (and
only such Warrant Certificates) will bear a legend in substantially
the following form:
NEITHER THE EXERCISE OF THE WARRANTS EVIDENCED BY THIS CERTIFICATE NOR
THE ISSUANCE OF SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE, AND
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH TRANSFER IS
PURSUANT TO (i) A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO
SUCH SECURITIES UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS
THEREUNDER OR (ii) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND, IF IT
HAS SO REQUESTED, THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
(EITHER ITS OWN COUNSEL OR, IF THE COMPANY SO REQUESTS, COUNSEL TO THE
HOLDERS OF SUCH SECURITIES) REASONABLY ACCEPTABLE TO THE COMPANY THAT
SUCH SECURITIES MAY BE SO TRANSFERRED. FURTHERMORE, THIS WARRANT AND
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO
RESTRICTIONS ON TRANSFER SET FORTH IN THE COMPANY'S CERTIFICATE OF
INCORPORATION AND IN A REGISTRATION RIGHTS AGREEMENT AND AN INVESTOR'S
AGREEMENT, BOTH OF EVEN DATE HEREWITH.
(b) Following the transfer or exchange of a Restricted Security
or Securities (other than pursuant to an effective registration
statement under the Securities Act) the transferor of such Restricted
Security or Securities, upon request of the Company, shall deliver to
the Company an opinion of counsel, in substance reasonably
satisfactory to the Company, to the effect that such Restricted
Security to be issued upon such transfer or exchange may be so issued
without the foregoing legend; provided that such Restricted Security
nonetheless shall contain a legend referencing the restrictions
contained in the Investor's Agreement of even date herewith.
(c) Subject to paragraph (a) above, the Company shall register
the transfer of all or any whole number of Warrants covered by any
outstanding Warrant Certificate in the Warrant Register upon surrender
to the Company of Warrant Certificates accompanied by a written
instrument or instruments of transfer, in form reasonably satisfactory
to the Company, duly executed by the registered Holder or his attorney
duly authorized in writing. Upon any such registration of transfer a
new Warrant Certificate shall be issued to the transferee and the
surrendered Warrant Certificate promptly shall be canceled by the
Company. Warrant Certificates may be exchanged at the option of the
Holder thereof, upon surrender, properly endorsed by the registered
Holders, at the Company, with written instructions, for other Warrant
Certificates evidencing in the aggregate a like number of Warrants.
The Company may require the payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any
such exchange or transfer.
Section 2.04. TRANSFER AND EXCHANGE OF WARRANTS. All the
restrictions imposed by this Article II upon the transferability of the
Restricted Securities shall cease and terminate as to any particular
Restricted Security when such Restricted Security shall have been
effectively registered under the Securities Act and applicable state
securities laws and sold by the Holder thereof in accordance with such
registration or sold under and pursuant to Rule 144. Whenever the
restrictions imposed by this Article II shall terminate as to any
Restricted Security as herein above provided, the Holder thereof shall be
entitled to receive from the Company, without expense (other than any tax
or governmental charge that may be imposed), a new certificate evidencing
such Restricted Security not bearing the restrictive legend otherwise
required to be borne by a certificate evidencing such Restricted Security.
ARTICLE III
COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Holder as follows:
Section 3.01. EXISTENCE; QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
Section 3.02. NO BREACH. The execution, delivery and performance of
this Agreement, the Warrants and the Registration Rights Agreement by the
Company, the issuance of the Warrants and the consummation of the
transactions contemplated hereby and thereby will not (a) violate the
Certificate of Incorporation or Bylaws of the Company, (b) violate any
loan, note or other evidence of indebtedness to which the Company is a
party or is bound, or constitute a breach of or default under any other
instrument or agreement to which the Company is a party or is bound which
is material to the business or properties of the Company taken as a whole,
(c) violate any judgment, order, injunction, decree or award against or
binding upon the Company, (d) result in the creation of any Lien upon any
of the properties or assets of the Company, or (e) violate any law, rule or
regulation relating to the Company, except in each such case as would not
have a material adverse effect on the Company.
Section 3.03. CORPORATE ACTION. The Company has all necessary
corporate power and authority to execute, deliver and perform its
obligations under this Agreement, the Warrants and the Registration Rights
Agreement; the execution, delivery and performance by the Company of this
Agreement, the Warrants and the Registration Rights Agreement have been
duly authorized by all necessary corporate action on the part of the
Company; this Agreement has been duly executed and delivered by the Company
and constitutes, and the Registration Rights Agreement when executed and
delivered by the Company will constitute, the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their respective terms, except to the extent that enforcement thereof
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, or (b) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in
equity or at law); the Warrants, when executed, issued and delivered
pursuant to this Agreement will constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally, or (ii) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at
law); the Warrant Shares initially covered by the Warrants will be duly and
validly authorized and reserved for issuance and when paid for, issued and
delivered in accordance with the Warrants, shall be duly and validly
issued, fully paid and nonassessable and free and clear of any Liens; and
none of the Warrant Shares issued pursuant to the terms hereof or the
Warrants shall be in violation of any preemptive rights of any Stockholder.
Section 3.04. APPROVALS. Except as contemplated by the Registration
Rights Agreement, no authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority or any other
Person which shall not have been obtained on or prior to the Date of
Issuance are necessary for the execution, delivery or performance by the
Company of this Agreement, the Warrants or the Registration Rights
Agreement or for the validity or enforceability thereof.
Section 3.05. CAPITALIZATION. As of the Date of Issuance of the
original Warrant to Holder, the capitalization of the Company consists
solely of Stock and options and warrants to acquire Stock.
ARTICLE IV
HOLDER'S REPRESENTATIONS AND WARRANTIES
The Holder represents and warrants to the Company as follows:
Section 4.01. PURCHASE ENTIRELY FOR OWN ACCOUNT. The Warrant is
being acquired and, if such Warrant is exercised, the Stock issuable upon
such exercise will be acquired, for investment for the Holder's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the federal or state
securities laws.
Section 4.02. INVESTMENT EXPERIENCE. The Holder represents that it
can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Warrant and the
Stock issuable upon exercise thereof. The Holder also represents it has
not been organized solely for the purpose of acquiring the Warrant or the
Stock issuable upon exercise thereof.
Section 4.03. RESTRICTED SECURITIES. The Holder understands that the
Warrant and the Stock issuable upon exercise of such Warrant are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and have not been registered under the
Securities Act nor qualified under applicable state securities laws and
that under such laws and applicable regulations such securities may not be
resold without registration under the Securities Act, except in certain
limited circumstances. In this connection, the Holder represents that it
is familiar with Rule 144, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act.
Section 4.04. ACCREDITED INVESTOR. The Holder is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under
the Securities Act.
ARTICLE V
HOLDERS; RIGHTS
Section 5.01. DELIVERY EXPENSES. If any Holder surrenders any
Warrant Certificate or Warrant Shares to the Company or a transfer agent of
the Company for exchange for instruments of other denominations or
registered in another name or names, the Company shall cause such new
instruments to be issued and shall deliver, in each case at the cost of the
Holder, from the office of such Holder from or to the Company or its
transfer agent, the surrendered instrument and any new instruments issued
in substitution or replacement for the surrendered instrument.
Section 5.02. TAXES. The Company shall pay all transfer taxes which
may be payable in connection with the execution and delivery of this
Agreement or the Registration Rights Agreement or the issuance of the
Warrants and Warrant Shares hereunder or in connection with any
modification of this Agreement, the Registration Rights Agreement or the
Warrants and shall hold each Holder harmless without limitation as to time
against any and all liabilities with respect to all such taxes. The
Company shall not, however, be required to pay: (i) federal, state or local
income tax; (ii) any intangible personal property, franchise or similar
tax; or (iii) any transfer tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Stock in a name
other than that in which a Warrant is registered, and no such issue or
delivery shall be made unless and until the Person requesting such issue
has established, to the satisfaction of the Company, that such tax has been
paid. In addition, the Company shall not be obligated to pay any transfer
tax that is the sole legal obligation of any Holder, unless the Company
shall have received an opinion of counsel to the effect that such payment,
if made, would not cause the Company to fail to satisfy the requirements of
section 857(a)(1) of the Internal Revenue Code of 1986, as amended. The
obligations of the Company under this Section 5.02 shall survive any
termination of this Agreement or the Registration Rights Agreement, and any
cancellation or termination of the Warrants.
Section 5.03. REPLACEMENT OF INSTRUMENTS. Upon receipt by the
Company of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of any certificate or instrument
evidencing any Warrants or Warrant Shares, and (a) in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to it, or (b) in
the case of mutilation, upon surrender or cancellation, thereof, the
Company, at the Holder's expense, shall execute, register and deliver, in
lieu thereof, a new certificate or instrument for (or evidencing the right
to purchase) an equal number of Warrants or Warrant Shares.
Section 5.04. CERTAIN RESTRICTIONS. The Company shall not at any
time enter into an agreement or other instrument, and has not entered into
an agreement currently in effect, making performance hereunder or the
issuance of shares of Stock upon the exercise of any Warrant a default
under any such agreement or instrument.
Section 5.05. INDEMNIFICATION. Each party hereto hereby irrevocably
indemnifies the other and saves it harmless against any and all reasonable
out of pocket losses, expenses or liabilities, including judgments, costs
and reasonable counsel fees and expenses arising out of or in connection
with a breach of this Agreement, except as a direct result of the gross
negligence, bad faith or willful misconduct of such other party.
ARTICLE VI
MISCELLANEOUS
Section 6.01. WAIVER. No failure on the part of any Holder to
exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege under this Agreement, the Warrants or the
Registration Rights Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege under this
Agreement, the Warrants or the Registration Rights Agreement preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
Section 6.02. NOTICES.
(a) All notices, requests and other communications provided for
herein and in the Warrants (including any waivers or consents under,
this Agreement and the Warrants) shall be given or made in writing:
if to the Company: Franchise Finance Corporation of America
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Attention: Mr. Morton H. Fleischer
Fax No.: (602) 585-2225
with a copy to: Franchise Finance Corporation of America
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Attention: Dennis L. Ruben, Esq.
Fax No.: (602) 585-2226
with a copy to: Kutak Rock
717 17th Street; Suite 2900
Denver, Colorado 80202
Attention: Paul E. Belitz, Esq.
Fax No.: (303) 292-7799
if to Holder: Colony Investors III, L.P.
c/o Colony Capital, Inc.
1999 Avenue of the Stars, Suite 1200
Los Angeles, California 90067
Attention: Mr. Kelvin L. Davis
Fax No.: (310) 282-8813
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Attention: Jonathan H. Grunzweig, Esq.
Fax No.: (213) 687-5600
if to any other person who is the registered Holder of any
Warrants or Warrant Shares, to the address for such Holder as it
appears in the stock or warrant ledger of the Company; or, in the case
of any Holder, at such other address as shall be designated by such
party in a notice to the Company; or, in the case of the Company, at
such other address as the Company may designate in a notice to the
Holders.
(b) All such notices, requests and other communications shall
be: (i) personally delivered, sent by courier guaranteeing overnight
delivery or sent by registered or certified mail, return receipt
requested, postage prepaid, in each case given or addressed as
aforesaid; and (ii) effective upon receipt.
Section 6.03. EXPENSES, ETC. Each party hereto shall pay all of its
own costs and expenses incurred with respect to the negotiation, execution
and delivery of this Agreement and the Warrants.
Section 6.04. AMENDMENTS, ETC. Any provision of this Agreement may
be amended or modified only by an instrument in writing signed by (a) the
Company and (b) the Holders of at least a majority of the Warrant Shares
issued or issuable upon exercise of the Warrants; provided, however, that
no such amendment or waiver, without the written consent of all Holders of
such shares and Warrants at the time outstanding, shall amend this
Section 6.04.
Section 6.05. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 6.06. SURVIVAL.
(a) All representations and warranties made by the Company
herein or in any certificate or other instrument delivered by it or on
its behalf under this Agreement or the Registration Rights Agreement
shall be considered to have been relied upon by each Holder and shall
survive the issuance of the Warrants or the Warrant Shares regardless
of any investigation made by or on behalf of any Holder. All
statements in any such certificate or other instrument so delivered
shall constitute representations and warranties by the Company
hereunder.
(b) All representations and warranties made by the Holders
herein shall be considered to have been relied upon by the Company and
shall survive the issuance to the Holders of the Warrants or the
Warrant Shares regardless of any investigation made by the Company or
on its behalf.
Section 6.07. CAPTIONS. The captions and section headings appearing
herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
Section 6.08. COUNTERPARTS. This Agreement may be executed on
counterpart signature pages or in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart
signature page or counterpart.
Section 6.09. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be fully performed in such
State.
Section 6.10. SEVERABILITY. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
Section 6.11. DEFECTS IN NOTICE. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice
pursuant to this Agreement shall not affect in any way the rights of any
registered Holder of a Warrant Certificate or the legality or validity of
any adjustment made pursuant to the provisions of the Warrant, or any
transaction giving rise to any such adjustment, or the legality or validity
of any action taken or to be taken by the Company.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
FRANCHISE FINANCE CORPORATION OF AMERICA
By: /s/ MORTON H. FLEISCHER
Name: Morton H. Fleischer
Title: President and Chief Executive Officer
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By: /s/ KELVIN L. DAVIS
Name: Kelvin L. Davis
Title: President and Chief Executive Officer
EXHIBIT 5
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) under the Securities Exchange Act
of 1934, as amended, each of the persons named below agrees to the joint
filing on behalf of each of them of a Statement on Schedule 13D (including
amendments thereto) with respect to the common stock, par value $.01 per
share, of Franchise Finance Corporation of America, a Delaware corporation,
and further agrees that this Joint Filing Agreement be included as an
exhibit to such filings provided that, as contemplated by Section 13d-
1(f)(l)(ii), no person shall be responsible for the completeness or
accuracy of the information concerning the other persons making the filing,
unless such person knows or has reason to believe that such information is
inaccurate. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument.
Dated: March 23, 1998
By: /s/ THOMAS J. BARRACK, JR.
_____________________________
Thomas J. Barrack, Jr.
By: /s/ KELVIN L. DAVIS
___________________________
Kelvin L. Davis
COLONYGP III, Inc.,
a Delaware corporation,
By: /s/ KELVIN L. DAVIS
_________________________
Kelvin L. Davis
President
COLONY CAPITAL III, L.P.,
a Delaware limited partnership,
By: ColonyGP III, Inc.,
a Delaware corporation,
its general partner
By: /s/ KELVIN L. DAVIS
________________________
Kelvin L. Davis
President
COLONY INVESTORS III, L.P.,
a Delaware limited partnership,
By: Colony Capital III, L.P.,
a Delaware limited partnership,
its general partner
By: ColonyGP III, Inc.,
a Delaware corporation,
its general partner
By: /s/ KELVIN L. DAVIS
_________________________
Kelvin L. Davis
President
COLONY SB, LLC,
a Delaware limited liability company,
By: Colony Investors III, L.P.,
a Delaware limited partnership,
its sole and managing member
By: Colony Capital III, L.P.,
a Delaware limited partnership,
its general partner
By: ColonyGP III, Inc.,
a Delaware corporation,
its general partner
By: /s/ KELVIN L. DAVIS
__________________________
Kelvin L. Davis
President
