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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Alexander Haagen Properties, Inc.
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(Name of Company)
COMMON STOCK, Par Value $.01 Per Share
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(Title of Class of Securities)
40443E100
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(CUSIP Number)
Lorenzo Lorenzotti, Esq.
Prometheus Western Retail, LLC
LF Strategic Realty Investors, L.P.
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
(212) 632-6000
with a copy to:
Kevin Grehan, Esq.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
(212) 474-1490
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 1, 1997
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(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 [ ].
Note: six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act but shall be subject to all
other provisions of the Act (however, see the Notes).
Page 1 of 12
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<PAGE>
SCHEDULE 13D
CUSIP No. 40443E100 Page 2 of 12 Pages
--------- --- ----
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1 NAME OF REPORTING PERSON
SS OR IRS IDENTIFICATION NO OF ABOVE PERSON
Prometheus Western Retail, LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(E) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES 15,666,666
BENEFICIALLY -------------------------------------------
OWNED BY EACH 8 SHARED VOTING POWER
REPORTING -0-
PERSON WITH -------------------------------------------
9 SOLE DISPOSITIVE POWER
15,666,666
-------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- ----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
15,666,666 shares of Common Stock*
*Assuming consummation of the purchase of all shares
of Common Stock to be purchased pursuant to the Stock
Purchase Agreement incorporated by reference herein.
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
56.5%, based upon number of shares of Common Stock
outstanding on March 31, 1997 and assuming
consummation of the purchase of all shares of Common
Stock to be purchased pursuant to the Stock Purchase
Agreement incorporated by reference herein.
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 12
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SCHEDULE 13D
CUSIP No. 40443E100 Page 3 of 12 Pages
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1 NAME OF REPORTING PERSON
SS OR IRS IDENTIFICATION NO OF ABOVE PERSON
LF Strategic Realty Investors, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF, OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(E) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES 15,666,666
BENEFICIALLY -------------------------------------------
OWNED BY EACH 8 SHARED VOTING POWER
REPORTING -0-
PERSON WITH -------------------------------------------
9 SOLE DISPOSITIVE POWER
15,666,666
-------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- ----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
15,666,666 shares of Common Stock*
*Assuming consummation of the purchase of all shares
of Common Stock to be purchased pursuant to the Stock
Purchase Agreement incorporated by reference herein.
- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
56.5%, based upon number of shares of Common Stock
outstanding on March 31, 1997 and assuming
consummation of the purchase of all shares of Common
Stock to be purchased pursuant to the Stock Purchase
Agreement incorporated by reference herein.
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14 TYPE OF REPORTING PERSON*
PN
- ----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 12
<PAGE>
Item 1. Security and Company
This statement on Schedule 13D (the "Statement") relates to
the Common Stock, par value $.01 per share (the "Common Stock"), of
Alexander Haagen Properties, Inc., a Maryland corporation (the
"Company"). The principal executive offices of the Company are located
at 3500 Sepulveda Boulevard, Manhattan Beach, California, 90266.
Item 2. Identity and Background
(a), (b), (c) and (f). This Statement is filed by Prometheus
Western Retail, LLC, a Delaware limited liability company
("Prometheus") and LF Strategic Realty Investors L.P., a Delaware
limited partnership ("LF Realty"). Prometheus and LF Realty are
collectively referred to herein as the "Reporting Persons". Prometheus
is a special purpose investment vehicle formed by LF Realty solely to
acquire the shares of Common Stock covered by this Statement. The only
activity of LF Realty is the acquisition for its own account of real
estate assets and securities and other interests in entities owning
real estate assets. The principal business offices of Prometheus and
LF Realty are at 30 Rockefeller Plaza, 63rd Floor, New York, New York,
10020.
The sole general partner of LF Realty is Lazard Freres Real
Estate Investors, LLC, a New York limited liability company ("LFREI"),
which has its principal offices at 30 Rockefeller Plaza, 63rd Floor,
New York, N.Y. 10020. LFREI's activities consist principally of acting
as the general partner of LF Realty and several other real estate
investment partnerships that are affiliated with Lazard Freres & Co.
LLC. ("Lazard"). Lazard disclaims beneficial ownership of any of the
shares of Common Stock reported in this Statement. The name, business
address and principal occupation or employment of the executive
officers of LFREI are set forth on Schedule I hereto and incorporated
by reference herein. Each person noted on such Schedule I is a citizen
of the United States.
(d) and (e). During the last five years, neither the
Reporting Persons nor, to the best knowledge of the Reporting Persons,
any of the persons listed in Schedule I hereto (i) has been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) nor (ii) has been a party to any civil proceeding of a
judicial or administrative body of competent jurisdiction, and is or
was, as a result of such proceeding, subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws, or
finding any violation with respect to such laws.
Page 4 of 12
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration
The funds for this transaction are to be made available to
Prometheus through advances from LF Realty. The funds to be provided
to LF Realty will be provided by capital subscriptions from its
partners.
Item 4. Purpose of Transaction
The shares of Common Stock that are the subject of this
Statement are to be acquired from the Company pursuant to a Stock
Purchase Agreement dated June 1, 1997, (the "Stock Purchase
Agreement") among the Company, LF Realty and Prometheus. While neither
Prometheus nor LF Realty has obtained actual, record ownership of the
shares of Common Stock reported by this Statement, LF Realty and
Prometheus acquired beneficial ownership of the shares of Common Stock
reported herein upon the signing of the Stock Purchase Agreement as a
result of Prometheus's binding commitment to acquire the shares of
Common Stock in accordance with the Stock Purchase Agreement, subject
to only limited conditions.
Subject to the terms and conditions of the Stock Purchase
Agreement, the Company will sell to Prometheus up to 15,666,666 shares
of Common Stock at a purchase price of $15.00 per share (the
"Transaction"), representing an aggregate investment in the Company of
$235 million (the "Total Equity Commitment"). Proceeds from the sale
of the shares are to be used by the Company to repay indebtedness and
to increase the Company's portfolio of neighborhood and community
shopping centers in a designated area of the Western United States.
The Transaction will be consummated in two or more stages.
Prior to shareholder approval of the Transaction, the Company will
sell to Prometheus 1,306,434 shares of Common Stock representing an
aggregate investment of approximately $19.6 million. This initial
closing of the Transaction (the "Initial Closing"), is expected to
occur in June or July 1997. The shares to be acquired by Prometheus at
the Initial Closing currently represent approximately 9.8% of the
outstanding Common Stock. Following the Initial Closing, the Company
is required to seek shareholder approval of the Transaction
("Shareholder Approval") at a special meeting of shareholders expected
to be held in or around September 1997. Following receipt of
Shareholder Approval, at one or more subsequent closings (each a
"Subsequent Closing"), the Company from time to time may, at its
election, sell additional shares of Common Stock to Prometheus at
$15.00 per share. All such Subsequent Closings will be in minimum
increments of $30 million (with
Page 5 of 12
<PAGE>
an aggregate minimum of at least $100 million being funded through the
Initial Closing and through Subsequent Closings within six months of
Shareholder Approval), until the Total Equity Commitment is invested
or, if earlier, until (a) eighteen months after Shareholder Approval
or (b) March 14, 1999 (unless extended by mutual agreement of the
parties). Upon Prometheus acquiring all of the shares of Common Stock
that the Company may sell pursuant to the Stock Purchase Agreement,
Prometheus will own approximately 56.5% of the outstanding Common
Stock, based upon the number of shares of Common Stock outstanding on
March 31, 1997. This percentage ownership translates into
approximately 38% of the shares of Common Stock on a "fully-diluted
basis" (i.e. based upon the number of outstanding shares of Common
Stock, the number of outstanding limited partnership units of
Alexander Haagen Properties Operating Partnership, L.P. (the "OP")
that are exchangeable for Common Stock, the number of shares of Common
Stock issuable under the convertible debt of the Company and the OP,
and the number of shares of Common Stock issuable under option or
other equity-incentive plans).
The Initial Closing will be subject to various conditions,
including (i) a conditional waiver of application to Prometheus of the
ownership limitations contained in the Company's charter with respect
to the Initial Closing, (ii) the continued treatment of the Company as
a real estate investment trust for federal income tax purposes (a
"REIT"), (iii) the confirmation by Prometheus of the Company's
representations and warranties during a twenty business day due
diligence period, and (iv) satisfaction of various customary closing
conditions. In addition, if the Initial Closing shall not have
occurred on or prior to August 15, 1997, the Stock Purchase Agreement
may be terminated by either party, unless such party is then in
default thereunder. Each Subsequent Closing will be subject to various
conditions, including (i) receipt of Shareholder Approval, (ii) the
continued treatment of the Company as a REIT and (iii) satisfaction of
various customary closing conditions.
In the event that the Company shall not have received
Shareholder Approval prior to December 31, 1997, Prometheus has an
option under the Stock Purchase Agreement to require that the Company
repurchase the shares of Common Stock acquired at the Initial Closing
at a price equal to the purchase price therefor, together with accrued
dividends. This option may be exercised at any time until 11 months
after the Initial Closing; provided that the Company shall not be
required to pay for the shares of Common Stock to be so repurchased
until the earlier to occur of (a) 18 months after the Initial Closing
and (b) the consummation by the Company of an issuance of debt or
equity securities or a sale of assets that yields net proceeds to the
Company of at least $50 million.
Page 6 of 12
<PAGE>
The foregoing discussion of the Stock Purchase Agreement is
qualified in its entirety to the full text of such agreement, a copy
of which is attached as Exhibit 1 hereto and is incorporated by
reference herein. See also Item 6.
Item 5. Interest in Securities of the Company
(a) As of the date of this Statement, Prometheus has
beneficial ownership of 15,666,666 shares, assuming consummation of
the sale by the Company of all shares issuable pursuant to the Stock
Purchase Agreement. Such shares would represent 56.5% of the issued
and outstanding shares of the Company, as of March 31, 1997. LF Realty
has no ownership interest in the Company beyond its interest in
Prometheus.
(b) Prometheus has the sole power to vote or to direct the
vote of all shares of Common Stock covered by this Statement, subject
to the terms of the Stockholders Agreement described in Item 6.
(c) Neither the Reporting Persons nor, to the knowledge of
the Reporting Persons, any of the other parties listed on Schedule I
hereto have acquired any shares of Common Stock of the Company during
the past sixty days.
(d) Prometheus has the sole right to receive or the power to
direct the receipt of dividends from, or the proceeds of sale of, the
shares of Common Stock covered by this Statement.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Company.
Concurrently with the execution of the Stock Purchase
Agreement, LFREI, LF Realty, Prometheus and the Company entered into a
stockholders agreement (the "Stockholders Agreement") and Prometheus
and the Company entered into a registration rights agreement (the
"Registration Rights Agreement").
The Stockholders Agreement contemplates that the Company
will amend its By-laws and take all action necessary to cause
designees of Prometheus to be nominated for election to the Board of
Directors of the Company from and after the date of the Shareholder
Approval until the standstill period described below ends, as follows:
Page 7 of 12
<PAGE>
(a) so long as Prometheus owns at least (x) a number of
shares of Common Stock equal to 50% of the aggregate number of shares
to be acquired pursuant to the Transaction and (y) 20% of the Common
Stock (on a fully- diluted basis), the Prometheus shall be entitled to
nominate four (4) directors:
(b) so long as Prometheus does not meet the ownership
criteria in clause (a)(x) or (a)(y) above but owns at least (x) a
number of shares to be acquired pursuant to the Transaction and (y)
15% of the Common Stock of the Company (on a fully-diluted basis),
Prometheus shall be entitled to nominate two (2) directors; and
(c) so long as Prometheus does not meet the ownership
criteria in clauses (a)(x) or (a)(y) or (b)(x) or (b)(y) above and
owns at least 10% of the Common Stock (on a fully-diluted basis),
Prometheus shall be entitled to nominate one (1) director.
The number of designees that Prometheus is entitled to nominate
increases according to an agreed upon schedule following increases in
the size of the Board, but Prometheus's consent is required prior to
any increase in the size of the Board beyond 17 members.
Additionally, the Stockholders Agreement provides that from
and after the date of the Stockholders' Agreement until a "Termination
Event" (which shall occur when Prometheus no longer owns at least (a)
25% of the aggregate number of Shares to be acquired pursuant to the
Transaction and (b) 15% of the outstanding Common Stock on a fully
diluted basis), Prometheus will have the right (ii) to obtain certain
operating and financial information with respect to the Company and
(ii) to participate in the Company's future equity offerings for cash
by purchasing its proportionate share (on a fully diluted basis and
limited to 37.5% of any offering) of the securities offered therein.
During a standstill period of five years (which period is
subject to early termination in certain circumstances but, if not
terminated early, shall be automatically extended until Prometheus
gives the Company 90 days' notice canceling such extensions or unless
sooner terminated upon certain events), Prometheus, LF Realty, LFREI
and their controlled affiliates will be subject to certain limitations
and restrictions relating to, among other matters: (a) acquisitions of
additional shares of Common Stock (generally limiting Prometheus to
beneficially owning no more than 49.9% of the shares of Common Stock
on an adjusted fully-diluted basis), (b) voting its shares of Common
Stock exceeding 40% of the outstanding Common Stock, either as
recommended by the board of directors or proportionately in accordance
with the vote of the other holders of Common
Page 8 of 12
<PAGE>
Stock), (c) acting in concert with others by becoming a member of a
"group" for purposes of Section 13(d) of the Securities Act of 1934
and the rules promulgated thereunder, (d) soliciting, encouraging or
proposing certain significant transactions involving the Company, (e)
soliciting, initiating, encouraging or participating in the
solicitation of proxies in connection with any election contest
involving the Company's board of directors or initiating or proposing
or participating in or encouraging the making of, or soliciting
shareholder approval of, any shareholder proposal, (f) seeking
representation on the Company's board of directors other than as
contemplated by the Stockholders Agreement and (g) requesting any
waiver of the foregoing restrictions.
For a period of five years after Shareholder Approval or, if
earlier, until a Termination Event, Prometheus may not sell any shares
of Common Stock except (a) in transactions pursuant to Rule 144 under
the Securities Act of 1933, (b) in negotiated transfers to third
parties, subject to certain conditions, including that it not result
in a person beneficially owning more than 9.8% of the outstanding
Common Stock and (c) subject to certain conditions, to bona fide
financial institutions for the purpose of securing bona fide
indebtedness.
The standstill period will terminate prior to its stated
term in the event of certain occurrences such as (i) a material event
of default by the Company or any subsidiary under any debt agreement,
(ii) the acquisition by any person or group of beneficial ownership of
more than 9.8% of the Company's Common Stock, (iii) specified
corporate actions relating to incurrence of indebtedness in excess of
a specified amount, (iv) investments outside the shopping center
industry and (v) REIT termination. Additionally, pursuant to the
Stockholders Agreement, from and after date of the Stockholders
Agreement until a Termination Event, Company is required to consult
with Prometheus prior to acting on certain matters including those
concerning the Company's financing arrangements, acquisitions over $10
million, dispositions over $20 million and employment of executive
management.
Pursuant to the Registration Rights Agreement, the Company
has granted Prometheus demand registration rights to facilitate the
resale of the Common Stock owned by it and has also granted Prometheus
certain piggyback rights to sell a portion of its shares in connection
with offerings of securities by the Company for its own account.
In addition to the foregoing, Prometheus and LF Realty also
entered into a Tag-Along Agreement (the "Tag- Along Agreement"), a
Stockholders' Voting Agreement (the
Page 9 of 12
<PAGE>
"Family Voting Agreement") and a Stockholders' Agreement (the "Family
Stockholders' Agreement") with Alexander Haagen, Sr., the Chairman of
the Company, and certain members of his family (collectively, the
"Haagen Family") that set forth various rights and obligations between
the Haagen Family, Prometheus and LF Realty in respect of the shares
of Common Stock owned by them. The Tag-Along Agreement provides that
members of the Haagen Family and Prometheus have the right to tag
along in connection with certain sales of Common Stock (in the case of
a tag-along by Prometheus, only if the sale by the Haagen Family is in
an underwritten transaction) up to 10% of the amount then beneficially
owned in the case of a tag-along by Prometheus and 25% of the amount
then beneficially owned in the case of a tag-along by members of the
Haagen Family. The Family Voting Agreement effectively binds members
of the Haagen Family to vote all of their shares of Common Stock in
favor of the Transaction and in accordance with the Stockholders'
Agreement. The Family Stockholders' Agreement provides certain
participation rights to the Haagen Family in connection with capital
stock issued by the Company.
All references to the Stock Purchase Agreement, the
Stockholders' Agreement, the Registration Rights Agreement, the
Tag-Along Agreement, the Family Voting Agreement and the Family
Stockholders' Agreement are qualified in their entirety by the full
text of such agreements, copies of which are attached as Exhibits
hereto and are incorporated by reference herein. See also Item 4.
Item 7. Material to be Filed as Exhibits
Exhibit 1: Stock Purchase Agreement dated as of
June 1, 1997 among Alexander Haagen
Properties, Inc., LF Strategic Realty
Investors, L.P. and Prometheus Western
Retail, LLC
Exhibit 2: Stockholders' Agreement dated as of
June 1, 1997 among Alexander Haagen
Properties, Inc., LF Strategic Realty
Investors, L.P. and Prometheus Western
Retail, LLC, Lazard Freres Real Estate
Investors, LLC
Exhibit 3: Registration Rights Agreement dated as
of June 1, 1997 between Alexander Haagen
Properties, Inc., Prometheus Western
Retail, LLC
Exhibit 4: Tag Along Agreement dated as of June 1,
1997 between LF Strategic Realty
Investors, L.P., Prometheus Western
Page 10 of 12
<PAGE>
Retail, LLC and certain stockholders
listed therein
Exhibit 5: Stockholders' Voting Agreement dated as
of June 1, 1997 between LF Strategic
Realty Investors, L.P., Prometheus
Western Retail, LLC and certain
stockholders listed therein
Exhibit 6: Stockholders' Agreement dated as of
June 1, 1997 between Alexander Haagen
Properties, Inc., LF Strategic Realty
Investors, L.P., Prometheus Western
Retail, LLC and certain stockholders
listed therein
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is
true, complete and correct.
PROMETHEUS WESTERN RETAIL, LLC
by LF STRATEGIC REALTY INVESTORS
L.P., as sole member,
by Lazard Freres Real Estate
Investors, LLC, its general
partner,
by /s/ Anthony E. Meyer
-------------------------------
Name: Anthony E. Meyer
Title: Chief Investment Officer
Page 11 of 12
<PAGE>
SCHEDULE I
Officers of Lazard Freres Real Estate Investors, LLC. The
business address for each of the following persons is 30 Rockefeller
Plaza New York, NY 10020.
Name Present and Principal Occupation
---- ---------------------------------
Arthur P. Solomon Chairman and Managing Director of
LFREI; Director of American
Apartment Communities II, Inc.
and Atlantic Properties Trust
Anthony E. Meyer Senior Vice President and
Managing Director of LFREI;
Member of partnership committee
of DP Operating Partnership LP
Robert P. Freeman President and Managing Director
of LFREI; Director of American
Apartment Communities II, Inc.,
Commonwealth Atlantic Properties
Inc., and Atlantic American
Properties Trust
Klaus P. Kretschmann Senior Vice President of LFREI;
Director American Apartment
Communities II, Inc.
Murry N. Gunty Vice President of LFREI; Member
of partnership committee of DP
Operating Partnership LP
Thomas M. Mulroy Vice President of LFREI
Lorenzo L. Lorenzotti Secretary of LFREI
Kevin J. Reardon Comptroller of LFREI
Page 12 of 12
<PAGE>
EXHIBIT 1
STOCK PURCHASE AGREEMENT
by and among
PROMETHEUS WESTERN RETAIL, LLC
and
LF STRATEGIC REALTY INVESTORS, L.P.
and
ALEXANDER HAAGEN PROPERTIES, INC.
dated as of
June 1, 1997
<PAGE>
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of June
1, 1997, is made by and between Alexander Haagen Properties, Inc., a
Maryland corporation (the "Company"), LF Strategic Realty Investors,
L.P., a Delaware limited partnership (the "Advancing Party"), and
Prometheus Western Retail, LLC, a Delaware limited liability company
and an affiliate of the Advancing Party ("Buyer").
RECITALS:
WHEREAS, Buyer wishes to purchase from the Company, and the
Company wishes to sell to Buyer, up to an aggregate of 15,666,666
shares of the Company's common stock, par value $0.01 per share (the
"Company Common Stock"), at a purchase price of $15.00 per share; and
WHEREAS, Buyer, the Advancing Party, and the Company are entering
into this Agreement to provide for such purchase and sale and to
establish various rights and obligations in connection therewith; and
WHEREAS, the Company and Buyer believe that the combination in a
strategic alliance of the leadership, expertise and experience in
retail development and operations of the Company and the proven
investment and capital markets expertise and access to capital of
Buyer and its affiliates will significantly enhance the Company's
ability to pursue its growth and operating strategies;
WHEREAS, by separate agreement (the "Voting Agreements"), certain
stockholders of the Company have agreed to support and vote in favor
of this Agreement;
NOW, THEREFORE, in consideration of the promises and the
representations, warranties, covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1 "Action" shall mean any action, suit, arbitration,
inquiry, proceeding or investigation by or before any Government
Authority.
Section 1.2 "ADA" shall have the meaning set forth in Section
3.11(e).
<PAGE>
Section 1.3 "Advancing Party" shall have the meaning set forth in
the first paragraph hereof.
Section 1.4 "Affiliate" shall have the meaning ascribed thereto
in Rule 12b-2 promulgated under the Exchange Act, and as in effect on
the date hereof.
Section 1.5 "Agreement" shall have the meaning set forth in the
first paragraph hereof.
Section 1.6 "Army Corps of Engineers" shall have the meaning set
forth in Section 3.11(d).
Section 1.7 "Benefit Arrangements" shall have the meaning set
forth in Section 3.13(h).
Section 1.8 "Blue Sky Laws" shall have the meaning set forth in
Section 3.4(e).
Section 1.9 "Board" shall mean the Board of Directors of the
Company.
Section 1.10 "Breaching Matters" shall have the meaning set forth
in Section 2.8(a).
Section 1.11 "Breakup Fee" shall have the meaning set forth in
Section 9.3(c).
Section 1.12 "Business Day" shall mean any day other than a
Saturday, a Sunday or a bank holiday in New York, N.Y.
Section 1.13 "Buyer" shall have the meaning set forth in the
first paragraph hereof.
Section 1.14 "Capital Expenditure Budget and Schedule" shall have
the meaning set forth in Section 3.11(i).
Section 1.15 "CERCLA" shall have the meaning set forth in Section
3.12(e).
Section 1.16 "Claim" shall have the meaning set forth in Section
3.12(g)(i).
Section 1.17 "Closing" shall mean the consummation of any Stock
Purchase.
Section 1.18 "Closing Date" shall mean, with respect to the
consummation of any Stock Purchase, the date on which the conditions
set forth herein with respect thereto shall be satisfied or duly
waived, or if the Company and Buyer mutually agree on a different
date, the date upon which they have mutually agreed.
Section 1.19 "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any successor thereto, including all of the rules and
regulations promulgated thereunder.
Section 1.20 "Commitment" shall have the meaning set forth in
Section 3.7.
Section 1.21 "Company" shall have the meaning set forth in the
first paragraph hereof.
2
<PAGE>
Section 1.22 "Company Charter" shall mean the Articles of
Amendment and Restatement of the Company and any amendment or
supplement thereto, as in effect on the date hereof.
Section 1.23 "Company Common Stock" shall have the meaning set
forth in the second paragraph hereof.
Section 1.24 "Company Environmental Reports" shall have the
meaning set forth in Section 3.12(f).
Section 1.25 "Company Leases" shall have the meaning set forth in
Section 3.11(f).
Section 1.26 "Company Plans" shall have the meaning set forth in
Section 3.13(b).
Section 1.27 "Company Preferred Stock" shall have the meaning set
forth in Section 3.3(a).
Section 1.28 "Company Properties" shall have the meaning set
forth in Section 3.11(a).
Section 1.29 "Company Registration Statement" shall have the
meaning set forth in Section 3.5(a).
Section 1.30 "Company Reports" shall have the meaning set forth
in Section 3.5(a).
Section 1.31 "Company Stock" shall mean, collectively, the
Company Common Stock and any other shares of capital stock of the
Company.
Section 1.32 "Competing Transaction" shall mean (i) any
acquisition in any manner, directly or indirectly (including through
any option, right to acquire or other beneficial ownership), of more
than 15% of the equity securities, on a Fully Diluted Basis, of the
Company, or assets representing a material portion of the assets of
the Company, other than any of the transactions contemplated by this
Agreement or (ii) any merger, consolidation, sale of assets, share
exchange, recapitalization, other business combination, liquidation,
or other action out of the ordinary course of business of the Company,
other than any of the transactions contemplated by this Agreement.
Section 1.33 "Controlled Group Liability" shall have the meaning
set forth in Section 3.13(h).
Section 1.34 "Convertible Debt" shall mean the Company's 7 1/2%
Convertible Subordinated Debentures due 2001, Series A and Series B
and the 7 1/4% Exchangeable Subordinated Debentures due 2003 of
Alexander Haagen Properties Operating Partnership, L.P.
Section 1.35 "Cure Notice" shall have the meaning set forth in
Section 2.8(b).
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Section 1.36 "Debt Instruments" shall mean all notes, loan
agreements, mortgages, deeds of trust or similar instruments which
evidence or secure any indebtedness owing by the Company or any of its
Subsidiaries.
Section 1.37 "Development Budget and Schedule" shall have the
meaning set forth in Section 3.11(j).
Section 1.38 "Development Properties" shall have the meaning set
forth in Section 3.11(j).
Section 1.39 "Employee Benefit Plans" shall have the meaning set
forth in Section 3.13(h).
Section 1.40 "Employees" shall have the meaning set forth in
Section 3.13(h).
Section 1.41 "Employment Agreements" shall have the meaning set
forth in Section 3.7.
Section 1.42 "Environmental Claim" shall have the meaning set
forth in Section 3.12(g)(ii).
Section 1.43 "Environmental Laws" shall have the meaning set
forth in Section 3.12(g)(iii).
Section 1.44 "Environmental Permits" shall have the meaning set
forth in Section 3.12(a).
Section 1.45 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and any successor thereto.
Section 1.46 "ERISA Affiliates" shall mean any entity which is
under "common control" with the Company, within the meaning of Section
4001(b)(1) of ERISA.
Section 1.47 "Exchange Act" shall have the meaning set forth in
Section 3.4(e).
Section 1.48 "Fully Diluted Basis" shall mean then outstanding
Company Common Stock plus Company Common Stock issuable in exchange
for OP Units, Company Common Stock issuable under the Convertible
Debt, and Company Common Stock issuable under option or other
equity-incentive plans listed on Schedule 3.13(b) and awards issued
pursuant thereto.
Section 1.49 "GAAP" shall have the meaning set forth in Section
3.5(b).
Section 1.50 "Government Authority" shall mean any government or
state (or any subdivision thereof) of or in the United States, or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
Section 1.51 "Ground Leases" shall have the meaning set forth in
Section 3.11(k).
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Section 1.52 "Indemnified Party" shall mean Buyer or the Company,
as the context may require.
Section 1.53 "Initial Closing" shall mean the first Closing,
which shall occur either (a) twenty-two Business Days after the
execution of this Agreement (or as soon thereafter as practicable that
all conditions to Closing shall have been satisfied) if Buyer does not
deliver a notice of Breaching Matters pursuant to Section 2.8(a) or
(b) if such notice is delivered, upon delivery by the Company of the
Cure Notice pursuant to Section 2.8(b) (or as soon thereafter as
practicable that all conditions to Closing shall have been satisfied).
Section 1.54 "Initial Number of Shares" shall mean 1,306,434
shares of Company Common Stock.
Section 1.55 "Insurance Policies" shall have the meaning set
forth in Section 3.16.
Section 1.56 "IRS" shall mean the Internal Revenue Service.
Section 1.57 "Liabilities" shall mean, as to any person, all
debts, adverse claims, liabilities and obligations, direct, indirect,
absolute or contingent of such person, whether known or unknown,
accrued, vested or otherwise, whether in contract, tort, strict
liability or otherwise and whether or not actually reflected, or
required by GAAP to be reflected, in such person's or entity's balance
sheets or other books and records, including without limitation (i)
obligations arising from non-compliance with any law, rule or
regulation of any Government Authority or imposed by any court or any
arbitrator of any kind, (ii) all indebtedness or liability of such
person for borrowed money, or for the purchase price of property or
services (including trade obligations), (iii) all obligations of such
person as lessee under leases, capital or other, (iv) liabilities of
such person in respect of plans covered by Title IV of ERISA, or
otherwise arising in respect of plans for Employees or former
Employees or their respective families or beneficiaries, (v)
reimbursement obligations of such person in respect of letters of
credit, (vi) all obligations of such person arising under acceptance
facilities, (vii) all liabilities of other persons or entities,
directly or indirectly, guaranteed, endorsed (other than for
collection or deposit in the ordinary course of business) or
discounted with recourse by such person or with respect to which the
person in question is otherwise directly or indirectly liable, (viii)
all obligations secured by any Lien on property of such person,
whether or not the obligations have been assumed, and (ix) all other
items which have been, or in accordance with GAAP would be, included
in determining total liabilities on the liability side of the balance
sheet.
Section 1.58 "Liens" shall mean all liens, mortgages, deeds of
trust, deeds to secure debt, security interests, pledges, claims,
charges, easements and other encumbrances of any nature whatsoever.
Section 1.59 "Loss and Expenses" shall have the meaning set forth
in Section 8.2(a).
Section 1.60 "Material Adverse Effect" shall mean a material
adverse effect on the financial condition, results of operations or
business of the Company and its Subsidiaries (to the extent of the
Company's interests therein) taken as a whole.
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Section 1.61 "Material Company Leases" shall have the meaning set
forth in Section 3.11(f).
Section 1.62 "Materials of Environmental Concern" shall have the
meaning set forth in Section 3.12(g)(iv).
Section 1.63 "1998 and 1999 Preliminary Capital Expenditure
Budgets and Schedules" shall have the meaning set forth in Section
3.11(i).
Section 1.64 "Other Filings" shall have the meaning set forth in
Section 5.1(b).
Section 1.65 "OP Units" shall mean the limited partnership units
in Alexander Haagen Properties Operating Partnership, L.P.
Section 1.66 "Operating Area" shall mean Arizona, California,
Nevada, New Mexico, Oregon, Utah and Washington.
Section 1.67 "Pension Plans" shall have the meaning set forth in
Section 3.13(h).
Section 1.68 "Per Share Purchase Price" shall mean the price of
$15.00 per share for the Company Common Stock.
Section 1.69 "Permitted Liens" shall mean (i) Liens (other than
Liens imposed under ERISA or any Environmental Law or in connection
with any Environmental Claim) for taxes or other assessments or
charges of Governmental Authorities that are not yet delinquent or
that are being contested in good faith by appropriate proceedings, in
each case, with respect to which adequate reserves are being
maintained by the Company or its Subsidiaries to the extent required
by GAAP, (ii) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other Liens (other than Liens imposed under
ERISA or any Environmental Law or in connection with any Environmental
Claim) imposed by law and created in the ordinary course of business
for amounts not yet overdue or which are being contested in good faith
by appropriate proceedings, in each case, with respect to which
adequate reserves or other appropriate provisions are being maintained
by the Company or its Subsidiaries to the extent required by GAAP and
which, to the extent same do not relate to work or materials provided
for in the Capital Expenditure Budget and Schedule, the 1997 and 1998
Preliminary Capital Expenditure Budgets and Schedules or the
Development Budget and Schedule, do not exceed $400,000 in the
aggregate (excluding from such calculation, any amounts disclosed in
writing by the Company to Buyer which (a) are fully covered by
insurance held by the Company under which the Company reasonably
expects full recovery of such amounts, or (b) for which an adequate
escrow has been established and is, at the relevant time, maintained),
(iii) the Company Leases and any leases entered into after March 31,
1997 in the ordinary course of business on commercially reasonable
terms, (iv) easements, rights-of-way, covenants and restrictions which
are customary and typical for properties similar to the Company
Properties and which do not (x) interfere materially with the ordinary
conduct of any Company Property or the business of the Company and its
Subsidiaries as a whole or (y) detract materially from the value or
usefulness of the Company Properties to which they apply, (v) the
Liens which were granted by
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the Company or any of its Subsidiaries to lenders pursuant to credit
agreements in existence on the date hereof which are described in
Schedule 3.9(c), (vi) the other Liens, if any, described in Schedule
1.69, and (vii) such imperfections of title and encumbrances, if any,
as would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect.
Section 1.70 "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust,
unincorporated organization, other form of business or legal entity or
Government Authority.
Section 1.71 "Projects" shall have the meaning set forth in
Section 3.11(j).
Section 1.72 "Property Restrictions" shall have the meaning set
forth in Section 3.11(a).
Section 1.73 "Proxy Statement" shall have the meaning set forth
in Section 5.1(b).
Section 1.74 "Purchase Price" shall mean the Per Share Purchase
Price multiplied by the number of shares of Company Common Stock to be
purchased and sold at a particular Closing.
Section 1.75 "Purchased Shares" shall have the meaning set forth
in Section 2.1.
Section 1.76 "Registration Rights Agreement" shall have the
meaning set forth in Section 2.5(a).
Section 1.77 "Regulatory Filings" shall have the meaning set
forth in Section 3.4(e).
Section 1.78 "REIT" shall have the meaning set forth in Section
3.8(b).
Section 1.79 "Release" shall have the meaning set forth in
Section 3.12(g)(v).
Section 1.80 "Remaining Equity Commitment" shall mean, on any
given date after the Initial Closing, the Total Equity Commitment
minus the sum of the Initial Purchase Price and, if any Subsequent
Purchases shall have occurred, minus the Subsequent Purchase Prices.
The Remaining Equity Commitment shall be deemed to be zero on the
earlier of (i) the date that the Remaining Equity Commitment equals
zero pursuant to the previous sentence, or (ii) eighteen months after
the Stockholder Approval, but not later than March 14, 1999 (unless
otherwise extended by Buyer and the Company in their sole discretion).
Section 1.81 "Rent Roll" shall have the meaning set forth in
Section 3.11(f).
Section 1.82 "Repurchase Payment" shall have the meaning set
forth in Section 2.9.
Section 1.83 "SEC" shall have the meaning set forth in Section
3.5(a).
Section 1.84 "Second Closing" shall mean the Closing next
following Stockholder Approval.
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Section 1.85 "Securities Act" shall have the meaning set forth in
Section 3.4(e).
Section 1.86 "Securities Laws" shall have the meaning set forth
in Section 3.5(a).
Section 1.87 "Stock Purchase" shall have the meaning set forth in
Section 2.1.
Section 1.88 "Stockholders Agreement" shall have the meaning set
forth in Section 2.5(a).
Section 1.89 "Stockholder Approval" shall have the meaning set
forth in Section 7.2(b).
Section 1.90 "Subsequent Closing" shall mean each Closing of a
Subsequent Purchase.
Section 1.91 "Subsequent Purchase Price" shall mean the Per Share
Purchase Price multiplied by the number of Purchased Shares purchased
by Buyer in a Subsequent Purchase.
Section 1.92 "Subsequent Purchases" shall have the meaning set
forth in Section 2.4(a).
Section 1.93 "Subsidiaries" shall mean with respect to any
person, any corporation, partnership, limited liability company, joint
venture, business trust or other entity, of which such person,
directly or indirectly, owns or controls 50% or more of the securities
or other interests entitled to vote in the election of directors or
others performing similar functions with respect to such corporation
or other organization, or to otherwise control such corporation,
partnership, limited liability company, joint venture, business trust
or other entity. Without limiting the generality of the foregoing, the
Company's Subsidiaries include each of the entities set forth on
Schedule 3.1(d).
Section 1.94 "Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not. The
term "Tax" also includes any amounts payable pursuant to any tax
sharing agreement to which any relevant entity is liable as a
successor or pursuant to contract.
Section 1.95 "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
Section 1.96 "Title Policies" shall have the meaning set forth in
Section 3.11(a).
Section 1.97 "Total Equity Commitment" shall mean the amount of
$235,000,000.00.
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Section 1.98 "Voting Agreements" shall have the meaning set forth
in the fifth paragraph hereof.
Section 1.99 "Welfare Plans" shall have the meaning set forth in
Section 3.13(h).
ARTICLE 2
Purchase and Sale of Shares; Closing
Section 2.1 Purchase and Sale. Subject to the terms and
conditions hereof, from time to time after the date hereof, at each
Closing, the Company will sell, convey, assign, transfer, and deliver,
and Buyer will purchase and acquire from the Company, an aggregate of
up to 15,666,666 shares of Company Common Stock (the "Purchased
Shares"). Each Closing at which Buyer purchases any Purchased Shares
is herein referred to as a "Stock Purchase."
Section 2.2 Consideration. Subject to the terms and conditions
hereof, at each Closing, Buyer shall deliver to the Company the
Purchase Price with respect to the number of shares of Company Common
Stock to be purchased and sold at such Closing by wire transfer of
immediately available funds in U.S. dollars to the account or accounts
specified by the Company.
Section 2.3 Initial Closing. Subject to the terms and conditions
hereof, at the Initial Closing, at which time the applicable
conditions set forth in Sections 7.1, 7.3 and 7.4 shall have been
satisfied or duly waived, Buyer will purchase and acquire (and the
Advancing Party shall advance sufficient funds for such purchase) from
the Company, and the Company will sell, convey, assign, transfer and
deliver to Buyer, the Initial Number of Shares of Company Common
Stock, and Buyer will pay to the Company the Purchase Price for such
shares of Company Common Stock.
Section 2.4 Subsequent Purchases and Sales.
(a) Subject to the terms and conditions hereof, following
the Initial Closing, the Company shall have the right to require,
subject to satisfaction or waiver of the applicable conditions set
forth in Sections 7.2, in the case of the Second Closing and 7.3, in
the case of other Subsequent Closings, Buyer to purchase (and to
require the Advancing Party to advance sufficient funds for such
purchase) from the Company from time to time at one or more Subsequent
Closings, up to an aggregate of 14,360,232 Purchased Shares (each
referred to as a "Subsequent Purchase" and, together, the "Subsequent
Purchases"). Subject to the terms and conditions hereof, the Closing
of any Subsequent Purchase shall occur as soon as possible following
the date on which the applicable conditions set forth in Sections 7.2
or 7.3, as applicable, and 7.4 shall have been satisfied or duly
waived.
(b) At least 20 Business Days prior to a Subsequent
Purchase, the Company shall notify (which notice shall be in writing
and irrevocable) Buyer the anticipated date of the
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Subsequent Closing and the number of Purchased Shares the Company is
requiring Buyer to purchase, which shall not be fewer than 2 million
Purchased Shares.
(c) If less than 6,666,667 of the Purchased Shares shall
have been issued and sold at all Closings prior to six months after
Stockholder Approval, then Buyer shall, subject to the satisfaction or
waiver of the applicable conditions set forth in Sections 7.3 and 7.4,
make a Subsequent Purchase of the number of Purchased Shares equal to
6,666,667 less the number of Purchased Shares purchased prior to such
date, from the Company (and the Company shall sell to Buyer) on or
before the date six months after the date of Stockholder Approval, or
as soon thereafter as all conditions to the parties' obligations to
effect the Subsequent Purchase hereunder shall have been satisfied or
waived; provided, however, that Buyer may waive the foregoing
requirement that such shares be purchased by such date.
(d) If less than all Purchased Shares shall have been issued
and sold at any and all Closings on or before the earlier of eighteen
months after the Stockholder Approval and March 14, 1999, then Buyer
shall, subject to the satisfaction or waiver of the applicable
conditions set forth in Sections 7.3 and 7.4, make a Subsequent
Purchase of all such remaining shares from the Company (and the
Company shall sell to Buyer) on or before the earlier of eighteen
months after Stockholder Approval and March 14, 1999, or as soon
thereafter as all conditions to Buyer's obligation to effect the
Subsequent Purchase hereunder shall have been satisfied or waived;
provided, however, that Buyer may waive the foregoing requirement that
such shares be purchased by such date.
(e) If the condition set forth in Section 7.3(d) is not
satisfied (which determination shall be made by Buyer, in its sole
discretion) or waived at any time when a Closing would otherwise
occur, the relevant Closing will be effected as to the number of
Purchased Shares, if any, as will not result in such condition failing
to be satisfied, and Buyer shall acquire any remaining Purchased
Shares as soon thereafter as such condition to Buyer's obligation to
effect the Subsequent Purchase shall have been, as determined in
Buyer's sole discretion, satisfied or waived.
Section 2.5 Additional Agreements and Closing Deliveries.
(a) Concurrently with the execution of this Agreement, the
Company, Buyer and the Advancing Party shall enter into a registration
rights agreement substantially in the form attached as Exhibit A (the
"Registration Rights Agreement"), and the Company, Buyer and the
Advancing Party shall enter into a stockholders agreement
substantially in the form attached as Exhibit B (the "Stockholders
Agreement").
(b) In addition to the other things required to be done
hereby, at each Closing, the Company shall deliver, or cause to be
delivered, to Buyer the following: (i) certificates representing the
number of shares of Company Common Stock to be issued and delivered at
such Closing, free and clear of all Liens (unless created by Buyer or
any of its Affiliates), with all necessary share transfer and other
documentary stamps attached, (ii) a certificate, dated the relevant
Closing Date and validly executed on behalf of the Company, as
contemplated by Section 7.1(a), as to the Initial Closing only, by
Section 7.2(a), as to the Second Closing only
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and by Section 7.3(a) as to other Subsequent Closings, (iii) evidence
or copies of any consents, approvals, orders, qualifications or
waivers required pursuant to Section 7.1, as to the Initial Closing
only and pursuant to Section 7.2, as to the Second Closing, (iv) all
certificates and other instruments and documents required by this
Agreement to be delivered by the Company to Buyer at or prior to each
Closing, and (v) such other instruments reasonably requested by Buyer,
as may be necessary or appropriate to confirm or carry out the
provisions of this Agreement.
(c) In addition to the delivery of the Purchase Price and
the other things required to be done hereby, at each Closing, Buyer
shall deliver, or cause to be delivered, to the Company the following:
(i) a certificate, dated the relevant Closing Date and validly
executed by Buyer, as contemplated by Section 7.4(a), (ii) if not
previously delivered to the Company, all other certificates,
documents, instruments and writings required pursuant hereto to be
delivered by or on behalf of Buyer at or before each Closing, and
(iii) such other instruments reasonably requested by the Company, as
may be necessary or appropriate to confirm or carry out the provisions
of this Agreement.
Section 2.6 Time and Place of Closings. Each Closing shall take
place at 9:00 a.m. Los Angeles time on the relevant Closing Date at
Latham & Watkins, 633 W. Fifth Street, Suite 4000, Los Angeles,
California, or at such other place and time as the Company and Buyer
shall mutually agree.
Section 2.7 Right to Assign. Buyer may assign its rights and
delegate its obligations created hereby to purchase Company Common
Stock in accordance with the provisions of Section 10.5.
Section 2.8 Verification of Representations and Warranties.
(a) From the date hereof until the date that is 20 Business
Days from the date hereof, Buyer may conduct such investigation as it
deems appropriate to confirm the accuracy of the representations and
warranties of the Company contained herein. No later than the second
Business Day after the last day of such twenty-Business-Day period,
Buyer shall deliver to the Company a written notice setting forth in
reasonable detail any matters as to which Buyer has knowledge (if any)
and that render any of the Company's representations and warranties
contained herein untrue or incorrect in such a way as would,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect (the "Breaching Matters").
(b) If Buyer shall have set forth one or more Breaching
Matters in any notice delivered pursuant to Section 2.8(a), within 30
Business Days after receipt of such notice the Company shall attempt,
to the extent commercially reasonable and practicable, to cause the
Breaching Matters identified by Buyer in such notice to be true or
correct so as would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect and, if the Company
cures all such Breaching Matters, the Company shall deliver to Buyer
written notice (the "Cure Notice") stating that all Breaching Matters
identified by Buyer in Buyer's notice have been cured to the extent
required and describing the manner in which such Breaching Matters
were so cured. If the Company fails to so cure and to deliver the Cure
Notice within 30 Business Days after its receipt of Buyer's notice,
Buyer shall have 10 Business
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Days to terminate this Agreement without liability to any party,
subject to the provisions of Section 9.3(a). If Buyer does not timely
terminate this Agreement pursuant to the preceding sentence, Buyer
shall be deemed to have waived the relevant Breaching Matters as
conditions to any Closing or as a basis for indemnification hereunder.
If Buyer obtains actual knowledge of any Breaching Matter during the
twenty-Business-Day period from the date hereof, but fails to include
such Breaching Matter in its notice pursuant to Section 2.8(a), Buyer
shall also be deemed to have waived such Breaching Matter.
Section 2.9 Limited Put Option.
(a) In the event that the Company does not receive
Stockholder Approval by December 31, 1997 (other than as a result of
Buyer's material breach of any of its obligations hereunder), the
Buyer will have the right to require the Company to repurchase all or
any part of the Initial Number of Shares pursuant to the terms
described below at a price in cash equal to the Purchase Price thereof
plus accrued but unpaid dividends, if any, thereon to the date of
purchase (the "Repurchase Payment"). After December 31, 1997 and no
later than eleven months following the date of this Agreement, the
Buyer may, at its sole option, exercise its right to cause the Company
to repurchase all or any part of the Initial Number of Shares by
surrendering to the Company the certificates for the shares it is
causing the Company to repurchase.
(b) If Buyer chooses to cause the Company to repurchase some
or all of the Initial Number of Shares, the Company will pay Buyer the
Repurchase Payment upon the earlier of (i) 18 months after the date of
this Agreement and (ii) the consummation by the Company of an issuance
of debt or equity securities or a sale of assets that yields net
proceeds to the Company of at least $50 million.
ARTICLE 3
Representations and Warranties of the Company
The Company hereby represents and warrants to Buyer as
follows:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland.
The Company has all requisite corporate power and authority to own,
operate, lease and encumber its properties and carry on its business
as now conducted, and to enter into this Agreement, the Registration
Rights Agreement, and the Stockholders Agreement and to perform its
obligations hereunder and thereunder.
(b) Each of the Subsidiaries of the Company is a
corporation, partnership or limited liability company duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and has the
corporate, partnership or
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limited liability company power and authority to own its properties
and to carry on its business as it is now being conducted.
(c) Each of the Company and its Subsidiaries is duly
qualified to do business and in good standing in each jurisdiction in
which the ownership of its property or the conduct of its business
requires such qualification, except for any failures to be so
qualified or to be in good standing as would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse
Effect.
(d) Schedule 3.1(d) sets forth the name of each Subsidiary
of the Company (whether owned, directly or indirectly, through one or
more intermediaries). All of the outstanding shares of capital stock
of, or other equity interest in, each of the Subsidiaries owned by the
Company are duly authorized, validly issued, fully paid and
nonassessable, and are owned, directly or indirectly, by the Company
free and clear of all Liens, except as set forth in Schedule 3.1(d).
The following information for each Subsidiary is set forth in Schedule
3.1(d), if applicable: (i) its name and jurisdiction of incorporation
or organization, (ii) the type of and percentage interest held by the
Company in the Subsidiary and the names of and percentage interest
held by the other interest holders, if any, in the Subsidiary, and
(iii) any loans from the Company to, or priority payments due to the
Company from, the Subsidiary, and the rate of return thereon. Except
as contemplated hereby and as set forth on Schedule 3.1(d), there are
no existing options, warrants, calls, subscriptions, convertible
securities or other rights, agreements or commitments which obligate
the Company or any of the Subsidiaries to issue, transfer or sell any
shares of capital stock or equity interests in any of the Subsidiaries
except as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
Section 3.2 Authority Relative to Agreements; Board
Approval.
(a) The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Stockholders
Agreement have been duly and validly authorized by all necessary
corporate action on the part of the Company, subject only to the
approval of the issuance of Company Common Stock pursuant to this
Agreement and of the Company Charter by the Company's stockholders.
This Agreement, the Registration Rights Agreement and the Stockholders
Agreement have been duly executed and delivered by the Company for
itself and constitute the valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their
terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights or general principles
of equity.
(b) The Board of Directors of the Company has, as of the
date hereof, approved this Agreement, the Registration Rights
Agreement, the Stockholders Agreement and the transactions
contemplated hereby and thereby, and determined to recommend that the
stockholders of the Company vote in favor of and approve the issuance
of Company Common Stock pursuant to this Agreement subject to the
fiduciary duty provisions of Section 5.8.
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(c) The shares of Company Common Stock to be acquired
pursuant to this Agreement have been duly authorized for issuance, and
upon issuance will be duly and validly issued, fully paid and
nonassessable.
(d) The issue and sale of the shares of Company Common Stock
hereunder will not give any stockholder of the Company the right to
demand payment for its shares under Maryland law or give rise to any
preemptive or similar rights.
Section 3.3 Capital Stock.
(a) The authorized capital stock of the Company as of the
date hereof consists of 50,000,000 shares of Company Common Stock, par
value $0.01 per share, 25,000,000 shares of excess stock, par value
$0.01 per share, and 5,000,000 shares of Preferred Stock, par value
$0.01 per share. As of March 31, 1997, there are 12,024,522 shares of
Company Common Stock issued and outstanding; to the Company's
knowledge no shares of excess stock, par value $.01 per share, issued
and outstanding; and no shares of Preferred Stock, par value $.01 per
share ("Company Preferred Stock"), issued and outstanding. All such
issued and outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth on Schedule 3.3(a), the Company
has no outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote (or which are convertible into
or exercisable for securities the holders of which have the right to
vote) with the stockholders of the Company on any matter. As of the
date hereof, except as set forth in Schedule 3.3(a) to this Agreement,
there are no existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments
which obligate the Company to issue, transfer or sell any shares of
capital stock or other equity interests of the Company.
(b) Except for interests in the Subsidiaries of the Company
and except as set forth in Schedule 3.3(b), none of the Company or any
of its Subsidiaries owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership,
limited liability company, joint venture, business, trust or entity
(other than investments in short-term investment securities).
Section 3.4 No Conflicts; No Defaults; Required Filings and
Consents. Neither the execution and delivery by the Company hereof nor
the consummation by the Company of the transactions contemplated
hereby in accordance with the terms hereof, will:
(a) conflict with or result in a breach of any provisions of
the Company Charter or by-laws of the Company;
(b) result in a breach or violation of, a default under, or
the triggering of any payment or other obligations pursuant to, or,
except as set forth in Schedule 3.9(g), accelerate vesting under, any
of the Amended and Restated 1993 Stock Option and Incentive Plan, as
amended, or similar compensation plan or any grant or award made under
any of the foregoing;
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(c) violate or conflict with any statute, regulation,
judgment, order, writ, decree or injunction applicable to the Company
or its Subsidiaries, except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect;
(d) subject to the Company obtaining the third party
consents set forth in Schedule 3.4(d)-A (with respect to the Initial
Closing), and Schedule 3.4(d)-B (with respect to each Subsequent
Closing), violate or conflict with or result in a breach of any
provision of, or constitute a default (or any event which, with notice
or lapse of time or both, would constitute a default) under, or result
in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of
any Lien upon any of the properties of the Company or its Subsidiaries
under, or result in being declared void, voidable or without further
binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any license,
franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which the Company or its Subsidiaries is a
party, or by which the Company or its Subsidiaries or any of their
properties is bound or affected, except for any of the foregoing
matters which would not reasonably be expected to, individually or in
the aggregate, result in a Material Adverse Effect; or
(e) require any consent, approval or authorization of, or
declaration, filing or registration with, any Government Authority,
other than any filings required under the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or state securities laws ("Blue Sky
Laws") (collectively, the "Regulatory Filings"), and any filings
required to be made with the Secretary of State of Maryland or any
national securities exchange on which the Company Common Stock is
listed, except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
Section 3.5 SEC and Other Documents; Financial Statements;
Undisclosed Liabilities.
(a) The Company has delivered or made available to Buyer the
registration statement of the Company filed with the Securities and
Exchange Commission ("SEC") in connection with the Company's initial
public offering of Company Common Stock, and all exhibits, amendments
and supplements thereto (collectively, the "Company Registration
Statement"), and each registration statement, report, proxy statement
or information statement and all exhibits thereto prepared by it or
relating to its properties since the effective date of the Company
Registration Statement, which are set forth in Schedule 3.5(a), each
in the form (including exhibits and any amendments thereto) filed with
the SEC (collectively, the "Company Reports"). Except as set forth in
Schedule 3.5(a), the Company Reports were filed with the SEC in a
timely manner and constitute all forms, reports and documents required
to be filed by the Company under the Securities Act, the Exchange Act
and the rules and regulations promulgated thereunder (the "Securities
Laws"). As of their respective dates, the Company Reports (i) complied
as to form in all material respects with the applicable requirements
of the Securities Laws and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in
the light of the circumstances under which they were made, not
misleading. There is no
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unresolved violation asserted by any Government Authority with respect
to any of the Company Reports.
(b) Each of the balance sheets included in or incorporated
by reference into the Company Reports (including the related notes and
schedules) fairly presented the financial position of the entity or
entities to which it relates as of its date and each of the statements
of operations, stockholders' equity (deficit) and cash flows included
in or incorporated by reference into the Company Reports (including
any related notes and schedules) fairly presented the results of
operations, retained earnings or cash flows, as the case may be, of
the entity or entities to which it relates for the periods set forth
therein, in each case in accordance with United States generally
accepted accounting principles ("GAAP") consistently applied during
the periods involved, except as may be noted therein and except, in
the case of the unaudited statements, normal recurring year-end
adjustments which would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(c) Except as and to the extent set forth in the Company
Reports and the Company's financial statements filed with the SEC or
in any Schedule hereto, to the Company's knowledge, none of the
Company or any of its Subsidiaries has any Liabilities (nor do there
exist any circumstances) that would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
Section 3.6 Litigation; Compliance With Law.
(a) Except as set forth on Schedule 3.6, there are no
Actions pending or, to the Company's knowledge, threatened against the
Company or any of its Subsidiaries that would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect, or which question the validity hereof or any action taken or
to be taken in connection herewith. Except as disclosed in Schedule
3.6(a), there are no continuing orders, injunctions or decrees of any
Government Authority to which the Company or any of its Subsidiaries
is a party or by which any of its properties or assets are bound.
(b) None of the Company or its Subsidiaries is in violation
of any statute, rule, regulation, order, writ, decree or injunction of
any Government Authority or any body having jurisdiction over them or
any of their respective properties which, if enforced, would,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
Section 3.7 Absence of Certain Changes or Events. Except as
disclosed in the Company Reports filed with the SEC prior to the date
hereof or in Schedule 3.7 and except for entering into employment
agreements (the "Employment Agreements"), a registration rights
agreement and a stockholders agreement with the employees listed on
Schedule 3.7, since December 31, 1996, the Company and each of its
Subsidiaries has conducted its business only in the ordinary course
and has acquired real estate and entered into financing arrangements
in connection therewith only in the ordinary course of such business,
and there has not been (a) any change, circumstance or event that
would reasonably be expected to result in a Material Adverse Effect,
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to the Company Common Stock, except in
accordance with Section 5.5, (c) any commitment,
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contractual obligation, borrowing, capital expenditure or transaction
(each, a "Commitment") entered into by the Company or any of its
Subsidiaries, other than Commitments which would not, individually or
in the aggregate, reasonably be expected to result in a Material
Adverse Effect, or (d) any change in the Company's accounting
principles, practices or methods which would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.
Section 3.8 Tax Matters; REIT and Partnership Status.
(a) The Company and each of its Subsidiaries has timely
filed with the appropriate taxing authority all Tax Returns required
to be filed by it or has timely requested extensions and any such
request has been granted and has not expired. Each such Tax Return is
complete and accurate in all respects. All Taxes shown as owed by the
Company or any of its Subsidiaries on any Tax Return have been paid or
accrued, except for Taxes being contested in good faith and for which
adequate reserves have been taken. The Company and each of its
Subsidiaries has properly accrued all Taxes for such periods
subsequent to the periods covered by such Tax Returns as required by
GAAP. None of the Company or any of its Subsidiaries has executed or
filed with the IRS or any other taxing authority any agreement now in
effect extending the period for assessment or collection of any Tax.
Except as set forth in Schedule 3.8(a), none of the Company or any of
its Subsidiaries is being audited or examined by any taxing authority
with respect to any Tax or is a party to any pending action or
proceedings by any taxing authority for assessment or collection of
any Tax, and no claim for assessment or collection of any Tax has been
asserted against it. True and complete copies of all federal, state
and local income or franchise Tax Returns filed by the Company and
each of its Subsidiaries for 1994 and 1995 and all communications
relating thereto have been delivered to Buyer or made available to
representatives of Buyer prior to the date hereof. No claim has been
made in writing or, to the Company's knowledge, otherwise by an
authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. Except as set forth in Schedule 3.8(a),
there is no dispute or claim concerning any Tax liability of the
Company or any of its Subsidiaries, (i) claimed or raised by any
taxing authority in writing or (ii) as to which the Company or any of
its Subsidiaries has knowledge. To the Company's knowledge, as of the
date hereof, (i) the Company is a domestically controlled REIT within
the meaning of Code Section 897(h)(4)(B). To the Company's knowledge,
except as set forth in Schedule 3.8(a), no person or entity which
would be treated as an "individual" for purposes of Section 542(a)(2)
of the Code (as modified by Section 856(h) of the Code) owns or would
be considered to own (taking into account the constructive ownership
rules of Section 544 of the Code, as modified by Section 856(h) of the
Code) in excess of 9.8% of the value of the outstanding equity
interests in the Company. Except as contemplated by this Agreement or
as set forth in Schedule 3.8(a), the Board of Directors has not
exempted any Person from the Ownership Limit or otherwise waived any
of the provisions of Article 7 of the Company Charter (as all
capitalized terms used in this sentence are defined in the Company
Charter). The Ownership Limit (as such term is defined in the Company
Charter) has not been modified. Each ownership interest that the
Company and each of its Subsidiaries has in an entity formed as a
partnership (or which files federal income tax returns as a
partnership) qualified, and since the date of its formation qualified,
to be treated as a
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partnership for federal income tax purposes or as a "qualified REIT
subsidiary" within the meaning of Section 856(i)(2) of the Code.
(b) The Company (i) intends in its federal income tax return
for the tax year that will end on December 31, 1997 to be taxed as a
real estate investment trust within the meaning of Section 856 of the
Code ("REIT") and has complied (or will comply) with all applicable
provisions of the Code relating to a REIT, for 1997, (ii) has
operated, and intends to continue to operate, in such a manner as to
qualify as a REIT for 1997, (iii) has not taken or omitted to take any
action which would reasonably be expected to result in a challenge to
its status as a REIT, and, to the Company's knowledge, no such
challenge is pending or threatened, and (iv) to the Company's
knowledge, and assuming the accuracy of Buyer's representations in
Sections 4.8 and 4.10 (disregarding the qualification relating to
Buyer's and the Advancing Party's knowledge and assuming no exceptions
are set forth in Schedule 4.10-B), will not be rendered unable to
qualify as a REIT for federal income tax purposes as a consequence of
the transactions contemplated hereby.
(c) Except as set forth on Schedule 3.8(c), any amount or
other entitlement that could be received (whether in cash or property
or the vesting of property) as a result of any of the transactions
contemplated hereby by any Employee, officer, or director of the
Company or any of its Affiliates who is a "disqualified individual"
(as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement,
other compensation arrangement or plan currently in effect would not
be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
(d) Except as set forth on Schedule 3.8(d), the disallowance
of a deduction under Section 162(m) of the Code for employee
remuneration will not apply to any amount paid or payable by the
Company or any of its Subsidiaries under any contract, stock plan,
program, arrangement or understanding currently in effect.
(e) The Company was eligible to and did validly elect to be
taxed as a REIT for federal income tax purposes for calendar year 1993
and all subsequent taxable periods and was in compliance with all
applicable laws, rules and regulations, including the Code, necessary
to permit it to be taxed as a REIT for all such periods. Each
Subsidiary of the Company organized as a partnership (and any other
Subsidiary that files Tax Returns as a partnership for federal income
tax purposes) was and continues to be classified as a partnership for
federal income tax purposes or as a "qualified REIT subsidiary" within
the meaning of Section 856(i)(2) of the Code.
(f) For purposes of this Section 3.8, no representation set
forth in Section 3.8 shall be deemed to be untrue or incorrect unless
such untruths or inaccuracies would, individually or in the aggregate,
be reasonably expected to result in a Material Adverse Effect.
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Section 3.9 Compliance with Agreements; Material Agreements.
(a) Neither the Company nor any of its Subsidiaries is in
default under or in violation of any provision of the Company Charter
or the By-laws of the Company (or equivalent documents), except for
such defaults or violations which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.
(b) The Company and each of its Subsidiaries have filed all
material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file with any Government Authority and all other material
reports and statements required to be filed by them, including any
report or statement required to be filed pursuant to the laws, rules
or regulations of the United States, and have paid all fees or
assessments due and payable in connection therewith, except for such
failures to file or pay which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect. There is no unresolved violation asserted by any regulatory
agency of which the Company has received written notice with respect
to any report or statement relating to an examination of the Company
or any of its Subsidiaries which, if resolved in a manner unfavorable
to the Company or such Subsidiary, would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.
(c) The Company Reports or Schedule 3.9(c) set forth (i) a
description of all material indebtedness of the Company and each of
its Subsidiaries, whether unsecured, or secured or collateralized by
mortgages, deeds of trust or other security interests in the Company
Properties or any other assets of the Company and each of its
Subsidiaries, or otherwise and (ii) each Commitment entered into by
the Company or any of its Subsidiaries (including any guarantees of
any third party's debt or any obligations in respect of letters of
credit issued for the Company's or any Subsidiary's account) which may
result in total payments or liability in excess of $400,000, excluding
Commitments made in the ordinary course of business with a maturity of
less than one year or that are terminable on 30 days or less notice,
and excluding Commitments the breach of which would not, individually
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. True and complete copies of the documents relating to
the foregoing have been delivered or made available to Buyer prior to
the date hereof. Neither the Company nor any of its Subsidiaries is in
default, and, to the Company's knowledge, no event has occurred which,
with the giving of notice or the lapse of time or both, would
constitute a default, under any of the documents described in clause
(i) or (ii) of this paragraph or in respect of any payment obligations
thereunder except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. All
joint venture and partnership agreements to which the Company or any
of its Subsidiaries is a party as of the date hereof are set forth in
Schedule 3.9(c), all of which are in full force and effect as against
the Company or such Subsidiary and, to the Company's knowledge, as
against the other parties thereto, and none of the Company or any of
its Subsidiaries is in default, and, to the Company's knowledge, no
event has occurred which, with the giving of notice or the lapse of
time or both, would constitute a default, with respect to any
obligations thereunder, except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect. To the Company's knowledge, the other parties to such
agreements are not in breach of any of their respective obligations
thereunder, except as would not, individually or in the aggregate,
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reasonably be expected to result in a Material Adverse Effect. To the
Company's knowledge, there is no condition with respect to the
Company's Subsidiaries (including with respect to the partnership
agreements for the Company's Subsidiaries that are partnerships) that
would, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
(d) Except as disclosed in the Company Reports or any other
Schedule hereto, Schedule 3.9(d) sets forth a complete and accurate
list of all material agreements entered into by the Company or any of
its Subsidiaries as of the date hereof relating to the development or
construction of, additions or expansions to, or management or leasing
services for retail shopping centers or other real properties which
are currently in effect and under which the Company or any of its
Subsidiaries currently has, or expects to incur, any material
obligation. True and complete copies of such agreements will be made
available to Buyer.
(e) Except as disclosed in the Company Reports and except
for (i) agreements made in the ordinary course of business with a
maturity of less than one year or that are terminable on 30 days or
less notice, and (ii) agreements the breach or non-fulfillment of
which would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, Schedule 3.9(e) sets
forth a complete and accurate list of all material agreements entered
into by the Company as of the date hereof which are not listed in any
other Schedule hereto, including material Debt Instruments. Each
agreement set forth in Schedule 3.9(e) is in full force and effect as
against the Company and, to the Company's knowledge, as against the
other parties thereto, no payments, if any, thereunder are delinquent,
the Company is not in default thereunder, and no notice of default
thereunder has been sent or received by the Company or any of its
Subsidiaries, except where the same would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect. To the Company's knowledge, no event has occurred which, with
notice or lapse of time or both, would constitute a default by the
Company under any agreement set forth in Schedule 3.9(e), except as
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. To the Company's knowledge, the
other parties to such agreements are not in breach of their respective
obligations thereunder, except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect. True and complete copies of each such agreement have been made
available to Buyer prior to the date hereof.
(f) Schedule 3.9(f) sets forth a complete and accurate list
of all agreements and policies of the Company in effect on the date
hereof relating to transactions with affiliates and potential
conflicts of interest. Each agreement or arrangement set forth in
Schedule 3.9(f) is in full force and effect, and the Company, each of
its Subsidiaries, and, to the Company's knowledge, the other parties
thereto are in compliance with such agreements and policies, or such
compliance has been waived by the Company's Board of Directors as set
forth in Schedule 3.9(f). True and complete copies of each such
agreement or arrangement will be made available to Buyer.
(g) Except as set forth on Schedule 3.9(g), there are no
change of control or similar provisions in any employment, severance,
stock option, stock incentive, or similar agreement or arrangement
which would be triggered by the transactions contemplated by this
Agreement. Schedule 3.9(g) identifies the obligations (including any
payment or other
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obligation, forgiveness of debt, other release from obligations, or
acceleration of vesting) which are created, accelerated or triggered
by the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
Section 3.10 Financial Records; Company Charter and By-laws;
Corporate Records.
(a) The books of account and other financial records of the
Company and each of its Subsidiaries are in all respects true and
complete, have been maintained in accordance with good business
practices, and are accurately reflected in all respects in the
financial statements included in the Company Reports, except, in each
case, as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(b) The Company has previously delivered or made available
to Buyer true and complete copies of the Company Charter and the
By-laws of the Company, as amended to date, and the charter, by-laws,
organization documents, partnership agreements and joint venture
agreements of its Subsidiaries, and all amendments thereto. All such
documents are listed in Schedule 3.10(b).
(c) The minute books and other records of corporate or
partnership proceedings of the Company and each of its Subsidiaries
contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action
of the stockholders and directors and any committees of the Board of
Directors of the Company and their Subsidiaries which are corporations
and all actions of the partners of the Subsidiaries which are
partnerships, except for documentation of discussions relating to or
in connection with the transactions contemplated hereby or matters
related hereto, and except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.
Section 3.11 Properties.
(a) Schedule 3.11(a) sets forth a complete and accurate list
and the address of all real property owned or leased by the Company or
any of its Subsidiaries or otherwise used by the Company or its
Subsidiaries in the conduct of their business or operations
(collectively, and together with the land at each address referenced
in Schedule 3.11(a) and all buildings, structures and other
improvements and fixtures located on or under such land and all
easements, rights and other appurtenances to such land, the "Company
Properties"). The Company, or in the case of Company Properties owned
by Subsidiaries that are not wholly owned Subsidiaries of the Company,
to the Company's knowledge, such Subsidiaries, owns or own, as the
case may be, good and insurable fee simple title (or, if so indicated
in Schedule 3.11(a), leasehold title) to each of the Company
Properties, in each case free and clear of any Liens, title defects,
contractual restrictions or covenants, laws, ordinances or regulations
affecting use or occupancy (including zoning regulations and building
codes) or reservations of interests in title (collectively, "Property
Restrictions"), except for (i) Permitted Liens and (ii) Property
Restrictions imposed or promulgated by law or by any Government
Authority which are customary and typical for similar properties. To
the Company's knowledge, none of the matters described in clauses (i)
and (ii) of the immediately preceding sentence materially interferes
with, impairs, or is violated by, the existence of any building or
other structure or improvement which constitutes a part of,
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or the present use, occupancy or operation (or, if applicable,
development) of, the Company Properties taken as a whole, and such
matters do not, individually or in the aggregate, have a Material
Adverse Effect. American Land Title Association policies of title
insurance (or marked title insurance commitments having the same force
and effect as title insurance policies) have been issued by national
title insurance companies insuring the fee simple or leasehold, as
applicable, title of the Company or its Subsidiaries, as applicable,
to each of the Company Properties in sufficient amounts to avoid
co-insurance statutes, subject only to the matters set forth therein
(the "Title Policies"), and, to the Company's knowledge, the Title
Policies are valid and in full force and effect and no claim has been
made under any such policy. The Company will make available to Buyer
true and complete copies of all such policies and of the most recent
surveys of the Company Properties, and true and complete copies of all
material exceptions referenced in such policies and the most recent
title reports for and surveys (to the extent not previously delivered
or made available to Buyer) of each of the Company Properties
available to the Company or any of its Subsidiaries for inspection by
Buyer or its representatives within five Business Days of Buyer's
request therefor.
(b) Except as set forth in Schedule 3.11(b), and except for
matters which would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect or to materially and
adversely affect the use or occupancy (or, if applicable, development)
of the Company Properties taken as a whole, the Company has no
knowledge (i) that any currently required certificate, permit or
license (including building permits and certificates of occupancy for
tenant spaces) from any Government Authority having jurisdiction over
any Company Property or any agreement, easement or other right which
is necessary to permit the lawful use, occupancy or operation of the
existing buildings, structures or other improvements which constitute
a part of any of the Company Properties or which are necessary to
permit the lawful use and operation of utility service to any Company
Property or of any existing driveways, roads or other means of egress
and ingress to and from any of the Company Properties has not been
obtained or is not in full force and effect, or of any pending
modification or cancellation of any of same, or (ii) of any violation
by any Company Property of any federal, state or municipal law,
ordinance, order, regulation or requirement, including any applicable
zoning law or building code, as a result of the use or occupancy of
such Company Property or otherwise. Except as set forth in Schedule
3.11(b), the Company has no knowledge of uninsured physical damage to
any Company Property in excess of $400,000 in the aggregate. To the
Company's knowledge, except for repairs identified in the Capital
Expenditure Budget and Schedule, each Company Property, (i) is in good
operating condition and repair and is structurally sound and free of
defects, with no material alterations or repairs being required
thereto under applicable law or insurance company requirements, and
(ii) consists of sufficient land, parking areas, driveways and other
improvements and lawful means of access and utility service and
capacity to permit the use thereof in the manner and for the purposes
to which it is presently devoted (or, in the case of the Development
Property, for the development and operation thereon of the applicable
Project), except, in each such case, to the extent that failure to
meet such standards would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or to
materially and adversely affect the use or occupancy of the Company
Properties taken as a whole (or, in the case of the Development
Property, the development and operation thereon of the applicable
Project). The Company will make available to Buyer true and complete
copies of all engineering reports, inspection reports, maintenance
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plans and other documents relating to the condition of any Company
Property prepared for the Company since the Company's Initial Public
Offering.
(c) The Company has no knowledge (i) that any condemnation,
eminent domain or rezoning proceedings are pending or threatened with
respect to any of the Company Properties, (ii) that any road widening
or change of grade of any road adjacent to any Company Property is
underway or has been proposed, (iii) of any proposed change in the
assessed valuation of any Company Property other than customarily
scheduled revaluations, (iv) of any special assessment made or
threatened against any Company Property, or (v) that any of the
Company Properties is subject to any so-called "impact fee" or to any
agreement with any Government Authority to pay for sewer extension,
oversizing utilities, lighting or like expenses or charges for work or
services by such Government Authority, except, in the case of each of
the foregoing, to the extent that same would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect or to materially and adversely affect the use or occupancy (or,
if applicable, development) of the Company Properties taken as a
whole.
(d) To the Company's knowledge, each of the Company
Properties is an independent unit which does not rely on any
facilities located on any property not included in such Company
Property to fulfill any municipal or governmental requirement or for
the furnishing to such Company Property of any essential building
systems or utilities, other than facilities the benefit of which
inures to the Company Properties pursuant to one or more valid
easements. Each of the Company Properties is served by public water
and sanitary systems and all other utilities, and, to the Company's
knowledge, each of the Company Properties has lawful access to public
roads, in all cases sufficient for the current use and occupancy of
each Company Property (or, in the case of the Development Property,
for the development and operation thereon of the applicable Project).
To the Company's knowledge, all parcels of land included in each
Company Property that purport to be contiguous are contiguous and are
not separated by strips or gores. Except as set forth in Schedule
3.11(d), to the Company's knowledge, no portion of any Company
Property includes any wetlands or vegetation or species protected by
any applicable laws. Except as set forth on Schedule 3.11(d) or the
Title Policies or surveys, none of the Company Properties lies in any
100-year flood plain area, as established by the U.S. Army Corps of
Engineers. The improvements on each Company Property which lies in a
flood plain area, if any, comply with applicable building codes and
other relevant laws and regulations, and the Company or its
Subsidiaries carry and presently maintain in full force and effect
flood insurance in connection with such Company Properties as required
by applicable law and as accurately described in Schedule 3.11(d). To
the Company's knowledge, no improvements constituting a part of any
Company Property encroach on real property not constituting a part of
such Company Property. No representation set forth in this subsection
(d) shall be deemed to be untrue unless such untruths are,
individually or in the aggregate, reasonably expected to have a
Material Adverse Effect or to materially and adversely affect the use
or occupancy of the Company Properties taken as a whole.
(e) Schedule 3.11(e) contains a complete and accurate list
of each survey, study or report prepared by or for the Company or any
Subsidiary since the Company's initial public offering, in connection
with any Company Property's compliance or non-compliance with the
requirements of the Americans with Disabilities Act (the "ADA"), other
than routine
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correspondence or memoranda. Except for matters addressed in the
Capital Expenditure Budget and Schedule, to the knowledge of the
Company, no Company Property fails to comply with the requirements of
the ADA except for such non-compliance as the Company believes will
not, individually or in the aggregate, have a Material Adverse Effect.
(f) The Company has provided to Buyer an accurate rent roll
for each Company Property as of March 31, 1997 (the "Rent Roll"),
which accurately describes each lease of space in each Company
Property (collectively, the "Company Leases"). The Company has
delivered to Buyer profiles of the Company Leases (the "Lease
Profiles"), which have been prepared in the ordinary course of
business. The Company will make available to Buyer a true and complete
copy of each Company Lease, including all amendments and modifications
thereto. With respect to each Company Lease for premises larger than
20,000 square feet of rentable space (collectively, the "Material
Company Leases"), except as set forth in Schedule 3.11(f) and except
for matters which are not, individually or in the aggregate,
reasonably expected to have a Material Adverse Effect, (i) each of the
Material Company Leases is valid and subsisting and in full force and
effect as against the Company or the Subsidiary, as applicable, and,
to the Company's knowledge, as against the tenant, and the information
on the Rent Roll with respect to the Material Company Leases is
accurate, (ii) the tenant under each of the Material Company Leases is
in actual possession of the premises leased thereunder, (iii) no
tenant under any Material Company Lease is more than 30 days in
arrears in the payment of rent, (iv) none of the Company or any of its
Subsidiaries has received any written notice from any tenant under any
Material Company Lease of its intention to vacate, (v) none of the
Company or any of its Subsidiaries has collected payment of rent under
any Material Company Lease (other than security deposits) accruing for
a period which is more than one month in advance, (vi) no notice of
default has been sent or received by the landlord under any Material
Company Lease which remains uncured as of the date hereof, no default
has occurred under any Material Company Lease and, to the Company's
knowledge, no event has occurred and is continuing which, with notice
or lapse of time or both, would constitute a default under any
Material Company Lease, (vii) except as disclosed on the Lease
Profiles or Schedule 3.11(f) or any other schedule hereto, no tenant
under any of the Material Company Leases has any purchase options or
kick-out rights or is entitled to any concessions, allowances,
abatements, setoffs, rebates or refunds, (viii) none of the Material
Company Leases and none of the rents or other amounts payable
thereunder has been mortgaged, assigned, pledged or encumbered by any
party thereto or otherwise, except in connection with financing
secured by the applicable Company Property which is described in
Schedule 3.9(c), (ix) (A) as of the date hereof, except as set forth
in Schedule 3.11(f), no brokerage or leasing commission or other
compensation is due or payable to any person with respect to or on
account of any of the Material Company Leases or any extensions or
renewals thereof incurred after the date hereof, and (B) any brokerage
or leasing commission or other compensation due or payable to any
person with respect to or on account of any of the Material Company
Leases or any extensions or renewals thereof have been incurred in the
ordinary course of business of the Company consistent with past
practice and market terms, (x) no space of a material size in any
Company Property is occupied by a tenant rent-free, (xi) no tenant
under any of the Material Company Leases has asserted any claim which
is likely to affect the collection of rent from such tenant, (xii)
other than as would be customary or consistent with commercially
reasonable retail leasing business practices, no tenant under any of
the Material Company Leases has any right to remove material
improvements or fixtures that have at any
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time been affixed to the premises leased thereunder, (xiii) each
tenant under the Material Company Leases is required thereunder to
maintain or to cause to be maintained, at its cost and expense, public
liability and property damage insurance with liability limits which
reasonably relate to the value of the contingent liabilities being
insured thereby or in the alternative, consistent with commercially
reasonable retail leasing business practices, tenants may self-insure
or the Company may provide such coverage to tenants and (xiv) the
landlord under each Material Company Lease has fulfilled all of its
obligations thereunder in respect of tenant improvements and capital
expenditures. Other than the tenants identified in the Rent Roll and
parties to easement agreements which constitute Permitted Liens, no
third party has any right to occupy or use any portion of any Company
Property. Budgets for all material tenant improvements and similar
material work required to be made by the lessor under each of the
Material Company Leases is incorporated in Schedule 3.11(i).
(g) Schedule 3.11(g) sets forth a complete and accurate list
of all material commitments, letters of intent or similar written
understandings made or entered into by the Company or any of its
Subsidiaries as of the date hereof (x) to lease any space larger than
25,000 rentable square feet at any of the Company Properties, (y) to
sell, mortgage, pledge or hypothecate any Company Property or
Properties, which, individually or in the aggregate, are material, or
to otherwise enter into a material transaction in respect of the
ownership or financing of any Company Property, or (z) to purchase or
to acquire an option, right of first refusal or similar right in
respect of any real property, which, individually or in the aggregate,
are material, which, in any such case, has not yet been reduced to a
written lease or contract, and sets forth with respect to each such
commitment, letter of intent or other understanding the principal
terms thereof. The Company will make available to Buyer a true and
complete copy of each such commitment, letter of intent or other
understanding. Schedule 3.11(g) also sets forth a complete and
accurate list of all agreements to purchase real property to which the
Company or any Subsidiary is a party.
(h) Except as set forth in Schedule 3.11(h), none of the
Company Properties is subject to any outstanding purchase options nor
has the Company or any of its Subsidiaries entered into any
outstanding contracts with others for the sale, mortgage, pledge,
hypothecation, assignment, sublease, lease or other transfer of all or
any part of any Company Property, and no person has any right or
option to acquire, or right of first refusal with respect to, the
Company's or any of its Subsidiaries' interest in any Company Property
or any part thereof. Except as set forth in Schedule 3.11(h) or
3.11(g), none of the Company or any of its Subsidiaries has any
outstanding options or rights of first refusal or has entered into any
outstanding contracts with others for the purchase of any real
property.
(i) Schedule 3.11(i) sets forth the Company's or any
Subsidiary's capital expenditure budget and schedule for each Company
Property, which describes the capital expenditures which the Company
or any Subsidiary has budgeted for such Company Property for the
period running through December 31, 1997 (the "Capital Expenditure
Budget and Schedule"), and the Company's or any Subsidiary's
preliminary capital expenditure budget and schedule for each Company
Property, which describes the capital expenditures which the Company
or any Subsidiary has budgeted for such Company Property for the
period commencing January 1, 1998 and running through December 31,
1999 (the "1998 and 1999
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Preliminary Capital Expenditure Budgets and Schedules"). Each of the
Capital Expenditure Budget and the 1998 and 1999 Preliminary Capital
Expenditure Budgets and Schedules also describes other capital
expenditures as are necessary, to the Company's knowledge, in order to
bring such Company Property into compliance with applicable laws,
ordinances, codes, health and safety regulations and insurance
requirements (including in respect of fire sprinklers, compliance with
the ADA (except to the extent that (x) a tenant under any Company
Lease is contractually responsible and liable for such ADA compliance
under its Company Lease or (y) with respect to shopping center
properties, any work required to cause such compliance is not material
and the related expenditures are, in the aggregate with all other such
expenditures, less than $400,000), and asbestos containing material)
or which the Company otherwise plans or expects to make in order to
cure or remedy any construction, electrical, mechanical or other
defects, to renovate, rehabilitate or modernize such Company Property,
or otherwise, excluding, however, any tenant improvements required to
be made under any Company Lease. To the Company's knowledge, the costs
and time schedules for 1997 set forth in the Capital Expenditure
Budget and Schedule are reasonable estimates and projections. To the
Company's knowledge, the costs and time schedules for 1998 and 1999
set forth in the 1998 and 1999 Preliminary Capital Expenditure Budgets
and Schedules are reasonable estimates and projections based upon
information available to the Company at the time that the 1998 and
1999 Preliminary Capital Expenditure Budgets and Schedules were
prepared, and, nothing has come to the attention of the Company since
such time which would indicate that the 1998 and 1999 Preliminary
Capital Expenditure Budgets and Schedules are inaccurate or misleading
in any material respect. Except as set forth in Schedule 3.11(i),
there are no outstanding or, to the Company's knowledge, threatened
requirements by any insurance company which has issued an insurance
policy covering any Company Property, or by any board of fire
underwriters or other body exercising similar functions, requiring any
repairs or alterations to be made to any Company Property that would,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
(j) Schedule 3.11(j) contains a list of each Company
Property which consists of or includes undeveloped land or which is in
the process of being developed or redeveloped (collectively, the
"Development Properties") and a brief description of the development
or redevelopment intended by the Company or any Subsidiary to be
carried out or completed thereon (collectively, the "Projects"),
including any budget and development schedule therefor prepared by or
for the Company or any Subsidiary (collectively, the "Development
Budget and Schedule"). Except as disclosed in Schedule 3.11(j), each
Development Property is zoned for the lawful development or
redevelopment thereon of the applicable Project, and the Company or
its Subsidiaries have obtained all permits, licenses, consents and
authorizations required for the lawful development or redevelopment
thereon of such Project, except only for such failure to meet the
foregoing standards as would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect. Except as set
forth in Schedule 3.11(j), to the Company's knowledge, there are no
material impediments to or constraints on the development or
redevelopment of any Project in all material respects within the time
frame and for the cost set forth in the Development Budget and
Schedule applicable thereto. In the case of each Project the
development of which has commenced, to the Company's knowledge, the
costs and expenses incurred in connection with such Project and the
progress thereof are, except as set forth in Schedule 3.11(j),
consistent and in compliance in all material respects with the
Development
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Budget and Schedule applicable thereto. The Company will make
available to Buyer all feasibility studies, soil tests, due diligence
reports and other studies, tests or reports performed by or for the
Company at any time since the Company's initial public offering, which
relate to the Development Properties or the Projects.
(k) The ground leases underlying the leased Company
Properties referenced in Schedule 3.11(a) (collectively, the "Ground
Leases") are accurately described in Schedule 3.11(k). Each of the
Ground Leases is valid, binding and in full force and effect as
against the Subsidiary and, to the Company's knowledge, as against the
other party thereto. Except as indicated in Schedule 3.11(k), none of
the Ground Leases is subject to any mortgage, pledge, Lien, sublease,
assignment, license or other agreement granting to any third party any
interest therein, collateral or otherwise, or any right to the use or
occupancy of any premises leased thereunder. True and complete copies
of the Ground Leases (including all amendments, modifications and
supplements thereto) have been delivered to Buyer prior to the date
hereof. To the Company's knowledge, except as set forth in Schedule
3.11(k), there is no pending or threatened proceeding which is
reasonably likely to interfere with the quiet enjoyment of the tenant
under any of the Ground Leases. Except as set forth in Schedule
3.11(k), as of the last day of the month preceding the date hereof and
as of the last day of the month preceding the date of the Initial
Closing, no payments under any Tenancy Lease are delinquent and no
notice of default under any Ground Lease has been sent or received by
the Company or any of its Subsidiaries. There does not exist under any
of the Ground Leases any default, and, to the Company's knowledge, no
event has occurred which, with notice or lapse of time or both, would
constitute such a default, except as would not, individually or in the
aggregate, be reasonably expected to result in a Material Adverse
Effect.
(l) The Company and each of its Subsidiaries have good and
sufficient title to all the personal and non-real properties and
assets reflected in their books and records as being owned by them
(including those reflected in the balance sheets of the Company and
its Subsidiaries as of December 31, 1996, except as since sold or
otherwise disposed of in the ordinary course of business), free and
clear of all Liens, except for Permitted Liens which are not,
individually or in the aggregate, reasonably expected to have a
Material Adverse Effect.
(m) The Company has provided to Buyer historical operating
expense information (the "Historical Expense Information"), which has
been prepared in the ordinary course of business. The Historical
Expense Information is accurate in all material respects.
Section 3.12 Environmental Matters.
(a) To the Company's knowledge, each of the Company and its
Subsidiaries has obtained, and now maintains as currently valid and
effective, all permits, certificates of financial responsibility and
other governmental authorizations required to be obtained by the
Company or any Subsidiary under the Environmental Laws (the
"Environmental Permits") in connection with the operation of its
businesses and properties, all of which are listed in Schedule
3.12(a). To the Company's knowledge, except as disclosed in the
Company Environmental Reports, each of the Company and its
Subsidiaries, and each Company Property is and has been in compliance
with all terms and conditions of the Environmental Permits and all
Environmental
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<PAGE>
Laws, except only to an extent which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect. The Company has no knowledge of any circumstances or
conditions that may prevent or interfere with such compliance in the
future.
(b) Each of the Company and its Subsidiaries has provided or
made available to Buyer all formal communications, oral or written
(whether from a Government Authority, citizens' group, employee or
other person), which the Company has received regarding (x) alleged or
suspected noncompliance of any of the Company Properties with any
Environmental Laws or Environmental Permits or (y) alleged or
suspected Liability of the Company or its Subsidiaries under any
Environmental Law, which noncompliance or Liability would,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
(c) There are no liens or encumbrances on any of the Company
Properties which arose pursuant to or in connection with any
Environmental Law or Environmental Claim and, to the Company's
knowledge, no government actions have been taken or threatened to be
taken or are in process which are reasonably likely to subject any
Company Property to such liens or other encumbrances.
(d) Except as disclosed in Schedule 3.12(e) (none of which
matters would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect), or set forth in the
Company Environmental Reports, no Environmental Claim has been
asserted or, to the Company's knowledge, threatened that may impose a
liability in excess of $400,000 with respect to the operations or the
businesses of the Company or its Subsidiaries, or with respect to the
Company Properties. To the Company's knowledge, except as set forth on
the Company Environmental Reports, no circumstances, past or present
actions, conditions, events or incidents which exist with respect to
the Company or its Subsidiaries or the Company Properties that would
reasonably be expected to result in any such Environmental Claim in
excess of $400,000 being asserted, in any such case, against (i) the
Company or its Subsidiaries, or (ii) to the Company's knowledge, any
person whose liability for any Environmental Claims the Company or its
Subsidiaries has or may have retained or assumed either contractually
or by operation of law.
(e) Except as disclosed in Schedule 3.12(e) (none of which
matters would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect), or set forth in the
Company Environmental Reports, (i) none of the Company or its
Subsidiaries has been notified or anticipates being notified of
potential responsibility in connection with any site that has been
placed on, or proposed to be placed on, the National Priorities List
or its state or foreign equivalents pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42
U.S.C. Section 9601 et seq., or analogous state laws, (ii) to the
Company's knowledge, no Materials of Environmental Concern are present
on, in or under any Company Property in a manner or condition that is
reasonably likely to give rise to an Environmental Claim which would
reasonably be expected to result in a Material Adverse Effect, (iii)
to the Company's knowledge, none of the Company or its Subsidiaries
has Released or arranged for the Release of any Materials of
Environmental Concern at any location to an extent or in a manner
which would reasonably be expected to result in a Material Adverse
Effect, (iv) to the Company's knowledge, no underground storage tanks,
surface impoundments,
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disposal areas, pits, ponds, lagoons, open trenches or disused
industrial equipment is present at any Company Property in a manner or
condition that is reasonably likely to give rise to an Environmental
Claim which would reasonably be expected to result in a Material
Adverse Effect, (v) to the Company's knowledge, no transformers,
capacitors or other equipment containing fluid with more than 50 parts
per million polychlorinated biphenyls are present at any Company
Property in a manner or condition that is reasonably likely to give
rise to an Environmental Claim which would reasonably be expected to
result in a Material Adverse Effect, except for any such transformers,
capacitors or other equipment owned by any utility company, and (vi)
to the Company's knowledge, no friable asbestos and no friable
asbestos-containing material is present at any Company Property and no
Employee, agent, contractor or subcontractor of the Company or its
Subsidiaries or any other person is now or has in the past been
exposed to friable asbestos at any Company Property, except, in the
case of each of the matters set forth in this subpart (vi), for such
matters as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(f) Schedule 3.12(f) contains a list of each environmental
report prepared for the Company or its Subsidiaries or otherwise in
the possession of any of them with respect to the environmental
condition of any Company Property (collectively, the "Company
Environmental Reports"). The Company has previously delivered or made
available to Buyer true and complete copies of (i) the executive
summary or conclusion included in each Company Environmental Report
and (ii) each Company Environmental Report which constitutes a "Phase
II" (or higher) environmental report or which is otherwise more
detailed or in-depth than a typical "Phase I" environmental report. To
the Company's knowledge, none of the matters disclosed by the Company
Environmental Reports would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect. The Company has
no knowledge of any facts or circumstances relating to the
environmental condition of any property owned, leased or otherwise
held by the Company that is not a Company Property that are reasonably
likely to result in a Material Adverse Effect.
(g) For purposes hereof, the terms listed below shall have
the following meanings:
(i) "Claim" shall mean all actions, causes of action, suits,
judgments, executions, claims, Liabilities and demands
whatsoever, in law or equity.
(ii) "Environmental Claim" shall mean any Claim
investigation or notice by any person alleging potential
liability (including potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries or fatalities, or
penalties) arising out of, based on or resulting from (A) the
presence, generation, transportation, treatment, use, storage,
disposal or Release of Materials of Environmental Concern or the
threatened Release of Materials of Environmental Concern at any
location, or (B) activities or conditions forming the basis of
any violation, or alleged violation of, or liability or alleged
liability under, any Environmental Law.
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(iii) "Environmental Laws" shall mean federal, state, and
local laws, ordinances, common law, orders, statutes, and
regulations relating to the pollution or protection of the
environment or of flora or fauna or their habitat or of human
health and safety, or to the cleanup or restoration of the
environment.
(iv) "Materials of Environmental Concern" shall mean all
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum or any fraction thereof, petroleum products and
hazardous substances or solid or hazardous wastes as now defined
and regulated under any Environmental Laws.
(v) "Release" shall mean any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration.
Section 3.13 Employees and Employee Benefit Plans.
(a) Schedule 3.13(a) sets forth a complete and accurate list
of all employment agreements between the Company or any of its
Subsidiaries and employees of the Company or any of its Subsidiaries.
Except for the employees who are parties to such employment
agreements, all of the employees of the Company and each of its
Subsidiaries are employed on an at-will basis (except for restrictions
or limitations on the at-will basis of such employees imposed by law
or equity or general principles of law or equity).
(b) The Company Reports or Schedule 3.13(b) sets forth a
complete and accurate list of all Employee Benefit Plans and all
material Benefit Arrangements which cover Employees of the Company or
any of its Subsidiaries with respect to their employment relationship
with the Company or any of its Subsidiaries (the "Company Plans").
With respect to each Company Plan, the Company will make available to
Buyer true and complete copies of: (i) the plans and related trust
documents and amendments thereto, (ii) the most recent summary plan
descriptions, if any, and the most recent annual report, if any, and
(iii) the most recent actuarial valuation (to the extent applicable).
(c) With respect to each Company Plan, (i) the Company and
each of its Subsidiaries is in compliance in all material respects
with the terms of each Company Plan and with the requirements
prescribed by all applicable statutes, orders or governmental rules or
regulations, (ii) the Company and each of its Subsidiaries has
contributed to each Pension Plan included in the Company Plans not
less than the amounts accrued for such plan for all plan periods for
which payment is due, and (iii) none of the Company or any of its
Subsidiaries has any funding commitment or other accrued liabilities
except as set forth on Schedule 3.13(c) or as reserved for in the
financial statements in or incorporated by reference into the Company
Reports, and in the case of each of clauses (i), (ii), and (iii),
except for such matters as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.
(d) Except as set forth on Schedule 3.13(d), none of the
Company or any of its Subsidiaries has made any commitment to
establish any new Employee Benefit Plan, to modify any Employee
Benefit Plan, or to increase benefits or compensation of Employees of
the
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Company or any of its Subsidiaries (except for normal increases in
compensation consistent with past practices), and to the Company's
knowledge, no intention to do so has been communicated to Employees of
the Company or any of its Subsidiaries.
(e) There are no pending or, to the Company's knowledge,
anticipated claims (excluding claims for benefits incurred in the
ordinary course of Company Plan activities) against or otherwise
involving any of the Company Plans or any fiduciaries thereof with
respect to their duties to the Company Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the
ordinary course of Company Plan activities) has been brought against
or with respect to any such Company Plans.
(f) Neither the Company nor any of the ERISA Affiliates has,
at any time after September 25, 1980, contributed to, or been required
to contribute to, any "multiemployer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA).
(g) Except as required by the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the
Code or requirements of state law and regulations and except as set
forth on Schedule 3.13(g), the Company and its Subsidiaries do not
maintain or contribute to any plan or arrangement which provides or
has any liability to provide life insurance, medical or other employee
welfare benefits described in Section 3(1) of ERISA to any Employee or
former Employee following his retirement or termination of employment
and, to the Company's knowledge, the Company and its Subsidiaries have
never represented, promised or contracted (whether in oral or written
form) to any Employee or former Employee that such benefits would be
provided.
(h) For purposes hereof, "Employee Benefit Plans" means each
and all "employee benefit plans" as defined in Section 3(3) of ERISA
maintained or contributed to by the Company or a Subsidiary or in
which the Company or a Subsidiary participates or participated and
which provides benefits to Employees, including (i) any such plans
that are "employee welfare benefit plans" as defined in Section 3(1)
of ERISA, including retiree medical and life insurance plans ("Welfare
Plans"), and (ii) any such plans that constitute "employee pension
benefit plans" as defined in Section 3(2) of ERISA ("Pension Plans").
"Benefit Arrangements" means life and health insurance,
hospitalization, savings, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, sick pay, sick leave,
disability, tuition refund, service award, company car, scholarship,
relocation, patent award, fringe benefit, individual employment,
consultancy or severance contracts and other polices or practices of
the Company or a Subsidiary providing employee or executive
compensation or benefits to Employees maintained or contributed to by
the Company or a Subsidiary, other than Employee Benefit Plans.
"Employees" mean all current employees, former employees and retired
employees of the Company or any of its Subsidiaries, including
employees on disability, layoff or leave status. "Controlled Group
Liability" means any and all liabilities (other than such liabilities
that arise solely out of, or relate solely to, the Company Plans) of
the ERISA Affiliates (other than the Company and its Subsidiaries)
under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections
412 and 4971 of the Code, (iv) the continuation coverage requirements
of Section 601 et seq. of ERISA and Section 4980B of the Code, and (v)
corresponding or similar provisions of foreign laws or regulations.
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(i) To the Company's knowledge, with respect to each Company
Plan that is subject to Title IV or Section 302 of ERISA or Section
412 or 4971 of the Code: (i) there does not exist any accumulated
funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, whether or not waived, (ii) the fair market
value of the assets of such plan equals or exceeds the actuarial
present value of all accrued benefits under such plan, on a
termination basis, (iii) no reportable event within the meaning of
Section 4043(c) of ERISA has occurred, with respect to which notice
has not been waived, and the consummation of the transactions
contemplated by this Agreement will not result in the occurrence of
any such reportable event, and (iv) all premiums due to the Pension
Benefit Guaranty Corporation have been timely paid in full.
(j) There does not now exist, nor do any circumstances exist
that could result in, any Controlled Group Liability that would be a
liability of the Company following the Closing. Without limiting the
generality of the foregoing, neither the Company nor any ERISA
Affiliate has engaged in any transaction described in Section 4069 or
Section 4204 of ERISA.
(k) Except as set forth in Schedule 3.13(k), neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (either alone or in conjunction
with any other event other than a termination of employment with
respect to which the employee being terminated receives payments or
benefits that he would have received if he had terminated or been
terminated and without regard to the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby)
result in, cause the accelerated vesting or delivery of, or increase
the amount or value of, any payment or benefit to any employee of the
Company.
Section 3.14 Labor Matters. Except as set forth in Schedule 3.14,
none of the Company or any of its Subsidiaries is a party to, or bound
by, any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor union organization.
Except for the matters set forth in Schedule 3.14 (none of which
matters would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect), there is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge
of the Company, threatened against the Company or any of its
Subsidiaries. To the knowledge of the Company, there are no
organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees
of the Company or any of its Subsidiaries.
Section 3.15 Affiliate Transactions. Schedule 3.15 sets forth a
complete and accurate list of all transactions, series of related
transactions or currently proposed transactions or series of related
transactions entered into by the Company or any of its Subsidiaries
since January 1, 1997 which are of the type required to be disclosed
by the Company pursuant to Item 404 of Regulation S-K of the
Securities Laws. A true and complete copy of all agreements or
contracts relating to any such transaction will be made available to
Buyer prior to the date hereof.
Section 3.16 Insurance. The Company maintains insurance policies,
including liability policies, covering the assets, business,
equipment, properties, operations, employees, officers and directors
of the Company and each of its Subsidiaries (collectively, the
"Insurance
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Policies"), which are of a type and in amounts customarily carried by
persons conducting businesses similar to those of the Company. There
is no material claim by the Company or any of its Subsidiaries pending
under any of the material Insurance Policies as to which coverage has
been questioned, denied or disputed by the underwriters of such
policies.
Section 3.17 Proxy Statement. The Proxy Statement and all of the
information included or incorporated by reference therein (other than
any information supplied or to be supplied by Buyer for inclusion or
incorporation by reference therein) will not, as of the date such
Proxy Statement is first mailed to the stockholders of the Company and
as of the time of the meeting of the stockholders of the Company in
connection with the transactions contemplated hereby, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated by the SEC thereunder.
Section 3.18 Maryland Takeover Law. The terms of Sections 3-602
and 3-702 of the Maryland General Corporation Law will not apply to
Buyer, any Stock Purchase or any other transaction contemplated
hereby. The resolutions in the form of Exhibit C hereto have been
adopted by the Company and have not been rescinded and revoked.
Section 3.19 Vote Required. The affirmative vote of the holders
of a majority (including LFREI and its Controlled Affiliates (as
defined in the Stockholders Agreement) for purposes of determining a
quorum, but not for purposes of determining a majority) of the
outstanding shares of Company Common Stock entitled to vote hereon and
duly present in person or by proxy at a meeting duly called to vote
hereon (and with each share of Company Common Stock entitled to one
vote per share) is the only vote of the holders of any class or series
of Company Stock necessary to approve this Agreement, the Registration
Rights Agreement, the Stockholders Agreement and the transactions
contemplated hereby and thereby.
Section 3.20 Brokers or Finders. Other than Prudential
Securities, Inc., no agent, broker, investment banker or other firm or
person, including any of the foregoing that is an Affiliate of the
Company, is or will be entitled to any broker's or finder's fee or any
other commission or similar fee from the Company in connection with
this Agreement or any of the transactions contemplated hereby for
which Buyer or any of its Affiliates will be responsible.
Section 3.21 Knowledge Defined. As used herein, the phrase "to
the Company's knowledge" (or words of similar import) means the actual
knowledge of any of Alexander Haagen, Sr., Charlotte Haagen, Alexander
Haagen III, Fred W. Bruning, Stuart J.S. Gulland, Steven M. Jaffe,
Patricia DeAngelis and Chris Fahey includes any facts, matters or
circumstances set forth in any written notice from any Government
Authority or any other material written notice received by the Company
or any of its Subsidiaries, and also including any matter of which
Buyer informs the Company in writing.
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ARTICLE 4
Representations and Warranties of Buyer and the Advancing Party
Buyer and the Advancing Party hereby jointly and severally
represent and warrant to the Company as follows:
Section 4.1 Organization.
(a) Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite corporate power and authority to
own, operate, lease and encumber its properties and to carry on its
business as now conducted, and to enter into this Agreement, the
Registration Rights Agreement and the Stockholders Agreement and to
perform its obligations hereunder and thereunder.
(b) The Advancing Party is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Advancing Party has all requisite corporate
power and authority to own, operate, lease and encumber its properties
and to carry on its business as now conducted, and to enter into this
Agreement, the Registration Rights Agreement and the Stockholders
Agreement and to perform its obligations hereunder and thereunder.
Section 4.2 Due Authorization. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement, and
the Stockholders Agreement have been duly and validly authorized by
all necessary corporate action on the part of Buyer and the Advancing
Party. This Agreement has been duly executed and delivered by each of
Buyer and the Advancing Party for itself and constitutes the valid and
legally binding obligations of Buyer and the Advancing Party,
enforceable against Buyer or the Advancing Party, as the case may be,
in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors'
rights or general principles of equity.
Section 4.3 Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement nor the performance by Buyer
or the Advancing Party, as the case may be, of its obligations
hereunder will conflict with, result in a breach of the terms,
conditions or provisions of, constitute a default under, result in the
creation of any mortgage, security interest, encumbrance, lien or
charge of any kind upon any of the properties or assets of Buyer or
the Advancing Party, as the case may be, pursuant to, or require any
consent, approval or other action by or any notice to or filing with
any Government Authority pursuant to, the organizational documents or
agreements of Buyer or the Advancing Party, as the case may be, or any
agreement, instrument, order, judgment, decree, statute, law, rule or
regulation by which Buyer or the Advancing Party, as the case may be,
is bound, except for filings after any Closing under Section 13(d) or
Section 16 of the Exchange Act.
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Section 4.4 Acquisition for Investment; Sophistication;
Source of Funds.
(a) Buyer is acquiring the Company Common Stock being
purchased by it for its own account for the purpose of investment and
not with a view to or for sale in connection with any distribution
thereof, and Buyer has no present intention or plan to effect any
distribution of shares of Company Common Stock, provided that the
disposition of Company Common Stock owned by Buyer shall at all times
be and remain within its control, subject to the provisions of this
Agreement and the Registration Rights Agreement. The certificate(s)
representing the Purchased Shares shall bear a prominent legend with
respect to the restrictions on transfer under the Securities Act and
under applicable state securities laws. Prior to any proposed transfer
of the Purchased Shares, unless such transfer is made pursuant to an
effective registration statement under the Securities Act, Buyer will
deliver to the Company an opinion of counsel, reasonably satisfactory
in form and substance to the Company, to the effect that the Purchased
Shares may be sold or otherwise transferred without registration under
the Securities Act. The Company will remove the legend relating to
Securities Act restrictions from any Purchased Shares at any time two
years after issuance if Buyer delivers to the Company an opinion of
counsel, reasonably satisfactory in form and substance to the Company,
to the effect that such Purchased Shares are no longer subject to
transfer restrictions under the Securities Act. Upon original issuance
thereof, and until such time as the same shall have been registered
under the Securities Act or sold pursuant to Rule 144 promulgated
thereunder (or any similar rule or regulation) each stock certificate
for the Purchased Shares shall bear any restricted securities legend
required pursuant to the Stockholders Agreement, unless such legend is
no longer required thereunder. Buyer is able to bear the economic risk
of the acquisition of Company Common Stock pursuant hereto and can
afford to sustain a total loss on such investment, and has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment.
(b) At the Initial Closing and at each subsequent Closing,
the Advancing Party shall have available and shall advance to Buyer
all of the funds necessary to satisfy Buyer's obligations hereunder
and to pay any related fees and expenses in connection with the
foregoing. The Advancing Party has, and at each Closing will have
either cash, written, enforceable subscriptions from its investors or
line of credit commitments sufficient, in any such case, to advance
the necessary funds to Buyer as will enable Buyer to purchase the
requisite Purchased Shares at each Closing, in accordance with this
Agreement. The Advancing Party has provided to the Company a true and
correct copy of the form of the subscription agreement executed by the
Advancing Party's investors.
(c) Each of Buyer and the Advancing Party is an "accredited
investor" as such term is defined in Regulation D promulgated under
the Securities Act.
(d) Each of Buyer and the Advancing Party has previously
delivered to the Company an audited balance sheet for Buyer, and the
Advancing Party, as the case may be, as of December 31, 1996, which
was certified by an officer of Buyer, and the Advancing Party, as the
case may be, and which fairly presented the financial position of
Buyer, and the Advancing Party, as the case may be, as of its date in
accordance with GAAP. Such balance sheet discloses either on its face
or by footnote, all material liabilities of the Buyer, and the
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Advancing Party, as the case may be, required to be disclosed under
GAAP. The Company agrees to keep such information confidential to the
same extent that Buyer is obligated to keep information confidential
pursuant to Section 5.4(b).
Section 4.5 Resources. Buyer and the Advancing Party have
requisite cash, cash equivalents, equity commitments or other sources
of financing available to consummate the transactions contemplated
hereby.
Section 4.6 Proxy Statement. None of the information supplied or
to be supplied by Buyer for inclusion or incorporation by reference in
the Proxy Statement will, as of the date the Proxy Statement is first
mailed to the stockholders of the Company and as of the time of the
meeting of the stockholders of the Company in connection with the
transactions contemplated hereby, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
Section 4.7 Brokers or Finders. No agent, broker, investment
banker or other firm or person, including any of the foregoing that is
an Affiliate of Buyer, or the Advancing Party, is or will be entitled
to any broker's or finder's fee or any other commission or similar fee
from Buyer or the Advancing Party in connection with this Agreement or
any of the transactions contemplated hereby for which the Company or
any of its Affiliates will be responsible.
Section 4.8 REIT Qualification Matters. To Buyer's and the
Advancing Party's knowledge, no person who would be treated as an
"individual" for purposes of Section 542(a)(2) of the Code (as
modified by Section 856(h) of the Code) owns, actually or beneficially
(determined through the application of the constructive ownership
rules of Section 544 of the Code, as modified by Section 856(h)(1)(B)
of the Code), in excess of 9.8% of the value of the outstanding equity
interests in Buyer or the Advancing Party.
Section 4.9 Investment Company Matters. Neither the Advancing
Party nor Buyer is, and after giving effect to the purchase of Company
Common Stock contemplated hereby neither will be, an "investment
company" or an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended.
Section 4.10 Ownership of Tenants. To Buyer's and the Advancing
Party's knowledge and except as set forth in Schedule 4.10-B, neither
Buyer nor the Advancing Party owns, actually or constructively
(determined through the application of the constructive ownership
rules of Section 318 of the Code, as modified by Section 856(d)(5) of
the Code), any stock, securities, or other ownership interest in any
of the tenants of the Company, as set forth in Schedule 4.10- A.
Capitalized terms used but not defined in this Section 4.10 shall have
the meaning assigned to them in the Company Charter. The Company shall
advise Buyer and the Advancing Party within a reasonable period of
time before the Closing of any material changes to Schedule 4.10- A.
The Company may update Schedule 4.10-A from time to time, and Buyer
and the Advancing Party agree to promptly notify the Company, to their
knowledge as to their actual and constructive ownership (determined
through the application of the constructive ownership rules
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of Section 318 of the Code, as modified by Section 856(d)(5) of the
Code) of any additional tenants of the Company, as may be set forth on
such updated schedule.
Section 4.11 Foreign Ownership. To Buyer's and the Advancing
Party's knowledge, not more than 10% of the interests in Buyer and the
Advancing Party are held, directly or indirectly, by "foreign persons"
(as described in Section 897(h)(4)(B) of the Code.
ARTICLE 5
Covenants Relating to Closings
Section 5.1 Taking of Necessary Action.
(a) Each party hereto agrees to use its commercially
reasonable best efforts promptly to take or cause to be taken all
action and promptly to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Agreement, the Registration Rights Agreement and the Stockholders
Agreement, subject to the terms and conditions hereof and thereof,
including all actions and things necessary to cause all conditions
precedent set forth in Article 7 to be satisfied.
(b) As promptly as practicable after the date hereof, the
Company shall prepare and file with the SEC a preliminary proxy
statement (the "Proxy Statement") by which the Company's stockholders
will be asked to approve, among other things, the issuance of shares
of Company Common Stock contemplated hereby. The Proxy Statement as
initially filed with the SEC, as it may be amended and refiled with
the SEC and as it may be mailed to the Company's stockholders, shall
be in form and substance reasonably satisfactory to Buyer. The Company
shall use its reasonable efforts to respond to any comments of the
SEC, and to cause the Proxy Statement to be mailed to the Company's
stockholders at the earliest practicable time. As promptly as
practicable after the date hereof, the Company shall prepare and file
any other filings required of the Company or its Subsidiaries under
the Exchange Act, the Securities Act or any other federal, state or
local laws relating to this Agreement and the transactions
contemplated hereby, and state takeover laws (the "Other Filings").
The Company and Buyer will notify each other promptly of the receipt
of any comments from the SEC or its staff and of any request by the
SEC or its staff or any other government officials for amendments or
supplements to the Proxy Statement or any Other Filing or for
additional information and will supply each other with copies of all
correspondence between each of them or any of their respective
representatives, on the one hand, and the SEC, or its staff or any
other government officials, on the other hand, with respect to the
Proxy Statement or any Other Filing. The Proxy Statement and any Other
Filing shall comply in all material respects with all applicable
requirements of law. Buyer shall provide the Company all information
about Buyer required to be included or incorporated by reference in
the Proxy Statement or any Other Filing and shall otherwise cooperate
with the Company in taking the actions described in this paragraph.
Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement or any Other Filing,
the Company or Buyer, as the case may be, shall
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promptly inform the other party of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials,
and/or mailing to stockholders of the Company, such amendment or
supplement. Subject to the provisions of Section 5.6, the Proxy
Statement shall include the recommendation of the Board of Directors
of the Company that the stockholders of the Company vote in favor of
and approve the Amended Company Charter and the issuance of Company
Common Stock pursuant to this Agreement.
(c) The Company shall call a meeting of its stockholders to
be held as promptly as practicable (and in no event later than
December 31, 1997) for the purpose of voting upon the transactions
(including the issuance of Company Common Stock) contemplated hereby;
provided that should a quorum not be obtained at such meeting of the
stockholders, the meeting of the stockholders shall be postponed or
adjourned (but in no event to a date later than December 31, 1997) in
order to permit additional time for soliciting and obtaining
additional proxies or votes.
(d) The Company shall use its commercially reasonable best
efforts to obtain the consents set forth in each of Schedules 3.4(d)-A
and 3.4(d)-B.
(e) Except as provided on Schedule 5.1(e), from the date
hereof until the sooner to occur of (A) the date on which the Investor
Nominees (as defined in the Stockholders Agreement) first become
members of the Board, and (B) if the Stockholder Approval vote fails,
the date of the stockholder meeting at which the Stockholder Approval
failed, (i) no grant or award of options or other similar
equity-related or incentive compensation shall be made pursuant to or
by amendment to the agreements listed on Schedule 3.9(g), and (ii) any
employment, stock option or other agreement entered into and which
contains a change-of-control or similar provision shall contain only a
change-of-control provision in the form included in the form of
employment agreement attached hereto as Exhibit D.
Section 5.2 Registration Rights Agreement. Concurrent with the
execution of this Agreement, the Company, the Advancing Party and
Buyer shall enter into the Registration Rights Agreement.
Section 5.3 Stockholders Agreement. Concurrent with the execution
of this Agreement, the Company, Lazard Freres Real Estate Investors,
LLC, the Advancing Party and Buyer shall enter into the Stockholders
Agreement.
Section 5.4 Public Announcements; Confidentiality.
(a) Subject to each party's disclosure obligations imposed
by law and any stock exchange or similar rules and the confidentiality
provisions contained in Section 5.4(b), the Company and Buyer will
cooperate with each other in the development and distribution of all
news releases and other public information disclosures with respect to
this Agreement, the Registration Rights Agreement the Stockholders
Agreement and any of the transactions contemplated hereby or thereby.
If a party is required by law or any stock exchange or similar rule to
issue a news release or other public announcement, it shall advise the
other party in
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advance thereof and use reasonable best efforts to cause a mutually
agreeable release or announcement to be issued.
(b) Buyer agrees that all information provided to Buyer or
any of its representatives pursuant to this Agreement shall be kept
confidential, and Buyer shall not (x) disclose such information to any
persons other than the directors, officers, employees, financial
advisors, investors, lenders, legal advisors, accountants, consultants
and affiliates of Buyer who reasonably need to have access to the
confidential information and who are advised of the confidential
nature of such information or (y) use such information in a manner
which would be detrimental to the Company; provided, however, the
foregoing obligation of Buyer shall not (i) relate to any information
that (1) is or becomes generally available other than as a result of
unauthorized disclosure by Buyer or by persons to whom Buyer has made
such information available, (2) is or becomes available to Buyer on a
non-confidential basis from a third party that is not, to Buyer's
knowledge, bound by any other confidentiality agreement with the
Company, or (ii) prohibit disclosure of any information if required by
law, rule, regulation, court order or other legal or governmental
process.
Section 5.5 Conduct of the Business. Except for transactions
contemplated hereby, during the period from the date hereof to the
sooner to occur of (A) the date on which the Investor Nominees (as
defined in the Stockholders Agreement) first become members of the
Board, and (B) if the Stockholder Approval vote fails, the date of the
stockholder meeting at which the Stockholder Approval failed, each of
the Company and each Subsidiary, except as otherwise consented to or
approved by Buyer in writing or as permitted or required hereby, (x)
has conducted and will conduct the business and has engaged and will
engage in transactions only in the ordinary course consistent with
past practice, and (y) will not:
(i) change any provision of the Amended Company Charter or
the Bylaws of the Company in a manner that would be adverse to
Buyer;
(ii) except for (A) issuances of shares of Company Common
Stock in consideration for the acquisition of assets by the
Company in bona fide arm's length transactions and subject to the
limitations set forth in the Company Charter (and which issuances
in any event shall not exceed 10% of the shares of Company Common
Stock outstanding, on a pro forma basis, assuming the
consummation of each of the Subsequent Closings contemplated by
this Agreement), (B) grants of options or the issuance or
reacquisition of shares of Company Common Stock pursuant to the
agreements listed on Schedule 3.13(b) or the awards listed on
Schedule 3.3(a) or automatic awards pursuant to the terms of the
Amended and Restated 1993 Stock Option and Incentive Plan, change
the number of shares of the authorized or issued capital stock of
the Company or issue or grant any option, warrant, call,
commitment, subscription, right to purchase or agreement of any
character relating to the authorized or issued capital stock of
the Company, or any securities convertible into shares of such
stock, or split, combine or reclassify any shares of the capital
stock of the Company or declare, set aside or pay any
extraordinary dividend (except as may be required to comply with
the requirements to maintain the Company's REIT status), other
distribution (whether in cash, stock or property or any
combination thereof) in respect of the capital stock of the
Company, or
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redeem or otherwise acquire any shares of such capital stock
(provided, however, that in connection with any transaction
described in clauses (A) and (B), Buyer shall be entitled, to the
extent so provided in Section 4.2 of the Stockholders Agreement,
to a participation right on the terms set forth in Section 4.2 of
the Stockholders Agreement as if all of the Purchased Shares were
issued and owned by Buyer at the time of such transaction, with
any additional shares of capital stock (as such term is used in
Section 4.2 of the Stockholders Agreement) which Buyer shall have
the right to purchase by virtue of such participation right to be
issued and purchased only at the time of the Subsequent Closing,
and subject to the satisfaction or waiver of the conditions
applicable to the purchase of Purchased Shares thereat);
(iii) take any action or permit any of its Subsidiaries to
take any action which would violate any of the Corporate Action
Covenants under (and as defined in) the Stockholders Agreement;
(iv) purchase or enter into a binding agreement to purchase
any real property without Investor's prior written consent,
including the purchase of any of the properties which are the
subject of the purchase agreements, letters of intent or other
arrangements described in Schedule 3.11(g) or the other Schedules
hereto; or
(v) enter into any employment agreement, or permit any of
its Subsidiaries to enter into any employment agreement with any
officer or other employee except for entry into the Employment
Agreements pursuant to Section 3.7 of this Agreement.
Section 5.6 No Solicitation of Transactions. Unless and until
this Agreement is terminated in accordance with its terms, none of the
Company or its Subsidiaries shall, directly or indirectly, through any
officer, director, agent or otherwise, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or
assistance), or take any other action to facilitate knowingly, any
inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Competing Transaction, or enter
into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or
authorize or knowingly permit any of the officers, directors or
employees of such party or any of its Subsidiaries or any investment
banker, financial advisor, attorney, accountant or other
representative retained by such party or any of such party's
Subsidiaries to take any such action, and the Company shall notify
Buyer orally (within one Business Day) and in writing (as promptly as
practicable) of all of the relevant details relating to all inquiries
and proposals which any officer or director of the Company may receive
relating to any of such matters and if such inquiry or proposal is in
writing, the Company shall deliver to Buyer a copy of such inquiry or
proposal; provided, however, that nothing contained in this Section
shall prohibit the Board from complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer or
prohibit the Board from taking such other actions as may be required
to comply with its fiduciary obligations. If the Board determines with
the advice of counsel that failure to do so could be held to violate
its fiduciary duties, it may provide information in response to an
unsolicited proposal. If the Company receives a bona fide proposal for
a Competing Transaction that the Board determines in good faith (based
on the advice of a
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nationally recognized financial advisor) may provide greater value to
the Company and its stockholders than the Agreement, it may enter into
negotiations with respect to such proposal. The Company will notify
Buyer of any such superior proposal not less than two Business Days
prior to entering into any definitive agreement with respect to a
Competing Transaction; provided, however, that in no event shall the
Company enter into a definitive agreement with respect to a Competing
Transaction less than five Business Days after the Company's initial
notification to Buyer of an inquiry or proposal relating to a
Competing Transaction. Within the two-Business-Day or
five-Business-Day period referred to above, Buyer may propose an
improved transaction.
Section 5.7 Information and Access. From the date hereof until
the date on which the Remaining Equity Commitment shall be zero, (i)
the Company and its Subsidiaries shall afford to Buyer and Buyer's
accountants, counsel and other representatives full and reasonable
access during normal business hours (and at such other times as the
parties may mutually agree) to its properties, books, contracts,
commitments, records and personnel and, during such period, shall
furnish promptly to Buyer (1) a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of
the Securities Laws, and (2) all other information concerning their
businesses, personnel and the Company Properties as Buyer may
reasonably request, and (ii) without limiting the generality of the
foregoing, Buyer shall have the right to (1) conduct or cause to be
conducted an environmental, physical, structural, electrical,
mechanical and other inspection and review of any Company Properties,
for which inspection Buyer will and hereby does indemnify and hold the
Company harmless from any and all damages whatsoever caused by such
inspection, or (2) request that the Company update, at Buyer's
expense, any existing reports, reviews or inspections thereof, in
which case the Company shall promptly so update its reports, reviews
and inspections and cause them to be certified to Buyer by the firm or
person who prepared such report or conducted such review or
inspection. Buyer and its accountants, counsel and other
representatives shall, in the exercise of the rights described in this
Section, not unduly interfere with the operation of the businesses of
the Company or its Subsidiaries.
Section 5.8 Notification of Certain Matters. Each of Buyer and
the Company shall use its good faith efforts to notify the other party
in writing of its discovery of any matter that would render any of
such party's or the other party's representations and warranties
contained herein untrue or incorrect in any material respect, but the
failure of either party to so notify the other party shall not be
deemed a breach of this Agreement.
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ARTICLE 6
Certain Additional Covenants
Section 6.1 Resale. Buyer acknowledges and agrees that the
Company Common Stock that Buyer will acquire in any Stock Purchase
will not be registered under the Securities Act and may only be sold
or otherwise disposed of in one or more transactions registered under
the Securities Act and, where applicable, relevant state securities
laws or as to which an exemption from the registration requirements of
the Securities Act and, where applicable, such state securities laws
is available, and Buyer agrees that the certificates representing such
Common Stock shall bear a legend to that effect and a legend as to its
status as restricted securities.
Section 6.2 Use of Funds. The Company shall use the funds
received from Stock Purchases to reduce indebtedness of the Company
and for the acquisition, development and redevelopment of retail
properties in the Operating Area; provided that the Company shall be
allowed to hold the funds in short term investments pending such use.
Section 6.3 REIT Compliance. Buyer and the Advancing Party will
make available to the Company information known to Buyer and the
Advancing Party regarding the ownership of interests in Buyer and the
Advancing Party, as requested by the Company and reasonably necessary
for the Company to review the accuracy of the representations set
forth in Sections 4.8, 4.10 and 4.11.
Section 6.4 REIT Status. From and after the date hereof and so
long as Buyer owns 10% or more of the outstanding Company Common Stock
unless the Directors on the Board nominated by the Buyer consent to
doing otherwise, the Company will elect to be taxed as a REIT in its
federal income tax returns, will comply with all applicable laws,
rules and regulations of the Code relating to a REIT, and will not
take any action or fail to take any action which would reasonably be
expected to, alone or in conjunction with any other factors, result in
the loss of its status as a REIT for federal income tax purposes.
Section 6.5 Guarantee. The Advancing Party hereby unconditionally
and irrevocably guarantees and agrees to be responsible for the
payment and performance of all of Buyer's obligations hereunder.
ARTICLE 7
Conditions to Closings
Section 7.1 Conditions of Purchase at Initial Closing. The
obligation of Buyer to purchase and pay for the Purchased Shares at
the Initial Closing is subject to satisfaction or waiver of each of
the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall
have been true and correct in all respects on
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and as of the date hereof, and shall be true and correct in all
respects on and as of the date of such Initial Closing, with the same
effect as though such representations and warranties had been made on
and as of the date of such Initial Closing (except for representations
and warranties that speak as of a specific date or time other than the
date of the Initial Closing (which need only be true and correct in
all respects as of such date or time)), other than, in all such cases,
such failures to be true and/or correct as would not in the aggregate
reasonably be expected to have a Material Adverse Effect; provided,
however, that if any of the representations and warranties is already
qualified in any respect by materiality or as to Material Adverse
Effect for purposes of this Section 7.1(a) such materiality or
Material Adverse Effect qualification will be in all respects ignored
(but subject to the overall standard as to Material Adverse Effect set
forth immediately prior to this proviso). The covenants and agreements
of the Company to be performed on or before the date of the Initial
Closing in accordance with this Agreement shall have been duly
performed in all respects, other than (except for the Company's
obligation to deliver the relevant shares of Company Common Stock at
the Initial Closing, and for the covenants set forth in Sections
5.1(e), 5.2 and 5.3, as to which the proviso set forth in this
other-than clause shall not apply) for such failures to have been
performed as would not in the aggregate reasonably be expected to have
a Material Adverse Effect (provided, however, that if any such
covenant or agreement is already qualified in any respect by
materiality or as to Material Adverse Effect for purposes of
determining whether this condition has been satisfied, such
materiality or Material Adverse Effect qualification will be in all
respects ignored and such covenant or agreement shall have been
performed in all respects without regard to such qualification (but
subject to the overall exception as to Material Adverse Effect set
forth immediately prior to this proviso)). The Company shall have
delivered to Buyer at the Initial Closing a certificate of an
appropriate officer in form and substance reasonably satisfactory to
Buyer dated the date of the Initial Closing to such effect.
In making any determination as to Material Adverse Effect under
this Section 7.1(a), the matters set forth in such Section shall be
aggregated and considered together.
(b) No Material Adverse Change. Since March 31, 1997 there
shall not have been any change, circumstance or event which has had or
would reasonably be expected to have a Material Adverse Effect.
(c) Consents. The Company shall have obtained the consents
set forth in Schedule 3.4(d)-A.
(d) Ownership Limit Waiver. Buyer's ownership of up to the
Initial Number of Shares shall have been exempted on a continuing
basis subject to continuing validity of the representations and
warranties of the Buyer and the Advancing Party in Article 4 hereof
(disregarding the qualification in Sections 4.8 and 4.10 relating to
Buyer's and the Advancing Party's knowledge and assuming no exceptions
are set forth in Schedule 4.10-B) and provided such exemption does not
otherwise jeopardize the Company's tax status as a REIT, from the
ownership limit provisions of Article VII Section 2 of the Company
Charter and the Board of Directors of the Company shall have taken
such action provided for under Article VII of the Company Charter to
grant such exemption to Buyer. For purposes of this paragraph (d),
references to Buyer, shall also be deemed to be references to any
Person who would be an
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Investor within the meaning of the Stockholders Agreement, provided
such Person has made the representations and warranties of the Buyer
in Article 4 hereof.
(e) Voting Agreements. Buyer shall have entered into the
Voting Agreements with Alexander Haagen, Sr., Charlotte Haagen and
Alexander Haagen III.
Section 7.2 Conditions to Purchase at Second Closing. The
obligations of Buyer to purchase and pay for the Purchased Shares at
the Second Closing are subject to satisfaction or waiver of each of
the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall
have been true and correct in all respects on and as of the date
hereof, and shall be true and correct in all respects on and as of the
date of the Second Closing, with the same effect as though such
representations and warranties had been made on and as of the date of
the Second Closing (except for representations and warranties that
speak as of a specific date or time other than the date of the Second
Closing (which need only be true and correct in all respects as of
such date or time)), other than, in all such cases, such failures to
be true and/or correct as would not in the aggregate reasonably be
expected to have a Material Adverse Effect; provided, however, that if
any of the representations and warranties is already qualified in any
respect by materiality or as to Material Adverse Effect for purposes
of this Section 7.2(a) such materiality or Material Adverse Effect
qualification will be in all respects ignored (but subject to the
overall standard as to Material Adverse Effect set forth immediately
prior to this proviso). The covenants and agreements of the Company to
be performed on or before the date of the Second Closing in accordance
with this Agreement shall have been duly performed in all respects,
other than (except for the Company's obligation to deliver the
relevant shares of Company Common Stock at the Second Closing, as to
which the proviso set forth in this other-than clause shall not apply)
for such failures to have been performed as would not in the aggregate
reasonably be expected to have a Material Adverse Effect (provided,
however, that if any such covenant or agreement is already qualified
in any respect by materiality or as to Material Adverse Effect for
purposes of determining whether this condition has been satisfied,
such materiality or Material Adverse Effect qualification will be in
all respects ignored and such covenant or agreement shall have been
performed in all respects without regard to such qualification (but
subject to the overall exception as to Material Adverse Effect set
forth immediately prior to this proviso)). The Company shall have
delivered to Buyer at the Second Closing a certificate of an
appropriate officer in form and substance reasonably satisfactory to
Buyer dated the date of the Second Closing to such effect.
For purposes of the foregoing condition, any Breaching Matters
waived by Buyer or cured by the Company in accordance with the
provisions of Section 2.8(b) shall not be taken into account.
(b) Stockholder Approval. The issuance of Company Common
Stock pursuant to this Agreement shall have been approved by the
majority vote of the Company's stockholders other than Buyer (the
"Stockholder Approval").
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(c) Consents. The Company shall have obtained the consents
set forth in Schedule 3.4(d)-B.
Section 7.3 Conditions of Purchase at All Closings. The
obligations of Buyer to purchase and pay for the Purchased Shares at
each Closing (including the Initial Closing and any Subsequent
Closing, except where otherwise indicated) are subject to satisfaction
or waiver of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained in Sections
3.1(a), 3.1(b), 3.1(c), 3.2, the second and third sentences of 3.3(a),
3.4, 3.8(b) and 3.18 shall be true and correct in all respects on and
as of the relevant Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing
Date (except for representations and warranties that speak as of a
specific date or time other than such Closing Date (which need only be
true and correct in all respects as of such date or time)), other
than, in all such cases, such failures to be true and/or correct as
would not in the aggregate reasonably be expected to have a Material
Adverse Effect; provided, however, that if any of the representations
and warranties is already qualified in any respect by materiality or
as to Material Adverse Effect for purposes of this Section 7.3(a) such
materiality or Material Adverse Effect qualification will be in all
respects ignored (but subject to the overall standard as to Material
Adverse Effect set forth immediately prior to this proviso). The
covenants and agreements of the Company to be performed on or before
the relevant Closing Date in accordance with this Agreement shall have
been duly performed in all respects, other than (except for the
Company's obligation to deliver the relevant shares of Company Common
Stock at the relevant Closing, as to which the proviso set forth in
this other-than clause shall not apply) for such failures to have been
performed as would not in the aggregate reasonably be expected to have
a Material Adverse Effect (provided, however, that if any such
covenant or agreement is already qualified in any respect by
materiality or as to Material Adverse Effect for purposes of
determining whether this condition has been satisfied, such
materiality or Material Adverse Effect or qualification will be in all
respects ignored and such covenant or agreement shall have been
performed in all respects without regard to such qualification (but
subject to the overall exception as to Material Adverse Effect set
forth immediately prior to this proviso)). As to each Closing other
than the Initial Closing, no condition to the obligations of Buyer to
purchase and pay for the Purchased Shares at the Initial Closing, and
that was not duly waived by Buyer, shall have failed to be satisfied
as of the Initial Closing. The Company shall have delivered to Buyer
at the relevant Closing a certificate of an appropriate officer in
form and substance reasonably satisfactory to Buyer dated the relevant
Closing Date to such effect.
For purposes of the foregoing condition, any Breaching Matters
waived in accordance with the provisions of Section 2.8(b) shall not
be taken into account.
(b) No Material Breach. The Company shall be in compliance
in all material respects with its covenants and other obligations
under this Agreement, the Stockholders Agreement and the Registration
Rights Agreement. The Company shall have satisfied the conditions of
(i) Section 7.1(a) at the Initial Closing, (ii) Section 7.2(a) at the
Second Closing,
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and (iii) Section 7.3(a) at all Closings, except in each case for any
Breaching Matters waived by Buyer in accordance with the terms hereof.
(c) No Injunction. There shall not be in effect any final
order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby and there shall be no pending Actions
which would reasonably be expected to have a material adverse effect
on the ability of the Company to consummate the transactions
contemplated hereby or to issue the Purchased Shares.
(d) REIT Status. The Company shall have elected to be taxed
as a REIT in its most recent federal income tax return, and shall be
in compliance with all applicable laws, rules and regulations,
including the Code, necessary to permit it to be taxed as a REIT,
unless the Investor Nominees (as defined in the Stockholders
Agreement) shall have voted to change such election. The Company shall
not have taken any action or have failed to take any action which
would reasonably be expected to, alone or in conjunction with any
other factors, result in the loss of its status as a REIT for federal
income tax purposes, unless the Investor Nominees shall have voted to
take or omit to take such action.
(e) Domestically Controlled REIT. Assuming the accuracy of
the representations set forth in Section 4.11 (disregarding the
qualification relating to Buyer's and the Advancing Party's
knowledge), to the Company's knowledge, the Company is, and after
giving effect to the relevant Closing will be, a
"domestically-controlled" REIT within the meaning of Code Section
897(h)(4)(B).
(f) Asset Test. The Board shall have determined that the
Company satisfied the "5% asset test" of Section 856(c)(5) of the Code
for the quarters ended September 30, 1996 and December 31, 1996.
Section 7.4 Conditions of Sale. The obligation of the Company to
issue and sell any Purchased Shares at any Closing (including the
Initial Closing and each Subsequent Closing, except where otherwise
indicated below) is subject to satisfaction or waiver of each of the
following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of Buyer and the Advancing Party
contained herein shall have been true and correct in all respects on
and as of the date hereof, and shall be true and correct in all
respects on and as of the relevant Closing Date with the same effect
as though such representations and warranties had been made on and as
of the relevant Closing Date (except for representations and
warranties that speak as of a specific date or time other than such
Closing Date (which need only be true and correct in all respects as
of such date or time)), other than, in all such cases, such failures
to be true and/or correct as would not in the aggregate reasonably be
expected to have a Material Adverse Effect on the Company or Buyer's
ability to consummate the transactions contemplated hereby; provided,
however, that if any of the representations and warranties is already
qualified in any respect by materiality or as to Material Adverse
Effect for purposes of this Section 7.4(a) such materiality or
Material Adverse Effect qualification will be in all respects ignored
(but subject to the overall standard as to Material Adverse Effect set
forth
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immediately prior to this proviso). The covenants and agreements of
Buyer to be performed on or before the relevant Closing Date in
accordance with this Agreement shall have been duly performed in all
respects, other than (except for Buyer's obligation to pay the
relevant Purchase Price at the relevant Closing, and, as to the
Initial Closing, except for Buyer's covenants set forth in Sections
5.2 and 5.3, as to which the proviso set forth in this other-than
clause shall not apply) for such failures to have been performed as
would not in the aggregate reasonably be expected to have a Material
Adverse Effect on the Company or Buyer's ability to consummate the
transactions contemplated hereby (provided, however, that if any such
covenant or agreement is already qualified in any respect by
materiality or as to Material Adverse Effect for purposes of
determining whether this condition has been satisfied, such
materiality or Material Adverse Effect qualification will be in all
respects ignored and such covenant or agreement shall have been
performed in all respects without regard to such qualification (but
subject to the overall exception as to Material Adverse Effect set
forth immediately prior to this proviso)). Buyer shall have delivered
to the Company at the relevant Closing a certificate of an appropriate
officer in form and substance reasonably satisfactory to the Company
dated the relevant Closing Date to such effect.
(b) Stockholder Approval. Except in the case of the Initial
Closing, the issuance of the Company Common Stock pursuant to this
Agreement shall have received Stockholder Approval.
(c) No Injunction. There shall not be in effect any final
order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby and there shall be no pending Actions
which would reasonably be expected to have a material adverse effect
on the ability of Buyer to consummate the transactions contemplated
hereby or to acquire the Purchased Shares.
(d) Consents. The Company shall have obtained the consents
set forth in Schedule 3.4(d)-A in the case of the Initial Closing, in
Schedule 3.4(d)-B in the case of the Second Closing, and in Schedule
3.4(d)-C in the case of each other Subsequent Closing.
ARTICLE 8
Survival; Indemnification
Section 8.1 Survival. Other than the representations contained in
Sections 4.8, 4.10, and 4.11 (which shall survive for as long as the
Buyer owns Purchased Shares) and the representation contained in
Section 3.8(e) (which shall survive indefinitely), all
representations, warranties and (except as provided by the last
sentence of this Section 8.1) covenants and agreements of the parties
contained herein, including indemnity or indemnification agreements
contained herein, or in any Schedule or Exhibit hereto, or any
certificate, document or other instrument delivered in connection
herewith shall survive the Initial Closing and any Subsequent Closing
until the first anniversary of the latest of the Initial Closing and
any Subsequent Closing. No Action or proceeding may be brought with
respect to any of the representations and warranties, or any of the
covenants or agreements which survive until such first anniversary,
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unless written notice thereof, setting forth in reasonable detail the
claimed misrepresentation or breach of warranty or breach of covenant
or agreement, shall have been delivered to the party alleged to have
breached such representation or warranty or such covenant or agreement
prior to such first anniversary; provided, however, that, if Buyer
shall have complied with this Section 8.1, the damages for breach by
the Company of any of the representations and warranties, or any of
the covenants or agreements which survive until such first
anniversary, shall be measured with respect to all of Buyer's
purchases of Company Common Stock hereunder and not with respect only
to Buyer's purchases hereunder made prior to such first anniversary,
but such measurement shall not in any event include any shares of
Company Stock that Buyer may have purchased other than from the
Company. Those covenants or agreements that contemplate or may involve
actions to be taken or obligations in effect after the Initial Closing
shall survive in accordance with their terms.
Section 8.2 Indemnification by Buyer or the Company.
(a) Subject to Section 8.1, from and after any Closing Date,
Buyer shall indemnify and hold harmless the Company, its successors
and assigns, from and against any and all damages, claims, losses,
expenses, costs, obligations, and liabilities, including liabilities
for all reasonable attorneys' fees and expenses (including attorney
and expert fees and expenses incurred to enforce the terms of this
Agreement) (collectively, "Loss and Expenses") suffered, directly or
indirectly, by the Company by reason of, or arising out of, (i) any
breach as of the date made or deemed made or required to be true of
any representation or warranty made by Buyer in or pursuant to this
Agreement, or (ii) any failure by Buyer or the Advancing Party to
perform or fulfill any of its covenants or agreements set forth
herein. Notwithstanding any other provision of this Agreement to the
contrary, in no event shall Loss and Expenses include a party's
incidental or consequential damages.
(b) Subject to Section 8.1, from and after any Closing Date,
the Company shall indemnify and hold harmless Buyer, its successors
and assigns, from and against any and all Loss and Expenses, suffered,
directly or indirectly, by Buyer by reason of, or arising out of, (i)
any breach as of the date made or deemed made or required to be true
of any representation or warranty made by the Company in or pursuant
to this Agreement and any statements made in any certificate delivered
pursuant to this Agreement, or (ii) any failure by the Company to
perform or fulfill any of its covenants or agreements set forth
herein. Notwithstanding any other provision of this Agreement to the
contrary, in no event shall Loss and Expenses include a party's
incidental or consequential damages.
(c) Notwithstanding the foregoing, (i) neither Buyer nor the
Company shall be responsible for any Loss and Expenses as provided by
paragraphs (a) and (b), respectively, of this Section 8.2 until the
cumulative aggregate amount of such Loss and Expenses suffered by
Buyer or the Company, as the case may be, exceeds $500,000, in which
case Buyer or the Company, as the case may be, shall then be liable
for all such Loss and Expenses, and (ii) the cumulative aggregate
indemnity obligation of each of Buyer and the Company under this
Section 8.2 shall in no event exceed the actual aggregate amount paid
by Buyer for the shares of Company Common Stock purchased by it from
the Company pursuant to this Agreement. Except with respect to
third-party claims being defended in good faith or claims for
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indemnification with respect to which there exists a good faith
dispute, the indemnifying party shall satisfy its obligations
hereunder within 30 days of receipt of a notice of claim under this
Article 8.
Section 8.3 Third-Party Claims. If a claim by a third party is
made against an Indemnified Party and if such Indemnified Party
intends to seek indemnity with respect thereto under this Article,
such Indemnified Party shall promptly notify the indemnifying party in
writing of such claims setting forth such claims in reasonable detail;
provided, however, the foregoing notwithstanding, the failure of any
Indemnified Party to give any notice required to be given hereunder
shall not affect such Indemnified Party's right to indemnification
hereunder except to the extent the indemnifying party from whom such
indemnity is sought shall have been prejudiced in its ability to
defend the claim or action for which such indemnification is sought by
reason of such failure. The indemnifying party shall have 20 days
after receipt of such notice to undertake, through counsel of its own
choosing and at its own expense, the settlement or defense thereof,
and the Indemnified Party shall cooperate with it in connection
therewith; provided, however, that the Indemnified Party may
participate in such settlement or defense through counsel chosen by
such Indemnified Party, provided that the fees and expenses of such
counsel shall be borne by such Indemnified Party. The Indemnified
Party shall not pay or settle any claim which the indemnifying party
is contesting. Notwithstanding the foregoing, the Indemnified Party
shall have the right to pay or settle any such claim, provided that in
such event it shall waive any right to indemnity therefor by the
indemnifying party. If the indemnifying party does not notify the
Indemnified Party within 20 days after the receipt of the Indemnified
Party's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the Indemnified Party shall have the
right to contest, settle or compromise the claim but shall not thereby
waive any right to indemnity therefor pursuant to this Agreement.
ARTICLE 9
Termination
Section 9.1 Termination. This Agreement may be terminated at any
time prior to the Initial Closing by:
(i) the mutual consent of the Company and Buyer;
(ii) Buyer (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by the
Company that is material in the context of the transactions
contemplated hereby of any representation, warranty, covenant or
agreement by the Company contained herein for which Buyer gives
Company notice pursuant to Section 2.8 within 20 Business Days of
the date of this Agreement;
(iii) the Company (if it is not in breach of any of its
material obligations hereunder) in the event of a breach or
failure by Buyer that is material in the context of the
transactions contemplated hereby of any representation, warranty,
covenant or
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agreement by Buyer contained herein which has not been, or cannot
be, cured within 30 Business Days after written notice of such
breach is given to Buyer; or
(iv) either the Company or Buyer, if the Initial Closing
shall not occur prior to August 15, 1997, unless the failure of
such occurrence shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe any material
covenant or agreement set forth herein required to be performed
or observed by such party on or before the date of the Initial
Closing.
(b) This Agreement may be terminated at any time by:
(i) either the Company or Buyer, in the event that the
stockholders of the Company vote upon and fail to approve the
issuance of Company Common Stock contemplated hereby (it being
understood that the Initial Closing shall have occurred prior to
the date of the meeting of holders of shares of Company Stock to
so approve); or
(ii) Buyer, (1) if the Board of Directors of the Company
shall have withdrawn, modified or failed to make or refrained
from making its recommendation that the stockholders of the
Company approve the issuance of Company Common Stock pursuant to
this Agreement as provided for in Section 3.2(b) and Section
5.1(b) or (2) if the Board of Directors of the Company at any
time refuses to reaffirm, at Buyer's request, such recommendation
and its determination to make such recommendation to the
stockholders of the Company, except, in each case, as permitted
by Section 5.6, or (3) if no meeting at which the stockholders of
the Company are asked to vote upon the transactions contemplated
by this Agreement shall have duly occurred on or prior to
December 31, 1997.
(iii) Company, if the Board in compliance with Section 5.6
hereof determines in good faith to terminate in favor of a
Competing Transaction, subject to the Company's obligation to pay
Buyer certain fees pursuant to Section 9.3 hereof.
Section 9.2 Procedure and Effect of Termination. In the event of
termination of this Agreement by either or both of the Company and
Buyer pursuant to Section 9.1, written notice thereof shall forthwith
be given by the terminating party to the other party hereto, and this
Agreement shall thereupon terminate and become void and have no
effect, and the transactions contemplated hereby shall be abandoned
without further action by the parties hereto, except that the
provisions of Sections 5.4 (Public Announcements; Confidentiality),
9.3 (Expenses), 10.2 (Governing Law), and 10.4 (Notices), and, in the
event of any termination following any Closing hereunder, the
provisions of Article 8 (Survival; Indemnification), and any related
definitional, interpretive or other provisions necessary for the
logical interpretation of such provisions, shall survive the
termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for
any breach of this Agreement.
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Section 9.3 Expenses.
(a) Except as set forth in this Agreement, whether or not
any Stock Purchase is consummated, all legal and other costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such costs and expenses (which in the case of the Company, shall
include stockholder solicitation costs); provided however, that if
Closing does not occur due to Buyer's termination of this Agreement in
accordance with Section 2.8, then the Company shall pay Buyer's
reasonable out of pocket expenses, which shall serve as liquidated
damages and be Buyer's sole remedy in such event.
(b) In addition to the rights of Buyer pursuant to Section
2.9 of this Agreement, if the Company's stockholders shall have failed
for any reason (other than as a result of Buyer's breach of any of its
material obligations hereunder) to approve this Agreement and the
transactions contemplated hereby by the requisite vote (as set forth
in the definition of the term "Shareholder Approval") at the Company's
stockholders' meeting held in accordance with the terms hereof, or the
Company shall have failed to duly convene such stockholders' meeting
on or prior to December 31, 1997 (provided that Buyer is not in
material default under this Agreement, that Buyer has not breached any
of its representations and warranties in any material respect, and
that Buyer has satisfied in all material respects its covenants
relating to the Second Closing and contemplated by the terms hereof to
be performed at or prior to the time of the Company's stockholders'
meeting), the Company shall make payment to Buyer within five Business
Days after the earlier of (i) the date on which the stockholders fail
to approve this Agreement and (ii) December 31, 1997, (by wire
transfer) of the amount of $1,762,500, as reimbursement and
compensation for Buyer's costs and expenses (including opportunity
costs) incurred in connection with this Agreement and the transactions
contemplated hereby.
(c) The Company shall pay Buyer a fee in the amount of
$8,225,000 (the "Breakup Fee"), provided that Buyer is not in material
default under this Agreement, that Buyer has not breached any of its
representations and warranties in any material respect, and that Buyer
has satisfied in all material respects its covenants relating to the
Initial Closing and contemplated by the terms hereof to be performed
at or prior to the time of the Company's stockholders' meeting in the
event that:
(i) (x) this Agreement and the transactions contemplated
hereby shall have been submitted to a vote of the Company's
stockholders (or in the event the Company shall fail to submit
such matters to a vote of its stockholders by December 31, 1997),
(y) a Competing Transaction shall have been publicly proposed
prior to such submission to a vote of the Company's stockholders
(or December 31, 1997, should the Company fail to so submit such
matters), and (z) the stockholders shall not, for any reason
(other than as a result of Buyer's breach of any of its material
obligations hereunder), have approved this Agreement and the
transactions contemplated hereby by the requisite vote; provided,
however, that the Company shall not be required to pay the
Breakup Fee unless the Company consummates such Competing
Transaction within twelve months after the earlier of the date on
which the stockholders fail to approve the Agreement and December
31, 1997; or
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(ii) the transactions contemplated by this Agreement do not
close as the result of the Company's wilful breach of a
representation, warranty or covenant contained herein;
provided, further, that any prior payment of the $1,762,500 will be
credited against the Breakup Fee payment. Upon payment to the Buyer of
the Breakup Fee, the Company shall have no further liability to Buyer
arising out of any Competing Transaction or the Company's wilful
breach of a representation, warranty or covenant contained herein.
ARTICLE 10
Miscellaneous
Section 10.1 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered to
the other party. Copies of executed counterparts transmitted by
telecopy, telefax or other electronic transmission service shall be
considered original executed counterparts for purposes of this
Section, provided receipt of copies of such counterparts is confirmed.
Section 10.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 10.3 Entire Agreement. This Agreement (including
agreements incorporated herein) and the Schedules and Exhibits hereto
contain the entire agreement between the parties with respect to the
subject matter hereof and there are no agreements, understandings,
representations or warranties between the parties other than those set
forth or referred to herein. This Agreement is not intended to confer
upon any person not a party hereto (and their successors and assigns)
any rights or remedies hereunder. The confidentiality agreement dated
February 26, 1997, between Lazard Freres Real Estate Investors, LLC
and the Company is superseded hereby.
Section 10.4 Notices. All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in
writing and delivered personally, sent by documented overnight
delivery service or, to the extent receipt is confirmed, telecopy,
telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to the Company shall be
addressed to:
Alexander Haagen Properties, Inc.
3500 Sepulveda Boulevard
Manhattan Beach, CA 90266-3696
Attention: Alexander Haagen, Sr.
Telecopy Number: (310) 545-6354
with a copy to:
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Latham & Watkins
633 W. Fifth Street, Suite 4000
Los Angeles, CA 90071
Attention: John M. Newell, Esq.
Telecopy Number: (213) 891-8763
or at such other address and to the attention of such other person as
the Company may designate by written notice to Buyer. Notices to Buyer
shall be addressed to:
Lazard Freres Real Estate Investors LLC
Thirty Rockefeller Plaza, 63rd Floor
New York, NY 10020
Attention: Arthur P. Solomon and Anthony E. Meyer
Telecopy Number: (212) 632-6052
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Kevin Grehan, Esq.
Telecopy Number: (212) 474-3700
Section 10.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors. Except as specifically provided hereby, Buyer
shall not be permitted to assign any of its rights hereunder to any
third party, other than to one or more Affiliates of Buyer or the
Advancing Party of which Buyer and the Advancing Party collectively,
directly or indirectly, Beneficially Own (as that term is defined in
the Stockholders Agreement) 98% or more of the voting power and the
economic interests, provided that such Affiliates make the
representations set forth in Article 4 hereof and agree to be bound
hereby and by the Stockholders Agreement, and provided that Buyer and
the Advancing Party shall remain liable hereunder, and provided that
any bona fide financial institution to which any Buyer, the Advancing
Party or any permitted transferee has Transferred (as that term is
used in the Stockholders Agreement) (including upon foreclosure of a
pledge) shares of Company Stock for the purpose of securing bona fide
indebtedness of any Buyer and which has agreed to be bound by this
Agreement and the Stockholders Agreement shall also be entitled to
enforce the rights of Buyer and the Advancing Party hereunder.
Section 10.6 Headings. The Section, Article and other headings
contained in this Agreement are inserted for convenience of reference
only and will not affect the meaning or interpretation of this
Agreement. All references to Sections or Articles contained herein
mean Sections or Articles of this Agreement unless otherwise stated.
Section 10.7 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing
signed by the party against whom enforcement of any such modification
or amendment is sought. Either party hereto may, only
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by an instrument in writing, waive compliance by the other party
hereto with any term or provision hereof on the part of such other
party hereto to be performed or complied with. The waiver by any party
hereto of a breach of any term or provision hereof shall not be
construed as a waiver of any subsequent breach.
Section 10.8 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one gender
shall be held to include the other gender as the context requires,
(ii) the terms "hereof", "herein", and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules and Exhibits
hereto) and not to any particular provision of this Agreement, and
Article, Section, paragraph, Exhibit and Schedule references are to
the Articles, Sections, paragraphs, Exhibits and Schedules to this
Agreement unless otherwise specified, (iii) the word "including" and
words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires
or unless otherwise specified, (iv) the word "or" shall not be
exclusive, and (v) provisions shall apply, when appropriate, to
successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against
the party drafting or causing any instrument to be drafted.
Section 10.9 Severability. Any provision hereof which is invalid
or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability, without affecting in any way the remaining
provisions hereof.
Section 10.10 Further Assurances. The Company and Buyer agree
that, from time to time, whether before, at or after any Closing Date,
each of them will execute and deliver such further instruments of
conveyance and transfer and take such other action as may be necessary
to carry out the purposes and intents hereof.
Section 10.11 Specific Performance. Buyer and the Company each
acknowledge that, in view of the uniqueness of the parties hereto, the
parties hereto would not have an adequate remedy at law for money
damages in the event that this Agreement were not performed in
accordance with its terms, and therefore agree that the parties hereto
shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which the parties hereto may be
entitled at law or in equity.
Section 10.12 Joint and Several Liability. The obligations and
liabilities of Buyer and the Advancing Party under or in connection
with this Agreement are joint and several.
Section 10.13 Interpretation of Schedules. Any matter set forth
on any Schedule shall be deemed to be referred to on all other
Schedules to which such matter logically relates and where such
reference would be appropriate and can reasonably be inferred from the
matters disclosed on the first Schedule as if set forth on such other
Schedules.
54
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the day first above
written.
ALEXANDER HAAGEN PROPERTIES, INC.
By: /S/ ALEXANDER HAAGEN, SR.
-------------------------------
Name: Alexander Haagen, Sr.
Title: Chairman, President and
Chief Executive Officer
PROMETHEUS WESTERN RETAIL, LLC
by: LF Strategic Realty Investors, L.P., its
member
by: Lazard Freres Real Estate Investors,
LLC, its general partner
By: /S/ ANTHONY E. MEYER
-----------------------------
Name: Anthony E. Meyer
Title: Chief Investment Officer
LF STRATEGIC REALTY INVESTORS L.P.
by: Lazard Freres Real Estate Investors, LLC,
its general partner
By: /S/ ANTHONY E. MEYER
------------------------------
Name: Anthony E. Meyer
Title: Chief Investment Officer
55
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.1 "Action"........................................... 1
Section 1.2 "ADA".............................................. 1
Section 1.3 "Advancing Party".................................. 2
Section 1.4 "Affiliate"........................................ 2
Section 1.5 "Agreement"........................................ 2
Section 1.6 "Army Corps of Engineers".......................... 2
Section 1.7 "Benefit Arrangements"............................. 2
Section 1.8 "Blue Sky Laws".................................... 2
Section 1.9 "Board"............................................ 2
Section 1.10 "Breaching Matters"............................... 2
Section 1.11 "Breakup Fee"..................................... 2
Section 1.12 "Business Day".................................... 2
Section 1.13 "Buyer"........................................... 2
Section 1.14 "Capital Expenditure Budget and Schedule"......... 2
Section 1.15 "CERCLA".......................................... 2
Section 1.16 "Claim"........................................... 2
Section 1.17 "Closing"......................................... 2
Section 1.18 "Closing Date".................................... 2
Section 1.19 "Code"............................................ 2
Section 1.20 "Commitment"...................................... 2
Section 1.21 "Company"......................................... 2
Section 1.22 "Company Charter"................................. 3
Section 1.23 "Company Common Stock"............................ 3
Section 1.24 "Company Environmental Reports"................... 3
Section 1.25 "Company Leases".................................. 3
Section 1.26 "Company Plans"................................... 3
Section 1.27 "Company Preferred Stock"......................... 3
Section 1.28 "Company Properties".............................. 3
Section 1.29 "Company Registration Statement".................. 3
Section 1.30 "Company Reports"................................. 3
Section 1.31 "Company Stock"................................... 3
Section 1.32 "Competing Transaction"........................... 3
Section 1.33 "Controlled Group Liability"...................... 3
Section 1.34 "Convertible Debt"................................ 3
Section 1.35 "Cure Notice"..................................... 3
Section 1.36 "Debt Instruments"................................ 4
Section 1.37 "Development Budget and Schedule"................. 4
Section 1.38 "Development Properties".......................... 4
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Page
Section 1.39 "Employee Benefit Plans".......................... 4
Section 1.40 "Employees"....................................... 4
Section 1.41 "Employment Agreements"........................... 4
Section 1.42 "Environmental Claim"............................. 4
Section 1.43 "Environmental Laws".............................. 4
Section 1.44 "Environmental Permits"........................... 4
Section 1.45 "ERISA"........................................... 4
Section 1.46 "ERISA Affiliates"................................ 4
Section 1.47 "Exchange Act".................................... 4
Section 1.48 "Fully Diluted Basis"............................. 4
Section 1.49 "GAAP"............................................ 4
Section 1.50 "Government Authority"............................ 4
Section 1.51 "Ground Leases"................................... 4
Section 1.52 "Indemnified Party"............................... 5
Section 1.53 "Initial Closing"................................. 5
Section 1.54 "Initial Number of Shares"........................ 5
Section 1.55 "Insurance Policies".............................. 5
Section 1.56 "IRS"............................................. 5
Section 1.57 "Liabilities"..................................... 5
Section 1.58 "Liens"........................................... 5
Section 1.59 "Loss and Expenses"............................... 5
Section 1.60 "Material Adverse Effect"......................... 5
Section 1.61 "Material Company Leases"......................... 6
Section 1.62 "Materials of Environmental Concern".............. 6
Section 1.63 "1998 and 1999 Preliminary Capital Expenditure
Budgets and Schedules".......................... 6
Section 1.64 "Other Filings"................................... 6
Section 1.65 "OP Units"........................................ 6
Section 1.66 "Operating Area".................................. 6
Section 1.67 "Pension Plans"................................... 6
Section 1.68 "Per Share Purchase Price"........................ 6
Section 1.69 "Permitted Liens"................................. 6
Section 1.70 "person".......................................... 7
Section 1.71 "Projects"........................................ 7
Section 1.72 "Property Restrictions"........................... 7
Section 1.73 "Proxy Statement"................................. 7
Section 1.74 "Purchase Price".................................. 7
Section 1.75 "Purchased Shares"................................ 7
Section 1.76 "Registration Rights Agreement"................... 7
Section 1.77 "Regulatory Filings".............................. 7
Section 1.78 "REIT"............................................ 7
Section 1.79 "Release"......................................... 7
Section 1.80 "Remaining Equity Commitment"..................... 7
Section 1.81 "Rent Roll"....................................... 7
Section 1.82 "Repurchase Payment".............................. 7
ii
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Page
Section 1.83 "SEC"............................................. 7
Section 1.84 "Second Closing".................................. 7
Section 1.85 "Securities Act".................................. 8
Section 1.86 "Securities Laws"................................. 8
Section 1.87 "Stock Purchase".................................. 8
Section 1.88 "Stockholders Agreement".......................... 8
Section 1.89 "Stockholder Approval"............................ 8
Section 1.90 "Subsequent Closing".............................. 8
Section 1.91 "Subsequent Purchase Price"....................... 8
Section 1.92 "Subsequent Purchases"............................ 8
Section 1.93 "Subsidiaries".................................... 8
Section 1.94 "Tax"............................................. 8
Section 1.95 "Tax Return"...................................... 8
Section 1.96 "Title Policies".................................. 8
Section 1.97 "Total Equity Commitment"......................... 8
Section 1.98 "Voting Agreements"............................... 9
Section 1.99 "Welfare Plans"................................... 9
ARTICLE 2
Purchase and Sale of Shares; Closing
Section 2.1 Purchase and Sale.................................. 9
Section 2.2 Consideration...................................... 9
Section 2.3 Initial Closing.................................... 9
Section 2.4 Subsequent Purchases and Sales..................... 9
Section 2.5 Additional Agreements and Closing Deliveries....... 10
Section 2.6 Time and Place of Closings......................... 11
Section 2.7 Right to Assign.................................... 11
Section 2.8 Verification of Representations and Warranties..... 11
Section 2.9 Limited Put Option................................. 12
ARTICLE 3
Representations and Warranties of the Company
Section 3.1 Organization and Qualification; Subsidiaries....... 12
Section 3.2 Authority Relative to Agreements; Board Approval... 13
Section 3.3 Capital Stock...................................... 14
Section 3.4 No Conflicts; No Defaults; Required Filings and
Consents......................................... 14
Section 3.5 SEC and Other Documents; Financial Statements;
Undisclosed Liabilities.......................... 15
Section 3.6 Litigation; Compliance With Law.................... 16
Section 3.7 Absence of Certain Changes or Events............... 16
Section 3.8 Tax Matters; REIT and Partnership Status........... 17
Section 3.9 Compliance with Agreements; Material Agreements.... 19
Section 3.10 Financial Records; Company Charter and By-laws;
Corporate Records................................ 21
iii
<PAGE>
Page
Section 3.11 Properties........................................ 21
Section 3.12 Environmental Matters............................. 27
Section 3.13 Employees and Employee Benefit Plans.............. 30
Section 3.14 Labor Matters..................................... 32
Section 3.15 Affiliate Transactions............................ 32
Section 3.16 Insurance......................................... 32
Section 3.17 Proxy Statement................................... 33
Section 3.18 Maryland Takeover Law............................. 33
Section 3.19 Vote Required..................................... 33
Section 3.20 Brokers or Finders................................ 33
Section 3.21 Knowledge Defined................................. 33
ARTICLE 4
Representations and Warranties of Buyer and the Advancing Party
Section 4.1 Organization....................................... 34
Section 4.2 Due Authorization.................................. 34
Section 4.3 Conflicting Agreements and Other Matters........... 34
Section 4.4 Acquisition for Investment; Sophistication......... 35
Section 4.5 Resources.......................................... 36
Section 4.6 Proxy Statement.................................... 36
Section 4.7 Brokers or Finders................................. 36
Section 4.8 REIT Qualification Matters......................... 36
Section 4.9 Investment Company Matters......................... 36
Section 4.10 Ownership of Tenants.............................. 36
Section 4.11 Foreign Ownership................................. 37
ARTICLE 5
Covenants Relating to Closings
Section 5.1 Taking of Necessary Action......................... 37
Section 5.2 Registration Rights Agreement...................... 38
Section 5.3 Stockholders Agreement............................. 38
Section 5.4 Public Announcements; Confidentiality.............. 38
Section 5.5 Conduct of the Business............................ 39
Section 5.6 No Solicitation of Transactions.................... 40
Section 5.7 Information and Access............................. 41
Section 5.8 Notification of Certain Matters.................... 41
iv
<PAGE>
Page
ARTICLE 6
Certain Additional Covenants
Section 6.1 Resale............................................. 42
Section 6.2 Use of Funds....................................... 42
Section 6.3 REIT Compliance.................................... 42
Section 6.4 REIT Status........................................ 42
Section 6.5 Guarantee.......................................... 42
ARTICLE 7
Conditions to Closings
Section 7.1 Conditions of Purchase at Initial Closing.......... 42
Section 7.2 Conditions to Purchase at Second Closing........... 44
Section 7.3 Conditions of Purchase at All Closings............. 45
Section 7.4 Conditions of Sale................................. 46
ARTICLE 8
Survival; Indemnification
Section 8.1 Survival........................................... 47
Section 8.2 Indemnification by Buyer or the Company............ 48
Section 8.3 Third-Party Claims................................. 49
ARTICLE 9
Termination
Section 9.1 Termination........................................ 49
Section 9.2 Procedure and Effect of Termination................ 50
Section 9.3 Expenses........................................... 50
ARTICLE 10
Miscellaneous
Section 10.1 Counterparts...................................... 52
Section 10.2 Governing Law..................................... 52
Section 10.3 Entire Agreement.................................. 52
Section 10.4 Notices........................................... 52
Section 10.5 Successors and Assigns............................ 53
Section 10.6 Headings.......................................... 53
Section 10.7 Amendments and Waivers............................ 53
Section 10.8 Interpretation; Absence of Presumption............ 54
Section 10.9 Severability...................................... 54
v
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Page
Section 10.10 Further Assurances............................... 54
Section 10.11 Specific Performance............................. 54
Section 10.12 Joint and Several Liability...................... 54
Section 10.13 Interpretation of Schedules...................... 54
vi
<PAGE>
SCHEDULES
Schedule 1.69 Permitted Liens
Schedule 3.1(d) Subsidiaries
Schedule 3.3(a) Capital Stock Commitments
Schedule 3.3(b) Other Equity Interests
Schedule 3.4(d)-A Consents for Initial Closing
Schedule 3.4(d)-B Consents for Second Closing
Schedule 3.5(a) Company Registration Statements and Company Reports
Schedule 3.6(a) Pending Litigation
Schedule 3.7 Absence of Certain Changes or Events
Schedule 3.8(a) Tax Matters
Schedule 3.8(c) Excess Parachute Payments
Schedule 3.8(d) Employee Remuneration
Schedule 3.9(c) Indebtedness; Joint Venture and Partnership Agreements
Schedule 3.9(d) Development, Construction, Management and Leasing
Agreements
Schedule 3.9(e) Other Material Agreements
Schedule 3.9(f) Conflict Policies and Agreements; Waivers
Schedule 3.9(g) Change of Control Provisions
Schedule 3.10(b) Corporate Records
Schedule 3.11(a) Property Title Summary
Schedule 3.11(b) Properties Violations/Engineering Reports
Schedule 3.11(d) Company Properties in Flood Plain Areas
Schedule 3.11(e) ADA Status
Schedule 3.11(f) Material Company Lease Information
Schedule 3.11(g) Letters of Intent or Similar Understandings
Schedule 3.11(h) Rights of First Refusal
Schedule 3.11(i) Non-Compliance and Capital Expenditure Budget and Schedule
Schedule 3.11(j) Developed, Undeveloped, or Rehabilitated Land of Company
Property
Schedule 3.11(k) Ground Leases
Schedule 3.12(a) Environmental Permits
Schedule 3.12(e) Environmental Concerns
Schedule 3.12(f) Environmental Reports
Schedule 3.13(a) Employment Agreements
Schedule 3.13(b) Company Plans
Schedule 3.13(c) Company Plan Liabilities
Schedule 3.13(d) New Employee Benefit Plans
Schedule 3.13(g) Termination and Retirement Benefits
Schedule 3.13(k) Employee Benefits Triggered or Accelerated
Schedule 3.14 Collective Bargaining; Labor Union Agreements
Schedule 3.15 Affiliate Transactions
Schedule 4.10 Tenants
Schedule 6.5(a) Property Management Activities and Reorganizational Matters
vii
<PAGE>
EXHIBITS
Exhibit A Registration Rights Agreement
Exhibit B Stockholders Agreement
Exhibit C Resolutions regarding Maryland Takeover Law
Exhibit D Form of Employment Agreement
viii
<PAGE>
EXHIBIT 2
(EXHIBIT B to Stock Purchase Agreement)
- ---------------------------------------------------------------------
STOCKHOLDERS AGREEMENT
by and among
LAZARD FRERES REAL ESTATE INVESTORS, LLC,
LF STRATEGIC REALTY INVESTORS, L.P.,
PROMETHEUS WESTERN RETAIL, LLC
and
ALEXANDER HAAGEN PROPERTIES, INC.
dated as of
June 1, 1997
- ---------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 - Definitions.......................................... 1
Section 1.1 "Adjusted Fully Diluted"....................... 1
Section 1.2 "Affiliate".................................... 2
Section 1.3 "Affiliate Arrangements"....................... 2
Section 1.4 "Agreement".................................... 2
Section 1.5 "Beneficially Own"............................. 2
Section 1.6 "Board"........................................ 2
Section 1.7 "Buyer"........................................ 2
Section 1.8 "Code"......................................... 2
Section 1.9 "Company"...................................... 2
Section 1.10 "Company Charter"............................. 2
Section 1.11 "Company Common Stock"........................ 2
Section 1.13 "Convertible Debt"............................ 2
Section 1.14 "Corporate Action Covenants".................. 3
Section 1.15 "Covered Transaction"......................... 3
Section 1.16 "Director".................................... 3
Section 1.17 "Early Standstill Termination Event".......... 3
Section 1.18 "Excess Shares"............................... 3
Section 1.19 "Exercise Notice"............................. 3
Section 1.20 "Extraordinary Transaction"................... 3
Section 1.21 "fully diluted"............................... 3
Section 1.22 "Geographic Region"........................... 3
Section 1.23 "Government Authority"........................ 3
Section 1.24 "Group"....................................... 3
Section 1.25 "Independent Nominees"........................ 4
Section 1.26 "Investor".................................... 4
Section 1.27 "Investor Nominees"........................... 4
Section 1.28 "Key Committees".............................. 4
Section 1.29 "management".................................. 4
Section 1.30 "Management Nominees"......................... 4
Section 1.31 "1933 Act".................................... 4
Section 1.32 "1934 Act".................................... 4
Section 1.33 "Nominating Committee"........................ 4
Section 1.34 "Operating Partnership"....................... 4
Section 1.35 "Participation Notice"........................ 4
Section 1.36 "person"...................................... 4
Section 1.37 "Securities Filings".......................... 5
Section 1.38 "Shareholder Approval"........................ 5
Section 1.39 "Shareholder Approval Date"................... 5
Section 1.40 "Standstill Extension Term"................... 5
Section 1.41 "Standstill Period"........................... 5
Section 1.42 "Stock Purchase Agreement".................... 5
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Page
----
Section 1.43 "Termination Event"........................... 5
Section 1.44 "13D Group"................................... 5
Section 1.45 "Transfer".................................... 5
Section 1.46 "Voting Securities"........................... 5
ARTICLE 2 - Board of Directors................................... 6
Section 2.1 Members of the Board........................... 6
Section 2.2 Committee Representation; Subsidiary Boards.... 8
Section 2.3 Vacancies...................................... 9
Section 2.4 Officers....................................... 9
ARTICLE 3 - Information Rights................................... 10
Section 3.1 Operating Statements; Public Company Status.... 10
Section 3.2 Advice of Actions.............................. 10
ARTICLE 4 - Voting and Participation Rights...................... 12
Section 4.1 Voting Rights.................................. 12
Section 4.2 Participation Rights........................... 12
ARTICLE 5 - Standstill Provisions................................ 15
Section 5.1 Standstill Periods............................. 15
Section 5.2 Restrictions During Standstill Period
and Standstill Extension Term................. 17
Section 5.3 Restrictions on Transfer....................... 18
Section 5.4 Notice to Company.............................. 19
Section 5.5 Compliance with Insider Trading Policy......... 19
Section 5.6 Compliance with Article VII of the Company
Charter........................................ 19
Section 5.7 Investment Company Matters...................... 19
Section 5.8 Waiver of Restrictions and Limits............... 19
Section 5.9 REIT Qualification.............................. 20
ARTICLE 6 - Additional Covenants.................................. 21
Section 6.1 Limitations on Corporate Actions................ 21
Section 6.2 Conduct of Business............................. 21
Section 6.3 Restrictions on Investments..................... 22
ARTICLE 7 - Miscellaneous......................................... 22
Section 7.1 Counterparts.................................... 22
ii
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Page
----
Section 7.2 Governing Law................................... 23
Section 7.3 Entire Agreement................................ 23
Section 7.4 Expenses........................................ 23
Section 7.5 Notices......................................... 23
Section 7.6 Successors and Assigns.......................... 24
Section 7.7 Headings........................................ 24
Section 7.8 Amendments and Waivers.......................... 24
Section 7.9 Interpretation; Absence of Presumption.......... 24
Section 7.10 Severability................................... 25
Section 7.11 Further Assurances............................. 25
Section 7.12 Specific Performance........................... 25
Section 7.13 Investor Breach................................ 25
Section 7.14 Confidentiality................................ 25
Section 7.15 Public Releases and Announcements.............. 26
iii
<PAGE>
THIS STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of
June 1, 1997, is made by and between Lazard Freres Real Estate
Investors, LLC, a Delaware limited liability company ("LFREI"), LF
Strategic Realty Investors, L.P., a Delaware limited partnership (the
"Advancing Party"), Prometheus Western Retail, LLC, a Delaware limited
liability company ("Buyer"), and Alexander Haagen Properties, Inc., a
Maryland corporation (the "Company"). Capitalized terms not otherwise
defined herein have the meaning ascribed to them in the Stock Purchase
Agreement (as hereinafter defined).
RECITALS:
WHEREAS, the Company, Buyer and the Advancing Party have
entered into a Stock Purchase Agreement, dated as of June 1, 1997 (the
"Stock Purchase Agreement"), pursuant to which the Company has agreed
to sell, and Buyer has agreed to purchase, certain shares of common
stock, par value $0.01 per share, of the Company (the "Company Common
Stock") upon the terms and subject to the conditions set forth
therein; and
WHEREAS, it is a condition to the transactions contemplated
by the Stock Purchase Agreement and the parties believe it to be in
their best interests that they enter into this Agreement and provide
for certain rights and restrictions with respect to the investment by
Investor (as hereinafter defined) in the Company and the corporate
governance of the Company; and
WHEREAS, the Company and Buyer believe that the combination
in a strategic partnership of the leadership, expertise and experience
in retail development and operations of the Company and the investment
and capital markets expertise and access to capital of Buyer and its
Affiliates will significantly enhance the Company's ability to pursue
its growth and operating strategies;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have
the following respective meanings:
Section 1.1 "Adjusted Fully Diluted" basis shall mean on a
fully diluted basis, except that shares of Common Stock issuable upon
conversion of the Convertible Debt or upon exercise of options granted
under management benefit plans shall not be included.
<PAGE>
Section 1.2 "Affiliate" shall have the meaning ascribed
thereto in Rule 12b-2 promulgated under the 1934 Act, and as in effect
on the date hereof.
Section 1.3 "Affiliate Arrangements" shall mean the
agreements and arrangements described in Schedule 3.9(f) of the Stock
Purchase Agreement or which are disclosed in public filings of the
Company.
Section 1.4 "Agreement" shall have the meaning set forth in
the first paragraph hereof.
Section 1.5 "Beneficially Own" shall mean, with respect to
any security, having direct or indirect (including through any
Subsidiary or Affiliate) "beneficial ownership" of such security, as
determined pursuant to Rule 13d-3 under the 1934 Act, including
pursuant to any agreement, arrangement or understanding, whether or
not in writing; provided, however, that all of the shares of Company
Common Stock which Buyer has agreed to purchase under the Stock
Purchase Agreement but which have not yet been purchased shall be
deemed to be Beneficially Owned by Investor until the Remaining Equity
Commitment is zero.
Section 1.6 "Board" shall mean the board of directors of the
Company.
Section 1.7 "Buyer" shall have the meaning set forth in the
first paragraph hereof.
Section 1.8 "Code" shall mean the Internal Revenue Code of
1986, as amended, and any successor thereto, including all of the
rules and regulations promulgated thereunder.
Section 1.9 "Company" shall have the meaning set forth in
the first paragraph hereof.
Section 1.10 "Company Charter" shall have the meaning set
forth in the Stock Purchase Agreement.
Section 1.11 "Company Common Stock" shall have the meaning
set forth in the second paragraph hereof.
Section 1.12 "Control" shall mean with respect to any
person, the power to direct the management and policies of such
person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise. "Controlled" shall have a
correlative meaning.
Section 1.13 "Convertible Debt" shall mean the Company's 7
1/2% Convertible Subordinated Debentures due 2001, Series A and B, and
the Operating Partnership's 7 1/4% Exchangeable Subordinated
Debentures due 2003.
2
<PAGE>
Section 1.14 "Corporate Action Covenants" shall have the
meaning set forth in Section 6.1.
Section 1.15 "Covered Transaction" shall have the meaning
set forth in Section 5.1(a)(iv).
Section 1.16 "Director" shall mean a member of the Board.
Section 1.17 "Early Standstill Termination Event" shall have
the meaning set forth in Section 5.1(a).
Section 1.18 "Excess Shares" shall have the meaning set
forth in Section 5.1(a)(ii).
Section 1.19 "Exercise Notice" shall have the meaning set
forth in Section 4.2(b).
Section 1.20 "Extraordinary Transaction" shall mean (a) any
merger, consolidation, sale of a material portion of the Company's
assets, recapitalization, other business combination, liquidation, or
other similar action out of the ordinary course of business of the
Company, or (b) any issuance of securities to any person or Group
requiring shareholder approval in accordance with the guidelines of
the American Stock Exchange (or any other stock exchange on which the
Company Common Stock is then listed) as to such matters, as in effect
as of the date of the Stock Purchase Agreement.
Section 1.21 "fully diluted" shall mean, with respect to the
Company Stock, the total number of outstanding shares of Company Stock
(for such purposes, treating as outstanding Company Stock all options
or warrants to purchase and securities convertible into (or
exchangeable or redeemable for) Company Common Stock, in each case
outstanding as of the date of the Stock Purchase Agreement and that
remain outstanding as of the relevant measurement date, assuming
exercise, conversion, exchange or redemption of such other securities
(including, without limitation, the Convertible Debentures and the
Operating Partnership units)).
Section 1.22 "Geographic Region" shall mean the states of
Arizona, California, Nevada, Oregon, Washington, New Mexico and Utah.
Section 1.23 "Government Authority" shall mean any
government or state (or any subdivision thereof) of or in the United
States, or any agency, authority, bureau, commission, department or
similar body or instrumentality thereof, or any governmental court or
tribunal.
Section 1.24 "Group" shall mean a "group" as such term is
used in Section 13(d)(3) of the 1934 Act.
3
<PAGE>
Section 1.25 "Independent Nominees" shall have the meaning
set forth in Section 2.1(a).
Section 1.26 "Investor" shall mean Buyer, and shall also
include any Affiliate of Buyer of which Buyer collectively, directly
or indirectly, Beneficially Owns 98% or more of the voting power and
economic interests, or, for purposes only of (i) Section 5.8 with
regard to ownership of shares of Company Common Stock by such Person
and (ii) the provisions of the Registration Rights Agreement, any bona
fide financial institution to which any Investor has Transferred
(including upon foreclosure of a pledge) shares of Company Stock for
the purpose of securing bona fide indebtedness of any Investor and
which has agreed to be bound by this Agreement.
Section 1.27 "Investor Nominees" shall have the meaning set
forth in Section 2.1(a).
Section 1.28 "Key Committees" shall have the meaning set
forth in Section 2.2(a).
Section 1.29 "management" of the Company shall include,
without limitation, the Company's Chairman and Vice-Chairman.
Section 1.30 "Management Nominees" shall have the meaning
set forth in Section 2.1(a). Management Nominees may be, but need not
be, members of management of the Company.
Section 1.31 "1933 Act" shall mean the Securities Act of
1933, as amended.
Section 1.32 "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
Section 1.33 "Nominating Committee" shall mean a committee
of the Board composed of three members (an Investor Nominee, an
Independent Nominee and a Management Nominee). The initial members of
the Nominating Committee shall be Arthur P. Solomon, Alexander Haagen
III and Fred L. Riedman.
Section 1.34 "Operating Partnership" shall mean Alexander
Haagen Operating Partnership, L.P., a California limited partnership.
Section 1.35 "Participation Notice" shall have the meaning
set forth in Section 4.2(b).
Section 1.36 "person" shall mean any individual,
corporation, partnership, limited liability company, joint venture,
trust, unincorporated organization, other form of business or legal
entity or Government Authority.
4
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Section 1.37 "Securities Filings" shall have the meaning set
forth in Section 3.1(a)(iii).
Section 1.38 "Shareholder Approval" shall have the meaning
set forth in the Stock Purchase Agreement.
Section 1.39 "Shareholder Approval Date" shall mean the date
on which a duly called and held meeting of shareholders of the Company
is held at which meeting (i) a quorum is present and (ii) Shareholder
Approval is obtained.
Section 1.40 "Standstill Extension Term" shall have the
meaning set forth in Section 5.1(b).
Section 1.41 "Standstill Period" shall have the meaning set
forth in Section 5.1(a).
Section 1.42 "Stock Purchase Agreement" shall have the
meaning set forth in the second paragraph hereof.
Section 1.43 "Termination Event" shall mean the date on
which the Remaining Equity Commitment is zero and the Buyer no longer
Beneficially Owns both (i) at least 25% of the Purchased Shares, and
(ii) at least 15% of the Company Common Stock on a fully diluted
basis.
Section 1.44 "13D Group" shall mean any group of persons
acquiring, holding, voting or disposing of Voting Securities which
would be required under Section 13(d) of the 1934 Act and the rules
and regulations thereunder (as in effect, and based on legal
interpretations thereof existing, on the date hereof) to file a
statement on Schedule 13D with the Securities and Exchange Commission
as a "person" within the meaning of Section 13(d)(3) of the 1934 Act
if such group beneficially owned Voting Securities representing more
than 5% of any class of Voting Securities then outstanding.
Section 1.45 "Transfer" shall have the meaning set forth in
Section 5.3.
Section 1.46 "Voting Securities" shall mean at any time
shares of any class of capital stock of the Company which are then
entitled to vote generally in the election of Directors.
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ARTICLE 2
Board of Directors
Section 2.1 Members of the Board
(a) Subject to right of the Nominating Committee to approve
nominees for Director as set forth in Section 2.2(a), from and
after the Shareholder Approval Date, if any, the Company shall
amend its By-laws, and the Company and Investor will take all
actions necessary, to cause the Board to be structured to consist
of eleven members, of which three members will be designees of
management of the Company (the "Management Nominees") (one in
each class of the Board), four members will be designees of
Investor (at least one in each class of the Board) (the "Investor
Nominees"), three members will be independent directors
designated by the Nominating Committee (the "Independent
Nominees") (one in each class of the Board) and one member will
be the new President of the Company (such Director, the
"President Nominee"), and the Company and Investor will take all
actions necessary to cause such nominees to become members of the
Board as soon as practicable after the Shareholder Approval Date.
If necessary to effectuate the placement of the Investor Nominees
on the Board, the Company shall solicit the resignations of the
appropriate number of Directors to the extent necessary to permit
the Investor Nominees to serve. Thereafter, during the Standstill
Period and Standstill Extension Term, if any, at each annual or
special meeting of stockholders of the Company at, or the taking
of action by written consent of stockholders of the Company with
respect to which any class of Directors is to be elected,
Investor shall have the right (but not the obligation) pursuant
to this Agreement and pursuant to the By-laws of the Company to
designate nominees to the Board (subject to right of the
Nominating Committee to approve nominees for Director as set
forth in Section 2.2(a)) such that Investor shall have on the
Board of Directors:
(i) a total of four representatives, so long as
Investor Beneficially Owns (A) a number of shares of Company
Common Stock equal to at least 50% of the aggregate number
of Purchased Shares to be acquired pursuant to the Stock
Purchase Agreement, and (B) Investor Beneficially Owns a
number of shares of Company Common Stock equal to at least
20% of the outstanding Common Stock, on a fully diluted
basis;
(ii) a total of two representatives, if Investor does
not meet the minimum ownership criteria of either clause
(a)(i)(A) or (a)(i)(B) above, but (A) Investor Beneficially
Owns a number of shares of Company Common Stock equal to
less than 50% of the aggregate number of Purchased Shares to
be acquired pursuant to the Stock Purchase Agreement, but
equal to or more than 25% of such aggregate number, and (B)
Investor Beneficially Owns a number of shares of Company
Common Stock equal to less than 20% of the outstanding
Company Common Stock on a fully diluted basis, but equal to
or
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more than 15% of the outstanding Company Common Stock on a
fully diluted basis;
(iii) a total of one representative, if Investor does
not meet the minimum ownership criteria in any of clause
(a)(i)(A), (a)(i)(B), (a)(ii)(A) or (a)(ii)(B) above, but
Beneficially Owns a number of shares of Company Common Stock
equal to less than 15% of the outstanding Company Common
Stock on a fully diluted basis, but equal to or more than
10% of the outstanding Company Common Stock on a fully
diluted basis; and
(iv) no representatives, if Investor does not meet any
of the minimum ownership criteria in any of clauses
(a)(i)(A), (a)(i)(B), (a)(ii)(A) or (a)(ii)(B) or (a)(iii)
above.
During the Standstill Period and Standstill Extension Term,
if any, at each annual or special meeting of stockholders of the
Company at, or the taking of action by written consent of
stockholders of the Company with respect to which any class of
Directors is to be elected, management of the Company and the
Nominating Committee shall each have the right (but not the
obligation) pursuant to this Agreement and pursuant to the
By-laws of the Company to designate three nominees to the Board
(subject to the right of the Nominating Committee to approve
nominees for Director as set forth in Section 2.2(a)), and the
President of the Company shall be designated as a nominee to the
Board.
(b) Investor will not name any person as an Investor Nominee
if (i) such person is not reasonably experienced in business,
financial or real estate matters, (ii) such person has been
convicted of, or has pled nolo contendere to, a felony, (iii) the
election of such person would violate any law, or (iv) any event
required to be disclosed pursuant to Item 401(f) of Regulation
S-K of the 1934 Act has occurred with respect to such person.
Investor shall use its reasonable efforts to afford the
independent directors of the Company a reasonable opportunity to
meet any individual that Investor is considering naming as an
Investor Nominee.
(c) Subject to the right of the Nominating Committee to
approve nominees for Director as set forth in Section 2.2(a), the
Company will support the nomination of and the election of each
Investor Nominee, each Management Nominee and each Independent
Nominee to the Board, and the Company will exercise all authority
under applicable law to cause each Investor Nominee, each
Management Nominee and each Independent Nominee to be elected to
the Board. Without limiting the generality of the foregoing, with
respect to each meeting of shareholders of the Company at which
Directors are to be elected, the Company shall use its reasonable
efforts to solicit from the shareholders of the Company eligible
to vote in the election of Directors proxies in favor of each
Investor Nominee, each Management Nominee and each Independent
Nominee.
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(d) During the period under this Agreement that Investor
shall be entitled pursuant to Section 2.1(a)(i) to designate four
Director representatives, if the total size of the Board is
increased to thirteen or more members, Investor shall then be
entitled to five Director representatives, and if the total size
of the Board is increased to fifteen or more members, Investor
shall then be entitled to six Director representatives, and if
the total size of the Board is increased to seventeen members,
Investor shall then be entitled to seven Director
representatives. During the period under this Agreement that
Investor shall be entitled pursuant to Section 2.1(a)(ii) to
designate two Director representatives, if the total size of the
Board is increased to fifteen or more members, Investor shall be
entitled to three Director representatives. The Board of
Directors shall not exceed seventeen members at any time, without
Investor's consent.
(e) If Investor's right to nominate directors to the Board
is reduced, Investor shall cause the applicable number of its
Investor Nominees to immediately resign (regardless of the
remaining term, if any) from the Board.
Section 2.2 Committee Representation; Subsidiary Boards
(a) During such time as Investor is entitled pursuant to
Section 2.1(a) to have at least two Investor Nominees on the
Board, the Company shall amend its By- laws to provide that,
unless Investor chooses not to exercise its rights under this
Section 2.2(a), at least one Director who is an Investor Nominee
shall serve on each of the audit committee, the compensation
committee, the executive committee, any special committee(s) of
the Board, and any other committees which shall be charged with
exercising substantial authority on behalf of the Board (other
than any committee charged with the approval of the transactions
contemplated by the Stock Purchase Agreement or this Agreement,
or any committee charged with evaluating any Competing
Transaction) (the foregoing, the "Key Committees").
During such time as Investor is entitled to have at least
one Investor Nominee on the Board, unless Investor chooses not to
exercise its rights under this Section 2.2(a), at least one
Director who is an Investor Nominee shall serve on the Nominating
Committee of the Board. The Company's By-laws shall be amended to
provide that the nomination of Independent Nominees for election
as Directors shall be by unanimous vote of such Nominating
Committee; provided, however, that the Investor Nominee who is a
member of the Nominating Committee will not oppose the
continuation of the terms of the independent directors of the
Company serving on the Board as of the date of this Agreement
until the expiration of their respective terms as Directors. In
addition, the Company's By-laws shall be amended to provide that
the unanimous consent of the Nominating Committee shall be
required prior to the appointment of a Chairman, Chief Executive
Officer or President of the Company. The Company's By-laws shall
be amended to provide that (i) the Board of Directors of the
Company shall not make any recommendation or appointment for
Directors who are Independent Nominees or Chairman, Chief
Executive Officer or President without the unanimous approval of
the Nominating Committee as set forth
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herein and (ii) any Board seat vacated by a Director who was an
Independent Nominee shall be filled only by a person unanimously
approved by the Nominating Committee.
Notwithstanding the foregoing, if none of the Directors who
are Investor Nominees would be considered "independent" of the
Company, "disinterested," "non-employee directors" and "outside
directors" (i) for purposes of any applicable rule of the
American Stock Exchange or any other securities exchange or other
self-regulating organization (such as the National Association of
Securities Dealers) requiring that members of the audit committee
of the Board be independent of the Company, (ii) for purposes of
any law or regulation that requires, in order to obtain or
maintain favorable tax, securities, corporate law or other
material legal benefits with respect to any plan or arrangement
for employee compensation or benefits, that the members of the
committee of the Board charged with responsibility for such plan
or arrangement be "independent" of the Company, "disinterested,"
"non- employee directors" or "outside directors," or (iii) for
purposes of any special committee formed in connection with any
transaction or potential transaction involving the Company and
any of Investor, its Affiliates or any Group of which Investor is
a member or such other transaction or potential transaction which
would involve an actual or potential conflict of interest on the
part of the Directors who are Investor Nominees, then a Director
who is an Investor Nominee shall not be required to be appointed
to any such committee; provided, however, that the committees of
the Board shall be organized such that, to the extent
practicable, the only items to be considered by a Key Committee
on which no Director who is an Investor Nominee may serve will be
those items which prevent the Director who is an Investor Nominee
from serving on such Key Committee. Any members of any Key
Committee who are Investor Nominees shall, in the event of any
vacancy in such membership, be replaced by a Director who is an
Investor Nominee elected by a majority of the Directors who are
Investor Nominees.
(b) During such time as Investor is entitled pursuant to
Section 2.1(a) to have at least one Investor Nominee on the
Board, unless Investor chooses not to exercise its rights under
this Section 2.2(b), one individual designated by Investor shall
serve as a member of the board of directors or comparable
governing body of each Subsidiary of the Company, if any, that is
a corporation or other person with a board of directors or board
of trustees.
Section 2.3 Vacancies. In the event that any Investor
Nominee shall cease to serve as a Director for any reason other than
the fact that Investor no longer has a right to nominate a Director,
as provided in Section 2.1(a), the vacancy resulting thereby shall be
filled by an Investor Nominee designated by Investor; provided,
however, that any Investor Nominee so designated shall satisfy the
qualification requirements set forth in Section 2.1(b).
Section 2.4 Officers. During the Standstill Period and any
Standstill Extension Term, if any, the Investor agrees, subject to
applicable law, that the Investor Nominees shall support the continued
election of Alexander Haagen, Sr. as Chairman and Chief Executive
Officer of the Company, and Alexander Haagen III as Vice-Chairman of
the
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Company (and successor Chairman to Alexander Haagen, Sr. upon his
retirement) and Chairman of the Executive Committee of the Board
subject to the terms of the Employment Agreements. The appointee for
President of the Company shall be named by the unanimous vote of the
Nominating Committee, and the President shall become Chief Executive
Officer at such time as the Nominating Committee (in consultation with
Alexander Haagen, Sr.) shall unanimously determine.
ARTICLE 3
Information Rights
Section 3.1 Operating Statements; Public Company Status
(a) From and after the date of this Agreement until the
Termination Event, if any, the Company will:
(i) deliver to Investor, as soon as practicable after
the end of each month or other reporting period, any
operating and financial statements and management reports
(x) of the Company, and (y) of each Subsidiary not
consolidated with the Company, which are regularly provided
to the senior management of the Company, each as, at and for
the end of such month or other reporting period, and such
other statements or reports as are reasonably requested by
Investor, all in such form as are prepared by the Company
for internal use by management (including, as applicable, by
e-mail);
(ii) deliver to Investor copies of all other
information distributed by the Company to the Board;
(iii) deliver to Investor, as promptly as practicable
following filing, a copy of each report, schedule or other
document filed by the Company pursuant to the requirements
of any federal or state securities laws (collectively, the
"Securities Filings"); and
(iv) continue to comply in all material respects with
the reporting requirements of Section 13 or 15(d) of the
1934 Act.
(b) Until a Termination Event, the Company and Investor will
afford one another a reasonable opportunity to review any
Securities Filing, any other filing with a Government Authority
and any press release or similar public announcement which refers
to, describes or mentions such other party or any Affiliate of
such other party prior to the time that such filing is filed with
or sent to the applicable Government Authority or such
announcement is disseminated.
Section 3.2 Advice of Actions. From and after the date of
this Agreement until the Termination Event, if any, without first
having consulted with the representative of
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Investor designated by Investor pursuant to this Section 3.2,
the Company will not seek approval by the Board of any proposal,
or enter into any definitive agreement, relating to:
(a) the acquisition in a single transaction or group of
related transactions, whether by merger, consolidation, purchase
of stock or assets or other business combination, of any business
or assets having a value in excess of $10,000,000;
(b) the sale or disposal in a single transaction or group of
related transactions of any assets, whether by merger,
consolidation, sale of stock or assets or other business
combination having a value in excess of $20,000,000;
(c) the incurrence or issuance of indebtedness in a single
transaction or group of related transactions, the entering into a
guaranty, or the engagement in any other financing arrangement in
excess of $20,000,000;
(d) the annual operating budget for the Company;
(e) a material change in the executive management of the
Company;
(f) any new material agreements or arrangements with any
members of the executive management of the Company;
(g) the issuance by the Company of capital stock of the
Company or of options, rights or warrants or other commitments to
purchase or securities convertible into (or exchangeable or
redeemable for) shares of capital stock of the Company, or the
issuance by a Subsidiary of any equity interests, other than, (i)
to the Company or a wholly owned Subsidiary thereof, and (ii) to
directors or employees of the Company or a Subsidiary in
connection with any employee benefit plan approved by the
shareholders of the Company;
(h) any change in the Company's dividend policy;
(i) amendments to joint venture and other material
agreements; or
(j) any request by the Company for a Subsequent Purchase
pursuant to the Stock Purchase Agreement.
Notwithstanding the foregoing, the Company shall have no
obligation to accept or comply with any advice offered by Investor or
its designated representative in any consultation referred to in this
Section 3.2. The designated representative of Investor, for purposes
of this Section 3.2, initially shall be Arthur P. Solomon. Investor
shall provide the Company with ten days prior written notice of any
replacement of the designated representative.
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ARTICLE 4
Voting and Participation Rights
Section 4.1 Voting Rights. Subject to the provisions of this
Section 4.1, Investor may vote the shares of Company Stock which it
owns in its sole and absolute discretion. During the Standstill
Period, and any Standstill Extension Term, if any, LFREI, the
Advancing Party, Buyer and Investor and any of their Controlled
Affiliates will vote all shares of Company Common Stock owned by any
of them that represent aggregate ownership of in excess of 40% of the
outstanding shares of Company Common Stock, in one of the following
two manners, at their option: (x) in accordance with the
recommendation of the Board, or (y) proportionally in accordance with
the votes of the other holders of Company Common Stock.
Notwithstanding anything to the contrary in the foregoing, during the
Standstill Period and any Standstill Extension Term, if any, LFREI,
the Advancing Party, Buyer and Investor and any of their Controlled
Affiliates shall vote all shares of Company Common Stock owned by any
of them in favor of the election of Directors nominated by the
Nominating Committee or the Board, as set forth in Section 2.1(a).
Section 4.2 Participation Rights
(a) Right to Participate. From and after the date hereof
until a Termination Event, if any, Investor shall be entitled to
a participation right to purchase or subscribe for up to that
number of additional shares of capital stock (including as
"capital stock" for purposes of this Section 4.2, any security,
option, warrant, call, commitment, subscription, right to
purchase or other agreement of any character that is convertible
into or exchangeable or redeemable for shares of capital stock of
the Company or any Subsidiary (and all references in this Section
4.2 to capital stock shall, as appropriate, be deemed to be
references to any such securities), and also including additional
shares of capital stock to be issued pursuant to the conversion,
exchange or redemption of any security, option, warrant, call,
commitment, subscription, right to purchase or other agreement of
any character that is convertible into or exchangeable or
redeemable for shares of capital stock, as if the price at which
such additional shares of capital stock is issued pursuant to any
such conversion, exchange or redemption were the market price on
the date of such issuance) to be issued or sold by the Company
which represents the same proportion of the total number of
shares of capital stock to be issued or sold by the Company
(including the shares of capital stock to be issued to Investor
upon exercise of its participation rights hereunder; it being
understood and agreed that the Company will accordingly be
required to either increase the number of shares of capital stock
to be issued or sold so that Investor may purchase additional
shares to maintain its proportionate interest, or to reduce the
number of shares of capital stock to be issued or sold to Persons
other than Investor) as is represented by the number of shares of
Company Common Stock owned by Investor prior to such sale or
issuance (and
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including for this purpose any shares of Company Common Stock to
be acquired pursuant to the Stock Purchase Agreement, but not yet
issued) relative to the number of shares of Company Common Stock
outstanding prior to such sale or issuance (and including for
this purpose any shares of Company Common Stock to be acquired
pursuant to the Stock Purchase Agreement, but not yet issued)
(but in no event more than 37.5% of the total number of shares of
capital stock to be issued or sold by the Company at all
subsequent offerings); provided, however, that the provisions of
this Section 4.2 shall not apply to (i) the issuance or sale by
the Company of any of its capital stock issued to the Company or
any of its Subsidiaries or pursuant to options, rights or
warrants or other commitments or securities in effect or
outstanding on the date of the Stock Purchase Agreement
(including, without limitation, the Convertible Debt and any
options issued or to be issued pursuant to the Employment
Agreements), (ii) the issuance of capital stock pursuant to the
conversion, exchange or redemption of any other capital stock,
but shall, without limitation, apply to the issuance by the
Company of any of its capital stock pursuant to benefit, option,
stock purchase, or other similar plans or arrangements, including
pursuant to or upon the exercise of options, rights, warrants, or
other securities or agreements (including those issued pursuant
to the Company's benefit plans), and (iii) the issuance of
capital stock for consideration other than cash. Notwithstanding
the foregoing, any participation rights provided for in this
Section which arise as a result of the exception contained in
clause (ii) of the preceding sentence shall be deferred until
such time as participation rights shall otherwise arise under
this Section.
(b) Notice. In the event the Company proposes to issue or
sell any shares of capital stock in a transaction giving rise to
the participation rights provided for in this Section, the
Company shall send a written notice (the "Participation Notice")
to Investor setting forth the number of shares of such capital
stock of the Company that the Company proposes to sell or issue,
the price (before any commission or discount) at which such
shares are proposed to be issued (or, in the case of an
underwritten or privately placed offering in which the price is
not known at the time the Participation Notice is given, the
method of determining such price and an estimate thereof), and
all other relevant information as to such proposed transaction as
may be necessary for Investor to determine whether or not to
exercise the rights granted in this Section. At any time within
20 days after its receipt of the Participation Notice, Investor
may exercise its participation rights to purchase or subscribe
for shares of such shares of capital stock, as provided for in
this Section, by so informing the Company in writing (an
"Exercise Notice"). Each Exercise Notice shall state the
percentage of the proposed sale or issuance that the Investor
elects to purchase. Each Exercise Notice shall be irrevocable,
subject to the conditions to the closing of the transaction
giving rise to the participation right provided for in this
Section.
(c) Abandonment of Sale or Issuance. The Company shall have
the right, in its sole discretion, at all times prior to
consummation of any proposed sale or issuance giving rise to the
participation right granted by this Section, to abandon, rescind,
annul, withdraw or otherwise terminate such sale or issuance,
whereupon all participation rights in respect of such proposed
sale or issuance pursuant to this Section shall become null and
void, and the Company shall have no liability or obligation to
Investor or any Affiliate thereof who has acquired shares of
Company
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Stock pursuant to the Stock Purchase Agreement or from Investor
with respect thereto by virtue of such abandonment, rescission,
annulment, withdrawal or termination.
(d) Terms of Sale. The purchase or subscription by Investor
or an Affiliate thereof, as the case may be, pursuant to this
Section shall be on the same price and other terms and
conditions, including the date of sale or issuance, as are
applicable to the purchasers or subscribers of the additional
shares of capital stock of the Company whose purchases or
subscriptions give rise to the participation rights (except that
the price to Investor to make such purchase or subscription shall
be net of payment of any underwriting, placement agent or similar
fee associated with such purchase or subscription), which price
and other terms and conditions shall be substantially as stated
in the relevant Participation Notice (which standard shall be
satisfied if the price, in the case of a negotiated transaction,
is not greater than 110% of the estimated price set forth in the
relevant Participation Notice or, in the case of an underwritten
or privately placed offering, is not greater than the greater of
(i) 110% of the estimated price set forth in the relevant
Participation Notice, and (ii) the most recent closing price on
or prior to the date of the pricing of the offering); provided,
however, that in the event the purchases or subscriptions giving
rise to the participation rights are effected by an offering of
securities registered under the 1933 Act and in which offering it
is not legally permissible for the securities to be purchased by
Investor to be included, such securities to be purchased by
Investor will be purchased in a concurrent private placement.
(e) Timing of Sale. If, with respect to any Participation
Notice, Investor fails to deliver an Exercise Notice within the
requisite time period, the Company shall have 120 days after the
expiration of the time in which the Exercise Notice is required
to be delivered in which to sell not more than 110% of the number
of shares of capital stock of the Company described in the
Participation Notice (plus, in the event such shares are to be
sold in an underwritten public offering, an additional number of
shares of capital stock of the Company, not in excess of 15% of
110% of the number of shares of capital stock of the Company
described in the Participation Notice, in respect of any
underwriters overallotment option) and not less than 90% of the
number of shares of capital stock of the Company described in the
Participation Notice at a price of not less than 90% of the
estimated price set forth in the Participation Notice. If, at the
end of 120 days following the expiration of the time in which the
Exercise Notice is required to be delivered, the Company has not
completed the sale or issuance of capital stock of the Company in
accordance with the terms described in the Participation Notice
(or at a price which is at least 90% of the estimated price set
forth in the Participation Notice), or in the event of any
contemplated sale or issuance within such 120-day period but
outside such price parameters, the Company shall again be
obligated to comply with the provisions of this Section with
respect to, and provide the opportunity to participate in, any
proposed sale or issuance of shares of capital stock of the
Company; provided, however, that notwithstanding the foregoing,
if the price at which such capital stock is to be sold in an
underwritten offering (or a privately placed offering in which
the price is not less than 97% of the most recent closing price
at the time of the pricing
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of the offering) is not at least 90% of the estimated price set
forth in the Participation Notice, the Company may inform
Investor of such fact and Investor shall be entitled to elect, by
written notice delivered within two Business Days following such
notice from the Company, to participate in such offering in
accordance with the provisions of this Section 4.2.
ARTICLE 5
Standstill Provisions
Section 5.1 Standstill Periods
(a) The "Standstill Period" shall be the period commencing
on the date of this Agreement and ending on the earlier of (x)
the fifth anniversary of the Shareholder Approval Date, and (y)
the earliest of:
(i) the occurrence of any event of default on the part
of the Company or any Subsidiary under any debt agreements,
instruments, or arrangements which event of default would
reasonably be expected to result in a Material Adverse
Effect and, in the case of a non-monetary event of default,
which event of default cannot be, or is not, cured by the
Company within the applicable cure period under such debt
agreement, instrument or arrangement;
(ii) the acquisition by any person or Group other than
Investor or any Affiliate thereof or any person or Group
acting in concert with or at the direction or request of the
Investor or any Affiliate thereof of Beneficial Ownership of
more than 9.8% of the voting power of the outstanding shares
of Voting Securities (any such shares acquired in excess of
such 9.8%, the "Excess Shares"), unless (x) the Excess
Shares are at or immediately following their acquisition
deprived of all voting rights pursuant to limitations on
ownership of shares contained in the Company Charter, as in
effect at the relevant time, or in any other legal, valid
and enforceable agreement, plan or other right in effect as
such time, or (y) provided the Excess Shares represent no
more than 5.2% of the voting power of the outstanding Voting
Securities, the Company, no later than the earlier of (aa)
sixty days after the date of such acquisition, and (bb) the
record date for the first meeting of shareholders after such
record date, has caused such person or Group to cease, or
such person or Group otherwise ceases, having Beneficial
Ownership of the Excess Shares;
(iii) any person or Group having a number of Directors
on the Board, or having the right or power to elect a number
of Directors on the Board, equal to or greater than the
number of Directors to which Investor is entitled;
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(iv) the authorization by the Company or the Board or
any committee thereof (with all Investor Nominees abstaining
or voting against) of the solicitation of offers or
proposals or indications of interest with respect to any
merger, consolidation, other business combination,
liquidation, sale of the Company or all or substantially all
of the assets of the Company or any other change of control
of the Company or similar extraordinary transaction, but
excluding any merger, consolidation or other business
combination in which the Company is the surviving and
acquiring corporation and in which the businesses or assets
so acquired do not, or would not reasonably be expected to,
have a value greater than 50% of the assets of the Company
prior to such merger, consolidation or other business
combination (any of the foregoing, a "Covered Transaction");
(v) the written submission by any person or Group other
than Investor or any Affiliate thereof of a proposal to the
Company (including to the Board or any agent, representative
or Affiliate of the Company) with respect to, or otherwise
expressing an interest in pursuing, a Covered Transaction;
provided, however, that the Standstill Period shall not
terminate pursuant to this Section 5.1(a)(v) if, as soon as
practicable after receipt of any such proposal, the Board
determines that such proposal is not in the best interest of
the Company and its shareholders and for so long as the
Board continues to reject such proposal as a result of such
determination;
(vi) in connection with any actual or proposed Covered
Transaction, the removal of any rights plan, provisions of
the Company Charter relating to staggered terms of office
for directors, provisions of the Company Charter or the
By-laws of the Company relating to supermajority voting of
the Company's shareholders, "excess share" provisions of the
Company Charter or the By-laws of the Company, or any other
similar arrangements, agreements, commitments or provisions
in the Company Charter or the Bylaws of the Company which
would reasonably be expected to impede the consummation of
such actual or proposed Covered Transaction by action of any
Government Authority, the Board, the shareholders of the
Company or otherwise, or, in connection with any actual or
proposed Covered Transaction, any modification, amendment,
waiver or repeal of the ownership restrictions in Article
VII of the Company Charter (except as may be necessary to
allow any acquisition of Company Stock that would not
constitute an Early Standstill Termination Event under
Section 5.1(a)(ii));
(vii) 90 days after the occurrence of a Termination
Event;
(viii) any material violation of any Corporate Action
covenant;
(ix) any breach by the Company of the Stock Purchase
Agreement which is neither cured nor desisted from within 30
days of receipt of written
16
<PAGE>
notice from Investor of such breach and which would
reasonably be expected to materially adversely affect
Investor or cause a Material Adverse Effect; or
(x) any breach of this Agreement by the Company which
is neither cured nor desisted from within 30 days of receipt
of written notice from Investor of such breach and which
would reasonably be expected to materially adversely affect
Investor or cause a Material Adverse Effect.
Any event set forth in subsection (i), (ii), (iii), (iv), (v),
(vi), (vii), (viii), (ix) or (x) of this Section 5.1(a) shall be
an "Early Standstill Termination Event."
(b) If the Standstill Period shall not have been terminated
prior to the fifth anniversary of the Shareholder Approval Date,
the Standstill Period and any Standstill Extension Term shall
automatically be extended for successive one-year periods (each
such period, a "Standstill Extension Term"). Any Standstill
Extension Term will be terminated upon the earlier of (i) the
first anniversary thereof, (ii) the occurrence of an Early
Standstill Termination Event, and (iii) 90 days after the
Investor either provides to the Company written notice that
Investor elects to terminate the Standstill Extension Term or
elects that a Standstill Extension Term not commence.
Section 5.2 Restrictions During Standstill Period
and Standstill Extension Term
(a) During the Standstill Period, if any, and any Standstill
Extension Term, LFREI, the Advancing Party, Buyer, and Investor
will not, will cause each of their Controlled Affiliates not to,
directly or indirectly:
(i) act in concert with any other person or Group by
becoming a member of a 13D Group, other than any 13D Group
comprised exclusively of Investor and one or more of its
Affiliates;
(ii) purchase or otherwise acquire shares of Company
Common Stock (or options, rights or warrants or other
commitments to purchase and securities convertible into (or
exchangeable or redeemable for) shares of Company Common
Stock) as a result of which, after giving effect to such
purchase or acquisition, LFREI, the Advancing Party, Buyer,
and Investor and their Controlled Affiliates will
Beneficially Own in the aggregate more than 49.9% of the
outstanding shares of Company Common Stock, on an Adjusted
Fully Diluted basis;
(iii) solicit, encourage or propose to effect or
negotiate any Covered Transaction;
(iv) solicit, initiate, encourage or participate in any
"solicitation" of "proxies" or become a "participant" in any
"election contest" (as such terms are defined or used in
Regulation 14A under the 1934 Act, disregarding clause
17
<PAGE>
(iv) of Rule 14a-1(l)(2) and including an exempt
solicitation pursuant to Rule 14a-2(b)(1)); call, or in any
way encourage or participate in a call for, any special
meeting of shareholders of the Company (or take any action
with respect to acting by written consent of the
shareholders of the Company); request, or take any action to
obtain or retain any list of holders of any securities of
the Company; or initiate or propose any shareholder proposal
or participate in or encourage the making of, or solicit
shareholders of the Company for the approval of, one or more
shareholder proposals; provided, however, that Investor
shall not be prohibited from communicating with a
securityholder who is engaged in any "solicitation" of
"proxies" or who is a "participant" in any "election
contest";
(v) seek representation on the Board or a change in the
composition or size of the Board other than as permitted by
Article 2;
(vi) request the Company or any of its directors,
officers, employees or agents to amend or waive any
provisions of this Section 5.2 or Article VII of the Company
Charter or seek to challenge the legality or effect thereof;
or
(vii) assist, advise, encourage or act in concert with
any person with respect to, or seek to do, any of the
foregoing.
Section 5.3 Restrictions on Transfer. Until the earlier of
(i) a Termination Event, or (ii) five years after the Shareholder
Approval Date, LFREI, the Advancing Party, Buyer, and Investor will
not, and will cause each of their Controlled Affiliates not to,
directly or indirectly sell, transfer or otherwise dispose of
(collectively, "Transfer") any shares of Company Common Stock except
for: (a) Transfers made in compliance with the requirements of Rule
144 of the 1933 Act, (b) Transfers pursuant to negotiated transactions
with third parties, provided the transferee acknowledges that it is
subject to the provisions of Article 5 of this Agreement to which
Investor is subject, (c) Transfers pursuant to or in accordance with
the Registration Rights Agreement in a bona fide public offering, (d)
Transfers to one or more Controlled Affiliates of Investor who agree
to be bound by the terms and conditions of this Agreement, who make
the representations set forth In Sections 4.8, 4.10 and 4.11 of the
Stock Purchase Agreement and who satisfy the ownership criteria in the
definition of "Investor", and (e) Transfers to a bona fide financial
institution for the purpose of securing bona fide indebtedness of any
Investor; provided, that no such Transfer shall result in the bona
fide financial institution having Beneficial Ownership (or "Beneficial
Ownership" or "Constructive Ownership," as such terms are defined in
the Company Charter) of more than
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<PAGE>
9.8% of the Company Stock unless such bona fide financial institution
acknowledges that it is subject to the provisions of Article 5 of this
Agreement to which Investor is subject and the Company receives
representations and covenants from such transferee requested by the
Company relating to the Company's status as a REIT. Notwithstanding
the foregoing, no Transfer under Section 5.3(a), (b) or (c), which
would result in the applicable transferee having Beneficial Ownership
(or "Beneficial Ownership" or "Constructive Ownership," as such terms
are defined in the Company Charter) of more than 9.8% of the Company
Stock or which would otherwise be in violation of the Charter shall
occur unless the Company, in its sole discretion, approves such
Transfer and receives representations and covenants from such
transferee requested by the Company relating to the Company's status
as a REIT.
Section 5.4 Notice to Company. During the period specified
in Section 5.3, if any party wishes to sell pursuant to subsection
5.3(a), (b) or (c) any shares of Company Common Stock, such party
shall give the Company 15 days' prior written notice of such proposed
sale, setting forth the number of shares of Company Common Stock that
such party proposes to sell, the expected timing of the proposed sale,
and the expected selling price of such sale, in order to enable the
Company to make an offer to purchase such shares. During the period
described in the preceding sentence, such party shall also notify the
Company if such party reaches a formal board-level decision to sell
shares of Company Common Stock representing more than 2% of the then
outstanding shares of Company Common Stock.
Section 5.5 Compliance with Insider Trading Policy. For as
long as LFREI, the Advancing Party, Buyer or Investor Beneficially
Owns any shares of Company Common Stock, such parties will, and will
use their commercially reasonable efforts to cause their directors,
officers, employees, agents, and representatives to, comply with the
written policy of the Company reasonably designed to prevent
violations of insider trading and similar laws.
Section 5.6 Compliance with Article VII of the Company
Charter. For as long as LFREI, the Advancing Party, Buyer or Investor
Beneficially Owns any shares of Company Common Stock (unless the
Standstill Period or any Standstill Extension Term is terminated by
any of the actions set forth in Section 5.1(a)(iv), (v) or (vi) (or
unless any such action occurs following the termination of the
Standstill Period or any Standstill Extension Term) or by any other
willful action by the Company which constitutes an Early Standstill
Termination Event (or would constitute an Early Standstill Termination
Event during the Standstill Period or any Standstill Extension Term)),
such parties will comply with Article VII of the Company Charter and
will not seek to challenge the legality or effect thereof.
Section 5.7 Investment Company Matters. From and after the
Shareholder Approval Date, if any, until a Termination Event, if any,
Investor shall use its reasonable best efforts to not be or become 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 5.8 Waiver of Restrictions and Limits. Provided that
Shareholder Approval is obtained, subject to the provisions of Section
5.9, the Company shall take all actions, including by providing any
necessary conditional exemptions from or amendments to (A) any
restrictions or limits contained in Article VII of the Company Charter
or (B) any agreement or instrument which governs ownership of shares
of Company Stock by any person, necessary to permit Investor to
Beneficially Own up to and including the greater of (i) 49.9% of the
outstanding shares of Company Common Stock on an Adjusted Fully
19
<PAGE>
Diluted basis and (ii) the percentage which represents the number of
shares of Company Common Stock purchased pursuant to the Stock
Purchase Agreement relative to the outstanding shares of Company
Common Stock. If any third party shall be given the right to
Beneficially Own more than 49.9% of the outstanding shares of Company
Common Stock on an Adjusted Fully Diluted basis, the Company shall
take all actions (including by providing the foregoing exemptions and
amendments) to waive any and all restrictions or limits on Investor
provided that such waiver does not result in the disqualification of
the Company as a REIT. From and after a Termination Event, if any, the
Company shall take all actions, including by providing any necessary
exemptions from or amendments to (A) any restrictions or limits
contained in Article VII of the Company Charter or (B) any agreement
or instrument which governs ownership of shares of Company Stock by
any person, necessary to permit Investor to Beneficially Own up to and
including 15% of the outstanding shares of Company Common Stock, but
shall not be required to take any action to permit Investor to
Beneficially Own more than 15% of the outstanding shares of Company
Common Stock. From and after the first date on which Investor does not
own at least 9.8% of the outstanding shares of Company Common Stock,
if any, the Company shall take all actions, including by providing any
necessary exemptions from or amendments to (A) the ownership limits
contained in Article VII of the Company Charter or (B) any agreement
or instrument which governs ownership of shares of Company Stock by
any person, necessary to permit Investor to Beneficially Own up to and
including 9.8% of the outstanding shares of Company Common Stock, but
shall not be required to take any action to permit Investor to
Beneficially Own more than 9.8% of the outstanding shares of Company
Common Stock. Notwithstanding the foregoing, Investor or the Company
may at any time acquire Beneficial Ownership of the securities of such
other party or its Affiliates to the extent permitted by applicable
law and the provisions of the organizational documents of such party
or its Affiliates, as applicable, and other agreements from time to
time governing the ownership of such securities.
Section 5.9 REIT Qualification. At any time Investor owns,
or has the right to own, Company Common Stock in violation of the
ownership limit provisions of the Charter, Investor shall immediately
inform the Company if it believes that (i) any of the representations
set forth in Sections 4.8, 4.10 or 4.11 of the Stock Purchase
Agreement are not true at that time or have not been true at any time
(taking into account the revised Schedule 4.10-A provided by the
Company to Investor from time to time and disregarding the
qualification relating to Buyer's or the Advancing Party's knowledge)
or (ii) the Investor's ownership of interests in the Company may
otherwise jeopardize the Company's tax status as a REIT. Investor
shall from time to time, as reasonably required by the Company,
cooperate (including by providing such information and documentation
as may be reasonably required by the Company and available to
Investor) with the Company to enable the Company to determine whether
the above covenant has been and is being satisfied. In addition,
Investor understands and agrees that the Company's grant to Investor
of an exception to the ownership limit provisions of the Charter shall
be conditioned upon the continuing accuracy of the representations set
forth in Sections 4.8, 4.10 and 4.11 of the Stock Purchase Agreement
(disregarding the qualification relating to Buyer's or the Advancing
Party's knowledge and assuming no exceptions are set forth in Schedule
4.10-B)
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<PAGE>
and upon such exception otherwise not causing the Company to fail to
qualify as a REIT for income tax purposes.
ARTICLE 6
Additional Covenants
Section 6.1 Limitations on Corporate Actions
The Company agrees that from and after the date of this
Agreement, until a Termination Event, if any, it will not, and will
not permit any of its Subsidiaries to:
(a) incur any additional indebtedness such that total
consolidated indebtedness for money borrowed (including for this
purpose any indebtedness evidenced by notes, debentures, bonds or
other similar instruments, or secured by any lien on any property
or asset, all obligations issued or assumed as the deferred
purchase price of property, conditional sale obligations,
obligations under any title retention agreement (but excluding
trade accounts payable and other accrued current liabilities
arising in the ordinary course of business), obligations under
letters of credit, or similar credit transactions, and
obligations which are required to be accounted for as capital
leases) in an amount in excess of 50% of the sum of (i) the
product of the number of outstanding shares of Common Stock of
the Company and the number of outstanding OP Units times the then
current market price of a share of Common Stock of the Company,
and (ii) the total consolidated indebtedness for money borrowed
(as described above); provided, however, that notwithstanding the
foregoing, the Company shall be permitted to incur at any time
indebtedness under a revolving line of credit up to a maximum
amount outstanding of $90 million;
(b) engage in any material business other than the
ownership, management and development of shopping center
properties in the Geographic Region; or
(c) in the case of the Company, (1) terminate its
eligibility for treatment as a real estate investment trust, as
defined in the Code, or (2) take any action or fail to take any
action which would reasonably be expected to, alone or in
conjunction with any other factors, result in the loss of such
eligibility, unless in the case of a failure to take action, such
action is taken within thirty days.
From and after the date of this Agreement, the Company shall take
all action necessary to amend its by-laws to provide that (i) the
taking of any action specified in Section 3.2(d) through (j) of this
Agreement shall require the approval of the Board of Directors, and
(ii) the taking of any action specified in Section 3.2(a) through (c)
(without regard to the dollar thresholds set forth therein) of this
Agreement shall require the approval of the Board of Directors if any
such transaction has a value at that time in excess of 1% of the
Company's total assets.
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<PAGE>
The agreements of the Company set forth in this Section 6.1 and
in Section 6.2 shall be the "Corporate Action Covenants."
Section 6.2 Conduct of Business. During the period from the
date hereof to the sooner to occur of (A) the date on which the
Remaining Equity Commitment shall be zero, and (B) if the Shareholder
Approval vote fails, the date of the shareholder meeting at which the
Shareholder Approval failed, each of the Company and each Subsidiary,
except as otherwise consented to or approved by Buyer in writing or as
permitted or required hereby will not:
(a) pursuant to or within the meaning of any bankruptcy law:
(i) commence a voluntary case, (ii) consent to the entry of an
order for relief against it in an involuntary case, (iii) consent
to the appointment of a custodian of it or for all or
substantially all of its property, (iv) make a general assignment
for the benefit of its creditors; or
(b) subject to the right of the Company to terminate the
Stock Purchase Agreement pursuant to Section 9.1(b)(iii) thereof,
allow (i) the sale, lease, transfer, conveyance or other
disposition (other that by way of merger or consolidation), in
one or a series of related transactions, of all or substantially
all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, or (iii) the
consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Buyer, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the Exchange Act), directly or indirectly, of
stock having more than 50% of the voting power of the Company.
Section 6.3 Restrictions on Investments. From the date of
this Agreement until the occurrence of a Termination Event, LFREI, the
Advancing Party, Buyer, Investor and their Controlled Affiliates shall
not, directly or indirectly, own any equity interest of more than 25%
in the aggregate in any public or private real estate company (i) the
primary business of which is the acquisition, development or
management of unenclosed shopping centers in the Geographic Region and
(ii) which owns at least 60% of its real estate assets (based on book
value) located in the Geographic Region, unless 75% of the Directors
of the Company (other than the Investor Nominees) have consented to
such ownership.
ARTICLE 7
Miscellaneous
Section 7.1 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and
22
<PAGE>
delivered to the other party. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for
purposes of this Section, provided receipt of copies of such
counterparts is confirmed.
Section 7.2 Governing Law. THIS AGREEMENT SHALL BE GOV-
ERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 7.3 Entire Agreement. This Agreement (including
agreements incorporated herein) and the Schedules and Exhibits hereto
contain the entire agreement between the parties with respect to the
subject matter hereof and there are no agreements, understandings,
representations or warranties between the parties other than those set
forth or referred to herein. This Agreement is not intended to confer
upon any person not a party hereto (and their successors and assigns)
any rights or remedies hereunder, except that the persons named in
Section 2.4 shall be express third party beneficiaries of such
Section.
Section 7.4 Expenses. Except as set forth in the Stock
Purchase Agreement, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
Without limiting the foregoing, the Company shall pay all costs and
expenses incurred in connection with the solicitation of votes of
shareholders of the Company to approve the transactions contemplated
by the Stock Purchase Agreement.
Section 7.5 Notices. All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in
writing and delivered personally, sent by documented overnight
delivery service or, to the extent receipt is confirmed, telecopy,
telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to the Company shall be
addressed to:
Alexander Haagen Properties, Inc.
3500 Sepulveda Boulevard
Manhattan Beach, CA 90266-3696
Attention: Alexander Haagen, Sr.
Telecopy: (310) 545-6354
with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attention: John M. Newell, Esq.
Telecopy: (213) 891-8763
23
<PAGE>
or at such other address and to the attention of such other person as
the Company may designate by written notice to Investor. Notices to
LFREI, the Advancing Party, Buyer or Investor shall be addressed to:
Lazard Freres Real Estate Investors, LLC
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
Attention: Arthur P. Solomon
Telecopy: (212) 632-6052
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Kevin J. Grehan, Esq.
Telecopy: (212) 474-3700
Section 7.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors (including, in the case LFREI, any successor to
the principal business of LFREI). Neither party shall be permitted to
assign any of its rights hereunder to any third party, except that any
Investor shall be permitted to assign its rights hereunder to the same
extent as Buyer or the Advancing Party is permitted to assign its
rights under the Stock Purchase Agreement, provided that such person
agrees to be bound by this Agreement.
Section 7.7 Headings. The Section, Article and other
headings contained in this Agreement are inserted for convenience of
reference only and will not affect the meaning or interpretation of
this Agreement. All references to Sections or Articles contained
herein mean Sections or Articles of this Agreement unless otherwise
stated.
Section 7.8 Amendments and Waivers. This Agreement may not
be modified or amended except by an instrument or instruments in
writing signed by the party against whom enforcement of any such
modification or amendment is sought. Any party hereto may, only by an
instrument in writing, waive compliance by another party hereto with
any term or provision hereof on the part of such other party hereto to
be performed orcomplied with. The waiver by any party hereto of a
breach of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.
Section 7.9 Interpretation; Absence of Presumption
(a) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one
gender shall be held to include the other gender as the context
requires, (ii) the terms "hereof", "herein", and "herewith" and
words of similar import shall, unless otherwise stated, be
construed to refer to
24
<PAGE>
this Agreement as a whole (including all of the Schedules and
Exhibits hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph, Schedule and Exhibit
references are to the Articles, Sections, paragraphs, Schedules
and Exhibits to this Agreement unless otherwise specified, (iii)
the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation," unless
the context otherwise requires or unless otherwise specified,
(iv) the word "or" shall not be exclusive, and (v) provisions
shall apply, when appropriate, to successive events and
transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be
drafted.
Section 7.10 Severability. Any provision hereof which is
invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability, without affecting in any way the
remaining provisions hereof.
Section 7.11 Further Assurances. The Company and Investor
agree that, from time to time, each of them will, and will cause their
respective Affiliates to, execute and deliver such further instruments
and take such other action as may be necessary to carry out the
purposes and intents hereof.
Section 7.12 Specific Performance. The Company and Investor
each acknowledge that, in view of the uniqueness of arrangements
contemplated by this Agreement, the parties hereto would not have an
adequate remedy at law for money damages in the event that this
Agreement were not performed in accordance with its terms, and
therefore agree that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to
which the parties hereto may be entitled at law or in equity.
Section 7.13 Investor Breach. In the event Investor shall
have breached (i) its obligation to effect a purchase of Company
Common Stock pursuant to the Stock Purchase Agreement which breach is
neither cured nor desisted from within 30 days of receipt of written
notice of such breach, or (ii) any of its obligations under this
Agreement which breach is neither cured nor desisted from within 30
days of receipt of written notice of such breach and which would
reasonably be expected to materially adversely affect the Company, the
Company shall no longer be required to perform any of its obligations
hereunder.
Section 7.14 Confidentiality. LFREI, the Advancing Party,
Buyer and Investor agree that all information provided to any of them
or any of their representatives pursuant to this Agreement shall be
kept confidential, and such parties shall not (x) disclose such
information to any persons other than the directors, officers,
employees, financial advisors, legal advisors, accountants,
consultants and affiliates of such parties who reasonably need to have
access to the confidential information and who are advised of the
confidential nature of such information or (y) use such information in
a manner which would be detrimental to the Company; provided, however,
the foregoing obligation of such parties
25
<PAGE>
shall not (a) relate to any information that (i) is or becomes
generally available other than as a result of unauthorized disclosure
by such parties or by persons to whom such parties have made such
information available, (ii) is or becomes available to such parties on
a non-confidential basis from a third party that is not, to such
parties' knowledge, bound by any other confidentiality agreement with
the Company, or (b) prohibit disclosure of any information if required
by law, rule, regulation, court order or other legal or governmental
process.
Section 7.15 Public Releases and Announcements. The Company
agrees that until a Termination Event, it shall endeavor to provide to
Investor advance copies of, or, in the case of oral announcements,
advance notice of, any public release or announcement concerning the
Company to be issued, released or made by the Company or any of its
Affiliates, in each case, if possible, at least one Business Day prior
to such release or announcement.
26
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the day first above
written.
PROMETHEUS WESTERN RETAIL, LLC
By: LF STRATEGIC REALTY INVESTORS,
L.P.
Its: Member
By: LAZARD FRERES REAL ESTATE
INVESTORS, LLC
Its: General Partner
By: /s/ Anthony E. Meyer
--------------------------
Anthony E. Meyer
Its: Chief Investment Officer
LAZARD FRERES REAL ESTATE
INVESTORS, LLC
By: /s/ Anthony E. Meyer
---------------------------
Anthony E. Meyer
Its: Chief Investment Officer
LF STRATEGIC REALTY INVESTORS, L.P.
By: LAZARD FRERES REAL ESTATE
INVESTORS, LLC
Its: General Partner
By: /s/ Anthony E. Meyer
---------------------------
Anthony E. Meyer
Its: Chief Investment Officer
ALEXANDER HAAGEN PROPERTIES, INC.
By: /s/ Alexander Haagen
----------------------------
Alexander Haagen, Sr.
Its: Chairman, Chief Executive
Officer and President
27
<PAGE>
EXHIBIT 3
(EXHIBIT A to Stock Purchase Agreement)
- ---------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
by and among
ALEXANDER HAAGEN PROPERTIES, INC.
and
PROMETHEUS WESTERN RETAIL, LLC
dated as of
June 1, 1997
- ---------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Section 1. Definitions........................................... 1
(a) "Agreement"......................................... 1
(b) "Buyer"............................................. 1
(c) "Commencement Date"................................. 1
(d) "Commission"........................................ 1
(e) "Company"........................................... 1
(f) "Company Registration Expenses"..................... 1
(g) "Demand Registration"............................... 2
(h) "Exchange Act"...................................... 2
(i) "NASD".............................................. 2
(j) "Registrable Securities"............................ 2
(k) "Registration Expenses"............................. 2
(l) "Registration Suspension Period".................... 2
(m) "Securities Act".................................... 2
(n) "Stock Purchase Agreement".......................... 3
(o) "Suspension Notice"................................. 3
(p) "Underwritten/Placed Offering"...................... 3
Section 2. Demand Registration................................... 3
(a) Obligation to File.................................. 3
(b) Black-Out Periods of Buyer.......................... 4
(c) Number of Demand Registrations...................... 4
(d) Size of Demand Registration......................... 4
(e) Notice.............................................. 5
(f) Expenses............................................ 5
(g) Selection of Underwriters........................... 5
Section 3. Incidental Registrations.............................. 5
(a) Notification and Inclusion.......................... 5
(b) Cut-back Provisions................................. 6
(c) Expenses............................................ 6
(d) Duration of Effectiveness........................... 6
Section 4. Registration Procedures............................... 7
Section 5. Requested Underwritten Offerings...................... 9
Section 6. Preparation; Reasonable Investigation................. 10
Section 7. Indemnification....................................... 10
(a) Indemnification by the Company...................... 10
(b) Indemnification by Buyer............................ 11
(c) Notices of Claims, etc.............................. 11
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Page
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(d) Other Indemnification............................... 12
(e) Indemnification Payments............................ 12
(f) Contribution........................................ 12
Section 8. Covenants Relating to Rule 144........................ 12
Section 9. Miscellaneous......................................... 13
(a) Counterparts........................................ 13
(b) Governing Law....................................... 13
(c) Entire Agreement.................................... 13
(d) Notices............................................. 13
(e) Successors and Assigns.............................. 14
(f) Headings............................................ 14
(g) Amendments and Waivers.............................. 14
(h) Interpretation; Absence of Presumption.............. 14
(i) Severability........................................ 15
ii
<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
June 1, 1997, by and among Alexander Haagen Properties, Inc., a
Maryland corporation (the "Company") and Prometheus Western Retail,
LLC, a Delaware limited liability corporation ("Buyer"). Capitalized
terms not otherwise defined herein have the meaning ascribed to them
in the Stock Purchase Agreement (as herein after defined).
WHEREAS, the Company, LF Strategic Realty Investors L.P.,
and Buyer have entered into a Stock Purchase Agreement, dated as of
June 1, 1997 (the "Stock Purchase Agreement"), that provides for the
purchase by Buyer and sale by the Company to Buyer of shares of
Company Common Stock; and
WHEREAS, in order to induce Buyer to enter into the Stock
Purchase Agreement, the Company has agreed to provide the registration
rights set forth herein;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
Section 1. Definitions. As used herein, the following terms
shall have the following meanings:
(a) "Agreement" shall have the meaning set forth in the
first paragraph hereof.
(b) "Buyer" shall mean Buyer, and shall also include any
Affiliate of Buyer of which Buyer or LF Strategic Realty
Investors, L.P., directly or indirectly, Beneficially Owns 98% or
more of the voting power and of the economic interests, or any
bona fide financial institution to which any Buyer has
Transferred (including upon foreclosure of a pledge) shares of
Company Stock for the purpose of securing bona fide indebtedness
of any Buyer. (Capitalized terms used in this definition and not
defined herein shall have the meanings ascribed to them in the
Stockholders Agreement).
(c) "Commencement Date" shall mean the first anniversary of
the date of this Agreement.
(d) "Commission" shall mean the Securities and Exchange
Commission, and any successor thereto.
(e) "Company" shall have the meaning set forth in the first
paragraph hereof.
(f) "Company Registration Expenses" shall mean the fees and
disbursements of counsel and independent public accountants for
the Company incurred in connection with the Company's performance
of or compliance with this
<PAGE>
Agreement, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and
compliance, and any premiums and other costs of policies of
insurance obtained by the Company against liabilities arising out
of the sale of any securities.
(g) "Demand Registration" shall have the meaning set forth
in Section 2(a).
(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and any successor thereto, and the rules and
regulations thereunder.
(i) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(j) "Registrable Securities" shall mean (i) any and all
shares of Company Common Stock acquired by Buyer pursuant to the
Stock Purchase Agreement, (ii) any and all securities acquired by
Buyer pursuant to Section 4.2 of the Stockholders Agreement, and
(iii) any securities issued or issuable with respect to any
Company Common Stock or other securities referred to in clause
(i) or (ii) by way of conversion, exchange, stock dividend or
stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization
or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities
when (A) a registration statement with respect to the sale of
such securities shall have become effective under the Securities
Act and such securities shall have been disposed of in accordance
with such registration statement, (B) such securities shall have
been sold in accordance with Rule 144 (or any successor
provision) under the Securities Act or (C) such securities are
eligible to be resold pursuant to Rule 144(k).
(k) "Registration Expenses" shall mean all registration,
filing and stock exchange or NASD fees, all fees and expenses of
complying with securities or blue sky laws, all printing
expenses, messenger and delivery expenses, any fees and
disbursements of any separate counsel retained by Buyer, and
transfer taxes, if any, and any premiums and other costs of
policies of insurance obtained by Buyer against liabilities
arising out of the public offering of securities, including
Company Registration expenses, but specifically excludes any fees
and disbursements of underwriters customarily paid by sellers of
securities who are not the issuers of such securities and all
underwriting discounts and commissions.
(l) "Registration Suspension Period" shall have the meaning
set forth in Section 2(b).
(m) "Securities Act" shall mean the Securities Act of 1933,
as amended, and any successor thereto, and the rules and
regulations thereunder.
(n) "Stock Purchase Agreement" shall have the meaning set
forth in the second paragraph hereof.
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<PAGE>
(o) "Suspension Notice" shall have the meaning set forth in
Section 2(b).
(p) "Underwritten/Placed Offering" shall mean a sale of
securities of the Company to an underwriter or underwriters for
reoffering to the public or on behalf of a person other than the
Company through an agent for sale to the public.
Section 2. Demand Registration
(a) Obligation to File. At any time following the
Commencement Date, promptly upon the written request of Buyer,
the Company will use its reasonable best efforts to file with the
Commission a registration statement under the Securities Act for
the offering of all of the Registrable Securities which Buyer
requests to be registered (the "Demand Registration"). The Demand
Registration shall be on an appropriate form and the Demand
Registration and any form of prospectus included therein shall
reflect such plan of distribution or method of sale as Buyer
notifies the Company, including the sale of some or all of the
Registrable Securities in a public offering or, if requested by
Buyer, subject to receipt by the Company of such information
(including information relating to purchasers) as the Company
reasonably may require, (i) in a transaction constituting an
offering outside the United States which is exempt from the
registration requirements of the Securities Act in which the
seller undertakes to effect registration after the completion of
such offering in order to permit such shares to be freely
tradeable in the United States, (ii) in a transaction
constituting a private placement under Section 4(2) of the
Securities Act in connection with which the seller undertakes to
effect a registration after the conclusion of such placement to
permit such shares to be freely tradeable by the purchasers
thereof, or (iii) in a transaction under Rule 144A of the
Securities Act in connection with which the seller undertakes to
effect a registration after the conclusion of such transaction to
permit such shares to be freely tradeable by the purchasers
thereof. The Company shall use its reasonable best efforts to
cause the Demand Registration to become effective, and, upon the
request of Buyer, keep the Demand Registration effective for up
to 90 days, unless the distribution of securities registered
thereunder has been earlier completed; provided, however, that if
such Demand Registration will require the Company to prepare or
file audited financial statements with respect to any fiscal year
by a date prior to the date on which the Company would otherwise
be required to prepare and file such audited financial
statements, then Buyer must notify the Company at least thirty
days in advance of the date upon which such audited financial
statements will be required to be filed. During the period during
which the Demand Registration is effective, the Company shall
supplement or make amendments to the Demand Registration, if
required by the Securities Act or if reasonably requested by
Buyer or an underwriter of Registrable Securities, including to
reflect any specific plan of distribution or method of sale, and
shall use its reasonable best efforts to have such supplements
and amendments declared effective, if required, as soon as
practicable after filing.
(b) Black-Out Periods of Buyer. Notwithstanding anything
herein to the contrary, (i) the Company shall have the right from
time to time to require Buyer not
3
<PAGE>
to sell under the Demand Registration or to suspend the
effectiveness thereof during the period starting with the date 30
days prior to the Company's good faith estimate, as certified in
writing by an executive officer of the Company to Buyer, of the
proposed date of filing of a registration statement or a
preliminary prospectus supplement relating to an existing shelf
registration statement, in either case, pertaining to an
underwritten public offering of equity securities of the Company
for the account of the Company, and ending on the date 75 days
following the effective date of such registration statement or
the date of filing of the final prospectus supplement, and (ii)
the Company shall be entitled to require Buyer not to sell under
the Demand Registration or to suspend the effectiveness thereof
(but not for a period exceeding 75 days in any calendar year) if
the Company determines, in its good faith judgment, that such
offering or continued effectiveness would interfere with any
material financing, acquisition, disposition, corporate
reorganization or other material transaction involving the
Company or any of its subsidiaries or public disclosure thereof
would be required prior to the time such disclosure might
otherwise be required, or when the Company is in possession of
material information that it deems advisable not to disclose in a
registration statement.
Once any registration statement filed pursuant to this
Section 2 or in which Registrable Securities are included
pursuant to Section 3 has been declared effective, any period
during which the Company fails to keep such registration
statement effective and usable for resale of Registrable
Securities for the period required by Section 4(b) shall be
referred to as a "Registration Suspension Period". A Registration
Suspension Period shall commence on and include the date that the
Company gives written notice to Buyer of its determination that
such registration statement is no longer effective or usable for
resale of Registrable Securities (the "Suspension Notice") to and
including the date when the Company notifies Buyer that the use
of the prospectus included in such registration statement may be
resumed for the disposition of Registrable Securities.
(c) Number of Demand Registrations. The Company shall be
obligated to effect, under this Section 2, only six Demand
Registrations (no more than two of which may be requested in any
two-year period). A Demand Registration shall not be deemed to
have been effected, nor shall it be sufficient to reduce the
number of Demand Registrations available to Buyer under this
Section 2, if such registration cannot be used by Buyer for more
than 60 days as a result of any stop order, injunction or other
order of the Commission or other Government Authority for any
reason other than an act or omission of Buyer and all the
Registerable Securities registered thereunder are not sold.
(d) Size of Demand Registration. The Company shall not be
required to effect a Demand Registration of less than a fair
market value, based on the closing market price on the trading
day immediately prior to the date of notice (as reported in the
Wall Street Journal), of $10,000,000, except that if the fair
market value, based on the closing market price on the trading
day immediately prior to the date of notice (as reported in the
Wall Street Journal), of the Registrable Securities outstanding
is
4
<PAGE>
less than $10,000,000, then the Company shall be required to
effect a Demand Registration of all of the remaining Registrable
Securities outstanding.
(e) Notice. The Company shall give Buyer prompt notice in
the event that the Company has suspended sales of Registrable
Securities under Section 2(b).
(f) Expenses. All Registration Expenses incurred in
connection with the first three Demand Registrations which may be
requested under this Section 2 shall be borne by the Company,
with Buyer only paying underwriting fees and discounts. All
Registration Expenses and underwriting fees and discounts
incurred in connection with any further Demand Registrations
which may be requested under this Section 2 shall be borne by
Buyer.
(g) Selection of Underwriters. Any and all underwriters or
other agents involved in any sale of Registrable Securities
pursuant to a registration statement contemplated by this Section
2 shall include such underwriter(s) or other agent(s) as selected
by Buyer and approved of by the Company, which approval shall not
be unreasonably withheld; provided that any Affiliate of Buyer
shall in all events be approved by the Company.
Section 3. Incidental Registrations
(a) Notification and Inclusion. If the Company proposes to
register for its own account any common equity securities of the
Company or any securities convertible into common equity
securities of the Company under the Securities Act (other than a
registration relating solely to the sale of securities to
participants in a dividend reinvestment plan, a registration on
Form S-4 relating to a business combination or similar
transaction permitted to be registered on such Form S-4, a
registration on Form S-8 relating solely to the sale of
securities to participants in a stock or employee benefit plan, a
registration permitted under Rule 462 under the Securities Act
registering additional securities of the same class as were
included in an earlier registration statement for the same
offering, and declared effective), the Company shall, at each
such time after the Commencement Date until Buyer no longer holds
Registerable Securities, promptly give written notice of such
registration to Buyer. Upon the written request of Buyer given
within 10 days after receipt of such notice by Buyer, the Company
shall seek to include in such proposed registration such
Registrable Securities as Buyer shall request be so included and
shall use its reasonable best efforts to cause a registration
statement covering all of the Registrable Securities that Buyer
has requested to be registered to become effective under the
Securities Act. The Company shall be under no obligation to
complete any offering of securities it proposes to make under
this Section 3 and shall incur no liability to Buyer for its
failure to do so. If, at any time after giving written notice of
its intention to register any securities and prior to the
effective date of the registration statement filed in connection
with such registration, the Company shall determine for any
reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice
of such determi- nation to Buyer and, thereupon, (i) in the
5
<PAGE>
case of a determination not to register, the Company shall be
relieved of its obligation to register any Registrable Securities
in connection with such registration (but not from its obligation
to pay the Registration Expenses incurred in connection
therewith) and (ii) in the case of a determination to delay
registering, the Company shall be permitted to delay registering
any Registrable Securities for the same period as the delay in
registering such other securities.
(b) Cut-back Provisions. If a registration pursuant to this
Section 3 involves an Underwritten/Placed Offering of the
securities so being registered, whether or not solely for sale
for the account of the Company, which securities are to be
distributed by or through one or more underwriters of recognized
standing under underwriting terms customary for such transaction,
and the underwriter or the managing underwriter, as the case may
be, of such Underwritten/ Placed Offering shall inform the
Company of its belief that the amount of securities requested to
be included in such registration or offering exceeds the amount
which can be sold in (or during the time of) such offering
without delaying or jeopardizing the success of the offering
(including the price per share of the securities to be sold),
then the Company will include in such registration (i) first, all
the securities of the Company which the Company proposes to sell
for its own account or the account of others (other than Buyer)
requesting inclusion in such registration pursuant to rights to
registration on request, and (ii) second, to the extent of the
amount which the Company is so advised can be sold in (or during
the time of) such offering, Registrable Securities and other
securities requested to be included in such registration, pro
rata among Buyer and others exercising incidental registration
rights, on the basis of the shares of Company Common Stock owned
by all such persons.
(c) Expenses. The Company shall bear and pay all Company
Registration Expenses incurred in connection with any
registration of Registrable Securities pursuant to this Section 3
for Buyer, and all Registration Expenses incurred in connection
with any registration of any securities for the Company's own
account referred to in the first sentence of Section 3(a), and
Buyer shall bear and pay all Registration Expenses (other than
Company Registration Expenses) and all underwriting fees and
discounts incurred in connection with any registration of
Registrable Securities pursuant to this Section 3 for Buyer.
(d) Duration of Effectiveness. At the request of Buyer, the
Company shall, subject to Section 2(b), use its reasonable best
efforts to keep any registration statement for which Registrable
Securities are included under this Section 3 effective and usable
for up to 90 days (subject to extension for the length of any
Registration Suspension Period), unless the distribution of
securities registered thereunder has been earlier completed;
provided, however, that in no event will the Company be required
to prepare or file audited financial statements with respect to
any fiscal year by a date prior to the date on which the Company
would be so required to prepare and file such audited financial
statements if such registration statement were no longer
effective and usable.
6
<PAGE>
Section 4. Registration Procedures. In connection with the
filing of any registration statement as provided in Section 2 or 3,
the Company shall use its reasonable best efforts to, as expeditiously
as reasonably practicable:
(a) prepare and file with the Commission the requisite
registration statement (including a prospectus therein) to effect
such registration and use its reasonable best efforts to cause
such registration statement to become effective, provided that
before filing such registration statement or any amendments or
supplements thereto, the Company will furnish to the counsel
selected by Buyer copies of all such documents proposed to be
filed, which documents will be subject to the review of such
counsel before any such filing is made, and the Company will
comply with any reasonable request made by such counsel to make
changes in any information contained in such documents relating
to Buyer;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to maintain the
effectiveness of such registration and to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement until
the earlier of such time as all of such securities have been
disposed of and the date which is 90 days after the date of
initial effectiveness of such registration statement;
(c) furnish to Buyer such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of
copies of the prospectus contained in such registration
statements (including each complete prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, including documents
incorporated by reference, as Buyer may reasonably request;
(d) register or qualify all Registrable Securities under
such other securities or blue sky laws of such jurisdictions as
Buyer shall reasonably request, to keep such registration or
qualification in effect for so long as such registration
statement remains in effect, and take any other action which may
be reasonably necessary or advisable to enable Buyer to
consummate the disposition in such jurisdictions of the
securities owned by Buyer, except that the Company shall not for
any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this paragraph be obligated to be so
qualified, or to consent to general service of process in any
such jurisdiction, or to subject the Company to any material tax
in any such jurisdiction where it is not then so subject;
(e) cause all Registrable Securities covered by such
registration statement to be registered with or approved by such
other Government Authority as may be reasonably necessary to
enable Buyer to consummate the disposition of such Registrable
Securities;
7
<PAGE>
(f) furnish to Buyer a signed counterpart, addressed to
Buyer (and the underwriters, if any), of
(i) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated
the date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to Buyer, and
(ii) to the extent permitted by then applicable rules
of professional conduct, a "comfort" letter, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated
the date of the closing under the underwriting agreement),
signed by the independent public accountants who have
certified the Company's financial statements included in
such registration statement, covering substantially the same
matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to
the date of such financial statements, all as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
(g) immediately notify Buyer at any time when the Company
becomes aware that a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under
which they were made, and at the request of Buyer promptly
prepare and furnish to Buyer a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of
such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under
which they were made;
(h) comply or continue to comply in all material respects
with the Securities Act and the Exchange Act and with all
applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least 12 months, but not more than 18 months, beginning with the
first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act, and not
file any amendment or supplement to such registration statement
or prospectus to which Buyer shall have reasonably objected on
the grounds that such amendment or supplement does not comply in
all material respects with the requirements of the Securities
Act, having
8
<PAGE>
been furnished with a copy thereof at least five Business Days
prior to the filing thereof;
(i) provide a transfer agent and registrar for all
Registrable Securities covered by such registration statement not
later than the effective date of such registration statement; and
(j) list all Company Common Stock covered by such
registration statement on any securities exchange on which any of
the Company Common Stock is then listed.
Buyer shall furnish in writing to the Company such information
regarding Buyer (and any of its affiliates), the Registrable
Securities to be sold, the intended method of distribution of such
Registrable Securities, and such other information requested by the
Company as is necessary for inclusion in the registration statement
relating to such offering pursuant to the Securities Act and the rules
of the Commission thereunder. Such writing shall expressly state that
it is being furnished to the Company for use in the preparation of a
registration statement, preliminary prospectus, supplementary
prospectus, final prospectus or amendment or supplement thereto, as
the case may be.
Buyer agrees by acquisition of the Registrable Securities that
upon receipt of any notice from the Company of the happening of any
event of the kind described in paragraph (g) of this Section 4, Buyer
will forthwith discontinue its disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable
Securities until Buyer's receipt of the copies of the supplemented or
amended prospectus contemplated by paragraph (g) of this Section 4.
Section 5. Requested Underwritten Offerings. If requested by
the underwriters for any underwritten offerings by Buyer, under a
registration requested pursuant to Section 2(a), the Company will
enter into a customary underwriting agreement with such underwriters
for such offering, to contain such representations and warranties by
the Company and such other terms as are customarily contained in
agreements of this type, including indemnities to the effect and to
the extent provided in Section 7. Buyer shall be a party to such
underwriting agreement and may, at its option, require that any or all
of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the
obligations of Buyer. Buyer shall not be required to make any
representations or warranties to or agreement with the Company or the
underwriters other than representations, warranties or agreements
regarding Buyer and Buyer's intended method of distribution and any
other representation or warranty required by law.
Section 6. Preparation; Reasonable Investigation. In
connection with the preparation and filing of the registration
statement under the Securities Act, the Company will give Buyer, its
underwriters, if any, and their respective counsel, the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will
9
<PAGE>
give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its
officers, its counsel and the independent public accountants who have
certified its financial statements as shall be necessary, in the
opinion of Buyer's and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the
Securities Act.
Section 7. Indemnification
(a) Indemnification by the Company. In the event of any
registration of any Registrable Securities of the Company under
the Securities Act, the Company will, and hereby does, indemnify
and hold harmless Buyer, each other person who participates as an
underwriter in the offering or sale of such securities and each
other person who controls any such underwriter within the meaning
of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which Buyer or any such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in the registration statement under
which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the
Company will reimburse Buyer and each such underwriter and
controlling person for any reasonable legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceedings;
provided, however, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information
furnished to the Company by Buyer or any other person who
participates as an underwriter in the offering or sale of such
securities, in either case, specifically stating that it is for
use in the preparation thereof, and provided, further, that the
Company shall not be liable to any person who participates as an
underwriter in the offering or sale of Registrable Securities or
any other person, if any, who controls such underwriter within
the meaning of the Securities Act in any such case to the extent
that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such
person's failure to send or give a copy of the final prospectus
or supplement to the persons asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable
Securities to such person if such statement or omission was
corrected in such final prospectus or supplement. Such indemnity
shall remain in full force and effect regardless of any
investigation made by or on behalf of Buyer or any such
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<PAGE>
underwriter or controlling person and shall survive the transfer
of such securities by Buyer.
(b) Indemnification by Buyer. The Buyer will, and hereby
does, indemnify and hold harmless (in the same manner and to the
same extent as set forth in paragraph (a) of this Section 7) the
Company, each director of the Company, each officer of the
Company and each other person, if any, who controls the Company
within the meaning of the Securities Act, and each other person
who participates as an underwriter in the offering or sale of
such securities and each other person who controls any such
underwriter within the meaning of the Securities Act, with
respect to any untrue statement or alleged untrue statement of a
material fact in or omission or alleged omission to state a
material fact from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such untrue
statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company by Buyer specifically
stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director,
officer, or controlling person and shall survive the transfer of
such securities by Buyer.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding
paragraphs of this Section 7, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the
preceding paragraphs of this Section 7, except to the extent that
the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying
party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified party
for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than
reasonable costs of investigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Section 7 (with
appropriate modifications) shall be given by the Company and
Buyer with respect to any required registration or other
qualification of securities under any federal or state law or
regulation of Governmental Authority other than the Securities
Act.
11
<PAGE>
(e) Indemnification Payments. The indemnification required
by this Section 7 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense,
as and when bills are received or expense, loss, damage or
liability is incurred.
(f) Contribution. If, for any reason, the foregoing
indemnity is unavailable, or is insufficient to hold harmless an
indemnified party, then the indemnifying party shall contribute
to the amount paid or payable by the indemnified party as a
result of the expense, loss, damage or liability, (i) in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on
the other (determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
or omission relates to information supplied by the indemnifying
party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission), or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in the proportion as is
appropriate to reflect not only the relative fault of the
indemnifying party and the indemnified party, but also the
relative benefits received by the indemnifying party on the one
hand and the indemnified party on the other, as well as any other
relevant equitable considerations. No indemnified party guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
indemnifying party who was not guilty of such fraudulent
misrepresentation.
Section 8. Covenants Relating to Rule 144. The Company will
file in a timely manner (taking into account any extensions granted by
the Commission), information, documents and reports in compliance with
the Exchange Act and will, at its expense, forthwith upon the request
of Buyer, deliver to Buyer a certificate, signed by the Company's
principal financial officer, stating (a) the Company's name, address
and telephone number (including area code), (b) the Company's Internal
Revenue Service identification number, (c) the Company's Commission
file number, (d) the number of shares of Company Common Stock and the
number of shares of Company Preferred Stock outstanding as shown by
the most recent report or statement published by the Company, and (e)
whether the Company has filed the reports required to be filed under
the Exchange Act for a period of at least 90 days prior to the date of
such certificate and in addition has filed the most recent annual
report required to be filed thereunder. If at any time the Company is
not required to file reports in compliance with either Section 13 or
Section 15(d) of the Exchange Act, the Company will, at its expense,
forthwith upon the written request of Buyer, make available adequate
current public information with respect to the Company within the
meaning of paragraph (c)(2) of Rule 144 of the General Rules and
Regulations promulgated under the Securities Act.
Section 9. Miscellaneous
(a) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement, and shall
12
<PAGE>
become effective when one or more counterparts have been signed
by each of the parties and delivered to the other party. Copies
of executed counterparts transmitted by telecopy, telefax or
other electronic transmission service shall be considered
original executed counterparts for purposes of this Section 9,
provided receipt of copies of such counterparts is confirmed.
(b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
(c) Entire Agreement. This Agreement (including agreements
incorporated herein) contains the entire agreement between the
parties with respect to the subject matter hereof and there are
no agreements or understandings between the parties other than
those set forth or referred to herein. This Agreement is not
intended to confer upon any person not a party hereto (and their
successors and assigns) any rights or remedies hereunder.
(d) Notices. All notices and other communications hereunder
shall be sufficiently given for all purposes hereunder if in
writing and delivered personally, sent by documented overnight
delivery service or, to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the
appropriate address or number as set forth below. Notices to the
Company shall be addressed to:
Alexander Haagen Properties, Inc.
3500 Sepulveda Boulevard
Manhattan Beach, CA 90266-3696
Attention: Alexander Haagen, Sr.
Telecopy Number: (310) 545-6354
with a copy to:
Latham & Watkins
633 W. Fifth Street, Suite 4000
Los Angeles, CA 90071
Attention: John M. Newell, Esq.
Telecopy Number: (213) 891-8763
or at such other address and to the attention of such other person as
the Company may designate by written notice to Buyer. Notices to Buyer
shall be addressed to:
Prometheus Western Retail, LLC
c/o Lazard Freres Real Estate Investors, LLC
Thirty Rockefeller Plaza, 63rd Floor
New York, NY 10020
Attention: Arthur P. Solomon
13
<PAGE>
Telecopy Number: (212) 632-6052
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Kevin Grehan, Esq.
Telecopy Number: (212) 474-3700
(e) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors. Neither party shall be permitted to assign
any of its rights hereunder to any third party, except that if
(i) Buyer transfers or pledges any or all Registrable Securities
to a bona fide financial institution as security for any bona
fide indebtedness of any Buyer and such financial institution
agrees to be bound by the Stockholders Agreement, the pledgee of
the Registrable Securities shall be considered an intended
beneficiary hereof and may exercise all rights of Buyer
hereunder, and (ii) any person included within the definition of
the term Buyer shall be permitted to assign its rights hereunder
to any other person included within such definition.
(f) Headings. The Section and other headings contained in
this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement.
All references to Sections or other headings contained herein
mean Sections or other headings of this Agreement unless
otherwise stated.
(g) Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in
writing signed by the party against whom enforcement of any such
modification or amendment is sought. Either party hereto may,
only by an instrument in writing, waive compliance by the other
party hereto with any term or provision hereof on the part of
such other party hereto to be performed or complied with. The
waiver by any party hereto of a breach of any term or provision
hereof shall not be construed as a waiver of any subsequent
breach.
(h) Interpretation; Absence of Presumption. For the purposes
hereof, (i) words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to
include the other gender as the context requires, (ii) the terms
"hereof", "herein", and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and Section, paragraph or other references are to the
Sections, paragraphs, or other references to this Agreement
unless otherwise specified, (iii) the word "including" and words
of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise
requires or unless otherwise specified, (iv) the word "or" shall
not be exclusive, and (v) provisions shall apply, when
appropriate, to successive events and transactions.
14
<PAGE>
This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be
drafted.
(i) Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such
invalidity or unenforceability, without affecting in any way the
remaining provisions hereof.
15
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the day first above
written.
ALEXANDER HAAGEN PROPERTIES, INC.
By: /s/ ALEXANDER HAAGEN SR.
-----------------------------------------
Name: Alexander Haagen, Sr.
Title: Chairman, President and Chief
Executive Officer
PROMETHEUS WESTERN RETAIL, LLC
by: LF Strategic Realty Investors, L.P.,
its member
by: Lazard Freres Real Estate
Investors, LLC, its general
partner
By: /s/ ANTHONY E. MEYER
-----------------------------------------
Name: Anthony E. Meyer
Title: Chief Investment Officer
16
<PAGE>
EXHIBIT 4
TAG-ALONG AGREEMENT made this 1st day of June, 1997
between certain holders of shares of the outstanding voting
Common Stock, $0.01 par value per share ("Common Stock"), of
Alexander Haagen Properties, Inc., a Maryland corporation (the
"Company"), set forth on the signature page hereof (each, a
"Stockholder" and, collectively, the "Stockholders"), and LF
Strategic Realty Investors L.P., a Delaware limited partnership
and Prometheus Western Retail, LLC, a Delaware limited liability
company (each, an "Investor" and, collectively, the "Investors").
R E C I T A L S
A. Concurrently with the execution of this Agreement,
pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement") dated as of June 1, 1997, between the Company and
certain of the Investors, the parties thereto entered into a
series of transactions, including the sale to the Investor of
certain shares of the Company's Common Stock (all such
transactions between the Company and the Investors are
hereinafter collectively referred to as the "Transactions").
B. As a condition to the Stock Purchase Agreement, the
Company and the Investors entered into a Stockholders' Agreement
(the "Investors' Stockholders' Agreement") and a Registration
Rights Agreement (the "Investors' Registration Agreement"), each
dated as of June 1, 1997 providing for certain rights and
restrictions with respect to the investment in the Company by the
Investors.
C. Concurrently with the execution of this Agreement, the
Stockholders, the Company and the Investors have entered into a
Stockholders' Voting Agreement (the "Voting Agreement") and a
Stockholders' Agreement (the "Stockholders' Agreement") pursuant
to which the Stockholders agreed to vote in favor of the
transactions and providing for certain rights for the
Stockholders with respect to the investment in the Company by the
Investors. In addition, the Company and the Stockholders have
entered into a Registration Rights Agreement dated as of June 1,
1997 (the "Stockholders Registration Agreement") providing for
certain rights and restrictions for the Stockholders.
D. As a condition to the Voting Agreement, the Company and
certain of the Stockholders have entered into employment
agreements, effective upon the approval of the Transactions by
the Company's shareholders.
<PAGE>
E. In order to induce the Investors to enter into the
Transactions and to induce the Stockholders to support the
Transactions, the Stockholders and Investors have agreed to grant
each other certain tag-along rights with respect to the shares of
the Common Stock, $0.01 par value per share, of the Company (the
"Common Stock") that each of them now or hereafter beneficially
owns, including the partnership units of the Alexander Haagen
Properties Operating Partnership, L.P., or the issued and
outstanding shares of Common Stock as well as shares of Common
Stock that may be issued hereafter upon the exercise of options,
stock dividends, distributions, subdivisions, combinations,
reclassifications, or otherwise (the shares subject to the
tag-along rights are hereinafter referred to as the "Subject
Stock").
NOW, THEREFORE, in consideration of the premises and
the mutual agreements herein set forth, the parties hereto agree as
follows:
1. Stockholders Transfer Restrictions. For so long as the
Stockholders own, in the aggregate, 5% or more of the Common
Stock, on a fully diluted basis, each Stockholder agrees that it
will not offer, sell, transfer, assign or otherwise dispose of
(collectively, "Transfer") by means of a firm commitment
underwriting, other than Transfers equal to or less than
1,000,000 shares of the Subject Stock or Transfers undertaken
solely for estate planning or to solely satisfy tax obligations
of the Stockholders, any of the Subject Stock without complying
with the provisions of Section 2 below.
2. Tag-Along Procedures.
(a) The Investors' right to participate in any
Transfers of the Subject Stock by the Stockholders shall be
governed by the provisions set forth below.
(b) In the event any of the stockholders desires to
Transfer any of the Subject Stock, such Stockholders shall notify
the Investors in writing of each such proposed Transfer. Such
notice shall set forth: (1) the number of shares of the Subject
Stock proposed to be Transferred; (ii) the proposed amount of
consideration and other material terms and conditions of the
transaction offered by the underwriters, including, without
limitation, the scheduled closing date, if any (the "Terms"); and
(iii) the aggregate number of shares the transferee may purchase
from the Investors (the "Maximum Tag-Along") which number shall
be equal to the lesser of (i) 10% of the number of shares of the
Subject Stock or (ii) the total number of shares of
<PAGE>
Common Stock beneficially owned by the Investors (the "Investors
Stock").
(c) The tag-along right may be exercised by the Investors,
acting together but not separately, by delivery of a written notice to
the Stockholders (the "Tag-Along Notice") within 10 business days
following receipt of the notice specified in Section 2(b) which notice
shall state the number of shares of Common Stock (which may not exceed
the Maximum Tag-Along) that the investors wish to include in such
Transfer to the underwriters pursuant to the Terms.
(d) Upon the giving of a Tag-Along Notice, the
Investors shall be unconditionally obligated to sell the number
of shares of Common Stock set forth in the Tag-Along Notice to
the underwriters subject to the Terms and shall execute the
underwriting agreement required by such underwriters on the terms
and conditions negotiated by the Stockholders. If Investor has
not provided the Tag-Along Notice within the 10 business-day
period referred to above, the Stockholders shall have the right
to Transfer up to that number of shares of the Subject Stock as
was specified pursuant to Section 7(b)(i) to the underwriters on
the Terms without further notice to Investor.
(e) At the closing of the tag-along sale to any
underwriters (of which the Stockholders shall give the Investors,
if the Investors provided the Tag-Along Notice, at least three
business days' prior written notice), the documentation of such
transaction shall provide that the underwriters shall remit to
the Investors the consideration (payable in funds available no
later than any funds paid to the Stockholders in connection with
their concurrent sale of shares) for the sales price of the
shares of the Common stock of the Investors sold pursuant hereto,
upon execution by the Investors of certificates or other
instruments representing the Common Stock, appropriately endorsed
or executed by such Investor sufficient to Transfer ownership of
such Common Stock to the underwriters or their designees.
3. Investor Transfer Restrictions. So long as any of the
Stockholders remain active in the management of the Company or
the Stockholders own, in the aggregate, 5% or more of the Common
Stock, on a fully diluted basis, each Investor agrees that it
will not, directly or indirectly, Transfer any of the Subject
Stock without complying with the provisions of Section 4 below.
<PAGE>
4. Stockholders Tag-Along Procedures.
(a) The Stockholders' right to participate in any
Transfers of the Subject Stock by the Stockholders shall be
governed by the provisions set forth below.
(b) In the event an Investor desires to Transfer any of
the Subject Shares, the Investors shall notify the Stockholders
in writing of each such proposed Transfer. Such notice shall set
forth: (i) the number of shares of the Subject Stock proposed to
be transferred; (ii) the proposed amount and form of
consideration and other material terms and conditions of the
transaction offered by the transferee, including, without
limitation, the scheduled closing date, if any (the "Terms"); and
(iii) the number of shares the transferee may purchase from the
Stockholders (the "Maximum Tag-Along") which number shall be
equal to the lesser of (i) 25% of the number of shares of the
Subject Stock proposed to be Transferred and (ii) the total
number of shares of Common Stock beneficially owned by the
Stockholders (the "Family Stock").
(c) The Tag-along right may be exercised by the
Stockholders by delivery of a written notice to the Investors
(the "Tag-Along Notice") within 10 business days following
receipt of the notice specified in Section 4(b) which notice
shall state the number of shares of Common Stock (which may not
exceed the Maximum Tag-Along) that the Stockholders wish to
include in such Transfer to the transferee pursuant to the Terms.
(d) Upon the giving of a Tag-Along Notice, the
Stockholders shall be unconditionally obligated to sell the
number of shares of Common Stock set forth in the Tag-Along
Notice to the transferee subject to the Terms. If a Stockholder
has not provided the Tag-Along Notice within the 10 business-day
period referred to above, the Investors shall have the right to
Transfer up to that number of shares of the Subject Stock as was
specified pursuant to Section 4(b)(i) to the transferee on the
Terms without further notice to the Stockholders.
(e) At the closing of the tag-along sale to any
transferee (of which the Investors shall give the Stockholders,
if Investor provided the Tag-Along Notice, at least three
business days' prior written notice), the documentation of such
transaction shall provide that the transferee shall remit to the
Stockholders the consideration (payable, and if the consideration
includes cash, in funds available no later than any funds paid to
the Investors in
<PAGE>
connection with his concurrent sale of shares) for the sales
price of the shares of the Common Stock of Investor sold pursuant
hereto, upon execution by the Stockholders of certificates or
other instruments representing the Common Stock, appropriately
endorsed or executed by such Investor sufficient to Transfer
ownership of such Common Stock to the transferee.
5. Holdback Events.
Each of the Stockholders and Investors (collectively,
the "Holders") shall not, if requested (pursuant to a timely
written notice) by the managing underwriter or underwriters of an
underwritten offering of Subject Stock (an "Underwritten
Offering"), effect any public or private sale of any Common
Stock, including a sale pursuant to Rule 144 or Rule 144A, during
the period ("Holdback Period") beginning 14 days prior to, and
ending 90 days after, the effective date of the registration
statement relating to such Underwritten Offering; provided,
however, that this Section 5 shall not preclude or in any way
restrict:
(a) any sale by one or more Stockholders in a single,
privately negotiated block trade of Common Stock aggregating more
than 5% of the Common Stock then outstanding and such purchaser
agrees to be bound by the restrictions of this Section 5;
(b) any sale by any Holder who, immediately prior to
such sale, beneficially owns (directly or indirectly) through
affiliates or otherwise less than 5% of the Common Stock then
outstanding; and
(c) any sale by the Holders unless the Company shall
have obtained from each beneficial owner of 5% or more of the
Common Stock then outstanding written agreements applicable to
such Underwritten Offering on terms substantially similar to
those of this Section 5.
The foregoing provisions shall not apply to any Holder
if such Holder is prevented by applicable statute or regulation
from entering into such agreement provided, however, that any
such Holder shall undertake, in its request to participate in any
Underwritten Offering, not to effect any public sale or
distribution of any commencing on the date of sale of such
Subject Stock unless it has provided 45 days' prior written
notice of such sale or distribution to the underwriter or
underwriters.
<PAGE>
The aggregate number of days during which one or more
Holdback Periods are in effect shall not exceed 104 days during
any 12-month period.
6. Miscellaneous.
(a) Remedies. Each party hereto, in addition to being
entitled to exercise all rights provided herein and granted by
law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Stockholders
and the Investors agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach
by the other of the provisions of this Agreement and hereby
agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the
Stockholders nor the Investors will on or after the date of this
Agreement enter into any agreement with respect to the Subject
Stock which is inconsistent with the rights granted to the other
in this Agreement or otherwise conflicts with the provisions
hereof. Each of the Stockholders and the Investors represents and
warrants to the other that the rights granted herein do not in
any way conflict with and are not inconsistent with the rights
granted to any other persons or entities by the Stockholder or
Investor, as the case may be, with respect to the Subject Stock.
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the
parties hereto agree in writing.
(d) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered First-class mail, telex, telecopier, or
air courier guaranteeing overnight delivery:
If to the Stockholders: Mr. Alexander Haagen
c/o Alexander Haagen
Properties, Inc.
3500 Sepulveda Boulevard
Manhattan Beach, California
90266
<PAGE>
with a copy to: Stroock & Stroock & Lavan
2029 Century Park East
Suite 1800
Los Angeles, California 90067
Attention: Glenn D. Smith, Esq.
If to the Investors: LF Strategic Realty Investors
L.P.
Thirty Rockefeller Plaza
63rd Floor
New York, New York 10020
Attention: Arthur P. Solomon
with a copy to: Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: Kevin Grehan, Esq.
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if
personally delivered; five business days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier
guaranteeing overnight delivery.
(e) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the permitted successors
and assigns of each of the parties. Without the prior written
consent of the other parties hereto, this Agreement may not be
assigned by any Investor or any Stockholder, other than to
another Investor or another Stockholder or an affiliate of any of
them (as such term is defined for purposes of the Securities
Exchange Act of 1934, as amended).
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(h) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California.
<PAGE>
(i) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or
referred to herein with respect to the tag-along rights granted
by the Stockholders with respect to the Subject Stock. This
Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above
written.
LF STRATEGIC REALTY INVESTORS L.P.
By: LAZARD FRERES REAL ESTATE
INVESTORS, LLC
Its: General Partner
By: /s/ Anthony E. Meyer
------------------------------
Anthony E. Meyer
Its: Chief Investment Officer
PROMETHEUS WESTERN RETAIL, LLC
By: LF STRATEGIC REALTY INVESTORS
L.P.
Its: Member
By: LAZARD FRERES REAL ESTATE
INVESTORS, LLC
Its: General Partner
By: /s/ Anthony E. Meyer
-------------------------------
Anthony E. Meyer
Its: Chief Investment Officer
STOCKHOLDERS:
/s/ Alexander Haagen
---------------------------------------
Alexander Haagen
/s/ Charlotte Haagen
---------------------------------------
Charlotte Haagen
/s/ Alexander Haagen, III
---------------------------------------
Alexander Haagen, III
The Haagen Living Trust dated
August 17, 1988
By: /s/ Alexander Haagen
------------------------------------
Alexander Haagen, Co-Trustee
<PAGE>
/s/ Autumn Haagen
---------------------------------------
Autumn Haagen
/s/ Alexander Haagen, III
---------------------------------------
Alexander Haagen III & Betty Haagen
Tr fbo Alexander Haagen IV UA
10/24/88
/s/ Alexander Haagen, III
---------------------------------------
Alexander Haagen III & Betty Haagen
Tr fbo Andrew Haagen UA 10/28/88
/s/ Alexander Haagen, III
---------------------------------------
Alexander Haagen III & Betty Haagen
Tr fbo Autumn Haagen UA 10/24/88
<PAGE>
EXHIBIT 5
STOCKHOLDERS' VOTING AGREEMENT
STOCKHOLDERS' VOTING AGREEMENT made this 1st day of June,
1997 between certain holders of the shares of the outstanding
voting Common Stock, $0.01 par value per share ("Common Stock"),
of the Company (as defined below) set forth on the signature page
hereof (each, a "Stockholder" and, collectively, the
"Stockholders"), and LF Strategic Realty Investors L.P., a
Delaware limited partnership and Prometheus Western Retail, LLC,
a Delaware limited liability company (each, an "Investor" and,
collectively, the "Investors").
R E C I T A L S
A. Concurrently with the execution of this Agreement,
pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement") dated as of June 1, 1997, between Alexander Haagen
Properties, Inc., a Maryland corporation (the "Company"), and
certain of the Investors, the parties thereto entered into a
series of transactions, including the sale to certain of the
Investors of certain shares of the Company's Common Stock (all
such transactions between the Company and the Investors are
hereinafter collectively referred to as the "Transactions").
B. As a condition to the Stock Purchase Agreement, the
Company and the Investors entered into a Stockholder's Agreement
(the "Investors' Stockholders' Agreement") dated as of June 1,
1997 providing for certain rights and restrictions with respect
to the investment in the Company by the Investors.
C. Concurrently with the execution of this Agreement, the
Stockholders, the Company and the Investors have entered into the
Stockholders' Agreement dated as of June 1, 1997 (the
"Stockholders' Agreement") providing for certain rights for the
Stockholders with respect to the investment in the Company by the
Investors.
D. As a condition to this Agreement, the Company and certain
of the Stockholders have entered into employment agreements,
effective upon the approval of the Transactions by the Company's
shareholders.
E. As of the date hereof, the Stockholders beneficially own
an aggregate of approximately 27% of the outstanding shares of
Common Stock.
<PAGE>
F. As an additional inducement to the Investors to enter
into the Transactions, each of the Stockholders have agreed to
vote in favor of the Transactions on the terms set forth below.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Voting of Shares. During the term of this Agreement for
so long as such Stockholder shall be the owner of any Shares (as
hereinafter defined), each of the Stockholders covenants and
agrees with each other Stockholder and the Investors, to vote
(which term shall include taking action without a meeting by
written consent) such number of Shares that may be voted by such
Stockholder in favor of (i) the Transactions and (ii) the
election of Directors of the Company (a) nominated by the
Nominating Committee of the Board and (b) the Investor Nominees,
each as provided in Section 2.1(a) of the Investors'
Stockholders' Agreement.
2. Shares. The term "Shares" as used herein shall mean any
and all shares of capital stock of the Company which carry voting
rights (including any voting rights which arise by reason of
default) and shall include shares of Common Stock now owned or
subsequently acquired by a Stockholder through purchase, gift,
stock splits, stock dividends and exercise of stock options;
provided, however, nothing contained herein shall be construed as
to restrict the ability of a Stockholder to sell, transfer or
otherwise dispose of any Shares owned by such Stockholder subject
to the terms.
3. Termination. This Agreement shall terminate concurrently
with the termination of the Investors' Stockholders' Agreement.
Notwithstanding anything to the contrary contained herein,
no transferee of any Shares (other than another Stockholder or to
an affiliate or associate thereof (as such terms are defined in
the Securities Exchange Act of 1934, as amended)) shall be
obligated to vote such Shares in accordance with the terms of
this Agreement.
4. Condition to Agreement. This Agreement and the voting
agreements contained herein shall not be effective
<PAGE>
until the employment agreements with each of Alexander Haagen,
Charlotte Haagen and Alexander Haagen III shall have been entered
into by each of them, in form and substance satisfactory to them,
and the Company following the approval by the Company's Board of
Directors, or any duly authorized committee thereof.
5. No Revocation. The voting agreements contained herein are
coupled with an interest and may not be revoked prior to
termination in accordance with Section 3, except by written
consent of the Investors, the Company and the Stockholders owning
a majority of the Shares.
6. General.
(a) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Maryland, without regard to any principles of conflicts of law.
(b) Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall
be deemed given if delivered personally or by facsimile
transmission (with subsequent letter confirmation by mail) or
three days after being mailed by certified or registered mail,
postage prepaid, return receipt requested, to the parties, their
successors in interest or their assigns at the following
addresses, or at such other addresses as the parties may
designate by written notice in the manner aforesaid:
If to the Stockholders: Alexander Haagen
c/o Alexander Haagen Properties,
Inc.
3500 Sepulveda Boulevard
Manhattan Beach, California 90266
with a copy to: Stroock & Stroock & Lavan
2029 Century Park East
Suite 1800
Los Angeles, California 90067
Attention: Glenn D. Smith, Esq.
If to the Investors: LF Strategic Realty Investors L.P.
Thirty Rockefeller Plaza
63rd Floor
New York, New York 10020
Attention: Arthur P. Solomon
<PAGE>
with a copy to: Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: Kevin Grehan, Esq.
(c) Entire Agreement. This Agreement contains the
entire understanding among the parties hereto and supersedes any
prior understandings and agreements, either oral or written,
between or among the parties hereto relating to the subject
matter hereof.
(d) Equitable Remedies. In addition to legal remedies,
in recognition of the fact that remedies at law may not be
sufficient, the parties (and their permitted successors and
assigns) shall be entitled to equitable remedies for breaches or
defaults hereunder, including, without limitation, specific
performance and injunction.
(e) Amendment. No amendment, modification or
termination of any provision of this Agreement shall be valid
unless in writing and signed by the Investors, the Company and
Stockholders owning a majority of the Shares.
(f) Binding Agreement; Successors and Assigns. This
Agreement shall be binding upon the parties hereto and their
respective successors and legal representatives; provided,
however, that the rights and obligations of the Investors under
this Agreement shall not be assigned to any party other than: (i)
to an affiliate of the Investors or to any entity with which the
Investors merges or combines; or (ii) with the consent of the
Stockholders owning a majority of the Shares.
(g) Counterparts. This Agreement may be executed in
several counterparts, and as so executed shall constitute one
agreement, binding on all of the parties hereto, notwithstanding
that all the parties are not a signatory to the original or the
same counterparts.
(h) No Waiver; Cumulative Remedies. No failure or delay
on the part of any party in exercising any right, power or remedy
hereunder shall, except to the extent expressly provided herein,
operate as a waiver hereof; nor shall any single or partial
exercise of any right, power or remedy preclude any other future
exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(i) Severability. The provisions of this Agreement are
severable, and if any clause or provision of
<PAGE>
this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such clause or provision shall,
as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting
the validity or unenforceability of such clause or provision in
any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the day and year first above written.
LF STRATEGIC REALTY INVESTORS L.P.
By: LAZARD FRERES REAL ESTATE
INVESTORS, LLC
Its: General Partner
By: /s/ Anthony E. Meyer
---------------------------
Anthony E. Meyer
Its: Chief Investment Officer
PROMETHEUS WESTERN RETAIL, LLC
By: LF STRATEGIC REALTY INVESTORS
L.P.
Its: Member
By: LAZARD FRERES REAL ESTATE
INVESTORS, LLC
Its: General Partner
By: /s/ Anthony E. Meyer
---------------------------
Anthony E. Meyer
Its: Chief Investment Officer
STOCKHOLDERS:
/s/ Alexander Haagen
------------------------------
Alexander Haagen
/s/ Charlotte Haagen
------------------------------
Charlotte Haagen
/s/ Alexander Haagen, III
------------------------------
Alexander Haagen, III
<PAGE>
The Haagen Living Trust dated
August 17, 1988
By: /s/ Alexander Haagen
----------------------------
Alexander Haagen, Co-Trustee
/s/ Autumn Haagen
------------------------------
Autumn Haagen
/s/ Alexander Haagen, III
------------------------------
Alexander Haagen III & Betty Haagen
Tr fbo Alexander Haagen IV UA
10/24/88
/s/ Alexander Haagen, III
------------------------------
Alexander Haagen III & Betty Haagen
Tr fbo Andrew Haagen UA 10/28/88
/s/ Alexander Haagen, III
------------------------------
Alexander Haagen III & Betty
Haagen
Tr fbo Alexander Haagen UA 10/24/88
<PAGE>
EXHIBIT 6
STOCKHOLDERS' AGREEMENT
-----------------------
STOCKHOLDERS' AGREEMENT made this 1st day of June, 1997
between Alexander Haagen Properties, Inc., a Maryland corporation
(the "Company"), certain holders of shares of the outstanding
voting Common Stock, $0.01 par value per share ("Common Stock"),
of the Company set forth on the signature page hereof (each, a
"Stockholder" and, collectively, the "Stockholders"), and LF
Strategic Realty Investors L.P., a Delaware limited partnership
and Prometheus Western Retail, LLC, a Delaware limited liability
company (each, an "Investor" and, collectively, the "Investors").
R E C I T A L S
A. Concurrently with the execution of this Agreement,
pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement") dated as of June 1, 1997, between the Company and
certain of the Investors, the parties thereto entered into a
series of transactions, including the sale to the Investors of
certain shares of the Company's Common Stock (all such
transactions between the Company and the Investors are
hereinafter collectively referred to as the "Transactions").
B. As a condition to the Stock Purchase Agreement, the
Company and the Investors entered into a Stockholder's Agreement
(the "Investors' Stockholders' Agreement") dated as of June 1,
1997 providing for certain rights and restrictions with respect
to the investment in the Company by the Investors.
C. Concurrently with the execution of this Agreement, the
Stockholders and the Investors have entered into the
Stockholders' Voting Agreement dated as of June 1, 1997 (the
"Voting Agreement") pursuant to which the Stockholders agreed to
vote in favor of the Transactions.
D. As a condition to the Voting Agreement, the Company and
certain of the Stockholders have entered into employment
agreements, effective upon the approval of the Transactions by
the Company's shareholders.
E. As of the date hereof, the Stockholders beneficially own
an aggregate of approximately 27% of the outstanding shares of
Common Stock.
<PAGE>
F. As an additional inducement to the Stockholders to enter
into the Voting Agreement, each of the Company and the Investors
have agreed to grant certain rights to the Stockholders and
observe certain limitations on the terms set forth below.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Participation Rights.
a. Right to Participate. From and after the date hereof
until a Termination Event (as defined in the Investors
Stockholders' Agreement), if any, the Stockholders shall be
entitled to a participation right to purchase or subscribe for up
to that number of additional shares of capital stock (including
as "capital stock" for purposes of this Section 1, any security,
option, warrant, call, commitment, subscription, right to
purchase or other agreement of any character that is convertible
into or exchangeable or redeemable for shares of capital stock of
the Company or any Subsidiary (and all references in this Section
1 to capital stock shall, as appropriate, be deemed to be
references to any such securities), and also including additional
shares of capital stock to be issued pursuant to the conversion,
exchange or redemption of any security, option, warrant, call,
commitment, subscription, right to purchase or other agreement of
any character that is convertible into or exchangeable or
redeemable for shares of capital stock, as if the price at which
such additional shares of capital is issued pursuant to any such
conversion, exchange or redemption were the market price on the
date of such issuance) to be issued or sold by the Company which
represents the same proportion of the total number of shares of
capital stock to be issued or sold by the Company (including the
shares of capital stock to be issued to the Stockholders or their
affiliates upon exercise of its participation rights hereunder;
it being understood and agreed that the Company will accordingly
be required to either increase the number of shares of capital
stock to be issued or sold so that the Stockholders may purchase
additional shares to maintain its
<PAGE>
proportionate interest, or to reduce the number of shares of
capital stock to be issued or sold to Persons other than the
Stockholders) as is represented by the number of shares of
Common Stock owned by the Stockholders and their affiliates
prior to such sale or issuance (and including for this
purpose any shares of Common Stock to be acquired pursuant
to options or other securities exercisable or exchangeable
for shares of Common Stock, but not yet issued) relative to
the number of shares of Common Stock outstanding prior to
such sale or issuance (after giving effect the conversion or
exercise of all outstanding securities convertible into or
exercisable for shares of Common Stock); provided, however,
that the provisions of this Section 1 shall not apply to (i)
the issuance or sale by the Company of any of its capital
stock issued to the Company or any of its subsidiaries (as
such term is defined in the Stock Purchase Agreement) or
pursuant to options, rights or warrants or other commitments
or securities in effect or outstanding on the date of the
Stock Purchase Agreement (including, without limitation, the
Convertible Debentures, as defined in the Stock Purchase
Agreement and any shares of Common Stock or options granted
or to be granted pursuant to the terms of employment
agreements with certain of the Stockholders), (ii) the
issuance of capital stock pursuant to the conversion,
exchange or redemption of any other capital stock, but
shall, without limitation, apply to the issuance by the
Company of any of its capital stock pursuant to benefit,
option, stock purchase, or other similar plans or
arrangements, including pursuant to or upon the exercise of
options, rights, warrants, or other securities or agreements
(including those issued pursuant to the Company's benefit
plans), and (iii) the issuance of capital stock for
consideration other than cash. Notwithstanding the
foregoing, any participation rights provided for in this
Section which arise as a result of the exception contained
in clause (ii) of the preceding sentence shall be deferred
until such time as participation rights shall otherwise
arise under this Section.
b. Notice. In the event the Company proposes to issue
or sell any shares of capital stock in a transaction giving
rise to the participation rights provided for in this
Section, the Company shall send a written notice (the
"Participation Notice") to the Stockholders setting forth
the number of shares of such capital stock of the Company
that the Company proposes to sell or issue, the price
(before any commission or discount) at which such shares are
proposed to be
<PAGE>
issued (or, in the case of an underwritten or privately
placed offering in which the price is not known at the time
the Participation Notice is given, the method of determining
such price and an estimate thereof), and all other relevant
information as to such proposed transaction as may be
necessary for the Stockholders to determine whether or not
to exercise the rights granted in this Section. At any time
within 20 days after its receipt of the Participation
Notice, a Stockholder may exercise its participation rights
to purchase or subscribe for shares of such shares of
capital stock, as provided for in this Section, by so
informing the Company in writing (an "Exercise Notice").
Each Exercise Notice shall state the percentage of the
proposed sale or issuance the Stockholder elects to
purchase. Each Exercise Notice shall be irrevocable, subject
to the conditions to the closing of the transaction giving
rise to the participation right provided for in this
Section.
c. Abandonment of Sale or Issuance. The Company shall
have the right, in its sole discretion, at all times prior
to consummation of any proposed sale or issuance giving rise
to the participation right granted by this Section, to
abandon, rescind, annul, withdraw or otherwise terminate
such sale or issuance, whereupon all participation rights in
respect of such proposed sale or issuance pursuant to this
Section 1 shall become null and void, and the Company shall
have no liability or obligation to the Stockholders with
respect thereto by virtue of such abandonment, rescission,
annulment, withdrawal or termination.
d. Terms of Sale. The purchase or subscription by a
Stockholder or an affiliate thereof, as the case may be,
pursuant to this Section shall be on the same price and
other terms and conditions, including the date of sale or
issuance, as are applicable to the purchasers or subscribers
of the additional shares of capital stock of the Company
whose purchases or subscriptions give rise to the
participation rights (except that the price to the
Stockholders to make such purchase or subscription shall be
net of payment of any underwriting, placement agent or
similar fee associated with such purchase or subscription),
which price and other terms and conditions shall be
substantially as stated in the relevant Participation Notice
(which standard shall be satisfied if the price, in the case
of a negotiated transaction, is not greater than 110% of the
estimated price set forth in the relevant Participation
Notice or, in the case of an underwritten or privately
placed offering, is not greater than the
<PAGE>
greater of (i) 110% of the estimated price set forth in the
relevant Participation Notice, and (ii) the most recent
closing price on or prior to the date of the pricing of the
offering); provided, however, that in the event the
purchases or subscriptions giving rise to the participation
rights are effected by an offering of securities registered
under the Securities Act of 1933, as amended (the "1933
Act") and in which offering it is not legally permissible
for the securities to be purchased by the Stockholders to be
included, such securities to be purchased by the
Stockholders will be purchased in a concurrent private
placement.
e. Timing of Sale. If, with respect to any
Participation Notice, a Stockholder fails to deliver an
Exercise Notice within the requisite time period, the
Company shall have 120 days after the expiration of the time
in which the Exercise Notice is required to be delivered in
which to sell not more than 110% of the number of shares of
capital stock of the Company described in the Participation
Notice (plus, in the event such shares are to be sold in an
underwritten public offering, an additional number of shares
of capital stock of the Company, not in excess of 15% of
110% of the number of shares of capital stock of the Company
described in the Participation Notice, in respect of any
underwriters over-allotment option) and not less than 90% of
the number of shares of capital stock of the Company
described in the Participation Notice at a price of not less
than 90% of the estimated price set forth in the
Participation Notice. If, at the end of 120 days following
the expiration of the time in which the Exercise Notice is
required to be delivered, the Company has not completed the
sale or issuance of capital stock of the Company in
accordance with the terms described in the Participation
Notice (or at a price which is at least 90% of the estimated
price set forth in the Participation Notice), or in the
event of any contemplated sale or issuance within such
120-day period but outside such price parameters, the
Company shall again be obligated to comply with the
provisions of this Section with respect to, and provide the
opportunity to participate in, any proposed sale or issuance
of shares of capital stock of the Company; provided,
however, that notwithstanding the foregoing, if the price at
which such capital stock is to be sold in an underwritten
offering (or a privately placed offering in which the price
is not less than 97% of the most recent closing price at the
time of the pricing of the offering) is not at least 90% of
the estimated price set forth in the Participation Notice,
the
<PAGE>
Company may inform the Stockholders of such fact and the
Stockholders shall be entitled to elect, by written notice
delivered within two Business Days following such notice
from the Company, to participate in such offering in
accordance with the provisions of this Section.
2. Termination. This Agreement shall terminate on the
earlier to occur of (a) a Termination Event or (b) the
termination of the Investors' Stockholders' Agreement.
3. General.
(a) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California, without regard to any principles of conflicts of law.
(b) Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall
be deemed given if delivered personally or by facsimile
transmission (with subsequent letter confirmation by mail) or
three days after being mailed by certified or registered mail,
postage prepaid, return receipt requested, to the parties, their
successors in interest or their assigns at the following
addresses, or at such other addresses as the parties may
designate by written notice in the manner aforesaid:
If to the Company: Alexander Haagen Properties,
Inc.
3500 Sepulveda Boulevard
Manhattan Beach, California
90266
Attention: Chief Executive
Officer
with a copy to: Latham & Watkins
633 West 5th Street
Suite 4000
Los Angeles, California 90071
Attention: John M. Newell, Esq.
If to the Stockholders: Alexander Haagen
c/o Alexander Haagen Properties,
Inc.
3500 Sepulveda Boulevard
Manhattan Beach, California
90266
<PAGE>
with a copy to: Stroock & Stroock & Lavan
2029 Century Park East
Suite 1800
Los Angeles, California 90067
Attention: Glenn D. Smith, Esq.
If to the Investor: LF Strategic Realty Investors
L.P.
Thirty Rockefeller Plaza
63rd Floor
New York, New York 10020
Attention: Arthur P. Solomon
with a copy to: Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: Kevin Grehan, Esq.
(c) Entire Agreement. This Agreement contains the
entire understanding among the parties hereto and supersedes any
prior understandings and agreements, either oral or written,
between or among the parties hereto relating to the subject
matter hereof.
(d) Equitable Remedies. In addition to legal remedies,
in recognition of the fact that remedies at law may not be
sufficient, the parties (and their permitted successors and
assigns) shall be entitled to equitable remedies for breaches or
defaults hereunder, including, without limitation, specific
performance and injunction.
(e) Amendment. No amendment, modification or
termination of any provision of this Agreement shall be valid
unless in writing and signed by the Investor, the Company and the
Stockholders.
(f) Binding Agreement; Successors and Assigns. This
Agreement shall be binding upon the parties hereto and their
respective successors, assigns and legal representatives;
provided, however, that the rights and obligations of the
Investor under this Agreement shall not be assigned to any party
other than: (i) to an affiliate of the Investors or to any entity
with which the Investor merges or combines; or (ii) with the
consent of the Stockholders. For purposes of this Agreement, the
term Stockholder shall include the affiliates or legal
representatives of such Stockholder, unless otherwise required by
the context.
(g) Counterparts. This Agreement may be executed in
several counterparts, and as so executed shall constitute
<PAGE>
one agreement, binding on all of the parties hereto,
notwithstanding that all the parties are not a signatory to the
original or the same counterparts.
(h) No Waiver; Cumulative Remedies. No failure or delay
on the part of any party in exercising any right, power or remedy
hereunder shall, except to the extent expressly provided herein,
operate as a waiver hereof; nor shall any single or partial
exercise of any right, power or remedy preclude any other future
exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(i) Severability. The provisions of this Agreement are
severable, and if any clause or provision of this Agreement shall
be held invalid or unenforceable in whole or in part in any
jurisdiction, then such clause or provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or
enforceability of such clause or provision in any other
jurisdiction or the remaining provisions hereof in any
jurisdiction.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the day and year first above written.
ALEXANDER HAAGEN PROPERTIES, INC.
By: /s/ Alexander Haagen
----------------------------------
Alexander Haagen
LF STRATEGIC REALTY INVESTORS L.P.
By: LAZARD FRERES REAL ESTATE
INVESTORS, LLC
Its: General Partner
By: /s/ Anthony E. Meyer
----------------------------------
Anthony E. Meyer
Its: Chief Investment Officer
PROMETHEUS WESTERN RETAIL, LLC
By: LF STRATEGIC REALTY INVESTORS
L.P.
Its: Member
By: LAZARD FRERES REAL ESTATE
INVESTORS, LLC
Its: General Partner
By: /s/ Anthony E. Meyer
---------------------------------
Anthony E. Meyer
Its: Chief Investment Officer
STOCKHOLDERS:
/s/ Alexander Haagen
------------------------------------
Alexander Haagen
/s/ Charlotte Haagen
------------------------------------
Charlotte Haagen
/s/ Alexander Haagen, III
------------------------------------
Alexander Haagen, III
<PAGE>
The Haagen Living Trust dated
August 17, 1988
By: /s/ Alexander Haagen
---------------------------------
Alexander Haagen, Co-Trustee
/s/ Autumn Haagen
------------------------------------
Autumn Haagen
/s/ Alexander Haagen, III
------------------------------------
Alexander Haagen III & Betty Haagen
Tr fbo Alexander Haagen IV UA
10/24/88
/s/ Alexander Haagen, III
------------------------------------
Alexander Haagen III & Betty Haagen
Tr fbo Andrew Haagen UA 10/28/88
/s/ Alexander Haagen, III
------------------------------------
Alexander Haagen III & Betty Haagen
Tr fbo Autumn Haagen UA 10/24/88
