Exhibit 2.1
INTEREST PURCHASE AGREEMENT
dated as of June 16, 1997
by and between
John R. Klopp, Craig M. Hatkoff and
Valentine Wildove & Company, Inc.,
a Delaware corporation, as sellers
and
California Real Estate Investment Trust, a
business trust organized under the laws of the State of
California, as buyer
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS.............................................................................1
ARTICLE 2 PURCHASE AND SALE.......................................................................4
Section 2.1 Purchase and Sale of Interests..........................................................4
Section 2.2 Purchase Price..........................................................................4
Section 2.3 Closing and Closing Date................................................................5
Section 2.4 Conditions to Closing...................................................................5
Section 2.5 Additional Closing Deliveries...........................................................6
Section 2.6 Pre-Closing Distributions...............................................................8
Section 2.7 Assumption by Valentine of Certain Obligations to Employees of
VCG; Guarantee by Klopp and Hatkoff of Valentine Assumption
Obligation..............................................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF SELLERS..............................................................................8
Section 3.1 Existence and Authority of Valentine....................................................9
Section 3.2 Authority of Individual Sellers.........................................................9
Section 3.3 Ownership of the Interests..............................................................9
Section 3.4 No Consents, Approvals, Violations or Breaches.........................................10
Section 3.5 Organizational Documents...............................................................11
Section 3.6 Taxes..................................................................................11
Section 3.7 Financial Statements...................................................................12
Section 3.8 Litigation; Legal and Governmental Proceedings and Judgments;
Licenses and Permits...................................................................12
Section 3.9 Employee Benefit Plans; Employment and Consulting Agreements;
Loans and Advances; Other Affiliated Transactions......................................13
Section 3.10 Material Contracts.....................................................................13
Section 3.11 Brokers................................................................................13
Section 3.12 No Material Change.....................................................................13
Section 3.13 Compliance with Laws...................................................................14
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER................................................14
Section 4.1 Existence and Authority of Buyer.......................................................14
Section 4.2 Investment Intent......................................................................14
Section 4.3 No Consents, Approvals, Violations or Breaches.........................................15
Section 4.4 Brokers................................................................................15
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Page
ARTICLE 5 COVENANTS OF SELLERS...................................................................15
Section 5.1 Operations in Ordinary Course..........................................................15
Section 5.2 Investigations.........................................................................16
Section 5.3 Conditions to Closing..................................................................16
ARTICLE 6 COVENANTS OF BUYER.....................................................................16
Section 6.1 Conditions to Closing..................................................................16
ARTICLE 7 FURTHER AGREEMENTS.....................................................................16
Section 7.1 Further Assurances.....................................................................16
Section 7.2 Costs and Expenses.....................................................................17
Section 7.3 Sellers' Access to Records.............................................................17
Section 7.4 Confidentiality........................................................................17
ARTICLE 8 TERMINATION............................................................................17
Section 8.1 Termination Events.....................................................................17
Section 8.2 Effect of Termination..................................................................18
ARTICLE 9 INDEMNIFICATION; REMEDIES..............................................................18
Section 9.1 Survival...............................................................................18
Section 9.2 Indemnification by Sellers.............................................................18
Section 9.3 Indemnification by Buyer...............................................................19
Section 9.4 Time Limitations.......................................................................19
Section 9.5 Procedure for Indemnification..........................................................19
ARTICLE 10 MISCELLANEOUS..........................................................................20
Section 10.1 Assignment; Transfer of Interests......................................................20
Section 10.2 Notices................................................................................20
Section 10.3 Entire Agreement.......................................................................22
Section 10.4 No Waiver..............................................................................22
Section 10.5 Governing Law..........................................................................22
Section 10.6 Counterparts...........................................................................22
Section 10.7 Public Announcements...................................................................22
Section 10.8 Availability of Equitable Remedies.....................................................22
Section 10.9 Construction...........................................................................22
Section 10.10 Arbitration.................................................................................23
EXHIBITS
Exhibit A Form of Non-Negotiable Note
Exhibit B Form of Assignment Agreement
Exhibit C Form of Employment Agreement
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DISCLOSURE SCHEDULES
Schedule 2.1 Retained Contract Rights
Schedule 2.7 Assumed Obligations to Employees
Schedule 3.5 Organizational Documents
Schedule 3.7 Liabilities
Schedule 3.8 Litigation
Schedule 3.9 Employment Agreements; Loans
Schedule 3.10 Material Contracts
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INTEREST PURCHASE AGREEMENT
INTEREST PURCHASE AGREEMENT, dated as of June 16, 1997, by and
among JOHN R. KLOPP, CRAIG M. HATKOFF, VALENTINE WILDOVE & COMPANY, INC., a
Delaware corporation, and CALIFORNIA REAL ESTATE INVESTMENT TRUST, a business
trust organized under the laws of the State of California.
Preliminary Statement
Capitalized terms used in this agreement are defined in
article 1 hereof. VCG is a Delaware limited partnership, of which Valentine is
the sole general partner and Individual Sellers are the sole limited partners.
VCG Montreal is a New York corporation and currently has issued and outstanding
1,000 shares of Common Stock, which shares are owned beneficially and of record
by VCG. 970M is a New York limited liability company, of which Individual
Sellers are the only members. VAMP is a New York limited liability company, of
which Individual Sellers are the only members. VPMS is a New Jersey limited
liability company, of which Individual Sellers are the only members.
Sellers desire to sell to Buyer and Buyer desires to purchase
from Sellers all of Sellers' partnership interests in and to VCG, and all of
Individual Sellers' membership interests in and to 970M, VAMP and VPMS, subject
to the terms and conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person.
"Assignment Agreement" has the meaning set forth in section
2.3 hereof.
"Business Day" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the City of New York, New York are
authorized or obligated by law or executive order to close.
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"Buyer" means California Real Estate Investment Trust, a
business trust organized under the laws of the State of California, whose name
is intended to be changed to Capital Trust.
"Closing" has the meaning set forth in section 2.3 hereof.
"Closing Date" has the meaning set forth in section 2.3
hereof.
"Common Stock" means the VCG Montreal Common Stock.
"Companies" means, collectively, VCG, VCG Montreal, 970M, VAMP
and VPMS.
"control" including, with correlative meanings, the terms
"controlled by" and "under common control with," means, as to any Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Damages" has the meaning set forth in section 9.2 hereof.
"Disclosure Schedules" means the disclosure schedules referred
to in articles 2 and 3 hereof and delivered in connection with the execution of
this agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
"Financial Statements" has the meaning set forth in section
3.7 hereof.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles Board or
by the Financial Accounting Standards Board or through other appropriate boards
or committees thereof and which are consistently applied for all periods after
the date hereof so as to properly reflect the financial condition, results of
operations and changes in financial position of any Person, except that any
accounting principle or practice required to be changed by such Accounting
Principles Board or Financial Accounting Standards Board (or other appropriate
board or committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.
"Indemnified Party" has the meaning set forth in section 9.5
hereof.
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"Indemnifying Party" has the meaning set forth in section 9.5
hereof.
"Individual Sellers" means John R. Klopp and Craig M. Hatkoff,
collectively.
"Interests" has the meaning set forth in section 2.1 hereof.
"Lien" means any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or any
other interest in property designated to secure the repayment of indebtedness,
whether arising by agreement or under any statute or law, or otherwise.
"970M" means 970 Management LLC, a New York limited liability
company.
"Notes" has the meaning set forth in section 2.2 hereof.
"Organizational Documents" has the meaning set forth in
section 3.5 hereof.
"Person" means an individual, a corporation, a partnership, a
limited liability company, a joint venture, an association, a joint-stock
company, a trust, a business trust, a government or any agency or any political
subdivision, any unincorporated organization or any other entity.
"Preferred Share Purchase Agreement" has the meaning set
forth in section 2.3 hereof.
"Purchase Price" has the meaning set forth in section 2.2
hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" means Individual Sellers and Valentine,
collectively.
"Taxes" has the meaning set forth in section 3.6 hereof.
"Valentine" means Valentine Wildove & Company, Inc., a
Delaware corporation.
"VAMP" means Victor Asset Management Partners, L.L.C., a New
York limited liability company.
"VCG" means Victor Capital Group, L.P., a Delaware limited
partnership.
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"VCG Montreal" means VCG Montreal Management, Inc., a New York
corporation.
"VPMS" means VP Metropolis Services, L.L.C., a New Jersey
limited liability company.
ARTICLE 2
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Interests. (a) On the terms
and subject to the conditions of this agreement, and in reliance upon the
representations and warranties contained herein, at the Closing Buyer shall
purchase from Sellers, and Sellers shall sell to Buyer, for the consideration
specified in section 2.2 hereof: (i) all of Sellers' general and limited
partnership interests in and to VCG; (ii) all of Individual Sellers' membership
interests in and to 970M; (iii) all of Individual Sellers' membership interests
in and to VAMP; and (iv) all of Individual Sellers' membership interests in and
to VPMS. Such partnership and membership interests are referred to herein,
collectively, as the "Interests."
(b) Buyer expressly acknowledges that it is not purchasing and
that Sellers shall retain the right to receive certain future potential revenues
and deferred fees, identified on Schedule 2.1 hereto, accruing under certain
contracts which were entered into and fully performed by the Companies prior to
the Closing Date.
Section 2.2 Purchase Price. (a) The aggregate purchase price
to be paid by Buyer to Sellers for the Interests shall be $5,000,000 (the
"Purchase Price"), payable:
(i) $2,162,500 to each of the Individual Sellers, of
which $1,912,500 is allocated to the purchase of each Individual
Seller's partnership interest in VCG and $250,000 is allocated to the
purchase of each Individual Seller's membership interests in 970M, VAMP
and VPMS; and
(ii) $675,000 to Valentine.
(b) At the Closing, the Purchase Price shall be tendered to
Sellers in the form of promissory notes (the "Notes") delivered to each of the
Sellers on the Closing Date, each substantially in the form attached hereto as
Exhibit A.
Section 2.3 Closing and Closing Date. Subject to the
conditions in section 2.4 hereof, the closing of the sale and purchase of the
Interests (the "Closing")
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will take place in a mutually acceptable manner and on the date (the "Closing
Date"), which is the date of the closing of the transactions contemplated by
that certain Preferred Share Purchase Agreement, dated as of June 16, 1997,
between Buyer and Veqtor Finance Company LLC, a Delaware limited liability
company (the "Preferred Share Purchase Agreement"). At the Closing, Sellers
shall deliver to Buyer, free and clear of any lien, charge, encumbrance or
expense against delivery of the Purchase Price therefor pursuant to section 2.2
hereof, an assignment agreement (the "Assignment Agreement") in the form of
Exhibit B hereto, transferring ownership of the Interests to Buyer.
Section 2.4 Conditions to Closing. (a) The obligation of Buyer
to close the transactions contemplated hereunder is subject to the satisfaction
on or prior to the Closing Date of the following conditions:
(i) no order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition (A) preventing the consummation of the closing of the
transactions contemplated by this agreement or (B) which is reasonably
likely to materially adversely affect the business, properties or
assets of the Companies or the transactions contemplated by this
agreement, shall be in effect;
(ii) each of the terms, covenants and conditions of
this agreement to be complied with and performed by Sellers on or prior
to the Closing Date shall have been duly complied with and performed in
all material respects, or Buyer shall have waived such compliance or
performance, and all documents to be delivered or actions to be taken
by Sellers pursuant to section 2.5 hereof shall have been delivered or
performed;
(iii) each of the representations and warranties made
by Sellers herein shall be true and correct in all material respects as
of the date hereof and as of the Closing Date (unless such
representation and warranty is made as of a specific date and then
shall be true and correct as of such date) with the same force and
effect as though such representations and warranties had been made as
of the Closing Date;
(iv) the transactions contemplated by the
Preferred Share Purchase Agreement shall have been consummated; and
(v) the form and substance of all instruments and
documents required to be delivered pursuant to this agreement by
Sellers shall be reasonably satisfactory in all respects to Buyer.
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(b) The obligation of Sellers to close the transactions
contemplated hereunder is subject to the satisfaction on or prior to the Closing
Date of the following conditions:
(i) no order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition (A) preventing the consummation of the closing of the
transactions contemplated by this agreement or (B) which is reasonably
likely to materially adversely affect the business, properties or
assets of the Companies or the transactions contemplated by this
agreement, shall be in effect;
(ii) each of the terms, covenants and conditions of
this agreement to be complied with and performed by Buyer on or prior
to the Closing Date shall have been duly complied with and performed in
all material respects, or Sellers shall have waived such compliance or
performance, and all documents to be delivered or actions to be taken
by Buyer pursuant to section 2.5 hereof shall have been delivered or
performed;
(iii) each of the representations and warranties made
by Buyer herein shall be true and correct in all material respects as
of the date hereof and as of the Closing Date (unless such
representation and warranty is made as of a specific date and then
shall be true and correct as of such date) with the same force and
effect as though such representations and warranties had been made as
of the Closing Date;
(iv) the transactions contemplated by the
Preferred Share Purchase Agreement shall have been consummated; and
(v) the form and substance of all instruments and
documents required to be delivered pursuant to this agreement by Buyer
shall be reasonably satisfactory in all respects to Sellers.
Section 2.5 Additional Closing Deliveries. (a) On or prior to
the Closing Date, Sellers shall deliver or cause to be delivered to Buyer the
documents listed below, in form and substance satisfactory to Buyer:
(i) an Assignment Agreement in the form of
Exhibit B hereto executed by or on behalf of the Sellers;
(ii) employment agreements substantially in the
form of Exhibit C hereto executed by each of Messrs. Hatkoff and Klopp;
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(iii) copies of the certificate of incorporation of
Valentine and the certificate of limited partnership of VCG, each
certified by the Secretary of State of the State of Delaware, the
articles of organization of 970M and VAMP, each certified by the
Secretary of the State of New York, and the certificate of formation of
VPMS, certified by the Secretary of the State of New Jersey;
(iv) resolutions of the board of directors of
Valentine approving and authorizing this agreement and the transactions
contemplated hereby, certified as of the Closing Date by its secretary
or assistant secretary as being in full force and effect without
modification or amendment;
(v) signature and incumbency certificates of the
officers of Valentine executing this agreement and any other documents
executed and delivered in connection herewith;
(vi) a certificate executed by or on behalf of
Sellers representing and warranting to Buyer that each of the
representations and warranties made by Sellers herein is true and
correct in all material respects as of the date hereof and as of the
Closing Date (unless such representation and warranty is made as of a
specific date and then shall be true and correct as of such date) with
the same force and effect as though such representations and warranties
had been made as of the Closing Date; and
(vii) an opinion of Coopers & Lybrand Securities
L.L.C., in form and substance satisfactory to Buyer, to the effect that
the consideration to be paid by the Buyer for the Interests is fair to
the Buyer from a financial point of view.
(b) On or prior to the Closing Date, Buyer shall deliver or
cause to be delivered to Sellers the documents listed below, in form and
substance satisfactory to Sellers:
(i) the Notes payable to Sellers in the aggregate
principal amount of $5,000,000 and substantially in the form attached
hereto as Exhibit A; (ii) an Assignment Agreement in the form of
Exhibit B hereto executed on behalf of Buyer;
(iii) employment agreements substantially in the
form of Exhibit C hereto executed on behalf of Buyer; and
(iv) a certificate executed on behalf of Buyer
representing and warranting to Sellers that each of the
representations and warranties made by
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Buyer herein is true and correct in all material respects as of the
date hereof and as of the Closing Date (unless such representation and
warranty is made as of a specific date and then shall be true and
correct as of such date) with the same force and effect as though such
representations and warranties had been made as of the Closing Date.
Section 2.6 Pre-Closing Distributions. Immediately prior to
the Closing Date, Sellers shall cause each of the Companies to declare a
dividend or make a distribution in cash, other assets or obligations of the
Companies such that the combined net worth of each of the Companies as of the
Closing Date (determined in accordance with GAAP) shall equal zero.
Section 2.7 Assumption by Valentine of Certain Obligations to
Employees of VCG; Guarantee by Klopp and Hatkoff of Valentine Assumption
Obligation. Valentine hereby assumes, effective on the Closing Date, all of the
obligations of VCG to past and present employees of VCG under the letter
agreements listed in Schedule 2.7 hereof and agrees to indemnify and hold
harmless VCG from and against all claims made by any past and present employees
of VCG under any such letter. The Individual Sellers hereby jointly and
severally guarantee the obligations of Valentine under this section 2.7, such
guarantee to terminate automatically with respect to any obligation assumed by
Valentine under this section 2.7 from which VCG is fully released in a written
document signed by the obligee under any such obligation, a copy of which
release has been delivered to VCG.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF SELLERS
Sellers, jointly and severally, represent and warrant to
Buyer, as of the date hereof and as of the Closing Date, as follows:
Section 3.1 Existence and Authority of Valentine. (a)
Valentine is a corporation duly formed, validly existing and in good standing
under the laws of the State of Delaware. Valentine has full corporate power and
authority to enter into this agreement and to perform its obligations hereunder.
The execution, delivery and performance of this agreement and the Assignment
Agreement by Valentine and the consummation by Valentine of the transactions
contemplated hereby have been duly authorized by all necessary proceedings on
the part of Valentine. This agreement has been duly executed and delivered, and
the Assignment Agreement when delivered will have been duly executed, on behalf
of Valentine and constitute valid and legally
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binding obligations of Valentine, enforceable against Valentine in accordance
with their terms, except to the extent that their enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equitable
principles.
(b) Valentine has full corporate power to carry on the
business in which it is currently engaged, and to own and use the properties
owned and used by it.
Section 3.2 Authority of Individual Sellers. This agreement
has been duly executed and delivered, and the Assignment Agreement when
delivered will have been duly executed, by each of Individual Sellers and
constitute legal, valid and binding obligations of each of Individual Sellers
enforceable against each of them in accordance with their terms, except to the
extent that their enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and by general equitable principles.
Section 3.3 Ownership of the Interests. (a) Valentine is the
record and beneficial owner of the sole general partner interest in VCG.
Individual Sellers are the record and beneficial owners of the sole limited
partner interests in VCG. Individual Sellers and Valentine have good and valid
title to the Interests in VCG and, upon the transfer of the general and limited
partnership interests in VCG in accordance with this agreement, Buyer will
receive good and valid title to the Interests in VCG free and clear of Liens
other than restrictions on transfer imposed by the Securities Act and applicable
state securities or "Blue Sky" laws.
(b) The authorized equity securities of VCG Montreal consist
of 1,000 shares of common stock, par value $1.00 per share, of which 1,000
shares are issued and outstanding and constitute the Common Stock. VCG is the
record and beneficial owner of all of the outstanding Common Stock. VCG has good
and valid title to the Common Stock and, upon the transfer of the general and
limited partnership interests in VCG, VCG will continue to hold good and valid
title to the Common Stock free and clear of Liens other than restrictions on
transfer imposed by the Securities Act and applicable state securities or "Blue
Sky" laws.
(c) Individual Sellers are the record and beneficial owners of
all of the outstanding membership interests in 970M. Individual Sellers have
good and valid title to the Interests in 970M and, upon the transfer of the
Interests in 970M in accordance with this agreement, Buyer will receive good and
valid title to the Interests in 970M free and clear of Liens other than
restrictions on transfer imposed by the Securities Act and applicable state
securities or "Blue Sky" laws.
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(d) Individual Sellers are the record and beneficial owners of
all of the outstanding membership interests in VAMP. Individual Sellers have
good and valid title to the Interests in VAMP and, upon the transfer of the
Interests in VAMP in accordance with this agreement, Buyer will receive good and
valid title to the Interests in VAMP free and clear of Liens other than
restrictions on transfer imposed by the Securities Act and applicable state
securities or "Blue Sky" laws.
(e) Individual Sellers are the record and beneficial owners of
all of the outstanding membership interests in VPMS. Individual Sellers have
good and valid title to the Interests in VPMS and, upon the transfer of the
Interests in VPMS in accordance with this agreement, Buyer will receive good and
valid title to the Interests in VPMS free and clear of Liens other than
restrictions on transfer imposed by the Securities Act and applicable state
securities or "Blue Sky" laws.
(f) There are no options, warrants, rights, calls,
commitments, conversion rights, rights of exchange or other agreements of any
character, contingent or otherwise, providing for the purchase, issuance or sale
of any Interests, or any arrangements that require or permit any Interests to be
voted by or at the discretion of anyone other than Sellers or VCG..
(g) The Interests are duly authorized, validly issued, fully
paid and non-assessable interests in the respective entities that have issued
the Interests.
(h) The Companies comprise all of the entities through which
the business and operations reflected in the financial statements of the
Companies referred to in section 3.7 hereof are held and conducted.
Section 3.4 No Consents, Approvals, Violations or Breaches.
Neither the execution and delivery by Sellers of this agreement, nor the
consummation by Sellers of the transactions contemplated hereby, will (i)
require any consent, approval, authorization or permit of, or filing,
registration or qualification with or notification to, any governmental or
regulatory authority under any law of the United States, any state or any
political subdivision thereof applicable to Sellers, other than any action
required to be taken by Buyer, (ii) assuming no violation on the part of Buyer,
violate any statute, law, ordinance, rule or regulation of the United States,
any state or any political subdivision thereof, or any judgment, order, writ,
decree or injunction applicable to Sellers or any of their properties or assets
or (iii) assuming no violation on the part of Buyer, violate, conflict with or
result in a material breach of any provisions of, or constitute a material
default (or any event which, with or without due notice or lapse of time, or
both, would constitute a material default) under, or result in the termination
of, or accelerate the performance required by, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other
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instrument or obligation to which Sellers are a party or by which any of their
respective properties or assets may be bound.
Section 3.5 Organizational Documents. Each of the Companies is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of formation, with full power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under applicable
contracts. Each of the Companies is duly qualified to do business as a foreign
entity and is in good standing under the laws of each state or other
jurisdiction in which the failure to so qualify is reasonably likely to
materially adversely affect the business, properties or assets of such Company.
Schedule 3.5 identifies each document pursuant to which each of the Companies is
organized and governed, including all certificates of incorporation,
certificates of limited partnership, certificates of formation, by-laws,
agreements of limited partnership, operating agreements and all amendments
thereto and all other agreements among any record or beneficial owners of
interests in the Companies (collectively, the "Organizational Documents"). The
Organizational Documents are in full force and effect. None of the Companies,
nor any stockholder, partner or member of the Companies, is in default of any of
its obligations under the Organizational Documents, and no event has occurred or
is continuing, and no condition exists, which, with the passage of time or the
giving of notice or both, would constitute a default by any such Person.
Section 3.6 Taxes. (a) Each of the Sellers and the Companies
has timely filed all federal, state, local and foreign tax returns and reports
required to be filed by or with respect to each of the Companies in respect of
all taxes, assessments or other governmental charges, including, without
limitation, income, estimated income, business, occupation, franchise, gross
income, gross receipts, alternative minimum, property, sales, transfer, gains,
value-added, use, ad valorem, intangibles, document, employment, commercial rent
or withholding taxes, including interest, penalties and additions in connection
therewith ("Taxes"). The returns and information filed with respect to any Taxes
are accurate in all material respects.
(b) All Taxes with respect to the Companies for which Sellers
or any of the Companies are or may be liable (whether disputed, incurred or
which may be incurred) in respect of periods or portions thereof ending on or
before the Closing Date shall have been paid to the proper taxing authority or
an adequate reserve (in conformity with GAAP) established therefor, and the
Companies do not have any material liability for Taxes for such periods in
excess of the amounts so paid or reserved. All Taxes that the Companies have
been required to collect or withhold have been duly collected or withheld.
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Section 3.7 Financial Statements. (a) Sellers have delivered
to Buyer copies of the audited combined balance sheets of the Companies as of
December 31, 1996 and 1995, and the related combined statements of income,
changes in partners' and members' capital (deficiency), and cash flows for each
of the three years in the period ended December 31, 1996, certified by David
Berdon & Company, independent certified public accountants (collectively, the
"Financial Statements"). The Financial Statements present fairly, in all
material respects, the financial position of the Companies as of December 31,
1996 and 1995, and the combined results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with GAAP.
(b) Sellers have delivered to Buyer copies of the combined
balance sheet of the Companies as of March 31, 1997, and the related combined
statements of income, changes in partners' and members' capital (deficiency),
and cash flows for the fiscal quarter ended on such date. The first quarter
financial statements present fairly, in all material respects, the financial
position of the Companies as of March 31, 1997 and the combined results of their
operations and their cash flows for the period ending on such date, in
conformity with GAAP.
(c) The Companies have no liabilities or obligations,
contingent or otherwise, other than (i) liabilities and obligations reflected in
the combined balance sheet of the Companies as of March 31, 1997 referred to in
section 3.7(b) hereof, (ii) liabilities incurred by the Companies in the
ordinary course of business since March 31, 1997 and (iii) liabilities and
obligations listed or referred to or described in Schedule 3.7 hereof.
Section 3.8 Litigation; Legal and Governmental Proceedings and
Judgments; Licenses and Permits. (a) Except as set forth in Schedule 3.8, (i)
there is no claim, suit, action or legal, administrative, arbitration or other
proceeding or governmental investigation pending, or to the knowledge of Sellers
threatened, against any of the Companies; (ii) to the knowledge of Sellers,
neither any of the Companies nor any employee of the Companies is a target or
subject of any pending or threatened criminal investigation or proceeding; and
(iii) none of the Companies is the subject of any order, judgment, stipulation
or decree which has not been subsequently reversed, suspended or vacated.
(b) Each of the Companies has all material licenses, permits
and similar authorizations from all federal, state and local and all foreign
authorities which is required in connection with its business.
Section 3.9 Employee Benefit Plans; Employment and Consulting
Agreements; Loans and Advances; Other Affiliated Transactions. (a) Except as
set forth in Schedule 3.9, none of the Companies maintains, sponsors,
participates in or
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contributes to any Plan (within the meaning given in ERISA section 3(3)). None
of the Companies is a party to, and none of their employees are subject to, any
collective bargaining agreements.
(b) Except as set forth in Schedule 3.9, neither Sellers nor
any of the Companies has any employment or consulting agreements or
understandings (whether written or oral) with any Person.
(c) Except as set forth in Schedule 3.9, there are (i) no
outstanding loans or advances between any of the Companies and any employees or
Affiliates of the Companies and (ii) no contractual arrangements between any of
the Companies and any employees or Affiliates of the Companies.
Section 3.10 Material Contracts. (a) Schedule 3.10 sets
forth a list of all material contracts to which any of the Companies is a party.
(b) Sellers have provided Buyer with copies of all material
contracts in existence as of the Closing Date. Except as set forth on Schedule
3.10, all of the material contracts are valid, binding and enforceable
obligations of the Companies, as applicable, and each of the Companies is not,
and to the best of knowledge of Sellers, the other party thereto is not, in
breach of or default under any such material contract.
Section 3.11 Brokers. Sellers have not engaged any broker in
connection with the transactions contemplated by this agreement and no Person
acting on behalf of Sellers or any of the Companies is or will be entitled to
any brokerage fee, commission, finder's fee or financial advisory fee, directly
or indirectly, from Sellers or any of the Companies in connection with the
transactions contemplated by this agreement.
Section 3.12 No Material Change. Since March 31, 1997, and
except as otherwise disclosed in this agreement, there has not been any material
adverse change in the financial position, operations, assets, liabilities or the
business of the Companies taken as a whole.
00
Section 3.13 Compliance with Laws. Each of the Companies is in
substantial compliance with, and has conducted its business in all material
respects so as to comply with, all applicable laws and regulations.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers, as of the date
hereof and as of the Closing Date, as follows:
Section 4.1 Existence and Authority of Buyer. (a) Buyer is a
business trust duly formed and validly existing under the laws of the State of
California. Buyer has full trust power and authority to enter into this
agreement and to perform its obligations hereunder. The execution, delivery and
performance of this agreement, the Notes and the Assignment Agreement by Buyer
and the consummation by Buyer of the transactions contemplated hereby have been
duly authorized by all necessary proceedings on the part of Buyer. This
agreement has been duly executed and delivered, and the Notes and the Assignment
Agreement when delivered will have been duly executed, on behalf of Buyer and
constitute valid and legally binding obligations of Buyer, enforceable against
Buyer in accordance with their terms, except to the extent that their
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equitable principles.
(b) Buyer has full trust power to carry on the business in
which it is currently engaged, and to own and use the properties owned and used
by it.
Section 4.2 Investment Intent. The Interests will be held by
Buyer for its own account for investment and not with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act, nor with any present intention of distributing or selling the same. Buyer
understands that the Interests to be purchased by it have not been registered
under the Securities Act or any other applicable statute regulating the purchase
and sale of securities and are being sold to it in a transaction that is exempt
from the registration requirements of the Securities Act and any other
applicable statute regulating the purchase and sale of securities and that the
Interests it is purchasing must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available.
Section 4.3 No Consents, Approvals, Violations or Breaches.
Neither the execution and delivery of this agreement by Buyer, nor the
consummation by Buyer of the transactions contemplated hereby, will (i) require
any consent, approval, authorization or permit of, or filing, registration or
qualification with or notification to, any governmental or regulatory authority
under any law of the United States, any state or any political subdivision
thereof applicable to Buyer, other than any action required to be taken by
Sellers, (ii) violate any provision of the declaration of trust of Buyer, (iii)
assuming no violations on the part of Sellers, violate any statute, law,
ordinance,
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rule or regulation of the United States, any state or any political subdivision
thereof, or any judgment, order, writ, decree or injunction applicable to Buyer
or any of its prop erties or assets, the violation of which would have a
material adverse effect upon Buyer or (iv) assuming no violation on the part of
Sellers, violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or any event which, with or without due notice or lapse of
time, or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Buyer is a party or
by which Buyer or any of its properties or assets may be bound which would have
a material adverse effect upon Buyer.
Section 4.4 Brokers. Buyer has not engaged any broker in
connection with the transactions contemplated by this agreement and no Person
acting on behalf of Buyer is or will be entitled to any brokerage fee,
commission, finder's fee or financial advisory fee, directly or indirectly, from
Buyer in connection with the transactions contemplated by this agreement.
ARTICLE 5
COVENANTS OF SELLERS
During the period from the date hereof to the Closing Date,
Sellers covenant and agree as follows:
Section 5.1 Operations in Ordinary Course. None of the
Companies shall:
(i) conduct its business and operations in such a manner as to
impair Sellers' ability to consummate the transactions contemplated
hereunder or
(ii) engage in any transaction, take any action or omit to take
any action, which could reasonably be expected to impair Sellers'
ability to consummate the transactions contemplated hereunder.
Section 5.2 Investigations. Sellers shall permit Buyer and its
agents to inspect the properties, assets, operations, books and records of the
Companies at reasonable times and upon reasonable notice; provided, however,
that any such inspection shall be conducted in such manner at such times and
upon such notice as is reasonably acceptable to Sellers. In addition, Sellers
shall furnish Buyer and its agents with copies of such documents and records
with respect to the Companies,
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their properties, assets, operations, books and records as Buyer shall from time
to time reasonably request.
Section 5.3 Conditions to Closing. Sellers shall use their
reasonable best efforts to satisfy, as expeditiously as reasonably possible, all
of the conditions to the obligations of Sellers hereunder reasonably within
Sellers' control, including obtaining all consents, approvals and agreements
which are required in order to consummate the transactions contemplated hereby.
ARTICLE 6
COVENANTS OF BUYER
Section 6.1 Conditions to Closing. Buyer shall use its
reasonable best efforts to satisfy, as expeditiously as reasonably possible, all
of the conditions to the obligations of Buyer hereunder reasonably within
Buyer's control, including obtaining all consents, approvals and agreements
which are required in order to consummate the transactions contemplated hereby.
ARTICLE 7
FURTHER AGREEMENTS
Section 7.1 Further Assurances. Each party to this agreement
shall, at the request of another party to this agreement, at any time and from
time to time following the Closing hereunder, execute and deliver or cause to be
executed and delivered all such further instruments and take or cause to be
taken all such further action as may be reasonably necessary or appropriate in
order more effectively to sell, assign, transfer and convey to Buyer the
Interests, or otherwise to confirm or carry out the provisions of this
agreement.
Section 7.2 Costs and Expenses. Each party to this agreement
shall bear its own respective costs and expenses incurred in connection with the
negotiation, preparation, execution, delivery and enforcement of this agreement
and the consummation of the transactions contemplated hereby.
Section 7.3 Sellers' Access to Records. From and after the
Closing Date, Buyer shall afford, and shall cause each of the Companies to
afford, each of Sellers and their authorized representatives access during
normal business hours to the Companies' respective properties, books and
records, and shall cause the Companies' officers, employees, accountants and
other authorized representatives to
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furnish such additional financial and other information as Sellers shall from
time to time reasonably request.
Section 7.4 Confidentiality. Except to the extent disclosure
is required by law, or in response to any governmental authority, or in
connection with any litigation relating to an alleged breach of this agreement,
each party shall maintain the confidentiality of all information obtained from
the other party hereto other than information that is otherwise publicly
available and shall use such information only for purposes reasonably related to
this agreement and the transactions contemplated hereby. The covenant contained
in this section 7.4 shall terminate and be of no further force and effect
following the Closing.
ARTICLE 8
TERMINATION
Section 8.1 Termination Events. This agreement may, by
notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material breach of any
provision of this agreement has been committed by the other party and such
breach has not been waived;
(b) (i) by Buyer if any of the conditions in section 2.4(a)
hereof has not been satisfied as of September 30, 1997 or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this agreement) and Buyer has not
waived such condition on or before September 30, 1997; or (ii) by Sellers, if
any of the conditions in section 2.4(b) hereof has not been satisfied as of
September 30, 1997 or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Sellers to comply with their
obligations under this agreement) and Sellers have not waived such condition on
or before September 30, 1997;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this agreement
to comply fully with its obligations under this agreement) on or before
September 30, 1997 or such later date as the parties may agree upon.
Section 8.2 Effect of Termination. Each party's right of
termination under section 8.1 hereof is in addition to any other rights it may
have under this agreement or
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otherwise, and the exercise of a right of termination will not be an election of
remedies. If this agreement is terminated pursuant to section 8.1 hereof, all
further obligations of the parties under this agreement will terminate, except
that the obligations in sections 7.2 and 7.4 hereof will survive; provided,
however, that if this agreement is terminated by a party because of the breach
of the agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
ARTICLE 9
INDEMNIFICATION; REMEDIES
Section 9.1 Survival.
(a) All representations and warranties (other than the
representations and warranties contained in section 3.6 hereof), and the
covenants and obligations in this agreement will survive the Closing until June
30, 1999.
(b) The representations and warranties contained in section
3.6 hereof will survive the Closing until June 30, 2001.
Section 9.2 Indemnification by Sellers. Sellers, jointly and
severally, will indemnify and hold Buyer harmless, and will pay to Buyer the
amount of, any loss, liability, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Sellers in this agreement;
(b) any breach by any Seller of any covenant or obligation of
such Seller in this agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any Seller or any of the
Companies (or any Person acting on their behalf) in connection with any of the
transactions contemplated by this agreement.
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Section 9.3 Indemnification by Buyer. Buyer will indemnify and
hold Sellers harmless, and will pay to Sellers the amount of any Damages
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Buyer in this agreement;
(b) any breach by Buyer of any covenant or obligation of
Buyer in this agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the transactions contemplated by this
agreement.
Section 9.4 Time Limitations. Sellers will have no liability
(for indemnification or otherwise) with respect to any representation and
warranty (other than the representations and warranties contained in section 3.6
hereof), covenant or obligation hereunder unless on or before June 30, 1999 (or,
in the case of the representations and warranties contained in section 3.6
hereof, June 30, 2001) Buyer notifies Sellers of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer.
Buyer will have no liability (for indemnification or otherwise) with respect to
any representation, warranty, covenant or obligation hereunder unless on or
before June 30, 1999 Sellers notify Buyer of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Sellers.
Section 9.5 Procedure for Indemnification. Each party entitled
to indemnification under this article (the "Indemnified Party") shall give
notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom;
provided, that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld); and, provided, further, that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this article, except to
the extent that such failure to give notice prejudices the Indemnifying Party;
and provided, further, that the Indemnifying Party shall have acknowledged that
one or more of the claims as to which indemnity may be sought are the subject of
indemnification hereunder. The Indemnified Party may participate in such defense
at such party's expense; provided, however, that the Indemnifying Party shall
pay the expense of one law firm for the Indemnified Party if representation of
the Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to
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actual or potential differing interests between the Indemnified Party and any
other party represented by such counsel in such proceeding. No Indemnifying
Party, in the defense of any such claim or litigation shall, except with the
consent of the Indemnified Party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation, and no Indemnified Party
shall consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the Indemnifying Party.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Assignment; Transfer of Interests. This agreement
may not be assigned by any party hereto without the prior written consent of the
other party except that Buyer may assign its rights to purchase Interests
hereunder to a wholly-owned subsidiary. This agreement shall be binding upon and
inure to the benefit of the parties hereto, their successors in interest and
permitted assigns.
Section 10.2 Notices. Any notices or other communications
required or permitted hereunder shall be sufficient if in writing and delivered
by hand or sent by telecopy, or sent, postage prepaid, by registered, certified
or express-mail, or by recognized overnight air courier service and shall be
deemed given when so delivered by hand or telecopied, or if mailed or sent by
overnight courier service, on the fifth (5) Business Day after mailing (one
Business Day in the case of express mail or overnight courier service) to the
parties at the following addresses:
(a) If to Buyer to:
California Real Estate Investment Trust
131 Steuart Street, #200
San Francisco, California 94105
Attention: Frank A. Morrow
Telecopy: (415) 543-6269
with a copy to:
Greenberg Glusker Fields Claman & Machtinger LLP
1900 Avenue of the Stars, #2100
Los Angeles, California 90067
Attention: Paula Peters
Telecopy: (310) 553-0687
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and:
Equity Group Investments, Inc.
2 North Riverside Plaza, 6th Floor
Chicago, Illinois 60606
Attention: Gary R. Garrabrant
Telecopy: (312) 454-0157
and:
Rosenberg & Liebentritt, P.C.
2 North Riverside Plaza, 15th Floor
Chicago, Illinois 60606
Attention: Alisa M. Singer
Telecopy: (312) 454-0335
(b) If to Sellers, to:
Victor Capital Group, L.P.
885 Third Avenue, 12th Floor
New York, New York 10002
Attention: John R. Klopp and Craig M. Hatkoff
Telecopy: (212) 593-0316
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein.
Section 10.3 Entire Agreement. This agreement, including the
Disclosure Schedules and Exhibits hereto, constitutes the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings, whether oral or written. No amendment or
modification of the terms of this agreement shall be binding or effective unless
expressed in writing and signed by each party.
Section 10.4 No Waiver. The waiver by any party of the breach
of any of the terms and conditions of, or any right under, this agreement shall
not be deemed to constitute the waiver of any other breach of the same or any
other term or condition or of any similar right. No such waiver shall be binding
or effective unless expressed in writing and signed by the party giving such
waiver.
Section 10.5 Governing Law. This agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements executed and to be fully performed in such State.
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Section 10.6 Counterparts. This agreement may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
Section 10.7 Public Announcements. Sellers and Buyer agree to
consult with each other prior to issuing any press release or otherwise making
any public statement (including without limitation any filing with the
Securities and Exchange Commission) with respect to the transactions
contemplated hereby. Buyer will consult with Sellers prior to issuing any press
release or otherwise making any public statement with respect to the Companies.
Section 10.8 Availability of Equitable Remedies. Since a
breach of the provisions of this agreement could not adequately be compensated
by money damages, any party to this agreement shall be entitled, in addition to
any other right or remedy available to it, to an injunction restraining such
breach or a threatened breach and to specific performance of any such provision
of this agreement, and in either case no bond or other security shall be
required in connection therewith, and the parties hereby consent to the issuance
of such an injunction and to the ordering of specific performance.
Section 10.9 Construction. The article and section headings
contained in this agreement are inserted for reference purposes only and shall
not affect the meaning or interpretation of this agreement.
Section 10.10 Arbitration. Any dispute or controversy between
Sellers and Buyer arising under, out of, in connection with, or in relation to
this agreement shall be determined and settled by arbitration in New York City
by a panel of three members in accordance with the Commercial Rules of the
American Arbitration Association as in effect for New York City. In the event of
any dispute with respect to any calculation, such calculation shall be
determined by an accountant from a "Big Six" accounting firm selected by
agreement of the parties (which accounting firm shall have no material
relationship with any party hereto or any of their Affiliates) or, in the event
the parties are unable to agree upon such accountant, an accountant selected in
accordance with the procedures established by the Commercial Rules of the
American Arbitration Association as in effect for New York City. Any
determination rendered therein shall be final and binding upon the parties and
their legal representatives.
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IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the day and year first above written.
SELLERS:
/s/ John R. Klopp
JOHN R. KLOPP
/s/ Craig M. Hatkoff
CRAIG M. HATKOFF
VALENTINE WILDOVE & COMPANY, INC.
/s/ John R. Klopp
By:
Name: John R. Klopp
Title: Co-President
BUYER:
CALIFORNIA REAL ESTATE INVESTMENT TRUST
/s/ John R. Klopp
By:
Name: John R. Klopp
Title: Chief Executive Officer
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