SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )
Pacific Gulf Properties Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
694396102
(CUSIP Number)
Mr. Matthew W. Kaplan
Rothschild Realty Inc.
1251 Avenue of the Americas
New York, New York 10020
(212) 403-3500
(Name, address and telephone number of person
authorized to receive notices and communications)
July 18, 1997
(Date of event which requires filing of this statement)
______________________
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Page 1 of 7 Pages
<PAGE>
13D
CUSIP No. 694396102
_____________________________________________________________________________
(1) NAME OF REPORTING PERSON Five Arrows Realty Securities L.L.C.
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS
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
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER -0-
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER 740,858 fn(1)
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER -0-
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER 740,858 fn(1)
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 740,858 fn(1)
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 5.8%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON
OO
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
fn(1) Upon conversion of (i) 270,270 shares of Class A Senior Cumulative
Convertible Preferred Stock and (ii) 470,588 shares of Class B Senior
Cumulative Convertible Preferred Stock, in each case, held by the reporting
person, which are convertible into Common Stock on a 1-for-1 basis, subject to
adjustment.
Page 2 of 7 Pages
<PAGE>
13D
CUSIP No. 694396102
_____________________________________________________________________________
(1) NAME OF REPORTING PERSON Rothschild Realty Investors II L.L.C.
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS
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
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER -0-
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER 740,858 fn(1)
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER -0-
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER 740,858 fn(1)
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 740,858 fn(1)
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 5.8%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON
OO
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
fn(1) Upon conversion of (i) 270,270 shares of Class A Senior Cumulative
Convertible Preferred Stock and (ii) 470,588 shares of Class B Senior
Cumulative Convertible Preferred Stock, in each case, held by the reporting
person, which are convertible into Common Stock on a 1-for-1 basis, subject to
adjustment.
Page 3 of 7 Pages
<PAGE>
Item 1. Security and Issuer
This statement on Schedule 13D ("Schedule 13D") is being filed
with respect to the Common Stock, par value $.01 per share (the "Common
Stock") of Pacific Gulf Properties, Inc., a Maryland corporation (the
"Company"), whose principal executive offices are located at 363 San
Miguel Drive, Newport Beach, California 92660-7805.
Item 2. Identity and Background
(a) This Schedule 13D is being filed on behalf of (i) Five Arrows
Realty Securities L.L.C., a Delaware limited liability company ("Five Arrows")
and (ii) Rothschild Realty Investors II L.L.C., a Delaware limited liability
company and sole Managing Member of Five Arrows ("Rothschild").
The reporting entities are making a joint filing pursuant to Rule
13d-1(f) because, by reason of the relationship as described herein, they may
be deemed to be a "group" within the meaning of Section 13(d)(3) with respect
to acquiring, holding and disposing of shares of Preferred Stock.
(b) The business address of each of the Five Arrows and Rothschild
is 1251 Avenue of the Americas, New York, New York 10020.
(c) Five Arrows is a private investment limited liability company.
The principal occupation of Rothschild is acting as managing member of Five
Arrows. The current Managers of Rothschild are John D. McGurck, Matthew W.
Kaplan, James E. Quigley, 3rd, and D. Pike Aloian.
(d) Neither of Five Arrows or Rothschild has, during the last five
years, been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors).
(e) Neither Five Arrows or Rothschild has, during the last five
years, been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as 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 a finding of any violation with respect to such laws.
Page 4 of 7 Pages
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration
The source of funds for the purchases reported by Five Arrows herein
was Five Arrow's capital. The total amount of funds used by Five Arrows to
purchase the 270,270 shares of Class A Senior Cumulative Convertible Preferred
Stock (the "Class A Preferred Stock") reported herein was $5,000,000. The
total amount of funds used by Five Arrows to purchase the 470,588 shares of
Class B Senior Cumulative Convertible Preferred Stock (the "Class B Preferred
Stock" and, together with the Class A Preferred Stock, the "Preferred Stock")
reported herein was $10,000,000.
Item 4. Purpose of Transaction
The purpose of the acquisition of the shares of Preferred Stock
by Five Arrows is for investment. The acquisition of the 270,270 shares of
Class A Preferred Stock was made pursuant to an Investment Agreement, dated
as of December 31, 1996, between the Company and Five Arrows (the "Class A
Investment Agreement"). The Class A Investment Agreement provides that on or
before December 31, 1997, the Company shall be required to sell to Five
Arrows, and Five Arrows shall be required to purchase from the Company, an
additional 1,081,081 shares of Class A Preferred Stock. The acquisition of
the 470,588 shares of Class B Preferred Stock was made pursuant to an
Investment Agreement, dated as of May 27, 1997, between the Company and Five
Arrows (the "Class B Investment Agreement"). The Class B Investment Agreement
provides that on or before December 31, 1997, the Company shall be required to
sell to Five Arrows, and Five Arrows shall be required to purchase from the
Company, an additional 941,177 shares of Class B Preferred Stock.
Five Arrows intends to review its holdings with respect to the
Company on a continuing basis. Depending on Five Arrows's evaluation of the
Company's business and prospects, and upon future developments (including, but
not limited to, market prices of the shares of Preferred Stock and
availability and alternative uses of funds; as well as conditions in the
securities markets and general economic and industry conditions), Five Arrows
may acquire other securities of the Company; sell all or a portion of its
shares of Preferred Stock or other securities of the Company, now owned or
hereafter acquired; provided, however, that Five Arrows has agreed that prior
to June 30, 1998 it shall not sell, transfer, convey, assign, pledge or
hypothecate any shares of the Preferred Stock or any shares of the Common
Stock into which such Preferred Stock is convertible.
Pursuant to the Articles Supplementary of the Charter of the
Company, Five Arrows has the right to elect one member of the Board of
Directors of the Company. Additionally, upon the occurrence of certain other
events, Five Arrows would have the right to elect a second member of the Board
of Directors of the Company. Consequently, James E. Quigley 3rd has been
designated as a member of the Board of Directors of the Company and has been
appointed to the Board of Directors of the Company by the existing Board of
Directors of the Company.
Page 5 of 7 Pages
<PAGE>
Other than as described above, Five Arrows has no present plans or
proposals which relate to, or would result in, any of the matters enumerated
in paragraphs (b) through (j), inclusive, of Item 4 of Schedule 13D. Five
Arrows may, at any time and from time to time, review or reconsider its
position with respect to the Company, and formulate plans or proposals with
respect to any such matters.
Item 5. Interest in Securities of the Issuer
(a) As of the close of business on July 18, 1997, Five Arrows
owned, within the meaning of Rule 13d-3 under the Exchange Act, (i) 270,270
shares of Class A Preferred Stock and (ii) 470,588 shares of Class B Preferred
Stock, each of which is convertible at any time on a 1-for-1 basis into Common
Stock of the Company, subject to adjustment. Upon the full conversion of the
740,858 shares of Preferred Stock, at the initial conversion ratio, Five
Arrows would own 5.8% of the issued and outstanding shares of Common Stock
(based on 12,129,455 shares of Common Stock outstanding as of May 1, 1997, as
reported in the Company's Form 10-Q for the quarterly period ended March 31,
1997). Rothschild, as sole managing member of Five Arrows, may be deemed the
beneficial owner of the 740,858 shares of Preferred Stock held by Five Arrows.
(b) Five Arrows has the sole power to vote and dispose of the
740,858 shares of Preferred Stock owned by it, which power may be exercised
by Rothschild.
(c) Five Arrows purchased the 270,270 shares of Class A Preferred
Stock from the Company on January 21, 1997 pursuant to the Class A Investment
Agreement. In consideration for the 270,270 shares of Class A Preferred
Stock, Five Arrows paid $18.50 per share for a total of $5,000,000. Five
Arrows purchased the 470,588 shares of Class B Preferred Stock from the
Company on July 18, 1997 pursuant to the Class B Investment Agreement. In
consideration for the 470,488 shares of Class B Preferred Stock, Five Arrows
paid $21.25 per share for a total of $10,000,000.
(d) Not applicable.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer
Pursuant to the Articles Supplementary of the Company and the terms of
the Preferred Stock, Five Arrows has the right to require the Company to
redeem its shares of Preferred Stock at a premium upon the occurrence of
certain events. Additionally, the Company has the right to redeem shares of
the Preferred Stock at a premium on or after December 31, 2001. Other than
as described herein, or the agreement described in Exhibit 99.1 in Item 7
below, there are no contracts, understandings or relationships (legal or
otherwise) among the persons named in Item 2 hereof and between such persons
or any person with respect to any securities of the Company, including but
not limited to transfer or voting of any of the Common Stock, finder's fees,
joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of proxies.
Page 6 of 7 Pages
<PAGE>
ITEM 7. Material To Be Filed As Exhibits
Exhibit Number Description
99.1 Joint Acquisition Statement, as required
by Rule 13d-1(f)(1) of the Securities Act
of 1934.
99.2 Investment Agreement, dated as of
December 31, 1996, between the Company
and Five Arrows.
99.3 Investment Agreement, dated as of
May 27, 1996, between the Company and
Five Arrows.
SIGNATURE
After reasonable inquiry and to the best of their knowledge and
belief, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Dated: July 28, 1997
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ Matthew W. Kaplan
Matthew W. Kaplan
Manager
ROTHSCHILD REALTY INVESTORS II L.L.C.
By: /s/ Matthew W. Kaplan
Matthew W. Kaplan
Senior Vice President
Page 7 of 7 Pages
EXHIBIT 99.1
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-1(f)1
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D, as amended, is filed on behalf of each of the
undersigned and that all subsequent amendments to this statement on
Schedule 13D, as amended, shall be filed on behalf of each of the
undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall
be responsible for the timely filing of such amendments, and for the
completeness and accuracy of the information concerning him or it
contained therein, but shall not be responsible for the completeness
and accuracy of the information concerning the other, except to the
extent that he or it knows or has reason to believe that such
information is inaccurate.
Dated: July 28, 1997
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ Matthew W. Kaplan
Matthew W. Kaplan
Manager
ROTHSCHILD REALTY INVESTORS II L.L.C.
By: /s/ Matthew W. Kaplan
Matthew W. Kaplan
Senior Vice President
INVESTMENT AGREEMENT
between
PACIFIC GULF PROPERTIES INC.
and
FIVE ARROWS REALTY SECURITIES L.L.C.
______________________
Dated as of December 31, 1996
______________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINED TERMS
SECTION 1.1 DEFINED TERMS 1
SECTION 1.2 TERMS DEFINED HEREIN 6
ARTICLE 2 SALE AND PURCHASE OF PREFERRED SHARES
SECTION 2.1 SALE OF PREFERRED SHARES 6
SECTION 2.2 PAYMENT FOR THE PREFERRED SHARES 7
SECTION 2.3 TRANSFER TAXES 7
ARTICLE 3 CLOSINGS
SECTION 3.1 CLOSINGS 7
SECTION 3.2 CLOSING DATES 7
SECTION 3.3 CANCELLATION OF SUBSEQUENT CLOSINGS 7
SECTION 3.4 AVAILABILITY FEE 8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1 DUE INCORPORATION AND STATUS OF THE COMPANY 8
SECTION 4.2 AUTHORITY 8
SECTION 4.3 VALID AGREEMENT OF THE COMPANY 8
SECTION 4.4 NO DEFAULT 9
SECTION 4.5 NO REQUIRED CONSENTS 9
SECTION 4.6 RESERVATION OF SHARES 9
SECTION 4.7 VALIDITY OF PREFERRED SHARES 9
SECTION 4.8 TRANSFERABILITY 9
SECTION 4.9 DISCLOSURE 10
SECTION 4.10 CAPITALIZATION 10
SECTION 4.11 LITIGATION 11
SECTION 4.12 ERISA 11
SECTION 4.13 ENVIRONMENTAL MATTERS 12
SECTION 4.14 INVESTMENT COMPANY 12
SECTION 4.15 TAXES 13
SECTION 4.16 INSURANCE 13
SECTION 4.17 AFFILIATED TRANSACTIONS 13
SECTION 4.18 LIABILITIES 13
SECTION 4.19 AGREEMENT AND WAIVER 14
SECTION 4.20 NO EVENT OF DEFAULT 14
SECTION 4.21 NO BROKERS 14
SECTION 4.22 BEAR, STEARNS & CO. INC. 14
SECTION 4.23 FULL DISCLOSURE 14
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
SECTION 5.1 ORGANIZATION 15
SECTION 5.2 ACCREDITED INVESTOR 15
SECTION 5.3 VALID AGREEMENTS OF THE INVESTOR 15
SECTION 5.4 NO DEFAULT 15
SECTION 5.5 OPPORTUNITY FOR INQUIRY 15
SECTION 5.6 PURCHASE ENTIRELY FOR OWN ACCOUNT 15
SECTION 5.7 MATERIALS 15
SECTION 5.8 KNOWLEDGE AND EXPERIENCE 16
SECTION 5.9 NO BROKERS 16
SECTION 5.10 INVESTMENT COMPANY 16
ARTICLE 6 COVENANTS AND UNDERTAKINGS
SECTION 6.1 CLOSINGS 16
SECTION 6.2 EXPENSES OF ROTHSCHILD REALTY INC. 16
SECTION 6.3 FEES AND EXPENSES OF SCHULTE ROTH & ZABEL LLP 16
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
INVESTOR TO CLOSE
SECTION 7.1 REPRESENTATIONS AND COVENANTS 17
SECTION 7.2 GOOD STANDING CERTIFICATES 17
SECTION 7.3 GOVERNMENTAL PERMITS AND APPROVALS 17
SECTION 7.4 LEGISLATION 18
SECTION 7.5 LEGAL PROCEEDINGS 18
SECTION 7.6 THIRD PARTY CONSENTS 18
SECTION 7.7 STOCK CERTIFICATES 18
SECTION 7.8 APPROVAL OF COUNSEL TO THE INVESTOR 18
SECTION 7.9 APPOINTMENT OF DIRECTOR 18
SECTION 7.10 CERTIFICATE OF DESIGNATION 19
SECTION 7.11 OPERATING AGREEMENT 19
SECTION 7.12 OPINIONS OF COUNSEL 19
SECTION 7.13 NO STOP ORDER 19
SECTION 7.14 LISTING OF COMMON STOCK 19
SECTION 7.15 EXPENSES OF ROTHSCHILD REALTY INC. 19
SECTION 7.16 FEES AND EXPENSES OF SCHULTE ROTH & ZABEL LLP 19
SECTION 7.17 AGREEMENT AND WAIVER 19
SECTION 7.18 DIVIDENDS ON PREFERRED SHARES 19
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO CLOSE
SECTION 8.1 REPRESENTATIONS AND COVENANTS 20
SECTION 8.2 GOVERNMENTAL PERMITS AND APPROVALS 20
SECTION 8.3 LEGAL PROCEEDINGS 20
SECTION 8.4 THIRD PARTY CONSENTS 20
SECTION 8.5 PURCHASE PRICE 20
SECTION 8.6 APPROVAL OF COUNSEL TO THE COMPANY 20
SECTION 8.7 NO STOP ORDER 21
SECTION 8.8 OPINION OF INVESTOR'S COUNSEL 21
ARTICLE 9 ASSIGNMENT
SECTION 9.1 ASSIGNABILITY BY INVESTOR 21
SECTION 9.2 ASSIGNABILITY BY THE COMPANY 21
SECTION 9.3 BINDING AGREEMENT 21
ARTICLE 10 MISCELLANEOUS
SECTION 10.1 APPLICABLE LAW 21
SECTION 10.2 NOTICES 21
SECTION 10.3 ENTIRE AGREEMENT; AMENDMENTS 22
SECTION 10.4 REMEDIES FOR BREACHES OF THIS AGREEMENT 22
SECTION 10.5 CONFIDENTIALITY 24
SECTION 10.6 STANDSTILL 24
SECTION 10.7 LOCK-UP 25
SECTION 10.8 TERMINATION 25
SECTION 10.9 COUNTERPARTS 26
<PAGE>
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT dated as of December 31, 1996
between Pacific Gulf Properties Inc., a corporation organized
under the laws of the State of Maryland (the "Company") and Five
Arrows Realty Securities L.L.C., a limited liability company
organized under the laws of the State of Delaware (the
"Investor").
WHEREAS, the Company wishes to issue the Preferred
Shares (as defined herein) to the Investor, and the Investor
wishes to purchase, acquire and accept the Preferred Shares from
the Company (the "Investment").
NOW THEREFORE, in consideration of the promises and the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE 1 DEFINED TERMS.
Section 1.1 Defined Terms. The following terms
shall, unless the context otherwise requires, have the meanings
set forth in this Section 1.1.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable
attorneys' fees and disbursements.
"Affiliate" means, with respect to any Person, (a) any
member of the Immediate Family of such Person or a trust
established for the benefit of such member, (b) any beneficiary
of a trust described in (a), (c) any Entity which, directly or
indirectly though one or more intermediaries, is deemed to be the
beneficial owner of 25% or more of the voting equity of the
Person for the purposes of Section 13(d) of the Exchange Act, (d)
any officer of the Person or any member of the Board of Directors
of the Person, or (e) any Entity which, directly or indirectly
through one or more intermediaries, controls, is controlled by,
or is under common control with, such Person, including such
Person or Persons referred to in the preceding clauses (a) or
(d); provided, however, that none of the Investor, Rothschild or
their respective Affiliates nor any of their respective officers,
directors, partners, members or Affiliates nor any Preferred
Director (as such term is defined in the Certificate of
Designation) shall be considered an Affiliate of the Company or
its Subsidiaries for purposes of this Agreement.
"Agreement" means this Investment Agreement, as
originally executed and as hereafter from time to time
supplemented, amended and restated.
"Agreement and Waiver" means the Agreement and Waiver,
dated as of the date of the initial Closing, between the Company
and the Investor in the form of Exhibit A attached hereto.
"Benefit Plan" means a defined benefit plan as defined
in Section 3(35) of ERISA that is subject to Title IV of ERISA
(other than a Multiemployer Plan) and in respect of which the
Company or any ERISA Affiliate is or within the immediately
preceding six (6) years was an "employer" as defined in
Section 3(5) of ERISA.
"Business Day" means any Monday, Tuesday, Wednesday,
Thursday or Friday which is not a day in which banking
institutions in New York City are authorized or obligated by law
or executive order to close.
"Certificate of Designation" means the Articles
Supplementary classifying 1,351,351 shares of preferred stock as
Senior Cumulative Convertible Preferred Stock of the Company in
the form of Exhibit B attached hereto.
"Charter" means the Articles of Amendment and
Restatement of the Company as currently in effect and as amended
in the future in a manner that is not inconsistent with the terms
of the Operative Instruments.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time or any successor statute thereto.
"Common Stock" means the shares of the common stock,
par value $.01 per share, of the Company.
"Confidential Information" means the identity of the
Company in the context of the Investment, the existence and
contents of discussions regarding the Investment and information
concerning the assets, operations, business, records, projections
and prospects of the Company; provided, however, that the term
"Confidential Information" does not include information that (i)
is or becomes available to the public other than as a result of
disclosure by any of the Investor or Rothschild or any of their
respective representatives, (ii) was available to the Investor or
Rothschild or was within the Investor's or Rothschild's knowledge
prior to its disclosure by the Company to the Investor or
Rothschild, or (iii) becomes available to the Investor or
Rothschild from a source other than the Company, provided that
such source is not known by the Investor or Rothschild to be
bound by a confidentiality agreement with the Company or its
representative.
"Entity" means any general partnership, limited
partnership, corporation, joint venture, trust, business trust,
real estate investment trust, limited liability company,
cooperative or association.
"Environmental Claim" means any complaint, summons,
citation, notice, directive, order, claim, litigation,
investigation, judicial or administrative proceeding, judgment,
letter or other communication from any governmental agency,
department, bureau, office or other authority, or any third party
alleging violations of Environmental Laws or Releases of
Hazardous Materials.
"Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. 9601 et seq., as amended; the Resource
Conservation and Recovery Act ("RCRA), 42 U.S.C. 6901 et seq., as
amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as
amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as
amended; and any other federal, state, local or municipal laws,
statutes, regulations, rules or ordinances imposing liability or
establishing standards of conduct for protection of the
environment.
"Environmental Liabilities" means any monetary
obligations, losses, liabilities (including strict liability),
damages, punitive damages, treble damages, costs and expenses
(including all reasonable out-of-pocket fees, disbursements and
expenses of counsel, reasonable out-of-pocket expert and
consulting fees and reasonable out-of-pocket costs for
environmental site assessments, remedial investigation and
feasibility studies), fines, penalties, sanctions and interest
incurred as a result of any Environmental Claim filed by any
governmental authority or any third party against the Company or
its Subsidiaries or any predecessors in interest which relate to
any violations of Environmental Laws, Remedial Actions, Releases
or threatened Releases of Hazardous Materials from or onto (i)
any assets, properties or businesses presently or formerly owned
by the Company, its Subsidiaries or a predecessor in interest, or
(ii) any facility which received Hazardous Materials generated by
the Company, its Subsidiaries or a predecessor in interest.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute of similar
import, and regulations thereunder, in each case as in effect
from time to time. References to sections of ERISA shall be
construed also to refer to any successor sections.
"ERISA Affiliate" means any (i) corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Company,
(ii) partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of
Section 414(c) of the Code) with the Company, or (iii) member of
the same affiliated service group (within the meaning of
Section 414(m) of the Code) as the Company, any corporation
described in clause (i) above or any partnership or trade or
business described in clause (ii) above.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"GAAP" means United States Generally Accepted
Accounting Principles, as in effect from time to time.
"Hazardous Materials" include (a) any element,
compound, or chemical that is defined, listed or otherwise
classified as a contaminant, pollutant, toxic pollutant, toxic or
hazardous substances, extremely hazardous substance or chemical,
hazardous waste, medical waste, biohazardous or infectious waste,
special waste, or solid waste under Environmental Laws; (b)
petroleum, petroleum-based or petroleum-derived products; (c)
electrical equipment containing polychlorinated biphenyls at a
level greater than 50 ppm; and (d) asbestos-containing materials.
"Immediate Family" means, with respect to any Person,
such Person's spouse, parents, parents-in-law, descendants,
nephews, nieces, brothers, sisters, brothers-in-law, sisters-in-
law, stepchildren, sons-in-law and daughters-in-law.
"Lien" means and includes any lien, security interest,
pledge, charge, option, right of first refusal, claim, mortgage,
lease, easement or any other encumbrance whatsoever.
"Material Adverse Effect," when used with reference to
events, acts, failures or omissions to act, or conduct of a
specified Person, means that such events, acts, failures or
omissions to act, or conduct would have a material adverse effect
on (i) the condition (financial or otherwise), earnings, business
affairs or business prospects of such Person and its consolidated
subsidiaries, considered as one enterprise, or (ii) the ability
of such Person to perform its obligations under the Operative
Instruments.
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA and subject to Title IV of
ERISA which is, or within the immediately preceding six (6) years
was, contributed to by the Company or any ERISA Affiliate.
"Operating Agreement" means the Operating Agreement,
dated as of the initial Closing Date, between the Company and the
Investor, in the form of Exhibit C attached hereto.
"Operative Instruments" means this Agreement, the
Certificate of Designation, and the Operating Agreement.
"Permit" means a permit, license, consent, order or
approval by any federal, state or local governmental agency.
"Person" means any individual or Entity.
"Plan" means an employee benefit plan defined in
Section 3(3) of ERISA in respect of which the Company or any
ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Preferred Shares" means the shares of the Company
designated in the Certificate of Designation as Senior Cumulative
Convertible Preferred Stock.
"Registration Statement" means the registration
statement of the Company on Form S-3 (Registration No. 333-02798)
filed with the SEC pursuant to the Securities Act.
"REIT" means a real estate investment trust described
in Code Section 856.
"Release" means any spilling, leaking, pumping,
emitting, emptying, discharging, injecting, escaping, leaching,
migrating, dumping, or disposing of Hazardous Materials
(including the abandonment or discarding of barrels, containers
or other closed receptacles containing Hazardous Materials) into
the environment.
"Remedial Action" means all actions taken to (i) clean
up, remove, remediate, contain, treat, monitor, assess, evaluate
or in any other way address Hazardous Materials in the
environment as required by Environmental Laws; (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials
so they do not migrate to cause substantial danger to public
health or welfare or the environment as required by 42 U.S.C.
9601; (iii) perform pre-remedial studies and investigations and
post-remedial operation and maintenance activities as required by
42 U.S.C. 9601; or (iv) any other actions authorized by 42 U.S.C.
9601.
"Reportable Event" means any of the events described in
Section 4043(b) of ERISA (other than events for which the notice
requirements have been waived).
"Representatives" means, with respect to any Person,
the directors, officers, employees, Affiliates, representatives
(including, but not limited to, financial advisors, attorneys and
accountants), agents or potential sources of financing of such
person.
"Rothschild" means Rothschild Realty Inc.
"SDAT" means the State Department of Assessment and
Taxation of Maryland.
"SEC" means the Securities and Exchange Commission or
any successor regulatory authority.
"Securities Act" means the Securities Act of 1933, as
amended.
"Subsidiary" of any Person or Entity means an Entity in
which such Person or Entity has the ability, whether by the
direct or indirect ownership of shares or other equity interests,
by contract or otherwise, to elect a majority of the directors of
a corporation or the trustees of a real estate investment trust,
to select the managing partner of a partnership, or otherwise to
select, or have the power to remove and then select, a majority
of those persons exercising governing authority over such Entity.
In the case of a limited partnership, the sole general partner,
all of the general partners to the extent each has equal
management control and authority, or the managing general partner
or managing general partners thereof shall be deemed to have
control of such partnership and, in the case of a trust other
than a real estate investment trust, any trustee thereof or any
Person having the right to select any such trustee shall be
deemed to have control of such trust.
"Termination Event" means (i) a Reportable Event with
respect to any Benefit Plan (with respect to which the 30 day
notice requirement has not been waived); (ii) the withdrawal of
the Company or any ERISA Affiliate from a Benefit Plan during a
plan year in which the Company or any ERISA Affiliate was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA;
(iii) providing a written notice of intent to terminate a Benefit
Plan to affected parties of a distress termination described in
Section 4041(c) of ERISA; or (iv) the institution by the PBGC of
proceedings to terminate a Benefit Plan.
Section 1.2 Terms Defined Herein. In addition to
the terms defined in Section 1.1 above, the following terms
shall, unless the context otherwise requires, have the meanings
set forth in this Agreement in the section set forth next to such
term.
Defined Term Section
Accredited Investor 5.2
Breach 4.20
Closing 2.1
Excess Stock 4.10
Indemnified Party 10.4.3
Indemnifying Party 10.4.3
Liabilities 4.18
1996 10-Qs 4.9
1995 10-K 4.2
1996 Proxy Statement 4.9
Preferred Stock 4.10
Purchase Price 2.1
Third Party Claim 10.4.3
ARTICLE 2 SALE AND PURCHASE OF PREFERRED SHARES.
Section 2.1 Sale of Preferred Shares. At the
closings provided for in Article 3 hereof (each a "Closing"): (i)
the Company shall issue and sell an aggregate of 1,351,351
Preferred Shares to the Investor, and shall deliver to the
Investor a stock certificate or certificates representing all of
the Preferred Shares, registered in the Investor's or its
nominee's name; and (ii) the Investor shall purchase, acquire and
accept such Preferred Shares for $18.50 per share (the "Purchase
Price") or an aggregate of approximately twenty-five million
dollars ($25,000,000.00).
Section 2.2 Payment for the Preferred Shares.
At the Closings and in accordance with the provisions
set forth in Article 3, the Purchase Price shall be paid by the
Investor to the Company in United States dollars by wire transfer
of funds immediately available in New York City to such
account(s) as the Company shall designate in a written notice
delivered to the Investor not less than five (5) Business Days
prior to the applicable Closing Date.
Section 2.3 Transfer Taxes. The Company shall pay
all stock transfer taxes, recording fees and other sales,
transfer, use, purchase or similar taxes resulting from the
Investment.
ARTICLE 3 CLOSINGS.
Section 3.1 Closings. The Company shall be entitled
to designate up to three Closings, the first two of which shall
provide for at least 270,270 Preferred Shares each, and the last
of which shall provide for the remaining Preferred Shares. Each
Closing of the sale and purchase of the Preferred Shares shall
take place at the offices of Schulte Roth & Zabel LLP, 900 Third
Avenue, New York, New York 10022 at 10:00 a.m. New York City
time.
Section 3.2 Closing Dates. Each Closing shall occur
on such date as the Company notifies the Investor on not less
than ten (10) Business Days notice or at such other time as the
Company and the Investor mutually agree in writing (each, a
"Closing Date"); provided, however, that if the sale of all of
the Preferred Shares as provided for herein shall not have
occurred before the one year anniversary date of this Agreement,
the Closing for such Preferred Shares as shall not have
previously been so sold shall occur on such anniversary date.
Section 3.3 Cancellation of Subsequent Closings. In
the event that a Change of Control or a Put Event (each as
defined in the Certificate of Designation) occurs after any
Closing Date, but prior to the sale by the Company to the
Investor of all 1,351,351 Preferred Shares to be sold pursuant to
this Agreement, and the Investor notifies the Company that it
will tender into the Put Offer (as defined in the Certificate of
Designation) any further Closings shall be canceled and the
Company shall immediately pay to the Investor by wire transfer in
immediately available funds an amount equal to the product of (i)
$0.37 and (ii) the difference between (x) 1,351,351 and (y) the
number of Preferred Shares which the Company has sold to the
Investor pursuant to this Agreement prior to the occurrence of
such Change of Control.
Section 3.4 Availability Fee. If all 1,351,351
Preferred Shares have not been sold hereunder (other than as a
consequence of the events provided for in Section 3.3) by the
dates set forth below (the "Availability Fee Dates") the Company
shall pay, on each such date by wire transfer in immediately
available funds, an amount equal to the product of (i) 0.0025 and
(ii) the difference between (x) $25,000,000 and (y) the aggregate
Purchase Price paid by the Investor in respect of Preferred
Shares which the Company has sold to the Investor pursuant to
this Agreement prior to such date. The Availability Fee Dates
are July 1, 1997, August 1, 1997, September 1, 1997, October 1,
1997, November 1, 1997 and December 1, 1997.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the
Investor as follows:
Section 4.1 Due Incorporation and Status of the
Company.
Section 4.1.1 Due Incorporation. The Company and
each of its Subsidiaries has been duly incorporated and is
validly existing and in good standing under the laws of the state
of their respective organization and are qualified or licensed,
and in good standing, as a foreign corporation authorized to do
business in each other jurisdiction in which its ownership of
properties or its conduct of business requires such qualification
or licensing, except where the failure to be so qualified or
licensed, or in good standing, as a foreign corporation would not
have a Material Adverse Effect on the Company.
Section 4.1.2 REIT Status. As of the date
hereof, the Company qualifies as a REIT under the Code and has
taken no action or omitted to take any action, the effect of
which reasonably could be expected to disqualify the Company as a
REIT under the Code.
Section 4.2 Authority. The Company has the power
and authority to own, lease and operate its properties, directly
or indirectly, and to conduct its business as presently conducted
and as contemplated by the Annual Report on Form 10-K, as
amended, as filed by the Company under the Exchange Act for the
year ended December 31, 1995 (the "1995 10-K").
Section 4.3 Valid Agreement of the Company. The
execution, delivery and performance of this Agreement, the
Operating Agreement and the Agreement and Waiver have each been
duly authorized by the Company. This Agreement has been, and the
Operating Agreement and Agreement and Waiver, upon the Closing,
will be executed and delivered by the Company. This Agreement
represents and the Operating Agreement and Agreement and Waiver,
upon the Closing will represent, the valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective 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).
Section 4.4 No Default. The execution and delivery
of the Operative Instruments by the Company and the performance
by the Company of its obligations do not (or if not yet executed,
upon the execution and delivery thereof will not) (a) violate the
Charter or By-Laws of the Company; (b) violate or constitute a
breach of or default under any mortgage, indenture, loan
agreement, promissory note or other agreement to which the
Company or any of its Subsidiaries is a party, or by which any of
them is bound, or to which any property of the Company or any of
its Subsidiaries is subject; or (c) conflict with or violate any
law or any regulation, rule, order or decree of any governmental
body, court or administrative agency having jurisdiction over the
Company or any of its Subsidiaries or the properties of any of
them; except, in the case of clauses (b) and (c) above, for such
breaches, defaults, conflicts or violations which would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company or on the ability of the Company to consummate the
transactions contemplated hereby.
Section 4.5 No Required Consents. The execution and
delivery of the Operative Instruments by the Company and the
performance by the Company of its obligations to be performed at
or prior to the related Closing do not require any filing or
registration with, or the receipt of any consent by, any
governmental or regulatory authority by the Company or its
Subsidiaries other than (a) any which have already been obtained
or waived and (b) such consents as may be required under the
Securities Act, the regulations promulgated thereunder or
applicable state securities laws.
Section 4.6 Reservation of Shares . The Company has
duly reserved solely for purposes of issuance upon conversion of
the Preferred Shares the shares of Common Stock into which the
Preferred Shares may be converted from time to time.
Section 4.7 Validity of Preferred Shares. The
Company has duly authorized the issuance and delivery of
1,351,351 shares of Preferred Stock pursuant to this Agreement
and, upon delivery thereof and receipt by the Company of the
Purchase Price therefor, such shares of Preferred Stock will be
duly authorized, validly issued, fully paid and nonassessable.
The Preferred Shares have the dividend, conversion, voting and
other terms set forth in the Certificate of Designation and, to
the extent not inconsistent therewith, as set forth in the
Charter and By-Laws of the Company and the Maryland General
Corporation Law.
Section 4.8 Transferability. Upon the issuance and
sale of the Preferred Shares by the Company to the Investor
pursuant to this Agreement, the Preferred Shares shall be fully-
registered shares under the Securities Act. Except to the extent
that the Investor is deemed to be an affiliate (as defined in the
Exchange Act), upon such issuance and sale and subject to the
restrictions on transfer set forth in the Certificate of
Designation (as modified by the Agreement and Waiver) such
Preferred Shares shall be freely transferable by the Investor
without the requirement that (i) such Preferred Shares be
registered or qualified pursuant to any federal law or (ii) the
Investor comply with the prospectus delivery requirements of the
Securities Act. Upon the conversion of the Preferred Shares into
shares of Common Stock, pursuant to the provisions of the
Certificate of Designation, such shares of Common Stock shall be
fully-registered shares under the Securities Act. Upon such
conversion, and subject to the restrictions on transferability
set forth in the Charter, such shares of Common Stock shall be
freely transferable by the Investor without the requirement that
(i) such shares of Common Stock be registered or qualified
pursuant to any federal law or (ii) the Investor comply with the
prospectus delivery requirements of the Securities Act.
Section 4.9 Disclosure. The Company has heretofore
delivered to the Investor the Proxy Statement relating to its
1996 Annual Meeting of Shareholders (the "1996 Proxy Statement"),
the 1995 10-K, and the Quarterly Reports on Form 10-Q as filed by
the Company under the Exchange Act for the quarters ended March
31, 1996, June 30, 1996 and September 30, 1996 (as amended the
"1996 10-Qs").
Section 4.9.1 No Misstatement or Omission. At
the time of filing, the 1996 Proxy Statement, the 1995 10-K and
the 1996 10-Qs complied in all material respects with the
requirements of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder. The 1996 Proxy Statement, the
1995 10-K and the 1996 10-Qs do not, as of their respective
dates, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
Section 4.9.2 Financial Statements. The
financial statements, including the notes thereto, and supporting
schedules included in the 1995 10-K and the 1996 10-Qs have been
prepared in conformity with GAAP applied on a consistent basis
(except as otherwise noted therein) and present fairly the
financial position of the Company and its Subsidiaries as of the
dates indicated and the results of their operations for the
periods shown.
Section 4.9.3 Subsequent Events. Since the
respective dates as of which information is given in the 1995 10-
K and the 1996 10-Qs, except as otherwise stated therein, in any
Current Report on Form 8-K filed by the Company or in the press
releases listed on Schedule 4.9.3 hereto and other than changes
in general economic conditions or industry conditions, there has
not been any change in the condition (financial or otherwise) or
in the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business which
would have a Material Adverse Effect on the Company.
Section 4.10 Capitalization. The authorized capital
stock of the Company consists of: (i) 25,000,000 shares of
Common Stock; (ii) 5,000,000 shares of preferred stock, par value
$.01 per share (the "Preferred Stock"); and (iii) 30,000,000
shares of excess stock, par value $.01 per share (the "Excess
Stock"). As of December 30, 1996, (i) 9,757,917, 0, and 0 shares
of the Common Stock, the Preferred Stock and the Excess Stock,
respectively, were validly issued and outstanding, fully paid and
nonassessable; and (ii) 1,638,760, 0, and 0 shares of the Common
Stock, the Preferred Stock and the Excess Stock, respectively,
were reserved for issuance as set forth on Schedule 4.10 hereto.
Except as contemplated by clauses (i) through (ii) of this
Section 4.10 or as set forth on Schedule 4.10 hereto, there are
no other shares of capital stock of the Company outstanding and
no other outstanding options, warrants, convertible or
exchangeable securities, subscriptions, rights (including
preemptive rights), stock appreciation rights, calls or
commitments of any character whatsoever to which the Company is a
party or may be bound requiring the issuance or sale of shares of
any capital stock of the Company, and there are no contracts or
other agreements by which the Company is or may become bound to
issue additional shares of its capital stock or any options,
warrants, convertible or exchangeable securities, subscriptions,
rights (including preemptive rights), stock appreciation rights,
calls or commitments of any character whatsoever relating to
such shares.
Section 4.11 Litigation. Except as set forth on
Schedule 4.11 or in the 1995 10-K or the 1996 10-Qs, the Company
has not received any notice of any outstanding judgments,
rulings, orders, writs, injunctions, awards or decrees of any
court or any foreign, federal, state, county or local government
or any other governmental, regulatory or administrative agency or
authority or arbitral tribunal against or involving the Company
or any of its Subsidiaries which is currently in effect. Neither
the Company nor any of its Subsidiaries is a party to, or to the
knowledge of the Company, threatened with, any litigation or
judicial, governmental, regulatory, administrative or arbitration
proceeding which, if decided adversely to their respective
interests could have an adverse effect upon the transactions
contemplated hereby or that could reasonably be expected to have
a Material Adverse Effect on the Company.
Section 4.12 ERISA. (i) Each Plan is in substantial
compliance with the applicable provisions of ERISA and the Code,
(ii) no Termination Event has occurred nor is reasonably expected
to occur with respect to any Benefit Plan, (iii) the most recent
annual report (Form 5500 Series) with respect to each Plan,
including Schedule B (Actuarial Information) thereto, copies of
which have been filed with the Internal Revenue Service, is
complete and correct in all material respects and fairly presents
the funding status of such Benefit Plan, and since the date of
such report there has been no material adverse change in such
funding status, (iv) no Benefit Plan had an accumulated (whether
or not waived) funding deficiency or permitted decreases which
would create a deficiency in its funding standard account within
the meaning of Section 412 of the Code at any time during the
previous 60 months, and (v) no Lien imposed under the Code or
ERISA exists or is likely to arise on account of any Benefit Plan
within the meaning of Section 412 of the Code. Neither the
Company nor any of its ERISA Affiliates has incurred any
withdrawal liability under ERISA with respect to any
Multiemployer Plan, and the Company is not aware of any facts
indicating that the Company or any of its ERISA Affiliates may in
the future incur any such withdrawal liability. Except as
required by Section 4980B of the Code, the Company does not
maintain a welfare plan (as defined in Section 3(1) of ERISA)
which provides benefits or coverage after a participant's
termination of employment. Neither the Company nor any of its
ERISA Affiliates have incurred any liability under the Worker
Adjustment and Retraining Notification Act. All Plans in
existence on the Closing Date are set forth on Schedule 4.12
hereto.
Section 4.13 Environmental Matters. Except as set
forth in Schedule 4.13 hereto, to the best knowledge of the
Company and its Subsidiaries:
(a) The operations and properties of the Company and
its Subsidiaries are in full compliance with Environmental Laws
except to the extent that any failure to comply is not reasonably
expected to have a Material Adverse Effect on the business of the
Company or its Subsidiaries taken as a whole or any predecessor
in interest;
(b) There has been no Release (i) at any assets,
properties or businesses currently owned or operated by the
Company, any of its Subsidiaries or any predecessor in interest;
(ii) from adjoining properties or businesses; or (iii) from or
onto any facilities which received Hazardous Materials generated
by the Company, any of its Subsidiaries or any predecessor in
interest that would result in any Environmental Liabilities
except to the extent that any such Release is not reasonably
expected to have a Material Adverse Effect on the business of the
Company or its Subsidiaries taken as a whole or any predecessor
in interest;
(c) No Environmental Claims have been asserted against
the Company, any of its Subsidiaries or any predecessor in
interest nor does the Company or any of its Subsidiaries have
knowledge or notice of any threatened or pending Environmental
Claims except to the extent that any such Environmental Claims
are not reasonably expected to have a Material Adverse Effect on
the business of the Company or its Subsidiaries taken as a whole
or any predecessor in interest;
(d) No Environmental Claims have been asserted against
any facilities that may have received Hazardous Materials
generated by the Company, any of its Subsidiaries or any
predecessor in interest except to the extent that any such
Environmental Claims are not reasonably expected to have a
Material Adverse Effect on the business of the Company or its
Subsidiaries taken as a whole or any predecessor in interest;
(e) The Company has delivered to the Investor true and
correct copies of all Phase I Environmental Assessments, material
environmental reports, studies or investigations in their
possession regarding any Environmental Liabilities at the assets,
properties or businesses of the Company or any of its
Subsidiaries; and
(f) To the extent that any of the assets, properties or
businesses owned or operated by the Company or any of its
Subsidiaries are located in "wetlands" regulated under
Environmental Laws the Company and its Subsidiaries are in
compliance with Environmental Laws regulating those "wetlands"
except to the extent that any such failure to comply is not
reasonably expected to have a Material Adverse Effect on the
business of the Company or its Subsidiaries taken as a whole or
any predecessor in interest.
Section 4.14 Investment Company. The Company is not,
and upon the issuance and sale of the Preferred Shares as herein
contemplated will not be, an "investment company" or an Entity
"controlled" by an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.
Section 4.15 Taxes. The Company has filed all
federal, state, local or foreign tax returns that are required to
be filed or has duly requested extensions thereof and has paid
all taxes required to be paid by it and any related assessments,
fines or penalties, except for any such tax, assessment, fine or
penalty that is being contested in good faith and by appropriate
proceedings or where the failure to make any such filing or
payment would not be reasonably expected to have a Material
Adverse Effect on the Company; and adequate charges, accruals and
reserves have been provided for in the financial statements of
the Company in respect of all material federal, state, local and
foreign taxes for all periods as to which the tax liability of
the Company has not been finally determined or remains open to
examination by applicable taxing authorities. The Company is not
currently under review by any federal or state taxing authority.
Section 4.16 Insurance. The Company carries or is
entitled to the benefits of insurance in such amounts and
covering such risks as is reasonably sufficient under the
circumstances and is consistent with comparable businesses and
all such insurance is in full force and effect.
Section 4.17 Affiliated Transactions. Except as set
forth on Schedule 4.17 or as disclosed in the 1995 10-K, the 1996
10-Qs or the 1996 Proxy Statement describe all transactions with,
or payments to, any Affiliate in excess of $60,000 in the
aggregate (other than reimbursement of expenses and compensation
payable to employees or officers or directors' fees payable to
the Company's directors). Neither the Company, nor any officer
or director of the Company, nor any of its Subsidiaries, or any
Affiliate of any of the foregoing, or any member of the Immediate
Family of any of the foregoing: (i) owns, directly or indirectly,
any interest in (excepting not more than five (5) percent stock
holdings held solely for investment purposes in securities of any
Person which are listed on any national securities exchange or
regularly traded in the over-the-counter market) or is an owner,
sole proprietor, shareholder, partner, director, officer,
employee, consultant or agent of any person which is a
competitor, lessor, lessee, customer or supplier of the Company
or any of its Subsidiaries; (ii) owns, directly or indirectly, in
whole or in part, any property, patent, trademark, service mark,
trade name, copyright, franchise, invention, permit, license or
secret or confidential information which the Company or any of
its Subsidiaries is using or the use of which is necessary for
the business of the Company or any of its Subsidiaries; or (iii)
has any cause of action or other suit, action or claim whatsoever
against, or owes any amount to, the Company or any of its
Subsidiaries, in each case (i) through (iii) except for those in
the ordinary course of business.
Section 4.18 Liabilities. Except as set forth on
Schedule 4.18, the Company and its Subsidiaries do not have any
material direct or indirect indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, fixed or
unfixed, choate or inchoate, liquidated or unliquidated, secured
or unsecured, subordinated or unsubordinated, matured or
unmatured, accrued, absolute, contingent or otherwise, including,
without limitation, liabilities on account of taxes, other
governmental, regulatory or administrative charges or lawsuits
brought, whether or not of a kind required by GAAP to be set
forth on a financial statement (collectively, "Liabilities"),
that were not fully and adequately reflected or reserved against
on the Balance Sheet of the Company (less Liabilities that have
been discharged in the ordinary course of business since the date
of the Balance Sheet of the Company).
Section 4.19 Agreement and Waiver. The Board of
Directors of the Company has approved the provisions of the
Agreement and Waiver.
Section 4.20 No Event of Default. No event has
occurred and is continuing and no condition exists which
constitutes a breach, an event of default, or otherwise gives any
other party the rights to accelerate or require payment of any
obligation, or with the passage of time would constitute such an
event (a "Breach"), under any agreement or instrument to which
the Company or any of its Subsidiaries is a party that could
reasonably be expected to have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries has
received any notice that an event has occurred and is continuing
or that a condition exists which constitutes a Breach under any
agreement or instrument to which the Company or any of its
Subsidiaries is a party that could reasonably be expected to have
a Material Adverse Effect on the Company.
Section 4.21 No Brokers. In connection with the
Investment, the Company has not retained or become obligated to
any broker or finder other than Bear, Stearns & Co. Inc.
Section 4.22 Bear, Stearns & Co. Inc. The Company
agrees that Bear, Stearns & Co. Inc. has acted on behalf of the
Company in connection with the issuance and sale of Preferred
Shares by the Company to the Investor and the Company shall be
solely responsible for any payments to Bear, Stearns & Co. Inc.
in connection therewith.
Section 4.23 Full Disclosure. All documents and
other papers delivered to the Investor by or on behalf of the
Company in connection with this Agreement and the transactions
contemplated hereby are true, complete, accurate and authentic
and, when taken together with the Company's representations and
warranties set forth in this Agreement, do not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements made, in light of the circumstances under which they
were made, not misleading.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
In order to induce the Company to enter into this
Agreement and to consummate the transactions contemplated hereby,
the Investor hereby represents and warrants to, and covenants
with, the Company as follows:
Section 5.1 Organization. The Investor has been
duly organized and is 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 carry on its business as now
conducted.
Section 5.2 Accredited Investor. The Investor is an
"Accredited Investor," as such term is defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
Section 5.3 Valid Agreements of the Investor. The
Investor has all right, power and authority to enter into this
Agreement and the Operating Agreement and to consummate the
transactions contemplated hereby and thereby. All action on the
part of the Investor, its officers, managers and members
necessary for the authorization, execution and delivery of the
Operative Agreements and the performance of all obligations of
the Investor hereunder have been taken or will be taken prior to
the Closing. Each of the Operative Instruments to which the
Investor is a party has each been duly authorized, executed and
delivered by the Investor, and constitutes a legal, valid and
binding obligation of the Investor, enforceable against the
Investor 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).
Section 5.4 No Default. The execution and delivery
of this Agreement and the Operating Agreement by the Investor and
the performance by the Investor of its obligations thereunder do
not (or if not yet executed, upon the execution and delivery
thereof will not) (a) violate the organizational documents of the
Investor; (b) violate or constitute a breach of or default under
any mortgage, indenture, loan agreement, promissory note or other
agreement to which the Investor is a party, or by which the
Investor is bound, or to which any property of the Investor is
subject; or (c) conflict with or violate any law or any
regulation, rule, order or decree of any governmental body, court
or administrative agency having jurisdiction over the Investor or
its properties except with respect to clauses (b) and (c) where
such conflict, breach, default or violation would not reasonably
be expected to have a Material Adverse Effect on the Investor.
Section 5.5 Opportunity for Inquiry. The Investor
has had a reasonable opportunity to ask questions of and receive
answers from representatives of the Company regarding the
business, management and financial affairs of the Company; it
being understood that no inquiry or investigation shall affect
the Investor's ability to rely on any representation or warranty
of the Company or the conditions to the obligations of the
Investor under this Agreement.
Section 5.6 Purchase Entirely for Own Account. The
Preferred Shares will be acquired for investment for the
Investor'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 Securities Act.
Section 5.7 Materials. The Investor acknowledges
that all documents, agreements, instruments, records, and books
that it has requested pertaining to the Company and its
businesses and financial affairs, have been made available to the
Investor and the Investor's attorneys, accountants and advisors
for inspection.
Section 5.8 Knowledge and Experience. The Investor
has such knowledge and experience in financial and business
matters that the Investor is capable of evaluating the merits and
risks involved in connection with the Investment.
Section 5.9 No Brokers. In connection with the
Investment, the Investor has not retained or become obligated to
any broker or finder.
Section 5.10 Investment Company. The Investor is
not, and upon the purchase of the Preferred Shares as herein
contemplated, will not be, an "investment company" or an Entity
"controlled" by and "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended.
ARTICLE 6 COVENANTS AND UNDERTAKINGS.
Section 6.1 Closings. The Company shall use its
best efforts to comply with all conditions precedent to the
Closings, including, without limiting the foregoing, the Company
shall cause the Certificate of Designation to have been adopted,
filed with the SDAT and become effective.
Section 6.2 Expenses of Rothschild Realty Inc.
Except as set forth in Section 6.3, the Company agrees to
reimburse Rothschild at each Closing for its reasonable out-of-
pocket expenses documented to the reasonable satisfaction of the
Company. All such amounts paid pursuant to this Section 6.2
shall be paid by wire transfer of funds immediately available in
New York City to such account(s) as Rothschild shall designate in
a written notice delivered to the Company not less than two
Business Days prior to the initial Closing Date; provided,
however, that the Investor, on behalf of the Company, may
directly pay out of the Purchase Price payable hereunder such
fees and expenses to Rothschild; provided, further, that the
aggregate of all such expenses including, without limitation, the
fees and expenses of Schulte Roth & Zabel LLP provided for in
Section 6.3 hereof, shall not exceed $125,000 through the initial
Closing Date and $20,000 (plus any amount of the $125,000
remaining) through any subsequent Closing Dates, if applicable
Section 6.3 Fees and Expenses of Schulte Roth &
Zabel LLP. Subject to the limitation set forth in Section
6.2, the Company agrees to pay to Schulte Roth & Zabel LLP,
counsel to the Investor, at each Closing reasonable fees and
expenses in connection with services rendered and expenses
incurred in connection with the issuance and sale of Preferred
Shares to the Investor. All such amounts paid pursuant to this
Section 6.3 shall be paid by wire transfer of funds immediately
available in New York City to such account(s) as Schulte Roth &
Zabel LLP shall designate in a written notice delivered to the
Company not less than two Business Days prior to each Closing
Date; provided, however, that the Investor, on behalf of the
Company, may directly pay out of the Purchase Price hereunder
such fees and expenses to Schulte Roth & Zabel LLP.
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE INVESTOR TO CLOSE.
The obligation of the Investor to complete each Closing is
subject, at its option, to the fulfillment on or prior to the
related Closing Date (unless otherwise provided) the following
conditions, any one (1) or more of which may be waived by it in
its sole discretion:
Section 7.1 Representations and Covenants. The
representations and warranties of the Company contained in this
Agreement shall be true, complete and accurate in all material
respects on and as of the related Closing Date with the same
force and effect as though made on and as of the related Closing
Date, except for changes contemplated or permitted by this
Agreement and except to the extent that any representation or
warranty is made as of a specified date, in which case, such
representation and warranty shall be true and correct in all
material respects as of such date. The Company shall have
performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by the Company on or prior to the
related Closing Date. The Company shall have delivered to the
Investor a certificate, dated the related Closing Date and signed
by the President and Chief Financial Officer of the Company, to
the foregoing effect and stating that all conditions to the
Investor's obligations hereunder have been satisfied.
Section 7.2 Good Standing Certificates. The Company
shall have delivered to the Investor: (i) copies of its Charter,
including all amendments thereto, certified by the SDAT; (ii) a
certificate from the SDAT to the effect that the Company is in
good standing and subsisting in such jurisdiction and listing all
charter documents of the Company on file in such state; (iii) a
certificate from the Secretary of State or other appropriate
official in each State in which the Company is qualified to do
business to the effect that the Company is in good standing in
such State; and (iv) a certificate as to the Tax status of the
Company from the appropriate official in its Maryland and each
State in which the Company is qualified to do business, in each
case, dated as of a date within reasonable proximity to the
related Closing Date.
Section 7.3 Governmental Permits and Approvals. Any
and all Permits necessary for the consummation of the
transactions contemplated hereby shall have been obtained and a
copy thereof shall have been delivered to the Investor; except
for (a) notice requirements which may be fulfilled subsequent to
the Closing Date and (b) consents, permits, approvals,
authorizations, filings and declarations the failure to obtain or
to undertake which will not adversely affect the ability of the
Company to perform its obligations under the Operative Agreements
or any agreement executed in accordance therewith or would not
have a Material Adverse Effect on the Company or its
Subsidiaries.
Section 7.4 Legislation. No legislation shall have
been proposed, and approved by a legislative committee, or
enacted, and no statute, law, ordinance, code, rule or regulation
shall have been adopted, revised or interpreted, by any foreign,
federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority,
which would require, upon or as a condition to the acquisition of
the Preferred Shares by the Investor, the divestiture or
cessation of the conduct of any business presently conducted by
the Company, on the one hand, or by the Investor, on the other
hand, or which, in the good faith judgment of the Investor, may,
individually or in the aggregate, have a Material Adverse Effect
on it or on the Company in the event that the transactions
contemplated hereby are consummated.
Section 7.5 Legal Proceedings. No suit, action,
claim, proceeding or investigation shall have been instituted or
threatened by or before any court or any foreign, federal, state,
county or local government or any other governmental, regulatory
or administrative agency or authority seeking to restrain,
prohibit or invalidate the issuance or sale of the Preferred
Shares to the Investor hereunder or the consummation of the
transactions contemplated hereby or to seek damages in connection
with such transactions.
Section 7.6 Third Party Consents. All consents,
waivers, licenses, variances, exemptions, franchises, permits,
approvals and authorizations from parties to any contracts and
other agreements (including any amendments and modifications
thereto) with the Company which may be required in connection
with the performance by the Company of its obligations under this
Agreement or to assure such contracts and other agreements
continue in full force and effect after the consummation of the
transactions contemplated hereby (without any Breach by the
Company or any of its Subsidiaries) shall have been obtained.
Section 7.7 Stock Certificates. The Company shall
have tendered to the Investor the stock certificate or
certificates representing the Preferred Shares to be purchased on
such Closing Date in accordance with Section 3.1 hereof,
registered in the Investor's name.
Section 7.8 Approval of Counsel to the Investor.
The Company shall furnish to counsel for the Investor such
certificates and documents as may reasonably be requested by
counsel to the Investor to enable such counsel to pass on or
evaluate the satisfaction of the conditions set forth in this
Article 7. All actions and proceedings hereunder and all
documents and other papers required to be delivered by the
Company hereunder or in connection with the consummation of the
transactions contemplated hereby, and all other related matters,
shall have been reasonably approved by Schulte Roth & Zabel LLP,
counsel to the Investor, as to their form and substance.
Section 7.9 Appointment of Director. Prior to or
concurrent with the initial Closing, the nominee designated by
the Investor as a director of the Company shall have been elected
and qualified to become a member of the Board of Directors of the
Company, and prior to and concurrent with any second Closing or
third Closing, the nominee designated by the Investor as a
director of the Company shall be continuing to serve as a member
of the Board of Directors of the Company; provided, however, that
the Company shall have the right to approve any such nominee
designated by the Investor in its reasonable discretion, it being
agreed that John D. McGurk, James E. Quigley 3rd, Matthew W.
Kaplan, and D. Pike Aloian shall be deemed to have been approved
by the Company for all purposes hereunder.
Section 7.10 Certificate of Designation. The
Certificate of Designation shall be effective.
Section 7.11 Operating Agreement. The Company shall
have executed and delivered to the Investor the Operating
Agreement.
Section 7.12 Opinions of Counsel. The Investor shall
have received favorable opinion letters, dated as of the related
Closing Date, from Gibson, Dunn & Crutcher LLP and Piper &
Marbury L.L.P. to the effect of the matters contained in Exhibit
D and Exhibit E, respectively.
Section 7.13 No Stop Order. On the related Closing
Date, no stop order suspending the effectiveness of the Company's
Registration Statement shall have been issued under the
Securities Act or proceedings therefor initiated or threatened by
the SEC.
Section 7.14 Listing of Common Stock. The Common
Stock issuable upon conversion of the Preferred Shares shall have
been approved for listing on the New York Stock Exchange.
Section 7.15 Expenses of Rothschild Realty Inc.
Rothschild shall have been reimbursed for the expenses to be paid
by the Company as described under Section 6.2.
Section 7.16 Fees and Expenses of Schulte Roth &
Zabel LLP. Provided that Schulte Roth & Zabel LLP shall have
provided to the Company a copy of its invoice and daily activity
log for services rendered and expenses incurred at least three
(3) days prior to the related Closing, Schulte Roth & Zabel LLP
shall have received the fees and disbursements to be paid by the
Company as described under Section 6.3.
Section 7.17 Agreement and Waiver. The Company
shall have executed and delivered to the Investor the Agreement
and Waiver.
Section 7.18 Dividends on Preferred Shares. All
accrued and unpaid dividends, whether or not declared, have been
paid to, or made available for payment to, the holders of the
Preferred Shares.
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE COMPANY TO CLOSE.
The obligation of the Company to complete each Closing is
subject, at its option, to the fulfillment on or prior to the
related Closing Date of the following conditions, any one (1) or
more of which may be waived it in its sole discretion:
Section 8.1 Representations and Covenants. The
representations and warranties of the Investor contained in this
Agreement shall be true, complete and accurate in all material
respects on and as of the related Closing Date with the same
force and effect as though made on and as of the related Closing
Date, except for changes contemplated or permitted by this
Agreement and except to the extent that any representation or
warranty is made as of a specified date, in which case, such
representation and warranty shall be true, complete and accurate
in all material respects as of such date. The Investor shall
have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the related
Closing Date. The Investor shall have delivered to the Company a
certificate, dated the related Closing Date and signed by an
officer of the Investor to the foregoing effect and stating that
all conditions to the Company's obligations hereunder have been
satisfied.
Section 8.2 Governmental Permits and Approvals. Any
and all Permits necessary for the consummation of the
transactions contemplated hereby shall have been obtained.
Section 8.3 Legal Proceedings. No suit, action,
claim, proceeding or investigation shall have been instituted or
threatened before any court or any foreign, federal, state,
county or local government or any other governmental, regulatory
or administrative agency or authority seeking to restrain,
prohibit or invalidate the sale of the Preferred Shares to the
Investor hereunder or the consummation of the transactions
contemplated hereby or to seek damages in connection with such
transactions.
Section 8.4 Third Party Consents. All consents,
waivers, licenses, variances, exemptions, franchises, permits,
approvals and authorizations from parties to any contracts and
other agreements (including any amendments and modifications
thereto) with the Investor which may be required in connection
with the performance by the Investor of its obligations under
this Agreement shall have been obtained.
Section 8.5 Purchase Price. The Investor shall have
tendered payment for the Preferred Shares in the amount and in
the manner specified in Section 3.1 hereof.
Section 8.6 Approval of Counsel to the Company. The
Investor shall furnish to counsel for the Company such
certificates and documents as may reasonably be requested by
counsel to the Company to enable such counsel to pass on or
evaluate the satisfaction of the conditions set forth in this
Article 8. All actions and proceedings hereunder and all
documents or other papers required to be delivered by the
Investor hereunder or in connection with the consummation of the
transactions contemplated hereby, and all other related matters,
shall be subject to the reasonable approval of Gibson, Dunn &
Crutcher LLP, counsel to the Company, as to their form and
substance.
Section 8.7 No Stop Order. On the Closing Date, no
stop order suspending the effectiveness of the Company's
Registration Statement shall have been issued under the
Securities Act or proceedings therefor initiated or threatened by
the SEC.
Section 8.8 Opinion of Investor's Counsel. The
Company shall have received from Schulte Roth & Zabel LLP,
counsel for the Investor, an opinion dated the Closing Date, in
substantially the form of Exhibit F hereto.
ARTICLE 9 ASSIGNMENT.
Section 9.1 Assignability by Investor. Subject to
the terms of the Agreement and Waiver, the Investor may, without
the consent or approval of the Company, assign its rights and
obligations under this Agreement to a Person to whom the Investor
assigns its interest in the Preferred Shares, pro rata based upon
the percentage of Preferred Shares transferred, provided that
such assignee agrees in writing to be bound by the terms of this
Agreement.
Section 9.2 Assignability by the Company. Without
the prior written consent of the Investor, in the sole and
absolute discretion of the Investor, the Company may not assign
or delegate its rights or obligations hereunder.
Section 9.3 Binding Agreement. Subject to the
provisions of Sections 9.1 and 9.2, this Agreement shall be
binding upon the heirs, successors and assigns of the parties.
ARTICLE 10 MISCELLANEOUS.
Section 10.1 Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York as applied between residents of that State
entering into contracts to be performed wholly within that State.
Section 10.2 Notices. All notices hereunder shall be
in writing and shall be given: (a) if to the Company, at 363 San
Miguel Drive, Newport Beach, California 92660-7805, Attention:
President, or such other address or addresses of which the
Investor shall have been given notice, with copies to Gibson,
Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles,
California 90071-3197, Attention: Dhiya El-Saden, Esq., or such
other address of which the Investor shall have been given notice;
and (b) if to the Investor, at Rothschild Realty Inc., 1251
Avenue of the Americas, New York, New York 10020, Attn: Matthew
Kaplan, or such other address of which the Company shall have
been given notice, with copies to Schulte Roth & Zabel LLP, 900
Third Avenue, New York, New York 10022, Attention: Andre Weiss,
Esq., or such other address of which the Company shall have been
given notice. Any notice shall be deemed to have been given if
personally delivered or sent by United States mail or by
commercial courier or delivery service or by telegram or telex
and shall be deemed received, unless earlier received, (i) if
sent by certified or registered mail, return receipt requested,
three business days after deposit in the mail, postage prepaid,
(ii) if sent by United States Express Mail or by commercial
courier or delivery service, one Business Day after delivery to a
United States Post Office or delivery service, postage prepaid,
(iii) if sent by telegram, telex or facsimile transmission, when
receipt is acknowledged by answerback, and (iv) if delivered by
hand, on the date of receipt.
Section 10.3 Entire Agreement; Amendments. This
Agreement and other agreements referred to herein set forth the
entire understanding of the parties hereto, and this Agreement
shall not be amended except by an instrument in writing executed
by the Company and the Investor.
Section 10.4 Remedies for Breaches of This Agreement.
Section 10.4.1 Survival of Certain Provisions.
All of the representations and warranties of the Company
contained in Article 4 above and all of the covenants and
undertakings of the Company contained in Article 6 above, shall
survive the Closings hereunder and continue in full force and
effect until the first anniversary of each Closing (subject to
any applicable statutes of limitations).
Section 10.4.2 Indemnification Provisions. In
the event that either the Company or the Investor breaches any of
its representations, warranties, and covenants contained herein,
provided that the non-breaching party makes a written claim for
indemnification against the breaching party pursuant to Section
10.2, then the breaching party agrees to indemnify the non-
breaching party from and against the entirety of any Adverse
Consequences the non-breaching party may suffer through and after
the date of the claim for indemnification (including any Adverse
Consequences the non-breaching party, its members or shareholders
may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or
caused by such breach. In addition to the indemnification rights
provided for herein, the non-breaching party shall also have the
right to all such remedies to which it is entitled as a matter of
law or equity.
Section 10.4.3 Matters Involving Third Parties.
(i) If any third party shall notify any party
entitled to be indemnified hereunder (the "Indemnified
Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against
the Company or the Investor (the "Indemnifying Party") under
this Section 10.4, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii)Any Indemnifying Party will have the right to
assume the defense of the Third Party Claim with counsel of
his or its choice reasonably satisfactory to the Indemnified
Party at any time within 15 days after the Indemnified Party
has given notice of the Third Party Claim; provided,
however, that the Indemnifying Party must conduct the
defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard;
and provided further that the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has
assumed and is conducting the defense of the Third Party
Claim in accordance with Section 10.4.3(ii) above, the
Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless
the judgment or proposed settlement involves only the
payment of money damages by one or more of the Indemnifying
Parties and does not impose an injunction or other equitable
relief upon the Indemnified Party.
(iv)So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in
accordance with Section 10.4.3(ii) above, the Indemnified
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably).
(v) In the event none of the Indemnifying Parties
assumes and conducts the defense of the Third Party Claim in
accordance with Section 10.4.3(ii) above, (A) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner he or it
reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith) and (B) the
Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 10.4.
Section 10.5 Confidentiality. The Investor agrees
not to use any Confidential Information for any purpose other
than evaluating the Investment and the Investor will not divulge,
furnish or make available to any other person or entity other
than the Investor's legal counsel, accountants and designated
advisors, and a limited number of the Investor's officers and
employees and the officers and employees of any member of the
Investor, solely to the extent necessary in connection with the
evaluation and consummation of the Investment; such persons and
entities shall be informed by the Investor of the confidential
nature of the Confidential Information and shall be directed to
treat such Confidential Information confidentially. Except as
required by law, without the prior written consent of the other
party or until such time as a mutually agreeable public
announcement is made, no party hereto will disclose to any Person
other than its Affiliates, attorneys, accountants and other
advisors either the fact that discussion or negotiations are
taking place concerning the Investment or any of the terms,
conditions or other facts with respect to the Investment,
including status or that the Confidential Information has been
made available to the Investor and its Representatives.
In the event that the Investor is requested or required
(by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar
process) to disclose any of the Confidential Information, the
Investor will provide the Company with prompt notice of such
request or requirements, and the Investor shall cooperate with
the Company in seeking to legally avoid such disclosure. If, in
the absence of a protective order, the Investor is legally
compelled, in the opinion of its counsel, to disclose any of the
information, the Company shall either seek and obtain appropriate
protective orders against such disclosure or shall hereby be
deemed to waive the Investor's compliance with the provisions of
this Agreement to the extent necessary to satisfy such request or
requirement.
Section 10.6 Standstill. Subject to the provisions
of the sentence next following, the Investor agrees that until
January 1, 1999 it and its Affiliates shall not (a) acquire,
offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities, direct or indirect
rights or options to acquire any voting securities, direct or
indirect rights or options to acquire any voting securities, or
securities or instruments convertible into voting securities, of
the Company, (b) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" to vote (as such
terms are used in the proxy rules of the SEC) securities of the
Company, or seek to advise or influence any person or entity with
respect to any voting of any securities of the Company, (c) form,
join or in any way participate in a "group" within the meaning of
Section 13(d)(3) of the Exchange Act, with respect to any voting
securities of the Company, (d) make any public announcement with
respect to or make or submit a proposal or offer (with or without
conditions) for the securities or assets of the Company or any
extraordinary transaction involving the Company or any of its
Subsidiaries, (e) submit or effect any filing or application, or
seek to obtain any permit, consent or agreement, approval or
other action, required by or from any regulatory agency with
respect to an acquisition of the Company or any of its securities
or assets, (f) otherwise act alone or in concert with others to
seek to control the management, board of directors or policies of
the Company; or (g) propose any of the foregoing unless and until
such proposal is specifically invited by the Company. Based on
the representations of Rothschild to the Company that Affiliates
of Rothschild (which representation Rothschild hereby reaffirms)
not under control of Rothschild have no access to any of the
internal information or files of Rothschild and receive no
information, recommendations or advice from Rothschild, the
Company agrees that the prohibitions of the preceding sentence
shall not apply to any Affiliates of Rothschild that are not
under the control of Rothschild and are engaged in the regular
business of trading in publicly-traded securities, so long as
such affiliates have not received, or been given access to, any
of the Confidential Information and have not received any
instructions, recommendations or advice pertaining to an
investment in or control of the Company from any party having
access to any of the Confidential Information.
Section 10.7 Lock-Up. The Investor agrees that for a
period of one year, commencing on the date of this Agreement, it
shall not sell transfer, convey, assign, pledge or hypothecate
any of the Preferred Shares or any shares of Common Stock
obtained upon conversion of any Preferred Shares.
Section 10.8 Termination. This Agreement may be
terminated at any time prior to the date which all of the
Preferred Shares have been sold hereunder:
(a) by the mutual written consent of the Investor and
the Company;
(b) by the Company or the Investor if the entire
amount of Preferred Shares to be sold by the Company to the
Investor hereto have not been sold on or prior to the date which
is the one year anniversary of the date hereof; providing that
the party attempting to terminate this Agreement is not in
material breach of any of its representations, warranties,
covenants or agreements contained in this Agreement. In the
event of termination by the Company or the Investor pursuant to
this Section 10.8, written notice thereof shall forthwith be
delivered to the other party;
(c) by the Investor, if there is a material breach of
any material representation or warranty set forth in Article 4
hereof or any covenant or agreement to be complied with or
performed by the Investor pursuant to the terms of this
Agreement, provided that the Investor may not terminate this
Agreement prior to the Closing unless the Company has not cured
such failure after 10 days notice thereof; or
(d) by the Company, if there is a material breach of
any material representation or warranty set forth in Article 5
hereof or any covenant or agreement to be complied with or
performed by the Investor pursuant to the terms of this
Agreement, provided that the Company may not terminate this
Agreement prior to the Closing unless the Investor has cured such
failure after 10 days notice thereof.
<PAGE>
Section 10.9 Counterparts. This Agreement may be
executed in more than one counterpart, each of which may be
executed by fewer than all the parties, with the same effect as
if the parties executed one counterpart as of the day and year
first above written.
IN WITNESS WHEREOF, the parties hereto have hereunto
set their hands and seals as of the day and year first above
written.
PACIFIC GULF PROPERTIES INC.
By: /s/ Glenn L. Carpenter
Name: Glenn L. Carpenter
Title: Chairman, Chief Executive Officer
and President
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ Matthew W. Kaplan
Name: Matthew W. Kaplan
Title: Manager
The undersigned hereby acknowledges the terms hereof
and hereby agrees to be bound by the following sections hereof:
Sections 10.5, 10.6 and 10.7.
ROTHSCHILD REALTY INC.
By: /s/ Matthew W. Kaplan
Name: Matthew W. Kaplan
Title: Senior Vice President
<PAGE>
SCHEDULE 4.9.3
Friday December 27 8:00 AM EDT
Pacific Gulf Properties Announces Successful Consummation of
Debenture Exchange Offer
NEWPORT BEACH, Calif., Dec. 27 /PRNewswire/ -- Pacific Gulf
Properties Inc. announced today the successful consummation of
its previously announced Exchange Offer for any and all of its
outstanding 8.375% Convertible Subordinated Debentures Due 2001
at an exchange rate of 58 shares of Common Stock for each $1,000
principal amount of validly tendered Debentures.
As of the expiration of the Exchange Offer at 5:00 p.m., New York
time, on December 26, 1996, an aggregate of approximately
$42,069,000 in principal amount of Debentures (constituting 74%
of the outstanding Debentures) had been validly tendered to the
Exchange Agent pursuant to the Exchange Offer (including
$1,775,000 of Debentures yet to be physically delivered pursuant
to notices of guaranteed delivery), and the Company has accepted
all validly tendered Debentures for exchange. As a result,
assuming the receipt of all guaranteed deliveries, the Company
will issue 2,440,002 new shares of its Common Stock pursuant to
the Exchange Offer, thereby increasing the number of outstanding
shares of Common Stock to 9,757,917. An aggregate of $14,437,000
in principal amount of Debentures will remain outstanding.
Glenn L. Carpenter, Chairman and Chief Executive Officer, stated
"We are very pleased with the results of this Exchange Offer. We
have strengthened our equity capital base and reduced our debt,
which should enhance our ability to take advantage of future
growth opportunities."
Pacific Gulf Properties Inc. is a self-administered and self-
managed equity real estate investment trust (REIT) that owns,
operates, manages, leases, acquires and rehabilitates multifamily
and industrial properties located in California and the Pacific
Northwest. SOURCE Pacific Gulf Properties Inc.
<PAGE>
SCHEDULE 4.10
Common Stock reserved for issuance, as of December 30, 1996:
775,247 shares issuable upon conversion of Debentures
615,404 shares issuable upon the exercise of options awarded
or to be awarded under the Company's stock incentive plan
248,109 shares issuable under the Company's dividend
reinvestment plan
<PAGE>
SCHEDULE 4.11
NONE
<PAGE>
SCHEDULE 4.12
Pacific Gulf Properties Inc. Retirement Plan (defined benefit
retirement income plan)
Pacific Gulf Properties Inc. Thrift Plan (401(k) plan)
Pacific Gulf Properties Inc. Share Option Plan (to the extent, if
any, subject to ERISA)
<PAGE>
SCHEDULE 4.13
NONE
<PAGE>
SCHEDULE 4.17
NONE
<PAGE>
SCHEDULE 4.18
NONE
INVESTMENT AGREEMENT
between
PACIFIC GULF PROPERTIES INC.
and
FIVE ARROWS REALTY SECURITIES L.L.C.
______________________
Dated as of May 27, 1997
______________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINED TERMS
SECTION 1.1 DEFINED TERMS 1
SECTION 1.2 TERMS DEFINED HEREIN 6
ARTICLE 2 SALE AND PURCHASE OF PREFERRED SHARES
SECTION 2.1 SALE OF PREFERRED SHARES 6
SECTION 2.2 PAYMENT FOR THE PREFERRED SHARES 7
SECTION 2.3 TRANSFER TAXES 7
ARTICLE 3 CLOSINGS
SECTION 3.1 CLOSINGS 7
SECTION 3.2 CLOSING DATES 7
SECTION 3.3 CANCELLATION OF SUBSEQUENT CLOSINGS 7
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1 DUE INCORPORATION AND STATUS OF THE COMPANY 8
SECTION 4.2 AUTHORITY 8
SECTION 4.3 VALID AGREEMENT OF THE COMPANY 8
SECTION 4.4 NO DEFAULT 8
SECTION 4.5 NO REQUIRED CONSENTS 9
SECTION 4.6 RESERVATION OF SHARES 9
SECTION 4.7 VALIDITY OF PREFERRED SHARES 9
SECTION 4.8 TRANSFERABILITY 9
SECTION 4.9 DISCLOSURE 9
SECTION 4.10 CAPITALIZATION 10
SECTION 4.11 LITIGATION 10
SECTION 4.12 ERISA 11
SECTION 4.13 ENVIRONMENTAL MATTERS 11
SECTION 4.14 INVESTMENT COMPANY 12
SECTION 4.15 TAXES 12
SECTION 4.16 INSURANCE 13
SECTION 4.17 AFFILIATED TRANSACTIONS 13
SECTION 4.18 LIABILITIES 13
SECTION 4.19 AGREEMENT AND WAIVER 13
SECTION 4.20 NO EVENT OF DEFAULT 13
SECTION 4.21 NO BROKERS 14
SECTION 4.22 BEAR, STEARNS & CO. INC. 14
SECTION 4.23 FULL DISCLOSURE 14
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
SECTION 5.1 ORGANIZATION 14
SECTION 5.2 ACCREDITED INVESTOR 14
SECTION 5.3 VALID AGREEMENTS OF THE INVESTOR 14
SECTION 5.4 NO DEFAULT 15
SECTION 5.5 OPPORTUNITY FOR INQUIRY 15
SECTION 5.6 PURCHASE ENTIRELY FOR OWN ACCOUNT 15
SECTION 5.7 MATERIALS 15
SECTION 5.8 KNOWLEDGE AND EXPERIENCE 15
SECTION 5.9 NO BROKERS 15
SECTION 5.10 INVESTMENT COMPANY 15
ARTICLE 6 COVENANTS AND UNDERTAKINGS
SECTION 6.1 CLOSINGS 16
SECTION 6.2 TRANSACTION FEE 16
SECTION 6.3 EXPENSES OF ROTHSCHILD REALTY INC. 16
SECTION 6.4 FEES AND EXPENSES OF SCHULTE ROTH & ZABEL LLP 16
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
INVESTOR TO CLOSE
SECTION 7.1 REPRESENTATIONS AND COVENANTS 17
SECTION 7.2 GOOD STANDING CERTIFICATES 17
SECTION 7.3 GOVERNMENTAL PERMITS AND APPROVALS 17
SECTION 7.4 LEGISLATION 17
SECTION 7.5 LEGAL PROCEEDINGS 18
SECTION 7.6 THIRD PARTY CONSENTS 18
SECTION 7.7 STOCK CERTIFICATES 18
SECTION 7.8 APPROVAL OF COUNSEL TO THE INVESTOR 18
SECTION 7.9 APPOINTMENT OF DIRECTOR 18
SECTION 7.10 CERTIFICATE OF DESIGNATION 19
SECTION 7.11 OPERATING AGREEMENT 19
SECTION 7.12 OPINIONS OF COUNSEL 19
SECTION 7.13 NO STOP ORDER 19
SECTION 7.14 LISTING OF COMMON STOCK 19
SECTION 7.15 EXPENSES OF ROTHSCHILD REALTY INC. 19
SECTION 7.16 FEES AND EXPENSES OF SCHULTE ROTH & ZABEL LLP 19
SECTION 7.17 AGREEMENT AND WAIVER 19
SECTION 7.18 DIVIDENDS ON PREFERRED SHARES 19
SECTION 7.19 TRANSACTION FEE 19
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO CLOSE
SECTION 8.1 REPRESENTATIONS AND COVENANTS 20
SECTION 8.2 GOVERNMENTAL PERMITS AND APPROVALS 20
SECTION 8.3 LEGAL PROCEEDINGS 20
SECTION 8.4 THIRD PARTY CONSENTS 20
SECTION 8.5 PURCHASE PRICE 20
SECTION 8.6 APPROVAL OF COUNSEL TO THE COMPANY 20
SECTION 8.7 NO STOP ORDER 21
SECTION 8.8 OPINION OF INVESTOR'S COUNSEL 21
ARTICLE 9 ASSIGNMENT
SECTION 9.1 ASSIGNABILITY BY INVESTOR 21
SECTION 9.2 ASSIGNABILITY BY THE COMPANY 21
SECTION 9.3 BINDING AGREEMENT 21
ARTICLE 10 MISCELLANEOUS
SECTION 10.1 APPLICABLE LAW 21
SECTION 10.2 NOTICES 21
SECTION 10.3 ENTIRE AGREEMENT; AMENDMENTS 22
SECTION 10.4 REMEDIES FOR BREACHES OF THIS AGREEMENT 22
SECTION 10.5 CONFIDENTIALITY 24
SECTION 10.6 STANDSTILL 24
SECTION 10.7 LOCK-UP 25
SECTION 10.8 CLASS A WAIVER 25
SECTION 10.9 COMPANY WAIVER 25
SECTION 10.10 AVAILABILITY FEE WAIVER 25
SECTION 10.11 TERMINATION 25
SECTION 10.12 COUNTERPARTS 27
<PAGE>
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT dated as of May 27, 1997 between
Pacific Gulf Properties Inc., a corporation organized under the
laws of the State of Maryland (the "Company") and Five Arrows
Realty Securities L.L.C., a limited liability company organized
under the laws of the State of Delaware (the "Investor").
WHEREAS, the Company wishes to issue the Preferred
Shares (as defined herein) to the Investor, and the Investor
wishes to purchase, acquire and accept the Preferred Shares from
the Company (the "Investment").
NOW THEREFORE, in consideration of the promises and the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE 1 DEFINED TERMS.
Section 1.1 Defined Terms. The following terms
shall, unless the context otherwise requires, have the meanings
set forth in this Section 1.1.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable
attorneys' fees and disbursements.
"Affiliate" means, with respect to any Person, (a) any
member of the Immediate Family of such Person or a trust
established for the benefit of such member, (b) any beneficiary
of a trust described in (a), (c) any Entity which, directly or
indirectly though one or more intermediaries, is deemed to be the
beneficial owner of 25% or more of the voting equity of the
Person for the purposes of Section 13(d) of the Exchange Act, (d)
any officer of the Person or any member of the Board of Directors
of the Person, or (e) any Entity which, directly or indirectly
through one or more intermediaries, controls, is controlled by,
or is under common control with, such Person, including such
Person or Persons referred to in the preceding clauses (a) or
(d); provided, however, that none of the Investor, Rothschild or
their respective Affiliates nor any of their respective officers,
directors, partners, members or Affiliates nor any Preferred
Director (as such term is defined in the Certificate of
Designation) shall be considered an Affiliate of the Company or
its Subsidiaries for purposes of this Agreement.
"Agreement" means this Investment Agreement, as
originally executed and as hereafter from time to time
supplemented, amended and restated.
"Agreement and Waiver" means the Agreement and Waiver,
dated as of the date of the initial Closing, between the Company
and the Investor in the form of Exhibit A attached hereto.
"Benefit Plan" means a defined benefit plan as defined
in Section 3(35) of ERISA that is subject to Title IV of ERISA
(other than a Multiemployer Plan) and in respect of which the
Company or any ERISA Affiliate is or within the immediately
preceding six (6) years was an "employer" as defined in
Section 3(5) of ERISA.
"Business Day" means any Monday, Tuesday, Wednesday,
Thursday or Friday which is not a day in which banking
institutions in New York City are authorized or obligated by law
or executive order to close.
"Certificate of Designation" means the Articles
Supplementary classifying 1,411,765 shares of preferred stock as
Class B Senior Cumulative Convertible Preferred Stock of the
Company in the form of Exhibit B attached hereto.
"Charter" means the Articles of Amendment and
Restatement of the Company as currently in effect and as amended
in the future in a manner that is not inconsistent with the terms
of the Operative Instruments.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time or any successor statute thereto.
"Common Stock" means the shares of the common stock,
par value $.01 per share, of the Company.
"Confidential Information" means the identity of the
Company in the context of the Investment, the existence and
contents of discussions regarding the Investment and information
concerning the assets, operations, business, records, projections
and prospects of the Company; provided, however, that the term
"Confidential Information" does not include information that (i)
is or becomes available to the public other than as a result of
disclosure by any of the Investor or Rothschild or any of their
respective representatives, (ii) was available to the Investor or
Rothschild or was within the Investor's or Rothschild's knowledge
prior to its disclosure by the Company to the Investor or
Rothschild, or (iii) becomes available to the Investor or
Rothschild from a source other than the Company, provided that
such source is not known by the Investor or Rothschild to be
bound by a confidentiality agreement with the Company or its
representative.
"Entity" means any general partnership, limited
partnership, corporation, joint venture, trust, business trust,
real estate investment trust, limited liability company,
cooperative or association.
"Environmental Claim" means any complaint, summons,
citation, notice, directive, order, claim, litigation,
investigation, judicial or administrative proceeding, judgment,
letter or other communication from any governmental agency,
department, bureau, office or other authority, or any third party
alleging violations of Environmental Laws or Releases of
Hazardous Materials.
"Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. 9601 et seq., as amended; the Resource
Conservation and Recovery Act ("RCRA), 42 U.S.C. 6901 et seq., as
amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as
amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as
amended; and any other federal, state, local or municipal laws,
statutes, regulations, rules or ordinances imposing liability or
establishing standards of conduct for protection of the
environment.
"Environmental Liabilities" means any monetary
obligations, losses, liabilities (including strict liability),
damages, punitive damages, treble damages, costs and expenses
(including all reasonable out-of-pocket fees, disbursements and
expenses of counsel, reasonable out-of-pocket expert and
consulting fees and reasonable out-of-pocket costs for
environmental site assessments, remedial investigation and
feasibility studies), fines, penalties, sanctions and interest
incurred as a result of any Environmental Claim filed by any
governmental authority or any third party against the Company or
its Subsidiaries or any predecessors in interest which relate to
any violations of Environmental Laws, Remedial Actions, Releases
or threatened Releases of Hazardous Materials from or onto (i)
any assets, properties or businesses presently or formerly owned
by the Company, its Subsidiaries or a predecessor in interest, or
(ii) any facility which received Hazardous Materials generated by
the Company, its Subsidiaries or a predecessor in interest.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute of similar
import, and regulations thereunder, in each case as in effect
from time to time. References to sections of ERISA shall be
construed also to refer to any successor sections.
"ERISA Affiliate" means any (i) corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Company,
(ii) partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of
Section 414(c) of the Code) with the Company, or (iii) member of
the same affiliated service group (within the meaning of
Section 414(m) of the Code) as the Company, any corporation
described in clause (i) above or any partnership or trade or
business described in clause (ii) above.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"GAAP" means United States Generally Accepted
Accounting Principles, as in effect from time to time.
"Hazardous Materials" include (a) any element,
compound, or chemical that is defined, listed or otherwise
classified as a contaminant, pollutant, toxic pollutant, toxic or
hazardous substances, extremely hazardous substance or chemical,
hazardous waste, medical waste, biohazardous or infectious waste,
special waste, or solid waste under Environmental Laws; (b)
petroleum, petroleum-based or petroleum-derived products; (c)
electrical equipment containing polychlorinated biphenyls at a
level greater than 50 ppm; and (d) asbestos-containing materials.
"Immediate Family" means, with respect to any Person,
such Person's spouse, parents, parents-in-law, descendants,
nephews, nieces, brothers, sisters, brothers-in-law, sisters-in-
law, stepchildren, sons-in-law and daughters-in-law.
"Lien" means and includes any lien, security interest,
pledge, charge, option, right of first refusal, claim, mortgage,
lease, easement or any other encumbrance whatsoever.
"Material Adverse Effect," when used with reference to
events, acts, failures or omissions to act, or conduct of a
specified Person, means that such events, acts, failures or
omissions to act, or conduct would have a material adverse effect
on (i) the condition (financial or otherwise), earnings, business
affairs or business prospects of such Person and its consolidated
subsidiaries, considered as one enterprise, or (ii) the ability
of such Person to perform its obligations under the Operative
Instruments.
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA and subject to Title IV of
ERISA which is, or within the immediately preceding six (6) years
was, contributed to by the Company or any ERISA Affiliate.
"Operating Agreement" means the Operating Agreement,
dated as of the initial Closing Date, between the Company and the
Investor, in the form of Exhibit C attached hereto.
"Operative Instruments" means this Agreement, the
Certificate of Designation, and the Operating Agreement.
"Permit" means a permit, license, consent, order or
approval by any federal, state or local governmental agency.
"Person" means any individual or Entity.
"Plan" means an employee benefit plan defined in
Section 3(3) of ERISA in respect of which the Company or any
ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Preferred Shares" means the shares of the Company
designated in the Certificate of Designation as Class B Senior
Cumulative Convertible Preferred Stock.
"Registration Statement" means the registration
statement of the Company on Form S-3 (Registration No. 333-23611)
filed with the SEC pursuant to the Securities Act.
"REIT" means a real estate investment trust described
in Code Section 856.
"Release" means any spilling, leaking, pumping,
emitting, emptying, discharging, injecting, escaping, leaching,
migrating, dumping, or disposing of Hazardous Materials
(including the abandonment or discarding of barrels, containers
or other closed receptacles containing Hazardous Materials) into
the environment.
"Remedial Action" means all actions taken to (i) clean
up, remove, remediate, contain, treat, monitor, assess, evaluate
or in any other way address Hazardous Materials in the
environment as required by Environmental Laws; (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials
so they do not migrate to cause substantial danger to public
health or welfare or the environment as required by 42 U.S.C.
9601; (iii) perform pre-remedial studies and investigations and
post-remedial operation and maintenance activities as required by
42 U.S.C. 9601; or (iv) any other actions authorized by 42 U.S.C.
9601.
"Reportable Event" means any of the events described in
Section 4043(b) of ERISA (other than events for which the notice
requirements have been waived).
"Representatives" means, with respect to any Person,
the directors, officers, employees, Affiliates, representatives
(including, but not limited to, financial advisors, attorneys and
accountants), agents or potential sources of financing of such
person.
"Rothschild" means Rothschild Realty Inc.
"SDAT" means the State Department of Assessment and
Taxation of Maryland.
"SEC" means the Securities and Exchange Commission or
any successor regulatory authority.
"Securities Act" means the Securities Act of 1933, as
amended.
"Subsidiary" of any Person or Entity means an Entity in
which such Person or Entity has the ability, whether by the
direct or indirect ownership of shares or other equity interests,
by contract or otherwise, to elect a majority of the directors of
a corporation or the trustees of a real estate investment trust,
to select the managing partner of a partnership, or otherwise to
select, or have the power to remove and then select, a majority
of those persons exercising governing authority over such Entity.
In the case of a limited partnership, the sole general partner,
all of the general partners to the extent each has equal
management control and authority, or the managing general partner
or managing general partners thereof shall be deemed to have
control of such partnership and, in the case of a trust other
than a real estate investment trust, any trustee thereof or any
Person having the right to select any such trustee shall be
deemed to have control of such trust.
"Termination Event" means (i) a Reportable Event with
respect to any Benefit Plan (with respect to which the 30 day
notice requirement has not been waived); (ii) the withdrawal of
the Company or any ERISA Affiliate from a Benefit Plan during a
plan year in which the Company or any ERISA Affiliate was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA;
(iii) providing a written notice of intent to terminate a Benefit
Plan to affected parties of a distress termination described in
Section 4041(c) of ERISA; or (iv) the institution by the PBGC of
proceedings to terminate a Benefit Plan.
Section 1.2 Terms Defined Herein. In addition to
the terms defined in Section 1.1 above, the following terms
shall, unless the context otherwise requires, have the meanings
set forth in this Agreement in the section set forth next to such
term.
Defined Term Section
Accredited Investor 5.2
Breach 4.20
Closing 2.1
Excess Stock 4.10
Indemnified Party 10.4.3
Indemnifying Party 10.4.3
Liabilities 4.18
1996 10-K 4.2
1997 Proxy Statement 4.9
Preferred Stock 4.10
Purchase Price 2.1
Third Party Claim 10.4.3
Transaction Fee 6.2
ARTICLE 2 SALE AND PURCHASE OF PREFERRED SHARES.
Section 2.1 Sale of Preferred Shares. At the
closings provided for in Article 3 hereof (each a "Closing"): (i)
the Company shall issue and sell an aggregate of 1,411,765
Preferred Shares to the Investor, and shall deliver to the
Investor a stock certificate or certificates representing all of
the Preferred Shares, registered in the Investor's or its
nominee's name; and (ii) the Investor shall purchase, acquire and
accept such Preferred Shares for $21.25 per share (the "Purchase
Price") or an aggregate of approximately thirty million dollars
($30,000,000.00).
Section 2.2 Payment for the Preferred Shares.
At the Closings and in accordance with the provisions
set forth in Article 3, the Purchase Price shall be paid by the
Investor to the Company in United States dollars by wire transfer
of funds immediately available in New York City to such
account(s) as the Company shall designate in a written notice
delivered to the Investor not less than five (5) Business Days
prior to the applicable Closing Date.
Section 2.3 Transfer Taxes. The Company shall pay
all stock transfer taxes, recording fees and other sales,
transfer, use, purchase or similar taxes resulting from the
Investment.
ARTICLE 3 CLOSINGS.
Section 3.1 Closings. The Company shall be entitled
to designate up to three Closings, the first two of which shall
provide for at least 235,294 Preferred Shares each, and the last
of which shall provide for the remaining Preferred Shares. Each
Closing of the sale and purchase of the Preferred Shares shall
take place at the offices of Schulte Roth & Zabel LLP, 900 Third
Avenue, New York, New York 10022 at 10:00 a.m. New York City
time.
Section 3.2 Closing Dates. Each Closing shall occur
on such date as the Company notifies the Investor on not less
than ten (10) Business Days notice or at such other time as the
Company and the Investor mutually agree in writing (each, a
"Closing Date"); provided, however, that if the sale of all of
the Preferred Shares as provided for herein shall not have
occurred before December 31, 1997, the Closing for such Preferred
Shares as shall not have previously been so sold shall occur on
December 31, 1997.
Section 3.3 Cancellation of Subsequent Closings. In
the event that a Change of Control or a Put Event (each as
defined in the Certificate of Designation) occurs after any
Closing Date, but prior to the sale by the Company to the
Investor of all 1,411,765 Preferred Shares to be sold pursuant to
this Agreement, and the Investor notifies the Company that it
will tender into the Put Offer (as defined in the Certificate of
Designation) any further Closings shall be canceled and the
Company shall immediately pay to the Investor by wire transfer in
immediately available funds an amount equal to the product of (i)
$0.425 and (ii) the difference between (x) 1,411,765 and (y) the
number of Preferred Shares which the Company has sold to the
Investor pursuant to this Agreement prior to the occurrence of
such Change of Control.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the
Investor as follows:
Section 4.1 Due Incorporation and Status of the
Company.
Section 4.1.1 Due Incorporation. The Company and
each of its Subsidiaries has been duly incorporated and is
validly existing and in good standing under the laws of the state
of their respective organization and are qualified or licensed,
and in good standing, as a foreign corporation authorized to do
business in each other jurisdiction in which its ownership of
properties or its conduct of business requires such qualification
or licensing, except where the failure to be so qualified or
licensed, or in good standing, as a foreign corporation would not
have a Material Adverse Effect on the Company.
Section 4.1.2 REIT Status. As of the date
hereof, the Company qualifies as a REIT under the Code and has
taken no action or omitted to take any action, the effect of
which reasonably could be expected to disqualify the Company as a
REIT under the Code.
Section 4.2 Authority. The Company has the power
and authority to own, lease and operate its properties, directly
or indirectly, and to conduct its business as presently conducted
and as contemplated by the Annual Report on Form 10-K, as
amended, as filed by the Company under the Exchange Act for the
year ended December 31, 1996 (the "1996 10-K").
Section 4.3 Valid Agreement of the Company. The
execution, delivery and performance of this Agreement, the
Operating Agreement and the Agreement and Waiver have each been
duly authorized by the Company. This Agreement has been, and the
Operating Agreement and Agreement and Waiver, upon the Closing,
will be executed and delivered by the Company. This Agreement
represents and the Operating Agreement and Agreement and Waiver,
upon the Closing will represent, the valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective 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).
Section 4.4 No Default. The execution and delivery
of the Operative Instruments by the Company and the performance
by the Company of its obligations do not (or if not yet executed,
upon the execution and delivery thereof will not) (a) violate the
Charter or By-Laws of the Company; (b) violate or constitute a
breach of or default under any mortgage, indenture, loan
agreement, promissory note or other agreement to which the
Company or any of its Subsidiaries is a party, or by which any of
them is bound, or to which any property of the Company or any of
its Subsidiaries is subject; or (c) conflict with or violate any
law or any regulation, rule, order or decree of any governmental
body, court or administrative agency having jurisdiction over the
Company or any of its Subsidiaries or the properties of any of
them; except, in the case of clauses (b) and (c) above, for such
breaches, defaults, conflicts or violations which would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company or on the ability of the Company to consummate the
transactions contemplated hereby.
Section 4.5 No Required Consents. The execution and
delivery of the Operative Instruments by the Company and the
performance by the Company of its obligations to be performed at
or prior to the related Closing do not require any filing or
registration with, or the receipt of any consent by, any
governmental or regulatory authority by the Company or its
Subsidiaries other than (a) any which have already been obtained
or waived and (b) such consents as may be required under the
Securities Act, the regulations promulgated thereunder or
applicable state securities laws.
Section 4.6 Reservation of Shares . The Company has
duly reserved solely for purposes of issuance upon conversion of
the Preferred Shares the shares of Common Stock into which the
Preferred Shares may be converted from time to time.
Section 4.7 Validity of Preferred Shares. The
Company has duly authorized the issuance and delivery of
1,411,765 shares of Preferred Stock pursuant to this Agreement
and, upon delivery thereof and receipt by the Company of the
Purchase Price therefor, such shares of Preferred Stock will be
duly authorized, validly issued, fully paid and nonassessable.
The Preferred Shares have the dividend, conversion, voting and
other terms set forth in the Certificate of Designation and, to
the extent not inconsistent therewith, as set forth in the
Charter and By-Laws of the Company and the Maryland General
Corporation Law.
Section 4.8 Transferability. Upon the issuance and
sale of the Preferred Shares by the Company to the Investor
pursuant to this Agreement, the Preferred Shares shall be fully-
registered shares under the Securities Act. Except to the extent
that the Investor is deemed to be an affiliate (as defined in the
Exchange Act), upon such issuance and sale and subject to the
restrictions on transfer set forth in the Certificate of
Designation (as modified by the Agreement and Waiver) such
Preferred Shares shall be freely transferable by the Investor
without the requirement that (i) such Preferred Shares be
registered or qualified pursuant to any federal law or (ii) the
Investor comply with the prospectus delivery requirements of the
Securities Act. Upon the conversion of the Preferred Shares into
shares of Common Stock, pursuant to the provisions of the
Certificate of Designation, such shares of Common Stock shall be
fully-registered shares under the Securities Act. Upon such
conversion, and subject to the restrictions on transferability
set forth in the Charter, such shares of Common Stock shall be
freely transferable by the Investor without the requirement that
(i) such shares of Common Stock be registered or qualified
pursuant to any federal law or (ii) the Investor comply with the
prospectus delivery requirements of the Securities Act.
Section 4.9 Disclosure. The Company has heretofore
delivered to the Investor the Proxy Statement relating to its
1997 Annual Meeting of Shareholders (the "1997 Proxy Statement")
and the 1996 10-K.
Section 4.9.1 No Misstatement or Omission. At
the time of filing, the 1997 Proxy Statement and the 1996 10-K
complied in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated by the SEC
thereunder. The 1997 Proxy Statement and the 1996 10-K do not,
as of their respective dates, contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made,
in light of the circumstances under which they were made, not
misleading.
Section 4.9.2 Financial Statements. The
financial statements, including the notes thereto, and supporting
schedules included in the 1996 10-K have been prepared in
conformity with GAAP applied on a consistent basis (except as
otherwise noted therein) and present fairly the financial
position of the Company and its Subsidiaries as of the dates
indicated and the results of their operations for the periods
shown.
Section 4.9.3 Subsequent Events. Since the
respective dates as of which information is given in the 1996 10-
K, except as otherwise stated therein, in any Current Report on
Form 8-K filed by the Company or in the press releases listed on
Schedule 4.9.3 hereto and other than changes in general economic
conditions or industry conditions, there has not been any change
in the condition (financial or otherwise) or in the earnings,
business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising
in the ordinary course of business which would have a Material
Adverse Effect on the Company.
Section 4.10 Capitalization. The authorized capital
stock of the Company consists of: (i) 25,000,000 shares of
Common Stock; (ii) 5,000,000 shares of preferred stock, par value
$.01 per share (the "Preferred Stock"); and (iii) 30,000,000
shares of excess stock, par value $.01 per share (the "Excess
Stock"). As of May 8, 1997, (i) 12,129,753, 270,270, and 0
shares of the Common Stock, the Preferred Stock and the Excess
Stock, respectively, were validly issued and outstanding, fully
paid and nonassessable; and (ii) 3,149,797, 1,081,081, and 0
shares of the Common Stock, the Preferred Stock and the Excess
Stock, respectively, were reserved for issuance as set forth on
Schedule 4.10 hereto. Except as contemplated by clauses (i)
through (ii) of this Section 4.10 or as set forth on Schedule
4.10 hereto, there are no other shares of capital stock of the
Company outstanding and no other outstanding options, warrants,
convertible or exchangeable securities, subscriptions, rights
(including preemptive rights), stock appreciation rights, calls
or commitments of any character whatsoever to which the Company
is a party or may be bound requiring the issuance or sale of
shares of any capital stock of the Company, and there are no
contracts or other agreements by which the Company is or may
become bound to issue additional shares of its capital stock or
any options, warrants, convertible or exchangeable securities,
subscriptions, rights (including preemptive rights), stock
appreciation rights, calls or commitments of any character
whatsoever relating to such shares.
Section 4.11 Litigation. Except as set forth on
Schedule 4.11 or in the 1996 10-K, the Company has not received
any notice of any outstanding judgments, rulings, orders, writs,
injunctions, awards or decrees of any court or any foreign,
federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority or
arbitral tribunal against or involving the Company or any of its
Subsidiaries which is currently in effect. Neither the Company
nor any of its Subsidiaries is a party to, or to the knowledge of
the Company, threatened with, any litigation or judicial,
governmental, regulatory, administrative or arbitration
proceeding which, if decided adversely to their respective
interests could have an adverse effect upon the transactions
contemplated hereby or that could reasonably be expected to have
a Material Adverse Effect on the Company.
Section 4.12 ERISA. (i) Each Plan is in substantial
compliance with the applicable provisions of ERISA and the Code,
(ii) no Termination Event has occurred nor is reasonably expected
to occur with respect to any Benefit Plan, (iii) the most recent
annual report (Form 5500 Series) with respect to each Plan,
including Schedule B (Actuarial Information) thereto, copies of
which have been filed with the Internal Revenue Service, is
complete and correct in all material respects and fairly presents
the funding status of such Benefit Plan, and since the date of
such report there has been no material adverse change in such
funding status, (iv) no Benefit Plan had an accumulated (whether
or not waived) funding deficiency or permitted decreases which
would create a deficiency in its funding standard account within
the meaning of Section 412 of the Code at any time during the
previous 60 months, and (v) no Lien imposed under the Code or
ERISA exists or is likely to arise on account of any Benefit Plan
within the meaning of Section 412 of the Code. Neither the
Company nor any of its ERISA Affiliates has incurred any
withdrawal liability under ERISA with respect to any
Multiemployer Plan, and the Company is not aware of any facts
indicating that the Company or any of its ERISA Affiliates may in
the future incur any such withdrawal liability. Except as
required by Section 4980B of the Code, the Company does not
maintain a welfare plan (as defined in Section 3(1) of ERISA)
which provides benefits or coverage after a participant's
termination of employment. Neither the Company nor any of its
ERISA Affiliates have incurred any liability under the Worker
Adjustment and Retraining Notification Act. All Plans in
existence on the Closing Date are set forth on Schedule 4.12
hereto.
Section 4.13 Environmental Matters. Except as set
forth in Schedule 4.13 hereto, to the best knowledge of the
Company and its Subsidiaries:
(a) The operations and properties of the Company and
its Subsidiaries are in full compliance with Environmental Laws
except to the extent that any failure to comply is not reasonably
expected to have a Material Adverse Effect on the business of the
Company or its Subsidiaries taken as a whole or any predecessor
in interest;
(b) There has been no Release (i) at any assets,
properties or businesses currently owned or operated by the
Company, any of its Subsidiaries or any predecessor in interest;
(ii) from adjoining properties or businesses; or (iii) from or
onto any facilities which received Hazardous Materials generated
by the Company, any of its Subsidiaries or any predecessor in
interest that would result in any Environmental Liabilities
except to the extent that any such Release is not reasonably
expected to have a Material Adverse Effect on the business of the
Company or its Subsidiaries taken as a whole or any predecessor
in interest;
(c) No Environmental Claims have been asserted against
the Company, any of its Subsidiaries or any predecessor in
interest nor does the Company or any of its Subsidiaries have
knowledge or notice of any threatened or pending Environmental
Claims except to the extent that any such Environmental Claims
are not reasonably expected to have a Material Adverse Effect on
the business of the Company or its Subsidiaries taken as a whole
or any predecessor in interest;
(d) No Environmental Claims have been asserted against
any facilities that may have received Hazardous Materials
generated by the Company, any of its Subsidiaries or any
predecessor in interest except to the extent that any such
Environmental Claims are not reasonably expected to have a
Material Adverse Effect on the business of the Company or its
Subsidiaries taken as a whole or any predecessor in interest;
(e) The Company has delivered to the Investor true and
correct copies of all Phase I Environmental Assessments, material
environmental reports, studies or investigations in their
possession regarding any Environmental Liabilities at the assets,
properties or businesses of the Company or any of its
Subsidiaries; and
(f) To the extent that any of the assets, properties or
businesses owned or operated by the Company or any of its
Subsidiaries are located in "wetlands" regulated under
Environmental Laws the Company and its Subsidiaries are in
compliance with Environmental Laws regulating those "wetlands"
except to the extent that any such failure to comply is not
reasonably expected to have a Material Adverse Effect on the
business of the Company or its Subsidiaries taken as a whole or
any predecessor in interest.
Section 4.14 Investment Company. The Company is not,
and upon the issuance and sale of the Preferred Shares as herein
contemplated will not be, an "investment company" or an Entity
"controlled" by an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.
Section 4.15 Taxes. The Company has filed all
federal, state, local or foreign tax returns that are required to
be filed or has duly requested extensions thereof and has paid
all taxes required to be paid by it and any related assessments,
fines or penalties, except for any such tax, assessment, fine or
penalty that is being contested in good faith and by appropriate
proceedings or where the failure to make any such filing or
payment would not be reasonably expected to have a Material
Adverse Effect on the Company; and adequate charges, accruals and
reserves have been provided for in the financial statements of
the Company in respect of all material federal, state, local and
foreign taxes for all periods as to which the tax liability of
the Company has not been finally determined or remains open to
examination by applicable taxing authorities. The Company is not
currently under review by any federal or state taxing authority.
Section 4.16 Insurance. The Company carries or is
entitled to the benefits of insurance in such amounts and
covering such risks as is reasonably sufficient under the
circumstances and is consistent with comparable businesses and
all such insurance is in full force and effect.
Section 4.17 Affiliated Transactions. Except as set
forth on Schedule 4.17 or as disclosed in the 1996 10-K or the
1997 Proxy Statement describe all transactions with, or payments
to, any Affiliate in excess of $60,000 in the aggregate (other
than reimbursement of expenses and compensation payable to
employees or officers or directors' fees payable to the Company's
directors). Neither the Company, nor any officer or director of
the Company, nor any of its Subsidiaries, or any Affiliate of any
of the foregoing, or any member of the Immediate Family of any of
the foregoing: (i) owns, directly or indirectly, any interest in
(excepting not more than five (5) percent stock holdings held
solely for investment purposes in securities of any Person which
are listed on any national securities exchange or regularly
traded in the over-the-counter market) or is an owner, sole
proprietor, shareholder, partner, director, officer, employee,
consultant or agent of any person which is a competitor, lessor,
lessee, customer or supplier of the Company or any of its
Subsidiaries; (ii) owns, directly or indirectly, in whole or in
part, any property, patent, trademark, service mark, trade name,
copyright, franchise, invention, permit, license or secret or
confidential information which the Company or any of its
Subsidiaries is using or the use of which is necessary for the
business of the Company or any of its Subsidiaries; or (iii) has
any cause of action or other suit, action or claim whatsoever
against, or owes any amount to, the Company or any of its
Subsidiaries, in each case (i) through (iii) except for those in
the ordinary course of business.
Section 4.18 Liabilities. Except as set forth on
Schedule 4.18, the Company and its Subsidiaries do not have any
material direct or indirect indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, fixed or
unfixed, choate or inchoate, liquidated or unliquidated, secured
or unsecured, subordinated or unsubordinated, matured or
unmatured, accrued, absolute, contingent or otherwise, including,
without limitation, liabilities on account of taxes, other
governmental, regulatory or administrative charges or lawsuits
brought, whether or not of a kind required by GAAP to be set
forth on a financial statement (collectively, "Liabilities"),
that were not fully and adequately reflected or reserved against
on the Balance Sheet of the Company (less Liabilities that have
been discharged in the ordinary course of business since the date
of the Balance Sheet of the Company).
Section 4.19 Agreement and Waiver. The Board of
Directors of the Company has approved the provisions of the
Agreement and Waiver.
Section 4.20 No Event of Default. No event has
occurred and is continuing and no condition exists which
constitutes a breach, an event of default, or otherwise gives any
other party the rights to accelerate or require payment of any
obligation, or with the passage of time would constitute such an
event (a "Breach"), under any agreement or instrument to which
the Company or any of its Subsidiaries is a party that could
reasonably be expected to have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries has
received any notice that an event has occurred and is continuing
or that a condition exists which constitutes a Breach under any
agreement or instrument to which the Company or any of its
Subsidiaries is a party that could reasonably be expected to have
a Material Adverse Effect on the Company.
Section 4.21 No Brokers. In connection with the
Investment, the Company has not retained or become obligated to
any broker or finder other than Bear, Stearns & Co. Inc.
Section 4.22 Bear, Stearns & Co. Inc. The Company
agrees that Bear, Stearns & Co. Inc. has acted on behalf of the
Company in connection with the issuance and sale of Preferred
Shares by the Company to the Investor and the Company shall be
solely responsible for any payments to Bear, Stearns & Co. Inc.
in connection therewith.
Section 4.23 Full Disclosure. All documents and
other papers delivered to the Investor by or on behalf of the
Company in connection with this Agreement and the transactions
contemplated hereby are true, complete, accurate and authentic
and, when taken together with the Company's representations and
warranties set forth in this Agreement, do not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements made, in light of the circumstances under which they
were made, not misleading.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
In order to induce the Company to enter into this
Agreement and to consummate the transactions contemplated hereby,
the Investor hereby represents and warrants to, and covenants
with, the Company as follows:
Section 5.1 Organization. The Investor has been
duly organized and is 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 carry on its business as now
conducted.
Section 5.2 Accredited Investor. The Investor is an
"Accredited Investor," as such term is defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
Section 5.3 Valid Agreements of the Investor. The
Investor has all right, power and authority to enter into this
Agreement and the Operating Agreement and to consummate the
transactions contemplated hereby and thereby. All action on the
part of the Investor, its officers, managers and members
necessary for the authorization, execution and delivery of the
Operative Agreements and the performance of all obligations of
the Investor hereunder have been taken or will be taken prior to
the Closing. Each of the Operative Instruments to which the
Investor is a party has each been duly authorized, executed and
delivered by the Investor, and constitutes a legal, valid and
binding obligation of the Investor, enforceable against the
Investor 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).
Section 5.4 No Default. The execution and delivery
of this Agreement and the Operating Agreement by the Investor and
the performance by the Investor of its obligations thereunder do
not (or if not yet executed, upon the execution and delivery
thereof will not) (a) violate the organizational documents of the
Investor; (b) violate or constitute a breach of or default under
any mortgage, indenture, loan agreement, promissory note or other
agreement to which the Investor is a party, or by which the
Investor is bound, or to which any property of the Investor is
subject; or (c) conflict with or violate any law or any
regulation, rule, order or decree of any governmental body, court
or administrative agency having jurisdiction over the Investor or
its properties except with respect to clauses (b) and (c) where
such conflict, breach, default or violation would not reasonably
be expected to have a Material Adverse Effect on the Investor.
Section 5.5 Opportunity for Inquiry. The Investor
has had a reasonable opportunity to ask questions of and receive
answers from representatives of the Company regarding the
business, management and financial affairs of the Company; it
being understood that no inquiry or investigation shall affect
the Investor's ability to rely on any representation or warranty
of the Company or the conditions to the obligations of the
Investor under this Agreement.
Section 5.6 Purchase Entirely for Own Account. The
Preferred Shares will be acquired for investment for the
Investor'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 Securities Act.
Section 5.7 Materials. The Investor acknowledges
that all documents, agreements, instruments, records, and books
that it has requested pertaining to the Company and its
businesses and financial affairs, have been made available to the
Investor and the Investor's attorneys, accountants and advisors
for inspection.
Section 5.8 Knowledge and Experience. The Investor
has such knowledge and experience in financial and business
matters that the Investor is capable of evaluating the merits and
risks involved in connection with the Investment.
Section 5.9 No Brokers. In connection with the
Investment, the Investor has not retained or become obligated to
any broker or finder.
Section 5.10 Investment Company. The Investor is
not, and upon the purchase of the Preferred Shares as herein
contemplated, will not be, an "investment company" or an Entity
"controlled" by and "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended.
ARTICLE 6 COVENANTS AND UNDERTAKINGS.
Section 6.1 Closings. The Company shall use its
best efforts to comply with all conditions precedent to the
Closings, including, without limiting the foregoing, the Company
shall cause the Certificate of Designation to have been adopted,
filed with the SDAT and become effective.
Section 6.2 Transaction Fee. The Company agrees to
pay to Rothschild at each Closing a transaction fee of $0.75 per
Preferred Share issued at such Closing (the "Transaction Fee").
The Transaction Fee payable at each Closing pursuant to this
Section 6.2 shall be paid by wire transfer of funds immediately
available to such account(s) as Rothschild shall designate in a
written notice delivered to the Company not less than two
Business Days prior to such Closing Date; provided, however, that
the Investor, on behalf of the Company, may directly pay the
Transaction Fee out of the Purchase Price payable hereunder at
each Closing.
Section 6.3 Expenses of Rothschild Realty Inc.
Except as set forth in Section 6.4, the Company agrees to
reimburse Rothschild at each Closing for its reasonable out-of-
pocket expenses documented to the reasonable satisfaction of the
Company. All such amounts paid pursuant to this Section 6.3
shall be paid by wire transfer of funds immediately available in
New York City to such account(s) as Rothschild shall designate in
a written notice delivered to the Company not less than two
Business Days prior to the initial Closing Date; provided,
however, that the Investor, on behalf of the Company, may
directly pay out of the Purchase Price payable hereunder such
fees and expenses to Rothschild; provided, further, that the
aggregate of all such expenses including, without limitation, the
fees and expenses of Schulte Roth & Zabel LLP provided for in
Section 6.4 hereof, shall not exceed $35,000 through the initial
Closing Date and $20,000 (plus any amount of the $35,000
remaining) through any subsequent Closing Dates, if applicable
(such limitation shall not apply to the fees and expenses of the
Investor, including the fees and expenses of Schulte Roth & Zabel
LLP, in connection with any amendments or supplements to the
Operative Instruments, the reasonable costs and expenses of which
shall be paid by the Company).
Section 6.4 Fees and Expenses of Schulte Roth &
Zabel LLP. Subject to the limitation set forth in Section
6.3, the Company agrees to pay to Schulte Roth & Zabel LLP,
counsel to the Investor, at each Closing reasonable fees and
expenses in connection with services rendered and expenses
incurred in connection with the issuance and sale of Preferred
Shares to the Investor. All such amounts paid pursuant to this
Section 6.4 shall be paid by wire transfer of funds immediately
available in New York City to such account(s) as Schulte Roth &
Zabel LLP shall designate in a written notice delivered to the
Company not less than two Business Days prior to each Closing
Date; provided, however, that the Investor, on behalf of the
Company, may directly pay out of the Purchase Price hereunder
such fees and expenses to Schulte Roth & Zabel LLP.
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE INVESTOR TO CLOSE.
The obligation of the Investor to complete each Closing is
subject, at its option, to the fulfillment on or prior to the
related Closing Date (unless otherwise provided) the following
conditions, any one (1) or more of which may be waived by it in
its sole discretion:
Section 7.1 Representations and Covenants. The
representations and warranties of the Company contained in this
Agreement shall be true, complete and accurate in all material
respects on and as of the related Closing Date with the same
force and effect as though made on and as of the related Closing
Date, except for changes contemplated or permitted by this
Agreement and except to the extent that any representation or
warranty is made as of a specified date, in which case, such
representation and warranty shall be true and correct in all
material respects as of such date. The Company shall have
performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by the Company on or prior to the
related Closing Date. The Company shall have delivered to the
Investor a certificate, dated the related Closing Date and signed
by the President and Chief Financial Officer of the Company, to
the foregoing effect and stating that all conditions to the
Investor's obligations hereunder have been satisfied.
Section 7.2 Good Standing Certificates. The Company
shall have delivered to the Investor: (i) copies of its Charter,
including all amendments thereto, certified by the SDAT; (ii) a
certificate from the SDAT to the effect that the Company is in
good standing and subsisting in such jurisdiction and listing all
charter documents of the Company on file in such state; (iii) a
certificate from the Secretary of State or other appropriate
official in each State in which the Company is qualified to do
business to the effect that the Company is in good standing in
such State; and (iv) a certificate as to the Tax status of the
Company from the appropriate official in its Maryland and each
State in which the Company is qualified to do business, in each
case, dated as of a date within reasonable proximity to the
related Closing Date.
Section 7.3 Governmental Permits and Approvals. Any
and all Permits necessary for the consummation of the
transactions contemplated hereby shall have been obtained and a
copy thereof shall have been delivered to the Investor; except
for (a) notice requirements which may be fulfilled subsequent to
the Closing Date and (b) consents, permits, approvals,
authorizations, filings and declarations the failure to obtain or
to undertake which will not adversely affect the ability of the
Company to perform its obligations under the Operative Agreements
or any agreement executed in accordance therewith or would not
have a Material Adverse Effect on the Company or its
Subsidiaries.
Section 7.4 Legislation. No legislation shall have
been proposed, and approved by a legislative committee, or
enacted, and no statute, law, ordinance, code, rule or regulation
shall have been adopted, revised or interpreted, by any foreign,
federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority,
which would require, upon or as a condition to the acquisition of
the Preferred Shares by the Investor, the divestiture or
cessation of the conduct of any business presently conducted by
the Company, on the one hand, or by the Investor, on the other
hand, or which, in the good faith judgment of the Investor, may,
individually or in the aggregate, have a Material Adverse Effect
on it or on the Company in the event that the transactions
contemplated hereby are consummated.
Section 7.5 Legal Proceedings. No suit, action,
claim, proceeding or investigation shall have been instituted or
threatened by or before any court or any foreign, federal, state,
county or local government or any other governmental, regulatory
or administrative agency or authority seeking to restrain,
prohibit or invalidate the issuance or sale of the Preferred
Shares to the Investor hereunder or the consummation of the
transactions contemplated hereby or to seek damages in connection
with such transactions.
Section 7.6 Third Party Consents. All consents,
waivers, licenses, variances, exemptions, franchises, permits,
approvals and authorizations from parties to any contracts and
other agreements (including any amendments and modifications
thereto) with the Company which may be required in connection
with the performance by the Company of its obligations under this
Agreement or to assure such contracts and other agreements
continue in full force and effect after the consummation of the
transactions contemplated hereby (without any Breach by the
Company or any of its Subsidiaries) shall have been obtained.
Section 7.7 Stock Certificates. The Company shall
have tendered to the Investor the stock certificate or
certificates representing the Preferred Shares to be purchased on
such Closing Date in accordance with Section 3.1 hereof,
registered in the Investor's name.
Section 7.8 Approval of Counsel to the Investor.
The Company shall furnish to counsel for the Investor such
certificates and documents as may reasonably be requested by
counsel to the Investor to enable such counsel to pass on or
evaluate the satisfaction of the conditions set forth in this
Article 7. All actions and proceedings hereunder and all
documents and other papers required to be delivered by the
Company hereunder or in connection with the consummation of the
transactions contemplated hereby, and all other related matters,
shall have been reasonably approved by Schulte Roth & Zabel LLP,
counsel to the Investor, as to their form and substance.
Section 7.9 Appointment of Director. Prior to or
concurrent with the initial Closing, the nominee designated by
the Investor as a director of the Company shall have been elected
and qualified to become a member of the Board of Directors of the
Company (or be continuing to serve as a member of the Board of
Directors of the Company pursuant to the Investment Agreement
dated December 31, 1996 between the Company and the Investor),
and prior to and concurrent with any second Closing or third
Closing, the nominee designated by the Investor as a director of
the Company shall be continuing to serve as a member of the Board
of Directors of the Company; provided, however, that the Company
shall have the right to approve any such nominee designated by
the Investor in its reasonable discretion, it being agreed that
John D. McGurk, James E. Quigley 3rd, Matthew W. Kaplan, and D.
Pike Aloian shall be deemed to have been approved by the Company
for all purposes hereunder.
Section 7.10 Certificate of Designation. The
Certificate of Designation shall be effective.
Section 7.11 Operating Agreement. The Company shall
have executed and delivered to the Investor the Operating
Agreement.
Section 7.12 Opinions of Counsel. The Investor shall
have received favorable opinion letters, dated as of the related
Closing Date, from Gibson, Dunn & Crutcher LLP and Piper &
Marbury L.L.P. to the effect of the matters contained in Exhibit
D and Exhibit E, respectively.
Section 7.13 No Stop Order. On the related Closing
Date, no stop order suspending the effectiveness of the Company's
Registration Statement shall have been issued under the
Securities Act or proceedings therefor initiated or threatened by
the SEC.
Section 7.14 Listing of Common Stock. The Common
Stock issuable upon conversion of the Preferred Shares shall have
been approved for listing on the New York Stock Exchange.
Section 7.15 Expenses of Rothschild Realty Inc.
Rothschild shall have been reimbursed for the expenses to be paid
by the Company as described under Section 6.3.
Section 7.16 Fees and Expenses of Schulte Roth &
Zabel LLP. Provided that Schulte Roth & Zabel LLP shall have
provided to the Company a copy of its invoice and daily activity
log for services rendered and expenses incurred at least three
(3) days prior to the related Closing, Schulte Roth & Zabel LLP
shall have received the fees and disbursements to be paid by the
Company as described under Section 6.4.
Section 7.17 Agreement and Waiver. The Company
shall have executed and delivered to the Investor the Agreement
and Waiver.
Section 7.18 Dividends on Preferred Shares. All
accrued and unpaid dividends, whether or not declared, have been
paid to, or made available for payment to, the holders of the
Preferred Shares.
Section 7.19 Transaction Fee. Rothschild shall have
been paid the Transaction Fee to be paid by the Company as
described under Section 6.2.
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE COMPANY TO CLOSE.
The obligation of the Company to complete each Closing is
subject, at its option, to the fulfillment on or prior to the
related Closing Date of the following conditions, any one (1) or
more of which may be waived it in its sole discretion:
Section 8.1 Representations and Covenants. The
representations and warranties of the Investor contained in this
Agreement shall be true, complete and accurate in all material
respects on and as of the related Closing Date with the same
force and effect as though made on and as of the related Closing
Date, except for changes contemplated or permitted by this
Agreement and except to the extent that any representation or
warranty is made as of a specified date, in which case, such
representation and warranty shall be true, complete and accurate
in all material respects as of such date. The Investor shall
have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the related
Closing Date. The Investor shall have delivered to the Company a
certificate, dated the related Closing Date and signed by an
officer of the Investor to the foregoing effect and stating that
all conditions to the Company's obligations hereunder have been
satisfied.
Section 8.2 Governmental Permits and Approvals. Any
and all Permits necessary for the consummation of the
transactions contemplated hereby shall have been obtained.
Section 8.3 Legal Proceedings. No suit, action,
claim, proceeding or investigation shall have been instituted or
threatened before any court or any foreign, federal, state,
county or local government or any other governmental, regulatory
or administrative agency or authority seeking to restrain,
prohibit or invalidate the sale of the Preferred Shares to the
Investor hereunder or the consummation of the transactions
contemplated hereby or to seek damages in connection with such
transactions.
Section 8.4 Third Party Consents. All consents,
waivers, licenses, variances, exemptions, franchises, permits,
approvals and authorizations from parties to any contracts and
other agreements (including any amendments and modifications
thereto) with the Investor which may be required in connection
with the performance by the Investor of its obligations under
this Agreement shall have been obtained.
Section 8.5 Purchase Price. The Investor shall have
tendered payment for the Preferred Shares in the amount and in
the manner specified in Section 3.1 hereof.
Section 8.6 Approval of Counsel to the Company. The
Investor shall furnish to counsel for the Company such
certificates and documents as may reasonably be requested by
counsel to the Company to enable such counsel to pass on or
evaluate the satisfaction of the conditions set forth in this
Article 8. All actions and proceedings hereunder and all
documents or other papers required to be delivered by the
Investor hereunder or in connection with the consummation of the
transactions contemplated hereby, and all other related matters,
shall be subject to the reasonable approval of Gibson, Dunn &
Crutcher LLP, counsel to the Company, as to their form and
substance.
Section 8.7 No Stop Order. On the Closing Date, no
stop order suspending the effectiveness of the Company's
Registration Statement shall have been issued under the
Securities Act or proceedings therefor initiated or threatened by
the SEC.
Section 8.8 Opinion of Investor's Counsel. The
Company shall have received from Schulte Roth & Zabel LLP,
counsel for the Investor, an opinion dated the Closing Date, in
substantially the form of Exhibit F hereto.
ARTICLE 9 ASSIGNMENT.
Section 9.1 Assignability by Investor. Subject to
the terms of the Agreement and Waiver, the Investor may, without
the consent or approval of the Company, assign its rights and
obligations under this Agreement to a Person to whom the Investor
assigns its interest in the Preferred Shares, pro rata based upon
the percentage of Preferred Shares transferred, provided that
such assignee agrees in writing to be bound by the terms of this
Agreement.
Section 9.2 Assignability by the Company. Without
the prior written consent of the Investor, in the sole and
absolute discretion of the Investor, the Company may not assign
or delegate its rights or obligations hereunder.
Section 9.3 Binding Agreement. Subject to the
provisions of Sections 9.1 and 9.2, this Agreement shall be
binding upon the heirs, successors and assigns of the parties.
ARTICLE 10 MISCELLANEOUS.
Section 10.1 Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York as applied between residents of that State
entering into contracts to be performed wholly within that State.
Section 10.2 Notices. All notices hereunder shall be
in writing and shall be given: (a) if to the Company, at 363 San
Miguel Drive, Newport Beach, California 92660-7805, Attention:
President, or such other address or addresses of which the
Investor shall have been given notice, with copies to Gibson,
Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles,
California 90071-3197, Attention: Dhiya El-Saden, Esq., or such
other address of which the Investor shall have been given notice;
and (b) if to the Investor, at Rothschild Realty Inc., 1251
Avenue of the Americas, New York, New York 10020, Attn: Matthew
Kaplan, or such other address of which the Company shall have
been given notice, with copies to Schulte Roth & Zabel LLP, 900
Third Avenue, New York, New York 10022, Attention: Andre Weiss,
Esq., or such other address of which the Company shall have been
given notice. Any notice shall be deemed to have been given if
personally delivered or sent by United States mail or by
commercial courier or delivery service or by telegram or telex
and shall be deemed received, unless earlier received, (i) if
sent by certified or registered mail, return receipt requested,
three business days after deposit in the mail, postage prepaid,
(ii) if sent by United States Express Mail or by commercial
courier or delivery service, one Business Day after delivery to a
United States Post Office or delivery service, postage prepaid,
(iii) if sent by telegram, telex or facsimile transmission, when
receipt is acknowledged by answerback, and (iv) if delivered by
hand, on the date of receipt.
Section 10.3 Entire Agreement; Amendments. This
Agreement and other agreements referred to herein set forth the
entire understanding of the parties hereto, and this Agreement
shall not be amended except by an instrument in writing executed
by the Company and the Investor.
Section 10.4 Remedies for Breaches of This Agreement.
Section 10.4.1 Survival of Certain Provisions.
All of the representations and warranties of the Company
contained in Article 4 above and all of the covenants and
undertakings of the Company contained in Article 6 above, shall
survive the Closings hereunder and continue in full force and
effect until the first anniversary of each Closing (subject to
any applicable statutes of limitations).
Section 10.4.2 Indemnification Provisions. In
the event that either the Company or the Investor breaches any of
its representations, warranties, and covenants contained herein,
provided that the non-breaching party makes a written claim for
indemnification against the breaching party pursuant to Section
10.2, then the breaching party agrees to indemnify the non-
breaching party from and against the entirety of any Adverse
Consequences the non-breaching party may suffer through and after
the date of the claim for indemnification (including any Adverse
Consequences the non-breaching party, its members or shareholders
may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or
caused by such breach. In addition to the indemnification rights
provided for herein, the non-breaching party shall also have the
right to all such remedies to which it is entitled as a matter of
law or equity.
Section 10.4.3 Matters Involving Third Parties.
(i) If any third party shall notify any party
entitled to be indemnified hereunder (the "Indemnified
Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against
the Company or the Investor (the "Indemnifying Party") under
this Section 10.4, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii)Any Indemnifying Party will have the right to
assume the defense of the Third Party Claim with counsel of
his or its choice reasonably satisfactory to the Indemnified
Party at any time within 15 days after the Indemnified Party
has given notice of the Third Party Claim; provided,
however, that the Indemnifying Party must conduct the
defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard;
and provided further that the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has
assumed and is conducting the defense of the Third Party
Claim in accordance with Section 10.4.3(ii) above, the
Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless
the judgment or proposed settlement involves only the
payment of money damages by one or more of the Indemnifying
Parties and does not impose an injunction or other equitable
relief upon the Indemnified Party.
(iv)So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in
accordance with Section 10.4.3(ii) above, the Indemnified
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably).
(v) In the event none of the Indemnifying Parties
assumes and conducts the defense of the Third Party Claim in
accordance with Section 10.4.3(ii) above, (A) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner he or it
reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith) and (B) the
Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 10.4.
Section 10.5 Confidentiality. The Investor agrees
not to use any Confidential Information for any purpose other
than evaluating the Investment and the Investor will not divulge,
furnish or make available to any other person or entity other
than the Investor's legal counsel, accountants and designated
advisors, and a limited number of the Investor's officers and
employees and the officers and employees of any member of the
Investor, solely to the extent necessary in connection with the
evaluation and consummation of the Investment; such persons and
entities shall be informed by the Investor of the confidential
nature of the Confidential Information and shall be directed to
treat such Confidential Information confidentially. Except as
required by law, without the prior written consent of the other
party or until such time as a mutually agreeable public
announcement is made, no party hereto will disclose to any Person
other than its Affiliates, attorneys, accountants and other
advisors either the fact that discussion or negotiations are
taking place concerning the Investment or any of the terms,
conditions or other facts with respect to the Investment,
including status or that the Confidential Information has been
made available to the Investor and its Representatives.
In the event that the Investor is requested or required
(by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar
process) to disclose any of the Confidential Information, the
Investor will provide the Company with prompt notice of such
request or requirements, and the Investor shall cooperate with
the Company in seeking to legally avoid such disclosure. If, in
the absence of a protective order, the Investor is legally
compelled, in the opinion of its counsel, to disclose any of the
information, the Company shall either seek and obtain appropriate
protective orders against such disclosure or shall hereby be
deemed to waive the Investor's compliance with the provisions of
this Agreement to the extent necessary to satisfy such request or
requirement.
Section 10.6 Standstill. Subject to the provisions
of the sentence next following, the Investor agrees that until
January 1, 1999 it and its Affiliates shall not (a) acquire,
offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities, direct or indirect
rights or options to acquire any voting securities, direct or
indirect rights or options to acquire any voting securities, or
securities or instruments convertible into voting securities, of
the Company, (b) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" to vote (as such
terms are used in the proxy rules of the SEC) securities of the
Company, or seek to advise or influence any person or entity with
respect to any voting of any securities of the Company, (c) form,
join or in any way participate in a "group" within the meaning of
Section 13(d)(3) of the Exchange Act, with respect to any voting
securities of the Company, (d) make any public announcement with
respect to or make or submit a proposal or offer (with or without
conditions) for the securities or assets of the Company or any
extraordinary transaction involving the Company or any of its
Subsidiaries, (e) submit or effect any filing or application, or
seek to obtain any permit, consent or agreement, approval or
other action, required by or from any regulatory agency with
respect to an acquisition of the Company or any of its securities
or assets, (f) otherwise act alone or in concert with others to
seek to control the management, board of directors or policies of
the Company; or (g) propose any of the foregoing unless and until
such proposal is specifically invited by the Company. Based on
the representations of Rothschild to the Company that Affiliates
of Rothschild (which representation Rothschild hereby reaffirms)
not under control of Rothschild have no access to any of the
internal information or files of Rothschild and receive no
information, recommendations or advice from Rothschild, the
Company agrees that the prohibitions of the preceding sentence
shall not apply to any Affiliates of Rothschild that are not
under the control of Rothschild and are engaged in the regular
business of trading in publicly-traded securities, so long as
such affiliates have not received, or been given access to, any
of the Confidential Information and have not received any
instructions, recommendations or advice pertaining to an
investment in or control of the Company from any party having
access to any of the Confidential Information.
Section 10.7 Lock-Up. The Investor agrees that until
June 30, 1998, it shall not sell transfer, convey, assign, pledge
or hypothecate any of the Preferred Shares, any shares of Class
A Senior Cumulative Convertible Preferred Stock of the Company
(the "Class A Preferred Stock"), or any shares of Common Stock
obtained upon conversion of any Preferred Shares or the Class A
Preferred Stock.
Section 10.8 Class A Waiver. The Investor, as the
holder of all of the outstanding shares of Class A Preferred
Stock, hereby consents (i) pursuant to Section 4(m) of the
Articles Supplementary Classifying 1,351,351 Shares of Preferred
Stock as Class A Senior Cumulative Convertible Preferred Stock,
and (ii) pursuant to Section 11.2(b) of the Operating Agreement
dated as of April 1, 1997 between the Company and the Investor,
to (i) the issuance by the Company of the Preferred Shares, (ii)
the Company entering into this Agreement, and (iii) the Company
entering into the Operating Agreement.
Section 10.9 Company Waiver. The Company hereby
waives the provisions of Section 10.6 of the Investment
Agreement, dated as of December 31, 1996, between the Company and
the Investor, for the sole purpose of allowing the Investor to
purchase the Preferred Shares from the Company as provided
herein.
Section 10.10 Availability Fee Waiver. The Investor
hereby waives the payment by the Company of all fees payable to
the Investor pursuant to Section 3.4 of the Investment Agreement
dated as of December 31, 1996, between the Investor and the
Company.
Section 10.11 Termination. This Agreement may be
terminated at any time prior to the date which all of the
Preferred Shares have been sold hereunder:
(a) by the mutual written consent of the Investor and
the Company;
(b) by the Company or the Investor if the entire
amount of Preferred Shares to be sold by the Company to the
Investor hereto have not been sold on or prior to December 31,
1997; provided that the party attempting to terminate this
Agreement is not in material breach of any of its
representations, warranties, covenants or agreements contained in
this Agreement. In the event of termination by the Company or
the Investor pursuant to this Section 10.11, written notice
thereof shall forthwith be delivered to the other party;
(c) by the Investor, if there is a material breach of
any material representation or warranty set forth in Article 4
hereof or any covenant or agreement to be complied with or
performed by the Investor pursuant to the terms of this
Agreement, provided that the Investor may not terminate this
Agreement prior to the Closing unless the Company has not cured
such failure after 10 days notice thereof; or
(d) by the Company, if there is a material breach of
any material representation or warranty set forth in Article 5
hereof or any covenant or agreement to be complied with or
performed by the Investor pursuant to the terms of this
Agreement, provided that the Company may not terminate this
Agreement prior to the Closing unless the Investor has cured such
failure after 10 days notice thereof.
<PAGE>
Section 10.12 Counterparts. This Agreement may be
executed in more than one counterpart, each of which may be
executed by fewer than all the parties, with the same effect as
if the parties executed one counterpart as of the day and year
first above written.
IN WITNESS WHEREOF, the parties hereto have hereunto
set their hands and seals as of the day and year first above
written.
PACIFIC GULF PROPERTIES INC.
By: /s/ Glenn L. Carpenter
Name: Glenn L. Carpenter
Title: Chairman, Chief Executive Officer
and President
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ Matthew W. Kaplan
Name: Matthew W. Kaplan
Title: Manager
The undersigned hereby acknowledges the terms hereof
and hereby agrees to be bound by the following sections hereof:
Sections 10.5, 10.6 and 10.7.
ROTHSCHILD REALTY INC.
By: /s/ Matthew W. Kaplan
Name: Matthew W. Kaplan
Title: Senior Vice President
<PAGE>
SCHEDULE 4.9.3
NONE
<PAGE>
SCHEDULE 4.10
Common Stock reserved for issuance, as of May 8, 1997:
704,045 shares issuable upon conversion of Debentures
847,904 shares issuable upon the exercise of options awarded
or to be awarded under the Company's stock incentive plan
246,497 shares issuable under the Company's dividend
reinvestment plan
1,351,351 shares issuable upon conversion of the Class A
Senior Cumulative Convertible Preferred Stock of the Company
Preferred Stock reserved for issuance, as of May 8, 1997:
1,081,081 shares of the Company's Class A Senior Cumulative
Convertible Preferred Stock
<PAGE>
SCHEDULE 4.11
NONE
<PAGE>
SCHEDULE 4.12
Pacific Gulf Properties Inc. Retirement Plan (defined benefit
retirement income plan)
Pacific Gulf Properties Inc. Thrift Plan (401(k) plan)
Pacific Gulf Properties Inc. Share Option Plan (to the extent, if
any, subject to ERISA)
<PAGE>
SCHEDULE 4.13
NONE
<PAGE>
SCHEDULE 4.17
NONE
<PAGE>
SCHEDULE 4.18
NONE
