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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
REGENCY REALTY CORPORATION
(Name of Issuer)
COMMON STOCK, $0.01 PAR VALUE
(Title of Class of Securities)
758939 10 2
(CUSIP Number)
PAUL E. SZUREK
SECURITY CAPITAL U.S. REALTY
69, ROUTE D'ESCH
L-1470 LUXEMBOURG
(352) 48 78 78
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
JUNE 11, 1996
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Sche-
dule 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 / /.
Check the following box if a fee is being paid with this state-
ment / X /. (A fee is not required only if the reporting per-
son: (1) has a previous statement on file reporting beneficial
ownership of more than five percent of the class of securities
described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less
of such class.) (See Rule 13d-7.)
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.
(Continued on following pages)
Page 1 of 11 Pages
CUSIP No. 758939 10 2 13D Page 2 of 11 Pages
1 NAME OF PERSON
SECURITY CAPITAL U.S. REALTY
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
LUXEMBOURG
7 SOLE VOTING POWER
NUMBER OF 7,618,500 (SEE ITEM 5)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 7,618,500
WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,618,500 (SEE ITEM 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.1% (SEE ITEM 5)
14 TYPE OF PERSON REPORTING*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT
CUSIP No. 758939 10 2 13D Page 3 of 11 Pages
1 NAME OF PERSON
SECURITY CAPITAL HOLDINGS S.A.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
LUXEMBOURG
7 SOLE VOTING POWER
NUMBER OF 7,618,500 (SEE ITEM 5)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 7,618,500
WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,618,500 (SEE ITEM 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.1% (SEE ITEM 5)
14 TYPE OF PERSON REPORTING*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT
ITEM 1. SECURITY AND ISSUER.
This Statement relates to shares of common stock, par
value $0.01 per share ("Common Stock"), of Regency Realty Cor-
poration, a Florida corporation ("Regency"). The principal
executive offices of Regency are located at 121 West Forsyth
Street, Suite 200, Jacksonville, Florida 32202.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is filed by Security Capital U.S. Re-
alty ("Security Capital U.S. Realty"), a corporation organized
and existing under the laws of Luxembourg, and by Security Cap-
ital Holdings S.A. ("Holdings"), a corporation organized and
existing under the laws of Luxembourg and a wholly owned sub-
sidiary of Security Capital U.S. Realty (together with Security
Capital U.S. Realty, "USRealty"). The business objective of
USRealty is to become Europe's preeminent publicly-held real
estate operating company with strategic investments in leading
"value-added" real estate operating companies in the United
States. USRealty intends to acquire 25% to 45% of the common
stock of a limited number of U.S. real estate operating compa-
nies with specific market niches and the potential to be lead-
ers in their respective peer groups. USRealty intends to maxi-
mize shareholder returns in these companies by investing suf-
ficient capital and, by obtaining representation on the boards
of directors and committees thereof, participating with manage-
ments in developing and implementing strategies for long-term
growth in per share operating results. The principal offices
of USRealty are located at 69, route d'Esch, L-1470, Luxem-
bourg.
During the last five years, to the best of USRealty's
knowledge, neither USRealty nor any of its executive officers
or directors has been convicted in a criminal proceeding (ex-
cluding traffic violations or similar misdemeanors) or has been
a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction as result of which USRealty or
such person was or is subject to a judgment, decree, or final
order enjoining future violations of, or prohibiting or man-
dating activities subject to, federal or state securities laws,
or finding any violation with respect to such laws.
Each executive officer and each director of USRealty is a
citizen of the United States but, with the exception of one
director, all executive officers and directors are residents of
various European countries. The name, business address, and
present principal occupation (including the name, principal
business and address of the corporation or organization in
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which such employment is conducted) of each executive officer
and director is set forth in Exhibit 1 to this Schedule 13D and
is specifically incorporated herein by reference.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Prior to February 3, 1996, USRealty purchased in stock
market transactions 119,100 shares of Common Stock for an ag-
gregate purchase price of $1,912,746 (including commissions).
These funds were general capital funds of USRealty.
Pursuant to a Stock Purchase Agreement, dated as of
June 11, 1996, by and among Regency, Security Capital U.S. Re-
alty and Holdings (the "Stock Purchase Agreement"), subject to
the terms and conditions thereof, Regency has agreed to sell
and USRealty has agreed to purchase up to 7,499,400 shares of
Common Stock (such Common Stock, the "Shares"). Security Capi-
tal U.S. Realty has agreed to advance to Holdings the funds
necessary to purchase the Shares as required by the Stock Pur-
chase Agreement, and has guaranteed the performance by Holdings
of its obligations thereunder.
The aggregate purchase price for the Shares to be paid
to Regency is up to $132,176,925 (the "Total Equity Commit-
ment"). These funds will be obtained by USRealty from cash on
hand and from draw downs under USRealty's $200,000,000 revolv-
ing credit facility pursuant to a Facility Agreement (the "Fa-
cility Agreement"), dated June 12, 1996, by and among Security
Capital U.S. Realty, Holdings, Commerzbank Aktiengesellschaft,
as arranger and collateral agent, Commerzbank International
S.A., as administrative agent and the financial institutions
listed in Schedule 1 thereto.
A copy of the Stock Purchase Agreement, and the vari-
ous Exhibits thereto, is attached hereto as Exhibit 2 and is
specifically incorporated herein by reference, and the descrip-
tion herein of such agreement and the Exhibits thereto is qual-
ified in its entirety by reference to such agreement and Exhib-
its. A copy of the Facility Agreement is attached hereto as
Exhibit 4 and is specifically incorporated herein by reference,
and the description herein of such agreement is qualified in
its entirety by reference to such agreement.
ITEM 4. PURPOSE OF TRANSACTION.
The purchase of the Shares is for the purpose of own-
ership and not with a view to or for sale in connection with
any distribution thereof. USRealty has no present intention or
plan to effect any distribution of the Shares.
-5-
Pursuant to the Stock Purchase Agreement, subject to
certain conditions described below, USRealty will purchase
934,400 Shares (the "Initial Purchase") at a price of $17.625
per share at the initial closing under the Stock Purchase
Agreement. Thereafter, subject to the terms of the Stock Pur-
chase Agreement, at such time as Regency may determine (i)
prior to December 1, 1996, USRealty will purchase 2,717,400
Shares (the "Second Purchase") at a price of $17.625 per share,
provided that if the Second Purchase shall not have occurred by
December 1, 1996, US Realty will have the right, at its elec-
tion, to cause the Second Purchase on or before December 31,
1996, and (ii) prior to June 1, 1997, US Realty will purchase
up to the remaining 3,847,600 Shares in minimum tranches of $30
million (each, and individually, a "Subsequent Purchase") at a
price of $17.625 per share, provided that if the Subsequent
Purchases shall not have occurred by June 1, 1997, USRealty
will have the right, at its election, to make the Subsequent
Purchases on or before June 30, 1997.
The Stock Purchase Agreement also provides that Re-
gency will submit to a vote of its shareholders for their ap-
proval a proposed amendment to Regency's charter to, among
other things, relax the ownership limitations therein with re-
spect to USRealty and certain affiliates and transferees and to
make certain other modifications to facilitate Regency's con-
tinued qualification as a domestically controlled real estate
investment trust for federal income tax purposes (a "REIT").
The initial closing is subject to various conditions,
including (i) an irrevocable waiver of application to USRealty
of the ownership limitations contained in the Company's charter
with respect to the Initial Shares plus 119,100 shares of Com-
mon Stock owned by USRealty as of June 11, 1996, (ii) the con-
tinued treatment of Regency as a REIT, and (iii) satisfaction
of various customary conditions. In addition, if the initial
closing shall not have occurred on or prior to October 31,
1996, the Stock Purchase Agreement may be terminated by either
party, unless such party is then in default thereunder. The
closings of the Second Purchase and each Subsequent Purchase
are subject to various conditions, including (i) approval by
Regency's shareholders of the transaction contemplated by the
Stock Purchase Agreement, (ii) approval by Regency's sharehold-
ers of the proposed amendment to Regency's charter to amend the
ownership limitations to permit USRealty to acquire up to 45%
of the capital stock of Regency and to make certain other modi-
fications to facilitate Regency's continued qualification as a
REIT, (iii) the continued treatment of Regency as a REIT, and
(iv) satisfaction of various customary conditions.
-6-
The Stock Purchase Agreement contemplates that the
parties will enter into a Stockholders Agreement and a Regis-
tration Rights Agreement at the initial closing. Forms of such
agreements are attached as Exhibits to the Stock Purchase
Agreement filed as an exhibit hereto, are specifically incorpo-
rated herein by reference, and the description herein of such
agreements is qualified in its entirety by reference to such
agreements. Pursuant to the Stockholders Agreement, USRealty
will be entitled to certain rights and will be subject to cer-
tain restrictions, including the following: (i) from and after
the date on which Regency's shareholders approve the transac-
tions contemplated by the Stock Purchase Agreement (the "Share-
holder Approval Date") until the next annual or special meeting
at which any directors are to be elected, USRealty will have
the right to have two directors on Regency's board of direc-
tors, and after such next annual or special meeting until such
time as USRealty no longer owns at least 20% of the outstanding
Common Stock or, if earlier, the expiration of the standstill
period described in (iv) below, USRealty will generally have
the right to nominate its proportionate share of Regency's
board of directors (but in no event more than 49% of the
directors), (ii) from and after the Shareholder Approval Date
until USRealty no longer owns at least 20% of the outstanding
Common Stock, USRealty will have the right to obtain certain
operating and financial information, (iii) from and after the
Shareholder Approval Date until USRealty no longer owns at
least 15% of the outstanding Common Stock, USRealty will have
the right to participate in Regency's future security offerings
by purchasing its proportionate share of the securities offered
therein, (iv) 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
for one-year increments unless USRealty gives Regency 270 days'
notice cancelling such extensions or unless sooner terminated
upon certain events), USRealty will be subject to certain
limitations and restrictions relating to voting of its shares
of Common Stock, acquisitions of additional shares of Common
Stock (generally limited to 45% of the outstanding shares of
Common Stock), transfers of its shares of Common Stock and
various other matters, and (v) as long as USRealty owns 20% of
the outstanding shares of Common Stock and as long as the
standstill period (including extensions) is in effect, Regency
may not take certain specified corporate actions relating to
incurrence of indebtedness, third party property management,
investments outside the retail shopping center industry and
REIT termination. Moreover, pursuant to the Stockholders
Agreement, from and after the Shareholder Approval Date until
USRealty does not own at least 20% of the outstanding Common
Stock, USRealty will consult with and advise Regency on certain
matters including those concerning Regency's business strategy,
financing arrangements, acquisition opportunities and investor
relations. Pursuant to the Registration Rights Agreement,
Regency will
-7-
grant USRealty certain registration rights to facilitate the
resale of its Shares under certain conditions and certain tag-
along rights to sell a portion of its Shares in connection with
certain extraordinary issuances of stock by Regency.
Except as set forth in this Item 4, USRealty presently
has no plans or proposals that relate to or would result in any
of the actions specified in clauses (a) through (j) of Item 4
of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
As of June 11, 1996 USRealty may be deemed to ben-
eficially own up to 7,618,500 shares of Common Stock because of
USRealty's right to acquire up to 7,499,400 of such shares pur-
suant to and subject to the terms and conditions of the Stock
Purchase Agreement and because of USRealty's ownership of an
additional 119,100 shares of Common Stock as of June 11, 1996.
If USRealty acquires such additional 7,499,400 Shares, USRealty
will own approximately 53.1% of the outstanding Common Stock,
and approximately 43.1% on a fully diluted basis, based on the
number of outstanding shares of Common Stock, and the number of
outstanding options and other securities convertible into Com-
mon Stock. Security Capital Group Incorporated is the largest
holder of the outstanding interests in Security Capital U.S.
Realty (although such ownership is less than 40%) and may, for
purposes of United States securities laws, be deemed to control
Security Capital U.S. Realty. Security Capital Group Incorpo-
rated disclaims beneficial ownership of the Shares to be ac-
quired by USRealty.
Prior to February 3, 1996, USRealty purchased 119,100
shares of Common Stock for an aggregate purchase price of
$1,912,746 (including commissions) through stock market trans-
actions using general capital funds of USRealty.
Except as set forth in this Item 5, to the best knowl-
edge and belief of USRealty, no transactions involving Common
Stock have been effected during the past 60 days by USRealty or
by its directors, executive officers or controlling persons.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATION-
SHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
As described above in Item 4, the Stock Purchase
Agreement, the Stockholders Agreement and the Registration
Rights Agreement among Regency, Security Capital U.S. Realty
and Holdings provide for various rights and restrictions with
respect to Regency's Common Stock.
-8-
A copy of the Stock Purchase Agreement, and the vari-
ous Exhibits thereto (including the forms of the Stockholders
Agreement and the Registration Rights Agreement), is attached
hereto as Exhibit 2 and is specifically incorporated herein by
reference, and the description herein of such agreement and the
Exhibits thereto is qualified in its entirety by reference to
such agreement and Exhibits.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed as part of this Schedule
13D:
Exhibit 1 - Name, Business Address, and Present Principal
Occupation of Each Executive Officer and Director
of Security Capital U.S. Realty and of Security
Capital Holdings S.A.
Exhibit 2 - Stock Purchase Agreement, dated as of June 11,
1996, by and among Regency Realty Corporation,
Security Capital Holdings S.A. and Security Capi-
tal U.S. Realty
Exhibit 3 - Joint filing agreement pursuant to 13d-1(f)(1)
Exhibit 4 - Facility Agreement, dated June 12, 1996, by and
among Security Capital U.S. Realty, Security
Capital Holdings S.A., Commerzbank Aktiengesell-
schaft, as arranger and collateral agent, Com-
merzbank International S.A., as administrative
agent and the financial institutions listed in
Scedule 1 thereto
-9-
SIGNATURE
After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this
statement is true, complete, and correct.
SECURITY CAPITAL U.S. REALTY
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
June 21, 1996
-10-
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
1 Name, Business Address, and Present
Principal Occupation of Each Executive
Officer and Director of Security Capital
U.S. Realty and of Security Capital
Holdings S.A.
2 Stock Purchase Agreement, dated as of
June 11, 1996, by and among Regency Realty
Corporation, Security Capital U.S. Realty
and Security Capital Holdings S.A.
3 Joint filing agreement pursuant to
13d-1(f)(1)
4 Facility Agreement, dated June 12, 1996, by
and among Security Capital U.S. Realty,
Security Capital Holdings S.A., Commerzbank
Aktiengesellschaft, as arranger and collateral
agent, Commerzbank International S.A., as
administrative agent and the financial
institutions listed in Scedule 1 thereto.
-11-
EXHIBIT 1
NAME, PRINCIPAL BUSINESS, AND ADDRESS
OF THE DIRECTORS AND EXECUTIVE OFFICERS
OF SECURITY CAPITAL U.S. REALTY
AND OF SECURITY CAPITAL HOLDINGS S.A.
The identity and background of the executive officers
and directors of Security Capital U.S. Realty and Security Capi-
tal Holdings S.A. are as follows:
SECURITY CAPITAL U.S. REALTY:
1 W. Joseph Houlihan is a Director of Security Cap-
ital U.S. Realty. Mr. Houlihan's present principal occupation
is as Executive Vice President and Director of the Institutional
Management Group of GIM Algemeen Vermogensbeheer which provides
investment management and advisory services. GIM Algemeen Verm-
ogensbeheer's business address is Fellenoord 35, Postbus 365,
5600 AJ Eindhoven, The Netherlands.
2 James T. Mauck is a Director of Security Capital
U.S. Realty. Mr. Mauck's present principal occupation is as
Managing Director for Continental Europe of R.R. Donnelley &
Sons Company which provides printing and related services. R.R.
Donnelley & Sons Company's European business address is Over-
schiestraat 59a, 1062XD Amsterdam, The Netherlands.
3 William D. Sanders is a Director of Security Cap-
ital U.S. Realty. Mr. Sanders' present principal occupation is
as Chairman of the Board of Directors and Chief Executive Of-
ficer of Security Capital Group Incorporated which controls and
operates a group of highly focused, fully integrated real estate
operating companies. Security Capital Group Incorporated's
business address is 125 Lincoln Avenue, Santa Fe, New Mexico
87501.
4 Paul E. Szurek is a Managing Director of Security
Capital U.S. Realty. Mr. Szurek's present principal occupation
is as Managing Director of Security Capital U.S. Realty and as
Managing Director of Security Capital (EU) Management S.A. Se-
curity Capital U.S. Realty's and Security Capital (EU) Manage-
ment S.A.'s business address is 69, route d'Esch, L-1470 Luxem-
bourg.
SECURITY CAPITAL HOLDINGS S.A.:
1. W. Joseph Houlihan is a Director of Security Cap-
ital Holdings S.A. Mr. Houlihan's present principal occupation
is as Executive Vice President and Director of the Institutional
Management Group of GIM Algemeen Vermogensbeheer which provides
investment management and advisory services. GIM Algemeen Verm-
ogensbeheer's business address is Fellenoord 35, Postbus 365,
5600 AJ Eindhoven, The Netherlands.
2. James T. Mauck is a Director of Security Capital
Holdings S.A. Mr. Mauck's present principal occupation is as
Managing Director for Continental Europe of R.R. Donnelley &
Sons Company which provides printing and related services. R.R.
Donnelley & Sons Company's European business address is Over-
schiestraat 59a, 1062XD Amsterdam, The Netherlands.
3. Paul E. Szurek is a Managing Director of Security
Capital Holdings S.A. Mr. Szurek's present principal occupation
is as Managing Director of Security Capital U.S. Realty and as
Managing Director of Security Capital (EU) Management S.A. Se-
curity Capital U.S. Realty's and Security Capital (EU) Manage-
ment S.A.'s business address is 69, route d'Esch, L-1470 Luxem-
bourg.
EXHIBIT 2
STOCK PURCHASE AGREEMENT
by and among
REGENCY REALTY CORPORATION
SECURITY CAPITAL HOLDINGS S.A.
and
SECURITY CAPITAL U.S. REALTY
dated as of
June 11, 1996
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 "Amended Company Charter".............. 2
Section 1.7 "Army Corps of Engineers".............. 2
Section 1.8 "Articles of Amendment"................ 2
Section 1.9 "Benefit Arrangements"................. 2
Section 1.10 "Blue Sky Laws"........................ 2
Section 1.11 "Breaching Matters".................... 2
Section 1.12 "Breakup Fee".......................... 2
Section 1.13 "Business Day"......................... 2
Section 1.14 "Buyer"................................ 2
Section 1.15 "Capital Expenditure Budget and
Schedule"........................... 2
Section 1.16 "CERCLA"............................... 2
Section 1.17 "Claim"................................ 2
Section 1.18 "Class B Common Stock"................. 2
Section 1.19 "Closing".............................. 2
Section 1.20 "Closing Date"......................... 3
Section 1.21 "Code"................................. 3
Section 1.22 "Commitment"........................... 3
Section 1.23 "Company".............................. 3
Section 1.24 "Company Charter"...................... 3
Section 1.25 "Company Common Stock"................. 3
Section 1.26 "Company Environmental Reports"........ 3
Section 1.27 "Company Leases"....................... 3
Section 1.28 "Company Plans"........................ 3
Section 1.29 "Company Preferred Stock".............. 3
Section 1.30 "Company Properties"................... 3
Section 1.31 "Company Registration Statement"....... 3
Section 1.32 "Company Reports"...................... 3
Section 1.33 "Company Stock"........................ 3
Section 1.34 "Competing Transaction"................ 3
Section 1.35 "Controlled Group Liability"........... 4
Section 1.36 "Cure Notice".......................... 4
Section 1.37 "Debt Instruments"..................... 4
Section 1.38 "Development Budget and Schedule"...... 4
Section 1.39 "Development Properties"............... 4
Section 1.40 "Employee Benefit Plans"............... 4
-i-
Section 1.41 "Employees"............................ 4
Section 1.42 "Employment Agreements"................ 4
Section 1.43 "Environmental Claim".................. 4
Section 1.44 "Environmental Laws"................... 4
Section 1.45 "Environmental Permits"................ 4
Section 1.46 "ERISA"................................ 4
Section 1.47 "ERISA Affiliates"..................... 4
Section 1.48 "Exchange Act"......................... 4
Section 1.49 "Executive Summaries of the Company
Environmental Reports".............. 5
Section 1.50 "GAAP"................................. 5
Section 1.51 "Government Authority"................. 5
Section 1.52 "HSR Act".............................. 5
Section 1.53 "Indemnified Party".................... 5
Section 1.54 "Initial Closing"...................... 5
Section 1.55 "Initial Number of Shares"............. 5
Section 1.56 "Initial Purchase Price"............... 5
Section 1.57 "Insurance Policies"................... 5
Section 1.58 "IRS".................................. 5
Section 1.59 "Lease Summaries"...................... 5
Section 1.60 "Liabilities".......................... 5
Section 1.61 "Liens"................................ 6
Section 1.62 "Loss and Expenses".................... 6
Section 1.63 "Material Adverse Effect".............. 6
Section 1.64 "Material Company Leases".............. 6
Section 1.65 "Materials of Environmental Concern"... 6
Section 1.66 "Next Dividend"........................ 6
Section 1.67 "1997 and 1998 Preliminary Capital
Expenditure Budgets and Schedules".. 6
Section 1.68 "Other Filings"........................ 6
Section 1.69 "Pension Plans"........................ 6
Section 1.70 "Per Share Purchase Price"............. 6
Section 1.71 "Per Share Additional Purchase Price".. 6
Section 1.72 "Permitted Liens"...................... 6
Section 1.73 "person"............................... 7
Section 1.74 "Prior Dividend"....................... 7
Section 1.75 "Projects"............................. 7
Section 1.76 "Property Restrictions"................ 7
Section 1.77 "Proxy Statement"...................... 7
Section 1.78 "Purchase Price"....................... 7
Section 1.79 "Purchased Shares"..................... 7
Section 1.80 "Registration Rights Agreement"........ 7
Section 1.81 "Regulatory Filings"................... 7
Section 1.82 "REIT"................................. 8
Section 1.83 "Release".............................. 8
Section 1.84 "Remaining Equity Commitment".......... 8
Section 1.85 "Rent Roll"............................ 8
Section 1.86 "SEC".................................. 8
Section 1.87 "Second Closing"....................... 8
Section 1.88 "Second Purchase"...................... 8
-ii-
Section 1.89 "Securities Act"....................... 8
Section 1.90 "Securities Laws"...................... 8
Section 1.91 "Stock Purchase"....................... 8
Section 1.92 "Stockholders Agreement"............... 8
Section 1.93 "Subsequent Purchase Price"............ 8
Section 1.94 "Subsequent Purchases"................. 8
Section 1.95 "Subsidiaries"......................... 8
Section 1.96 "Tax".................................. 9
Section 1.97 "Tax Return"........................... 9
Section 1.98 "Tenancy Leases"....................... 9
Section 1.99 "Total Equity Commitment".............. 9
Section 1.100 "Voting Agreements".................... 9
Section 1.101 "Welfare Plans"........................ 9
ARTICLE 2
Purchase and Sale of Shares; Closing
Section 2.1 Purchase and Sale...................... 9
Section 2.2 Consideration.......................... 10
Section 2.3 Initial Closing........................ 10
Section 2.4 Subsequent Purchases and Sales......... 10
Section 2.5 Additional Agreements and Closing
Deliveries........................... 11
Section 2.6 Time and Place of Closings............. 11
Section 2.7 Right to Assign........................ 11
Section 2.8 Company's Right to Cure................ 11
Section 2.9 Additional Purchase Price.............. 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
-iii-
Section 3.9 Compliance with Agreements; Material
Agreements........................... 18
Section 3.10 Financial Records; Company Charter
and By-laws; Corporate Records....... 20
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........................ 32
Section 3.18 Florida Takeover Law................... 32
Section 3.19 Vote Required.......................... 32
Section 3.20 Brokers or Finders..................... 33
Section 3.21 Stockholders Agreement................. 33
Section 3.22 Knowledge Defined...................... 33
ARTICLE 4
Representations and Warranties of Buyer and the Advancing Party
Section 4.1 Organization........................... 33
Section 4.2 Due Authorization...................... 34
Section 4.3 Conflicting Agreements and Other
Matters.............................. 34
Section 4.4 Acquisition for Investment;
Sophistication; Source of
Funds................................ 34
Section 4.5 Proxy Statement........................ 35
Section 4.6 Brokers or Finders..................... 35
Section 4.7 REIT Qualification Matters............. 35
Section 4.8 Investment Company Matters............. 35
Section 4.9 Ownership of Tenants................... 35
ARTICLE 5
Covenants Relating to Closings
Section 5.1 Taking of Necessary Action............. 36
Section 5.2 Registration Rights Agreement.......... 37
Section 5.3 Stockholders Agreement................. 37
Section 5.4 Public Announcements; Confidentiality.. 37
Section 5.5 Conduct of the Business................ 38
Section 5.6 No Solicitation of Transactions........ 39
Section 5.7 Information and Access................. 39
Section 5.8 Notification of Certain Matters........ 40
Section 5.9 Issuance Pursuant to Shelf
Registration......................... 40
-iv-
ARTICLE 6
Certain Additional Covenants
Section 6.1 Resale................................. 40
Section 6.2 Use of Funds........................... 40
Section 6.3 REIT Status............................ 40
Section 6.4 Guarantee.............................. 40
Section 6.5 Property Management Activities
and Reorganizational Matters......... 41
ARTICLE 7
Conditions to Closings
Section 7.1 Conditions of Purchase at Initial
Closing.............................. 41
Section 7.2 Conditions to Purchase at
Subsequent Closings.................. 42
Section 7.3 Conditions of Purchase at All
Closings............................. 44
Section 7.4 Conditions of Sale..................... 45
ARTICLE 8
Survival; Indemnification
Section 8.1 Survival............................... 46
Section 8.2 Indemnification by Buyer or the
Company.............................. 47
Section 8.3 Third-Party Claims..................... 47
ARTICLE 9
Termination
Section 9.1 Termination............................ 48
Section 9.2 Procedure and Effect of Termination.... 49
Section 9.3 Expenses............................... 49
ARTICLE 10
Miscellaneous
Section 10.1 Counterparts........................... 50
-v-
Section 10.2 Governing Law.......................... 50
Section 10.3 Entire Agreement....................... 50
Section 10.4 Notices................................ 51
Section 10.5 Successors and Assigns................. 51
Section 10.6 Headings............................... 52
Section 10.7 Amendments and Waivers................. 52
Section 10.8 Interpretation; Absence of
Presumption.......................... 52
Section 10.9 Severability........................... 52
Section 10.10 Further Assurances..................... 52
Section 10.11 Specific Performance................... 52
Section 10.12 Joint and Several Liability............ 53
Section 10.13 Interpretation of Schedules............ 53
-vi-
SCHEDULES
Schedule 1.70 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 3.4(d)-C Consents for Other Subsequent Closings
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 3.9(c) Indebtedness; Joint Venture
and Partnership Agreements
Schedule 3.9(d) Development, Construction, Management
and Leasing Arrangements
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(l) Tenancy 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) Employee Benefit Plans
Schedule 3.13(g) Termination and Retirement Benefits
Schedule 3.14 Collective Bargaining; Labor Union Agreements
Schedule 3.15 Affiliate Transactions
Schedule 4.9 Tenants
Schedule 6.5(a) Property Management Activities and Reorgani-
zational Matters
-vii-
EXHIBITS
Exhibit A Voting Agreement
Exhibit B Registration Rights Agreement
Exhibit C Stockholders Agreement
Exhibit D Employment Agreement
Exhibit E Amended Company Charter
-viii-
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dat-
ed as of June 11, 1996, is made by and among Regency Realty
Corporation, a Florida corporation (the "Company"), Security
Capital U.S. Realty, a Luxembourg corporation (the "Advancing
Party"), and Security Capital Holdings S.A., a Luxembourg cor-
poration and a wholly owned subsidiary 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
7,499,400 shares (as such number may be adjusted as set forth
below) of the Company's common stock, par value $0.01 per share
(the "Company Common Stock") at a price of $17.625 per share;
and
WHEREAS, Buyer and the Company are entering into this
Agreement to provide for such purchase and sale and to estab-
lish various rights and obligations in connection therewith;
and
WHEREAS, in consideration for the rights to be grant-
ed to it in the Stockholders Agreement (as defined below), the
Advancing Party has agreed to advance to Buyer all funds for
any and all purchases of Company Common Stock pursuant hereto
and otherwise guarantee Buyer's obligations hereunder; and
WHEREAS, the Company and Buyer believe that the com-
bination in a strategic partnership of the leadership, exper-
tise and experience in the retail shopping center industry of
the Company and the unique market knowledge, operating experi-
ence, research capabilities and access to capital of Buyer and
its affiliates will significantly enhance the Company's ability
to pursue its growth and operating strategies; and
WHEREAS, by separate agreement (the "Voting Agree-
ments"), certain shareholders of the Company have agreed to
support and vote in favor of this Agreement;
NOW, THEREFORE, in consideration of the premises and
the representations, warranties, covenants and agreements con-
tained 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:
-1-
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 1.3.11(e).
Section 1.3 "Advancing Party" shall have the
meaning set forth in the first paragraph hereof.
Section 1.4 "Affiliate" shall have the meaning as-
cribed 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 "Amended Company Charter" shall have
the meaning set forth in Section 7.2(c).
Section 1.7 "Army Corps of Engineers" shall have
the meaning set forth in Section 3.11(d).
Section 1.8 "Articles of Amendment" shall mean the
Articles of Amendment to Articles of Incorporation of the Com-
pany, filed on December 20, 1995 with respect to the Class B
Common Stock.
Section 1.9 "Benefit Arrangements" shall have the
meaning set forth in Section 3.13(h).
Section 1.10 "Blue Sky Laws" shall have the meaning
set forth in Section 3.4(e).
Section 1.11 "Breaching Matters" shall have the
meaning set forth in Section 2.8(a).
Section 1.12 "Breakup Fee" shall have the meaning
set forth in Section 9.3(c).
Section 1.13 "Business Day" shall mean any day other
than a Saturday, a Sunday or a bank holiday in New York, N.Y.
-2-
Section 1.14 "Buyer" shall have the meaning set
forth in the first paragraph hereof.
Section 1.15 "Capital Expenditure Budget and Sched-
ule" shall have the meaning set forth in Section 3.11(i).
Section 1.16 "CERCLA" shall have the meaning set
forth in Section 3.12(e).
Section 1.17 "Claim" shall have the meaning set
forth in Section 3.12(g)(i).
Section 1.18 "Class B Common Stock" shall have the
meaning set forth in Section 3.3(a).
Section 1.19 "Closing" shall mean the consummation
of any Stock Purchase.
Section 1.20 "Closing Date" shall mean, with respect
to the consummation of any Stock Purchase, three Business Days
after 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 1.21 "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 1.22 "Commitment" shall have the meaning set
forth in Section 3.7.
Section 1.23 "Company" shall have the meaning set
forth in the first paragraph hereof.
Section 1.24 "Company Charter" shall mean the Ar-
ticles of Amendment to the Charter of the Company, as in effect
on the date hereof.
Section 1.25 "Company Common Stock" shall have the
meaning set forth in the second paragraph hereof.
Section 1.26 "Company Environmental Reports" shall
have the meaning set forth in Section 3.12(f).
Section 1.27 "Company Leases" shall have the meaning
set forth in Section 3.11(f).
Section 1.28 "Company Plans" shall have the meaning
set forth in Section 3.13(b).
-3-
Section 1.29 "Company Preferred Stock" shall have
the meaning set forth in Section 3.3(a).
Section 1.30 "Company Properties" shall have the
meaning set forth in Section 3.11(a).
Section 1.31 "Company Registration Statement" shall
have the meaning set forth in Section 3.5(a).
Section 1.32 "Company Reports" shall have the mean-
ing set forth in Section 3.5(a).
Section 1.33 "Company Stock" shall mean, collec-
tively, the Company Common Stock and any other shares of capi-
tal stock of the Company.
Section 1.34 "Competing Transaction" shall mean (i)
any acquisition in any manner, directly or indirectly (includ-
ing 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, (ii) any
merger, consolidation, sale of assets, share exchange, recapi-
talization, 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 Agree-
ment, or (iii) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage
in any of the foregoing.
Section 1.35 "Controlled Group Liability" shall have
the meaning set forth in Section 3.13(h).
Section 1.36 "Cure Notice" shall have the meaning
set forth in Section 2.8(b).
Section 1.37 "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 1.38 "Development Budget and Schedule" shall
have the meaning set forth in Section 3.11(j).
Section 1.39 "Development Properties" shall have the
meaning set forth in Section 3.11(j).
Section 1.40 "Employee Benefit Plans" shall have the
meaning set forth in Section 3.13(h).
-4-
Section 1.41 "Employees" shall have the meaning set
forth in Section 3.13(h).
Section 1.42 "Employment Agreements" shall have the
meaning set forth in Section 3.7.
Section 1.43 "Environmental Claim" shall have the
meaning set forth in Section 3.12(g)(ii).
Section 1.44 "Environmental Laws" shall have the
meaning set forth in Section 3.12(g)(iii).
Section 1.45 "Environmental Permits" shall have the
meaning set forth in Section 3.12(a).
Section 1.46 "ERISA" shall mean the Employee Retire-
ment Income Security Act of 1974, as amended, and any successor
thereto.
Section 1.47 "ERISA Affiliates" shall mean, with
respect to any entity, trade or business, any other entity,
trade or business that is a member of a group described in
Section 1.4414(b), (c), (m) or (o) of the Code or Section
1.44001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as
the first entity, trade or business pursuant to Section
1.44001(a)(14) of ERISA.
Section 1.48 "Exchange Act" shall have the meaning
set forth in Section 3.4(e).
Section 1.49 "Executive Summaries of the Company
Environmental Reports" shall have the meaning set forth in
Section 3.12(f).
Section 1.50 "GAAP" shall have the meaning set forth
in Section 3.5(b).
Section 1.51 "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 1.52 "HSR Act" shall have the meaning set
forth in Section 3.4(e).
Section 1.53 "Indemnified Party" shall mean Buyer or
the Company, as the context may require.
-5-
Section 1.54 "Initial Closing" shall mean the first
Closing.
Section 1.55 "Initial Number of Shares" shall mean
934,400 shares of Company Common Stock.
Section 1.56 "Initial Purchase Price" shall mean
$16,468,800.
Section 1.57 "Insurance Policies" shall have the
meaning set forth in Section 3.16.
Section 1.58 "IRS" shall mean the Internal Revenue
Service.
Section 1.59 "Lease Summaries" shall have the mean-
ing set forth in Section 3.11(f).
Section 1.60 "Liabilities" shall mean, as to any
person, all debts, adverse claims, liabilities and obligations,
direct, indirect, absolute or contingent of such person, wheth-
er 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 (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) reimburse-
ment obligations of such person in respect of letters of cred-
it, (vi) all obligations of such person arising under accep-
tance 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 busi-
ness) or discounted with recourse by such person or with re-
spect 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.
-6-
Section 1.61 "Liens" shall mean all liens, mort-
gages, deeds of trust, deeds to secure debt, security inter-
ests, pledges, claims, charges, easements and other encum-
brances of any nature whatsoever.
Section 1.62 "Loss and Expenses" shall have the
meaning set forth in Section 8.2(a).
Section 1.63 "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.
Section 1.64 "Material Company Leases" shall have
the meaning set forth in Section 3.11(f).
Section 1.65 "Materials of Environmental Concern"
shall have the meaning set forth in Section 3.12(g)(iv).
Section 1.66 "Next Dividend" shall mean, with re-
spect to each Closing, the first dividend paid by the Company
after such Closing.
Section 1.67 "1997 and 1998 Preliminary Capital Ex-
penditure Budgets and Schedules" shall have the meaning set
forth in Section 3.11(i).
Section 1.68 "Other Filings" shall have the meaning
set forth in Section 5.1(b).
Section 1.69 "Pension Plans" shall have the meaning
set forth in Section 3.13(h).
Section 1.70 "Per Share Purchase Price" shall mean
the price of $17.625 per share for the Company Common Stock.
Section 1.71 "Per Share Additional Purchase Price"
shall mean, with respect to each share of Company Common Stock
purchased by Buyer at any Closing, an amount equal to 85% of
the product of (i) the per share amount of the Next Dividend
multiplied by (ii) a fraction, the numerator of which is the
number of days during the period commencing the day after the
dividend payment date for the last dividend paid by the Company
prior to the date of such Closing (the "Prior Dividend") and
running through the day immediately prior to the date of such
Closing (inclusive), and the denominator of which is the number
of days during the period commencing the day after the dividend
payment date for the Prior Dividend and running through the
dividend payment date for the Next Dividend (inclusive).
-7-
Section 1.72 "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, mate-
rialmen and other Liens (other than Liens imposed under ERISA
or any Environmental Law or in connection with any Environmen-
tal Claim) imposed by law and created in the ordinary course of
business for amounts not yet overdue or which are being con-
tested 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 Subsid-
iaries 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 Pre-
liminary Capital Expenditure Budgets and Schedules or the De-
velopment Budget and Schedule, do not exceed $200,000 in the
aggregate (excluding from such calculation, any amounts dis-
closed in writing by the Company to Buyer which (a) are fully
covered by insurance held by the Company under which the Com-
pany 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, (v)
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 mate-
rially from the value or usefulness of the Company Properties
to which they apply, (iv) the Liens which were granted by the
Company or any of its Subsidiaries to lenders pursuant to
credit agreements in existence on the date hereof which are
described in Schedule 3.9(c), (v) the other Liens, if any,
described in Schedule 1.70, 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 Mate-
rial Adverse Effect.
Section 1.73 "person" shall mean any individual,
corporation, partnership, limited liability company, joint ven-
ture, trust, unincorporated organization, other form of busi-
ness or legal entity or Government Authority.
Section 1.74 "Prior Dividend" shall have the meaning
set forth in Section 1.65.
-8-
Section 1.75 "Projects" shall have the meaning set
forth in Section 3.11(j).
Section 1.76 "Property Restrictions" shall have the
meaning set forth in Section 3.11(a).
Section 1.77 "Proxy Statement" shall have the mean-
ing set forth in Section 5.1(b).
Section 1.78 "Purchase Price" shall mean the Per
Share Purchase Price multiplied by the number of shares of Com-
pany Common Stock to be purchased and sold at a particular
Closing.
Section 1.79 "Purchased Shares" shall have the mean-
ing set forth in Section 2.1.
Section 1.80 "Registration Rights Agreement" shall
have the meaning set forth in Section 2.5(a).
Section 1.81 "Regulatory Filings" shall have the
meaning set forth in Section 3.4(e).
Section 1.82 "REIT" shall have the meaning set forth
in Section 3.8(b).
Section 1.83 "Release" shall have the meaning set
forth in Section 3.12(g)(v).
Section 1.84 "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) the later of (A) June 30, 1997 (un-
less otherwise extended by Buyer and the Company in their sole
discretion) or (B) if Buyer timely notifies the Company that it
is, pursuant to Section 2.4(b) or 2.4(c), exercising its right
to make the Second Purchase and/or part or all of any remaining
Subsequent Purchase, then, the date as soon thereafter as (x)
all conditions to Buyer's obligations to effect such
purchase(s) shall have been satisfied or waived, and (y) such
purchase(s) shall have been effected.
Section 1.85 "Rent Roll" shall have the meaning set
forth in Section 3.11(f).
-9-
Section 1.86 "SEC" shall have the meaning set forth
in Section 3.5(a).
Section 1.87 "Second Closing" shall mean the Closing
of the Second Purchase pursuant to Section 2.4(a) or (b) after
the Initial Purchase.
Section 1.88 "Second Purchase" shall have the mean-
ing set forth in Section 2.4(a).
Section 1.89 "Securities Act" shall have the meaning
set forth in Section 3.4(e).
Section 1.90 "Securities Laws" shall have the mean-
ing set forth in Section 3.5(a).
Section 1.91 "Stock Purchase" shall have the meaning
set forth in Section 2.1.
Section 1.92 "Stockholders Agreement" shall have the
meaning set forth in Section 2.5(a).
Section 1.93 "Subsequent Purchase Price" shall mean
the Per Share Purchase Price multiplied by the number of Pur-
chased Shares purchased by Buyer in a Subsequent Purchase.
Section 1.94 "Subsequent Purchases" shall have the
meaning set forth in Section 2.4(a).
Section 1.95 "Subsidiaries" shall mean with respect
to any person, any corporation, partnership, joint venture,
business trust or other entity, of which such person, directly
or indirectly, owns or controls at least 50% of the securities
or other interests entitled to vote in the election of direc-
tors or others performing similar functions with respect to
such corporation or other organization, or to otherwise control
such corporation, partnership, joint venture, business trust or
other entity. Without limiting the generality of the forego-
ing, the Company's Subsidiaries include each of the entities
set forth on Schedule 3.1(d).
Section 1.96 "Tax" means any federal, state, local,
or foreign income, gross receipts, license, payroll, employ-
ment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section
1.959A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, dis-
ability, real property, personal property, sales, use, trans-
fer,
-10-
registration, value added, alternative or add-on minimum, esti-
mated, or other tax of any kind whatsoever, including any in-
terest, 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 li-
able as a successor or pursuant to contract.
Section 1.97 "Tax Return" means any return, declara-
tion, report, claim for refund, or information return or state-
ment relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
Section 1.98 "Tenancy Leases" shall have the meaning
set forth in Section 3.11(l).
Section 1.99 "Total Equity Commitment" shall mean
the amount of $132,176,925.00 or, if the total number of Pur-
chased Shares shall have been reduced pursuant to Section 2.1
of this Agreement, the number of Purchased Shares, as so re-
duced, multiplied by the Per Share Purchase Price.
Section 1.100 "Voting Agreements" shall have the
meaning set forth in the fifth paragraph hereof, and shall be
in the form set forth in Exhibit A.
Section 1.101 "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, trans-
fer, and deliver, and Buyer will purchase and acquire from the
Company, an aggregate of up to 7,499,400 shares of Company Com-
mon Stock (the "Purchased Shares"); provided, however, that if
at any Closing following such time as Buyer shall have pur-
chased 6,845,000 Purchased Shares or at which Buyer shall ac-
quire in the aggregate (at such Closing together with all prior
Closings) in excess of 6,845,000 Purchased Shares the purchase
by Buyer of Purchased Shares in excess of 6,845,000 Purchased
Shares would result in any holder of Class B Common Stock hav-
ing the right to convert shares of Class B Common Stock into
more than 9.8% of the Voting Securities (as defined in the
Stockholders Agreement), then, unless any such conversion right
has been waived, the number of Purchased Shares shall be re-
duced to 6,845,000 or such greater number as would not result
-11-
in such conversion right (and the number of Purchased Shares to
be purchased at such Closing and any Subsequent Closing shall
be reduced accordingly). Each Closing at which Buyer purchases
any Purchased Shares is herein referred to as a "Stock Pur-
chase."
Section 2.2 Consideration. Subject to the terms and
conditions hereof, at each Closing, Buyer shall deliver to the
Company the relevant 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 Com-
pany.
Section 2.3 Initial Closing. Subject to the terms
and conditions hereof, at a mutually agreeable time promptly
following the date on which the applicable conditions set forth
in Sections 7.1, 7.3 and 7.4 shall have been satisfied or duly
waived (but, in any event, no sooner than 20 days after the
date hereof), Buyer will purchase and acquire (and the Advanc-
ing 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
Initial 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 Ini-
tial Closing, the Company shall have the right to require, sub-
ject to satisfaction or waiver of the applicable conditions set
forth in Sections 7.2 and 7.3, Buyer to purchase (and to re-
quire the Advancing Party to advance sufficient funds for such
purchase) from the Company (i) at the Second Closing, 2,717,400
Purchased Shares (the "Second Purchase"), and (ii) from time to
time at one or more Subseqent Closings, up to an aggregate of
3,847,600 (as such number may be reduced pursuant to Section
2.1) Purchased Shares; provided that the Subsequent Purchase
Price at each Subseqent Closing shall be not less than $30 mil-
lion (or a minimum of 1,702,128 Purchased Shares) (each, and
individually and the Second Purchase referred to as a "Sub-
sequent 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 Sec-
tions 7.2, 7.3 and 7.4 shall have been satisfied or duly
waived.
(b) If the Second Purchase shall not have occurred
on or before December 1, 1996, then Buyer shall have the right,
-12-
subject to the satisfaction or waiver of the applicable condi-
tions set forth in Sections 7.2, 7.3 and 7.4, to make the Sec-
ond Purchase from the Company on or before December 31, 1996,
or as soon thereafter as all conditions to Buyer's obligation
to effect the Second Purchase hereunder shall have been satis-
fied or waived.
(c) If less than 3,847,600 (as such number may be
reduced pursuant to Section 2.1) Purchased Shares shall have
been issued and sold at any and all Subsequent Purchases other
than at the Second Purchase on or before June 1, 1997, then
Buyer shall have the right, subject to the satisfaction or
waiver of the applicable conditions set forth in Sections 7.2,
7.3 and 7.4, to make a Subsequent Purchase from the Company on
or before June 30, 1997, or as soon thereafter as all condi-
tions to Buyer's obligation to effect the Subsequent Purchase
hereunder shall have been satisfied or waived.
(d) If the condition set forth in Section 7.3(f) 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 con-
dition to Buyer's obligation to effect the Subsequent Purchase
shall have been, as determined in Buyer's sole discretion, sat-
isfied or waived.
Section 2.5 Additional Agreements and Closing Deliv-
eries. (a) At the Initial Closing, and as a condition to the
parties' obligations hereunder to effect the transactions con-
templated hereby at the Initial Closing, the Company and Buyer
shall enter into a registration rights agreement substantially
in the form attached as Exhibit B (the "Registration Rights
Agreement"), and the Company, Buyer and the Advancing Party
shall enter into a shareholders agreement substantially in the
form attached as Exhibit C (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) certifi-
cates 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 each Subsequent Closing, and by Section 7.3(a) as
-13-
to all Closings, (iii) evidence or copies of any consents, ap-
provals, orders, qualifications or waivers required pursuant to
Section 7.1, as to the Initial Closing only, pursuant to Sec-
tion 7.2, as to each Subsequent Closing, and pursuant to Sec-
tion 7.3, as to all Closings, (iv) all certificates and other
instruments and documents required by this Agreement to be de-
livered 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 Com-
pany, all other certificates, documents, instruments and writ-
ings required pursuant hereto to be delivered by or on behalf
of Buyer at or before each Closing, and (iii) such other in-
struments reasonably requested by the Company, as may be neces-
sary or appropriate to confirm or carry out the provisions of
this Agreement.
Section 2.6 Time and Place of Closings. Each Clos-
ing shall take place on the relevant Closing Date at such 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 Sec-
tion 10.5.
Section 2.8 Company's Right to Cure. (a) From the
date hereof until the date that is four weeks from the date
hereof, Buyer may conduct such investigation as it deems ap-
propriate 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 four-week pe-
riod, Buyer shall deliver to the Company a written notice set-
ting 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 in-
correct in such a way as would, individually or in the aggre-
gate, 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
-14-
the Company shall attempt, to the extent commercially reason-
able 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 so, 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 deliver the Cure Notice within 30 Business Days after
its receipt of Buyer's notice, Buyer shall have 10 Business
Days to terminate this Agreement without liability to any par-
ty. 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 four-week
period from the date hereof, but fails to include such Breach-
ing Matter in its notice pursuant to Section 2.8(a), Buyer
shall also be deemed to have waived such Breaching Matter.
Section 2.9 Additional Purchase Price. As ad-
ditional consideration from Buyer to the Company for the shares
of Company Common Stock purchased at each Closing, Buyer agrees
that, simultaneously with its receipt of the Next Dividend pay-
able with respect to each such share of Company Common Stock
purchased at such Closing, Buyer shall pay to the Company the
amount of the Per Share Additional Purchase Price applicable to
each such share of Company Common Stock.
ARTICLE 3
Representations and Warranties of the Company
The Company hereby represents and warrants to Buyer
as follows:
Section 3.1 Organization and Qualification; Subsid-
iaries. (a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Florida. 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.
-15-
(b) Each of the Subsidiaries of the Company is a
corporation, partnership or limited liability company duly or-
ganized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization, and
has the corporate or partnership power and authority to own its
properties and to carry on its business as it is now being con-
ducted.
(c) Each of the Company and its Subsidiaries is duly
qualified to do business and in good standing in each jurisdic-
tion in which the ownership of its property or the conduct of
its business requires such qualification, except for any fail-
ures 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 Sub-
sidiary 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 incor-
poration or organization, (ii) the type of and percentage in-
terest 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 Subsid-
iary, and the rate of return thereon. Except as contemplated
hereby, there are no existing options, warrants, calls, sub-
scriptions, convertible securities or other rights, agreements
or commitments which obligate the Company or any of the Subsid-
iaries 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 Stockhold-
ers Agreement have been duly and validly authorized by all nec-
essary 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 Amended Company Charter
by the Company's shareholders. This Agreement has been duly
executed and delivered by the Company for itself and consti-
tutes the valid and legally binding obligation of the Company,
-16-
enforceable against the Company in accordance with its 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 transac-
tions contemplated hereby and thereby, and determined to recom-
mend that the shareholders of the Company vote in favor of and
approve the issuance of Company Common Stock pursuant to this
Agreement.
(c) The shares of Company Common Stock to be ac-
quired 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 Com-
mon Stock hereunder will not give any shareholder of the Com-
pany the right to demand payment for its shares under Florida
law or give rise to any preemptive or similar rights. Neither
the entry into or announcement of this Agreement nor the con-
summation of the transactions contemplated hereby will result
in any holder of Class B Common Stock having the right to con-
vert any shares of Class B Common Stock into shares of Company
Common Stock pursuant to Section 4(a) of the Articles of Amend-
ment.
(e) The Board of Directors of the Company has
adopted a resolution authorizing the placement of the Investor
Nominees (as defined in the Stockholders Agreement) on the
Board of Directors of the Company in accordance with the terms
of the Stockholders Agreement, and approving any necessary ex-
pansion of the number of directors constituting the Board of
Directors, all in accordance with the requirements of the Com-
pany Charter.
Section 3.3 Capital Stock. (a) The authorized
capital stock of the Company as of the date hereof consists of
25,000,000 shares of Company Common Stock, par value $0.01 per
share, 10,000,000 shares of Special Common Stock, par value
$0.01 per share, and 10,000,000 shares of Preferred Stock, par
value $0.01 per share. As of May 31, 1996, there are 6,848,699
shares of Company Common Stock issued and outstanding, 1,916
shares of Series A 8% Cumulative Preferred Stock, par value
$.01 per share ("Company Preferred Stock"), issued and out-
standing and 2,500,000 shares of Class B Non-voting Common
Stock, par value $0.01 per share ("Class B Common Stock"), is-
sued and outstanding. All such issued and outstanding shares
-17-
of Company Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. 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 shareholders
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 cor-
poration, partnership, joint venture, business, trust or entity
(other than investments in short-term investment securities).
Section 3.4 No Conflicts; No Defaults; Required Fil-
ings and Consents. Except as contemplated hereby, neither the
execution and delivery by the Company hereof nor the consumma-
tion 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 pro-
visions 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 obliga-
tions pursuant to, or, except as set forth in Schedule
3.9(g), accelerate vesting under, any of the Regency Re-
alty Corporation 1993 Long Term Omnibus Plan or similar
compensation plan or any grant or award made under any of
the foregoing;
(c) violate or conflict with any statute, regula-
tion, judgment, order, writ, decree or injunction appli-
cable to the Company or its Subsidiaries, except as would
not, individually or in the aggregate, reasonably be ex-
pected 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), Schedule 3.4(d)-B (with respect to
the Second Closing), and Schedule 3.4(d)-C (with respect
to each other Subsequent Closing), violate or conflict
with or result in a breach of any provision of, or con-
stitute a default (or any event which, with notice or
-18-
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 Gov-
ernment 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"), the Hart-Scott-Rodino Antitrust Im-
provements Act of 1976, as amended (the "HSR Act"), state
securities laws ("Blue Sky Laws") (collectively, the
"Regulatory Filings"), and any filings required to be made
with the Secretary of State of Florida or any national
securities exchange on which the Company Common Stock is
listed, except as would not, individually or in the ag-
gregate, 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 de-
livered or made available to Buyer the registration statement
of the Company filed with the Securities and Exchange Commis-
sion ("SEC") in connection with the Company's initial public
offering of Company Common Stock, and all exhibits, amendments
and supplements thereto (collectively, the "Company Registra-
tion 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 ex-
hibits and any amendments thereto) filed with the SEC (col-
lectively, the "Company Reports"). 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 regula-
tions promulgated thereunder (the "Securities Laws"). As of
their respective dates, the Company Reports (i) complied as to
-19-
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 state-
ments made therein, in the light of the circumstances under
which they were made, not misleading. There is no unresolved
violation asserted by any Government Authority with respect to
any of the Company Reports.
(b) Each of the balance sheets included in or incor-
porated by reference into the Company Reports (including the
related notes and schedules) fairly presented the financial po-
sition of the entity or entities to which it relates as of its
date and each of the statements of operations, shareholders'
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, re-
tained earnings or cash flows, as the case may be, of the en-
tity or entities to which it relates for the periods set forth
therein, in each case in accordance with United States gen-
erally 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, indi-
vidually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect. The projections set forth in the
Regency Realty Corporation 1996 Consolidated Operating Re-
project dated May 30, 1996 which has previously been delivered
by the Company to Buyer represent the Company's good faith ex-
pectations and estimates with respect to the matters set forth
therein.
(c) Except as and to the extent set forth in the
Company Reports or any Schedule hereto, to the Company's knowl-
edge, 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)
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 connec-
tion herewith. Except as disclosed in Schedule 3.6(a), there
are no continuing orders, injunctions or decrees of any Govern-
ment Authority to which the Company or any of its Subsidiaries
is a party or by which any of its properties or assets are
bound.
-20-
(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 the
entering into employment agreements in the form attached as
Exhibit D (the "Employment Agreements") with the employees
listed on Schedule 3.7, since December 31, 1994, 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 any
change, circumstance or event that would reasonably be expected
to result in a Material Adverse Effect, 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, contractual obligation,
borrowing, capital expenditure or transaction (each, a "Commit-
ment") 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 Ad-
verse 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 Mate-
rial Adverse Effect.
Section 3.8 Tax Matters; REIT and Partnership Sta-
tus. (a) The Company and each of its Subsidiaries has timely
filed with the appropriate taxing authority all Tax Returns re-
quired 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 Com-
pany 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
-21-
assessment or collection of any Tax, and no claim for assess-
ment 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 1993, 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, other-
wise 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 con-
cerning any Tax liability of the Company or any of its Subsid-
iaries, (i) claimed or raised by any taxing authority in writ-
ing 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), and (ii) all
non-domestic beneficial owners (whether direct or indirect) of
Company Common Stock are set forth in Schedule 3.8(a). 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 Sec-
tion 856(h) of the Code) owns or would be considered to own
(taking into account the ownership attribution rules under Sec-
tion 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
interest in the Company. Except as contemplated by this Agree-
ment or as set forth in Schedule 3.8(a), the Board of Directors
has not exempted any Person from the Ownership Limit, the Re-
lated Tenant Limit or the Existing Holder Limit or otherwise
waived any of the provisions of Article 5 of the Company Char-
ter (as all capitalized terms used in this sentence are defined
in the Company Charter). The Exiting Holder Limit and the Own-
ership Limit (as such terms are defined in the Company Charter)
have not been modified pursuant to Section 5.8 or 5.9 of the
Company Charter or otherwise. 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 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 ended December 31, 1995 and for the
tax year that will end on December 31, 1996 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 1995
-22-
and 1996, (ii) has operated, and intends to continue to oper-
ate, in such a manner as to qualify as a REIT for 1995 and
1996, (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 representation
in Section 4.7, will not be rendered unable to qualify as a
REIT for federal income tax purposes as a consequence of the
transactions contemplated hereby.
(c) Any amount or other entitlement that could be
received (whether in cash or property or the vesting of prop-
erty) as a result of any of the transactions contemplated here-
by by any Employee, officer, or director of the Company or any
of their 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) 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 Subsid-
iaries 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. 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 representa-
tion set forth in Section 3.8 shall be deemed to be untrue or
incorrect unless such untruths or inaccuracies would, individu-
ally or in the aggregate, be reasonably expected to result in a
Material Adverse Effect.
Section 3.9 Compliance with Agreements; Material
Agreements. (a) Neither the Company nor any of its Subsidiar-
ies 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
-23-
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, to-
gether 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 re-
quired 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 aggre-
gate, reasonably be expected to result in a Material Adverse
Effect. There is no unresolved violation asserted by any regu-
latory agency of which the Company has received written notice
with respect to any report or statement relating to an examina-
tion of the Company or any of its Subsidiaries which, if re-
solved in a manner unfavorable to the Company or such Subsid-
iary, 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 Sub-
sidiaries (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 $200,000, excluding
Commitments made in the ordinary course of business with a ma-
turity 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 ex-
pected to result in a Material Adverse Effect. True and com-
plete 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 de-
scribed in clause (i) or (ii) of this paragraph or in respect
-24-
of any payment obligations thereunder except as would not, in-
dividually or in the aggregate, reasonably be expected to re-
sult in a Material Adverse Effect. All joint venture and part-
nership agreements to which the Company or any of its Subsid-
iaries is a party as of the date hereof are set forth in Sched-
ule 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 Com-
pany'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, reason-
ably 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 part-
nership 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 com-
plete 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 and suburban office properties 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 have been delivered or made available to Buyer
prior to the date hereof.
(e) Except as disclosed in the Company Reports and
except for (i) agreements made in the ordinary course of busi-
ness with a maturity of less than one year or that are termi-
nable 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 Ad-
verse Effect, Schedule 3.9(e) sets forth a complete and ac-
curate list of all material agreements entered into by the Com-
pany as of the date hereof which are not listed in any other
Schedule hereto, including the 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,
-25-
as against the other parties thereto, no payments, if any, the-
reunder are delinquent, the Company is not in default thereun-
der, and no notice of default thereunder has been sent or re-
ceived by the Company or any of its Subsidiaries, except where
the same would not, individually or in the aggregate, reason-
ably be expected to result in a Material Adverse Effect. To
the Company's knowledge, no event has occurred which, with no-
tice 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, reason-
ably 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, reason-
ably be expected to result in a Material Adverse Effect. True
and complete copies of each such agreement have been delivered
or made available to Buyer prior to the date hereof. The rep-
resentations and warranties of the Company and its Affiliates
set forth in the agreements listed under Items 6 and 7 of
Schedule 3.9(e) have not been breached.
(f) Schedule 3.9(f) sets forth a complete and ac-
curate list of all agreements and policies of the Company in
effect on the date hereof relating to transactions with affili-
ates and potential conflicts of interest. Each agreement or
policy set forth in Schedule 3.9(f) is in full force and ef-
fect, and the Company, each of its Subsidiaries, and, to the
Company's knowledge, the other parties thereto are in compli-
ance 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 agree-
ment or policy have been delivered to Buyer.
(g) Except as set forth on Schedule 3.9(g), there
are no change of control or similar provisions in any employ-
ment, severance, stock option, stock incentive, or similar
agreement or arrangement which would be triggered by the trans-
actions contemplated by this Agreement. Schedule 3.9(g) iden-
tifies the obligations (including any payment or other obliga-
tion, 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 oth-
er financial records of the Company and each of its Subsidiar-
ies are in all respects true and complete, have been maintained
in accordance with good business practices, and are accurately
-26-
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 Sub-
sidiaries have been made available to Buyer, contain in all
material respects accurate records of all meetings and accu-
rately reflect in all material respects all other corporate ac-
tion of the shareholders 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 transac-
tions 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 Subsid-
iaries 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 Prop-
erties"). 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 marketable 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 oc-
cupancy (including zoning regulations and building codes) or
reservations of interests in title (collectively, "Property
Restrictions"), except for (i) Permitted Liens and (ii) Prop-
erty Restrictions imposed or promulgated by law or by any Gov-
ernment Authority which are customary and typical for similar
properties. To the Company's knowledge, none of the matters
-27-
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 im-
provement which constitutes a part of, or the present use, oc-
cupancy 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 Ef-
fect. American Land Title Association policies of title in-
surance (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 Sub-
sidiaries, as applicable, to each of the Company Properties in
amounts at least equal to the original cost thereof, subject
only to Permitted Liens, and, to the Company's knowledge, such
policies are valid and in full force and effect and no claim
has been made under any such policy. The Company has delivered
or made available to Buyer true and complete copies of all such
policies and of the most recent surveys of the Company Proper-
ties, 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 will be provided or
made available by the Company 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 ag-
gregate, reasonably be expected to have a Material Adverse Ef-
fect 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 op-
eration of the existing buildings, structures or other improve-
ments 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 threat of modi-
fication or cancellation of any of same, or (ii) of any viola-
tion 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
-28-
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
$200,000 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 con-
dition and repair and is structurally sound and free of de-
fects, 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 ex-
pected 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 has delivered or made available to Buyer
true and complete copies of all engineering reports, inspection
reports, maintenance plans and other documents relating to the
condition of any Company Property prepared for the Company or
otherwise in the Company's or any Subsidiary's possession.
(c) The Company has no knowledge (i) that any con-
demnation, 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 ad-
jacent to any Company Property is underway or has been pro-
posed, (iii) of any proposed change in the assessed valuation
of any Company Property other than customarily scheduled re-
valuations, (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 exten-
sion, oversizing utilities, lighting or like expenses or charg-
es 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 ex-
pected to have a Material Adverse Effect or to materially and
adversely affect the use or occupancy (or, if applicable, de-
velopment) 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
-29-
or for the furnishing to such Company Property of any essential
building systems or utilities, other than facilities the ben-
efit 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 util-
ities, and, to the Company's knowledge, each of the Company
Properties has lawful access to public roads, in all cases suf-
ficient for the current use and occupancy of each Company Prop-
erty (or, in the case of the Development Property, for the de-
velopment 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 lies in any flood plain area (as defined,
as of the date hereof, by the U.S. Army Corps of Engineers (the
"Army Corps of Engineers") or otherwise) or includes any wet-
lands or vegetation or species protected by any applicable
laws. Except as set forth on Schedule 3.11(d), none of the
Company Properties lies in any 100-year flood plain area, as
established by the Army Corps of Engineers. Schedule 3.11(d)
accurately describes the Army Corps of Engineers' flood-plain
designation for each flood plain area in which any Company
Property listed in such Schedule 3.11(d) is located. The im-
provements on each Company Property which lies in a flood plain
area 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 ap-
plicable 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 consti-
tuting a part of such Company Property. No representation set
forth in this subsection (d) shall be deemed to be untrue un-
less such untruths are, individually or in the aggregate, rea-
sonably expected to have a Material Adverse Effect or to mate-
rially and adversely affect the use or occupancy (or, if ap-
plicable, development) of the Company Properties taken as a
whole.
(e) Schedule 3.11(e) contains a complete and ac-
curate list of each survey, study or report prepared by or for
the Company or any Subsidiary in connection with any Company
Property's compliance or non-compliance with the requirements
of the Americans with Disabilities Act (the "ADA"), other than
routine correspondence or memoranda. Except for matters ad-
dressed 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
-30-
as the Company believes will not, individually or in the ag-
gregate, have a material adverse effect on the financial condi-
tion, results of operations or business of the Company and its
Subsidiaries (to the extent of the Company's interest therein)
taken as a whole.
(f) The Company has provided to Buyer an accurate
rent roll for each Company Property as of May 31, 1996 (the
"Rent Roll"), which identifies and accurately describes each
lease of space in each Company Property (collectively, the
"Company Leases"). The Company has delivered to Buyer a sum-
mary of each Company Lease (the "Lease Summaries") which ac-
curately describes the material terms thereof. The Company has
delivered or will make available to Buyer a true and complete
copy of each Company Lease, including all amendments and modi-
fications thereto. With respect to each Company Lease for pre-
mises larger than 10,000 square feet of rentable space (col-
lectively, the "Material Company Leases"), except as set forth
in Schedule 3.11(f) and except for matters which are not, indi-
vidually 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 has not
been amended, modified or supplemented, (ii) the tenant under
each of the Material Company Leases is in actual possession of
the premises leased thereunder, (iii) no tenant under any Mate-
rial Company Lease is more than 30 days in arrears in the pay-
ment of rent, (iv) none of the Company or any of its Subsidiar-
ies 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 de-
posits) 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) no tenant under any of the Mate-
rial Company Leases has any purchase options or kick-out rights
or is entitled to any concessions, allowances, abatements, set-
offs, rebates or refunds, (viii) none of the Material Company
Leases and none of the rents or other amounts payable thereun-
der 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
-31-
set forth in Schedule 3.11(f), no brokerage or leasing commis-
sion 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) except as set forth in the Lease Summaries,
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) no tenant under
any of the Material Company Leases has any right to remove ma-
terial improvements or fixtures that have at any time been af-
fixed to the premises leased thereunder, (xiii) each tenant
under the Material Company Leases is required thereunder to
maintain, at its cost and expenses, public liability and prop-
erty damage insurance with liability limits which reasonably
relate to the value of the contingent liabilities being insured
thereby, and (xiv) the landlord under each Material Company
Lease has fulfilled all of its obligations thereunder in re-
spect of tenant improvements and capital expenditures. Other
than the tenants identified in the Rent Roll and Lease Sum-
maries and parties to easement agreements which constitute Per-
mitted Liens, no third party has any right to occupy or use any
portion of any Company Property. The Rent Roll or Lease Sum-
maries include a budget for all material tenant improvement and
similar material work required to be made by the lessor under
each of the Material Company Leases. None of the matters dis-
closed in Schedule 3.11(f) has or could have, individually or
in the aggregate, a Material Adverse Effect.
(g) Schedule 3.11(g) sets forth a complete and ac-
curate list of all material commitments, letters of intent or
similar written understandings made or entered into by the Com-
pany or any of its Subsidiaries as of the date hereof (x) to
lease any space larger than 10,000 rentable square feet at any
of the Company Properties, (y) to sell, mortgage, pledge or hy-
pothecate any Company Property or Properties, which, individu-
ally or in the aggregate, are material, or to otherwise enter
into a material transaction in respect of the ownership or fi-
nancing of any Company Property, or (z) to purchase or to ac-
quire 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 has
-32-
previously delivered or made available to Buyer a true and com-
plete 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 or any of its Subsidiaries has granted any out-
standing options or has entered into any outstanding contracts
with others for the sale, mortgage, pledge, hypothecation, as-
signment, 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 Subsid-
iaries 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) contains a complete and ac-
curate description of any non-compliance by any Company Prop-
erty, to the Company's knowledge, with any law, ordinance,
code, health and safety regulation or insurance requirement
(except for the ADA, which is addressed in this respect in Sec-
tion 3.11(e) above), other than such non-compliance as would
not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Schedule 3.11(i) also 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, 1996 (the "Capital Expenditure Budget and
Schedule"), and the Company's or any Subsidiary's preliminary
capital expenditure budget and schedule for each Company Prop-
erty, which describes the capital expenditures which the Com-
pany or any Subsidiary has budgeted for such Company Property
for the period commencing January 1, 1997 and running through
December 31, 1998 (the "1997 and 1998 Preliminary Capital Ex-
penditure Budgets and Schedules"). Each of the Capital Expen-
diture Budget and the 1997 and 1998 Preliminary Capital Expen-
diture Budgets and Schedules also describes other capital ex-
penditures as are necessary, to the Company's knowledge, in
order to bring such Company Property into compliance with ap-
plicable laws, ordinances, codes, health and safety regulations
and insurance requirements (including in respect of fire sprin-
klers, 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
-33-
to cause such compliance is not material and the related expen-
ditures are, in the aggregate with all other such expenditures,
less than $200,000) 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 improve-
ments required to be made under any Company Lease. To the
Company's knowledge, the costs and time schedules for 1996 set
forth in the Capital Expenditure Budget and Schedule are rea-
sonable estimates and projections. To the Company's knowledge,
the costs and time schedules for 1997 and 1998 set forth in the
1997 and 1998 Preliminary Capital Expenditure Budgets and
Schedules are reasonable estimates and projections based upon
information available to the Company at the time that the 1997
and 1998 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 1997 and
1998 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 insur-
ance 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, in-
dividually or in the aggregate, reasonably be expected to re-
sult 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 rehabilitated
(collectively, the "Development Properties") and a brief de-
scription of the development or rehabilitation intended by the
Company or any Subsidiary to be carried out or completed
thereon (collectively, the "Projects"), including any budget
and development or rehabilitation schedule therefor prepared by
or for the Company or any Subsidiary (collectively, the "De-
velopment Budget and Schedule"). Except as disclosed in Sched-
ule 3.11(j), each Development Property is zoned for the lawful
development thereon of the applicable Project, and the Company
or its Subsidiaries have obtained all permits, licenses, con-
sents and authorizations required for the lawful development or
rehabilitation thereon of such Project, except only for such
failure to meet the foregoing standards as would not, individu-
ally or in the aggregate, be reasonably expected to have a Ma-
terial Adverse Effect. Except as set forth in Schedule
3.11(j), to the Company's knowledge, there are no material im-
pediments to or constraints on the development or rehabilita-
tion of any Project in all material respects within the time
-34-
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 all aspects of the Development Budget and Schedule ap-
plicable thereto. The Company has delivered to Buyer all fea-
sibility studies, soil tests, due diligence reports and other
studies, tests or reports performed by or for the Company, or
otherwise in the possession of the Company, which relate to the
Development Properties or the Projects.
(k) The Company has disclosed to Buyer all adverse
matters known to the Company with respect to or in connection
with the Company Properties (including the Company Leases and
the Tenancy Leases), which would, individually or in the ag-
gregate, reasonably be expected to have a Material Adverse Ef-
fect.
(l) The ground leases underlying the leased Company
Properties referenced in Schedule 3.11(a) (collectively, the
"Tenancy Leases") are accurately described in Schedule 3.11(l).
Each of the Tenancy 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 indi-
cated in Schedule 3.11(l), none of the Tenancy Leases is sub-
ject to any mortgage, pledge, Lien, sublease, assignment, li-
cense or other agreement granting to any third party any inter-
est therein, collateral or otherwise, or any right to the use
or occupancy of any premises leased thereunder. True and com-
plete copies of the Tenancy 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(l), there is no pending or
threatened proceeding which is reasonably likely to interfere
with the quiet enjoyment of the tenant under any of the Ten-
ancy Leases. Except as set forth in Schedule 3.11(l), 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 thereunder has been sent or received by
the Company or any of its Subsidiaries, and, as of the date of
each Subsequent Closing, there will be no material deteriora-
tion with respect to such matters from the Company's perspec-
tive. There does not exist under any of the Tenancy Leases
any default, and, to the Company's knowledge, no event has oc-
curred which, with notice or lapse of time or both, would con-
stitute such a default, except as would not, individually or in
-35-
the aggregate, be reasonably expected to result in a Material
Adverse Effect.
(m) 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 March 31,
1996, except as since sold or otherwise disposed of in the or-
dinary course of business), free and clear of all Liens, except
for Permitted Liens which are not, individually or in the ag-
gregate, reasonably expected to have a Material Adverse Effect.
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 effec-
tive, all permits, certificates of financial responsibility and
other governmental authorizations required under the Environ-
mental 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 Executive Summaries of the Company
Environmental Reports, each of the Company and its Subsidiar-
ies, and each Company Property is and has been in compliance
with all terms and conditions of the Environmental Permits and
all Environmental Laws, except only to an extent which would
not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect. The Company has no
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 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 Prop-
erties with any Environmental Laws or Environmental Permits or
(y) alleged or suspected Liability of the Company or its Sub-
sidiaries 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.
-36-
(d) No Environmental Claim with respect to the op-
erations or the businesses of the Company or its Subsidiaries,
or with respect to the Company Properties, has been asserted
or, to the Company's knowledge, threatened, and, to the Com-
pany's knowledge, 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 Environmental
Claim 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, reason-
ably be expected to have a Material Adverse Effect), or set
forth in the Executive Summaries of the Company Environmental
Reports, (i) none of the Company or its Subsidiaries has been
notified or anticipates being notified of potential responsi-
bility 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 En-
vironmental Response, Compensation and Liability Act ("CER-
CLA"), 42 U.S.C. Section 9601 et seq., or analogous state or
foreign 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, disposal ar-
eas, 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 poly-
chlorinated 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 trans-
formers, capacitors or other equipment owned by any utility
company, and (vi) to the Company's knowledge, no asbestos or
asbestos-containing material is present at any Company Property
-37-
other than floor tiles that do not contain any friable asbestos
and no Employee, agent, contractor or subcontractor of the Com-
pany or its Subsidiaries or any other person is now or has in
the past been exposed to friable asbestos or asbestos-
containing material 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 envi-
ronmental 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 (collec-
tively, the "Company Environmental Reports"). The Company has
previously delivered or made available to Buyer true and com-
plete copies of (i) the executive summary or conclusion in-
cluded in each Company Environmental Report (collectively, the
"Executive Summaries of the Company Environmental Reports") and
(ii) each Company Environmental Report which constitutes a
"Phase II" (or higher) environmental report or which is other-
wise more detailed or in-depth than a typical "Phase I" envi-
ronmental report. The Executive Summaries of the Company Envi-
ronmental Reports disclose all materially adverse matters known
to the Company in respect of the environmental condition (in-
cluding violations of Environmental Laws, Environmental Claims
and the presence or Release of any Materials of Environmental
Concern) of the Company Properties (it being understood, how-
ever, that reference in the Executive Summaries of the Company
Environmental Reports to other environmental reports, investi-
gations, assessments or other documents shall not constitute
disclosure of the contents thereof except to the extent such
contents are fully discussed in the Executive Summaries of the
Company Environmental Reports). To the Company's knowledge,
none of the matters disclosed by the Executive Summaries of the
Company Environmental Reports would, individually or in the
aggregate, be reasonably likely to have a Material Adverse Ef-
fect. The Company has no knowledge of any facts or circum-
stances 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 Ma-
terial 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, debts, dues, accounts, reckonings,
bonds, bills, covenants, contracts, controversies,
promises, trespasses, damages, judgments, executions,
-38-
claims, liabilities and demands whatsoever, in law or
equity.
(ii) "Environmental Claim" shall mean any Claim
investigation or notice (written or oral) by any per-
son alleging potential liability (including potential
liability for investigatory costs, cleanup costs,
governmental response costs, natural resources dam-
ages, property damages, personal injuries or fatali-
ties, or penalties) arising out of, based on or re-
sulting from (A) the presence, generation, transpor-
tation, treatment, use, storage, disposal or Release
of Materials of Environmental Concern or the threat-
ened 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 Environ-
mental Law.
(iii) "Environmental Laws" shall mean federal,
state, local, provincial, municipal and foreign laws,
ordinances, principles of common law, rules, by-laws,
orders, governmental policies, statutes, regulations,
agreements, treaties, customary law, and interna-
tional principles relating to the pollution or pro-
tection 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, in-
cluding, but not limited to, any laws or regulations
relating to (A) generation, treatment, storage, dis-
posal or transportation of Materials of Environmental
Concern, emissions or discharges or protection of the
environment from the same, (B) exposure of persons
to, or Release or threat of Release of, Materials of
Environmental Concern, and (C) noise.
(iv) "Materials of Environmental Concern" shall
mean all chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or any fraction thereof,
petroleum products and hazardous substances (as de-
fined in Section 101(14) of CERCLA, 42 U.S.C.
Section 6601(14)), 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, dis-
posal, discharge, dispersal, leaching or migration
-39-
Section 3.13 Employees and Employee Benefit Plans.
(a) Schedule 3.13(a) sets forth a complete and accurate list
of all employment agreements with employees of the Company or
any of its Subsidiaries. Except for the employees who are par-
ties 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 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 affect Em-
ployees of the Company or any of its Subsidiaries (the "Company
Plans"). With respect to each Company Plan, the Company has
delivered or made 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 Com-
pany and each of its Subsidiaries is in compliance in all mate-
rial 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 liabilities except as reserved for in the
financial statements in or incorporated by reference into the
Company Reports, and, in the case of clause (i) through (iii),
except for such matters as would not, individually or in the
aggregate, reasonably be expected to result in a Material Ad-
verse Effect.
(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 ben-
efits or compensation of Employees of the Company or any of its
Subsidiaries (except for normal increases in compensation con-
sistent 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 knowl-
edge, anticipated claims against or otherwise involving any of
the Company Plans or any fiduciaries thereof with respect to
-40-
their duties to the Plans and no suit, action or other litiga-
tion (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 or any entity under "common
control" with the Company within the meaning of Section 4001 of
ERISA has 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 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 ben-
efits to any Employee or former Employee upon 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 Sec-
tion 3(3) of ERISA maintained or contributed to by a party
hereto or in which a party hereto participates or participated
and which provides benefits to Employees, including (i) any
such plan 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 Sec-
tion 3(2) of ERISA ("Pension Plans"). "Benefit Arrangements"
means life and health insurance, hospitalization, savings, bo-
nus, deferred compensation, incentive compensation, holiday,
vacation, severance pay, sick pay, sick leave, disability, tu-
ition refund, service award, company car, scholarship, reloca-
tion, patent award, fringe benefit, individual employment, con-
sultancy or severance contracts and other polices or practices
of a party hereto providing employee or executive compensation
or benefits to Employees, other than Employee Benefit Plans.
"Employees" mean all current employees, former employees and
retired employees of a party hereto or any of its Subsidiaries,
including employees on disability, layoff or leave status.
"Controlled Group Liability" means any and all liabilities un-
der (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii)
Sections 412 and 4971 of the Code, (iv) the continuation cover-
age 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, other than such liabilities
that arise solely out of, or relate solely to, the Plans.
-41-
(i) To the Company's knowledge, with respect to each
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 plan (whether or not vested), on a termination basis,
(iii) no reportable event within the meaning of Section 4043(c)
of ERISA has occurred, and the consummation of the transactions
contemplated by this agreement will not result in the occur-
rence of any such reportable event, and (iv) all premiums to
the Pension Benefit Guaranty Corporation have been timely paid
in full.
(j) There does not now exist, nor do any circum-
stances exist that could result in, any Controlled Group Li-
ability that would be a liability of the Company following the
Closing. Without limiting the generality of the foregoing,
neither the Company nor any ERISA Affiliate has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
(k) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (either alone or in conjunction with any other
event) result in, cause the accelerated vesting (except as set
forth in Schedule 3.9(g)) 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 agree-
ment, 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, individu-
ally or in the aggregate, reasonably be expected to have a Ma-
terial 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 Sub-
sidiaries. To the knowledge of the Company, there are no orga-
nizational efforts with respect to the formation of a collec-
tive bargaining unit presently being made or threatened in-
volving 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 transac-
tions or series of related transactions entered into by the
Company or any of its Subsidiaries since January 1, 1996 which
-42-
are of the type required to be disclosed by the Company pursu-
ant 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 has been delivered or made available to
Buyer prior to the date hereof.
Section 3.16 Insurance. The Company maintains in-
surance policies, including liability policies, covering the
assets, business, equipment, properties, operations, employees,
officers and directors of the Company and each of its Subsid-
iaries (collectively, the "Insurance Policies"), which are of a
type and in amounts customarily carried by persons conducting
businesses similar to those of the Company. There is no mate-
rial claim by the Company or any of its Subsidiaries pending
under any of the material Insurance Policies as to which cover-
age 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 refer-
ence therein (other than any information supplied or to be sup-
plied by Buyer for inclusion or incorporation by reference
therein) will not, as of the date such Proxy Statement is first
mailed to the shareholders of the Company and as of the time of
the meeting of the shareholders 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 Florida Takeover Law. The terms of
Sections 607.0901 and 607.0902 of the Florida 1989 Business
Corporation Act will not apply to Buyer, any Stock Purchase or
any other transaction contemplated hereby.
Section 3.19 Vote Required. The affirmative vote of
the holders of a majority of the outstanding shares of Company
Common Stock and Company Preferred Stock voting together as a
single class and 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 and each share of Company Preferred Stock being en-
titled to 50 votes 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 Stock-
holders Agreement and the transactions contemplated hereby and
-43-
thereby, except that adoption of the Amended Company Charter
requires only that the vote of the outstanding shares of the
combined class of Company Common Stock and Company Preferred
Stock entitled to vote thereon (and with each share of Company
Common Stock entitled to one vote per share and each share of
Company Preferred Stock being entitled to 50 votes per share)
which vote for such adoption is greater than the number of such
outstanding shares who vote against such adoption.
Section 3.20 Brokers or Finders. 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 commis-
sion 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 Stockholders Agreement. If the Stock-
holders Agreement were in effect as of the date hereof, the
Company would be in compliance with each of the covenants set
forth in Section 6.1 thereof (subject to the consummation of
the reorganization described in Schedule 6.5(a)).
Section 3.22 Knowledge Defined. As used herein, the
phrase "to the Company's knowledge" (or words of similar im-
port) means the actual knowledge of any of Martin E. Stein,
Jr., Bruce M. Johnson, Richard E. Cook, Robert C. Gillander,
Jr., James D. Thompson, J. Christian Leavitt or Robert L.
Miller, Jr. and includes any facts, matters or circumstances
set forth in any written notice from any Government Authority
or any other material written notice received by the Company or
any of its Subsidiaries, and also including any matter of which
Buyer informs the Company in writing.
ARTICLE 4
Representations and Warranties of Buyer and the Advancing Party
Buyer and the Advancing Party hereby jointly and sev-
erally represent and warrant to the Company as follows:
Section 4.1 Organization. (a) Buyer is a corpora-
tion duly incorporated, validly existing and in good standing
under the laws of Luxembourg. Buyer has all requisite corpor-
ate 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.
-44-
(b) The Advancing Party is a corporation duly in-
corporated, validly existing and in good standing under the
laws of Luxembourg. The Advancing Party has all requisite cor-
porate 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, de-
livery 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 credi-
tors' rights or general principles of equity.
Section 4.3 Conflicting Agreements and Other Mat-
ters. 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, consti-
tute 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, sta-
tute, 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.
Section 4.4 Acquisition for Investment; Sophistica-
tion; 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 Com-
pany Common Stock owned by Buyer shall at all times be and re-
main within its control, subject to the provisions of this
Agreement and the Registration Rights Agreement. Buyer is able
-45-
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 fi-
nancial and business matters that it is capable of evaluating
the merits and risks of the proposed investment, and therefore
has the capacity to protect its own interests in connection
with the acquisition of Company Common Stock pursuant hereto.
(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) The Advancing Party has previously delivered to
the Company (i) an audited balance sheet for the Advancing
Party as of December 31, 1995, and (ii) an unaudited balance
sheet for the Advancing Party as of April 30, 1996, each bal-
ance sheet which was certified by an officer of the Advancing
Party and which fairly presented the financial position of the
Advancing Party as of its date in accordance with GAAP. Each
such balance sheet discloses either on its face or by footnote,
all material liabilities of the Advancing Party required to be
disclosed under GAAP.
Section 4.5 Proxy Statement. None of the informa-
tion supplied or to be supplied by Buyer for inclusion or in-
corporation by reference in the Proxy Statement will, as of the
date the Proxy Statement is first mailed to the shareholders of
the Company and as of the time of the meeting of the sharehold-
ers of the Company in connection with the transactions contem-
plated hereby, contain any untrue statement of a material fact
or omit to state any material fact required to be stated there-
in or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not mis-
leading.
Section 4.6 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
-46-
Party in connection with this Agreement or any of the transac-
tions contemplated hereby for which the Company or any of its
Affiliates will be responsible.
Section 4.7 REIT Qualification Matters. To Buyer's
knowledge, no person 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 ownership attribution rules under Sec-
tion 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
interest in Buyer or the Advancing Party.
Section 4.8 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 In-
vestment Company Act of 1940, as amended.
Section 4.9 Ownership of Tenants. Buyer does not
own, directly or indirectly, an interest in a Tenant listed on
Schedule 4.9, which interest is equal to or greater than (i)
10% of the combined voting power of all classes of stock of
such Tenant, (ii) 10% of the total number of shares in all
classes of stock of such Tenant, or (iii) if such Tenant is not
a corporation, 10% of the assets or net profits of such Tenant.
For purposes of this Section, the rules prescribed by Section
318(a) of the Code, for determining the ownership of stock, as
modified by Section 856(d)(5) of the Code, shall apply in de-
termining direct and indirect ownership of stock, assets, or
net profits. Capitalized terms used but not defined in this
Section 4.9 shall have the meaning assigned to them in the Com-
pany Charter. The Company shall advise Buyer within a reason-
able period of time before the Closing of any material changes
to Schedule 4.9.
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 consum-
mate and make effective the transactions contemplated by this
Agreement, the Registration Rights Agreement and the Stockhold-
ers Agreement, subject to the terms and conditions hereof and
-47-
thereof, including all actions and things necessary to cause
all conditions precedent set forth in Article 7 to be satis-
fied.
(b) As promptly as practicable after the date
hereof, the Company shall prepare and file with the SEC a pre-
liminary proxy statement (the "Proxy Statement") by which the
Company's shareholders will be asked to approve the Amended
Company Charter and 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 shareholders,
shall be in form and substance reasonably satisfactory to Buy-
er. 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 shareholders at the earliest practi-
cable 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 relat-
ing to this Agreement and the transactions contemplated hereby,
including under the HSR Act and state takeover laws (the "Other
Filings"), and Buyer shall prepare and file any filings re-
quired of Buyer by the HSR Act. 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 cor-
respondence 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 State-
ment and any Other Filing shall comply in all material respects
with all applicable requirements of law. Buyer shall provide
the Company all information about Buyer required to be included
or incorporated by reference in the Proxy Statement or any
Other Filing and shall otherwise cooperate with the Company in
taking the actions described in this paragraph. Whenever any
event occurs which is required to be set forth in an amendment
or supplement to the Proxy Statement or any Other Filing, the
Company or Buyer, as the case may be, shall promptly inform the
other party of such occurrence and cooperate in filing with the
SEC or its staff or any other government officials, and/or
mailing to shareholders of the Company, such amendment or sup-
plement. Subject to the provisions of Section 5.6, the Proxy
Statement shall include the recommendation of the Board of Di-
rectors of the Company that the shareholders of the Company
vote in favor of and approve the Amended Company Charter and
-48-
the issuance of Company Common Stock pursuant to this Agree-
ment.
(c) The Company shall call a meeting of its share-
holders to be held as promptly as practicable for the purpose
of voting upon the transactions (including the issuance of Com-
pany Common Stock and the amendments to the Company Charter)
contemplated hereby; provided that should a quorum not be ob-
tained at such meeting of the shareholders, or if fewer shares
of Company Common Stock than the number required therefor are
voted in favor of approval and adoption of the transactions
(including the issuance of Company Common Stock and the amend-
ments to the Company Charter) contemplated hereby, the meeting
of the shareholders shall be postponed or adjourned in order to
permit additional time for soliciting and obtaining additional
proxies or votes. In no event shall the record date for deter-
mining shareholders entitled to notice of and to vote at such
shareholders' meeting to be held in accordance with the terms
hereof be earlier than the date following the date of the Ini-
tial Closing.
(d) The Company shall use its commercially reason-
able best efforts to obtain the consents set forth in each of
Schedules 3.4(d)-A, 3.4(d)-B and 3.4(d)-C.
(e) From and after the date hereof, (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. At the
Initial Closing, the Company, Buyer and the Advancing Party
shall enter into the Registration Rights Agreement.
Section 5.3 Stockholders Agreement. At the Initial
Closing, the Company, 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 confidenti-
ality provisions contained in Section 5.4(b), the Company and
Buyer (or Buyer's U.S. representatives) will cooperate with
each other in the development and distribution of all news re-
leases and other public information disclosures with respect to
-49-
this Agreement, the Registration Rights Agreement the Stock-
holders Agreement and any of the transactions contemplated
hereby or thereby.
(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, of-
ficers, employees, financial advisors, legal advisors, ac-
countants, 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 unautho-
rized 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 (and with respect to transactions or conduct relat-
ing to the number of shares of Company Stock outstanding, from
May 31, 1996) to the sooner to occur of (A) the date on which
the Remaining Equity Commitment shall be zero, and (B) if ap-
proval for the issuance of the Company Common Stock required to
effect a Subsequent Purchase shall, in accordance with the
terms hereof, have been sought from the shareholders of the
Company but the requisite approval of the Company's sharehold-
ers shall not have been obtained, the date of the shareholder
meeting at which such shareholder approval shall not have been
obtained, the Company, except as otherwise consented to or ap-
proved by Buyer in writing or as permitted or required hereby
(x) has conducted or will conduct the business of the Company
and its Subsidiaries and has engaged or will engage in transac-
tions only in the ordinary course, and (y) will not:
(i) change any provision of the Amended Com-
pany Charter or the By-laws 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 acquisi-
tion of assets by the Company in bona fide arm's length
transactions and subject to the limitations set forth in
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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 contem-
plated by this Agreement), (B) grants of options or the
issuance of shares of Company Common Stock pursuant to
the agreements listed and up to the amounts set forth in
Schedule 3.3(a), change the number of shares of the au-
thorized or issued capital stock of the Company or issue
or grant any option, warrant, call, commitment, sub-
scription, right to purchase or agreement of any charac-
ter relating to the authorized or issued capital stock
of the Company, or any securities convertible into
shares of such stock (including Company Preferred Stock
or Class B Common Stock), or split, combine or reclas-
sify 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 require-
ments of Section 6.3), other distribution (whether in
cash, stock or property or any combination thereof) in
respect of the capital stock of the Company, or redeem
or otherwise acquire any shares of such capital stock
(provided, however, that in connection with any transac-
tion 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 Sub-
sidiaries to take any action which would violate any of
the Corporate Action Covenants under (and as defined in)
the Stockholders Agreement if the Stockholders Agreement
were then in effect;
(iv) purchase or enter into a binding agree-
ment 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 de-
scribed in Schedule 3.11(g) or the other Schedules
hereto; or
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(v) enter into any employment agreement, or
permit any of its Subsidiaries to enter into any em-
ployment 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 other-
wise, 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 offic-
ers, directors or employees of such party or any of its sub-
sidiaries or any investment banker, financial advisor, attor-
ney, 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
it or any of its Subsidiaries or any such officer, director,
employee, investment banker, financial advisor, attorney, ac-
countant or other representative 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 pro-
posal; provided, however, that nothing contained in this Sec-
tion shall prohibit the Board of Directors of the Company 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 the fiduciary obligations of the Board of Directors of the
Company, as determined in good faith by the Board of Directors
of the Company based on the written advice of outside counsel.
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 af-
ford to Buyer and Buyer's accountants, counsel and other rep-
resentatives 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
-52-
of the Securities Laws, and (2) all other information concern-
ing 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 con-
duct or cause to be conducted an environmental, physical,
structural, electrical, mechanical and other inspection and
review of any Company Properties or 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 un-
duly interfere with the operation of the businesses of the Com-
pany 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 mat-
ter that would render any of such party's or the other party's
representations and warranties contained herein untrue or in-
correct in any material respect, but the failure of either par-
ty to so notify the other party shall not be deemed a breach of
this Agreement.
Section 5.9 Issuance Pursuant to Shelf Registration.
The Company shall cause the Purchased Shares to be issued pur-
suant to and registered under the Company's shelf registration
statement which is in effect as of the date hereof (or another
shelf registration statement in effect as of the date of the
relevant Closing) and, in connection with each such issuance
and registration, will prepare and cause to be filed a prospec-
tus supplement to such shelf registration statement.
ARTICLE 6
Certain Additional Covenants
Section 6.1 Resale. Buyer acknowledges and agrees
that even though the Company Common Stock that Buyer will ac-
quire in any Stock Purchase will be, as of the relevant Closing
thereof, registered under the Securities Act, it may, to the
extent Buyer is an affiliate of the Company for purposes of the
Securities Act, 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 Securi-
ties Act and, where applicable, such state securities laws is
-53-
available, and Buyer agrees that the certificates representing
such Common Stock may bear a legend as to its possible affili-
ate status to that effect.
Section 6.2 Use of Funds. The Company shall use the
funds received from Stock Purchases for the repayment of debt
of the Company and/or the acquisition or development of assets
by the Company.
Section 6.3 REIT Status. From and after the date
hereof and so long as Buyer owns 10% or more of the outstanding
Company Common Stock, 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 6.4 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.
Section 6.5 Property Management Activities and Reor-
ganizational Matters. (a) The Company will cause at or prior
to the Second Closing, (i) the transfer of employees as set
forth in Schedule 6.5(a), and (ii) the restructuring and con-
solidation of certain Subsidiaries, the terms and conditions of
which are set forth in Schedule 6.5(a), and in form and sub-
stance reasonably satisfactory to the Company and Buyer.
(b) The Company shall request all consents listed in
Schedule 3.4(d)-B which are required in connection with the
matters contemplated in this Section 6.5(b) within one Business
Day after the date hereof, and shall use its best efforts to
obtain such consents prior to the Initial Closing.
(c) The Company will use all reasonable efforts to
phase out and terminate the administrative services arrangement
described in Paragraph D of Schedule 3.9(f) within one year of
the date hereof or as soon as possible thereafter, and, prior
to such termination, will not expand or increase, or permit to
be expanded or increased, the scope, type or quantity of ser-
vices provided or the amount of office space leased pursuant
thereto or otherwise with the parties thereto.
-54-
ARTICLE 7
Conditions to Closings
Section 7.1 Conditions of Purchase at Initial Clos-
ing. The obligation of Buyer to purchase and pay for the Pur-
chased Shares at the Initial Closing is subject to satisfaction
or waiver of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein
shall have been true and correct in all respects on and as of
the date hereof, and shall be true and correct in all respects
on and as of the date of 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 ex-
pected 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 Ad-
verse Effect for purposes of this Section 7.1(a) such materi-
ality or Material Adverse Effect qualification will be in all
respects ignored (but subject to the overall standard as to Ma-
terial Adverse Effect set forth immediately prior to this pro-
viso). The covenants and agreements of the Company to be per-
formed on or before the date of the Initial Closing in accor-
dance 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 Ini-
tial 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 ex-
pected 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 satis-
fied, 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.
-55-
For purposes of the foregoing condition, any Breach-
ing Matters waived by Buyer or cured by the Company in accor-
dance with the provisions of Section 2.8(b) shall not be taken
into account.
In making any determination as to Material Adverse
Effect under this Section 7.1(a) or under Section 7.2(a) or
7.3(a), the matters set forth in each such Section shall be
aggregated and considered together.
(b) No Material Adverse Change. Since March 31,
1996 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) HSR Act. Any waiting period applicable to the
consummation of the transactions contemplated hereby under the
HSR Act shall have expired or been terminated, and no action
shall have been instituted by the United States Department of
Justice or the United States Federal Trade Commission challeng-
ing or seeking to enjoin the consummation of the transactions
contemplated hereby, which action shall not have been withdrawn
or terminated, or the Company and Buyer shall have mutually
concluded that no filing under the HSR Act is required with
respect to the transactions contemplated hereby.
(d) Consents. The Company shall have obtained the
consents set forth in Schedule 3.4(d)-A.
(e) Ownership Limit Waiver. Buyer's ownership of up
to the Initial Number of Shares plus the 119,000 shares of Com-
pany Common Stock owned by Buyer or its Affiliates as of the
date hereof shall have been irrevocably exempted from the own-
ership limit provisions of Article 5 of the Company Charter and
the Board of Directors of the Company shall have taken such
other action provided for under Article 5 of the Company Char-
ter as Buyer shall have requested to irrevocably waive the ap-
plication of said Article 5 to Buyer's acquisition and holding
of up to the Initial Number of Shares and to establish an "Own-
ership Limit" as defined in said Article 5 in respect of Buyer
which permits Buyer's ownership of the Initial Number of Shares
plus the 119,000 shares of Company Common Stock owned by Buyer
or its Affiliates as of the date hereof. For purposes of this
paragraph (e), references to Buyer, shall also be deemed to be
references to any Person who would be an Investor within the
meaning of the Stockholders Agreement.
(f) Related Tenant Limit Waiver. The Board of Di-
rectors of the Company shall have granted a waiver of the Re-
lated Tenant Limit (as such term in defined in the Company
-56-
Charter) to Buyer (or other exemption with the same effect) in
form and substance reasonably satisfactory to Buyer.
Section 7.2 Conditions to Purchase at Subsequent
Closings. The obligations of Buyer to purchase and pay for the
Purchased Shares at any Subsequent Closing are subject to sat-
isfaction or waiver of each of the following conditions pre-
cedent:
(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 Subsequent Closing, with the same
effect as though such representations and warranties had been
made on and as of the date of the Subsequent Closing (except
for representations and warranties that speak as of a specific
date or time other than the date of the Subsequent 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, how-
ever, that if any of the representations and warranties is al-
ready qualified in any respect by materiality or as to Material
Adverse Effect for purposes of this Section 7.2(a) such materi-
ality 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 Subsequent Closing in
accordance with this Agreement shall have been duly performed
in all respects, other than (except for the Company's obliga-
tion to deliver the relevant shares of Company Common Stock at
the Subsequent Closing, and, with respect to the Second Clos-
ing, for the covenants set forth in Section 6.5(a), as to which
the proviso set forth in this other-than clause shall not ap-
ply) 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 agree-
ment 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 Subsequent Closing a certificate of
-57-
an appropriate officer in form and substance reasonably satis-
factory to Buyer dated the date of the Subsequent Closing to
such effect.
(b) Shareholder Approval. The issuance of Company
Common Stock pursuant to this Agreement shall have been ap-
proved by the requisite vote of the Company's shareholders.
(c) Amended Company Charter; Modification of Owner-
ship Limit. With respect to the Second Closing, the amendment
to the Company Charter in the form attached as Exhibit E (the
"Amended Company Charter") shall have been approved by the req-
uisite vote of holders of Company Common Stock, all as required
by and in accordance with the Company Charter, and duly filed
with the Secretary of State of Florida and shall be in full
force and effect, and a resolution related to the Amended Com-
pany Charter, which shall have been approved by Buyer, shall
have been adopted by the Board of Directors of the Company.
(d) Consents. The Company shall have obtained the
consents set forth in Schedule 3.4(d)-B with respect to the
Second Closing and in Schedule 3.4(d)-C with respect to each
other Subsequent Closing.
(e) Certain Conditions Still True. The conditions
precedent set forth in Sections 7.1(b), (c), (d) and (f) shall
continue to be satisfied or waived in all respects on and as of
the date of the Subsequent Closing.
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 sub-
ject to satisfaction or waiver of each of the following condi-
tions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained in Sec-
tions 3.1(a), 3.1(b), 3.1(c), 3.1(d), 3.2, the second and third
sentences of 3.3(a), 3.4, 3.5, 3.8(b), 3.8(e), 3.18, 3.19, and
3.20 shall have been true and correct in all respects on and as
of the date hereof, and shall be true and correct in all re-
spects on and as of the relevant Closing Date with the same ef-
fect 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
-58-
Effect; provided, however, that if any of the representations
and warranties is already qualified in any respect by materi-
ality 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 agree-
ments 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 Com-
pany'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 (pro-
vided, however, that if any such covenant or agreement is al-
ready qualified in any respect by materiality or as to Material
Adverse Effect for purposes of determining whether this condi-
tion 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 re-
spects without regard to such qualification (but subject to the
overall exception as to Material Adverse Effect set forth im-
mediately 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 Ini-
tial 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 cer-
tificate of an appropriate officer in form and substance rea-
sonably satisfactory to Buyer dated the relevant Closing Date
to such effect.
For purposes of the foregoing condition, any Breach-
ing Matters waived in accordance with the provisions of Section
2.8(b) shall not be taken into account.
(b) No Injunction. There shall not be in effect any
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.
(c) Proceedings. All corporate and other proceed-
ings to be taken by the Company in connection with the trans-
actions contemplated hereby and all documents incident thereto
shall be reasonably satisfactory in form and substance to Buyer
-59-
and Buyer shall have received all such counterpart originals or
certified or other copies of such documents as they may reason-
ably request.
(d) REIT Status. The Company shall have elected to
be taxed as a REIT in its most recent federal income tax re-
turn, 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. 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.
(e) Opinion of Counsel. Buyer shall have received
an opinion from Foley & Lardner in form and substance reason-
ably satisfactory to Buyer.
(f) Domestically-Controlled REIT. The Company is,
and after giving effect to the relevant Closing will be, a
"domestically-controlled" REIT within the meaning of Code Sec-
tion 897(h)(4)(B).
Section 7.4 Conditions of Sale. The obligation of
the Company to issue and sell any Purchased Shares at any Clos-
ing (including the Initial Closing and each Subsequent Closing,
except where otherwise indicated below) is subject to satisfac-
tion 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 re-
spects on and as of the date hereof, and shall be true and cor-
rect in all respects on and as of the relevant Closing Date
with the same effect as though such representations and warran-
ties had been made on and as of the relevant Closing Date (ex-
cept for representations and warranties that speak as of a spe-
cific 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 ex-
pected 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 materi-
ality 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 agree-
ments of Buyer to be performed on or before the relevant Clos-
ing Date in accordance with this Agreement shall have been duly
performed in all respects, other than (except for Buyer's obli-
gation to pay the relevant Purchase Price at the relevant Clos-
ing, and, as to the Initial Closing, except for Buyer's cov-
enants set forth in Sections 5.2 and 5.3, as to which the pro-
viso set forth in this other-than clause shall not apply) for
such failures to have been performed as would not in the ag-
gregate reasonably be expected to have a Material Adverse Ef-
fect on the Company or Buyer's ability to consummate the trans-
actions 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 qualifi-
cation (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 Clos-
ing a certificate of an appropriate officer in form and sub-
stance reasonably satisfactory to the Company dated the rel-
evant Closing Date to such effect.
(b) HSR Act. Any waiting period applicable to the
consummation of the transactions contemplated hereby under the
HSR Act shall have expired or been terminated, and no action
shall have been instituted by the United States Department of
Justice or the United States Federal Trade Commission challeng-
ing or seeking to enjoin the consummation of the transactions
contemplated hereby, which action shall not have been withdrawn
or terminated, or the Company and Buyer shall have mutually
concluded that no filing under the HSR Act is required with
respect to the transactions contemplated hereby.
(c) Shareholder Approval. Except in the case of the
Initial Closing, the issuance of the Company Common Stock pur-
suant to this Agreement shall have been approved by the requi-
site vote of the Company's shareholders.
(d) No Injunction. There shall not be in effect any
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 trans-
actions contemplated hereby or to acquire the Purchased Shares.
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(e) Consents. The Company shall have obtained the
consents set forth in Schedule 3.4(d)-A in the case of the Ini-
tial 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.
(f) Proceedings. All corporate and other proceed-
ings to be taken by Buyer in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company
and the Company shall have received all such counterpart origi-
nals or certified or other copies of such documents as it may
reasonably request.
(g) Opinion of Counsel. The Company shall have re-
ceived an opinion from counsel to Buyer reasonably acceptable
to the Company in form and substance reasonably satisfactory to
the Company.
ARTICLE 8
Survival; Indemnification
Section 8.1 Survival. All representations, warran-
ties and (except as provided by the last sentence of this Sec-
tion 8.1) covenants and agreements of the parties contained
herein, including indemnity or indemnification agreements con-
tained herein, or in any Schedule or Exhibit hereto, or any
certificate, document or other instrument delivered in connec-
tion herewith shall survive the Initial Closing and any Subse-
quent Closing until the first anniversary of the latest of the
Initial Closing and any Subsequent Closing. No Action or pro-
ceeding may be brought with respect to any of the representa-
tions and warranties, or any of the covenants or agreements
which survive until such first anniversary, unless written no-
tice 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, how-
ever, that, if Buyer shall have complied with this Section 8.1,
the damages for breach by the Company of any of the representa-
tions 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 mea-
surement shall not in any event include any shares of Company
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Stock that Buyer may have purchased other than from the Com-
pany. 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 suc-
cessors 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 in-
curred 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 rep-
resentation 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 Clos-
ing 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 represen-
tation 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 $250,000, in which case Buyer or the Company, as
the case may be, shall then be liable for all such Loss and Ex-
penses, 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 there-
to 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 here-
under 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 indemni-
fication is sought by reason of such failure. The indemnifying
party shall have 20 days after receipt of such notice to under-
take, through counsel of its own choosing and at its own ex-
pense, the settlement or defense thereof, and the Indemnified
Party shall cooperate with it in connection therewith; pro-
vided, however, that the Indemnified Party may participate in
such settlement or defense through counsel chosen by such In-
demnified Party, provided that the fees and expenses of such
counsel shall be borne by such Indemnified Party. The Indemni-
fied Party shall not pay or settle any claim which the indemni-
fying 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 Agree-
ment.
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;
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(ii) Buyer (if it is not in breach of any of its ma-
terial obligations hereunder) in the event of a breach or fail-
ure by the Company that is material in the context of the
transactions contemplated hereby of any representation, war-
ranty, covenant or agreement by the Company contained herein
which has not been, or cannot be, cured within 30 Business Days
after written notice of such breach is given to the Company;
(iii) the Company (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 trans-
actions contemplated hereby of any representation, warranty,
covenant or agreement by Buyer contained herein which has not
been, or cannot be, cured within 30 Business Days after written
notice of such breach is given to Buyer; or
(iv) either the Company or Buyer, if the Initial
Closing shall not have occurred on or prior to October 31,
1996, 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) Buyer, in the event that the shareholders of the
Company vote upon and fail to approve either (1) the issuance
of Company Common Stock contemplated hereby, or (2) the Amended
Company Charter (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 re-
frained from making its recommendation that the shareholders of
the Company approve the issuance of Company Common Stock pursu-
ant 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 rec-
ommendation and its determination to make such recommendation
to the shareholders of the Company, except, in each case, as
permitted by Section 5.6, or (3) if no meeting at which the
shareholders of the Company are asked to vote upon the transac-
tions contemplated by this Agreement shall have duly occurred
on or prior to the six-month anniversary of the date of the
Stockholders Agreement.
Section 9.2 Procedure and Effect of Termination. In
the event of termination of this Agreement by either or both of
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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 ter-
minate 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 defi-
nitional, 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.
Section 9.3 Expenses. (a) Except as set forth in
this Agreement, whether or not any Stock Purchase is consum-
mated, all legal and other costs and expenses incurred in con-
nection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and ex-
penses (which in the case of the Company, shall include share-
holder solicitation costs), except that Buyer and the Company
shall share equally the filing fees for the filing under the
HSR Act which is to be made in connection with the transactions
contemplated hereby.
(b) In the event that the Company's shareholders
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 at the Company's shareholders' meeting
held in accordance with the terms hereof, or the Company shall
have failed to duly convene such shareholders' meeting on or
prior to October 31, 1996 provided that Buyer is not in mate-
rial default under this Agreement, that Buyer has not breached
any of its representations and warranties in any material re-
spect, 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 shareholders' meeting, the Company shall im-
mediately make payment to Buyer (by wire transfer) of the
amount of $1.0 million, as reimbursement and compensation for
Buyer's costs and expenses (including opportunity costs) in-
curred in connection with this Agreement and the transactions
contemplated hereby.
(c) In the event that (i) this Agreement and the
transactions contemplated hereby shall have been submitted to a
vote of the Company's shareholders (or in the event the Company
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shall fail to submit such matters to a vote of its shareholders
in violation of its obligations hereunder), (ii) a Competing
Transaction shall have been proposed prior to such submission
to a vote of the Company's shareholders (or such time as such
submission would have occurred had the Company not so failed to
so submit such matters), and (iii) the shareholders 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 req-
uisite vote, then, provided that Buyer is not in material de-
fault 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
shareholders' meeting, the Company shall immediately make pay-
ment to Buyer (by wire transfer) of a fee in the amount of $5.0
million (the "Breakup Fee"); provided, however, that if the
Competing Transaction was not solicited, initiated or encour-
aged directly or indirectly by the Company or any of its Sub-
sidiaries through any officer, director, agent or otherwise,
the Company shall not be required to pay the Breakup Fee unless
a Competing Transaction has been consummated or agreed to
within six months after the occurrence of the events described
in clauses (i), (ii) and (iii) above. Upon payment to the
Buyer of the Breakup Fee, the Company shall have no further
liability to Buyer arising out of any Competing Transaction.
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 effec-
tive when one or more counterparts have been signed by each
party hereto and delivered to the other party. Copies of exe-
cuted 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 FLORIDA WITHOUT REFERENCE TO THE CHOICE OF LAW PRIN-
CIPLES THEREOF.
Section 10.3 Entire Agreement. This Agreement (in-
cluding agreements incorporated herein) and the Schedules and
-67-
Exhibits hereto contain the entire agreement between the par-
ties with respect to the subject matter hereof and there are no
agreements, understandings, representations or warranties be-
tween the parties other than those set forth or referred to
herein. This Agreement is not intended to confer upon any per-
son not a party hereto (and their successors and assigns) any
rights or remedies hereunder.
Section 10.4 Notices. All notices and other com-
munications hereunder shall be sufficiently given for all pur-
poses 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 transmis-
sion service to the appropriate address or number as set forth
below. Notices to the Company shall be addressed to:
Regency Realty Corporation
121 W. Forsyth Street, Suite 200
Jacksonville, Florida 32202
Attention: Martin E. Stein, Jr.
Telecopy Number: (904) 634-3428
with a copy to:
Foley & Lardner
Greenleaf Building
200 Laura Street
Jacksonville, Florida 32202
Attention: Charles E. Commander III, Esq.
Telecopy Number: (904) 359-8700
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:
Security Capital Holdings S.A.
69, route d'Esch
L-2953 Luxembourg
Attention: Paul E. Szurek
Telecopy Number: (352) 4590-3331
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopy Number: (212) 403-2000
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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 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 Agree-
ment) (including upon foreclosure of a pledge) shares of Com-
pany 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 en-
force 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 Sec-
tions 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 in-
struments in writing signed by the party against whom enforce-
ment of any such modification or amendment is sought. Either
party hereto may, only by an instrument in writing, waive com-
pliance 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 con-
strued 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
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otherwise specified, (iii) the word "including" and words of
similar import when used in this Agreement shall mean "includ-
ing, 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 interpre-
tation 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 affect-
ing 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 af-
ter 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 Agree-
ment 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 ob-
ligations and liabilities of Buyer and the Advancing Party un-
der or in connection with this Agreement are joint and several.
Section 10.13 Interpretation of Schedules. Any mat-
ter 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 reason-
ably be inferred from the matters disclosed on the first Sched-
ule as if set forth on such other Schedules.
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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.
REGENCY REALTY CORPORATION
By: /s/ Martin E. Stein, Jr.
Name: Martin E. Stein, Jr.
Title: President
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL U.S. REALTY
By: /s/ Paul E. Szuek
Name: Paul E. Szurek
Title: Managing Director
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EXHIBIT B
_______________________________________________________
REGISTRATION RIGHTS AGREEMENT
by and among
REGENCY REALTY CORPORATION
SECURITY CAPITAL HOLDINGS S.A.
and
SECURITY CAPITAL U.S. REALTY
dated as of
_______ __, 1996
_______________________________________________________
TABLE OF CONTENTS
Page
Section 1. Definitions............................... 1
(a) "Agreement".......................... 1
(b) "Buyer".............................. 1
(c) "Commencement Date".................. 1
(d) "Company"............................ 1
(e) "Company Registration Expenses"...... 1
(f) "Commission"......................... 2
(g) "Exchange Act"....................... 2
(h) "Exercise Notice".................... 2
(i) "Extraordinary Transaction".......... 2
(j) "Extraordinary Transaction Shares"... 2
(k) "Holdings"........................... 2
(l) "NASD"............................... 2
(m) "Registrable Securities"............. 2
(n) "Registration Expenses".............. 2
(o) "Registration Suspension Period"..... 3
(p) "Securities Act"..................... 3
(q) "Shelf Registration"................. 3
(r) "Stockholders Agreement"............. 3
(s) "Stock Purchase Agreement"........... 3
(t) "Suspension Notice".................. 3
(u) "Tag-Along Notice"................... 3
(v) "Tag-Along Shares"................... 3
(w) "Third Party"........................ 3
(x) "Underwritten/Placed Offering"....... 3
(y) "USREALTY"........................... 3
Section 2. Shelf Registration........................ 3
(a) Obligation to File and Maintain...... 3
(b) Black-Out Periods of Buyer........... 4
(c) Black-Out Periods of the Company..... 4
(d) Number of Shelf Registrations........ 5
(e) Size of Shelf Registration........... 6
(f) Notice............................... 6
(g) Expenses............................. 6
(h) Selection of Underwriters............ 6
Section 3. Incidental Registrations.................. 6
(a) Notification and Inclusion........... 6
-i-
(b) Cut-back Provisions.................. 7
(c) Expenses............................. 7
(d) Duration of Effectiveness............ 7
Section 4. Registration Procedures................... 7
Section 5. Requested Underwritten Offerings.......... 10
Section 6. Preparation; Reasonable Investigation..... 10
Section 7. Tag-Along Rights.......................... 11
(a) Rights and Notice.................... 11
(b) Number of Shares to be Included...... 11
(c) Abandonment of Sale.................. 11
(d) Terms of Sale........................ 12
(e) Timing of Sale....................... 12
Section 8. Indemnification........................... 12
(a) Indemnification by the Company....... 12
(b) Indemnification by Buyer............. 13
(c) Notices of Claims, etc............... 13
(d) Other Indemnification................ 14
(e) Indemnification Payments............. 14
(f) Contribution......................... 14
Section 9. Covenants Relating to Rule 144............ 14
Section 10. Miscellaneous............................. 15
(a) Counterparts......................... 15
(b) Governing Law........................ 15
(c) Entire Agreement..................... 15
(d) Notices.............................. 15
(e) Successors and Assigns............... 16
(f) Headings............................. 16
(g) Amendments and Waivers............... 16
(h) Interpretation; Absence of
Presumption....................... 16
(i) Severability......................... 17
-ii-
REGISTRATION RIGHTS AGREEMENT (the "Agreement"),
dated as of ________ __, 1996, by and among Regency Realty
Corporation, a Florida corporation (the "Company"), Security
Capital U.S. Realty, a Luxembourg corporation ("USREALTY"),
and Security Capital Holdings S.A., a Luxembourg corporation
("Holdings") and a wholly owned subsidiary of USREALTY. Cap-
italized terms not otherwise defined herein have the meaning
ascribed to them in the Stock Purchase Agreement (as herein-
after defined).
WHEREAS, the Company, Holdings and USREALTY have
entered into a Stock Purchase Agreement, dated as of June 11,
1996 (the "Stock Purchase Agreement"), that provides for the
purchase by Holdings and sale by the Company to Holdings 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 suf-
ficiency 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 fol-
lowing terms shall have the following meanings:
(a) "Agreement" shall have the meaning set forth
in the first paragraph hereof.
(b) "Buyer" shall mean, collectively, as the con-
text may require, USREALTY and Holdings, and shall also in-
clude any Affiliate of USREALTY or Holdings of which USREALTY
and/or Holdings collectively, directly or indirectly, Benefi-
cially Own 98% or more of the voting power and of the eco-
nomic 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 se-
curing 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 Agree-
ment.)
(c) "Commencement Date" shall mean the first an-
niversary of the date of this Agreement, except that, in the
case of any Buyer which is a bona fide financial institution
to which any other Buyer has Transferred (including upon
foreclosure of a pledge) shares of Company Stock for the pur-
pose of securing bona fide indebtedness, the Commencement
Date shall be the date of this Agreement.
(d) "Company" shall have the meaning set forth in
the first paragraph hereof.
(e) "Company Registration Expenses" shall mean the
fees and disbursements of counsel and independent public ac-
countants for the Company incurred in connection with the
Company's performance of or compliance with this Agreement,
including the expenses of any special audits or "cold com-
fort" 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.
(f) "Commission" shall mean the Securities and Ex-
change Commission, and any successor thereto.
(g) "Exchange Act" shall mean the Securities Ex-
change Act of 1934, as amended, and any successor thereto,
and the rules and regulations thereunder.
(h) "Exercise Notice" shall have the meaning set
forth in Section 7(a).
(i) "Extraordinary Transaction" shall mean (i) any
merger, consolidation, sale or acquisition of assets, recapi-
talization, other business combination, liquidation, or other
action out of the ordinary course of business of the Company,
or (ii) any sale, issuance or other disposition of capital
stock of the Company representing, in the aggregate, at least
30% of the then outstanding capital stock of the Company.
(j) "Extraordinary Transaction Shares" shall have
the meaning set forth in Section 7(a).
(k) "Holdings" shall have the meaning set forth in
the first paragraph hereof.
(l) "NASD" shall mean the National Association of
Securities Dealers, Inc.
(m) "Registrable Securities" shall mean (i) any
and all shares of Company Stock acquired by Buyer pursuant to
the Stock Purchase Agreement, (ii) any and all securities ac-
quired by Buyer pursuant to Section 4.2 of the Stockholders
Agreement, and (iii) any securities issued or issuable with
-2-
respect to any Company 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 Registra-
ble 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 ef-
fective under the Securities Act and such securities shall
have been disposed of in accordance with such registration
statement, or (B) such securities shall have been sold in ac-
cordance with Rule 144 (or any successor provision) under the
Securities Act.
(n) "Registration Expenses" shall mean all regis-
tration, 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,
any fees and disbursements of underwriters customarily paid
by sellers of securities who are not the issuers of such se-
curities and all underwriting discounts and commissions 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.
(o) "Registration Suspension Period" shall have
the meaning set forth in Section 2(b).
(p) "Securities Act" shall mean the Securities Act
of 1933, as amended, and any successor thereto, and the rules
and regulations thereunder.
(q) "Shelf Registration" shall have the meaning
set forth in Section 2(a).
(r) "Stockholders Agreement" shall have the mean-
ing set forth in Section 2(c).
(s) "Stock Purchase Agreement" shall have the
meaning set forth in the second paragraph hereof.
(t) "Suspension Notice" shall have the meaning set
forth in Section 2(b).
(u) "Tag-Along Notice" shall have the meaning set
forth in Section 7(a).
(v) "Tag-Along Shares" shall have the meaning set
forth in Section 7(a).
-3-
(w) "Third Party" shall have the meaning set forth
in Section 7(a).
(x) "Underwritten/Placed Offering" shall mean a
sale of securities of the Company to an underwriter or under-
writers for reoffering to the public or on behalf of a person
other than the Company through an agent for sale to the pub-
lic.
(y) "USREALTY" shall have the meaning set forth in
the first paragraph hereof.
Section 2. Shelf Registration. (a) Obligation to
File and Maintain. 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 Com-
mission a registration statement under the Securities Act for
the offering on a continuous or delayed basis in the future
of all of the Registrable Securities (the "Shelf Registra-
tion"). The Shelf Registration shall be on an appropriate
form and the Shelf Registration and any form of prospectus
included therein or prospectus supplement relating thereto
shall reflect such plan of distribution or method of sale as
Buyer may from time to time notify 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 place-
ment under Section 4(2) of the Securities Act in connection
with which the seller undertakes to effect a registration af-
ter 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 connec-
tion with which the seller undertakes to effect a registra-
tion 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 keep the
Shelf Registration continuously effective for the period be-
ginning on the date on which the Shelf Registration is de-
clared effective and ending on the first date that there are
no Registrable Securities. During the period during which
the Shelf Registration is effective, the Company shall
supplement or make amendments to the Shelf Registration, if
required by the Securities Act or if reasonably requested by
-4-
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 to sell un-
der the Shelf Registration or to suspend the effectiveness
thereof during the period starting with the date 30 days pri-
or 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 90 days following the effective date of such registra-
tion statement or the date of filing of such prospectus sup-
plement, and (ii) the Company shall be entitled to require
Buyer not to sell under the Shelf Registration or to suspend
the effectiveness thereof (but not for a period exceeding 90
days) if the Company determines, in its good faith judgment,
that such offering or continued effectiveness would interfere
with any material financing, acquisition, disposition, corpo-
rate 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 pos-
session 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 includ-
ed pursuant to Section 3 has been declared effective, any pe-
riod during which the Company fails to keep such registration
statement effective and usable for resale of Registrable Se-
curities for the period required by Section 4(b) shall be re-
ferred to as a "Registration Suspension Period". A Registra-
tion Suspension Period shall commence on and include the date
that the Company gives written notice to Buyer of its deter-
mination that such registration statement is no longer effec-
tive or usable for resale of Registrable Securities (the
"Suspension Notice") to and including the date when the Com-
pany notifies Buyer that the use of the prospectus included
in such registration statement may be resumed for the dispo-
sition of Registrable Securities.
-5-
(c) Black-Out Periods of the Company. Subject to
the conditions of this Section 2(c), Buyer shall have the
right, exercisable on not more than two occasions, to require
the Company not to sell, and to use its good faith efforts to
cause any other holder of common equity securities or secu-
rities convertible into common equity securities of the Com-
pany not to sell, any common equity securities of the Company
or any securities convertible into common equity securities
of the Company under any registration statement or prospectus
supplement relating to an existing shelf registration state-
ment (other than sales of shares of Common Stock upon the re-
demption of limited partnership units of any Subsidiary of
the Company and sales of equity securities issued or granted
pursuant to any employee benefit or similar plan or any divi-
dend reinvestment plan), or to suspend the effectiveness
thereof, during the period starting with the date 15 days
prior to Buyer's good faith estimate, as certified in writing
by an executive officer of Buyer to the Company, of the pro-
posed date of filing of a preliminary prospectus supplement
relating to a Shelf Registration filed pursuant to Section
2(a), pertaining to an underwritten public offering of Regis-
trable Securities, and ending on the date 60 days following
the date of filing of the final prospectus supplement, but in
no event on a date later than 75 days following the date of
filing of the preliminary prospectus supplement. The
Company's obligations under this Section 2(c) are subject to
the continuing satisfaction of the following conditions: (a)
the Registrable Securities to be offered by Buyer in such un-
derwritten public offering shall represent (i) in the case of
Buyer's first exercise of its rights under this Section 2(c),
the greater of (A) at least 20% of the then outstanding
shares of Company Common Stock and (B) at least that number
of shares of Registrable Securities having a market value,
based on the most recent closing price, of $50 million, in
each case determined at the time Buyer exercises its rights
under this Section 2(c); and (ii) in the case of Buyer's sec-
ond exercise of its rights under this Section 2(c), the
greater of (A) at least 40% of the total number of shares of
Registrable Securities then Beneficially Owned by Buyer and
its Affiliates and (B) at least that number of shares of Reg-
istrable Securities having a market value, based on the most
recent closing price, of $60 million, in each case determined
at the time Buyer exercises its rights under this Section
2(c); (b) no black-out period pursuant to Section 2(b)(i)
shall be in effect at the time of Buyer's exercise of its
rights under this Section 2(c); (c) the Company shall not
have suspended sales of Registrable Securities pursuant to
Section 2(b)(ii); (d) the Company shall not have delivered to
Buyer a written notice to the effect that the Board of Direc-
tors has determined in good faith that compliance with this
-6-
Section 2(c) would reasonably be expected to have a Material
Adverse Effect on the Company; and (e) Buyer shall not be in
default of any of its material obligations under the Stock
Purchase Agreement, the Stockholders Agreement, dated as of
the date hereof, by and among the Company, Holdings and USRE-
ALTY (the "Stockholders Agreement"), or this Agreement. In
no event may the Company include in any preliminary prospec-
tus supplement under which Buyer is offering Registrable Se-
curities covered by this Section 2(c) any equity securities
of the Company or any securities convertible into equity se-
curities of the Company.
(d) Number of Shelf Registrations. The Company
shall be obligated to effect, under this Section 2, a minimum
of one Shelf Registration, plus an additional Shelf Registra-
tion for each $50,000,000 of shares of Company Stock pur-
chased by Buyer from the Company subsequent to the Initial
Closing. A Shelf Registration shall not be deemed to have
been effected, nor shall it be sufficient to reduce the num-
ber of Shelf Registrations available to Buyer under this Sec-
tion 2, unless such registration becomes effective pursuant
to the Securities Act and is kept continuously effective for
a period of at least two years (other than any periods during
such period of effectiveness which are Registration Suspen-
sion Periods, and provided that no such Registration Suspen-
sion Periods shall count towards such two-year period); pro-
vided, however, that no Shelf Registration shall be deemed to
have been effected, nor shall it reduce the number of Shelf
Registrations available under this Section 2, if such regis-
tration 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.
(e) Size of Shelf Registration. The Company shall
not be required to effect a Shelf Registration of fewer than
1,000,000 shares or other units of Registrable Securities (as
adjusted for any stock splits, reverse stock splits or simi-
lar events which occur after the date hereof), except that if
there are less than 1,000,000 (as adjusted for any stock
splits, reverse stock splits or similar events which occur
after the date hereof) shares of Registrable Securities out-
standing, then the Company shall be required to effect a
Shelf Registration of all of the remaining shares or other
units of Registrable Securities outstanding.
(f) Notice. The Company shall give Buyer prompt
notice in the event that the Company has suspended sales of
Registrable Securities under Section 2(b).
-7-
(g) Expenses. All Registration Expenses incurred
in connection with any Shelf Registration which may be re-
quested under this Section 2 shall be borne by Buyer, and all
Company Registration Expenses incurred in connection with any
such Shelf Registration shall be borne by the Company; pro-
vided that Buyer shall reimburse the Company for the first
$25,000 of fees and disbursements of counsel and independent
public accountants for the Company included in Company Regis-
tration Expenses and relating to each such Shelf Registra-
tion.
(h) Selection of Underwriters. Any and all under-
writers 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 Security Capital Markets Group Incorporated or any other
Affiliate of Buyer shall in all events be approved by the
Company.
Section 3. Incidental Registrations. (a) Noti-
fication and Inclusion. If the Company proposes to register
for its own account any common equity securities of the Com-
pany or any securities convertible into common equity securi-
ties 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 secu-
rities 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, promptly give
written notice of such registration to Buyer. Upon the writ-
ten 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 reason-
able 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 of-
fering 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 in-
tention to register any securities and prior to the effective
-8-
date of the registration statement filed in connection with
such registration, the Company shall determine for any reason
not to register or to delay registration of such securities,
the Company may, at its election, give written notice of such
determination to Buyer and, thereupon, (i) in the case of a
determination not to register, the Company shall be relieved
of its obligation to register any Registrable Securities in
connection with such registration (but not from its obliga-
tion 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 regis-
tering any Registrable Securities for the same period as the
delay in registering such other securities.
(b) Cut-back Provisions. If a registration pursu-
ant to this Section 3 involves an Underwritten/Placed Offer-
ing of the securities so being registered, whether or not
solely for sale for the account of the Company, which securi-
ties are to be distributed by or through one or more under-
writers of recognized standing under underwriting terms cus-
tomary for such transaction, and the underwriter or the man-
aging 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 securi-
ties 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 (b) 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 registra-
tion, pro rata among Buyer and others exercising incidental
registration rights, on the basis of the shares of Company
Stock requested to be included 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 Sec-
tion 3 for Buyer, and all Registration Expenses incurred in
connection with any registration of any other securities re-
ferred to in the first sentence of Section 3(a), and Buyer
shall bear and pay all Registration Expenses incurred in con-
nection with any registration of Registrable Securities pur-
suant to this Section 3 for Buyer.
-9-
(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 Sec-
tion 3 effective and usable for up to 90 days (subject to ex-
tension for the length of any Registration Suspension Pe-
riod), 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 ef-
fective and usable.
Section 4. Registration Procedures. In connection
with the filing of any registration statement as provided in
Section 2 or 3, the Company shall use its reasonable best ef-
forts to, as expeditiously as reasonably practicable:
(a) prepare and file with the Commission the
requisite registration statement (including a pro-
spectus therein) to effect such registration and
use its reasonable best efforts to cause such reg-
istration 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 cop-
ies 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 infor-
mation 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 ef-
fectiveness 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, in the case of
Section 2, the termination of the period during
which the Shelf Registration is required to be kept
effective, or, in the case of Section 3, the ear-
lier of such time as all of such securities have
-10-
been disposed of and the date which is 90 days af-
ter the date of initial effectiveness of such reg-
istration 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 Secu-
rities under such other securities or blue sky laws
of such jurisdictions as Buyer shall reasonably re-
quest, to keep such registration or qualification
in effect for so long as such registration state-
ment 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, ex-
cept that the Company shall not for any such pur-
pose be required to qualify generally to do busi-
ness 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 Se-
curities;
(f) furnish to Buyer a signed counterpart,
addressed to Buyer (and the underwriters, if any),
of
(i) an opinion of counsel for the Com-
pany, dated the effective date of such reg-
istration statement (and, if such registration
-11-
includes an underwritten public offering, dat-
ed the date of the closing under the under-
writing agreement), reasonably satisfactory in
form and substance to Buyer, and
(ii) to the extent permitted by then ap-
plicable rules of professional conduct, a
"comfort" letter, dated the effective date of
such registration statement (and, if such reg-
istration includes an underwritten public of-
fering, dated the date of the closing under
the underwriting agreement), signed by the in-
dependent public accountants who have certi-
fied the Company's financial statements in-
cluded in such registration statement,
covering substantially the same matters with re-
spect to such registration statement (and the pro-
spectus included therein) and, in the case of the
accountants' letter, with respect to events subse-
quent 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 relat-
ing 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 rea-
sonable 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;
-12-
(h) comply or continue to comply in all mate-
rial respects with the Securities Act and the Ex-
change Act and with all applicable rules and regu-
lations of the Commission, and make available to
its security holders, as soon as reasonably practi-
cable, 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 provi-
sions of Section 11(a) of the Securities Act, and
not file any amendment or supplement to such regis-
tration statement or prospectus to which Buyer
shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all
material respects with the requirements of the
Securities Act, having been furnished with a copy
thereof at least five Business Days prior to the
filing thereof;
(i) provide a transfer agent and registrar
for all Registrable Securities covered by such reg-
istration statement not later than the effective
date of such registration statement; and
(j) list all Company Stock covered by such
registration statement on any securities exchange
on which any of the Company Stock is then listed.
Buyer shall furnish in writing to the Company such informa-
tion regarding Buyer (and any of its affiliates), the Regis-
trable Securities to be sold, the intended method of distri-
bution of such Registrable Securities, and such other infor-
mation requested by the Company as is necessary for inclusion
in the registration statement relating to such offering pur-
suant 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, supplemen-
tary 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 para-
graph (g) of this Section 4, Buyer will forthwith discontinue
its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securi-
ties until Buyer's receipt of the copies of the supplemented
-13-
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 con-
tain 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 6. 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 condi-
tions 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 repre-
sentation or warranty required by law.
Section 6. Preparation; Reasonable Investigation.
In connection with the preparation and filing of the regis-
tration statement under the Securities Act, the Company will
give Buyer, its underwriters, if any, and their respective
counsel, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to
its books and records and such opportunities to discuss the
business of the Company with its officers, its counsel and
the independent public accountants who have certified its fi-
nancial 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 Securi-
ties Act.
Section 7. Tag-Along Rights. From and after the
date hereof until the earlier of (i) the date on which Buyer
shall own shares of Company Common Stock representing less
than 9.8% of the then outstanding shares of Company Common
Stock on a fully diluted basis, or (ii) the date on which
Buyer shall no longer be subject to the standstill restric-
tions set forth in Section 5.2(a) of the Stockholders Agree-
ment (unless Buyer is not subject to such restrictions as a
result of an Early Termination Event (as that term is defined
in the Stockholders Agreement)), Buyer shall be entitled to
the rights set forth in this Section 7.
-14-
(a) Rights and Notice. The Company shall not di-
rectly or indirectly sell or otherwise dispose of shares of
Company Stock to any person (a "Third Party") in connection
with an Extraordinary Transaction in which the consideration
for some or all of the shares of Company Stock is cash or
cash equivalents (as determined under GAAP), unless the terms
and conditions of such sale or other disposition shall in-
clude an offer to Buyer to include, at the option of Buyer,
in such sale or other disposition the Registrable Securities
owned by Buyer at the time of such sale or other disposition
determined in accordance with Section 7(b) (the "Tag-Along
Shares"). The Company shall send a written notice (the "Tag-
Along Notice") to Buyer setting forth the number of shares of
Company Stock proposed to be sold or otherwise disposed of in
the Extraordinary Transaction (the "Extraordinary Transaction
Shares"), and the price at which such shares are proposed to
be sold (or the method by which such price is proposed to be
determined). At any time within 15 days after its receipt of
the Tag-Along Notice, Buyer may exercise its option to sell
the Tag-Along Shares by furnishing written notice of such ex-
ercise (the "Exercise Notice") to the Company.
(b) Number of Shares to be Included. If the pro-
posed sale or other disposition by the Company in connection
with an Extraordinary Transaction is consummated, Buyer shall
have the right to sell to the Third Party as part of such
proposed sale or other disposition such number of Registrable
Securities owned by Buyer equal to the product of (i) the ra-
tio (which in no event shall exceed 20% for purposes of this
Section 7) of the total number of Registrable Securities
owned by Buyer at the time that Buyer receives the Tag-Along
Notice to the total number of outstanding shares of Company
Stock, on a fully diluted basis, at the time that Buyer re-
ceives the Tag-Along Notice, and (ii) the number of Extraor-
dinary Transaction Shares; provided, however, that if the
number of Tag-Along Shares is greater than the number of Reg-
istrable Securities owned by Buyer at the time that Buyer re-
ceives the Tag-Along Notice, then Buyer shall have the right
to sell to the Third Party as part of the proposed sale or
other disposition to the Third Party by the Company in con-
nection with an Extraordinary Transaction the total number of
Registrable Securities owned by Buyer at the time that Buyer
receives the Tag-Along Notice. All calculations pursuant to
this paragraph shall exclude and ignore any unissued shares
of Company Stock issuable pursuant to stock options, warrants
and other rights to acquire shares of Company Stock and pur-
suant to convertible or exchangeable securities.
(c) Abandonment of Sale. Each of the Company and
the Third Party shall have the right, in its sole discretion,
-15-
at all times prior to consummation of the proposed sale or
other disposition giving rise to the tag-along right granted
by this Section 7 to abandon, rescind, annul, withdraw or
otherwise terminate such sale or other disposition, whereupon
all tag-along rights in respect of such sale or other dispo-
sition pursuant to this Section 7 shall become null and void,
and neither the Company nor the Third Party shall have any
liability or obligation to Buyer with respect thereto by vir-
tue of such abandonment, rescission, annulment, withdrawal or
termination.
(d) Terms of Sale. The purchase from Buyer pur-
suant to this Section 7 shall be on the same terms and condi-
tions, including the per share price and the date of sale or
other disposition, as are applicable to the Company, and
which shall be consistent with the relevant Tag-Along Notice.
(e) Timing of Sale. If, with respect to any Tag-
Along Notice, Buyer fails to deliver an Exercise Notice with-
in 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 or otherwise
dispose of not more than the number of shares of Company
Stock described in the Tag-Along Notice on terms not more fa-
vorable to the Company than were set forth in the Tag-Along
Notice. If, at the end of 120 days following the receipt of
the Tag-Along Notice, the Company has not completed the sale
or other disposition of Company Stock in accordance with the
terms described in the Tag-Along Notice, the Company shall
again be obligated to comply with the provisions of this Sec-
tion 7 with respect to, and provide Buyer with the opportun-
ity to participate in, any proposed sale or other disposition
of shares of Company Stock in connection with an Extraordi-
nary Transaction.
Section 8. Indemnification. (a) Indemnification
by the Company. In the event of any registration of any Reg-
istrable Securities of the Company under the Securities Act,
the Company will, and hereby does, indemnify and hold harm-
less Buyer, each other person who participates as an under-
writer 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 loss-
es, claims, damages or liabilities (or actions or proceed-
ings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or al-
leged untrue statement of any material fact contained in the
-16-
registration statement under which such Registrable Securi-
ties were registered under the Securities Act, any prelimi-
nary prospectus, final prospectus or summary prospectus con-
tained 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 reim-
burse Buyer and each such underwriter and controlling person
for any reasonable legal or any other expenses reasonably in-
curred by them in connection with investigating or defending
any such loss, claim, liability, action or proceedings; pro-
vided, 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 ex-
pense 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 prospec-
tus, final prospectus, summary prospectus, amendment or sup-
plement in reliance upon and in conformity with written in-
formation furnished to the Company by Buyer or any other per-
son 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 con-
trols 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 there-
of) or expense arises out of such person's failure to send or
give a copy of the final prospectus or supplement to the per-
sons asserting an untrue statement or alleged untrue state-
ment or omission or alleged omission at or prior to the writ-
ten 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 investiga-
tion made by or on behalf of Buyer or any such underwriter or
controlling person and shall survive the transfer of such se-
curities by Buyer.
(b) Indemnification by Buyer. The Company may re-
quire, as a condition to including any Registrable Securities
in any registration statement pursuant to Section 2 or Sec-
tion 3, that the Company shall have received an undertaking
satisfactory to it from Buyer to indemnify and hold harmless
(in the same manner and to the same extent as set forth in
paragraph (a) of this Section 8) the Company, each director
of the Company, each officer of the Company and each other
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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 with-
in the meaning of the Securities Act, with respect to any un-
true 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 in-
formation furnished to the Company by Buyer specifically
stating that it is for use in the preparation of such regis-
tration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Such indemnity
shall remain in full force and effect regardless of any in-
vestigation 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 re-
ceipt 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 8, 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 Sec-
tion 8, 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, un-
less in such indemnified party's reasonable judgment a con-
flict 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 coun-
sel 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 simi-
lar to that specified in the preceding paragraphs of this
-18-
Section 8 (with appropriate modifications) shall be given by
the Company and Buyer with respect to any required registra-
tion or other qualification of securities under any federal
or state law or regulation of Governmental Authority other
than the Securities Act.
(e) Indemnification Payments. The indemnification
required by this Section 8 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 forego-
ing 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 indem-
nified party as a result of the expense, loss, damage or li-
ability, (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 refer-
ence 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 indem-
nified party and the parties' relative intent, knowledge, ac-
cess 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 in-
demnifying party and the indemnified party, but also the rel-
ative 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 par-
ty 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 9. 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 finan-
cial 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 Com-
pany's Commission file number, (d) the number of shares of
-19-
Company Common Stock and the number of shares of Company Pre-
ferred 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 com-
pliance with either Section 13 or Section 15(d) of the Ex-
change 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 10. Miscellaneous. (a) Counterparts.
This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other
party. Copies of executed counterparts transmitted by tele-
copy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of
this Section 10, provided receipt of copies of such counter-
parts is confirmed.
(b) Governing Law. THIS AGREEMENT SHALL BE GOV-
ERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF FLORIDA WITHOUT REFERENCE TO THE CHOICE OF LAW PRIN-
CIPLES 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 here-
under if in writing and delivered personally, sent by docu-
mented overnight delivery service or, to the extent receipt
is confirmed, telecopy, telefax or other electronic transmis-
sion service to the appropriate address or number as set
forth below. Notices to the Company shall be addressed to:
-20-
Regency Realty Corporation
121 W. Forsyth Street, Suite 200
Jacksonville, Florida 32202
Attention: Martin E. Stein, Jr.
Telecopy Number: (904) 634-3428
with a copy to:
Foley & Lardner
Greenleaf Building
200 Laura Street
Jacksonville, Florida 32202
Attention: Charles E. Commander III, Esq.
Telecopy Number: (904) 359-8700
or at such other address and to the attention of such other
person as the Company may designate by written notice to Buy-
er. Notices to Buyer shall be addressed to:
Security Capital Holdings S.A.
69, route d'Esch
L-2953 Luxembourg
Attention: Paul E. Szurek
Telecopy Number: (352) 4590-3331
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopy Number: (212) 403-2000
(e) Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties here-
to 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 institu-
tion 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 Secu-
rities shall be considered an intended beneficiary hereof and
may exercise all rights of Buyer hereunder, and (ii) any per-
son included within the definition of the term Buyer shall be
permitted to assign its rights hereunder to any other person
included within such definition.
-21-
(f) Headings. The Section and other headings con-
tained in this Agreement are inserted for convenience of ref-
erence only and will not affect the meaning or interpretation
of this Agreement. All references to Sections or other head-
ings 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 instru-
ments in writing signed by the party against whom enforcement
of any such modification or amendment is sought. Either par-
ty hereto may, only by an instrument in writing, waive com-
pliance 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 re-
quires, (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, para-
graphs, or other references to this Agreement unless other-
wise specified, (iii) the word "including" and words of simi-
lar import when used in this Agreement shall mean "including,
without limitation," unless the context otherwise requires or
unless otherwise specified, (iv) the word "or" shall not be
exclusive, and (v) provisions shall apply, when appropriate,
to successive events and transactions.
This Agreement shall be construed without regard to
any presumption or rule requiring construction or interpre-
tation 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.
-22-
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.
REGENCY REALTY CORPORATION
By:
Name: Martin E. Stein, Jr.
Title: President
SECURITY CAPITAL U.S. REALTY
By:
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL HOLDINGS S.A.
By:
Name: Paul E. Szurek
Title: Managing Director
EXHIBIT C
STOCKHOLDERS AGREEMENT
by and among
REGENCY REALTY CORPORATION
SECURITY CAPITAL HOLDINGS S.A.
SECURITY CAPITAL U.S. REALTY
and
THE REGENCY GROUP, INC.
dated as of
_________ __, 1996
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.1 "Affiliate"............................... 1
Section 1.2 "Affiliate Arrangements".................. 2
Section 1.3 "Agreement"............................... 2
Section 1.4 "Beneficially Own"........................ 2
Section 1.5 "Board"................................... 2
Section 1.6 "Buyer"................................... 2
Section 1.7 "Code".................................... 2
Section 1.8 "Company"................................. 2
Section 1.9 "Company Common Stock".................... 2
Section 1.10 "Conflict of Interest Policies"........... 2
Section 1.11 "Corporate Action Covenants".............. 2
Section 1.12 "Covered Transaction"..................... 2
Section 1.13 "Director"................................ 2
Section 1.14 "Early Termination Event"................. 2
Section 1.15 "Excess Shares"........................... 2
Section 1.16 "Exercise Notice"......................... 2
Section 1.17 "Extraordinary Transaction"............... 2
Section 1.18 "15% Termination Date".................... 3
Section 1.19 "fully diluted"........................... 3
Section 1.20 "Geographic Region"....................... 3
Section 1.21 "Government Authority".................... 3
Section 1.22 "Group"................................... 3
Section 1.23 "Investor"................................ 4
Section 1.24 "Investor Nominees"....................... 4
Section 1.25 "Investor Restricted Person".............. 4
Section 1.26 "Key Committees".......................... 4
Section 1.27 "1933 Act"................................ 4
Section 1.28 "1934 Act"................................ 4
Section 1.29 "Participation Notice".................... 4
Section 1.30 "person".................................. 4
Section 1.31 "SCGI".................................... 4
Section 1.32 "SCGI Restricted Person".................. 4
Section 1.33 "Securities Filings"...................... 4
Section 1.34 "Shareholder Approval".................... 4
Section 1.35 "Shareholder Approval Date"............... 4
Section 1.36 "Shopping Center Company"................. 5
Section 1.37 "Shopping Center Property"................ 5
Section 1.38 "Standstill Extension Term"............... 5
Section 1.39 "Standstill Period"....................... 5
Section 1.40 "Stock Purchase Agreement"................ 5
Section 1.41 "13D Group"............................... 5
Section 1.42 "Transfer"................................ 5
Section 1.43 "TRG"..................................... 5
Section 1.44 "TRG Restricted Person"................... 5
Section 1.45 "20% Termination Date".................... 5
Section 1.46 "USREALTY"................................ 6
Section 1.47 "Voting Securities"....................... 6
ARTICLE 2
Board of Directors
Section 2.1 Investor Nominees......................... 6
Section 2.2 Committee Representation;
Subsidiary Boards....................... 7
Section 2.3 Vacancies................................. 8
ARTICLE 3
Information Rights
Section 3.1 Strategic Advice; Operating
Statements; Public Company Status....... 8
Section 3.2 Advice of Actions.......................... 9
ARTICLE 4
Voting and Participation Rights
Section 4.1 Voting Rights............................. 10
Section 4.2 Participation Rights...................... 11
ARTICLE 5
Standstill Provisions
Section 5.1 Standstill Periods........................ 14
Section 5.2 Restrictions During Standstill
Period and Standstill Extension
Term.................................... 16
Section 5.3 Investments in Shopping Center
Properties and Purchases of
Interests in Shopping Center
Companies............................... 17
Section 5.4 Notice to Company. ........................ 19
Section 5.5 Compliance with Insider Trading Policy.... 20
Section 5.6 Compliance with Section 5.2 of the
Company Charter......................... 20
Section 5.7 Investment Company Matters................ 20
Section 5.8 Waiver of Restrictions and Limits......... 20
Section 5.9 REIT Qualification........................ 21
ARTICLE 6
Limitations on Corporate Actions, Etc.
Section 6.1 Limitations on Corporate Actions.......... 21
Section 6.2 Provision of Information.................. 23
Section 6.3 Compliance with Conflicts of Interest
Policy.................................. 23
Section 6.4 Maintenance of Affiliate and
Joint Venture Arrangements.............. 24
Section 6.5 Sales of Assets........................... 24
Section 6.6 Investments in Shopping Center
Properties and Purchases of
Interests in Shopping Center
Companies............................... 24
ARTICLE 7
Miscellaneous
Section 7.1 Counterparts.............................. 26
Section 7.2 Governing Law............................. 26
Section 7.3 Entire Agreement.......................... 26
Section 7.4 Expenses.................................. 26
Section 7.5 Notices................................... 26
Section 7.6 Successors and Assigns.................... 27
Section 7.7 Headings.................................. 27
Section 7.8 Amendments and Waivers.................... 27
Section 7.9 Interpretation; Absence of Presumption.... 28
Section 7.10 Severability.............................. 28
Section 7.11 Further Assurances........................ 28
Section 7.12 Specific Performance...................... 28
Section 7.13 Investor Breach........................... 28
Section 7.14 Confidentiality........................... 28
Section 7.15 Public Releases and Announcements......... 29
THIS STOCKHOLDERS AGREEMENT (the "Agreement"), dated
as of ________ __, 1996, is made by and among Regency Realty
Corporation, a Florida corporation (the "Company"), Security
Capital U.S. Realty, a Luxembourg corporation ("USREALTY"),
Security Capital Holdings S.A., a Luxembourg corporation and a
wholly owned subsidiary of USREALTY ("Buyer"), and The Regency
Group, Inc., a Florida corporation ("TRG"). Capitalized terms
not otherwise defined herein have the meaning ascribed to them
in the Stock Purchase Agreement (as hereinafter defined).
RECITALS:
WHEREAS, the Company, USREALTY and Buyer have entered
into a Stock Purchase Agreement, dated as of June 11, 1996 (the
"Stock Purchase Agreement"), pursuant to which the Company is
selling, conveying, assigning and transferring, and Buyer is
purchasing, certain shares of the common stock, par value $.01
per share, of the Company (the "Company Common Stock") on the
date hereof, and pursuant to which the Company has agreed to
sell, and Buyer has agreed to purchase, certain additional
shares of Company Common Stock, upon the terms and subject to
the conditions set forth therein; and
WHEREAS, it is a condition to the transactions con-
templated by the Stock Purchase Agreement and the parties be-
lieve 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 de-
fined) in the Company and the corporate governance of the Com-
pany; and
WHEREAS, the Company and Buyer believe that the com-
bination in a strategic partnership of the leadership, exper-
tise and experience in the retail shopping center industry of
the Company and the unique market knowledge, operating experi-
ence, research capabilities 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 "Affiliate" shall have the meaning as-
cribed thereto in Rule 12b-2 promulgated under the 1934 Act,
and as in effect on the date hereof.
Section 1.2 "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 fil-
ings of the Company.
Section 1.3 "Agreement" shall have the meaning set
forth in the first paragraph hereof.
Section 1.4 "Beneficially Own" shall mean, with re-
spect 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.
Section 1.5 "Board" shall mean the board of direc-
tors of the Company.
Section 1.6 "Buyer" shall have the meaning set
forth in the first paragraph hereof.
Section 1.7 "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 1.8 "Company" shall have the meaning set
forth in the first paragraph hereof.
Section 1.9 "Company Common Stock" shall have the
meaning set forth in the second paragraph hereof.
Section 1.10 "Conflict of Interest Policies" shall
have the meaning set forth in Section 6.3.
Section 1.11 "Corporate Action Covenants" shall have
the meaning set forth in Section 6.1.
Section 1.12 "Covered Transaction" shall have the
meaning set forth in Section 5.1(a)(iv).
Section 1.13 "Director" shall mean a member of the
Board.
Section 1.14 "Early Termination Event" shall have
the meaning set forth in Section 5.1(a).
Section 1.15 "Excess Shares" shall have the meaning
set forth in Section 5.1(a)(ii).
Section 1.16 "Exercise Notice" shall have the mean-
ing set forth in Section 4.2(b).
Section 1.17 "Extraordinary Transaction" shall mean
(a) any merger, consolidation, sale of a material portion of
the Company's assets, recapitalization, other business combina-
tion, liquidation, or other similar action out of the ordinary
course of business of the Company, or (b) any issuance of secu-
rities to any person or Group requiring shareholder approval in
accordance with the guidelines of the New York Stock Exchange
as to such matters, as in effect as of the date of the Stock
Purchase Agreement.
Section 1.18 "15% Termination Date" shall mean the
first date, if any, following the date on which the Remaining
Equity Commitment shall have been reduced to zero on which In-
vestor's ownership of Company Common Stock, on a fully diluted
basis, shall have been below 15% of the outstanding shares of
Company Common Stock for a continuous period of 180 days; pro-
vided, that, if Investor's ownership of Company Common Stock
shall, following the date on which the Remaining Equity Commit-
ment shall have been reduced to zero, have fallen below 15% by
number of the outstanding shares of Company Stock, on a fully
diluted basis, as a result of the redemption of limited part-
nership or other interests in partnerships or other entities
for shares of Company Common Stock, then the 15% Termination
Date shall mean the first date, if any, following the date on
which Investor's ownership of Company Common Stock shall have
been below 15% by number of the outstanding shares of Company
Stock, on a fully diluted basis, for a continuous period of 450
days; provided, however, that if Investor's ownership of Com-
pany Common Stock shall, following the date on which the Re-
maining Equity Commitment shall have been reduced to zero, have
fallen below 15% of the outstanding shares of Company Common
Stock as a result of a Transfer by Investor of Company Common
Stock or a failure of Investor to exercise its rights under
Section 4.2 during the 60 days immediately prior to the expira-
tion of such 180-day period, if any such rights are exercisable
during such period, to the extent necessary to (and provided
that it shall be possible by such exercise to) raise its owner-
ship of the outstanding Company Common Stock above such 15%
threshold, then the 15% Termination Date shall occur immedi-
ately upon such Transfer or failure to exercise its rights un-
der Section 4.2, as the case may be.
Section 1.19 "fully diluted" shall mean, with re-
spect to the Company Stock, the total number of outstanding
shares of Company Stock (for such purposes, treating as Company
Stock all shares of Company Preferred Stock and Class B Common
Stock and 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 conversion of all such
shares of Company Preferred Stock and Class B Common Stock and
assuming exercise, conversion, exchange or redemption of such
other securities).
Section 1.20 "Geographic Region" shall mean the
states of Florida, Alabama, Mississippi, Georgia, North Caro-
lina, South Carolina, Tennessee, Kentucky, Virginia, West Vir-
ginia, Maryland and the District of Columbia, and the southern
regions of the states of Indiana and Ohio (including the cities
of Indianapolis and Columbus, respectively).
Section 1.21 "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 1.22 "Group" shall mean a "group" as such
term is used in Section 13(d)(3) of the 1934 Act.
Section 1.23 "Investor" shall mean, collectively,
as the context may require, USREALTY and Buyer, and shall also
include any Affiliate of USREALTY or Buyer of which USREALTY
and/or Buyer collectively, directly or indirectly, Beneficially
Own 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 1.24 "Investor Nominees" shall have the
meaning set forth in Section 2.1(a).
Section 1.25 "Investor Restricted Person" shall
have the meaning set forth in Section 5.3(a).
Section 1.26 "Key Committees" shall have the
meaning set forth in Section 2.2(a).
Section 1.27 "1933 Act" shall mean the Securities
Act of 1933, as amended.
Section 1.28 "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
Section 1.29 "Participation Notice" shall have the
meaning set forth in Section 4.2(b).
Section 1.30 "person" shall mean any individual,
corporation, partnership, limited liability company, joint ven-
ture, trust, unincorporated organization, other form of busi-
ness or legal entity or Government Authority.
Section 1.31 "SCGI" shall have the meaning set
forth in Section 5.3(a).
Section 1.32 "SCGI Restricted Person" shall have
the meaning set forth in Section 5.3(a).
Section 1.33 "Securities Filings" shall have the
meaning set forth in Section 3.1(b)(iii).
Section 1.34 "Shareholder Approval" shall have the
meaning set forth in Section 5.3(d).
Section 1.35 "Shareholder Approval Date" shall mean
the date on which a duly called and held meeting of sharehold-
ers of the Company is held at which meeting (i) a quorum is
present and (ii) the transactions (including the issuance of
the Company Common Stock and the amendments to the Company
Charter) contemplated by the Stock Purchase Agreement are ap-
proved by the affirmative vote of the holders of the requisite
number of shares of Company Stock.
Section 1.36 "Shopping Center Company" shall have
the meaning set forth in Section 5.3(b).
Section 1.37 "Shopping Center Property" shall have
the meaning set forth in Section 5.3(a).
Section 1.38 "Standstill Extension Term" shall have
the meaning set forth in Section 5.1(b).
Section 1.39 "Standstill Period" shall have the
meaning set forth in Section 5.1(a).
Section 1.40 "Stock Purchase Agreement" shall have
the meaning set forth in the second paragraph hereof.
Section 1.41 "13D Group" shall mean any group of
persons acquiring, holding, voting or disposing of Voting Secu-
rities 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 1.42 "Transfer" shall have the meaning set
forth in Section 5.2(a)(ii).
Section 1.43 "TRG" shall have the meaning set forth
in the first paragraph hereof.
Section 1.44 "TRG Restricted Person" shall have the
meaning set forth in Section 6.6.
Section 1.45 "20% Termination Date" shall mean the
first date, if any, following the date on which the Remaining
Equity Commitment shall have been reduced to zero on which In-
vestor's ownership of Company Common Stock, on a fully diluted
basis, shall have been below 20% of the outstanding shares of
Company Common Stock for a continuous period of 180 days; pro-
vided, that, if Investor's ownership of Company Common Stock
shall, following the date on which the Remaining Equity Commit-
ment shall have been reduced to zero, have fallen below 20% by
number of the outstanding shares of Company Stock, on a fully
diluted basis, as a result of the redemption of limited part-
nership or other interests in partnerships or other entities
for shares of Company Common Stock, then the 20% Termination
Date shall mean the first date, if any, following the date on
which Investor's ownership of Company Common Stock shall have
been below 20% by number of the outstanding shares of Company
Stock, on a fully diluted basis, for a continuous period of 450
days; provided, however, that if Investor's ownership of Com-
pany Common Stock shall, following the date on which the Re-
maining Equity Commitment shall have been reduced to zero, have
fallen below 20% of the outstanding shares of Company Common
Stock as a result of a Transfer by Investor of Company Common
Stock or a failure of Investor to exercise its rights under
Section 4.2 during the 60 days immediately prior to the expira-
tion of such 180-day period, if any such rights are exercisable
during such period, to the extent necessary to (and provided
that it shall be possible by such exercise to) raise its owner-
ship of the outstanding Company Common Stock above such 20%
threshold, then the 20% Termination Date shall occur immedi-
ately upon such Transfer or failure to exercise its rights un-
der Section 4.2, as the case may be.
Section 1.46 "USREALTY" shall have the meaning set
forth in the first paragraph hereof.
Section 1.47 "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 Direc-
tors.
ARTICLE 2
Board of Directors
Section 2.1 Investor Nominees. (a) From and
after the Shareholder Approval Date, if any, and until the next
annual or special meeting of shareholders of the Company at, or
the next taking of action by written consent of shareholders of
the Company with respect to, which any Directors are to be
elected, the Investor shall have the right (but not the obliga-
tion) to have on the Board two Directors (such Directors, the
"Investor Nominees"), and the Company shall cause such Investor
Nominees to become members of the Board. If necessary to ef-
fectuate the placement of such Investor Nominees on the Board,
the Company shall, at its sole option, (i) expand the size of
the Board or (ii) solicit the resignations of the appropriate
number of Directors, in either case, to the extent necessary to
permit the Investor Nominees to serve. Thereafter and until
the earlier of the 20% Termination Date, if any, and the expi-
ration of the Standstill Period or any Standstill Extension
Term (other, in either case, as a result of an Early Termina-
tion Event), at each annual or special meeting of shareholders
of the Company at, or the taking of action by written consent
of shareholders of the Company with respect to, which any Di-
rectors are to be elected, Investor shall have the right (but
not the obligation) pursuant to this Agreement (i) to nominate
for election to the Board that number of Directors which, when
added to the number of Directors (such Directors also, "Inves-
tor Nominees") who are then Investor Nominees and who will con-
tinue to serve as Directors without regard to the outcome of
the election at such meeting or by such consent, represent the
greater of (x) two and (y) the same proportion of the total
number of Directors as is represented by the number of shares
of Company Common Stock which Investor then owns relative to
the outstanding Company Common Stock (but in no event more than
49% of the Board), and (ii) to be entitled to the benefits of
the agreements of the Company contained in Subsection 2.1(c)
with respect to the Investor Nominees described in clause (i)
of this sentence. Following the expiration of the Standstill
Period or any Standstill Extension Term (other, in either case,
as a result of an Early Termination Event), if such expiration
of the Standstill Period or any Standstill Extension Term shall
be prior to the 20% Termination Date, and until the 20% Ter-
mination Date, at each annual or special meeting of sharehold-
ers of the Company at, or the taking of action by written con-
sent of shareholders of the Company with respect to, which any
Directors are to be elected, Investor shall have the right (but
not the obligation) pursuant to this Agreement (i) to nominate
for election to the Board that number of Directors which, when
added to the number of Directors who are then Investor Nominees
and who will continue to serve as Directors without regard to
the outcome of the election at such meeting or by such consent,
represent the lesser of (x) two and (y) the same proportion of
the total number of Directors as is represented by the number
of shares of Company Common Stock which Investor then owns
relative to the outstanding Company Common Stock (such Direc-
tors also, "Investor Nominees") and (ii) to be entitled to the
benefits of the agreements of the Company contained in Subsec-
tion 2.1(c) with respect to the Investor Nominees described in
clause (i) of this sentence. In computing the number of In-
vestor Nominees, any fraction is to be rounded down to the
nearest whole number. At the time of the expiration of the
Standstill Period or any Standstill Extension Term, if the Com-
pany shall so request, Investor shall use its reasonable ef-
forts to cause one or more then-serving Investor Nominees to
resign from the Board such that there shall be no more Investor
Nominees on the Board than the lesser of (x) two and (y) the
same proportion of the total number of Directors as is repre-
sented by the number of shares of Company Common Stock which
Investor then owns relative to the outstanding Company Common
Stock.
(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 fel-
ony, (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 re-
spect to such person. Investor shall use its reasonable ef-
forts to afford the independent directors of the Company a rea-
sonable opportunity to meet any individual that Investor is
considering naming as an Investor Nominee.
(c) The Company will support the nomination of, and
the Company's nominating committee (or any other committee ex-
ercising a similar function) shall recommend to the Board, the
election of each Investor Nominee to the Board, and the Company
will exercise all authority under applicable law to cause each
Investor Nominee to be elected to the Board. Without limiting
the generality of the foregoing, with respect to each meeting
of shareholders of the Company at which Directors are to be
elected, the Company shall use its reasonable efforts to so-
licit from the shareholders of the Company eligible to vote in
the election of Directors proxies in favor of any Investor Nom-
inees.
(d) From and after the Shareholder Approval Date, if
any, until the earlier of the 20% Termination Date, if any, and
the expiration of the Standstill Period or any Standstill Ex-
tension Term (other, in either case, as a result of an Early
Termination Event), the total number of members of the Board
shall not be less than eleven without the prior written consent
of Investor, in its sole discretion.
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 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 each of the audit committee, the nomi-
nating 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 (the foregoing, the "Key Com-
mittees"). Notwithstanding the foregoing, if none of the Di-
rectors who are Investor Nominees would be considered "inde-
pendent" of the Company or "disinterested" (i) for purposes of
any applicable rule of the New York 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, securi-
ties, corporate law or other material legal benefits with re-
spect 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 or "disinterested", 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 mem-
bers 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 pursu-
ant 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 Inves-
tor shall serve as a member of the board of directors or com-
parable governing body of each Subsidiary of the Company, if
any, that is a corporation or other person with a board of di-
rectors 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).
ARTICLE 3
Information Rights
Section 3.1 Strategic Advice; Operating
Statements; Public Company Status. (a) From and after the
Shareholder Approval Date, if any, until the 20% Termination
Date, Buyer will from time to time, as reasonably requested by
the Company, use reasonable efforts to make reasonably
available to the Company the benefit of Buyer's market exper-
tise, operating experience and research capabilities and will
from time to time, as
reasonably requested by the Company, consult with and advise
the Company on matters concerning:
(i) business and operating strategy;
(ii) financing and capital formation (including
advice regarding capital markets and structure,
method and timing of capital-rasing efforts);
(iii) property acquisition strategy and acquisi-
tion opportunities with respect to Shopping Center
Properties in the Geographic Region of which Buyer
becomes aware; and
(iv) investor relations;
provided, however, that nothing herein shall require Buyer to
provide the Company with any information that may be subject to
any obligation of confidentiality on Buyer's part. Upon the
reasonable request of the Company, Buyer further will provide
to the Company any relevant market or economic research in its
possession which is not readily available from third parties
and which is not subject to any obligation of confidentiality
on Buyer's part. Buyer will be entitled to receive customary
fees and expense reimbursement for its undertaking of any ac-
tions contemplated by this Section 3.1(a), which fees and ex-
penses will be agreed upon by Buyer and the Company in each
instance.
(b) From and after the Shareholder Approval Date, if
any, until the 20% Termination Date, if any, the Company will:
(i) deliver to Investor, as soon as practicable
after the end of each month or other reporting pe-
riod, any operating and financial statements and man-
agement 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 practi-
cable following filing, a copy of each report, sched-
ule or other document filed by the Company pursuant
to the requirements of any federal or state securi-
ties 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.
(c) 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 dis-
seminated.
Section 3.2 Advice of Actions. From and after the
Shareholder Approval Date, if any, until the 20% Termination
Date, if any, without first having consulted with the represen-
tative of Investor designated by Investor pursuant to this Sec-
tion 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; or
(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 employ-
ees of the Company or a Subsidiary in connection with any
employee benefit plan approved by the shareholders of the
Company.
Notwithstanding the foregoing, the Company shall have no obli-
gation 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 In-
vestor, for purposes of this Section 3.2, initially shall be
Paul E. Szurek. Investor shall provide the company with ten
days prior written notice of any replacement of the designated
representative.
ARTICLE 4
Voting and Participation Rights
Section 4.1 Voting Rights. Subject to the provi-
sions of this Section 4.1, Investor may vote the shares of Com-
pany Stock which it owns in its sole and absolute discretion.
During the Standstill Period, if any, and any Standstill Exten-
sion Term, Investor will vote all shares of Company Common
Stock which it owns in one of the following two manners, at its
option: (a) in accordance with the recommendation of the Board
or (b) proportionally, in accordance with the votes of the
other holders of Company Common Stock; provided, however, that
Investor may vote all of the shares of Company Common Stock
that it owns, in its sole and absolute discretion, with regard
to (x) the election of the Investor Nominee(s) to the Board,
(y) any amendment to the Company Charter or the By-laws of the
Company which would reasonably be expected to materially ad-
versely affect Investor, and (z) any Extraordinary Transaction
submitted to a vote of the shareholders of the Company. With
regard to (i) any amendment to the Company Charter or the By-
laws of the Company which would reasonably be expected to mate-
rially adversely affect Investor, and (ii) any Extraordinary
Transaction submitted to a vote of the stockholders of the Com-
pany, Investor will vote all shares of Company Common Stock
owned by it that represent ownership of in excess of 40% of the
outstanding shares of Company Common Stock, in one of the fol-
lowing two manners, at its option: (x) in accordance with the
recommendation of the Board, or (y) proportionally in ac-
cordance with the votes of the other holders of Company Common
Stock. With regard to any Extraordinary Transaction submitted
to a vote of the stockholders of the Company which requires the
affirmative vote of holders of two-thirds of the shares of Com-
pany Common Stock, Investor will vote all shares of Company
Common Stock owned by it that represent ownership of in excess
of 28% of the outstanding shares of Company Common Stock, in
one of the following two manners, at its option: (x) in ac-
cordance with the recommendation of the Board, or (y) propor-
tionally in accordance with the votes of the other holders of
Company Common Stock.
Section 4.2 Participation Rights. (a) Right to
Participate. From and after the date hereof until the 15% Ter-
mination Date, if any, Investor shall be entitled to a par-
ticipation 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 addi-
tional 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 is-
sued or sold by the Company which represents the same propor-
tion of the total number of shares of capital stock to be is-
sued or sold by the Company (including the shares of capital
stock to be issued to Investor upon exercise of its participa-
tion 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 propor-
tionate 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 including
for this purpose any shares of Company Common Stock to be ac-
quired 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 ac-
quired pursuant to the Stock Purchase Agreement, but not yet
issued) (but in no event, (i) more than 42.5% of the total num-
ber of shares of capital stock to be issued or sold by the Com-
pany at the first offering of shares of capital stock by the
Company following the date on which the Remaining Equity Com-
mitment (as such term is defined in the Stock Purchase Agree-
ment) shall be zero, or, (ii) more than 37.5% of the total num-
ber of shares of capital stock to be issued or sold by the Com-
pany at all subsequent offerings); provided, however, that the
provisions of this Section 4.2 shall not apply to (i) the issu-
ance or sale by the Company of any of its capital stock issued
to the Company or any of its Subsidiaries or pursuant to op-
tions, rights or warrants or other commitments or securities in
effect or outstanding on the date of the Stock Purchase Agree-
ment, or (ii) the issuance of capital stock pursuant to the
conversion, exchange or redemption of any other capital stock,
and with respect to the original issuance of which other capi-
tal stock Investor had and fully exercised participation rights
pursuant to this Section 4.2, 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), as if the price at which such capital stock is
issued were the market price on the date of such issuance.
(b) Notice. In the event the Company proposes to
issue or sell any shares of capital stock in a transaction giv-
ing rise to the participation rights provided for in this Sec-
tion, the Company shall send a written notice (the "Participa-
tion 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 with-
in 20 days after its receipt of the Participation Notice, In-
vestor may exercise its participation rights to purchase or
subscribe for shares of such shares of capital stock, as pro-
vided for in this Section, by so informing the Company in writ-
ing (an "Exercise Notice"). Each Exercise Notice shall state
the percentage of the proposed sale or issuance that the Inves-
tor elects to purchase. Each Exercise Notice shall be irre-
vocable, subject to the conditions to the closing of the trans-
action 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 li-
ability or obligation to Investor or any Affiliate thereof who
has acquired shares of Company Stock pursuant to the Stock Pur-
chase Agreement or from Investor with respect thereto by virtue
of such abandonment, rescission, annulment, withdrawal or ter-
mination.
(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 ap-
plicable to the purchasers or subscribers of the additional
shares of capital stock of the Company whose purchases or sub-
scriptions give rise to the participation rights, 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 transac-
tion, is not greater than 110% of the estimated price set forth
in the relevant Participation Notice or, in the case of an un-
derwritten 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 consideration to be
received by the Company in connection with the issuance of
shares of capital stock giving rise to participation rights
hereunder is other than cash or cash equivalents, the price per
share at which the participation rights may be exercised shall
be the price per share set forth in the Participation Notice or
determined in the manner set forth in the Participation Notice
(which shall in either event be the price as set forth in the
agreement pursuant to which such shares are to be issued, pro-
vided that the consideration to be received therefor is valued
based upon the fair market value thereof, as determined in good
faith by the Company's independent directors, after consulta-
tion with appropriate financial and legal advisors, or the
price determined in accordance with paragraph (a) of this Sec-
tion 4.2); provided, further, however, that in the event the
consideration to be received by the Company in connection with
the issuance of shares of capital stock giving rise to partici-
pation rights hereunder is other than cash or cash equivalents,
and the fair market value of the consideration to be received
is not determinable, the price per share at which the partici-
pation rights may be exercised shall, (i) in the event that
shares of capital stock with an established trading market are
being issued or sold, be the average ten-day trailing market
price of such shares as of the date of receipt of the Partici-
pation Notice, and (ii) in the event any other shares of cap-
ital stock are being issued or sold, be determined by reference
to the amount set forth above, adjusted as may be appropriate
to reflect the relationship between those shares of capital
stock with an established trading market and those shares of
capital stock to be issued in the relevant transaction; pro-
vided, however, that if the consideration otherwise covered by
the second proviso of this Section 4.2(d) is received in con-
nection with a merger or consolidation by the Company, the
price per share at which the participation rights may be exer-
cised shall be the market value per share of Company Common
Stock issued in respect of such merger or consolidation as of
the date of the merger or consolidation agreement; and pro-
vided, finally, that in the event the purchases or subscrip-
tions 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 pri-
vate placement.
(e) Timing of Sale. If, with respect to any Par-
ticipation 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 Com-
pany 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 Com-
pany described in the Participation Notice on terms not more
favorable to the purchaser than were set forth in the Partici-
pation Notice. If, at the end of 120 days following the expi-
ration of the time in which the Exercise Notice is required to
be delivered, the Company has not completed the sale or is-
suance 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 capi-
tal stock is to be sold in an underwritten offering (or a pri-
vately placed offering in which the price is not less than 97%
of the most recent closing price at the time of the pricing of
the offering) is not at least 90% of the estimated price set
forth in the Participation Notice, the Company may inform In-
vestor 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) Subject to
the provisions of the following sentence, the "Standstill
Period" shall be the period commencing on the Shareholder
Approval Date, if any, and ending on the earlier of (x) the
fifth anniversary of the date thereof, 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 Mate-
rial 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 pe-
riod 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 re-
quest of the Investor or any Affiliate thereof of Benefi-
cial 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 im-
mediately following their acquisition deprived of all vot-
ing rights pursuant to limitations on ownership of shares
contained in the Company Charter, as in effect at the rel-
evant 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 num-
ber of Directors on the Board, equal to or greater than
the number of Directors to which Investor is entitled;
(iv) the authorization by the Company or the Board or
any committee thereof (with all Investor Nominees abstain-
ing or voting against) of the solicitation of offers or
proposals or indications of interest with respect to any
merger, consolidation, other business combination, liqui-
dation, 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 com-
bination in which the Company is the surviving and acquir-
ing 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 com-
bination (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, rep-
resentative 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 Cov-
ered Transaction, the removal of any rights plan, provi-
sions 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" pro-
visions of the Company Charter or the By-laws of the Com-
pany, or any other similar arrangements, agreements, com-
mitments or provisions in the Company Charter or the By-
laws 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,
whether or not in connection with any actual or proposed
Covered Transaction, any modification, amendment, waiver
or repeal of the ownership restrictions in Article 5 of
the Company Charter (except as may be necessary to allow
any acquisition of Company Stock that would not constitute
an Early Termination Event under Section 5.1(a)(ii));
(vii) any breach by the Company of the Stock Purchase
Agreement which 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 Investor or cause a Material Adverse Effect;
(viii) any breach of this Agreement by the Company
which 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 In-
vestor or cause a Material Adverse Effect;
(ix) any violation of any Corporate Action Covenant;
or
(x) any exercise of a conversion right with respect
to shares of Class B Common Stock effected at a time or in
circumstances in which the Percentage Limit (as such term
is defined in the Articles of Amendment to Articles of
Incorporation of the Company, filed on December 20, 1995)
is for any reason not applicable, ineffective or waived.
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 Termination Event."
(b) If the Standstill Period shall not have been
terminated prior to the fifth anniversary of the date hereof,
the Standstill Period and any Standstill Extension Term shall
automatically be extended for successive one-year periods (each
such period, a "Standstill Extension Term"), unless, in the
case of each Standstill Extension Term, Investor provides to
the Company written notice at least 270 days prior to the com-
mencement of such Standstill Extension Term, that such Stand-
still Extension Term and all further Standstill Extension Terms
are cancelled. Any Standstill Extension Term will be termi-
nated upon the earlier of (i) the first anniversary thereof,
and (ii) the occurrence of an Early Termination Event.
Section 5.2 Restrictions During Standstill Period
and Standstill Extension Term. (a) During the Standstill Pe-
riod, if any, and any Standstill Extension Term (and, with re-
spect only to the provisions of subsection (ii) hereof, also at
any other time when Investor owns more than 15% of the then
outstanding shares of Company Common Stock, on a fully diluted
basis), Investor will not, will cause each of its controlled
Affiliates not to, and will use its reasonable best efforts to
cause each of its other Affiliates not to, directly or indi-
rectly:
(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) sell, transfer, pledge or otherwise dispose of
(collectively, "Transfer") any shares of Company Common
Stock except for: (v) Transfers made in compliance with
the requirements of Rule 144 of the 1933 Act, (w) Trans-
fers pursuant to negotiated transactions with third par-
ties, provided, however, that no such Transfer which would
result in the applicable transferee having beneficial own-
ership of more than 9.8% of the Company Stock shall occur
unless (A) the Company, in its sole discretion, approves
such Transfer, and (B) the transferee acknowledges that it
is subject to the provisions of Article 5 of this Agree-
ment to which Investor is subject, (x) Transfers pursuant
to or in accordance with the Registration Rights Agreement
or otherwise in a public offering, (y) Transfers to one or
more Affiliates of Investor who agree to be bound by the
terms and conditions of this Agreement and who satisfy the
ownership criteria in the definition of "Investor", and
(z) Transfers to a bona fide financial institution for the
purpose of securing bona fide indebtedness of any Inves-
tor; provided, that no such Transfer shall result in the
bona fide financial institution having beneficial owner-
ship of more than 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;
(iii) purchase or otherwise acquire shares of Company
Common Stock (or options, rights or warrants or other com-
mitments 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, Investor and its Affiliates will
Beneficially Own more than 45% of the outstanding shares
of Company Common Stock, on a fully diluted basis;
(iv) solicit, encourage or propose to effect or nego-
tiate any Covered Transaction other than pursuant to the
Stock Purchase Agreement;
(v) 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 (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 spe-
cial 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 con-
test";
(vi) seek representation on the Board or a change in
the composition or size of the Board other than as permit-
ted by Article 2;
(vii) Transfer any capital stock of Buyer or any capi-
tal stock of any Affiliate of Buyer that owns Company Com-
mon Stock, or cause Buyer or any such Affiliate thereof to
Transfer any options, warrants, convertible securities or
other similar rights to acquire any capital stock of Buyer
or any such Affiliate thereof; provided, however, that no
such Transfer shall be prohibited if after giving effect
thereto the Beneficial Owner of such shares of Company
Common Stock satisfies the ownership criteria in the defi-
nition of "Investor"; and provided, further, that no
Transfers to a bona fide financial institution for the
purpose of securing bona fide indebtedness of any Investor
shall be prohibited hereby;
(viii) request the Company or any of its directors,
officers, employees or agents to amend or waive any provi-
sions of this Section 5.2 or Section 5.2 of the Company
Charter or seek to challenge the legality or effect
thereof; or
(ix) assist, advise, encourage or act in concert with
any person with respect to, or seek to do, any of the
foregoing.
(b) At such time as the restrictions on the activi-
ties of Investor contained in Section 5.2(a), 5.2(b) or 5.4
take effect, such restrictions shall supercede any restrictions
on the activities of Investor contained in the Confidentiality
Agreement, dated May 10, 1995, by and between Investor and the
Company whereupon all such restrictions set forth in said Con-
fidentiality Agreement shall cease to apply.
Section 5.3 Investments in Shopping Center Proper-
ties and Purchases of Interests in Shopping Center Companies.
(a) Subject to the provisions of the following sentence, and
excluding transactions which are the subject of paragraph (b)
of this Section, from and after the date hereof until the ear-
lier of (i) the date, if any, on which shareholders of the Com-
pany vote upon and fail to approve the transactions contem-
plated by the Stock Purchase Agreement, (ii) the six-month an-
niversary of the date hereof if a meeting at which the share-
holders of the Company are asked to vote upon the transactions
contemplated by the Stock Purchase Agreement shall not have oc-
curred on or prior to such six-month anniversary date, and
(iii) the 20% Termination Date, if any, Investor and any other
person of which Investor is the direct or indirect general
partner or as to which Investor has the direct or indirect
right or power to elect a majority of the board of directors or
other governing body or otherwise controls (but subject, in the
case of any person other than Investor, to the fiduciary duties
of such person or its general partner, board of directors or
other governing body) (any such person, an "Investor Restricted
Person") shall not, and Investor shall use its reasonable best
efforts to cause Security Capital Group Incorporated ("SCGI")
and any person of which SCGI is the direct or indirect general
partner or as to which SCGI has the direct or indirect right or
power to elect a majority of the board of directors or other
governing body or otherwise controls (but subject, in the case
of any person other than Investor, to the fiduciary duties of
such person or its general partner, board of directors or other
governing body) (SCGI and any such person, an "SCGI Restricted
Person") not to, directly or indirectly, own, purchase, develop
or otherwise acquire, directly or indirectly, any grocery-
store, drugstore, or general merchandise discount-store (such
as Wal-Mart, K-Mart, Target, TJ Maxx, Steinmart or similar
store) anchored shopping center under 250,000 square feet of
leasable area located in the Geographic Region (a "Shopping
Center Property", and not including within the meaning of such
defined term any enclosed regional or urban mall or other simi-
lar shopping facility). Notwithstanding the foregoing, Inves-
tor, any Investor Restricted Person or any SCGI Restricted Per-
son may own, purchase, or otherwise acquire, directly or indi-
rectly, any Shopping Center Properties if the investment in the
Shopping Center Properties is incidental to an investment made
by Investor, such Investor Restricted Person or such SCGI Re-
stricted Person which investment is not primarily related to
Shopping Center Properties; it being understood and agreed that
any acquisition of real estate properties in which Shopping
Center Properties constitute 30% or less of the purchase price
of all of the real estate properties acquired shall be consid-
ered an investment in which the Shopping Center Properties ac-
quired are incidental to an investment which is not primarily
related to Shopping Center Properties; provided, however, that
if Investor, any Investor Restricted Person or any SCGI Re-
stricted Person determines to make such a permitted investment,
Investor, such Investor Restricted Person or such SCGI Re-
stricted Person shall afford the Company a period of 20 day
after receipt of written notice from Investor describing the
material terms of the proposed investment, in which to provide
Investor, such Investor Restricted Person or such SCGI Re-
stricted Person, as applicable, written notice that it elects
to purchase the Shopping Center Properties constituting a part
of such investment (subject to customary due diligence and
other closing conditions); in the event Investor, such Investor
Restricted Person or such SCGI Restricted Person thereafter
makes such investment and the price and other terms are not
less favorable to the Company than those set forth in the no-
tice of material terms delivered to the Company, the Company
shall promptly acquire the Shopping Center Properties included
therein, at the price allocated to such Shopping Center Proper-
ties in the purchase agreement entered into by Investor, the
Investor Restricted Person or the SCGI Restricted Person, as
the case may be, in respect of such acquisition and otherwise
on terms substantially similar to the terms of Investor's, the
Investor Restricted Person's or SCGI Restricted Person's acqui-
sition of such properties; provided, further, that if Investor,
an Investor Restricted Person or an SCGI Restricted Person
shall have made such a purchase, including the Shopping Center
Properties therein, and if Investor, an Investor Restricted or
an SCGI Restricted Person should thereafter, but prior to the
20% Termination Date, determine to sell any Shopping Center
Properties so purchased, Investor, such Investor Restricted
Person or such SCGI Restricted Person shall inform the Company
of such fact, and the Company shall have 20 days in which to
give Investor, such Investor Restricted Person or such SCGI Re-
stricted Person written notice that it desires to purchase such
Shopping Center Properties; such notice shall set forth the
terms on which the Company is prepared to effect such purchase;
Investor, such Investor Restricted Person or such SCGI Re-
stricted Person shall be free to accept such offer, or to oth-
erwise dispose of such Shopping Center Properties, but shall in
no event dispose of such Shopping Center Properties on terms
materially less favorable to Investor, such Investor Restricted
Person or such SCGI Restricted Person without first again af-
fording the Company the opportunity to purchase such Shopping
Center Properties.
(b) From and after the date hereof until the earlier
of (i) the date, if any, on which shareholders of the Company
vote upon and fail to approve the transactions contemplated by
the Stock Purchase Agreement, (ii) the six-month anniversary of
the date hereof if a meeting at which the shareholders of the
Company are asked to vote upon the transactions contemplated by
the Stock Purchase Agreement shall not have occurred on or
prior to such six-month anniversary date, and (iii) the 20%
Termination Date, if any, Investor and any Investor Restricted
Person shall not, and Investor shall use its reasonable best
efforts to cause all SCGI Restricted Persons not to, purchase
or otherwise acquire equity securities, or options, warrants,
calls, purchase rights, subscription rights, conversion rights,
exchange rights or similar rights to purchase or otherwise ac-
quire equity securities, representing 9% or more of the equity
interest of any person, other than the Company, if (i) such
person's principal business activity is the acquisition, devel-
opment or ownership for rental purposes of Shopping Center
Properties, (ii) more than 25% of such person's assets are
Shopping Center Properties (but not including as Shopping Cen-
ter Property assets for such purpose any indebtedness secured
directly or indirectly by Shopping Center Properties), or (iii)
more than 25% of such person's revenues are derived from the
purchase, development or ownership of Shopping Center Proper-
ties (any such person, a "Shopping Center Company"); provided,
however, that Investor, any Investor Restricted Person or any
SCGI Restricted Person shall be entitled to purchase or other-
wise acquire less than 9% of the equity interest of a Shopping
Center Company only if no Investor, Investor Restricted Person
or SCGI Restricted Person shall be represented on (or have the
right to nominate representatives to) the board of directors or
similar governing body or shall participate in the management,
of such Shopping Center Company.
(c) The provisions of this Section 5.3 shall not
restrict Investor, any Investor Restricted Person or any SCGI
Restricted Person from, directly or indirectly, (w) providing
debt financing for Shopping Center Properties or investing in,
owning or acquiring a mortgage REIT or other person substan-
tially all of whose business consists of making mortgage loans
on Shopping Center Properties and other real estate assets, (x)
in connection with the activities described in clause (w), ac-
quiring or owning any Shopping Center Properties through fore-
closure on mortgages or similar instruments or other realiza-
tion on security, or (y) the ownership of any REIT convertible
debt which is passively held and unaccompanied by representa-
tion on the board of directors or participation in management
and which is held by a person of which none of Investor, any
Investor Restricted Person or any SCGI Restricted Person di-
rectly or indirectly Beneficially Owns 20% or more of the out-
standing economic or voting interest.
(d) Notwithstanding any contrary provision herein,
the provisions of this Section 5.3 shall not go into effect
unless and until the transactions contemplated by the Stock
Purchase Agreement shall have been approved by the holders of
the requisite number of shares of Company Stock at a duly
called and held meeting of shareholders of the Company at which
meeting a quorum is present (such approval, the "Shareholder
Approval").
Section 5.4 Notice to Company. From and after the
Shareholder Approval Date, if any, until the expiration of the
Standstill Period or any Standstill Extension Period, if Inves-
tor wishes to sell pursuant to subsection 5.2(a)(ii)(v), (w) or
(x) any shares of Company Common Stock, Investor shall give the
Company 15 days' prior written notice of such proposed sale,
setting forth the number of shares of Company Common Stock that
Investor 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, Investor
shall also notify the Company if Investor 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 Investor Beneficially Owns any shares
of Company Common Stock, Investor will, and will use its com-
mercially reasonable efforts to cause its 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. It is
understood and agreed that no such policy existed as of the
date of the Stock Purchase Agreement, and that prior to the
adoption or amendment of any such policy to which Investor will
be subject (including
any such policy proposed to be adopted following the date of
the Stock Purchase Agreement and prior to the date hereof, and
to which Investor would become subject by virtue hereof), the
Company will consult with Investor, and will not adopt or amend
any such policy, nor will Investor be subject to any such
policy, without the written consent of Investor, which consent
will not be unreasonably withheld.
Section 5.6 Compliance with Section 5.2 of the
Company Charter. For as long as Investor Beneficially Owns any
shares of Company Common Stock (unless the Standstill Period or
any Standstill Extension Term is terminated by any of the ac-
tions set forth in Section 5.1(a)(iv), (v) or (vi) (or unless
any such action occurs following the termination of the Stand-
still Period or any Standstill Extension Term) or by any other
willful action by the Company which constitutes an Early Termi-
nation Event (or would constitute an Early Termination Event
during the Standstill Period or any Standstill Extension
Term)), Investor and each Investor Restricted Person will, and
Investor will use its reasonable best efforts to cause the SCGI
Restricted Persons to, comply with Section 5.2 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 the 20% Ter-
mination Date, if any, Investor shall use its reasonable best
efforts to not be or become an "investment company" or an en-
tity "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 the third sentence of this Section 5.8, the Com-
pany shall take all actions, including by providing any nec-
essary exemptions from or amendments to (A) any restrictions or
limits contained in Article 5 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) 45% of
the outstanding shares of Company Common Stock 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 45% of the outstanding shares of Company Common
Stock, the Company shall take all actions (including by provid-
ing 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 the 15% Termination Date, 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 5 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 pro-
viding any necessary exemptions from or amendments to (A) the
ownership limits contained in Article 5 of the Company Charter
or (B) any agreement or instrument which governs ownership of
shares of Company Stock by any person, necessary to permit In-
vestor to Beneficially Own up to and including 9.8% of the out-
standing shares of Company Common Stock, but shall not be re-
quired 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. From and after
the Shareholder Approval Date until the 15% Termination Date,
Investor shall annually inform the Company whether Investor be-
lieves, and shall otherwise from time to time, as reasonably
requested by the Company, reasonably cooperate (including by
providing such information and documentation as may be reason-
ably requested by the Company) with the Company to enable the
Company to determine whether, any person 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 ownership at-
tribution rules under 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 interest in Investor.
ARTICLE 6
Limitations on Corporate Actions, Etc.
Section 6.1 Limitations on Corporate Actions. (a)
The Company agrees that from and after the Shareholder Approval
Date, until the earlier of (i) the termination of the Stand-
still Period or any Standstill Extension Term or (ii) the 20%
Termination Date, if any, it will not, and will not permit any
of its Subsidiaries to:
(A) incur 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 obli-
gations issued or assumed as the deferred pur-
chase price of property, conditional sale obli-
gations, 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 60% of the gross book value
of the consolidated book assets of the Company
(excluding any minority interests not convert-
ible into interests in the Company) before de-
preciation and amortization, unless the viola-
tion of such ratio is cured within 30 days of
its occurrence;
(B) cause or permit the sum of (w) stocks,
securities, partnership interests or any similar
investments or instruments of or in any other
Person, (x) assets held other than directly by
the Company, (y) loans made by the Company to a
Subsidiary, or loans made by a Subsidiary to the
Company, and (z) assets managed by Persons other
than employees of the Company (excluding reten-
tion of a third party manager that is desisted
prior to the fifth day immediately preceding the
end of the calendar quarter in which it arises
and provided that any asset managed by a third
party shall be considered a passive asset to be
included in the calculations pursuant to Section
6.1(b)), to, at any time constitute more than
30%, at cost, of the consolidated assets owned
by the Company;
(C) have at any time prior to June 1,
1997, more than 15%, and at all other times,
more than 10%, at cost, of its consolidated as-
sets in property types other than Shopping Cen-
ter Properties or land suitable and intended for
development of Shopping Center Properties; pro-
vided, however, that for purposes of this sub-
section (C) of Section 6.1(a), Shopping Center
Properties shall include any grocery-, drug- or
general merchandise discount-store anchored
shopping center under 350,000 square feet of
leasable area located in the Geographic Region;
(D) in the case of the Company, (1) termi-
nate 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 ac-
tion 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; or
(E) except as permitted or required by any
agreements or commitments existing as of the
date of the Stock Purchase Agreement and dis-
closed to Investor pursuant thereto, own any
interest in any partnership unless the Company
is the sole managing general partner of such
partnership.
(b) from and after Shareholder Approval Date, until
the first date, if any, following the date on which the Remain-
ing Equity Commitment shall have been reduced to zero on which
Investor's ownership of Company Common Stock shall have been
below 20% by value of the actually outstanding shares of Com-
pany Common Stock for a continuous period of 180 days (or if
Investor's ownership of Company Common Stock shall, following
the date on which the Remaining Equity Commitment shall have
been reduced to zero, have fallen below 20% by value of the
actually outstanding shares of Company Common Stock as a result
of a Transfer by Investor of Company Common Stock or a failure
of Investor to exercise its rights under Section 4.2 during the
60 days immediately prior to the expiration of such 180-day
period, if any such rights are exercisable during such period,
to the extent necessary to (and provided that it shall be pos-
sible by such exercise to) raise its ownership of the actually
outstanding Company Common Stock above such 20% threshold, then
until such Transfer or failure to exercise its rights under
Section 4.2, as the case may be), the Company
(i) will not, without the prior written consent of
Investor, either take any action that would cause, or fail
to take any action which failure would cause, (A) the per-
centage of the Company's consolidated gross income that is
considered "passive income" (within the meaning of Section
1296(a)(1) of the Code, and computed using the assumptions
and conventions set forth in Schedule 6.1(c) hereto, to-
gether with such modifications thereto as Investor shall
advise the Company in writing are necessary as a result of
the promulgation of regulations, rulings, or other formal
or informal administrative guidance clarifying existing
law or a change in existing law or interpretations there-
of) to exceed 30%, or (B) the average percentage of the
Company's assets (by value, computed as of the end of ev-
ery calendar quarter) held during any taxable year which
produce passive income or which are held for the produc-
tion of passive income (as such terms are used in Section
1296(a)(2) of the Code and computed using the assumptions
and conventions set forth in Schedule 6.1(c) hereto, to-
gether with such modifications thereto as Investor shall
advise the Company in writing are necessary as a result of
the promulgation of regulations, rulings, or other formal
or informal administrative guidance clarifying existing
law or a change in existing law or interpretations there-
of) to exceed 30%; and
(ii) will otherwise consider in good faith sugges-
tions made by Investor as to the structure of the opera-
tions of the Company and its Subsidiaries in order to per-
mit Investor or any shareholder of Investor to avoid being
classified as a "passive foreign investment company" under
the Code.
The agreements of the Company set forth in subsections (a) and
(b) of this Section 6.1, and Sections 6.3, 6.4 and 6.6 shall be
the "Corporate Action Covenants."
Section 6.2 Provision of Information. For as long
as Investor Beneficially Owns any shares of Company Stock, the
Company will provide to Investor all information and documenta-
tion requested by Investor, and will cooperate with Investor as
requested, as may be necessary for Investor to perform the cal-
culations to be made in connection with and to meet the docu-
mentation requirements pursuant to Sections 1291 through 1297
of the Code, as may be amended from time to time, and any suc-
cessor provisions thereto, and as may otherwise be reasonably
necessary in connection with any other record keeping or re-
porting laws, rules or regulations (including all such informa-
tion, documentation and cooperation as is necessary to enable
Investor to (1) file any Tax Returns it is required to file and
(2) to determine and document its status, income, asset mix and
other relevant items with respect to the Passive Foreign In-
vestment Company provisions of the Code).
Section 6.3 Compliance with Conflicts of Interest
Policy. Promptly following the date hereof, the Company shall,
subject to the reasonable consent and approval of Investor,
adopt policies typical of publicly traded companies relating to
transactions with affiliates and potential conflicts of in-
terest (such policies, together with the Affiliate Arrange-
ments, as modified or amended from time to time with the con-
sent of Investor, collectively, the "Conflict of Interest Poli-
cies"). From and after the date of adoption of such Conflict
of Interest Policies until the 20% Termination Date, (x) the
Company will, and will cause its Subsidiaries to, comply with
and enforce such Conflict of Interest Policies, and (y) Inves-
tor will comply with the Conflict of Interest Policies; pro-
vided, however, that the provisions of this Agreement, the
Stock Purchase Agreement and the Registration Rights Agreement
and the transactions contemplated hereby and thereby shall not
be limited, amended or modified in any way by, and shall govern
in the event of a conflict with, the Conflict of Interest Poli-
cies; provided further that no Conflict of Interest Policy
shall in any way discriminate or differentiate among any Af-
filiates of the Company.
Section 6.4 Maintenance of Affiliate and Joint
Venture Arrangements. From and after the date hereof until the
20% Termination Date, if any, (x) the Company will, and will
cause its Subsidiaries to, comply with, enforce and keep in
effect each of the Affiliate Arrangements, and (y) the Company
will not, and will cause its Subsidiaries not to, (A) modify,
amend or waive any provision contained in any Affiliate Ar-
rangement without the prior written consent of Investor, in its
sole discretion, or (B) materially expand or increase, or per-
mit to be materially expanded or increased, the scope, type or
quantity of activities performed, or transactions entered into,
by Village Common Shopping Center, a Florida limited partner-
ship, Regency Ocean East Partnership, Ltd., a Florida limited
partnership, or RRC Operating Partnership of Georgia, L.P., a
Georgia limited partnership, or (C) enter into new joint ven-
ture, partnership or similar arrangements with third parties,
or (D) directly or indirectly, own, purchase, develop, or oth-
erwise acquire or finance any Shopping Center Property in con-
junction with any Affiliate which is not a wholly owned Subsid-
iary of the Company or otherwise in a joint venture with any
such party, in each case, without the prior written consent of
Investor, in its sole discretion, provided that in the case of
the proposed joint venture arrangement with WLD Enterprises,
Ltd. regarding the Deerfield Beach shopping center, Investor
shall not unreasonably withhold its consent.
Section 6.5 Sales of Assets. From and after the
date hereof until the 15% Termination Date, if any, the Company
will, and will cause its Subsidiaries to, use its reasonable
efforts, consistent with prudent management of the Company's
properties and assets in the interest of the Company's share-
holders, to dispose of properties or assets through tax de-
ferred exchanges which exchanges will defer any capital gains
distributions to shareholders of the Company. In the event it
is expected that any capital gains distributions are to be
made, the Company will endeavor to provide Investor with such
advance notice thereof as may be practicable.
Section 6.6 Investments in Shopping Center Proper-
ties and Purchases of Interests in Shopping Center Companies.
(a) Subject to the provisions of the following sentence, and
excluding transactions which are the subject of paragraph (b)
of this Section, from and after the date hereof until the ear-
lier of (i) the date, if any, on which shareholders of the Com-
pany vote upon and fail to approve the transactions contem-
plated by the Stock Purchase Agreement, and (ii) the 20% Termi-
nation Date, if any, TRG and any other person of which TRG is
the direct or indirect general partner or as to which TRG has
the direct or indirect right or power to elect a majority of
the board of directors or other governing body or otherwise
controls (any such person, a "TRG Restricted Person") shall
not, directly or indirectly, own, purchase, develop or oth-
erwise acquire, directly or indirectly, any Shopping Center
Property. Notwithstanding the foregoing, TRG or any TRG Re-
stricted Person may own, purchase, or otherwise acquire, di-
rectly or indirectly, any Shopping Center Properties if the in-
vestment in the Shopping Center Properties is incidental to an
investment made by TRG or such TRG Restricted Person which in-
vestment is not primarily related to Shopping Center Proper-
ties; it being understood and agreed that any acquisition of
real estate properties in which Shopping Center Properties con-
stitute 30% or less of the purchase price of all of the real
estate properties acquired shall be considered an investment in
which the Shopping Center Properties acquired are incidental to
an investment which is not primarily related to Shopping Center
Properties; provided, however, that if TRG or any TRG Re-
stricted Person determines to make such a permitted investment,
TRG or such TRG Restricted Person shall afford the Company a
period of 20 day after receipt of written notice from TRG de-
scribing the material terms of the proposed investment, in
which to provide TRG or such TRG Restricted Person, as applica-
ble, written notice that it elects to purchase the Shopping
Center Properties constituting a part of such investment (sub-
ject to customary due diligence and other closing conditions);
in the event TRG or such TRG Restricted Person thereafter makes
such investment and the price and other terms are not less fa-
vorable to the Company than those set forth in the notice of
material terms delivered to the Company, the Company shall
promptly acquire the Shopping Center Properties included
therein, at the price allocated to such Shopping Center Proper-
ties in the purchase agreement entered into by TRG or the TRG
Restricted Person, as the case may be, in respect of such ac-
quisition and otherwise on terms substantially similar to the
terms of TRG's or the TRG Restricted Person's acquisition of
such properties; provided, further, that if TRG or a TRG Re-
stricted Person shall have made such a purchase, including the
Shopping Center Properties therein, and if TRG or a TRG Re-
stricted Person should thereafter, but prior to the 20% Ter-
mination Date, determine to sell any Shopping Center Properties
so purchased, TRG or such TRG Restricted Person shall inform
the Company of such fact, and the Company shall have 20 days in
which to give TRG or such TRG Restricted Person written notice
that it desires to purchase such Shopping Center Properties;
such notice shall set forth the terms on which the Company is
prepared to effect such purchase; TRG or such TRG Restricted
Person shall be free to accept such offer, or to otherwise dis-
pose of such Shopping Center Properties, but shall in no event
dispose of such Shopping Center Properties on terms materially
less favorable to TRG or such TRG Restricted Person without
first again affording the Company the opportunity to purchase
such Shopping Center Properties.
(b) From and after the date hereof until the earlier
of (i) the date, if any, on which shareholders of the Company
vote upon and fail to approve the transactions contemplated by
the Stock Purchase Agreement, and (ii) the 20% Termination
Date, if any, TRG and any TRG Restricted Person shall not pur-
chase or otherwise acquire equity securities, or options, war-
rants, calls, purchase rights, subscription rights, conversion
rights, exchange rights or similar rights to purchase or other-
wise acquire equity securities, representing 9% or more of the
equity interest of any person, other than the Company, if such
person is a Shopping Center Company; provided, however, that
TRG or any TRG Restricted Person shall be entitled to purchase
or otherwise acquire less than 9% of the equity interest of a
Shopping Center Company only if no TRG or TRG Restricted Person
shall be represented on (or have the right to nominate repre-
sentatives to) the board of directors or similar governing body
or shall participate in the management, of such Shopping Center
Company.
(c) The provisions of this Section 6.6 shall not
restrict TRG or any TRG Restricted Person from, directly or
indirectly, (w) providing debt financing for Shopping Center
Properties or investing in, owning or acquiring a mortgage REIT
or other person substantially all of whose business consists of
making mortgage loans on Shopping Center Properties and other
real estate assets, (x) in connection with the activities de-
scribed in clause (w), acquiring or owning any Shopping Center
Properties through foreclosure on mortgages or similar instru-
ments or other realization on security, or (y) the ownership of
any REIT convertible debt which is passively held and unac-
companied by representation on the board of directors or par-
ticipation in management and which is held by a person of which
none of TRG or any TRG Restricted Person directly or indirectly
Beneficially Owns 20% or more of the outstanding economic or
voting interest.
(d) Each of the Company and Investor shall be en-
titled to the benefits of the provisions contained in this Sec-
tion 6.6.
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 effec-
tive when one or more counterparts have been signed by each of
the parties and delivered to the other party. Copies of exe-
cuted 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 GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF FLORIDA WITHOUT REFERENCE TO THE CHOICE OF LAW PRIN-
CIPLES THEREOF.
Section 7.3 Entire Agreement. This Agreement (in-
cluding agreements incorporated herein) and the Schedules and
Exhibits hereto contain the entire agreement between the par-
ties with respect to the subject matter hereof and there are no
agreements, understandings, representations or warranties be-
tween the parties other than those set forth or referred to
herein. This Agreement is not intended to confer upon any per-
son not a party hereto (and their successors and assigns) any
rights or remedies hereunder.
Section 7.4 Expenses. Except as set forth in the
Stock Purchase Agreement, all legal and other costs and ex-
penses incurred in connection with this Agreement and the tran-
sactions contemplated hereby shall be paid by the party incur-
ring such costs and expenses. Without limiting the foregoing,
the Company shall pay all costs and expenses incurred in con-
nection 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 com-
munications hereunder shall be sufficiently given for all pur-
poses 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 transmis-
sion service to the appropriate address or number as set forth
below. Notices to the Company shall be addressed to:
Regency Realty Corporation
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
Attention: Martin E. Stein, Jr.
Telecopy Number: (904) 634-3428
with a copy to:
Foley & Lardner
Greenleaf Building
200 Laura Street
Jacksonville, Florida 32202
Attention: Charles E. Commander III, Esq.
Telecopy Number: (904) 359-8700
or at such other address and to the attention of such other
person as the Company may designate by written notice to Inves-
tor. Notices to Investor shall be addressed to:
Security Capital Holdings S.A.
69, route d'Esch
L-2953 Luxembourg
Attention: Paul E. Szurek
Telecopy Number: (352) 4590-3331
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopy Number: (212) 403-2000
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. 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 any other person who would
satisfy the criteria in the definition of "Investor" which
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 Sec-
tions or Articles contained herein mean Sections or Articles of
this Agreement unless otherwise stated.
Section 7.8 Amendments and Waivers. This Agree-
ment may not be modified or amended except by an instrument or
instruments in writing signed by the party against whom en-
forcement of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing, waive com-
pliance by another party hereto with any term or provision
hereof on the part of such other party hereto to be performed
or complied with. The waiver by any party hereto of a breach
of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.
Section 7.9 Interpretation; Absence of Presump-
tion. (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 "here-
with" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (in-
cluding all of the Schedules and Exhibits hereto) and not to
any particular provision of this Agreement, and Article, Sec-
tion, paragraph, Schedule and Exhibit references are to the
Articles, Sections, paragraphs, Schedules and Exhibits to this
Agreement unless otherwise specified, (iii) the word "includ-
ing" 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 interpre-
tation 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 affect-
ing 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. Investor agrees that
all information provided to Investor or any of its representa-
tives pursuant to this Agreement shall be kept confidential,
and Investor shall not (x) disclose such information to any
persons other than the directors, officers, employees, finan-
cial advisors, legal advisors, accountants, consultants and
affiliates of Investor who reasonably need to have access to
the confidential information and who are advised of the confi-
dential nature of such information or (y) use such information
in a manner which would be detrimental to the Company; pro-
vided, however, the foregoing obligation of Investor shall not
(a) relate to any information that (i) is or becomes generally
available other than as a result of unauthorized disclosure by
Investor or by persons to whom Investor has made such informa-
tion available, (ii) is or becomes available to Investor on a
non-confidential basis from a third party that is not, to
Investor's knowledge, bound by any other confidentiality agree-
ment with the Company, or (b) prohibit disclosure of any infor-
mation 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 the 20% Termination Date, 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.
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.
REGENCY REALTY CORPORATION
By:
Name: Martin E. Stein, Jr.
Title: President
SECURITY CAPITAL HOLDINGS S.A.
By:
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL U.S. REALTY
By:
Name: Paul E. Szurek
Title: Managing Director
THE REGENCY GROUP, INC.
By:
Name: Martin E. Stein, Jr.
Title:
EXHIBIT E
PROPOSED AMENDMENT TO COMPANY CHARTER
The Amended and Restated Articles of Incorporation of
the Company are hereby amended by deleting Article 5 thereof in
its entirety, and inserting in lieu thereof the following:
"ARTICLE 5
REIT PROVISIONS
Section 5.1 Definitions. For the purposes of this Ar-
ticle 5, the following terms shall have the following meanings:
(a) "Acquire" shall mean the acquisition of Benefi-
cial Ownership of shares of Capital Stock by any means
including, without limitation, acquisition pursuant to the
exercise of any option, warrant, pledge or other security
interest or similar right to acquire shares, but shall not
include the acquisition of any such rights, unless, as a
result, the acquirer would be considered a Beneficial
Owner as defined below. The term "Acquisition" shall have
the correlative meaning.
(b) "Actual Owner" shall mean, with respect to any
Capital Stock, that Person who is required to include in
its gross income any dividends paid with respect to such
Capital Stock.
(c) "Beneficial Ownership" shall mean ownership of
Capital Stock by a Person who would be treated as an owner
of such shares of Capital Stock, either directly or
indirectly, under Section 542(a)(2) of the Code, taking
into account for this purpose (i) constructive ownership
determined under Section 544 of the Code, as modified by
Section 856(h)(1)(B) of the Code (except where expressly
provided otherwise); and (ii) any future amendment to the
Code which has the effect of modifying the ownership rules
under Section 542(a)(2) of the Code. The terms "Benefi-
cial Owner," "Beneficially Owns" and "Beneficially Owned"
shall have the correlative meanings.
(d) "Code" shall mean the Internal Revenue Code of
1986, as amended. In the event of any future amendments
to the Code involving the renumbering of Code sections,
the Board of Directors may, in its sole discretion, deter-
mine that any reference to a Code section herein shall
mean the successor Code section pursuant to such amend-
ment.
(e) "Constructive Ownership" shall mean ownership of
Capital Stock by a Person who would be treated as an owner
of such Capital Stock, either directly or constructively,
through the application of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner', "Constructively Owns" and "Construc-
tively Owned" shall have the correlative meanings.
(f) "Existing Holder" shall mean any of The Regency
Group, Inc., MEP, Ltd., and The Regency Group II, Ltd.
(and any Person who is a Beneficial Owner of Capital Stock
as a result of attribution of the Beneficial Ownership
from any of the Persons previously identified) who at the
opening of business on the date after the Initial Public
Offering was the Beneficial Owner of Capital Stock in ex-
cess of the Ownership Limit; and any Person who Acquires
Beneficial Ownership from another Existing Holder, except
by Acquisition on the open market, so long as, but only so
long as, such Person Beneficially Owns Capital Stock in
excess of the Ownership Limit.
(g) "Existing Holder Limit" for an Existing Holder
shall mean, initially, the percentage by value of the out-
standing Capital Stock Beneficially Owned by such Existing
Holder at the opening of business on the date after the
Initial Public Offering, and after any adjustment pursuant
to Section 5.8 hereof, shall mean such percentage of the
outstanding Capital Stock as so adjusted; provided, how-
ever, that the Existing Holder Limit shall not be a per-
centage which is less than the Ownership Limit or in
excess of 9.8%. Beginning with the date after the Initial
Public Offering, the Secretary of the Corporation shall
maintain and, upon request, make available to each
Existing Holder, a schedule which sets forth the then
current Existing Holder Limits for each Existing Holder.
(h) "Initial Public Offering" means the closing of
the sale of shares of Common Stock pursuant to the
Corporation's first effective registration statement for
such Common Stock filed under the Securities Act of 1933,
as amended.
(i) "Non-U.S. Person" shall mean any Person who is
not (i) a citizen or resident of the United States, (ii) a
partnership created or organized in the United States or
under the laws of the United States or any state therein
(including the District of Columbia), (iii) a corporation
created or organized in the United States or under the
laws of the United States or any state therein (including
the District of Columbia), or (iv) any estate or trust
(other than a foreign estate or foreign trust, within the
meaning of Section 7701(a)(31) of the Code).
(j) "Ownership Limit" shall initially mean 7% by
value of the outstanding Capital Stock of the Corporation,
and after any adjustment as set forth in Section 5.9,
shall mean such greater percentage (but not greater than
9.8%) by value of the outstanding Capital Stock as so ad-
justed.
(k) "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified
under Section 401(a) or 501(c)(17) of the Code), a portion
of a trust permanently set aside for or to be used exclu-
sively for the purposes described in Section 642(c) of the
Code, association, private foundation within the meaning
of Section 509(a) of the Code, joint stock company or
other entity, and also includes a group as that term is
used for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended; but does not include an
underwriter retained by the Company which participates in
a public offering of the Capital Stock for a period of 90
days following the purchase by such underwriter of the
Capital Stock, provided that ownership of Capital Stock by
such underwriter would not result in the Corporation being
"closely held" within the meaning of Section 856(h) of the
Code and would not otherwise result in the Corporation
failing to quality as a REIT.
(l) "REIT" shall mean a real estate investment trust
under Section 856 of the Code.
(m) "Redemption Price" shall mean the lower of (i)
the price paid by the transferee from whom shares are be-
ing redeemed and (ii) the average of the last reported
sales price, regular way, on the New York Stock Exchange
of the relevant class of Capital Stock on the ten trading
days immediately preceding the date fixed for redemption
by the Board of Directors, or if the relevant class of
Capital Stock is not then traded on the New York Stock
Exchange, the average of the last reported sales prices,
regular way, of such class of Capital Stock (or, if sales
prices, regular way, are not reported, the average of the
closing bid and asked prices) on the ten trading days im-
mediately preceding the relevant date as reported on any
exchange or quotation system over which the Capital Stock
may be traded, or if such class of Capital Stock is not
then traded over any exchange or quotation system, then
the price determined in good faith by the Board of Direc-
tors of the Corporation as the fair market value of such
class of Capital Stock on the relevant date.
(n) "Related Tenant Owner" shall mean any Construc-
tive Owner who also owns, directly or indirectly, an in-
terest in a Tenant, which interest is equal to or greater
than (i) 10% of the combined voting power of all classes
of stock of such Tenant, (ii) 10% of the total number of
shares of all classes of stock of such Tenant, or (iii) if
such Tenant is not a corporation, 10% of the assets or net
profits of such Tenant.
(o) "Related Tenant Limit" shall mean 9.8% by value
of the outstanding Capital Stock of the Corporation.
(p) "Restriction Termination Date" shall mean the
first day after the date of the Initial Public Offering on
which the Corporation determines pursuant to Section 5.13
that it is no longer in the best interest of the Corpora-
tion to attempt to, or continue to, qualify as a REIT.
(q) "Special Shareholder" shall mean any of (i)
Security Capital U.S. Realty, Security Capital Holdings
S.A. and any Affiliate (as such term is defined in the
Stockholders Agreement) of Security Capital U.S. Realty or
Security Capital Holdings S.A., (ii) any Investor (as such
term is defined in Section 5.2 of the Stockholders
Agreement), (iii) any bona fide financial institution to
whom Capital Stock is Transferred in connection with any
bona fide indebtedness of any Investor or any Person
previously identified, (iv) any Person who is considered a
Beneficial Owner of Capital Stock as a result of the
attribution of Beneficial Ownership from any of the
Persons previously identified and (v) any one or more
Persons who Acquire Beneficial Ownership from a Special
Shareholder, except by Acquisition on the open market.
(r) "Special Shareholder Limit" for a Special Share-
holder shall mean, initially, 45% in the aggregate by
value of the outstanding shares of Capital Stock of the
Corporation and after any adjustment pursuant to Section
5.8 shall mean the percentage of the outstanding Capital
Stock as so adjusted; provided, however, that if any
Person and its Affiliates (taken as a whole), other than
the Special Shareholder, shall directly or indirectly own
in the aggregate more than 45% by value of the outstanding
shares of Capital Stock of the Corporation, the definition
of "Special Shareholder Limit" shall be revised in
accordance with Section 5.8 of the Stockholders Agreement.
Notwithstanding the foregoing provisions of this
definition, if, as the result of any Special Shareholder's
ownership (taking into account for this purpose construc-
tive ownership under Section 544 of the Code, as modified
by Section 856(h)(1)(B) of the Code) of shares of Capital
Stock, any Person who is an individual within the meaning
of Section 542(a)(2) of the Code (taking into account the
ownership attribution rules under Section 544 of the Code,
as modified by Section 856(h) of the Code) and who is the
Beneficial Owner of any interest in a Special Shareholder
would be considered to Beneficially Own more than 9.8% of
the outstanding shares of Capital Stock, then unless such
individual reduces his or her interest in the Special
Shareholder so that such Person no longer Beneficially
Owns more than 9.8% of the outstanding shares of Capital
Stock, the Special Shareholder Limit shall be reduced to
such percentage as would result in such Person not being
considered to Beneficially Own more than 9.8% of the
outstanding Shares of Capital Stock. Notwithstanding any-
thing contained herein to the contrary, in no event shall
the Special Shareholder Limit be reduced below the Owner-
ship Limit. At the request of the Special Shareholders,
the Secretary of the Corporation shall maintain and, upon
request, make available to each Special Shareholder a
schedule which sets forth the then current Special
Shareholder Limits for each Special Shareholder.
(s) "Stock Purchase Agreement" shall mean that Stock
Purchase Agreement dated as of June __, 1996, by and among
the Corporation, Security Capital Holdings S.A., and Secu-
rity Capital U.S. Realty, as the same may be amended from
time to time.
(t) "Stockholders Agreement" shall mean that Stock-
holders Agreement dated as of , 1996, by and
among the Corporation, Security Capital Holdings S.A., and
Security Capital U.S. Realty, as the same may be amended
from time to time.
(u) "Tenant" shall mean any tenant of (i) the Corpo-
ration, (ii) a subsidiary of the Corporation which is
deemed to be a "qualified REIT subsidiary" under Section
856(i)(2) of the Code, or (iii) a partnership in which the
Corporation or one or more of its qualified REIT subsid-
iaries is a partner.
(v) "Transfer" shall mean any sale, transfer, gift,
assignment, devise, or other disposition of Capital Stock
or the right to vote or receive dividends on Capital Stock
(including (i) the granting of any option or entering into
any agreement for the sale, transfer or other disposition
of Capital Stock or the right to vote or receive dividends
on the Capital Stock or (ii) the sale, transfer, assign-
ment or other disposition or grant of any securities or
rights convertible or exchangeable for Capital Stock),
whether voluntarily or involuntarily, whether of record or
Beneficially, and whether by operation of law or other-
wise; provided, however, that any bona fide pledge of
Capital Stock shall not be deemed a Transfer until such
time as the pledgee effects an actual change in ownership
of the pledged shares of Capital Stock.
Section 5.2. Restrictions on Transfer. Except as pro-
vided in Section 5.11 and Section 5.16, during the period com-
mencing at the Initial Public Offering:
(a) No Person (other than an Existing Holder or a
Special Shareholder) shall Beneficially Own Capital Stock
in excess of the Ownership Limit, no Existing Holder shall
Beneficially Own Capital Stock in excess of the Existing
Holder Limit for such Existing Holder and no Special
Shareholder shall Beneficially Own Capital Stock in excess
of the Special Shareholder Limit.
(b) No Person shall Constructively Own Capital Stock
in excess of the Related Tenant Limit for more than thirty
(30) days following the date such Person becomes a Related
Tenant Owner.
(c) Any Transfer that, if effective, would result in
any Person (other than an Existing Holder or a Special
Shareholder) Beneficially Owning Capital Stock in excess
of the Ownership Limit shall be void ab initio as to the
Transfer of such Capital Stock which would be otherwise
Beneficially Owned by such Person in excess of the Owner-
ship Limit, and the intended transferee shall Acquire no
rights in such Capital Stock.
(d) Any Transfer that, if effective, would result in
any Existing Holder Beneficially Owning Capital Stock in
excess of the applicable Existing Holder Limit shall be
void ab initio as to the Transfer of such Capital Stock
which would be otherwise Beneficially Owned by such Exist-
ing Holder in excess of the applicable Existing Holder
Limit, and such Existing Holder shall Acquire no rights in
such Capital Stock.
(e) Any Transfer that, if effective, would result in
any Special Shareholder Beneficially Owning Capital Stock
in excess of the applicable Special Shareholder Limit
shall be void ab initio as to the Transfer of such Capital
Stock which would be otherwise Beneficially Owned by such
Special Shareholder in excess of the applicable Special
Shareholder Limit, and such Special Shareholder shall Ac-
quire no rights in such Capital Stock.
(f) Any Transfer that, if effective, would result in
any Related Tenant Owner Constructively Owning Capital
Stock in excess of the Related Tenant Limit shall be void
ab initio as to the Transfer of such Capital Stock which
would be otherwise Constructively Owned by such Related
Tenant Owner in excess of the Related Tenant Limit, and
the intended transferee shall Acquire no rights in such
Capital Stock.
(g) Any Transfer that, if effective, would result in
the Capital Stock being beneficially owned by less than
100 Persons (within the meaning of Section 856(a)(5) of
the Code) shall be void ab initio as to the Transfer of
such Capital Stock which would be otherwise beneficially
owned by the transferee, and the intended transferee shall
Acquire no rights in such Capital Stock.
(h) Any Transfer that, if effective, would result in
the Corporation being "closely held" within the meaning of
Section 856(h) of the Code shall be void ab initio as to
the portion of any Transfer of the Capital Stock which
would cause the Corporation to be "closely held" within
the meaning of Section 856(h) of the Code, and the in-
tended transferee shall Acquire no rights in such Capital
Stock.
(i) Any other Transfer that, if effective, would
result in the disqualification of the Corporation as a
REIT by virtue of actual, Beneficial or Constructive Own-
ership of Capital Stock shall be void ab initio as to such
portion of the Transfer resulting in the disqualification,
and the intended transferee shall Acquire no rights in
such Capital Stock.
Section 5.3. Remedies for Breach.
(a) If the Board of Directors or a committee thereof
shall at any time determine in good faith that a Transfer has
taken place that falls within the scope of Section 5.2 or that
a Person intends to Acquire Beneficial Ownership of any shares
of the Corporation that would result in a violation of Section
5.2 (whether or not such violation is intended), the Board of
Directors or a committee thereof shall take such action as it
or they deem advisable to refuse to give effect to or to pre-
vent such Transfer, including, but not limited to, refusing to
give effect to such Transfer on the books of the Corporation or
instituting proceedings to enjoin such Transfer, subject, how-
ever, in all cases to the provisions of Section 5.16.
(b) Without limitation to Sections 5.2 and 5.3(a),
any purported transferee of shares Acquired in violation of
Section 5.2 and any Person retaining shares in violation of
Section 5.2(b) shall be deemed to have acted as agent on behalf
of the Corporation in holding those shares Acquired or retained
in violation of Section 5.2 and shall be deemed to hold such
shares in trust on behalf of and for the benefit of the Corpo-
ration. Such shares shall be deemed a separate class of stock
until such time as the shares are sold or redeemed as provided
in Section 5.3(c). The holder shall have no right to receive
dividends or other distributions with respect to such shares,
and shall have no right to vote such shares. Such holder shall
have no claim, cause of action or any other recourse whatsoever
against any transferor of shares Acquired in violation of Sec-
tion 5.2. The holder's sole right with respect to such shares
shall be to receive, at the Corporation's sole and absolute
discretion, either (i) consideration for such shares upon the
resale of the shares as directed by the Corporation pursuant to
Section 5.3(c) or (ii) the Redemption Price pursuant to Section
5.3(c). Any distribution by the Corporation in respect of such
shares Acquired or retained in violation of Section 5.2 shall
be repaid to the Corporation upon demand.
(c) The Board of Directors shall, within six months
after receiving notice of a Transfer or Acquisition that
violates Section 5.2 or a retention of shares in violation of
Section 5.2(b), either (in its sole and absolute discretion,
subject to the requirements of Florida law applicable to
redemption) (i) direct the holder of such shares to sell all
shares held in trust for the Corporation pursuant to Section
5.3(b) for cash in such manner as the Board of Directors
directs or (ii) redeem such shares for the Redemption Price in
cash on such date within such six month period as the Board of
Directors may determine. If the Board of Directors directs the
holder to sell the shares, the holder shall receive such
proceeds as the trustee for the Corporation and pay the
Corporation out of the proceeds of such sale (i) all expenses
incurred by the Corporation in connection with such sale, plus
(ii) any remaining amount of such proceeds that exceeds the
amount paid by the holder for the shares, and the holder shall
be entitled to retain only the amount of such proceeds in
excess of the amount required to be paid to the Corporation.
Section 5.4. Notice of Restricted Transfer. Any Person
who Acquires, attempts or intends to Acquire, or retains shares
in violation of Section 5.2 shall immediately give written no-
tice to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may re-
quest in order to determine the effect, if any, of such Trans-
fer, attempted or intended Transfer, or retention, on the
Corporation's status as a REIT.
Section 5.5. Owners Required to Provide Information.
From the date of the Initial Public Offering and prior to the
Restriction Termination Date:
(a) Every shareholder of record of more than 5% by
value (or such lower percentage as required by the Code or
the regulations promulgated thereunder) of the outstanding
Capital Stock of the Corporation shall, within 30 days
after December 31 of each year, give written notice to the
Corporation stating the name and address of such record
shareholder, the number and class of shares of Capital
Stock Beneficially Owned by it, and a description of how
such shares are held; provided that a shareholder of
record who holds outstanding Capital Stock of the Corpora-
tion as nominee for another Person, which Person is re-
quired to include in its gross income the dividends re-
ceived on such Capital Stock (an "Actual Owner"), shall
give written notice to the Corporation stating the name
and address of such Actual Owner and the number and class
of shares of such Actual Owner with respect to which the
shareholder of record is nominee. Each such shareholder
of record shall provide to the Corporation such additional
information as the Corporation may request in order to
determine the effect, if any, of such Beneficial Ownership
on the Corporation's status as a REIT.
(b) Every Actual Owner of more than 5% by value (or
such lower percentage as required by the Code or Regula-
tions promulgated thereunder) of the outstanding Capital
Stock of the Corporation who is not a shareholder of
record of the Corporation, shall within 30 days after De-
cember 31 of each year, give written notice to the Corpo-
ration stating the name and address of such Actual Owner,
the number and class of shares Beneficially Owned, and a
description of how such shares are held.
(c) Each Person who is a Beneficial Owner of Capital
Stock and each Person (including the shareholder of
record) who is holding Capital Stock for a Beneficial
Owner shall provide to the Corporation such information as
the Corporation may request, in good faith, in order to
determine the Corporation's status as a REIT.
(d) Nothing in this Section 5.5 or any request pur-
suant hereto shall be deemed to waive any limitation in
Section 5.2.
Section 5.6. Remedies Not Limited. Except as provided in
Section 5.15, nothing contained in this Article shall limit the
authority of the Board of Directors to take such other action
as it deems necessary or advisable to protect the Corporation
and the interests of its shareholders in preserving the
Corporation's status as a REIT.
Section 5.7. Ambiguity. In the case of an ambiguity in
the application of any of the provisions of this Article 5,
including without limitation any definition contained in Sec-
tion 5.1 and any determination of Beneficial Ownership, the
Board of Directors in its sole discretion shall have the power
to determine the application of the provisions of this Article
5 with respect to any situation based on the facts known to it.
Section 5.8. Modification of Existing Holder Limits and
Special Shareholder Limits. Subject to the provisions of Sec-
tion 5.10, the Existing Holder Limits may or shall, as provided
below, be modified as follows:
(a) Any Existing Holder or Special Shareholder may
Transfer Capital Stock to another Person, and, so long as
such Transfer is not on the open market, any such Transfer
will decrease the Existing Holder Limit or Special Share-
holder Limit, as applicable, for such transferor (but not
below the Ownership Limit) and increase the Existing
Holder Limit or Special Shareholder Limit, as applicable,
for such transferee by the percentage of the outstanding
Capital Stock so transferred. The transferor Existing
Holder or Special Shareholder, as applicable, shall give
the Board of Directors of the Corporation prompt written
notice of any such transfer. Any Transfer by an Existing
Holder or Special Shareholder on the open market shall
neither reduce its Existing Holder Limit or Special
Shareholder Limit, as applicable, nor increase the
Ownership Limit, Existing Holder Limit or Special Share-
holder Limit of the transferee.
(b) Any grant of Capital Stock or a stock option
pursuant to any benefit plan for directors or employees
shall increase the Existing Holder Limit or Special
Shareholder Limit for the affected Existing Holder or Spe-
cial Shareholder, as the case may be, to the maximum ex-
tent possible under Section 5.10 to permit the Beneficial
Ownership of the Capital Stock granted or issuable under
such employee benefit plan.
(c) The Board of Directors may reduce the Existing
Holder Limit of any Existing Holder, with the written con-
sent of such Existing Holder, after any Transfer permitted
in this Article 5 by such Existing Holder on the open mar-
ket.
(d) Any Capital Stock issued to an Existing Holder
or Special Shareholder pursuant to a dividend reinvestment
plan adopted by the Corporation shall increase the Exist-
ing Holder Limit or Special Shareholder Limit, as the case
may be, for the Existing Holder or Special Shareholder to
the maximum extent possible under Section 5.10 to permit
the Beneficial Ownership of such Capital Stock.
(e) Any Capital Stock issued to an Existing Holder
or Special Shareholder in exchange for the contribution or
sale to the Corporation of real property, including Capi-
tal Stock issued pursuant to an "earn-out" provision in
connection with any such sale, shall increase the Existing
Holder Limit or Special Shareholder Limit, as the case may
be, for the Existing Holder or Special Shareholder to the
maximum extent possible under Section 5.10 to permit the
Beneficial Ownership of such Capital Stock.
(f) The Special Shareholder Limit shall be in-
creased, from time to time, whenever there is an increase
in Special Shareholders' percentage ownership (taking into
account for this purpose constructive ownership under
Section 544 of the Code, as modified by Section
856(h)(1)(B) of the Code) of the Capital Stock (or any
other capital stock) of the Corporation due to any event
other than the purchase of Capital Stock (or any other
capital stock) of the Corporation by a Special Share-
holder, by an amount equal to such percentage increase
multiplied by the Special Shareholder Limit.
(g) The Board of Directors may reduce the Special
Shareholder Limit for any Special Shareholder and the Ex-
isting Holder Limit for any Existing Holder, as ap-
plicable, after the lapse (without exercise) of an option
described in Clause (b) of this Section 5.8 by the per-
centage of Capital Stock that the option, if exercised,
would have represented, but in either case no Existing
Holder Limit or Special Shareholder Limit shall be reduced
to a percentage which is less than the Ownership Limit.
Section 5.9. Modification of Ownership Limit. Subject to
the limitations provided in Section 5.10, the Board of Direc-
tors may from time to time increase or decrease the Ownership
Limit; provided, however, that any decrease may only be made
prospectively as to subsequent holders (other than a decrease
as a result of a retroactive change in existing law that would
require a decrease to retain REIT status, in which case such
decrease shall be effective immediately).
Section 5.10. Limitations on Modifications. Notwith-
standing any other provision of this Article 5:
(a) Neither the Ownership Limit, the Special Share-
holder Limit nor any Existing Holder Limit may be in-
creased if, after giving effect to such increase, five
Persons who are considered individuals pursuant to Section
542(a)(2) of the Code (taking into account all of the then
Existing Holders and Special Shareholders) could
Beneficially Own, in the aggregate, more than 49.5% by
value of the outstanding Capital Stock.
(b) Prior to the modification of any Existing Holder
Limit or Ownership Limit pursuant to Section 5.8 or 5.9,
the Board of Directors of the Corporation may require such
opinions of counsel, affidavits, undertakings or agree-
ments as it may deem necessary or advisable in order to
determine or insure the Corporation's status as a REIT.
(c) No Existing Holder Limit or Special Shareholder
Limit may be a percentage which is less than the Ownership
Limit.
(d) The Ownership Limit may not be increased to a
percentage which is greater than 9.8%.
Section 5.11. Exceptions. The Board of Directors may,
upon receipt of either a certified copy of a ruling of the In-
ternal Revenue Service, an opinion of counsel satisfactory to
the Board of Directors or such other evidence as the Board of
Directors deems appropriate, but shall in no case be required
to, exempt a Person (the "Exempted Holder") from the Ownership
Limit, the Special Shareholder Limit, the Existing Holder Limit
or the Related Tenant Limit, as the case may be, if the ruling
or opinion concludes or the other evidence shows (A) that no
Person who is an individual as defined in Section 542(a)(2) of
the Code will, as the result of the ownership of the shares by
the Exempted Holder, be considered to have Beneficial Ownership
of an amount of Capital Stock that will violate the Ownership
Limit, the Special Shareholder Limit or the applicable Existing
Holder Limit, as the case may be, or (B) in the case of an
exception of a Person from the Related Tenant Limit that the
exemption from the Related Tenant Limit would not cause the
Corporation to fail to qualify as a REIT. The Board of
Directors may condition its granting of a waiver on the
Exempted Holder's agreeing to such terms and conditions as the
Board of Directors determines to be appropriate in the
circumstances.
Section 5.12. Legend. All certificates representing
shares of Capital Stock of the Corporation shall bear a legend
referencing the restrictions on ownership and transfer as set
forth in these Articles. The form and content of such legend
shall be determined by the Board of Directors.
Section 5.13. Termination of REIT Status. The Board of
Directors may revoke the Corporation's election of REIT status
as provided in Section 856(g)(2) of the Code if, in its discre-
tion, the qualification of the Corporation as a REIT is no
longer in the best interests of the Corporation. Notwithstand-
ing any such revocation or other termination of REIT status,
the provisions of this Article 5 shall remain in effect unless
amended pursuant to the provisions of Article 10.
Section 5.14. Certain Transfers to Non-U.S. Persons Void.
Any Transfer of shares of Capital Stock of the Corporation to
any Person (other than a Special Shareholder) that results in
the fair market value of the shares of Capital Stock of the
Corporation owned directly and indirectly by Non-U.S. Persons
to comprise 50% or more of the fair market value of the issued
and outstanding shares of Capital Stock of the Corporation (de-
termined, until the 15% Termination Date (as defined in the
Stockholders Agreement), if any, by assuming that the Special
Shareholders are Non-U.S. Persons, and own a percentage of the
outstanding shares of Capital Stock of the Corporation (by
value) equal to 45%), shall be void ab initio to the fullest
extent permitted under applicable law and the intended trans-
feree shall be deemed never to have had an interest therein.
If the foregoing provision is determined to be void or invalid
by virtue of any legal decision, statute, rule or regulation,
then the shares held or purported to be held by the transferee
shall, automatically and without the necessity of any action by
the Board of Directors or otherwise, (i) be prohibited from
being voted at any time such securities result in the fair mar-
ket value of the shares of Capital Stock of the Corporation
owned directly and indirectly by Non-U.S. Persons to comprise
50% or more of the fair market value of the issued and
outstanding shares of Capital Stock of the Corporation (de-
termined, until the 15% Termination Date, if any, assuming that
the Special Shareholders are Non-U.S. Persons, and own a
percentage of the outstanding shares of capital stock of the
Corporation (by value) equal to 45%), (ii) not be entitled to
dividends with respect thereto, (iii) be considered held in
trust by the transferee for the benefit of the Corporation and
shall be subject to the provisions of Section 5.3(c) as if such
shares of Capital Stock were the subject of a Transfer that
violates Section 5.2, and (iv) not be considered outstanding
for the purpose of determining a quorum at any meeting of
shareholders.
Section 5.15. Severability. If any provision of this
Article or any application of any such provision is determined
to be invalid by any federal or state court having jurisdiction
over the issues, the validity of the remaining provisions shall
not be affected and the application of such provisions shall be
affected only to the extent necessary to comply with the deter-
mination of such court.
Section 5.16. New York Stock Exchange Transactions.
Nothing in this Article 5 shall preclude the settlement of any
transaction entered into through the facilities of the New York
Stock Exchange."
EXHIBIT 3
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) of Regulation 13D-G of the
Securities Exchange Act of 1934, the persons or entities below
agree to the joint filing on behalf of each of them of this
Statement on Schedule 13D (including any and all amendments
thereto) with respect to the Common Stock of Regency Realty Cor-
poration, and further agree that this Joint Filing Agreement be
included as an Exhibit to such joint filings. In evidence
thereof the undersigned, being duly authorized, hereby execute
this Agreement this 21st day of June, 1996.
SECURITY CAPITAL U.S. REALTY
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
EXHIBIT 4
FACILITY AGREEMENT
DATED JUNE 12, 1996
U.S.$ 200,000,000
REVOLVING CREDIT FACILITY
FOR
SECURITY CAPITAL HOLDINGS S.A.
AS BORROWER
AND
SECURITY CAPITAL U.S. REALTY
AS GUARANTOR
AND
COMMERZBANK AKTIENGESELLSCHAFT
AS ARRANGER
AND
COMMERZBANK INTERNATIONAL S.A.
AS ADMINISTRATIVE AGENT
AND
COMMERZBANK AKTIENGESELLSCHAFT
AS COLLATERAL AGENT
ALLEN & OVERY
NEW YORK
This FACILITY AGREEMENT is dated June 12, 1996 and made BETWEEN:
(1) SECURITY CAPITAL HOLDINGS S.A., a company incorporated in
Luxembourg with a registered office located at 69, route d'
Esch, L-1470 Luxembourg (the "BORROWER");
(2) SECURITY CAPITAL U.S. REALTY, a company incorporated in Lux-
embourg with a registered office located at 69, route d'
Esch, L-1470 Luxembourg (the "GUARANTOR");
(3) COMMERZBANK AKTIENGESELLSCHAFT New York branch, as arranger
(in this capacity the "ARRANGER");
(4) THE FINANCIAL INSTITUTIONS listed in Schedule 1 (the "LEND-
ERS");
(5) COMMERZBANK INTERNATIONAL S.A. as administrative agent (in
this capacity the "ADMINISTRATIVE AGENT"); and
(6) COMMERZBANK AKTIENGESELLSCHAFT New York branch, as col-
lateral agent (in this capacity the "COLLATERAL AGENT").
1. INTERPRETATION
1.1 TERMS DEFINED
In this Agreement:
"ADVANCE"
means an advance made or to be made by a Lender under the
Facility and includes the Term Advances.
"AFFILIATE"
in relation to a person, means any Subsidiary or holding
company of that person, and any other Subsidiary of that
holding company.
"AFFILIATED LENDER"
in relation to a Lender, means any other Lender which is an
Affiliate of the Lender.
"AGENT"
means the Administrative Agent or the Collateral Agent.
"ANNIVERSARY"
means, in any year, the anniversary of the Signing Date be-
ing June .
2
"APPROVED JURISDICTION"
means any State of the United States and such other juris-
dictions as the Borrower and the Administrative Agent may
agree in writing.
"BASE RATE"
means, as of any date, the rate determined by the Adminis-
trative Agent to be the higher of (a) the Prime Rate and (b)
the aggregate of the Federal Funds Rate on that date plus
0.50 per cent. per annum.
"BASE RATE ADVANCE"
means an Advance in respect of which the Borrower has
elected interest be calculated by reference to the Base
Rate.
"BORROWING BASE"
means, at any time, the amount determined by the Adminis-
trative Agent on the basis of the most recent Compliance
Certificate and/or the most recent Borrowing Base Certifi-
cate to be 35 per cent. of the aggregate of the Market Value
of all Qualifying Collateral which is included in the Col-
lateral at that time and which has been provided as Col-
lateral in accordance with Section 4 of the Master Col-
lateral Agreement and in respect of which the relevant Col-
lateral Perfection Procedures have been completed PROVIDED
THAT Qualifying Collateral comprising SCG Securities and any
other Qualifying Security issued by any company in which SCG
is directly or indirectly the principal shareholder shall be
deemed not to exceed 10 per cent. of such aggregate Market
Value and the Borrowing Base shall be computed accordingly.
"BORROWING BASE CERTIFICATE"
means a certificate substantially in the form set out in
Schedule 2 duly executed by a Managing Director or Financial
Director of each of the Borrower and the Guarantor.
"BORROWER SUBORDINATION AGREEMENT"
means an agreement between the Borrower and the Guarantor
substantially in the form of Exhibit D to the Master Col-
lateral Agreement.
"BUSINESS DAY"
means a day (other than a Saturday or a Sunday) on which
banks are open for business in each of London and New York
City and Luxembourg.
3
"CASH EQUIVALENT INVESTMENT"
means at any time cash and any evidence of indebtedness is-
sued or guaranteed by the Government of the United States of
America.
"CODE"
means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regu-
lations thereunder, in each case as in effect from time to
time. Reference to sections of the Code shall be construed
to also refer to any successor sections.
"COLLATERAL"
has the meaning given to it in the Master Collateral Agree-
ment.
"COLLATERAL PERFECTION PROCEDURES"
means the procedures set out in Section 4 of the Master Col-
lateral Agreement and includes:
(a) in relation to any item of Collateral, all other ac-
tions and things as are necessary or desirable in the
reasonable opinion of the Collateral Agent as the Col-
lateral Agent from time to time notifies to the Bor-
rower to ensure that the Security Interests contem-
plated by the Finance Documents have been created and
perfected in relation to that Collateral; and
(b) such amended or additional procedures as the Collateral
Agent and the Borrower may from time to time agree in
writing in relation to any Security Document or which,
in the reasonable opinion of the Collateral Agent, are
necessary to create, perfect and maintain the Security
Interests intended to be created under that Security
Document in respect of any Collateral to be provided by
the Borrower or which otherwise becomes, or is intended
to become, Collateral thereafter and which are notified
to the Borrower by the Collateral Agent in writing.
"COLLATERAL SHORTFALL"
has the meaning ascribed to it in Clause 8.3.
"COMMITMENT"
in relation to a Lender, means
(a) in the case of a Lender which is a Lender on the date
of this Agreement, the amount in Dollars set opposite
its name in Schedule 1, to the extent not cancelled or
reduced under this Agreement; and
4
(b) in the case of a Lender which becomes a Lender after
the date of this Agreement, the amount of any other
Lender's Commitment acquired by it under Clause 24 (Al-
terations to the Contracting Parties) to the extent not
cancelled or reduced under this Agreement.
"COMMITMENT PERIOD"
means, subject to Clause 2.4 (Extension of Final Maturity
Date), the period commencing on the Signing Date and ex-
piring on the Final Maturity Date.
"COMPLIANCE CERTIFICATE"
means a compliance certificate, including all Attachments
annexed thereto, substantially in the form of Schedule 3
duly executed by a Managing Director or Financial Director
of each of the Borrower and the Guarantor together with such
changes therein as the Administrative Agent may from time to
time reasonably request.
"CONFIDENTIAL INFORMATION MEMORANDUM"
means the confidential information memorandum dated April
1996 prepared or to be prepared in connection with the Syn-
dication.
"CONTRACTING PARTY"
means any of the Financial Institutions, the Borrower and
the Guarantor.
"DEBT"
of any Person means all indebtedness of such Person (ex-
cluding, for the avoidance of doubt, obligations for the
purchase price of stock under stock purchase agreements) for
or in respect of (i) borrowed money; (ii) acceptances under
any acceptance credit facility; (iii) amounts raised under
any note purchase facility or the issue of bonds, notes,
debentures or similar instruments; (iv) amounts raised pur-
suant to any issue of shares which are expressed to be re-
deemable at the option of the holder; (v) the amount of any
liability in respect of leases which would be treated in the
audited financial statements of such Person as finance
leases; (vi) the amount of any liability in respect of any
purchase price for assets or service the payment of which is
deferred for a period in excess of one hundred and eighty
days; (vii) the amount of any liability in respect of cur-
rency or interest rate swap, cap or collar arrangements or
any similar derivative instrument Provided that if such cur-
rency, interest rate swap, cap or collar arrangement or any
similar derivative instrument has been entered into in order
to hedge the currency or interest rate exposure of such Per-
son in respect of Debt, the amount of any liability in re-
spect of such arrangement or instrument shall not be taken
into account; (viii) amounts raised under any other transac-
tion (including, without limitation, any forward sale or
purchase agreement) having the commercial effect of a bor-
rowing; and (ix) any guarantee or other assumption of li-
ability for the obligations of any third party in respect of
any of the foregoing.
5
"DEBT SERVICE COVERAGE RATIO"
means, with respect to any Person, the ratio of Operating
Income to Principal and Interest Expense.
"DEBT TO NET WORTH RATIO"
means, with respect to any Person, the ratio of Debt to Net
Worth calculated in accordance with generally accepted ac-
counting principles.
"DEFAULT"
means any Event of Default and any event or condition which,
with the giving of notice to the Borrower, lapse of time or
fulfillment of any other applicable condition (or any combi-
nation of the foregoing), would constitute an Event of De-
fault.
"DOLLARS" or "$"
means the lawful currency for the time being of the USA.
"EBITDA"
means, in relation to any Person at any time, net income
before any adjustments for or on account of interest, taxes,
depreciation, amortization and minority interests, calcu-
lated in accordance with generally accepted accounting prin-
ciples.
"ERISA"
means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in
effect from time to time.
"ERISA AFFILIATE"
means any corporation, trade or business that is a member of
a controlled group of corporations or a controlled group of
trades or businesses, as described in sections 414(b) and
414(c), respectively, of the Code or section 4001 of ERISA.
"EVENT OF DEFAULT"
means any of the events specified in Clause 16.1 (Events of
Default).
"FACILITY"
means the facilities referred to in Clause 2.1 (Facilities).
6
"FACILITY OFFICE"
in relation to a Lender, means:
(a) the office(s) of the Lender notified to the Adminis-
trative Agent prior to the Signing Date; or
(b) in the case of a Lender which becomes a Contracting
Party after the Signing Date, the office(s) of the
Lender notified by the Lender to the Administrative
Agent before or upon becoming a Lender; or
(c) any other office(s) notified by the Lender to the Ad-
ministrative Agent in accordance with Clause 24.7
(Change of Facility Office),
in each case as the office(s) through which the Lender will
perform all or any of its obligations under the Finance
Documents.
"FEDERAL FUNDS RATE"
means, on any day, the rate per annum (rounded upward if
necessary to the nearest one/one-hundredth of one per cent.)
equal to the weighted average of the rate on overnight Fed-
eral funds transactions with members of the Federal Reserve
System arranged by the Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day Provided that (a) if
such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeed-
ing Business Day, and (b) if no such rate is published on
such next succeeding Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to the Admin-
istrative Agent on such day on such transactions as reason-
ably determined by the Administrative Agent. Each change in
the interest rate on a Base Rate Advance which results from
a change in the Federal Funds Rate shall become effective on
the day on which the change in the Federal Funds Rate be-
comes effective.
"FEE LETTER"
means the letter dated February 21, 1996 from the Arranger
to the Borrower detailing certain fees to be paid by the
Borrower in connection with the Facility.
"FINAL MATURITY DATE"
means, subject to Clause 2.4, June 12, 1999.
"FINAL REPAYMENT DATE"
means, subject to Clause 2.5 (Term-out Option), the date
falling two years after the Final Maturity Date.
7
"FINANCE DOCUMENT"
means any of this Agreement, the Security Documents, the Fee
Letter, the Substitution Certificates, the Syndication
Agreement and any other document designated as such by the
Administrative Agent and the Borrower.
"FINANCIAL INSTITUTION"
means the Arranger, either Agent or a Lender.
"FISCAL YEAR"
means a fiscal year of the Borrower and the Guarantor.
"GROUP"
means the Guarantor and its Subsidiaries for the time being
and from time to time.
"GUARANTEE" OR" GUARANTEE"
of any person means any agreement or undertaking pursuant to
which such person guarantees, assumes or otherwise becomes
secondarily, contingently or otherwise liable for any obli-
gation of any other person (other than by virtue of endorse-
ment of instruments in the ordinary course of deposit or
collection and obligations of such person to purchase stock
under stock purchase agreements).
"GUARANTOR SUBORDINATION AGREEMENT"
means an agreement between the Guarantor and the relevant
creditors substantially in the form of Exhibit E to the Mas-
ter Collateral Agreement.
"INTEREST COVERAGE RATIO"
means the ratio of Operating Income to Interest Expense.
"INTEREST EXPENSE"
means, in respect of any Person, the aggregate of its paid
or accrued interest expense on such Person's Debt excluding
interest properly capitalized under generally accepted ac-
counting principles being interest attributable to construc-
tion projects.
"INTEREST PERIOD"
means, in respect of a Term Advance which is a LIBOR ad-
vance, each period of interest selected by the Borrower in
accordance with Clause 7.6 (Interest Periods for Term Ad-
vance).
8
"INTERNAL REVENUE CODE"
means the Internal Revenue Code of 1986 of the USA.
"INVESTMENT ADVISER"
means Security Capital (EU) Management S.A. or such other
entity providing investment advice to the Group as may be
approved by the Administrative Agent (such approval not to
be unreasonably withheld and such decision not to be un-
reasonably delayed).
"LENDER"
means a bank or financial institution whose name appears in
Schedule 1 in its capacity as a participant in the Facility.
"LIEN"
means any mortgage, pledge, hypothecation, assignment, de-
posit arrangement, encumbrance, lien (statutory or other) or
preference, priority or other security agreement or prefer-
ential arrangement of any kind or nature whatsoever (includ-
ing, without limitation, any conditional sale or other title
retention agreement, any financing lease having substan-
tially the same economic effect as any of the foregoing, and
the filing of any financing statement under the Uniform Com-
mercial Code or comparable law of any jurisdiction) having
the effect of security.
"LIBOR"
means in relation to a LIBOR Advance:
(a) the rate per annum appearing on the Telerate page 3750
(the "TELERATE SCREEN") at or about 11.00 a.m. on the
applicable Rate Fixing Day for the offering of deposits
in Dollars for a period comparable to its Term; or
(b) if:
(i) no relevant rate appears on the Telerate Screen
for the purposes of paragraph (a) above; or
(ii) the Administrative Agent determines that no rate
for a period of comparable duration to that Term
appears on the Telerate Screen at the relevant
time:
the arithmetic mean (rounded upwards, if necessary,
to two decimal places) of the respective rates, as
supplied to the Administrative Agent at its request,
quoted by the Reference Lenders to leading banks in
the London Interbank Market at or about 11.00 a.m. on
the Rate Fixing Day for the offering of deposits in
Dollars in an amount comparable to its Term. If any
of the Reference Lenders is unable or otherwise fails
to supply an offered rate by 11.30 a.m. on the Rate
Fixing Day, LIBOR shall, subject to
9
Clause 9(a)(i) (Market Disruption), be determined on
the basis of the quotations of the remaining Refer-
ence Lenders.
"LIBOR ADVANCE"
means an Advance in respect of which the Borrower has re-
quested interest be calculated by reference to LIBOR.
"LIBOR MARGIN"
means, subject to Clause 7.5 (Reduction in Margin), 1.75
per cent. per annum.
"MAJORITY LENDERS"
means, at any time, Lenders whose Commitments:
(a) then aggregate more than 66 2/3 per cent. of the To-
tal Commitments; or
(b) if the Total Commitments have been reduced to zero,
aggregated more than 66 2/3 per cent. of the Total
Commitments immediately before the reduction.
"MARGIN STOCK"
has the meaning ascribed to such term in Regulation U of
the Board of Governors of the Federal Reserve System or
any regulations substituted therefor, as from time to time
in effect.
"MARKET VALUE"
has the meaning set out in Schedule 4
"MASTER COLLATERAL AGREEMENT"
means the Master Collateral Agreement to be entered into
between (1) the Borrower, (2) the Guarantor, (3) the Ad-
ministrative Agent and (4) the Collateral Agent substan-
tially to the effect set out in Exhibit A.
"MATURITY DATE"
means, in relation to a LIBOR Advance, the last day of its
Term and in relation to a Base Rate Advance the Final Ma-
turity Date.
"NET WORTH"
means, with respect to any person at any time:
10
(a) (in relation to a company whose equity securities are
quoted by the Pricing Service at that time) the num-
ber of securities issued (together with the number of
shares into which all partnership units held or is-
sued by such company may be converted) multiplied by
the closing sale price quoted (or in the absence of a
sale, the closing bid price) by the Pricing Service
in respect of all such equity securities for the pre-
vious Business Day plus the book value of all non-
public equity securities;
(b) (in relation to a company whose equity securities are
not quoted by the Pricing Service at that time or if
no closing sale or bid price is available) the value
of its assets calculated in accordance with paragraph
b(ii) of the definition of Market Value as set forth
in Schedule 4 minus its total liabilities; and
(c) in relation to the Guarantor if its equity securities
are not quoted by a Pricing Service, total consoli-
dated net assets (shareholders' equity) based on fair
value as set out in the consolidated financial state-
ments of the Guarantor or the statement of net assets
of the Guarantor.
"NON-RECOURSE DEBT"
means Debt of any Person in respect of which the creditor
thereof has rights of recourse solely to specific assets
of such Person and no other right of recourse against such
Person.
"OPERATING INCOME"
means net operating income of a Person being the differ-
ence between the revenues of such Person and its expenses
excluding income derived from extraordinary activities and
before deduction of interest expense, taxes, charges to
contingency reserves, depreciation, amortisation, extraor-
dinary items, minority interests and other material and
non-recurrent items and shall otherwise be computed in
accordance with generally accepted accounting principles
and in relation to the Borrower shall be deemed to include
dividends received, accrued interest receivable and real-
ized gains from sales of special opportunity investments.
"PRICING SERVICE"
means Dow-Jones & Company Inc. and in the case of the
definition of "Net Worth" of the Guarantor, Reuters.
"PRIME RATE"
means, on any day, the rate of interest from time to time
publicly announced by the Administrative Agent as its
"base" or "prime" rate for loans denominated in Dollars
made in New York, which rate may not be the lowest rate
charged to its borrowers. Each change in the interest
rate on an Advance which results from a change in the
Prime Rate shall become effective on the day on which the
change in the Prime Rate becomes effective.
11
"PRINCIPAL AND INTEREST EXPENSE"
means in respect of any Person, the aggregate of (a) all
amounts of regularly scheduled principal paid in respect
of Debt of such person (including, without limitation con-
vertible debt) but excluding bullet repayments on maturity
of a loan, principal paid in respect of revolving credits
and principal paid in respect of revolving credits that
convert into term loans and (b) Interest Expense provided
that for the purposes of the calculation of the
Guarantor's Debt Service Coverage Ratio in Clause
15.11(c)(iii)(C) (Financial Condition), Principal and In-
terest Expense shall exclude all repayments of principal
under the Finance Documents (including payments of princi-
pal on any Repayment Instalment).
"QUALIFYING COLLATERAL"
means each of the following, for so long as the Lenders
have a fully perfected first priority security interest
over the same under the Master Collateral Agreement:
(i) cash,
(ii) any SCG Security providing (a) no Event of De-
fault specified in Clause 16.6 (Insolvency),
16.7 (Insolvency Proceedings) or 16.8 (Appoint-
ment of receivers and managers) shall have oc-
curred in relation to SCG, such Events of De-
fault to be construed as if references in such
Clauses to the Borrower and the Guarantor were
references to SCG; and (b) there is no event of
default (howsoever described) or event which
with the sending of notice, passage of time
(other than any applicable grace period granted
for curable defaults) or fulfillment of any
other condition could become an event of default
under any agreement constituting or evidencing
Debt (not being Non-Recourse Debt) of SCG in an
aggregate amount in excess of US$10,000,000 or
its equivalent in any other currencies; and
(iii) any Qualifying Security which the Borrower has
designated as Collateral under Section 1(b) of
the Master Collateral Agreement PROVIDED HOWEVER
that a Qualifying Security shall not be included
as Qualifying Collateral if any one or more of
the following shall apply:
(a) there are any restrictions on the payment of
dividends on such Qualifying Security (other
than any such restrictions which are, in the
reasonable opinion of the Administrative Agent
(after consultation with the Borrower), custom-
ary for REITs which have lines of credit or any
Debt outstanding);
(b) in the case of a Qualifying Security of a REIT,
distributions by the REIT are less than or equal
to the minimum amounts required in order for the
REIT not to be taxed at the corporate or entity
level or for it otherwise to maintain its status
as a REIT;
(c) there is an event of default (howsoever de-
scribed) or event which with the sending of no-
tice, passage of time (other than any applicable
grace period granted for curable defaults) or
fulfillment of any other condition could become
an event of default under any agreement consti-
tuting or evidencing Debt (not being Non-
12
Recourse Debt) of such Qualifying Issuer in an
aggregate amount in excess of the lower of (x)
US$10,000,000 or its equivalent in any other
currencies and (y) 25 per cent. of the Net Worth
of such Qualifying Issuer;
(d) an Event of Default specified in Clause 16.6
(Insolvency), 16.7 (Insolvency Proceedings) or
16.8 (Appointment of receivers and managers)
occurs in relation to such Qualifying Issuer,
other than the appointment of a receiver in re-
spect of specific assets subject to Non-Recourse
Debt, such Events of Default to be construed as
if references in such Clauses to the Borrower
and the Guarantor were references to such Quali-
fying Issuer;
and PROVIDED FURTHER that there shall be excluded from
Qualifying Collateral a Qualifying Security which if it
were included would result in the weighted average of the
consolidated Debt to Net Worth ratio of all Qualifying
Issuers forming part of the Qualifying Collateral exceed-
ing 1:1 (weighted according to the proportion which the
Market Value of the Qualifying Security of a particular
class bears to the aggregate of the Market Value of all
Qualifying Securities which the Borrower has designated as
forming part of the Collateral).
"QUALIFYING ISSUER"
means any Real Estate Operating Company and any REIT which
at any time has on a consolidated basis:
(a) a Debt to Net Worth ratio of no greater than 1.5:1.0;
(b) a ratio of EBITDA to average Debt of not less than 14
per cent.;
(c) an Interest Coverage Ratio of not less than 1.9:1.0;
and
(d) a Debt Service Coverage Ratio of not less than
1.4:1.0,
calculated in the case of paragraphs (b), (c) and (d) on a
rolling basis for the four most recent quarters or, if
less, since the date of active operations, save in the
case of a company which has been operating for less than
one year in which case for the purpose of paragraph (b)
EBITDA shall be calculated on an annualized basis with
Debt being calculated on the average of Debt outstanding
during the relevant period; and
For the purposes of calculating the ratios set out in
paragraphs (b) (ratio of EBITDA to Debt), (c) Interest
Coverage Ratio) and (d) (Debt Service Coverage Ratio)
above for the three year period commencing on the date the
Guarantor or the Borrower acquired an interest in the
Qualifying Issuer, the general and administrative expenses
of such Qualifying Issuer shall be deemed to equal:
(i) if they are equal to or less than 4.5 per cent.
of gross revenues of such Qualifying Issuer, the
amount of those expenses;
(ii) if they are greater than 4.5 per cent. but do
not exceed 7.5 per cent. of gross revenues, 4.5
per cent. of gross revenues of such Qualifying
Issuer; and
13
(iii) if they exceed 7.5 per cent. of gross revenues,
the amount of those expenses of such Qualifying
Issuer which exceed 7.5 per cent. of gross rev-
enues, plus 4.5 per cent. of gross revenues,
Provided that if the Borrower owns less than one per cent.
of the securities of a particular class issued by a Real
Estate Operating Company or REIT and the Administrative
Agent consents thereto in each particular case such entity
need only satisfy the Debt to Net Worth ratio set out in
paragraph (a) above to be a Qualifying Issuer and not the
ratios set out in paragraphs (b), (c) and (d).
"QUALIFYING SECURITY"
means the securities of a Qualifying Issuer provided that
there are no transfer restrictions or pre-emption rights
applicable thereto other than transfer restrictions im-
posed to comply with applicable securities laws or other
transfer restrictions which in either case have been ap-
proved by the Majority Lenders (such approval not to be
unreasonably withheld).
"RATE FIXING DAY"
means in relation to any Advance, the second Business Day
before its Utilisation Date.
"RATING AGENCIES"
means any of Moody's Investors Service, Inc, Standard &
Poor's Ratings Group, Duff and Phelps and Fitch Investor
Services, Inc.
"REAL ESTATE OPERATING COMPANY"
means a company the primary object and purpose of which is
the acquisition, development, promotion, sale and lease of
real estate or interests in real estate and which is in-
corporated and doing business in an Approved Jurisdiction.
"REIT"
means a real estate investment trust in either corporate
or trust form and established under the laws of any State
of the USA and qualifying for treatment as a "real estate
investment trust" under the Internal Revenue Code.
"REFERENCE LENDERS"
means, subject to Clause 24.5 (Reference Lenders), the
principal London offices of Commerzbank Aktiengesell-
schaft, and of two other Lenders (or Affiliates of Lend-
ers) to be appointed by the Administrative Agent after the
Signing Date after consultation with the Borrower and the
Guarantor.
14
"REPAYMENT DATE"
means each date for the payment of principal on the Term
Advance in accordance with Clause 8.1 (Repayment of Ad-
vances).
"REPAYMENT INSTALMENT"
means each instalment for repayment of the Term Advances
referred to in Clause 8 (Repayment and Prepayment of Ad-
vances).
"REQUEST"
means a request, substantially in the form of Schedule 5,
made by the Borrower in accordance with Clause 5.2 (Form
of Request).
"REQUESTED AMOUNT"
in relation to a Request, means the amount of the Advance
requested in the Request.
"REQUIREMENT(S) OF LAW"
shall mean as to any person, the certificate of incorpora-
tion and by-laws or other organisational or governing
documents of such person, and any law, treaty, rule or
regulation, or determination of an arbitrator or a court
or other governmental authority, in each case applicable
to or binding upon such person or any of its property or
to which such person or any of its property is subject.
"SAME DAY FUNDS"
means Dollar funds settled through the New York Clearing
House Interbank Payments System or such other same day
funds for payment in Dollars as the Administrative Agent
may specify to the Borrower as being customary at the time
for the settlement of international transactions in New
York City of the type contemplated by this Agreement.
"SCG"
means Security Capital Group Incorporated.
"SCG SECURITY"
means any security issued by SCG.
"SECURITY DOCUMENTS"
means each of:
15
(a) the Borrower Subordination Agreement, the Guarantor
Subordination Agreement and the Stock Pledge Agree-
ment;
(c) the Master Collateral Agreement;
(d) each document designated as a Security Document under
Section 6 of the Master Collateral Agreement; or
(e) any other document designated as such in writing by
the Collateral Agent and the Borrower.
"SECURITY INSTRUMENT"
means any mortgage, deed of trust, security agreement,
amendment or supplement thereto, chattel mortgage, chattel
mortgage note assignment, pledge agreement, or other
agreement providing for, evidencing or perfecting any se-
curity interest in real or personal property.
"SECURITY INTEREST"
means any Lien, encumbrance or security interest of any
kind whatsoever, whether arising under a Security Instru-
ment or as a matter of law, judicial process or otherwise.
"SIGNING DATE"
means the date of this Agreement.
"STOCK PLEDGE AGREEMENT"
means an agreement between the Guarantor and the Col-
lateral Agent substantially in the form exhibited to the
Master Collateral Agreement.
"SUBORDINATED DEBT"
means any unsecured indebtedness for borrowed money of any
member of the Group which is subordinate to its obliga-
tions under the Finance Documents.
"SUBSIDIARY"
means any person of which or in which any other person own
directly or indirectly in excess of 50 per cent. of:
(a) the combined voting power of all classes of stock
having general voting power under ordinary circum-
stances to elect a majority of the board of directors
of such person, if it is a corporation; or
16
(b) the beneficial interest of such person, if it is
a trust, association or other unincorporated
organisation.
Provided always that any REIT or Real Estate Company in
which the Borrower or the Guarantor reasonably expects to
have its ownership of the rights referred to in (a) or (b)
above eventually diluted to less than 50 per cent. and
which in accordance with generally accepted accounting
principles is not or would not be consolidated in the fi-
nancial statements of the Borrower or the Guarantor shall
not constitute a Subsidiary.
"SUBSTITUTION CERTIFICATE"
has the meaning given to it in Clause 24.4 (Substitution
Certificates).
"SYNDICATION"
means the primary syndication by the Arranger of the Fa-
cility.
"SYNDICATION AGREEMENT"
means an agreement substantially in the form of Schedule 7
with such amendments as the Arranger and the Agents may
approve or reasonably require and which the Borrower has
approved, acting reasonably.
"TAXES"
includes all present and future income and other taxes,
levies, imposts, deductions, charges, duties and withhold-
ings and any charges of a similar nature, together with
interest thereon and penalties with respect thereto, if
any, and any payments made on or in respect thereof; "TAX-
ATION" and "TAX" shall be construed accordingly.
"TERM"
in relation to an Advance, means the period for which it
is to be borrowed, as selected by the Borrower in the rel-
evant Request and in the case of the Term Advances, means
the duration of each Interest Period.
"TERM ADVANCE"
means each term advance made or deemed made by the Lenders
to the Borrower in accordance with Clause 2.5 (Term-out
Option).
"TERM-OUT OPTION"
means the option granted to the Borrower in Clause 2.5
(Term-out Option).
17
"TERM-OUT PERIOD"
means the period commencing on the Final Maturity Date and
ending on the Final Repayment Date.
"TOTAL COMMITMENTS"
means the aggregate for the time being of the Commitments,
being $200,000,000 at the date of this Agreement.
"TOTAL OUTSTANDINGS"
means, on any day, the aggregate of all Advances outstand-
ing on that day, together with all other amounts outstand-
ing under or in connection with the Finance Documents,
including, without limitation, accrued interest and fees.
"USA"
means the United States of America.
"UTILISATION DATE"
means, in relation to any Advance, the date for the making
of the Advance as specified by the Borrower in the rel-
evant Request.
1.2 CONSTRUCTION
In this Agreement, unless the context otherwise requires:
(a) a reference to "ASSETS" includes property and rights
of every kind, present, future and contingent (in-
cluding uncalled share capital), and every kind of
interest in an asset;
(b) a reference to a "PERSON" or "PERSON" means an indi-
vidual, a company, a corporation, a partnership, a
joint venture, a trust or unincorporated organisa-
tion, joint stock company or other similar organisa-
tion, a government or any political subdivision
thereof, a court, or any other legal entity, whether
acting in an individual, fiduciary or other capacity;
(c) a reference to the "WINDING UP" of a corporation
shall be construed so as to include any equivalent or
analogous proceedings under the law of any jurisdic-
tion in which the company is incorporated or any ju-
risdiction in which the company carries on business;
(d) a reference to a Contracting Party or a Reference
Lender is, where relevant and subject to Clauses 18
(The Agents and the Joint Arrangers) and 24 (Alter-
ations to the Contracting Parties), a reference to or
to include, as appropriate, their respective succes-
sors or assigns;
(e) references to Clauses, Schedules and Attachments are
references to, respectively, clauses of and schedules
and attachments to this Agreement;
18
(f) a reference to another agreement shall be con-
strued as a reference to that other agreement as
it may have been, from time to time, amended,
varied, supplemented or novated;
(g) references to "GENERALLY ACCEPTED ACCOUNTING PRIN-
CIPLES" shall mean:
(1) as to a particular Person other than the Bor-
rower or the Guarantor, such accounting practice
as, in the opinion of the independent ac-
countants of recognized national standing regu-
larly retained by such Person and acceptable to
the Administrative Agent, those principles and
practices (i) which are recognized as such by
the Financial Accounting Standards Board of the
USA, (ii) which are applied for all periods af-
ter the date hereof in a manner consistent with
the manner in which such principles and prac-
tices were applied to the most recent audited
financial statements of the relevant Person fur-
nished to the Lenders or where a change therein
has been concurred in by such Person's indepen-
dent auditors, and (iii) which are consistently
applied for all periods after the date hereof so
as to reflect properly the financial condition,
and results of operations and changes in finan-
cial position, of such Person.
(2) with respect to the Borrower or the Guarantor,
the generally accepted accounting principles
adopted by the Guarantor and Borrower as set
forth in the financial statements delivered by
such Person to the Finance Parties in respect of
the fiscal year ending 31 December 1995. If
there is a change in such accounting practice as
to the Borrower or the Guarantor that could af-
fect the Borrower's or the Guarantor's ability
to comply with the terms of any Finance Docu-
ment, the parties hereto agree to review and
discuss such changes in accounting practice and
the terms of this Agreement for a period of no
more than thirty (30) days with a view to amend-
ing this Agreement so that the financial mea-
sures of the Borrower's or the Guarantor's oper-
ating performance and financial condition are
substantially the same after such change as they
were immediately before such change.
(h) a reference to "CONSOLIDATED" means the consolidation
of accounts in accordance with generally accepted
accounting principles;
(i) a reference to a time of day is, unless otherwise
stated, a reference to London time;
(j) a period of a month or months is the period commenc-
ing on the first day thereof and ending on the nu-
merically corresponding day in the relevant subse-
quent month or, if there is no such day, the last day
of the relevant subsequent month; and
(k) the index to and the headings in this Agreement are
for convenience only and shall be ignored in constru-
ing this Agreement.
19
2. FACILITIES
2.1 FACILITIES
Subject to the terms of this Agreement, the Lenders grant
to the Borrower the following facilities:-
(a) a committed revolving advance facility whereby the
Lenders shall, when requested by the Borrower, make
revolving Advances to the Borrower; and
(a) a term advance facility whereby the Borrower may
elect to convert outstanding revolving Advances into
Term Advances in accordance with Clause 2.5 (Term-out
Option).
2.2 FACILITY LIMITS
The aggregate principal amount of all outstanding Advances
at any one time shall not exceed the Total Commitments at
that time.
2.3 NATURE OF THE LENDERS' RIGHTS AND OBLIGATIONS UNDER THIS
AGREEMENT
(a) No Lender is obliged to make an Advance if it would
cause the aggregate principal amount of any outstand-
ing Advances made by it and its Affiliated Lender(s)
to exceed its Commitment.
(b) The obligations of each Financial Institution owed
under the Finance Documents are several, and failure
of a Financial Institution to carry out those obliga-
tions shall not relieve any other party of its obli-
gations under the Finance Documents. No Financial
Institution shall be responsible for the obligations
of any other Financial Institution under the Finance
Documents.
(c) The obligations of the Borrower and the Guarantor
towards each of the Financial Institutions under the
Finance Documents are given to each of them as sepa-
rate and independent rights, and each Financial In-
stitution may, except as otherwise stated in this
Agreement, separately enforce those rights.
2.4 EXTENSION OF FINAL MATURITY DATES
(a) At least 60 days prior to the second Anniversary of
the Signing Date and each Anniversary thereafter
(which is one year prior to the applicable Final Ma-
turity Date), the Borrower may, by notice to the Ad-
ministrative Agent (which shall promptly notify the
Lenders) request each Lender to review whether or not
it is willing to extend the Final Maturity Date for a
further year.
(b) Each Lender so requested will notify the Administra-
tive Agent in writing no later than 30 days prior to
the second Anniversary of the Signing Date or, as the
case may be, the relevant Anniversary thereafter
(which is one year prior to the applicable Final Ma-
turity Date) whether or not it wishes its Final Matu-
rity Date to be extended by a further year.
20
(c) If a Lender notifies the Administrative Agent that it
agrees to extend as requested and Lenders with Com-
mitments totalling not less than 80 per cent. of the
Total Commitments (including that of the first men-
tioned Lender) also so agree, the Final Maturity Date
applicable to that Lender's Commitment shall be ex-
tended for a further year from the then current Final
Maturity Date and the Agent shall so notify that
Lender and the Borrower thereof.
(d) upon receipt of notification by the Administrative
Agent that Lenders with Commitments totalling at
least 80 per cent. (but less than 100 per cent. of
Total Commitments) have agreed to extend as requested
the Borrower may, by notice to the Administrative
Agent:
(i) request the other Lenders or any of them to in-
dicate whether or not they are prepared to in-
crease their Commitments (in place of the Lend-
ers which have not agreed to extend as re-
quested);
(ii) introduce another financial institution reason-
ably acceptable to the Administrative Agent to
cover all or part of the shortfall; or
(iii) allow the Total Commitments to reduce by an
amount equal to the Commitments of Lenders who
have refused to extend their Commitment,
(and any Lender who has not agreed to an extension
shall enter into such documentation as the Borrower
and the Administrative Agent may reasonably require
to transfer its Commitment to the existing Lender or
new financial institution).
(e) No request to extend the Final Maturity Date may be
made by the Borrower nor shall any agreement to ex-
tend become effective if there is a Default under the
Facility on the date of such request.
(f) No extension of the Final Maturity Date shall be ef-
fective until the Administrative Agent (on behalf of
those Lenders which have agreed to extend) has re-
ceived the applicable Extension Fee payable in ac-
cordance with Clause 19.6 (Extension Fee).
(g) No Lender is under any obligation to extend the Final
Maturity Date applicable to its Commitment or to in-
crease its Commitment under Clause 2.4(d) but upon
having so agreed, it shall be obliged to extend the
Final Maturity Date in accordance with Clause 2.4(c)
or, subject to appropriate documentation being en-
tered into by the relevant parties, to increase its
Commitment in accordance with Clause 2.4(d).
(h) If any Lender does not give any notice in accordance
with this Clause 2.4 following a request to extend
from the Borrower that Lender shall be deemed to have
refused to extend the Final Maturity Date.
(i) On each extension of the Final Maturity Date the Ad-
ministrative Agent shall as soon as practicable no-
tify the Borrower and each Lender which Lenders have
agreed to extend the Final Maturity Date and their
individual Commitments.
21
(j) Where the Final Maturity Date is extended under this
Clause 2.4 in respect of less than all the Lenders,
the Lenders in respect of which such extension takes
effect shall, on and from the Final Maturity Date for
the other Lenders, be deemed to be all the Lenders
for the purposes of the definitions of "Commitment",
and "Total Commitments", and the provisions of this
Agreement shall be construed accordingly.
2.5 TERM-OUT OPTION
(a) At least 30 days prior to any Final Maturity Date,
the Borrower may, by notice in the form set out in
Part II of Schedule 5 to the Administrative Agent
(which shall promptly notify the Lenders) request
that all Advances outstanding on such Final Maturity
Date be converted automatically into one or more Term
Advances in accordance with this clause.
(b) In any request given under Clause 2.5(a), the Bor-
rower shall also specify:
(i) the number of Term Advances (not exceeding four)
which shall be in minimum amounts of
$10,000,000;
(ii) whether the Term Advances are to be LIBOR Ad-
vances or Base Rate Advances or a mixture of the
two; and
(iii) if any Term Advance is to be a LIBOR Advance,
the duration of its first Interest Period se-
lected in accordance with Clause 7.6 (Interest
Periods for Term Advances).
(c) No such request may be made by the Borrower if there
is a Default.
(d) The Borrower agrees to pay to the Lenders a conver-
sion fee in connection with the Term-out Option.
Such fee will be calculated and payable in accordance
with Clause 19.7 (Conversion Fee).
(e) If the Borrower notifies the Administrative Agent in
accordance with Clause 2.5(a) above, all Advances
which are outstanding on such Final Maturity Date
shall be automatically converted to Term Advances
repayable on the Final Repayment Date in accordance
with Clause 8 (Repayment and Prepayment of Advances).
(f) The Borrower may not borrow any further Advances fol-
lowing the Final Maturity Date.
(g) Any notice given by the Borrower under this Clause
shall be irrevocable.
3. PURPOSE OF THE FACILITY
(a) The proceeds of each Advance shall be applied by the
Borrower towards its general corporate purposes.
22
(b) Without prejudice to paragraph (a) above and the re-
maining provisions of this Agreement, none of the
Financial Institutions shall be bound to enquire as
to, nor shall any of them be responsible for, the
application by the Borrower of the proceeds of any
Advance.
4. CONDITIONS PRECEDENT
4.1 DOCUMENTARY CONDITIONS PRECEDENT
(a) The obligations of each Agent and each Lender under
this Agreement are subject to the condition that the
Administrative Agent has received all of the follow-
ing in form and substance satisfactory to it:
(i) a certificate of a Managing Director of the Bor-
rower and the Guarantor including:
(A) certified copies of resolutions of the
Board of Directors of the Borrower and the
Guarantor authorising or ratifying the ex-
ecution, delivery and performance of the
Finance Documents to which it is or will be
a party;
(B) certified copies of all documents evidenc-
ing any necessary corporate action, con-
sent, and governmental or regulatory ap-
proval (if any) with respect to the Finance
Documents to which the Borrower and the
Guarantor is or will be a party;
(C) certification of the names of the officer
or officers of the Borrower and the Guaran-
tor authorised to sign the Finance Docu-
ments to which each is or will be a party,
together with a sample of the true signa-
ture of each such officer (it being under-
stood that each Financial Institution may
conclusively rely on such certificate until
formally advised by a like certificate of
any changes therein);
(ii) certified copies of the constitutive documents
of the Borrower and the Guarantor;
(iii) a certificate from a Managing Director of each
of the Borrower and the Guarantor confirming
that:
(A) the representations and warranties in
Clause 14 (Representations and Warranties)
were correct on the Signing Date; and
(B) no Default had occurred and was continuing
on the Signing Date.
(iv) the Master Collateral Agreement and the Borrower
Subordination Agreement duly executed by the
Borrower and the Guarantor together with all
conditions precedent required thereunder;
(v) confirmation from State Street Bank and Trust
Company that it has taken all steps required
under the Master Collateral Agreement with re-
spect to all Collateral held by them as custo-
dian thereunder;
23
(vi) the Stock Pledge Agreement duly executed by the
Guarantor;
(vii) a duly completed Federal Reserve Form U-1 ex-
ecuted by the Borrower;
(viii) the following legal opinions addressed to the
Administrative Agent (on behalf of the Lenders),
the Collateral Agent and to the Lenders:
(A) from Allen & Overy, in relation to English
law;
(B) from Clifford Chance, in relation to New
York law, the Master Collateral Agreement
and the obligations of the Borrower and the
Guarantor under the Finance Documents;
(C) from Massachusetts counsel to the Borrower
and the Guarantor reasonably acceptable to
the Administrative Agent in relation to
Massachusetts law as to certain matters
concerning the Master Collateral Agreement;
(D) from Arendt & Medernach, Luxembourg counsel
to the Borrower and the Guarantor;
(ix) evidence of the acceptance by the process agent
of each of the Borrower and the Guarantor speci-
fied in Clause 29 Jurisdiction) of its appoint-
ment under that Clause and under Section 31 of
the Master Collateral Agreement;
(x) confirmation from the Collateral Agent that it
holds Collateral with a Market Value in excess
of $350,000,000.
(b) Each of the documents specified in paragraph (a)
above shall be certified by a Managing Director of
the Borrower or the Guarantor (as the case may be) as
being correct, complete and in full force and effect
as at a date no earlier than the Signing Date.
(c) The Administrative Agent shall promptly notify the
Borrower and the Lenders whether or not the above
conditions precedent have been met or waived.
4.2 CONDITIONS PRECEDENT TO EACH REQUEST AND EACH ADVANCE
The obligations of each Agent and each Lender in respect
of each Advance are subject to the further conditions pre-
cedent that:
(a) both on the date of the relevant Request and on the
relevant Utilisation Date:
(i) the matters represented by the Borrower and the
Guarantor and set out in Clause 14 (Representa-
tions and Warranties) (other than Clause
14.1(k)) are correct in all material respects on
and as at each of those dates as if made on each
date;
24
(ii) no Default has occurred and is continuing or
would result from the Advance;
(iii) the Advance would not cause the Total Outstand-
ings to exceed the Borrowing Base or otherwise
cause Clause 2.2 (Facility limits) to be contra-
vened;
(iv) a Collateral Shortfall shall not have occurred
and be continuing;
(v) the Collateral Agent holds Collateral with a
Market Value in excess of $350,000,000; and
(vi) no Event of Default specified in Clause 16.6
(Insolvency), 16.7 (Insolvency Proceedings) or
16.8 (Appointment of Receivers and Managers)
shall have occurred in relation to the Invest-
ment Adviser, such Clauses to be construed as if
references therein to the Borrower and the Guar-
antor were references to the Investment Adviser.
(vii) the Advance would not contravene Section 24(f)
(Margin Regulations) of the Master Collateral
Agreement.
PROVIDED THAT paragraphs (i) to (vii) shall not apply
in respect of an Advance to be applied solely in or
towards repayment of an outstanding Advance on the
relevant Utilisation Date.
(b) no more than two Advances may be made on the same day
and no more than 12 Advances may be outstanding at
any one time.
4.3 CONFIRMATION OF COLLATERAL
No Advance (other than an Advance to be applied solely in
or towards repayment of an outstanding Advance) may be
disbursed to the Borrower unless on the proposed Utilisa-
tion Date the Administrative Agent and the Collateral
Agent are satisfied that the Borrowing Base will be equal
to or greater than the aggregate of the Total Outstandings
after the disbursement to the Borrower of such Advance and
all other Advances to be made on such Utilisation Date,
taking into account any prepayments or repayments of Ad-
vances which are to be made by the Borrower on such Utili-
sation Date.
5. UTILISATION OF THE FACILITY
5.1 DELIVERY OF REQUESTS
Subject to the terms of this Agreement, the Borrower may
utilise the Facility by delivering a duly completed Re-
quest to the Administrative Agent (copied to the Col-
lateral Agent), not later than 12 noon three Business Days
prior to the relevant Utilisation Date in relation to a
LIBOR Advance and two Business Days prior to the relevant
Utilisation Date in relation to a Base Rate Advance.
25
5.2 FORM OF REQUEST
Each Request shall specify:
(a) the proposed Utilisation Date, which shall be a Busi-
ness Day falling two days or more before the then
latest Final Maturity Date;
(b) the Requested Amount, which shall be a minimum of
$3,000,000 and integral multiples thereof of
$500,000;
(c) whether the Advances are to be LIBOR Advances or Base
Rate Advances;
(d) the Term of any requested LIBOR Advances, which shall
be a period of one, two, three or six months, or such
other period as may be agreed between the Borrower
and the Administrative Agent, in each case ending on
or before the then latest Final Maturity Date, Pro-
vided always that the term of the requested Advance
if it is to be a LIBOR Advance may be a period of
less than one month if, at the time of requesting
such Advance, the Borrower notifies the Administra-
tive Agent that such request is made in connection
with a public offering of shares by the Guarantor or
a major sale of assets of the Borrower; and
(e) the details of the bank and account to which the pro-
ceeds of the Advances are to be made available to the
Borrower in accordance with Clause 10.1 (Funds and
Place).
6. REDUCTION AND CANCELLATION OF THE TOTAL COMMITMENTS
6.1 AUTOMATIC REDUCTION OF EACH LENDER'S COMMITMENT
The amount of each Lender's Commitment shall (if not al-
ready so reduced) be automatically reduced to zero at
close of business on the Final Maturity Date for that
Lender.
6.2 VOLUNTARY CANCELLATION
(a) (i) Subject to sub-paragraph (ii) below, the Bor-
rower may, on giving not less than five days'
prior written notice to the Administrative Agent
(which shall promptly give notice thereof to the
Lenders), cancel the Total Commitments in whole
or in part (but, if in part, in a minimum
amount, and integral multiples, of $10,000,000).
(ii) Any cancellation may only take effect in respect
of the unutilized portion of the Facility.
(b) Any cancellation in part under this Clause 6.2 shall
be applied against the Commitment of each Lender pro
rata.
26
6.3 IRREVOCABLE
(a) Any notice by the Borrower under this Clause 6 of
cancellation of the whole or any part of the Total
Commitments shall be irrevocable and shall specify
the date upon which the cancellation is to become
effective and the amount of the Total Commitments to
be cancelled.
(b) No amount of the Total Commitments cancelled under
this Agreement may subsequently be reinstated unless
agreed by all the Lenders and the Administrative
Agent.
7. INTEREST
7.1 RATE
The rate of interest applicable to each Advance for its
Term shall be the rate per annum determined by the Admin-
istrative Agent to be the aggregate of:
(a) in the case of a LIBOR Advance, the LIBOR Margin and
LIBOR relative to that Advance; or
(b) in the case of a Base Rate Advance, the Base Rate
relative to that Advance.
7.2 DUE DATES
Save as otherwise provided in this Agreement,
(a) accrued interest on each LIBOR Advance is payable by
the Borrower on its Maturity Date or the last day of
its Interest Period and, if the Term of any LIBOR
Advance is longer than three months, at three monthly
intervals from the Utilisation Date of that Advance
or the first day of the relevant Interest Period as
the case may be;
(b) accrued interest on each Base Rate Advance is payable
by the Borrower in arrears in respect of the period
in which such Base Rate Advance is outstanding on
each March 31, June 30, September 30 and December 31
and the Final Maturity Date and the Final Repayment
Date.
7.3 DEFAULT INTEREST
(a) If the Borrower or the Guarantor fails to pay any
amount payable by it under this Agreement on the due
date, it shall, on demand by the Administrative Agent
from time to time, pay interest on the overdue amount
from the due date up to the date of actual payment,
as well after as before judgment, at a rate, subject
to paragraph (c) below, determined by the Administra-
tive Agent to be two per cent. (2%) per annum above
the higher of:
(i) (in the case of an Advance which has become due
and payable prior to its Maturity Date or, if it
is a Term Advance, prior to the last day of the
relevant
27
Interest Period) the rate applicable to the
overdue amount under Clause 7.1(a) (Rate) im-
mediately before the due date (if of principal);
and
(ii) (in all other cases) the rate which would have
been payable if the overdue amount had, during
the period of non-payment, constituted a LIBOR
Advance in the currency of the overdue amount
made under this Agreement for successive Terms
of up to three months, as the Administrative
Agent may determine from time to time (each a
"DESIGNATED TERM").
(b) The rate of interest shall be determined:
(i) if calculated by reference to the Base Rate, on
each day; or
(ii) if calculated by reference to LIBOR, two Busi-
ness Days before the first day of the relevant
Designated Term.
(c) If the Administrative Agent (after consultation with
the Reference Lenders) determines that deposits in
the currency of the overdue amount are not or were
not, as the case may be, being made available by the
Reference Lenders to leading banks in the London In-
terbank Market in the ordinary course of business,
the rate shall be determined by reference to the cost
of funds to the Reference Lenders from such other
sources as the Administrative Agent (after consulta-
tion with the Reference Lenders) may from time to
time reasonably determine.
(d) Interest shall be compounded monthly (if calculated
by reference to the Base Rate) or at the end of each
Designated Term (if calculated by reference to LI-
BOR).
7.4 CALCULATION OF INTEREST
Interest shall accrue from day to day, and be computed on
the basis of:
(a) in the case of each LIBOR Advance and each Base Rate
Advance in respect of which interest thereon is de-
termined by reference to the Federal Funds Rate, 360
days and for the actual number of days elapsed;
(b) in the case of a Base Rate Advance in respect of
which interest thereon is determined by reference to
the Prime Rate, 365/366 days and for the actual num-
ber of days elapsed.
7.5 REDUCTION IN MARGIN
The LIBOR Margin applicable to a LIBOR Advance shall be
reduced to 1.50 per cent. per annum if and for so long as
the Guarantor receives an investment grade rating for its
senior unsecured long-term debt from two Rating Agencies,
one of which shall be Moody's Investor Services, Inc. or
Standard & Poor's Ratings Group. Such reduction in LIBOR
Margin shall apply on any Rate Fixing Day on which such
investment grade rating is in effect.
28
7.6 INTEREST PERIODS FOR TERM ADVANCES
(a) During the Term Period the Borrower may designate
Term Advances as LIBOR Advances or Base Rate Advances
provided that each Advance is in a minimum amount of
$10,000,000 and that there are not more than four
Term Advances outstanding at any time. If the Bor-
rower requests a Term Advance which is a LIBOR Ad-
vance, the Borrower shall select interest periods for
the Term Advance. Such selection will be made by the
Borrower in the Request given upon exercise of the
Term-out Option and during the Term Period, by a no-
tice received by the Administrative Agent not later
than 12 (noon) three Business Days before the com-
mencement of each Interest Period.
(b) During the Term Period, each Interest Period for the
Term Advance will commence on the Final Maturity Date
or the expiry of the immediately preceding Interest
Period.
(c) Each Interest Period will be of either one, two,
three or six months as so selected under
paragraph (a) above subject as provided below.
(d) If the Borrower fails to select an Interest Period
for the outstanding Term Advance during the Term Pe-
riod in accordance with paragraph (a) above, that
Interest Period will be one month.
(e) The Borrower will ensure that Interest Periods in
respect of an Advance or Advances equal to a Repay-
ment Instalment shall be selected (and if necessary
shortened) so as to expire on a Repayment Date.
(f) An Interest Period which commences on the last Busi-
ness Day of a month shall end on the last Business
Day of the corresponding month.
(g) Subject to the foregoing, the Borrower may sub-divide
or consolidate Advances during the Term Period.
7.7 NOTIFICATION
Each determination of a rate of interest by the Adminis-
trative Agent under this Agreement shall promptly be noti-
fied to the relevant Contracting Parties.
8. REPAYMENT AND PREPAYMENT OF ADVANCES
8.1 REPAYMENT OF ADVANCES
(a) The Borrower shall repay each Advance (other than a
Term Advance) made to it in full on its Maturity Date
to the Administrative Agent for the account of the
Lenders.
(b) The Borrower shall repay the Term Advances (if made)
in full in four equal semi-annual instalments. Each
instalment shall have a principal amount equal as
nearly as possible to 25 per cent. of the aggregate
principal amount of the Term Advances at the begin-
ning of the Term-Out Period. The first repayment
instalment shall be paid on the Business Day
29
falling six months after the Final Maturity Date.
The final repayment instalment shall be repaid on the
Final Repayment Date.
8.2 PREPAYMENT OF ADVANCES
(a) The Borrower may, by giving not later than 12 noon on
the relevant day not less than three Business Days'
notice to the Administrative Agent (which shall be
irrevocable) and subject to Clause 26(a)(iii) (Indem-
nities), prepay any Advance made to it in a minimum
amount of US$1,000,000 and integral multiples of
$500,000 in excess thereof.
(b) The Borrower may not pre-pay any Advance except as
expressly provided in this Agreement. Any Advance
prepaid prior to the Final Maturity Date may be re-
borrowed in accordance with the provisions of this
Agreement.
(c) Prepayments shall be made together with accrued in-
terest and all other amounts then due under this
Agreement.
(d) Any partial prepayment of the Term Advance shall be
applied against the repayment instalments in chrono-
logical order.
8.3 MANDATORY PREPAYMENT/PROVISION OF COLLATERAL
If at any time Total Outstandings exceed the Borrowing
Base (a "COLLATERAL SHORTFALL"), the Borrower shall, be-
fore close of business on the relevant date (as determined
in accordance with Clause 8.4 below) prepay Advances and/
or provide further Qualifying Collateral to the Collateral
Agent in accordance with the Master Collateral Agreement
so that the Total Outstandings after such prepayment and/
or provision of Qualifying Collateral are equal to or less
than the Borrowing Base.
8.4 "BORROWING BASE VIOLATIONS"
(a) If a Compliance Certificate shows that the consoli-
dated Debt to Net Worth ratio of a Qualifying Issuer
exceeds 1.5:1 or the combined consolidated Debt to
Net Worth ratios of all Qualifying Issuers calculated
on a weighted average basis in accordance with the
definition of Qualifying Collateral exceeds 1:1 (the
"LEVERAGE EXCESS") and the Borrower has not provided
the Administrative Agent with evidence reasonably
satisfactory to the Administrative Agent that such
Leverage Excess has been rectified within 30 days
from the date of notification by the Administrative
Agent of such violation (the "LEVERAGE VIOLATION IN-
TERIM DATE") then the Borrower shall before close of
business on the date fifteen days after the Leverage
Violation Interim Date, at its discretion, prepay
Advances and/or provide further Qualifying Collateral
to the Collateral Agent in accordance with the Master
Collateral Agreement so that Total Outstandings after
such prepayment and/or provision of Qualifying Col-
lateral are equal to or less than the Borrowing Base.
(b) If the ratio of consolidated EBITDA to consolidated
average Debt of a Qualifying Issuer is less than 14
per cent. or the consolidated Interest Coverage Ratio
of a Qualifying Issuer is less than 1.9:1 or the Debt
Service Coverage Ratio of a Qualifying Issuer is less
than 1.4:1
30
for two consecutive quarters, as shown by reference
to the relevant Compliance Certificates then the Bor-
rower shall before close of business on the date fif-
teen days after notification by the Administrative
Agent of such violation for two consecutive quarters,
at its discretion, prepay Advances and/or provide
further Qualifying Collateral to the Collateral Agent
in accordance with the Master Collateral Agreement so
that Total Outstandings after such prepayment and/or
provision of Qualifying Collateral are equal to or
less than the Borrowing Base.
(c) If the Administrative Agent has notified the Borrower
that there is a violation of the Borrowing Base, as
shown by a Compliance Certificate (other than a vio-
lation referred to in paragraphs (a) or (b) above)
then the Borrower shall (i) before close of business
on the date (the "COMPLIANCE CERTIFICATE INTERIM
DATE") thirty days after the date on which the Admin-
istrative Agent has notified the Borrower of such
breach notify the Administrative Agent of its propos-
als to rectify such breach and (ii) before the close
of business on the date fifteen days after the Com-
pliance Certificate Interim Date, at its discretion,
prepay Advances and/or provide further Qualifying
Collateral to the Collateral Agent in accordance with
the Master Collateral Agreement so that Total Out-
standings after such prepayment and/or provision of
Qualifying Collateral are equal to or less than the
Borrowing Base.
(d) If the Administrative Agent has notified the Borrower
that there is a violation of the Borrowing Base, as
shown by a Borrowing Base Certificate (other than a
violation referred to in paragraphs (a) or (b)
above), then the Borrower shall (i) before close of
business on the date (the "BORROWING BASE CERTIFICATE
INTERIM DATE") fifteen days after the date on which
the Administrative Agent has notified the Borrower of
such breach notify the Administrative Agent of its
proposals to rectify such breach and (ii) before
close of business on the date thirty days after the
Borrowing Base Certificate Interim Date, at its dis-
cretion, prepay Advances and/or provide further
Qualifying Collateral to the Collateral Agent in ac-
cordance with the Master Collateral Agreement so that
Total Outstandings after such prepayment and/or pro-
vision of Qualifying Collateral are equal to or less
than the Borrowing Base.
9. MARKET DISRUPTION
(a) If, in relation to any proposed LIBOR Advance:
(i) where LIBOR is to be determined by reference to
the Reference Lenders and no, or only one, Ref-
erence Lender is able to supply a rate for the
purposes of determining LIBOR or the Administra-
tive Agent otherwise determines (which determi-
nation shall be conclusive and binding on all
the Contracting Parties) that adequate and fair
means do not exist for ascertaining LIBOR rela-
tive to the LIBOR Advance; or
(ii) the Administrative Agent receives notification:
(A) from Lenders participating in more than 50
per cent. by value of the proposed LIBOR
Advance that, in their opinion, Dollar de-
posits of equal duration to the Term re-
quested will not be available to them in
the London
31
or Interbank Market in the ordinary course
of business in sufficient amounts to fund
their LIBOR Advance for that Term; or
(B) from Lenders participating in more than 50
per cent. by value of the proposed LIBOR
Advance that, by reason of circumstances
affecting the London Interbank Market, the
cost to them of deposits obtained in the
London Interbank Market to fund their LIBOR
Advances would be in excess of the relevant
LIBOR,
the Administrative Agent shall, promptly serve a notice
(a "SUSPENSION NOTICE") on the Borrower and the relevant
Lenders stating that the relevant event has occurred and
that this Clause 9 is in operation.
(b) After a Suspension Notice has been served:
(i) notwithstanding any other provision of this
Agreement, the LIBOR Advance shall not be made;
(ii) no further Requests for a LIBOR Advance or for
interest to be calculated on a LIBOR basis may
be delivered by the Borrower until the Adminis-
trative Agent notifies the Borrower that the
event specified in the Suspension Notice no
longer prevails, which the Administrative Agent
shall do as soon as practicable after so ascer-
taining;
(iii) if the Borrower so requires, within five Busi-
ness Days of service of a Suspension Notice, the
Borrower and the Administrative Agent shall en-
ter into negotiations (which the Administrative
Agent shall not be obliged to continue for a
period of more than 30 days) in good faith with
a view to agreeing a substitute basis for deter-
mining the rate of interest and/or funding ap-
plicable to any future LIBOR Advances; and
(iv) any substitute basis agreed under sub-
paragraph (iii) above shall, with the prior con-
sent of all the Lenders, take effect in ac-
cordance with its terms and be binding on all
the Contracting Parties.
10. PAYMENTS
10.1 FUNDS AND PLACE
(a) Except as otherwise provided in this Agreement, all
payments to be made by the Borrower, the Guarantor or
any Lender under this Agreement shall be made to the
Administrative Agent to the account of the Adminis-
trative Agent at Commerzbank Aktiengesellschaft New
York Branch, 2 World Financial Center, New York, NY
10281-1050, USA for value on the due date in Dollars
and in either immediately available Federal funds
(payment to be made no later than 12 noon (New York
time)) for credit to Account No. 150/1250406, Account
name, Commerzbank International S.A., Luxembourg or
Same Day Funds for credit to Account No 150/1250406,
Account name, Commerzbank International S.A.,
32
Luxembourg or at such other office or bank in New
York City as the Administrative Agent by not less
than five Business Days notice shall have previously
notified to the Borrower, Guarantor or Lender, as the
case may be.
(b) Subject to Clause 10.3 (Taxes), each payment received
by the Administrative Agent for the account of an-
other person under paragraph (a) above shall:
(i) in the case of a payment received for the ac-
count of the Borrower, be made available by the
Administrative Agent to the Borrower by applica-
tion:
(A) first, in or towards payment (on the date
of receipt) of any amount due from the Bor-
rower under this Agreement
(B) secondly, in payment (on the date and in
the currency and funds of receipt) to the
account of the Borrower's custodial agent
with such office or bank in North Quincy,
Massachusetts as it shall have previously
notified to the Administrative Agent;
and
(ii) in the case of any other payment, be made avail-
able by the Administrative Agent to the person
for whose account the payment was received (in
the case of a Lender for the account of its Fa-
cility Office) on the date of receipt for the
account of such person to such account of the
person with such office or bank in New York City
as it shall have previously notified to the Ad-
ministrative Agent;
(c) The Administrative Agent shall promptly distribute
payments received for the account of the Lenders
among the Lenders pro rata to their respective en-
titlements.
10.2 RECOVERY OF PAYMENTS
Unless the Administrative Agent has received notice from a
Lender, the Borrower or the Guarantor not less than two
Business Days before the date upon which the Lender, the
Borrower or the Guarantor (the "PARTY LIABLE") is to pay
an amount to the Administrative Agent for transfer to the
Borrower or Lender respectively (the "PAYEE") that the
party liable does not intend to make that amount available
to the Administrative Agent, the Administrative Agent may
assume that the party liable has paid the amount to it on
the due date in accordance with this Agreement. In reli-
ance upon that assumption, the Administrative Agent may
(but shall not be obliged to) make available to the
payee(s) a corresponding sum. If the amount is not in
fact made available to Administrative Agent and the party
liable does not forthwith on demand pay the amount to the
Administrative Agent together with interest on the amount
until its payment at a rate determined by the Administra-
tive Agent to reflect its cost of funds, the payee(s)
shall forthwith on demand repay the amount to the Adminis-
trative Agent together with interest on the amount calcu-
lated as above. The provisions of this Clause 10.2 are
without prejudice to any rights which the Agent and the
payee may have against the party liable.
33
10.3 TAXES
(a) All payments to be made by the Borrower or the Guar-
antor under the Finance Documents shall be made:
(i) without set-off or counterclaim; and
(ii) free and clear of and without deduction for or
on account of all Taxes except to the extent
that the Borrower or the Guarantor is compelled
by law to make payment subject to any Taxes.
For the purposes of this Clause 10, "RELEVANT TAX"
means any Tax imposed by or in the USA or the juris-
diction of incorporation of the Borrower or the Guar-
antor or any other jurisdiction from or through which
a payment is made by the Borrower or the Guarantor
under any Finance Document (or any federation or or-
ganisation of which any of those jurisdictions is at
the relevant time a member) or any political sub-
division or taxing authority of any of the foregoing.
(b) All Taxes required to be deducted or withheld from
any amounts paid or payable under the Finance Docu-
ments shall be paid by the Borrower or the Guarantor
(as the case may be) promptly and in any event before
penalties attach thereto. If any Relevant Taxes or
amounts in respect of Relevant Taxes must be deducted
from any amounts payable or paid by the Borrower or
the Guarantor under the Finance Documents (or payable
or paid by an Agent to a Financial Institution under
the Finance Documents), the Borrower or the Guarantor
(as the case may be) shall pay such additional
amounts as may be necessary to ensure that the rel-
evant Financial Institution receives a net amount
equal to the full amount which it would have received
had payment not been made subject to Relevant Tax.
(c) Within thirty days of each payment by the Borrower or
the Guarantor under sub-paragraph (b) above of Tax or
in respect of Taxes, it shall deliver to the Adminis-
trative Agent for the relevant Financial Institution
a certified copy of the original receipt, if one is
available, or other appropriate evidence issued by
the authority to whom the payment was made that the
Tax has been duly remitted to the appropriate author-
ity.
(d) (i) Subject to sub-paragraph (ii) below, if Relevant
Taxes must be withheld or deducted from any
amounts payable or paid by the Borrower or the
Guarantor to a Lender under the Finance Docu-
ments the Borrower or the Guarantor (as the
case may be) may by giving not less than ten
Business Days' notice to the Lender (through the
Administrative Agent):
(A) prepay in full any Advance made to it by
the Lender together with all other amounts
payable to the Lender under the Finance
Documents; and
(B) cancel that Lender's Commitment;
(ii) any notice by the Borrower or the Guarantor
shall be irrevocable and may only be given under
sub-paragraph (i) above whilst the duty to with-
hold or deduct
34
continues and for so long as no Default has oc-
curred which is continuing; such Lender's Com-
mitment shall be cancelled on the giving of the
notice; and
(iii) the Borrower shall be entitled to introduce a
new Lender acceptable to the Administrative
Agent or arrange for an existing Lender to as-
sume the Commitment and Advance of the Lender
where Commitment has been cancelled and Advance
prepaid in accordance with sub-paragraphs (i)
and (ii) above.
10.4 NON-BUSINESS DAYS
Whenever any payment under the Finance Documents becomes
due on a day which is not a Business Day, then the due
date shall instead be the next Business Day in that calen-
dar month (if there is one) or the preceding Business Day
(if there is not). During any extension of the due date
for payment of any principal under this Agreement interest
shall be payable on the principal at the rate payable on
the original due date.
10.5 CERTIFICATIONS
Any certification or determination of a rate or amount
made by a Financial Institution shall be prima facie
evidence of the matters certified or determined.
10.6 APPROPRIATIONS
In the case of a partial payment, the Administrative Agent
may appropriate the payment towards the obligations of the
Borrower or the Guarantor under the Finance Documents in
the following order:
(a) FIRST, in or towards payment pro rata of any costs
and expenses of the Financial Institutions due but
unpaid under the Finance Documents;
(b) SECONDLY, in or towards payment pro rata of any ac-
crued interest due but unpaid under the Finance Docu-
ments;
(c) THIRDLY, in or towards payment pro rata of any prin-
cipal due but unpaid under the Finance Documents; and
(d) FOURTHLY, in or towards payment pro rata of any other
sum due but unpaid under the Finance Documents.
Any appropriation as above shall override any appropria-
tion made by the Borrower or the Guarantor.
10.7 MITIGATION
If, in respect of any Lender, circumstances arise which
would, or would on the giving of notice, result in:
35
(a) any additional amounts becoming payable under
Clause 10.3(b) (Taxes); or
(b) any amount becoming payable under Clause 11 (In-
creased Costs); or
(c) any prepayment or cancellation under Clause 12 (Il-
legality),
then, without limiting the obligations of the Borrower and
the Guarantor under this Agreement and without prejudice
to the terms of Clauses 10 (Payments), 11 and 12, the
Lender shall, in consultation with the Administrative
Agent, the Borrower and the Guarantor, take such reason-
able steps as may be open to it (including, without limi-
tation, changing a Facility Office) to mitigate or remove
such circumstance, including (without limitation) the
transfer of its rights and obligations under this Agree-
ment to another bank or financial institution acceptable
to the Borrower and the Guarantor, unless to do so might
(in the opinion of the Lender) in any way be materially
prejudicial to it or would otherwise be contrary to its
banking policy.
11. INCREASED COSTS
11.1 INCREASED COSTS
Subject to Clause 11.2 (Exceptions), if the result of the
introduction of or any change in any law, regulation,
treaty or official directive or request from any govern-
mental or regulatory authority (whether or not having the
force of law but if not having the force of law, being of
a type with which the Lender is accustomed to comply) or
any change in the interpretation or application thereof
including, without limitation, those relating to Taxation,
any reserve, special deposit, cash ratio, liquidity or
capital adequacy requirement or any other form of banking
or monetary controls, is that:
(i) a Financial Institution incurs an additional cost as
a result of having entered into, or performing, main-
taining or funding its obligations under, any Finance
Document; or
(ii) a Lender incurs an additional cost in making, funding
or maintaining all or any advances comprised in a
class of advances formed by or including the Advances
made or to be made by it under this Agreement; or
(iii) any amount payable to a Financial Institution or the
effective return to a Financial Institution under
this Agreement or on its capital is reduced; or
(iv) a Financial Institution makes any payment or foregoes
any interest or other return on or calculated by ref-
erence to any amount received or receivable by it
from the Borrower, the Guarantor or the Administra-
tive Agent under any Finance Document,
then and in each such case:
(A) the Financial Institution shall notify the Bor-
rower through the Administrative Agent of the
relevant event promptly upon becoming aware of
the event and of the amount of any claim under
this Clause 11.1 promptly upon ascertaining that
amount;
36
(B) within 14 days of any demand from time to time
by the Financial Institution through the Admin-
istrative Agent, the Borrower shall pay to the
Administrative Agent for the account of the Fi-
nancial Institution such amount as the Financial
Institution shall certify will compensate the
Financial Institution for the additional cost
(or, in the case of paragraph (ii) above, the
proportion of the additional cost as is at-
tributable to its making, funding or maintaining
Advance(s)), reduction, payment or forgone in-
terest or other return.
(C) (a) subject to sub-paragraph (b) below, the
Borrower may by giving not less than ten
Business Days' notice to the Lender
(through the Administrative Agent):
(i) prepay in full any Advance made to it
by the Lender together with all other
amounts payable to the Lender under
the Finance Documents; and
(ii) cancel that Lender's Commitment;
(b) any notice by the Borrower shall be ir-
revocable and may only be given under sub-
paragraph (a) above whilst the circum-
stances giving rise to the notification
under paragraph (A) above continue and for
so long as no Event of Default has occurred
which is continuing; such Lender's
Commitment shall be cancelled on the giving
of the notice; and
(c) the Borrower shall be entitled to introduce
a new Lender acceptable to the Administra-
tive Agent or arrange for an existing
Lender to assume the Commitment and Advance
of the Lender where Commitment has been
cancelled and Advance prepaid in accordance
with sub-paragraphs (c)(a)(i) and (ii)
above.
11.2 EXCEPTIONS
Clause 11.1 shall not apply to or in respect of:
(a) any change in the rate of Taxation on the overall net
income of a Lender (or the overall net income of a
division or branch of the Lender) imposed in the ju-
risdiction in which its principal office or Facility
Office for the time being is situate;
(b) any circumstances referred to in Clause 10.3 (Taxes)
or to the extent otherwise provided in Clause 24.8
(Increased Costs/Withholding Taxes);
(c) any increased cost which is incurred in consequence
of the implementation of matters set out in the re-
port of the Basle Committee on Banking Regulations
and Supervisory Practices dated July, 1988 and en-
titled "International Convergence and Capital Mea-
surement and Capital Standards", unless it results
from a change in the interpretation,
37
administration or application of such matters by any
relevant agency after the date of this Agreement; and
(d) any increased cost attributable to the negligence or
wilful misconduct of a Finance Party.
12. ILLEGALITY
If the introduction of or any change in any law, regula-
tion, treaty or official directive (whether or not having
the force of law but, if not having the force of law, be-
ing of a type with which the Lender is accustomed to com-
ply) shall make it unlawful or contrary to an official
directive ("SUPERVENING ILLEGALITY") in any jurisdiction
for any Lender to make available or fund or maintain any
Advance or to give effect to its obligations as contem-
plated by this Agreement, the Lender may give notice
thereof to the Borrower through the Administrative Agent,
whereupon:
(a) the Borrower shall, within the time allowed by the
relevant law, regulation, treaty or official direc-
tive, prepay the Lender's Advances to it together
with all other amounts payable to the Lender under
the Finance Documents; and
(b) such Lender's Commitment shall forthwith be can-
celled,
to the extent required to remove the Supervening Illegal-
ity.
13. GUARANTEE
13.1 GUARANTEE
The Guarantor irrevocably and unconditionally:
(a) guarantees to the Financial Institutions, as princi-
pal obligor and not merely as surety, prompt perfor-
mance by the Borrower of all its obligations under
this Agreement and the other Finance Documents and
the payment of all sums payable now or in the future
to the Financial Institutions by the Borrower under
this Agreement when and as they become due; and
(b) undertakes with the Financial Institutions that if
and whenever the Borrower is in default in the pay-
ment of any amount under this Agreement the Guarantor
shall forthwith pay the amount as if the Guarantor
instead of the Borrower were expressed to be the
principal obligor, together with interest on the
amount at the rate per annum from time to time pay-
able by the Borrower on the amount from the date when
it becomes payable by the Borrower until payment of
it in full.
13.2 CONTINUING GUARANTEE
This guarantee is a continuing guarantee and shall extend
to the ultimate balance of all sums payable by the Bor-
rower under the Finance Documents.
38
13.3 REINSTATEMENT
Where any discharge (whether in respect of the obligations
of the Borrower or any security for those obligations or
otherwise) is made in whole or in part or any arrangement
is made on the faith of any payment, security or other
disposition which is avoided or must be repaid on bank-
ruptcy, liquidation or otherwise without limitation, the
liability of the Guarantor under this guarantee shall con-
tinue as if the discharge or arrangement, as the case may
be, had not occurred. Each of the Financial Institutions
is entitled to concede or compromise any claim that any
payment, security or other disposition is liable to avoid-
ance or repayment.
13.4 WAIVER OF DEFENCES
The obligations of the Guarantor under this Clause 13
shall not be affected by any act, omission, matter or
thing which, but for this provision, might operate to re-
lease or otherwise exonerate it from its obligations under
this Clause 13 in whole or in part, including without
limitation and whether or not known to it or any Financial
Institution:
(a) any time or waiver granted to or composition with the
Borrower or any other person;
(b) the taking, variation, compromise, renewal or release
of, or refusal or neglect to perfect or enforce, any
rights, remedies or securities against the Borrower
or any other person;
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Borrower or any other
person;
(d) any variation of a Finance Document or any other
document or security so that references to the Fi-
nance Document in this Clause 13 shall include each
variation (including without limitation any substi-
tute basis agreed under Clause 9 (Market Disrup-
tion)); or
(e) any unenforceability, invalidity or frustration of
any obligations of the Borrower or any other person
under any Finance Document or any other document or
security, to the intent that the Guarantor's obliga-
tions under this Clause 13 shall remain in full force
and its guarantee be construed accordingly, as if
there were no unenforceability, invalidity or frus-
tration.
13.5 IMMEDIATE RECOURSE
The Guarantor waives any right it may have of first re-
quiring any of the Financial Institutions to proceed
against or enforce any other rights or security or claim
payment from any other person before claiming from the
Guarantor under this Clause 13.
13.6 PRESERVATION OF RIGHTS
Until all amounts which may be or become payable by the
Borrower under or in connection with this Agreement and
the other Finance Documents have been irrevocably paid and
discharged in full, each Financial Institution may:
39
(a) refrain from applying or enforcing, as appropri-
ate, any other moneys, security or rights held
or received by that Financial Institution in
respect of those amounts, or apply and enforce
the same in such manner and order as it sees fit
(whether against those amounts or otherwise) and
the Borrower shall not be entitled to the ben-
efit of the same; and
(b) hold in an interest bearing suspense account any mon-
eys received from the Guarantor or on account of the
Borrower's liability under this Clause 13.
13.7 NON-COMPETITION
(a) Until all amounts which may be or become payable by
the Borrower under this Agreement have been ir-
revocably paid in full, the Guarantor shall not:
(i) be subrogated to any rights, security or moneys
held, received or receivable by any Financial
Institution or be entitled to any right of con-
tribution in respect of any payment made or mon-
eys received on account of the Guarantor's li-
ability under this Clause 13;
(ii) be entitled and claim to rank as a creditor
against the estate or in the bankruptcy or liq-
uidation of the Borrower in competition with any
Financial Institution; or
(iii) receive, claim or have the benefit of any pay-
ment, distribution or security from or on ac-
count of the Borrower, or exercise any right of
set-off as against the Borrower.
(b) The Guarantor shall forthwith pay to the Administra-
tive Agent for the account of the Financial Institu-
tions an amount equal to any set-off (as referred to
in (iii) above) in fact exercised by it and shall
hold in trust for and forthwith pay or transfer, as
the case may be, to the Administrative Agent for the
Financial Institutions any payment or distribution or
benefit of security in fact received by it.
13.8 OTHER DOCUMENTS
This guarantee shall be in addition to and shall not in
any way be prejudiced by any other guarantee or any secu-
rity now or hereafter held by any Financial Institution in
respect of the obligations of the Borrower under this
Agreement.
13.9 CERTIFICATE
A certificate of the Administrative Agent as to any amount
owing from the Borrower under this Agreement or any other
Finance Document shall be prima facie evidence of that
amount.
40
14. REPRESENTATIONS AND WARRANTIES
14.1 REPRESENTATIONS AND WARRANTIES
Each of the Borrower and the Guarantor (in respect of it-
self and its Subsidiaries) represents and warrants to each
of the Financial Institutions that:
(a) ORGANISATION, ETC.
(i) Each member of the Group is a corporation val-
idly organised and existing and, if applicable,
in good standing under the laws of the State or
jurisdiction of its incorporation, is duly
qualified to do business and, if applicable, in
good standing as a foreign corporation in each
jurisdiction where the nature of its business
makes such qualification necessary and has full
power and authority to own its property and con-
duct its business substantially as presently
conducted and as presently proposed to be con-
ducted by it;
(ii) it has full power and authority to enter into
and to perform its obligations under the Finance
Documents to which each is a party; and
(iii) it is in compliance with all Requirements of
Law, except to the extent that the failure to
comply therewith could not, in the aggregate,
have a material adverse effect on the business,
operations, property or financial or other con-
dition of the Group taken as a whole, and could
not materially adversely affect the ability of
the Borrower or the Guarantor to perform its
obligations under any Finance Document.
(b) DUE AUTHORISATION
The execution and delivery by each of the Borrower
and the Guarantor of the Finance Documents executed
or to be executed by it, the performance by each of
the Borrower and the Guarantor of its respective ob-
ligations under the Finance Documents and the trans-
actions contemplated by the Finance Documents:
(i) have been duly authorised by all necessary cor-
porate action;
(ii) do not and will not require any approval or con-
sent of any governmental agency or authority;
(iii) do not and will not conflict with, result in any
violation of, or constitute a default under any
provision of the constitutive documents of the
Borrower, the Guarantor or any of their Subsid-
iaries or any agreement, instrument or document
binding upon or applicable to the Borrower or
the Guarantor or any of their Subsidiaries or
any present law or governmental regulation or
court or administrative decree or order ap-
plicable to the Borrower, the Guarantor or any
of their Subsidiaries;
41
(iv) will not, save as provided by the Finance Docu-
ments, result in or require the creation or im-
position of any Security Interest on any prop-
erty of any member of the Group pursuant to the
provisions of any agreement, indenture or other
instrument or document binding upon or ap-
plicable to any member of the Group.
(c) VALIDITY OF THE FINANCE DOCUMENTS
Each Finance Document will on the due execution and
delivery thereof be the legal, valid and binding ob-
ligation of the Borrower or the Guarantor, as the
case may be, enforceable against the Borrower or the
Guarantor in accordance with its terms, subject only
to such qualifications as may be contained in the
legal opinions delivered under Clause 4.1(a) (Docu-
mentary Conditions Precedent).
(d) FINANCIAL INFORMATION
(i) All balance sheets, statements of income and
shareholders' equity, changes in financial posi-
tion and other financial information which have
been or will be furnished by the Borrower or the
Guarantor to the Administrative Agent for any
Financial Institution for the purposes of or in
connection with this Agreement or any transac-
tion contemplated hereby have been or will be
prepared in accordance with generally accepted
accounting principles consistently applied
throughout the periods involved (except as dis-
closed therein) and, as far as the Borrower or
the Guarantor is aware, do or will give a true
and fair view of the consolidated or consolidat-
ing, as appropriate, financial condition of the
Group or financial condition of the Borrower, as
the case may be, as at the dates thereof and the
results of their operations for the periods then
ended, including, without limitation, the con-
solidated balance sheet at December 31, 1995,
the statement of net assets, the statement of
operations, the statement of changes in net as-
sets and the schedule of investments for the
Fiscal Year then ended, of the Group, certified
by Price Waterhouse S.A. together with the unau-
dited statement of funds from operations for the
period from July 7 to December 31, 1995; and
(ii) Since December 31, 1995 there has been no mate-
rial adverse change in the consolidated finan-
cial condition of the Group taken as a whole
from that reflected in the consolidated balance
sheet as of December 31, 1995.
(e) ABSENCE OF DEFAULT
No member of the Group is in default in the payment
of any Debt in an aggregate amount of more than
$10,000,000 (or its equivalent in any other currency)
or any other material obligation or under any law or
governmental regulation or court or administrative
decree or order materially affecting its property or
business, or aware of any facts or circumstances
which would give rise to any such default.
42
(f) LITIGATION, ETC.
No litigation or arbitration or governmental investi-
gation or proceeding against any member of the Group
or to which any of the properties of any member
thereof is subject is pending or, to the knowledge of
the Borrower or the Guarantor threatened which, if
adversely determined, might materially adversely af-
fect the consolidated financial condition or opera-
tions of the Group or impair the ability of the Bor-
rower or the Guarantor to perform any of its obliga-
tions under any Finance Document.
(g) NO BURDENSOME AGREEMENT
No member of the Group is a party to any agreement or
other instrument or document, or subject to any char-
ter or other corporate restriction, materially ad-
versely affecting its business, properties, assets,
operations or condition (financial or otherwise).
(h) TAXES
Each member of the Group has filed all tax returns
and reports required by law to have been filed by
them and have paid all taxes and governmental charges
thereby shown to be owing, except for taxes being
contested in good faith by appropriate proceedings
and for which appropriate reserves have been estab-
lished in accordance with generally accepted account-
ing principles.
(i) ERISA
No member of the Group has a pension benefit plan
subject to Title IV of ERISA. No unpaid or contin-
gent liability to the Pension Benefit Guaranty Corpo-
ration ("PBGC") has been or is expected to be in-
curred, directly or indirectly, by any member of the
Group (other than for payment of PBGC premiums in the
ordinary course). No event has occurred and there
exists no condition or set of circumstances which
presents a material risk of the termination or par-
tial termination of any plan which could result, di-
rectly or indirectly, in a liability on the part of
any member of the Group to the PBGC. The Group con-
stitutes a venture capital operating company for the
purposes of ERISA or is otherwise exempt from ERISA
requirements.
(j) PARI PASSU
The obligations of the Borrower and the Guarantor
under the Finance Documents are direct and uncondi-
tional obligations and rank in all respects at least
pari passu with all other present and future unse-
cured and unsubordinated obligations of the Borrower
and the Guarantor except to the extent that such ob-
ligations are afforded priority under the Security
Documents.
(k) CONFIDENTIAL INFORMATION MEMORANDUM
The information contained in the Confidential Infor-
mation Memorandum (as supplemented prior to the date
of the Syndication Agreement) was and remains true
and accurate in all
43
material respects as at its date, the date of this
Agreement and the date of the Syndication Agreement
and was not incomplete or misleading in any material
respect by reason of any omission.
(l) NOT AN INVESTMENT COMPANY
It is not an "investment company" within the meaning
of the Investment Company Act of 1940 of the USA.
14.2 REPETITION
The representations and warranties set out in Clause 14.1
shall:
(a) be made on the Signing Date; and
(b) (unless expressed to be given as at or in respect of
a particular date) be deemed to be repeated on the
date of the Syndication Agreement and (other than
Clause 14.1(k)) on the date of delivery of each Re-
quest, on each Utilisation Date and on the first day
of each Interest Period, with reference to the facts
and circumstances then subsisting, as if made at
such time.
15. COVENANTS
The covenants in this Clause 15 shall remain in force
from the Signing Date for so long as the Commitment is in
force or any amount is outstanding under the Finance
Documents.
15.1 FINANCIAL INFORMATION, ETC.
Each of the Borrower and the Guarantor will furnish, or
will cause to be furnished to the Administrative Agent
for each Lender and to the Collateral Agent, copies of
the following financial statements, reports and informa-
tion (all of which shall be computed in Dollars):
(a) together with the financial statements delivered
pursuant to Clauses 15.1(b) and (c) hereof, a Com-
pliance Certificate and an updated and revised
schedule I to the Master Collateral Agreement;
(b) within 60 days after the close of each of the first
three quarters of each Fiscal Year, consolidated
balance sheets of the Borrower and of the Guarantor
at the close of such quarter, and the related con-
solidated and consolidating statements of income and
retained earnings, stockholders' equity and state-
ments of changes in financial position of the Bor-
rower and of the Guarantor for the period commencing
at the end of the previous Fiscal Year and ending
with the close of such quarter, certified by a Man-
aging Director or Financial Director of each of the
Borrower and the Guarantor prepared in accordance
with generally accepted accounting principles;
(c) within 90 days after the close of each Fiscal Year
consolidated balance sheets at the close of such
Fiscal Year and the related consolidated statements
of income and retained
44
earnings, stockholders' equity and changes in financial
position for such Fiscal Year, of the Borrower and of the
Group, certified without qualification by Price Water-
house S.A. or other independent public accountants of
recognised standing selected by the Guarantor and accept-
able to the Majority Lenders;
(d) promptly upon receipt thereof, copies of all de-
tailed financial and management reports submitted to
the Borrower or the Guarantor by independent public
accountants in connection with each annual or in-
terim audit made by such accountants of the books of
any member of the Group;
(e) promptly upon the mailing thereof to stockholders
generally, any annual report, proxy statement or
other communication;
(f) promptly upon any filing thereof by the Borrower or
the Guarantor with the Institute Monetaire Luxem-
bourgeoise or the Securities and Exchange Commis-
sion, any annual, periodic or special report or reg-
istration statement (exclusive of exhibits thereto)
or any prospectus generally available to the public;
(g) promptly from time to time at the reasonable request
of the Administrative Agent valuations (appraisals)
from the Guarantor's independent valuers approved by
the Administrative Agent (acting reasonably) of
land, properties under development and operating
properties held by the Borrower and the Qualifying
Issuers which are Subsidiaries and in the case of
other Qualifying Issuers if the Borrower or the
Guarantor or the Investment Adviser has such valua-
tions;
(h) if in the Administrative Agent's reasonable opinion
the aggregate Market Value of Qualifying Collateral
has been adversely affected in a material way for
whatever reason, a Borrowing Base Certificate dated
and delivered within ten days of a request by the
Administrative Agent which Borrowing Base Certifi-
cate shall demonstrate compliance with the Borrowing
Base based upon the Market Value as defined in
Clause 1.1 subject to the following modifications:
(1) the closing sale or bid price, as the case may
be, of a Qualifying Security quoted by the
Pricing Service as of the Business Day im-
mediately preceeding the date of the Borrowing
Base Certificate shall apply;
(2) in all other cases the values or amounts used
for the purposes of the most recent Compliance
Certificate delivered under Clause 15.1(a)
shall apply for those items forming part of the
Qualifying Collateral at the date of the Bor-
rowing Base Certificate or if the relevant
Qualifying Security has been acquired since the
date of the most recent Compliance Certificate
the value basis set out in sub-paragraph (c) of
the definition of Market Value shall be used
for such items;
(i) promptly from time to time an updated and revised
schedule I to the Master Collateral Agreement as the
Administrative Agent may reasonably request from
time to time; and
45
(j) promptly from time to time such other information
with respect to the Collateral or the financial con-
dition and operations of the Group as any Lender
may, through the Administrative Agent, from time to
time reasonably request.
15.2 MAINTENANCE OF CORPORATE EXISTENCE
Except as permitted by Clause 15.13 (Consolidation,
Merger, etc.), each of the Borrower and the Guarantor
will cause to be done at all times all things necessary
to maintain and preserve its corporate existence.
15.3 PAYMENT OF TAXES, ETC.
Each of the Borrower and the Guarantor will, and shall
cause each of its Subsidiaries to, pay and discharge, as
the same may become due and payable, all taxes, govern-
mental assessments and other governmental charges or lev-
ies on it or on any of its property, as well as claims of
any kind which, if unpaid, might become a lien upon any
of its properties, provided, however, that the foregoing
shall not require any member of the Group to pay any such
tax, assessment, charge, levy or lien so long as it shall
contest the validity thereof in good faith by appropriate
proceedings and shall set aside and maintain, in ac-
cordance with generally accepted accounting principles,
adequate reserves with respect thereto.
15.4 INSURANCE
Each of the Borrower and the Guarantor will, and will
cause each other member of the Group to, maintain insur-
ance coverage by financially sound and reputable insurers
in such forms and amounts, with such deductibles and
against such risks, as are customary for corporations en-
gaged in the same or a similar business and owning and
operating similar properties.
15.5 NOTICE OF DEFAULT OR LITIGATION
Each of the Borrower and the Guarantor will as soon as
practicable after becoming aware of the same (and in any
event within one Business Day of becoming aware of such
occurrence) give notice to the Administrative Agent of:
(a) the occurrence of any Default;
(b) any litigation or arbitration or any governmental
investigation or proceeding previously not disclosed
by it to the Lenders which has been instituted or is
threatened against any member of the Group or to
which any of the properties of any thereof is or may
become subject which, if adversely determined, might
materially adversely affect the consolidated finan-
cial condition or operations of the Group or impair
the ability of the Borrower or the Guarantor to per-
form its obligations under any Finance Document; and
(c) any material adverse development which shall occur
in any litigation, arbitration or governmental in-
vestigation or proceeding previously disclosed by
the Borrower to the Lenders.
46
15.6 CONDUCT OF BUSINESS
Each of the Borrower and the Guarantor will, and will
cause each Subsidiary to do or cause to be done all
things reasonably necessary to preserve and keep in full
force and effect its existence and all franchises, rights
and privileges necessary for the proper conduct of its
business.
15.7 DIRECT OWNERSHIP OF REAL ESTATE
No member of the Group will own directly any real prop-
erty or interest therein without giving prior notice to
the Administrative Agent and agreeing with the Adminis-
trative Agent prior to acquiring such property or inter-
est a form of mortgage or security interest in respect of
such property or interest in form and substance reason-
ably satisfactory to the Administrative Agent and grant-
ing to the Collateral Agent on behalf of the Lenders a
first ranking priority security interest over such prop-
erty or interest provided that this covenant shall not
apply to a lease by the Borrower or the Guarantor of of-
fice premises for its own use for which a full market
rent with no premium is to be paid.
15.8 BOOKS AND RECORDS
Each of the Borrower and the Guarantor will, and will
cause each other member of the Group to, keep all mate-
rial books and records reflecting all of its business
affairs and transactions in accordance with generally
accepted accounting principles and permit any Lender or
any of its representatives (provided that such person is
accompanied by a representative of the Borrower or the
Guarantor), at reasonable times and intervals, to visit
all of its offices, discuss its financial matters with
its officers and independent accountants (and hereby au-
thorises such independent accountants to discuss its fi-
nancial matters with the Administrative Agent or any
Lender or its representatives) and examine any of its
books and other corporate records.
15.9 VALUE OF ASSETS
The Borrower and Guarantor will ensure that the value of
consolidated gross assets of the Borrower comprise no
less than 90 per cent. of the value of consolidated gross
assets of the Guarantor computed in accordance with gen-
erally accepted accounting principles.
15.10 SECURITY INTERESTS
The Borrower and the Guarantor will not, and will not
permit any Subsidiary to, create, incur, assume or suffer
to exist any Security Interest upon any of its property
or assets or revenues, whether now owned or hereafter ac-
quired, except:
(a) liens for taxes, assessments or other governmental
charges or levies, and liens securing claims or de-
mands incurred in the ordinary course of business,
provided in each case that:
(i) payment thereof is not at the time required by
Clause 15.3 (Payment of Taxes); and
47
(ii) if required by generally accepted accounting
principles, the applicable member of the Group
shall have set aside and maintained adequate
reserves with respect thereto;
(b) liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment
insurance or other forms of governmental insurance
or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other
than for borrowed money) entered into in the ordi-
nary course of business or to secure obligations on
surety or appeal bonds;
(c) Security Interests for the benefit of the Lenders
under the Security Documents;
(d) Security Interests over real property or interests
therein in existence at the date of acquisition of
such property or interest by a Subsidiary which is a
US person (and not created in contemplation of such
acquisition) and which secures a principal amount no
greater than that outstanding at the date of acqui-
sition together with any items capitalized in ac-
cordance with generally accepted accounting prin-
ciples; and
(e) any other Security Interest to which the Majority
Lenders have granted their prior written consent.
15.11 FINANCIAL CONDITION
(a) The Borrower will not incur any liabilities other
than:
(i) indebtedness under the Finance Documents;
(ii) indebtedness owed to the Guarantor which is
fully subordinated to the Borrower's indebted-
ness under the Finance Documents in form and
substance reasonably satisfactory to the Major-
ity Lenders; and
(iii) other liabilities arising in respect of
short-term (meaning 90 days or less) ac-
counts payable not to exceed $15,000,000 or
its equivalent in aggregate at any time.
(b) The Borrower will ensure that at all times an ag-
gregate amount of $10,000,000 will:
(i) remain undrawn under this Agreement but avail-
able for borrowing hereunder;
(ii) be held by the Collateral Agent as Collateral
in freely marketable securities; or
(iii) be held by the Borrower in the form of Cash
Equivalent Investments.
(c) The Guarantor will:
(i) (other than obligations under the Finance Docu-
ments and any liabilities arising under the in-
demnity, referred to at Section 30(b) of the
Master Collateral Agreement, given by the Guar-
antor in favour of Banque Internationale a
48
Luxembourg) not incur any indebtedness for bor-
rowed money or prepay any principal of or make
any payment of interest on or guarantee or in-
demnify any person in respect of, any such in-
debtedness unless the obligations in respect of
such indebtedness, guarantee or indemnity is
fully subordinated to the Guarantor's obliga-
tions under the Finance Documents in form and
substance reasonably satisfactory to the Major-
ity Lenders;
(ii) ensure that its Net Worth, calculated on a con-
solidated basis, exceeds $250,000,000 at all
times;
(iii) procure that all relevant times, calculated on
a consolidated basis:
(A) its Debt to Net Worth Ratio is not less
than 1:1
(B) its Interest Coverage Ratio is not less
than 2:1
(C) its Debt Service Coverage Ratio is not less
than 1.4:1.
15.12 DIVIDENDS, STOCK PURCHASES
(a) The Borrower will not declare or pay any dividends or
make any other distribution, either in cash or prop-
erty, on any shares of its capital stock of any class
which exceed 50 per cent. of its consolidated net
income plus depreciation but after deduction of taxes
for each Fiscal Year all as computed in accordance
with generally accepted accounting principles;
(b) Neither the Borrower nor the Guarantor will:
(i) directly or indirectly, or through any Subsid-
iary, purchase, redeem or retire any shares of
its capital stock of any class or any warrants,
rights or options to purchase or acquire any
shares of its capital stock; or
(ii) pay any dividend or make any other payment or
distribution, either directly or indirectly or
through any Subsidiary, in respect of its capi-
tal stock or otherwise, other than in respect of
normal operating expenses (including advisory
fees),
at any time when a Default or a Collateral Shortfall
has occurred and is continuing or would result
therefrom.
15.13 CONSOLIDATION, MERGER, ETC.
Neither the Borrower nor the Guarantor nor any of their
respective Subsidiaries or Affiliates will consolidate
with or merge into or with any other corporation or sell,
transfer, lease or otherwise dispose of all or any sub-
stantial part of its assets to any person, except the
merger, consolidation or liquidation of any Subsidiary
into or with any other member of the Group.
49
15.14 PLANS
No Borrower will, and the Borrower will not permit any
ERISA Affiliate to, establish, or incur or suffer to ex-
ist any obligations with respect to, any employee pension
benefit plan maintained for the employees of the Borrower
or any ERISA Affiliate and covered by Title IV of ERISA.
15.15 INCONSISTENT AGREEMENTS
Neither the Borrower nor the Guarantor will, and will not
permit any other member of the Group to, enter into any
agreement containing any provision which would be vio-
lated or breached by any borrowing by the Borrower made
under this Agreement or by the performance by the Bor-
rower or the Guarantor of its obligations under the Fi-
nance Documents.
15.16 ERISA AND COMPLIANCE WITH REQUIREMENTS OF LAW
The Borrower and the Guarantor will, and will cause each
Subsidiary to, comply in all respects with all Require-
ments of Law, the non-compliance with which could have a
material adverse effect on the business operations, fi-
nancial condition or properties of the Borrower, the
Guarantor or any Subsidiary or on the ability of the Bor-
rower to perform its obligations under this Agreement.
Neither the Borrower nor the Guarantor will permit any of
their respective assets to become or be deemed to be
"plan assets" within the meaning of ERISA, the Internal
Revenue Code and the respective regulations promulgated
thereunder, of any ERISA Plan or any non-ERISA plan.
16. DEFAULT
16.1 Events of Default
Each of the events set out in Clauses 16.2 (Non-Payment)
to 16.16 (Investment Adviser) (inclusive) is an Event of
Default (whether or not caused by any reason whatsoever
outside the control of the Borrower, the Guarantor or any
other person).
16.2 NON-PAYMENT
The Borrower or the Guarantor does not pay:-
(a) any principal amount payable by it under the Finance
Documents within two days of the due date therefor;
(b) interest or any fee or any other amount payable by
it under the Finance Documents within five days of
the due date therefor,
at the place at which, and in the currency in which, it
is expressed to be payable.
16.3 BREACH OF OTHER OBLIGATIONS
The Borrower or the Guarantor, as the case may be, does
not comply with:
50
(a) Clause 8.3 (Mandatory Prepayment/Provision of Col-
lateral), Clause 8.4 (Borrowing Base Violations),
Clause 15.5(a) (Notification of a Default) or Clause
15.10 (Security Interests);
(b) any provision of Clause 15.1(a) (Compliance Certifi-
cates) or (h) (Borrowing Base Certificates) or
Clause 15.1(i) (other financial information) within
10 days of the Administrative Agent providing writ-
ten notice to the Borrower and the Guarantor (as
appropriate) of the failure;
(c) any provision of Clause 15.1(b) to (g) (financial
statements and appraisals) or Clause 15.3 (Payment
of Taxes etc.) within 60 days of the Administrative
Agent providing written notice to the Borrower and
the Guarantor (as appropriate) of the failure;
(d) any other provision of the Finance Documents and the
failure to comply (if it is capable of remedy) is
not remedied within 30 days of the Administrative
Agent providing written notice to the Borrower or
the Guarantor (as appropriate) of the failure.
16.4 MISREPRESENTATION
A representation, warranty or statement made or repeated
in or in connection with any Finance Document or in any
document delivered by or on behalf of the Borrower or the
Guarantor under or in connection with any Finance Docu-
ment is incorrect in any material respect when made or
deemed to be made or repeated.
16.5 CROSS-DEFAULT
(a) Any Debt of the Guarantor, the Borrower or any of
their respective Subsidiaries in an aggregate amount
of at least $10,000,000 or its equivalent in any
other currencies is not paid when due or within any
applicable grace period; or
(b) any Debt of the Guarantor, the Borrower or any of
their respective Subsidiaries in an aggregate amount
of at least $10,000,000 or its equivalent in any
other currencies becomes, or becomes capable of be-
ing declared, prematurely due and payable, in each
case as a result of an event of default (howsoever
described) under the document relating to that in-
debtedness.
16.6 INSOLVENCY
(a) The Borrower or the Guarantor or any of their re-
spective Subsidiaries is, or is deemed for the pur-
poses of any law to be, unable to pay its debts as
they fall due or is, or is deemed to be, insolvent,
or admits inability to pay its debts as they fall
due; or
(b) the Borrower or the Guarantor or any of their re-
spective Subsidiaries suspends making payments on
all or any class of its debts or announces an inten-
tion to do so, or a moratorium is declared in re-
spect of any of its indebtedness.
51
16.7 INSOLVENCY PROCEEDINGS
Otherwise than in connection with a voluntary amalgam-
ation or reconstruction on a solvent basis permitted un-
der Clause 15.13 (Consolidation, Merger, etc.):-
(a) any step (including petition, proposal or convening
a meeting) is taken by the Borrower or the Guarantor
or any of their respective Subsidiaries in any rel-
evant jurisdiction with a view to a composition,
assignment or arrangement with its creditors gener-
ally (or any class of them); or
(b) a members' or board meeting of the Borrower or the
Guarantor or any of their respective Subsidiaries is
convened for the purpose of considering any resolu-
tion for (or to petition for) its winding-up or its
administration or any such resolution is passed; or
(c) any person presents a petition for the winding-up or
for the administration of the Borrower or the Guar-
antor or of their respective Subsidiaries in any
relevant jurisdiction and the relevant petition or
action is not dismissed, withdrawn or otherwise dis-
continued within 30 days; or
(d) any order for the winding-up or administration of
the Borrower or the Guarantor or any of their re-
spective Subsidiaries is made in any relevant juris-
diction;
(e) any other step (including petition, proposal or con-
vening a meeting) is taken in any relevant jurisdic-
tion with a view to the rehabilitation, administra-
tion, custodianship, liquidation, winding-up or dis-
solution of the Borrower or the Guarantor or any of
their respective Subsidiaries or any other insol-
vency proceedings involving the Borrower or the
Guarantor or any of their respective Subsidiaries
and the relevant petition, action or procedure is
not dismissed, withdrawn or otherwise discontinued
within 60 days; or
(f) the Borrower or the Guarantor or any of their re-
spective Subsidiaries shall commence a voluntary
case concerning itself under Title 11 of the U.S.
Code entitled "Bankruptcy", as now or hereafter in
effect, or any successor thereto (the "BANKRUPTCY
CODE") or, in the case of a Subsidiary, under any
equivalent bankruptcy law;
(g) an involuntary case is commenced against the Bor-
rower or the Guarantor or any of their respective
Subsidiaries or any of its respective Subsidiaries,
and the petition is not controverted within 20 days,
or is not dismissed within 30 days, after commence-
ment of the case;
(h) a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substan-
tially all of the assets of the Borrower or the
Guarantor or any of their respective Subsidiaries,
or the Borrower, the Guarantor or any of their re-
spective Subsidiaries commences any other proceeding
under any reorganisation, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the
Borrower, the Guarantor or any of their respective
Subsidiaries, or there is commenced against the Bor-
rower, the Guarantor or any of their respective Sub-
sidiaries any such proceeding which remains
52
unstayed or undismissed for a period of 30 days, or the
Borrower, the Guarantor or any of their respective Sub-
sidiaries is adjudicated insolvent or bankrupt;
(i) any order of relief or other order approving any
such case or proceeding is entered;
(j) the Borrower, the Guarantor or any of their respec-
tive Subsidiaries suffers any appointment of any
custodian or the like for it or any substantial part
of its property to continue undischarged or unstayed
for a period of 30 days;
(k) the Borrower, the Guarantor or any of their respec-
tive Subsidiaries makes a general assignment for the
benefit of creditors; or
(l) any corporate action is taken by the Borrower, the
Guarantor or any of their respective Subsidiaries
for the purpose of effecting any of the foregoing.
16.8 APPOINTMENT OF RECEIVERS AND MANAGERS
(a) Any liquidator, trustee in bankruptcy, judicial cus-
todian, compulsory manager, receiver, administrative
receiver, administrator or the like is appointed in
any place in respect of the Borrower or the Guaran-
tor or any of their respective Subsidiaries or any
material part of the respective assets of any of the
foregoing; or
(b) the directors of the Borrower or the Guarantor or
any of their respective Subsidiaries request the
appointment of a liquidator, trustee in bankruptcy,
judicial custodian, compulsory manager, receiver,
administrative receiver, administrator or the like
in respect of the Borrower, the Guarantor or any of
their respective Subsidiaries or any substantial
part of its or their assets; or
(c) any person enforces any Security Interest over any
of the Collateral or any other material part of the
assets of the Borrower or the Guarantor or any of
their respective Subsidiaries and (except in rela-
tion to the Collateral) the relevant proceedings are
not dismissed, withdrawn or otherwise discontinued
within 60 days.
16.9 LEGAL PROCESS
(a) Any judgment or order is made against any member of
the Group (not paid or fully covered by insurance)
of US$10,000,000 or more which is not stayed or dis-
charged or bonded pending appeal within 30 days or
(where payment may be lawfully withheld pending the
outcome of such proceedings) is not being contested
in good faith by the relevant party by appropriate
proceedings within 30 days; or
(b) any attachment, sequestration, distress or execution
or lien in favour of any governmental or regulatory
authority affects any material asset of the Guaran-
tor, the Borrower or any of their respective Subsid-
iaries and is not discharged within 30 days.
53
16.10 UNLAWFULNESS
It is or it becomes unlawful for the Guarantor or the
Borrower to perform any of its obligations under the Fi-
nance Documents.
16.11 GUARANTEE
The guarantee by the Guarantor hereunder is not effective
or enforceable or is alleged by the Guarantor to be inef-
fective or unenforceable for any reason.
16.12 SECURITY
(a) Any Security Document is not effective or enforce-
able in whole or in part or is alleged by the Bor-
rower or the Guarantor to be ineffective or unen-
forceable in whole or in part for any reason; or
(b) proceedings are brought by any person alleging any
Security Document to be ineffective or unenforceable
in whole or in part for any reason and:
(i) such proceedings are not discontinued, dis-
missed or withdrawn within 30 days; or
(ii) the Borrower or the Guarantor does not
within 30 days demonstrate to the satisfac-
tion of the Collateral Agent (acting on the
instructions of the Majority Lenders) that
such proceedings are frivolous or vexatious
or have no reasonable prospect of success
and in any such case are being contested by
the Borrower or the Guarantor in good faith
by appropriate proceedings.
16.13 LOSS OF AUTHORISATIONS
Any authorisation material to the business of the Bor-
rower or the Guarantor is suspended, revoked or lapses
and is not renewed.
16.14 CHANGE OF CONTROL
(a) The Investment Adviser ceases to be directly or in-
directly a Subsidiary of SCG;
(b) SCG fails to own beneficially directly or indirectly
at least 20 per cent. of the voting share capital of
the Guarantor;
(c) the Guarantor fails to own beneficially directly or
indirectly at least 95 per cent. of the voting share
capital of the Borrower;
(d) any person or persons acting in concert (other than
SCG) owns more than 10 per cent. of shares of the
Guarantor and continues to do so for more than 30
days after notice thereof has been given by the Ad-
ministrative Agent to the Guarantor or such longer
period as may be reasonably necessary for the Guar-
antor to exercise promptly and in good faith its
rights with respect to any excess shares under the
Guarantor's Articles of Incorporation.
54
16.15 PARI PASSU
The obligations of the Borrower and the Guarantor under
the Finance Documents shall not constitute direct and un-
conditional obligations or shall not rank in all respects
at least pari passu with all other present and future un-
secured and unsubordinated obligations of the Borrower or
the Guarantor as the case may be.
16.16 INVESTMENT ADVISER
Any Event of Default specified in Clause 16.6 (Insol-
vency), 16.7 (Insolvency Proceedings) or 16.8 (Appoint-
ment of Receivers and Managers) shall occur in relation
to the Investment Adviser and there shall not be ap-
pointed within 15 days following such Event of Default a
substitute Investment Adviser reasonably acceptable to
the Majority Lenders.
16.17 ACCELERATION
On and at any time after the occurrence of an Event of
Default and whilst such Event of Default is continuing
the Administrative Agent may, and shall if so directed by
the Majority Lenders, by notice to the Borrower or the
Collateral Agent (as the case may require):-
(a) cancel the Total Commitments; and/or
(b) demand that all the Advances, together with accrued
interest and all other amounts accrued under this
Agreement be immediately due and payable, whereupon
they shall become immediately due and payable;
(c) demand that all the Advances, together with accrued
interest and all other amounts accrued under this
Agreement, be payable on demand, whereupon they
shall immediately become payable on demand by the
Administrative Agent; and/or
(d) request and direct the Collateral Agent to take all
steps necessary or advisable to protect and enforce
Security Interests pursuant to the Master Collateral
Agreement, and the Collateral Agent shall act ac-
cordingly.
17. ACCOUNTS AS EVIDENCE
Accounts maintained by a Lender in connection with this
Agreement shall constitute prima facie evidence of sums
owing to the Lender.
18. THE AGENTS AND THE ARRANGER
18.1 APPOINTMENT AND DUTIES OF THE AGENTS
(a) Each Financial Institution (other than the Adminis-
trative Agent) irrevocably appoints the Administra-
tive Agent to act as its agent under and in connec-
tion with the Finance Documents.
55
(b) Each Financial Institution (other than the Col-
lateral Agent) irrevocably appoints the Collateral
Agent to act as its agent in connection with the
Finance Documents.
(c) Each Contracting Party appointing an Agent ir-
revocably authorises that Agent on its behalf to
perform the duties and to exercise the rights, pow-
ers and discretions that are specifically delegated
to it under or in connection with the Finance Docu-
ments, together with any other incidental rights,
powers and discretions. Each Financial Institution
irrevocably appoints each Agent to enter into the
Finance Documents on its behalf.
(d) An Agent shall have only those duties which are ex-
pressly specified in the relevant Finance Documents.
Those duties are solely of a mechanical and adminis-
trative nature.
18.2 ROLE OF THE ARRANGER
Except as otherwise provided in this Agreement, the Ar-
ranger has no obligations of any kind to any other Con-
tracting Party under or in connection with any Finance
Document.
18.3 RELATIONSHIP
The relationship between an Agent and the Contracting
Parties which have appointed it as Agent is that of agent
and principal only. Except in relation to the Security
Documents, nothing in this Agreement constitutes an Agent
as trustee or fiduciary for any other Contracting Party
or any other person and as between the Agents and the
other Financial Institutions no Agent need hold in trust
any moneys paid to it for a Contracting Party or be li-
able to account for interest on those moneys.
18.4 MAJORITY LENDERS' DIRECTIONS
As against the Financial Institutions, each Agent will be
fully protected if it acts in accordance with the in-
structions of the Majority Lenders in connection with the
exercise of any right, power or discretion or any matter
not expressly provided for in the Finance Documents. Any
such instructions given by the Majority Lenders will be
binding on all the Lenders. In the absence of such in-
structions, an Agent may, as between itself and the other
Financial Institutions, act as it considers to be in the
best interests of all the Lenders.
18.5 DELEGATION
Each Agent may act under the Finance Documents through
its personnel and agents and except as specifically pro-
vided in the Finance Documents, it is not responsible for
the acts and omissions of such agents (other than employ-
ees) who are selected by it with reasonable care. The
Collateral Agent may appoint State Street Bank and Trust
Company to act as custodian in respect of the Collateral
and neither it nor the Administrative Agent shall be re-
sponsible for the acts and omissions of such custodian.
18.6 RESPONSIBILITY FOR DOCUMENTATION
Neither of the Agents or the Arranger is responsible to
any other Contracting Party for:-
56
(a) the execution, genuineness, validity, enforceability
or sufficiency of any Finance Document or any other
document;
(b) the sufficiency of the Security Interests created
under the Security Documents in respect of any Col-
lateral;
(c) any error or omission in any legal opinion;
(d) the collectability of amounts payable under any Fi-
nance Document; or
(e) the accuracy of any statements (whether written or
oral) made in or in connection with any Finance
Document.
18.7 DEFAULT
(a) Neither Agent is obliged to monitor or enquire as to
whether or not a Default has occurred. Neither
Agent will be deemed to have knowledge of the occur-
rence of a Default. However, if an Agent receives
notice from a Contracting Party referring to this
Agreement, describing the Default and stating that
the event is a Default, or otherwise has actual
knowledge of an Event of Default, it shall promptly
notify the Lenders and the Borrower.
(b) An Agent may require the receipt of security satis-
factory to it whether by way of payment in advance
or otherwise, against any liability or loss which it
will or may incur in taking any proceedings or ac-
tion arising out of or in connection with any Fi-
nance Document on behalf of the Financial Institu-
tions before it commences those proceedings or takes
that action.
18.8 EXONERATION
(a) Without limiting paragraph (b) below, neither Agent
will be liable to any other Contracting Party for
any action taken or not taken by it under or in con-
nection with any Finance Document, unless directly
caused by that Agent's gross negligence or wilful
misconduct.
(b) No Contracting Party may take any proceedings
against any officer, employee or agent of an Agent
in respect of any claim it might have against that
Agent or in respect of any act or omission of any
kind (including gross negligence or wilful miscon-
duct) by that officer, employee or agent in relation
to any Finance Document.
18.9 RELIANCE
Each Agent may:-
(a) rely on any notice or document reasonably believed
by it to be genuine and correct and to have been
signed by, or with the authority of, the proper per-
son;
57
(b) rely on any statement made by a director or employee
of any person regarding any matters which may rea-
sonably be assumed to be within his knowledge or
within his power to verify; and
(c) engage and rely on legal or other professional ad-
visers selected by it (including those in the
Agent's employment and those representing a Con-
tracting Party other than that Agent).
18.10 CREDIT APPROVAL AND APPRAISAL
Without affecting the responsibility of the Borrower and
the Guarantor for information supplied by it or on its
behalf in connection with any Finance Document, each
Lender confirms that it:-
(a) has made its own independent investigation and as-
sessment of the financial condition and affairs of
the Borrower, the Guarantor and their related enti-
ties in connection with its participation in this
Agreement and has not relied on any information pro-
vided to it by any Agent or Joint Arranger in con-
nection with any Finance Document; and
(b) will continue to make its own independent appraisal
of the creditworthiness of the Borrower, the Guaran-
tor and their related entities while any amount is
or may be outstanding under the Finance Documents or
any Commitment is in force.
18.11 INFORMATION
(a) Each Agent shall promptly forward to the person con-
cerned the original or a copy of any document which
is delivered to that Agent by a Contracting Party
for that person.
(b) The Administrative Agent shall promptly supply a
Lender with a copy of each document received by the
Administrative Agent under Clause 4 (Conditions Pre-
cedent) upon the request and at the expense of that
Lender.
(c) Except where this Agreement specifically provides
otherwise, neither Agent is obliged to review or
check the accuracy or completeness of any document
it forwards to another Contracting Party.
(d) Except as provided above, neither Agent has any
duty:-
(i) either initially or on a continuing basis to
provide any Lender with any credit or other in-
formation concerning the financial condition or
affairs of the Borrower, the Guarantor or any
related entity of the Borrower or the Guarantor
whether coming into the possession of that Agent
or that of any of its related entities before,
on or after the date of this Agreement; or
(ii) unless specifically requested to do so by a
Lender in accordance with this Agreement, to
request any certificates or other documents from
the Borrower or the Guarantor.
18.12 THE AGENTS AND THE ARRANGER INDIVIDUALLY
58
(a) If it is also a Lender, each of the Agents and the
Arranger has the same rights and powers under this
Agreement as any other Lender and may exercise those
rights and powers as though it were not an Agent or
an Arranger.
(b) Each of the Agents and the Arranger may:-
(i) carry on any business with the Borrower, the
Guarantor or their related entities;
(ii) act as agent or trustee for, or in relation to
any financing involving, the Borrower, the Guar-
antor or their related entities; and
(iii) retain any profits or remuneration in connection
with its activities under the Finance Documents
or in relation to any of the foregoing.
(c) In acting as an Agent, the agency division of each
Agent will be treated as a separate entity from its
other divisions and departments. Any information
acquired by an Agent otherwise than in its capacity
as an Agent may be treated as confidential by that
Agent and will not be deemed to be information pos-
sessed by that Agent in its capacity as such.
18.13 INDEMNITIES
(a) Without limiting the liability of the Borrower and
the Guarantor under the Finance Documents, each
Lender shall forthwith on demand indemnify each
Agent, for that Lender's pro rata share of any li-
ability or loss incurred by such Agent in any way
relating to or arising out of its acting as the Ad-
ministrative Agent or the Collateral Agent (as the
case may be), except to the extent that the li-
ability or loss arises directly from the relevant
Agent's negligence or wilful misconduct.
(b) The Borrower shall forthwith on demand reimburse
each Lender for any payment made by it under para-
graph (a) above.
18.14 COMPLIANCE
(a) An Agent may refrain from doing anything which
might, in its opinion, constitute a breach of any
law or regulation or be otherwise actionable at the
suit of any person, and may do anything which, in
its opinion, is necessary or desirable to comply
with any law or regulation of any jurisdiction.
(b) Without limiting paragraph (a) above, neither Agent
need disclose any information relating to the Bor-
rower, the Guarantor or any of their related enti-
ties if the disclosure might, in the opinion of that
Agent, constitute a breach of any law or regulation
or any duty of secrecy or confidentiality or be oth-
erwise actionable at the suit of any person.
18.15 RESIGNATION OF AGENTS
(a) Notwithstanding its irrevocable appointment, both
Agents (but not one Agent only) may resign by giving
not less than 60 days' notice to the Lenders and the
Borrower,
59
in which case each Agent concerned may forthwith appoint
one of its Affiliates as successor Agent or, failing
that, the Majority Lenders may identify a proposed suc-
cessor Agent and notify the Borrower of the identity of
such person. Such person shall, with the consent of the
Borrower, be appointed as the successor Agent. If the
Borrower withholds its consent to the appointment of any
successor Agent it shall, within 30 days of receiving
notice of the identity of the proposed appointee of the
Majority Lenders, identify one or more other persons who
are willing to act as the relevant Agent and whom the
Majority Lenders shall (subject to paragraph (ii) below)
thereafter appoint as the relevant Agent, provided that:
(i) if the Borrower does not during such 30 day pe-
riod identify any such persons, the person iden-
tified by the Majority Lenders shall at the end
of such period be appointed as the successor
Agent; and
(ii) if the Majority Lenders do not consent to the
person (or any of the persons) identified by the
Borrower (such consent not to be unreasonably
withheld) the person initially identified by the
Majority Lenders shall be appointed as the rel-
evant Agent.
(b) If the appointment of a successor Agent is to be
made by the Majority Lenders but they have not,
within 45 days after notice of resignation, ap-
pointed a successor Agent which accepts the appoint-
ment, the retiring Agent may appoint a successor
Agent.
(c) The resignation of the retiring Agent and the ap-
pointment of any successor Agent will both become
effective only upon the successor Agent notifying
all the Parties that it accepts the appointment and
(in the case of a successor Collateral Agent) the
transfer of the benefit of the Security Documents to
the new Collateral Agent as agent and trustee for
the Financial Institutions. On giving the notifica-
tion, the successor Agent will succeed to the posi-
tion of the retiring Agent and the term "ADMINISTRA-
TIVE AGENT" or "COLLATERAL AGENT", as appropriate,
will mean the successor Agent.
(d) A retiring Agent shall, at its own cost, make avail-
able to the successor Agent such documents and
records and provide such assistance as the successor
Agent may reasonably request for the purposes of
performing its functions as the relevant Agent under
this Agreement.
(e) Upon its resignation becoming effective, this
Clause 18 (The Agents and the Arranger) shall con-
tinue to benefit the retiring Agent in respect of
any action taken or not taken by it under or in con-
nection with the Finance Documents while it was an
Agent, and, subject to paragraph (d) above, it shall
have no further obligation in its capacity as such
Agent under any Finance Document.
(f) The resignation of an Agent is subject to the suc-
cessor Agent becoming a party to the Master Col-
lateral Agreement and the other Security Documents
to which the retiring Agent is a party as a Finan-
cial Institution.
18.16 LENDERS
60
Each Agent may treat each Lender as a Lender, entitled to
payments under this Agreement and as acting through its
Facility Office(s), until it has received notice from the
Lender to the effect that it is no longer entitled to
payments and/or is no longer acting through its specified
Facility Office not less than 5 Business Days prior to
the relevant payment.
18.17 INFORMATION BETWEEN AGENTS
(a) Each Agent shall promptly notify the other Agent of
receipt by it of any Request or repayment of any Ad-
vance.
(b) Each Agent shall notify the other Agent, promptly on
request, of any relevant information concerning a
Utilisation which that Agent requires in order to
enable it to perform its obligations under this
Agreement.
18.18 THE AGENTS AS TRUSTEE
(a) Each of the Agents in its capacity as trustee or
otherwise in respect of the Collateral and the Secu-
rity Documents is not liable for any failure, omis-
sion or defect in perfecting the security consti-
tuted by any Security Document, including failure to
(i) register the same in accordance with the provi-
sions of any of the documents of title of the Bor-
rower to any of the property thereby charged, (ii)
effect or procure registration of or otherwise pro-
tect or perfect any Security Document or any Secu-
rity Interest created by a Security Document under
any registration laws or requirements in any juris-
diction or (iii) take any other steps to perfect the
Security Interests intended to be created under the
Security Documents in respect of any of the Col-
lateral, except (in each case) as specifically pro-
vided otherwise in the Security Documents.
(b) Each of the Agents in its capacity as trustee or
otherwise in respect of the Security Documents and
the Collateral may accept without enquiry such title
as the Borrower may have to the Collateral.
(c) As between itself and the other Financial Institu-
tions, each of the Agents in its capacity as trustee
or otherwise in respect of the Security Documents is
not under any obligations to hold any title deed,
Security Document or any other document in connec-
tion with the Collateral in its own possession or to
take any steps to protect or preserve the same. The
Collateral Agent will use all reasonable care to
ensure the safe custody of all such title documents,
Security Documents and other documents which are in
its possession but will not, as between itself and
the other Financial Institutions, be liable for the
damage or destruction of any such documents save
where caused by the gross negligence of the Col-
lateral Agent or any of its employees, servants or
agents.
(d) Save as otherwise provided in the Security Docu-
ments, all moneys which under the trusts therein
contained are received by either Agent in its capac-
ity as trustee or otherwise may be invested in the
name of or under the control of such Agent in any
investment for the time being authorised by English
or New York law for the investment by trustees of
trust money or in any other investments which may be
selected by such Agent. Additionally, save as oth-
erwise provided in the Security Documents, the same
may be placed on deposit
61
in the name of or under the control of such Agent at
such bank or institution (including such Agent or
one of its Affiliates) and upon such terms as such
Agent may think fit.
19. FEES
19.1 COMMITMENT FEE
(a) The Borrower shall pay to the Administrative Agent
for the account of each Lender a commitment fee in
Dollars on the undrawn, uncancelled amount of that
Lender's Commitment during the period from the Sign-
ing Date up to and including the Final Maturity Date
for that Lender. Such fee shall be computed at the
rate of 0.25 per cent. per annum where the aggregate
undrawn, uncancelled Commitments of all of the Lend-
ers (taken as a whole) is equal to or less than
$100,000,000 and at the rate of 0.375 per cent for
any amount in excess of $100,000,000.
(b) Accrued commitment fee shall be payable quarterly in
arrears from the Signing Date and on the Final Matu-
rity Date and shall be calculated to and including
the last day of the immediately preceding month.
Accrued commitment fee shall also be payable to the
Administrative Agent for the account of the relevant
Lender(s) on the cancelled amount of any Commitment
at the time the cancellation comes into effect.
19.2 ACCRUAL
The commitment fee referred to in Clause 19.1 (Commitment
fee) shall accrue from day to day and be calculated on
the basis of a year of 360 days and for the actual number
of days elapsed.
19.3 ARRANGEMENT FEE
The Borrower shall pay to the Administrative Agent for
the account of the Arranger on the Signing Date an ar-
rangement fee and an underwriting fee in the amounts
agreed between the Administrative Agent and the Borrower
in a letter dated the Signing Date. The underwriting fee
shall be distributed to the Lenders in the proportions
agreed between the Arranger and the Lenders prior to the
Signing Date.
19.4 ADMINISTRATIVE AGENT'S FEE
The Borrower shall pay to the Administrative Agent for
its own account an annual agency fee of the amount agreed
between the Administrative Agent and the Borrower in the
letter referred to in Clause 19.3. The Administrative
Agent's fee shall be payable quarterly in arrears for so
long as any amount is or may be outstanding under the Fi-
nance Documents or any Commitment is in force.
62
19.5 COLLATERAL AGENT'S FEE
The Borrower shall pay to the Collateral Agent for its
own account an annual agency fee of the amount agreed
between the Collateral Agent and the Borrower. The Col-
lateral Agent's fee shall be payable quarterly in arrears
for so long as any amount is or may be outstanding under
the Finance Documents or any Commitment is in force.
19.6 EXTENSION FEE
If the Borrower requests and Lenders holding at least 80
per cent. of Total Outstandings agree to extend the Final
Maturity Date of the Facility in accordance with Clause
2.4 (Extension of Final Maturity Dates), the Borrower
shall in respect of such extension pay to the Administra-
tive Agent for the account of each such Lender an exten-
sion fee in Dollars computed at the rate of 0.15 per
cent. of the amount of its Commitment as will be in ef-
fect immediately following the then latest Final Maturity
Date. Such extension fee shall be payable within ten
Business Days of the date of notification by the Adminis-
trative Agent that the Final Maturity Date is extended
and no extension of the Final Maturity Date shall be ef-
fective until such extension fee has been paid by the
Borrower.
19.7 CONVERSION FEE
If the Borrower exercises the Term-out Option in ac-
cordance with Clause 2.5 (Term-out Option) the Borrower
shall pay to the Administrative Agent for the account of
the Lenders a conversion fee in Dollars computed at the
rate of 0.20 per cent. of Total Outstandings on the first
day of the Term-out Period payable on such day and 0.10
per cent. of Total Outstandings on the first anniversary
thereof payable on such day.
19.8 VAT
Any fee referred to in this Clause 19 (Fees) is exclusive
of any value added tax or any similar tax chargeable in
connection with that fee. If any value added tax or
similar tax is so chargeable, it shall be paid by the
Borrower at the same time as it pays the relevant fee.
20. EXPENSES
20.1 FACILITY EXPENSES
The Borrower shall reimburse the Administrative Agent or
the Joint Arrangers, as appropriate on demand for the
reasonable charges and expenses (together with value
added tax or any similar tax thereon and including, with-
out limitation, the reasonable fees and expenses of legal
advisers) incurred by the Administrative Agent or the
Joint Arrangers, as the case may be, in connection with:
(a) the Syndication;
(b) the negotiation, preparation, printing and execution
of this Agreement and any other documents referred
to in this Facility Agreement;
63
(c) any other Finance Document; and
(d) all supplements, waivers and variations in relation
to the Finance Documents and any other documents re-
ferred to therein.
20.2 ENFORCEMENT EXPENSES
The Borrower shall reimburse each of the Agents on demand
for the charges and expenses (together with value added
tax or any similar tax thereon and including, without
limitation, the fees and expenses of legal advisers)
properly incurred by either of them in connection with
the enforcement of, or the preservation of any rights
under, any of the Finance Documents.
21. STAMP DUTIES
The Borrower shall pay, and on demand indemnify, each of
the Agents against any and all stamp, registration and
similar Taxes which may be payable in connection with the
entry into or performance of any of the Finance Documents
including the Syndication Agreement (other than any Sub-
stitution Certificate or any other document transferring
an interest pursuant to Clause 24.3) or the enforcement
of any of the Finance Documents.
22. AMENDMENTS, WAIVERS, REMEDIES CUMULATIVE
22.1 AMENDMENTS
(a) Subject to paragraph (b) below, if authorised by the
Majority Lenders, the Administrative Agent or the
Collateral Agent, as the case may be, may, on behalf
of the Lenders, grant waivers or consents or (with
the prior consent of the Borrower) vary the terms of
the provisions of any Finance Document, unless the
express provisions of the relevant Finance Document
provide that the same can only be granted or ef-
fected by another authority.
(b) Nothing in paragraph (a) above shall authorise ex-
cept with the prior consent of all the Lenders:
(A) subject to Clause 2.4 (Extension of the Final
Maturity Date), the extension of any Commitment
Period or Final Maturity Date; or
(B) any variation of the definition of "BORROWING
BASE", "MAJORITY LENDERS" or "QUALIFYING IS-
SUER" in Clause 1.1 (Terms defined); or
(C) any change in any rate at which interest is
payable under any of the Finance Documents; or
(D) any extension of the date for, or alteration in
the amount or currency of, any payment of prin-
cipal, interest, fee, commission or any other
amount payable under any of the Finance Docu-
ments; or
64
(E) any increase in any Lender's Commitment; or
(F) any variation of Clause 27 (Pro Rata Sharing)
or this Clause 22.1; or
(G) any variation or amendment to any provision of
the Finance Documents requiring the unanimous
consent of the Lenders which would result in
the removal of such requirement; or
(H) any release of the guarantee contained in
Clause 13 (Guarantee); or
(I) any variation of Clause 15.11(c) (Financial
Condition); or
(J) save as otherwise provided in any Finance Docu-
ment, any release of Collateral.
22.2 WAIVERS
No failure to exercise and no delay in exercising, on the
part of any Contracting Party, any right, power or privi-
lege under any Finance Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any
right, power or privilege preclude any other or further
exercise thereof, or the exercise of any other right,
power or privilege. No waiver by any Contracting Party
shall be effective unless it is in writing and signed by
the waiving party.
22.3 REMEDIES CUMULATIVE
The rights and remedies of each Contracting Party pro-
vided in the Finance Documents are cumulative and not
exclusive of any rights or remedies provided by law.
23. NOTICES
23.1 ADDRESS
(a) Except as otherwise stated in this Agreement, all
notices or other communications under this Agreement
to any Contracting Party shall be made by letter or
facsimile and shall be deemed to be duly given or
made when delivered (in the case of a letter or when
received (in the case of facsimile) to or by the
Contracting Party addressed to it at its address,
telex number or facsimile number:
(i) notified to the Administrative Agent prior to
the Signing Date; or
(ii) in the case of a Contracting Party which be-
comes a Contracting Party after the Signing
Date, notified to the Administrative Agent be-
fore or at the time it becomes a Contracting
Party;
(iii) in the case of the Administrative Agent, at its
address, telex number of facsimile number set
out in paragraph (b) below; or
65
(iv) in the case of the Collateral Agent, at its ad-
dress, telex number or facsimile number set out
in paragraph (c) below; or
(v) in the case of the Borrower, at the Borrower's
address, telex number or facsimile number set
out in paragraph (d) below; or
(vi) in the case of the Guarantor, at the
Guarantor's address, telex number or facsimile
number set out in paragraph (e) below; or
(vii) as the Contracting Party may, after the Signing
Date, specify to the Administrative Agent for
such purpose by not less than five Business
Days' notice; or
(viii) in the case of the Administrative Agent or the
Collateral Agent, as the Administrative Agent
or the Collateral Agent may specify to the
other Contracting Parties, for such purpose by
not less than five Business Days' notice.
(b) The Administrative Agent's address, telex number and
facsimile number for notices as at the Signing Date
is:
Commerzbank International S.A.
11, rue Notre Dame
2240 Luxembourg
Grand Duchy of Luxembourg
For the attention of the Loan Department
Telephone No.: 477911-1
Telex No.: 1293 cbklu lu
Fax No.: 477911-419
with a copy to
Commerzbank Aktiengesellschaft
New York Branch
2 World Financial Center
New York, N.Y. 10281-1050
USA
For the attention of the Real Estate Department
Fax No.: 212 266-7530
(c) The Collateral Agent's address, telex number and
facsimile number for notices as at the Signing Date
is:
Commerzbank Aktiengesellschaft
New York Branch
66
2 World Financial Center
New York, N.Y. 10281-1050
USA
For the attention of the Real Estate Department
Fax No.: 212 266-7530
(d) The Borrower's address, telex number and facsimile
number for notices as at the Signing Date is:
69, Route D'Esch
L-1470 Luxembourg
Telex: 3636BIL
Fax: 352 7590 335
For the attention of Paul Szurek
with a copy to
Security Capital UK Management Limited
162 Queen Victoria Street
London EC4V 4DB
Fax No.: 0171 332 2915
(e) The Guarantor's address, telex number and facsimile
number for notices as at the Signing Date is:
69, Route D'Esch
L-1470 Luxembourg
Telex: 3636BIL
Fax: 352 7590 335
For the attention of Paul Szurek
23.2 NON-WORKING DAYS
A notice or other communication received on a non-working
day or after business hours in the place of receipt shall
be deemed to be served on the next following working day
in that place.
24. ALTERATIONS TO THE CONTRACTING PARTIES
24.1 SUCCESSORS
67
This Agreement shall be binding upon and inure to the
benefit of each of the Contracting Parties and their re-
spective successors and permitted assigns.
24.2 ASSIGNMENTS AND TRANSFERS BY BORROWER OR GUARANTOR
Neither the Borrower nor the Guarantor may assign or oth-
erwise transfer all or any part of its rights or obliga-
tions under the Finance Documents without the prior con-
sent of all the Lenders.
24.3 ASSIGNMENTS AND TRANSFERS BY LENDERS
(a) Subject to paragraphs (b) and (c) below, any Lender
(the "ASSIGNOR") may at any time assign or otherwise
transfer all or any part of its rights or obliga-
tions under this Agreement (subject in the case of
an assignment or transfer of part only of its rights
or obligations, to a minimum amount of US
$10,000,000 being assigned or transferred and to the
Assignor retaining a minimum Commitment of US
$10,000,000) to another bank or financial institu-
tion (the "ASSIGNEE") with, subject as provided be-
low, the prior consent of the Administrative Agent
and the Borrower (not to be unreasonably withheld).
The minimum Commitment of US $10,000,000 applicable
to partial assignments or transfers shall be reduced
proportionately in accordance with the cancellation
or reduction of the Total Commitments.
(b) A transfer of obligations shall only be effective if
it is made pursuant to the Syndication Agreement or
if the Assignee has confirmed to the Administrative
Agent, Collateral Agent, the Borrower and the Guar-
antor prior to the transfer taking effect, that it
undertakes to be bound by the terms of this Agree-
ment as a Lender in form and substance satisfactory
to the Administrative Agent, the Collateral Agent,
the Borrower and the Guarantor; on any such transfer
becoming effective and the Assignee becoming bound,
the Assignor shall be relieved of its obligations to
the extent that they are transferred to the Assign-
ee.
(c) Nothing in this Agreement restricts the ability of a
Lender:
(i) to sub-contract an obligation if that Lender
remains liable under this Agreement for that
obligation; or
(ii) to sub-participate its rights. However in the
case of any such sub-contract or sub-participa-
tion, the Lender must retain sole management
and voting powers under this Agreement in rela-
tion to the obligations and rights concerned;
or
(iii) to assign or otherwise transfer its rights or
obligations to any Affiliate of such Lender; or
(iv) to assign or otherwise transfer its rights or
obligations under the Finance Documents by way
of security to a Federal Reserve Bank; or
(v) to assign or otherwise transfer its rights or
obligations if an Event of Default has occurred
and is continuing; or
68
(vi) to assign or otherwise transfer its rights or
obligations by virtue of the Syndication Agree-
ment provided there is prior consultation with
the Borrower about the New Lenders.
(d) On each occasion (other than under the Syndication
Agreement) an Assignor assigns, transfers or novates
its Commitment rights and/or obligations under this
Agreement, the Assignee shall on the date of the as-
signment, transfer and/or novation, pay to the Ad-
ministrative Agent for its own account a fee of
$2,500.
24.4 SUBSTITUTION CERTIFICATES
(a) If any Lender (the "EXISTING LENDER") wishes to
transfer all or any of its rights and/or obligations
under this Agreement to another bank or financial
institution (the "NEW LENDER") as contemplated in
Clause 24.3 (Assignment and Transfers by Lenders),
then, as an alternative to Clause 24.3 and subject
to paragraph (b) below, such transfer may be ef-
fected by way of a novation by the delivery to, and
the execution by, the Administrative Agent of a duly
completed certificate, substantially in the form of
Schedule 6 (a "SUBSTITUTION CERTIFICATE").
(b) On the date specified in the Substitution Certifi-
cate:
(i) to the extent that in the Substitution Certifi-
cate the Existing Lender seeks to transfer its
rights and/or obligations under this Agreement,
the Borrower, the Guarantor and the Existing
Lender shall each be released from further ob-
ligations to each other under this Agreement
and their respective rights against each other
shall be cancelled (such rights and obligations
being referred to in this Clause 24.4 as "DIS-
CHARGED RIGHTS AND OBLIGATIONS");
(ii) the Borrower, the Guarantor and the New Lender
shall each assume obligations towards each
other and/or acquire rights against each other
which differ from the Discharged Rights and
Obligations only insofar as the Borrower, the
Guarantor and the New Lender have assumed and/
or acquired them in place of the Borrower, the
Guarantor and the Existing Lender; and
(iii) the New Lender and the other Contracting Par-
ties shall acquire the same rights and assume
the same obligations between themselves as they
would have acquired and assumed had the New
Lender been a Contracting Party as a Lender
with the rights and/or the obligations acquired
or assumed by it as a result of the transfer,
and, on the date upon which the transfer takes
effect, the New Lender named therein shall pay
to the Administrative Agent for its own account
a transfer fee of $2,500.
(d) (i) Subject to sub-paragraph (ii) below, each of
the Contracting Parties authorises the Adminis-
trative Agent to execute any duly completed
Substitution Certificate on its behalf.
69
(ii) The authorisation contained in sub-
paragraph (i) above does not extend to the ex-
ecution of a Substitution Certificate on behalf
of either the Existing Lender or the New Lender
named therein.
(e) The Administrative Agent shall promptly notify the
other Contracting Parties of the receipt and execu-
tion on their behalf by it of any Substitution Cer-
tificate.
24.5 REFERENCE LENDERS
If a Reference Lender (or, if a Reference Lender is not a
Lender, the Lender of which it is an Affiliate) ceases to
be one of the Lenders, the Administrative Agent will, in
consultation with the Borrower and the Guarantor appoint
another Lender or an Affiliate of a Lender as a Reference
Lender.
24.6 DISCLOSURE
Each Lender may disclose to a proposed assignee or trans-
feree or a New Lender or any sub-participant, risk par-
ticipant or other participant proposing to enter or hav-
ing entered into a contract with the Lender regarding any
Finance Document any information in the possession of the
Lender received under this Agreement relating to the Bor-
rower, the Guarantor or any of its related entities as it
sees fit provided always that information which is confi-
dential may only be disclosed to a person with whom such
Lender is proposing to enter, or has entered into, a
transfer, participation or other agreement in relation to
this Agreement if the person has provided a written un-
dertaking to keep the information confidential and only
to use it for the purposes of this Agreement.
24.7 CHANGE OF FACILITY OFFICE
Each Lender shall participate in this Agreement through
its Facility Office(s), but may change any Facility Of-
fice from time to time by five Business Days' prior no-
tice to the Administrative Agent.
24.8 INCREASED COSTS/WITHHOLDING TAXES
If:
(a) any assignment or transfer of all or any part of the
rights or obligations of a Lender pursuant to Clause
24.3 (Assignment and Transfers by Lenders) or 24.4
(Substitution Certificates); or
(b) any change in a Lender's Facility Office,
results at the time of any assignment, transfer or change
in amounts becoming due under Clause 10.3(b) (Taxes) or
11.1 (Increased Costs), then the assignee, transferee,
New Lender or Lender, as the case may be, shall be en-
titled to receive those amounts only to the extent that
the assignor, transferor, Existing Lender or Lender, as
the case may be, would have been so entitled had there
been no assignment, transfer, substitution or change in
Facility Office.
70
25. SET-OFF
Each Financial Institution may (but shall not be obliged
to) at any time after a Default has occurred and is con-
tinuing set off against any obligation of the Borrower or
the Guarantor due and payable but not paid under any Fi-
nance Document any moneys held by the Lender for the ac-
count of the Borrower or the Guarantor as the case may be
at any office of the Financial Institution anywhere and
in any currency. The Financial Institution may effect
any appropriate currency exchanges to implement such set-
off and shall thereafter notify the Borrower.
26. INDEMNITIES
(a) Each of the Borrower and the Guarantor shall indem-
nify each Financial Institution against any loss or
expense which that Financial Institution may reason-
ably sustain or incur as a consequence of:
(i) the occurrence of any Default; or
(ii) the operation of Clause 16.2 (Non-Payment); or
(iii) any repayment or prepayment of a LIBOR Advance
or payment of an overdue amount being made oth-
erwise than on a Maturity Date relative thereto
and, for the purpose of this Clause 26
(a)(iii), a Maturity Date relative to an over-
due amount shall be the last day of any Desig-
nated Term (as defined in Clause
7.3(a)(ii)(Default Interest)); or
(iv) (other than by reason of gross negligence or
default by any Lender or any Agent) any Advance
not being made after a Request has been served
in respect thereof; or
(v) any prepayment not being made following notice
thereof by the Borrower.
(b) The Borrower's and the Guarantor's liability under
paragraph (a) above shall include, without limita-
tion, any loss (but not loss of margin) or expense
on account of funds borrowed, contracted for or uti-
lised to fund any amount payable under any Finance
Document, any amount repaid or prepaid or any Ad-
vance.
27. PRO RATA SHARING
27.1 REDISTRIBUTION
(a) Subject to Clause 27.2 (Notification), if at any
time the proportion which any Lender (the "RECEIVING
LENDER") has received or recovered (whether by set-
off or otherwise) in respect of its portion of any
sum due and owing from a Borrower under any Finance
Document is greater (the amount of excess being re-
ferred to in this Clause 27.1 as the "EXCESS
AMOUNT") than the proportion received or recovered
by the Lender receiving or recovering the smallest
proportion (which shall include a nil receipt),
then:
(i) the receiving Lender shall promptly notify the
Administrative Agent;
71
(ii) the receiving Lender shall promptly and in any
event within ten days of receipt or recovery of
the excess amount pay to the Administrative
Agent an amount equal to the excess amount;
(iii) the Administrative Agent shall treat the pay-
ment as if it were a payment by the Borrower on
account of a sum owed to the Lenders and shall
pay the same to the Lenders (including the re-
ceiving Lender) pro rata to their respective
entitlements; and
(iv) as between the Borrower and the receiving
Lender the excess amount shall be treated as
not having been paid, while as between the Bor-
rower and each Lender (including the receiving
Lender), it shall be treated as having been
paid to the extent receivable by the Lender.
(b) If a receiving Lender is subsequently required to
repay to a Borrower any amount received or recovered
by it and dealt with under paragraph (a) above, each
Lender shall promptly repay to the Administrative
Agent for the account of the receiving Lender the
portion of the amount distributed to it, together
with interest thereon at a rate sufficient to reim-
burse the receiving Lender for any interest which it
has been required to pay to the Borrower in respect
of the portion of such amount.
27.2 NOTIFICATION
(a) Each Lender shall promptly give notice to the Admin-
istrative Agent of the receipt or recovery by the
Lender of any amount received or recovered by it in
respect of this Agreement otherwise than through the
Administrative Agent.
(b) Each Lender shall give notice to the Administrative
Agent before instituting any legal action or pro-
ceedings under or in connection with this Agreement.
(c) Upon receipt of any notice under paragraph (a) or
(b) above, the Administrative Agent will as soon as
practicable notify all the other Lenders.
28. GOVERNING LAW
This Agreement is governed by English law.
29. JURISDICTION
(a) Each of the Borrower and the Guarantor irrevocably
agrees for the benefit of each of the Financial In-
stitutions that the Courts of England shall have ju-
risdiction to hear and determine any suit, action or
proceeding and to settle any disputes, which may
arise out of or in connection with the Finance Docu-
ments, and for such purposes irrevocably submits to
the jurisdiction of such Courts.
72
(b) Without prejudice to paragraph (a) above, each of
the Borrower and the Guarantor irrevocably agrees
that the State Courts or the Federal District Courts
sitting in New York City shall have jurisdiction to
hear and determine any suit, action or proceeding,
and to settle any disputes, which may arise out of
or in connection with the Finance Documents, and for
such purposes irrevocably submits to the jurisdic-
tion of such Courts.
(c) Each of the Borrower and the Guarantor irrevocably
waives any objection which it may have now or here-
after to such Courts as are referred to in paragraph
(a) or (b) above being nominated as the forum to
hear and determine any suit, action or proceeding,
and to settle any disputes, which may arise out of
or in connection with the Finance Documents and any
claim that any such Court is not a convenient or
appropriate forum.
(d) Each of the Borrower and the Guarantor agrees that
the process by which any suit, action or proceeding
in England is begun may be served on the Borrower
and/or the Guarantor by being delivered to Legibus
Secretaries Limited, 200 Aldersgate Street, London
EC1A 4JJ and that the process by which any suit ac-
tion or proceeding in New York is begun may be
served on the Borrower and/or the Guarantor by being
delivered to CT Corporation System, 1633 Broadway
New York, New York, 10019.
(e) The submission to the said jurisdictions shall not
(and shall not be construed so as to) limit the
right of any of the Contracting Parties to take pro-
ceedings against any other Contracting Party in any
other court of competent jurisdiction, nor shall the
taking of proceedings in any one or more jurisdic-
tions preclude the taking of proceedings in any
other jurisdiction, whether concurrently or not.
(f) Each of the Borrower and the Guarantor further ir-
revocably consents to the service of process out of
the aforesaid Courts in any such action or proceed-
ings by the mailing of copies thereof by registered
or certified airmail, postage prepaid to the Bor-
rower and/or the Guarantor at its address applying
for the time being under Clause 23.1 (Notices).
(g) Nothing herein shall affect the right to serve pro-
cess in any other manner permitted by law.
......................... ........................
SECURITY CAPITAL HOLDINGS S.A. SECURITY CAPITAL U.S. REALTY
30. SEVERABILITY
If any provision of this Agreement is prohibited or unen-
forceable in any jurisdiction, the prohibition or unen-
forceability shall not invalidate the remaining provisions
of this Agreement or affect the validity or enforceability
of the provision in any other jurisdiction.
31. COUNTERPARTS
This Agreement may be executed in any number of counter-
parts and all of the counterparts taken together shall be
deemed to constitute one and the same instrument.
73
32. LANGUAGE
Each document referred to herein or to be delivered here-
under shall be in the English language or accompanied by
an English translation thereof certified as accurate by an
officer of the Borrower or the Guarantor. In the case of
conflict and unless the Administrative Agent otherwise
specifies, the English language version of any such docu-
ment shall prevail.
IN WITNESS whereof the parties hereto have caused this Agree-
ment to be duly executed on the date first written above.
74
SIGNATORIES
BORROWER
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
GUARANTOR
SECURITY CAPITAL U.S. REALTY
By: /s/ Paul E. Szurek
ARRANGER
COMMERZBANK A.G. NEW YORK BRANCH
By: /s/ Marianne I. Medora /s/ Sean H. Harrigan
Vice President Senior Vice President
LENDER
COMMERZBANK A.G. LOS ANGELES BRANCH
By: /s/ Marianne I. Medora /s/ Sean H. Harrigan
Vice President Senior Vice President
ADMINISTRATIVE AGENT
COMMERZBANK INTERNATIONAL S.A.
By: /s/ Ellen Farns
COLLATERAL AGENT
COMMERZBANK A.G. NEW YORK BRANCH
By: /s/ Marianne I. Medora /s/ Sean H. Harrigan
Vice President Senior Vice President