Exhibit 7
Execution Counterpart
================================================================================
STOCK PURCHASE AGREEMENT
between
AP-KEI HOLDINGS, LLC
and
▇▇▇▇▇ EQUITY, INC.
October 10, 1996
================================================================================
-1-
TABLE OF CONTENTS
PAGE
SECTION 1. PURCHASE AND SALE OF COMMON STOCK......................................................1
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................2
2.1. Corporate Organization...........................................................2
2.2. Subsidiaries.....................................................................2
2.3. SEC Reports......................................................................3
2.4. Financial Statements.............................................................3
2.5. Absence of Certain Changes or Events.............................................3
2.6. Undisclosed Liabilities..........................................................4
2.7. Capitalization...................................................................4
2.8. Corporate Proceedings, etc.......................................................5
2.9. Board of Directors...............................................................6
2.10. Consents and Approvals...........................................................6
2.11. Absence of Defaults, Conflicts, etc..............................................7
2.12. Compliance with Law..............................................................7
2.13. REIT Status......................................................................8
2.14. Litigation.......................................................................8
2.15. Private Offering.................................................................9
2.16. Asset Base.......................................................................9
2.17. Broker's or Finder's Commissions.................................................9
SECTION 3. REPRESENTATIONS AND WARRANTIES OF APOLLO...............................................9
3.1. Corporate Organization...........................................................9
3.2. Apollo's Ownership of the Company Securities....................................10
3.3. Corporate Proceedings, etc......................................................10
3.4. Consents and Approvals..........................................................10
3.5. Absence of Defaults, Conflicts, etc.............................................11
3.6. Compliance with Law.............................................................11
3.7. Litigation......................................................................11
3.8. Private Offering................................................................11
SECTION 4. COMPANY COVENANTS.....................................................................12
4.1. Use of Proceeds.................................................................12
4.2. Board of Directors..............................................................12
4.3. Takeover Defenses...............................................................13
4.4. Subscription Right..............................................................14
4.5. Termination of Company Covenants................................................15
-i-
SECTION 5. APOLLO COVENANTS......................................................................15
5.1. Standstill Agreements...........................................................15
5.2. Lockup Agreement................................................................17
5.3. Resale of Securities............................................................18
5.4. Consent Solicitation............................................................18
5.5. Special Purpose Entity..........................................................18
5.6. Limitations on Ownership and Voting.............................................18
SECTION 6. ADDITIONAL COVENANTS..................................................................19
6.1. Further Assurance...............................................................19
6.2. Financial and Business Information..............................................19
6.3. Inspection......................................................................20
6.4. Keeping of Books................................................................20
6.5. Lost, etc. Certificates Evidencing Shares; Exchange.............................21
6.6. Confidentiality.................................................................21
SECTION 7. INTERPRETATION OF THIS AGREEMENT......................................................21
7.1. Terms Defined...................................................................21
7.2. Accounting Principles...........................................................25
7.3. Directly or Indirectly..........................................................25
7.4. Governing Law...................................................................25
7.5. Paragraph and Section Headings..................................................25
SECTION 8. TERMINATION AND SURVIVAL..............................................................26
8.1. Termination.....................................................................26
8.2. Survival of Representations and Warranties......................................26
SECTION 9. MISCELLANEOUS.........................................................................26
9.1. Notices.........................................................................26
9.2. Expenses and Taxes..............................................................27
9.3. Reproduction of Documents.......................................................27
9.4. Successors and Assigns..........................................................27
9.5. Notice of Proposed Action; Equitable Remedies...................................28
9.6. Attorneys' Fees.................................................................28
9.7. Entire Agreement; Amendment and Waiver..........................................29
9.8. Limitation on Enforcement of Remedies...........................................29
9.9. Counterparts....................................................................30
-ii-
EXHIBIT A Registration Rights Agreement
EXHIBIT B(1) Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, a professional association,
counsel to the Company
EXHIBIT B(2) Opinion of Ropes & ▇▇▇▇, counsel to the Company
EXHIBIT C Articles of Incorporation of the Company
EXHIBIT D Amended and Restated Bylaws of the Company
EXHIBIT E(1) Form of Assignment and Assumption Agreement
EXHIBIT E(2) Form of Assignment and Assumption Agreement
-iii-
▇▇▇▇▇ EQUITY, INC.
STOCK PURCHASE AGREEMENT
Dated as of October 10, 1996
AP-KEI Holdings, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
▇▇▇▇▇ Equity, Inc., a Florida corporation (the "Company"), hereby
agrees with AP- KEI Holdings, LLC, a Delaware limited liability company
("Apollo"), as follows:
SECTION 1. PURCHASE AND SALE OF COMMON STOCK
---------------------------------
1.1. Upon the terms and subject to the conditions set forth in this
Agreement, and in reliance upon the Company's and Apollo's representations set
forth below, at the Closing (as defined below) the Company shall issue and sell
to Apollo, and Apollo shall purchase from the Company, 3,000,000 shares of its
common stock, par value $.01 per share (the "Common Stock"), at a price of
fourteen dollars and fifty cents ($14.50) per share for an aggregate cash
purchase price of forty three million five hundred thousand dollars
($43,500,000) (the "Purchase Price") (such shares, collectively, the "Shares").
Such sale and purchase shall be effected on the Closing Date by the Company's
delivering to Apollo, duly registered in its name (or in the name of its nominee
designated by Apollo prior to the Closing Date), a duly executed stock
certificate evidencing the Shares being purchased by it, against delivery by
Apollo to the Company of the Purchase Price by wire transfer of immediately
available funds to such account as the Company shall designate prior to the
Closing Date.
1.2. Concurrently with the sale and purchase of the Shares, (i) the
Company and Apollo shall execute the Registration Rights Agreement, the form of
which is attached as Exhibit A hereto (the "Registration Rights Agreement"), and
(ii) Apollo shall receive from the Company's counsel, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, a
professional association and Ropes & ▇▇▇▇, opinions, dated the Closing Date, the
form of which is attached as Exhibits B(1) and B(2) hereto.
1.3. The closing of such sale and purchase (the "Closing") shall take
place at 10:00 A.M., New York City time, on the date of this Agreement or such
other date as Apollo and the Company agree in writing (the "Closing Date"), at
the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, 153 East 53rd Street, New York, New
York, or such other location as Apollo and the Company shall mutually select.
-1-
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Apollo that:
2.1. Corporate Organization
----------------------
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. Attached
hereto as Exhibits C and D, respectively, are true and complete copies of the
Amended and Restated Articles of Incorporation and the Amended and Restated
Bylaws of the Company, as amended through the date hereof (collectively, the
"Organizational Documents").
(b) The Company has all requisite power and authority and
has all necessary approvals, licenses, permits and authorizations to own its
properties and to carry on its business as now conducted. The Company has all
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.
(c) The Company has filed all necessary documents to qualify
to do business as a foreign corporation in, and the Company is in good standing
under the laws of each jurisdiction in which the conduct of the Company's
business or the nature of its properties requires such qualification, except
where the failure to so qualify would not have a material adverse effect on the
business, properties, results of operations or financial condition of the
Company and its subsidiaries taken as a whole (a "Material Adverse Effect").
2.2. Subsidiaries
------------
Except as set forth on Schedule 2.2, the Company has no subsidiaries
and no interests or investments in any partnership, trust or other entity or
organization. Each subsidiary of the Company and each other entity and
organization listed on Schedule 2.2 has been duly organized, is validly existing
and in good standing under the laws of the jurisdiction of its organization, has
the corporate power and authority to own its properties and to conduct its
business and is duly registered, qualified and authorized to transact business
and is in good standing in each jurisdiction in which the conduct of its
business or the nature of its properties requires such registration,
qualification or authorization; all of the outstanding equity or other
participating interests of each subsidiary and each other entity and
organization listed on Schedule 2.2 have been duly authorized and validly
issued, are fully paid and non-assessable, and, to the extent owned by the
Company as indicated on Schedule 2.2, are owned free and clear of any mortgage,
pledge, lien, encumbrance, security interest, claim or equity.
-2-
2.3. SEC Reports
-----------
The Company has caused to be delivered to Apollo copies of the
Company's Annual Report on Form 10-K for the fiscal years ended December 31,
1993, 1994 and 1995, Quarterly Reports on Form 10-Q for each of the first two
fiscal quarters of the Company's current fiscal year, the Company's Proxy
Statement for its annual meeting of shareholders held on May 7, 1996 and such
Reports on Form 8-K as the Company has filed during the period between January
1, 1996 and the date hereof, and will cause to be delivered to Apollo copies of
such additional documents as may be filed by the Company pursuant to the
Exchange Act on or prior to the Closing Date (collectively, the "SEC Reports").
The SEC Reports were, and those delivered prior to the Closing will be, prepared
and filed in compliance with the rules and regulations promulgated by the SEC
under the Exchange Act, and do not and will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
in order to make the statements contained therein, in light of the circumstances
under which they were made or will be made, not misleading.
2.4. Financial Statements
--------------------
The audited consolidated balance sheets of the Company and its
subsidiaries and the related notes thereto as of December 31, 1993, 1994 and
1995 and the unaudited consolidated balance sheet of the Company and its
subsidiaries and the related notes thereto as at June 30, 1996 (the "Unaudited
Consolidated Balance Sheet") present fairly the financial position of the
Company and its subsidiaries as at the dates thereof, and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows, for the fiscal periods ended on such dates, including, with respect to
all of the foregoing, the related notes thereto, present fairly the consolidated
financial position, the results of operations, cash flows and changes in
financial position of the Company and its subsidiaries for the respective
periods indicated. All such financial statements, including the schedules and
notes thereto, were prepared in accordance with generally accepted accounting
principles ("GAAP") applied consistently throughout the periods involved.
2.5. Absence of Certain Changes or Events
------------------------------------
Except as disclosed in the SEC Reports filed with the SEC prior to the
date hereof or in Schedule 2.5, since June 30, 1996, the Company and each of its
subsidiaries has conducted its business only in the ordinary course of such
business and has not (i) sold or acquired any real estate or (ii) leased all or
substantially all of any property or (iii) entered into any financing
arrangements in connection therewith or (iv) granted an option to purchase or
lease all or substantially all of any property or (v) entered into a contract to
do any of the foregoing and there has not been (a) any change, circumstance or
event that has resulted in a Material Adverse Effect or (b) any declaration,
setting aside or payment of any dividend or other distribution with respect to
the Common Stock.
-3-
2.6. Undisclosed Liabilities
-----------------------
Except as set forth on Schedule 2.6, neither the Company nor any
subsidiary has any material liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise) except for (i) liabilities or
obligations reflected or reserved against in the Unaudited Consolidated Balance
Sheet, (ii) liabilities and obligations relating to outstanding leases that are
not required to be disclosed under GAAP and (iii) current liabilities incurred
in the ordinary course of business since the date of such balance sheet.
2.7. Capitalization
--------------
(a) On the date hereof, the authorized capital stock of the
Company consists of 100,000,000 shares of its Common Stock and 50,000,000 shares
of preferred stock, par value $.01 per share (the "Preferred Stock"). The issued
and outstanding shares of capital stock of the Company as of the close of
business on the date one (1) Business Day prior to the Closing Date consisted of
17,881,556 shares of Common Stock, and the Company has not issued any shares of
Common Stock since that date except for shares issued as a result of the
exercise of any warrants, options or convertible securities or shares issued in
connection with the Company's Monthly Stock Investment Plan which are listed on
Schedule 2.7. No shares of Preferred Stock are outstanding.
(b) All the outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid and non-assessable.
Upon issuance, sale and delivery as contemplated by this Agreement, the Shares
will be duly authorized, validly issued, fully paid and non-assessable shares of
the Company, free and clear of any mortgage, pledge, lien, encumbrance, security
interest, claim or rights or interests of any third party of any nature
whatsoever.
(c) Except for the conversion rights which attach to the
warrants, options and convertible securities which are listed on Schedule 2.7
hereto and except for rights pursuant to the Company's Common Stock Rights
Agreement, dated as of September 30, 1990 (as amended from time to time, the
"Rights Agreement") and rights pursuant to the Company's Monthly Stock
Investment Plan, on the Closing Date (after giving effect to the issuance of the
Shares) there will be no shares of Common Stock or any other equity security of
the Company issuable upon conversion or exchange of any security of the Company
nor will there be any rights, options or warrants outstanding or other
agreements to acquire shares of Common Stock nor will the Company be
contractually obligated to purchase, redeem or otherwise acquire any of its
outstanding shares. No shareholder of the Company is entitled to any preemptive
or similar rights to subscribe for shares of capital stock of the Company other
than those rights of Apollo existing pursuant to this Agreement.
-4-
2.8. Corporate Proceedings, etc.
---------------------------
(a) The Company has authorized the execution, delivery and
performance of this Agreement and each of the transactions and agreements
contemplated hereby. No other corporate action (including shareholder approval)
is necessary to authorize such execution, delivery and performance, and upon
such execution and delivery this Agreement, the Registration Rights Agreement
and the Amended Rights Agreement shall constitute the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms. The Company has authorized the issuance and delivery of the Shares
in accordance with this Agreement.
(b) The Company has duly taken such actions under Florida
law so that the execution and delivery of this Agreement, and the acquisition,
from time to time, by Apollo or its Affiliates of the Permitted Securities shall
not be an "affiliated transaction" under the provisions of ss.607.0901 of the
Florida Business Corporation Act (the "FBCA") or a "control share acquisition"
by Apollo or its Affiliates under the provisions of ss. 607.0902 of the Florida
Business Corporation Act; provided, however, that: (a) nothing in this Agreement
shall preclude the application of either of ss.607.0901 or ss.607.0902 to any
other transaction not expressly permitted under this Agreement, whether
involving Apollo or any of its Affiliates or otherwise; and (b) in the event
that Apollo or any of its Affiliates shall, at any time, be the Beneficial Owner
of any security of the Company, including without limitation, any share of
Common Stock, which is not a Permitted Security (each a "Prohibited Security"
and collectively "Prohibited Securities"), then all Permitted Securities shall
be aggregated with all Prohibited Securities in calculating whether Apollo and
its Affiliates engage or have engaged in an "affiliated transaction" or a
"control share acquisition", as the case may be. The Company has provided Apollo
with a copy of the resolutions of the Board of Directors of the Company (the
"Board of Directors") that carry out the actions described by this Section
2.8(b).
(c) The Company has duly amended the Rights Agreement (the
"Amended Rights Agreement") such that the definition of "Exempt Person"
thereunder includes (i) Apollo and its Affiliates so long as neither Apollo nor
any of its Affiliates is the Beneficial Owner of any Prohibited Security and
(ii) any person who is an "Affiliate" (using in this clause (ii) only the term
as defined in the Rights Agreement) of Apollo to the extent that such
"Affiliate" would be an Acquiring Person (as defined in the Rights Agreement) as
a result of "Beneficially Owning" (as defined in the Rights Agreement) any
Permitted Securities; provided, however, that, in the event that Apollo or any
Affiliate shall, at any time, Beneficially Own any Prohibited Security, then:
(a) nothing in this Agreement shall preclude the Company from amending and
restating the Rights Agreement in any way or adopting a new rights agreement;
and (b) all Permitted Securities shall be aggregated with all Prohibited
Securities in calculating the number of securities of the Company, including,
without
-5-
limitation, Common Stock, of which Apollo and its Affiliates are Beneficial
Owners for purposes of the Rights Agreement. The Company has provided Apollo
with a copy of the Amended Rights Agreement.
(d) The Company has duly taken all such actions under its
Amended and Restated Articles of Incorporation as are necessary such that the
Permitted Securities beneficially owned from time to time by Apollo and its
Affiliates shall not be deemed to be "Excess Shares", as such term is defined
therein; provided, however, that: (a) nothing in this Agreement shall preclude
the application of the Excess Share provision of the Amended and Restated
Articles of Incorporation, as in effect on the date hereof or as amended or
restated from time to time (the "Articles"), to any other acquisition of shares
of securities of the Company not expressly permitted under this Agreement,
whether by Apollo or any of its Affiliates or otherwise; and (b) in the event
that Apollo or any of its Affiliates shall, at any time, become the Beneficial
Owner of any Prohibited Security, the Permitted Securities may, to the extent
provided in the Articles, be aggregated with any Prohibited Securities in
calculating the number of shares of securities of the Company, including,
without limitation, Common Stock, for purposes of any calculation under the
Articles, including, without limitation, any so-called Excess Share calculation.
The Company has provided Apollo with a copy of the resolutions of the Board of
Directors that carry out the actions described by this Section 2.8(d).
2.9. Board of Directors
------------------
Effective immediately following the Closing, the Board of Directors of
the Company (the "Board of Directors") consists of twelve (12) directors,
including Messrs. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇▇ and W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, who
have been duly elected as Disinterested Directors to the Board of Directors by
the affirmative vote of at least seven directors (each named person, together
with any person from time to time designated by Apollo to replace such person,
provided that each such designee is reasonably acceptable to the Board of
Directors, is herein referred to as an "Apollo Director"). The foregoing
election has been expressly conditioned upon the Closing under this Agreement,
and no Apollo Director shall serve as a director on the Board of Directors until
immediately following the Closing.
2.10. Consents and Approvals
----------------------
The execution and delivery by the Company of this Agreement, the
performance by the Company of its obligations hereunder and the consummation by
the Company of the transactions contemplated hereby do not require the Company
or any of its subsidiaries to obtain any consent, approval or action of, or make
any filing with or give any notice to, any corporation, person or firm or any
public, governmental or judicial authority except (a) as set forth in Schedule
2.10; and (b) such as have been duly obtained or made, as the case may be, and
-6-
are in full force and effect on the date hereof and will continue to be in full
force and effect on the Closing Date; and (c) such as would not have a Material
Adverse Effect or an Apollo Material Adverse Effect following the Closing.
2.11. Absence of Defaults, Conflicts, etc.
------------------------------------
The execution and delivery of this Agreement does not, and the
fulfillment of the terms hereof by the Company, and the issuance of the Shares
will not, (i) result in a breach of any of the terms, conditions or provisions
of, or (ii) constitute a default under, or (iii) permit the acceleration of
rights under or termination of, any indenture, mortgage, deed of trust, credit
agreement, note or other evidence of indebtedness, or other agreement of the
Company or any of its subsidiaries (collectively the "Agreements and
Instruments"), or the Organizational Documents, or any rule or regulation of any
court or federal, state or foreign regulatory board or body or administrative
agency having jurisdiction over the Company or any of its subsidiaries or over
their respective properties or businesses, which breach, default, acceleration
of rights or termination would have a Material Adverse Effect or an Apollo
Material Adverse Effect following the Closing. To the Company's knowledge, no
event has occurred and no condition exists which, upon notice or the passage of
time (or both), would constitute a default under any such Agreements and
Instruments or in any license, permit or authorization to which the Company or
any subsidiary is a party or by which any of them may be bound.
2.12. Compliance with Law
-------------------
(a) Subject to such matters as are identified in the SEC
Reports relating to governmental rules and regulations promulgated under the
Americans with Disabilities Act and environmental laws, neither the Company nor
any of its subsidiaries nor any property owned by them is in material violation
of any laws, ordinances, governmental rules or regulations to which it is
subject, including without limitation laws or regulations relating to the
environment or to occupational health and safety, and no material expenditures
are or will be required in order to cause its current operations or properties
to comply with any such law, ordinances, governmental rules or regulations.
There is no continuing order, injunction or decree to which the Company or any
of its subsidiaries is subject or by which any of their assets is bound, and to
the best knowledge of the Company neither the Company nor any of its
subsidiaries is subject to, or the target of, any inquiry or investigation which
could result in any such order, injunction or decree.
(b) To the Company's knowledge, the Company and its
subsidiaries have all licenses, permits, franchises or other governmental
authorizations necessary to the ownership of their property or to the conduct of
their respective businesses, which if violated or not obtained might have a
Material Adverse Effect. To the Company's knowledge, neither the Company nor any
subsidiary has been finally denied any application for any such licenses,
permits, franchises or other governmental authorizations necessary to its
business.
-7-
2.13. REIT Status
-----------
(a) To the Company's knowledge, which is principally based
on information provided by stockholders, as of the date hereof, (i) the Company
is a "domestically-controlled" REIT within the meaning of the Code Section
897(h)(4)(B), and (ii) non-domestic persons Holding five percent (5%) or more of
the Common Stock are set forth in Schedule 2.13. To the Company's knowledge,
except as set forth in Schedule 2.13 and interests in the Company held by Apollo
that may be attributed to an "individual", no person or entity which would be
treated as an "individual" for purposes of Section 542(a)(2) of the Code (as
modified by Section 856(h) of the Code) owns or would be considered to own
(taking into account the ownership attribution 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 the Company.
(b) (i) The Company was eligible to and did validly elect to
be taxed as a real estate investment trust ("REIT") for federal income tax
purposes beginning for calendar year 1993 and has met all of the requirements to
be treated as a REIT within the meaning of Sections 856-860 of the Code since
such time. The Company has met all requirements necessary to be treated as a
REIT for purposes of the income tax provisions of each of the states in which it
owns property or conducts business (to the extent any such state recognizes REIT
status). Each subsidiary of the Company is a Qualified REIT Subsidiary as
defined in Section 856(i) of the Code. 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.
(ii) The Company has operated, and intends to
continue to operate, in such a manner as to qualify as a REIT for 1996.
(iii) The Company has not taken or omitted to take
any action which has resulted in a challenge to its status as a REIT, and no
challenge to the Company's status as a REIT is pending or, to the Company's
knowledge, threatened.
2.14. Litigation
----------
(a) Except for the matters described on Schedule 2.14, there
are no actions, suits, investigations or proceedings pending, or to the
knowledge of the Company, threatened, against the Company or its subsidiaries,
or any of their respective properties or assets, by or before any court,
arbitrator or governmental body, department, commission, board, bureau, agency
or instrumentality (i) which would question the validity of this Agreement or
the Registration Rights Agreement or any action taken or to be taken pursuant
hereto or thereto, or (ii) that would have a Material Adverse Effect.
(b) Neither the Company nor its subsidiaries is in default
with respect to any judgment, order, writ, injunction, decree or award which
would result in a Material Adverse Effect.
-8-
2.15. Private Offering
----------------
The offer, sale and issuance of the Shares are exempt from the
registration requirements of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
2.16. Asset Base
----------
The Company and its subsidiaries do not hold "non-exempt assets" (as
such term is used in Section 802.4 of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act) with an
aggregate fair market value of more than $15,000,000.
2.17. Broker's or Finder's Commissions
--------------------------------
Except as set forth in Schedule 2.17, no broker's or finder's fee or
commission (whether payable in cash, any equity interest in the Company or any
of its subsidiaries, or any other form of compensation) will be payable by the
Company with respect to the issuance and sale of the Shares or the transactions
contemplated hereby.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF APOLLO
----------------------------------------
Apollo represents and warrants to the Company that:
3.1. Corporate Organization
----------------------
(a) Apollo is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware.
AP-MM KEI Holdings, LLC, the managing member of Apollo, is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. Apollo Real Estate Investment Fund II, L.P., is a limited
liability partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware (the "Fund"). AP-MM KEI Holdings, LLC
owns 1% of the equity interest in Apollo and the Fund owns the remaining 99% of
the equity interest in Apollo. Apollo Real Estate Advisors II, L.P. is a limited
liability partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware ("Advisors"). Advisors is the general
partner of the Fund.
(b) Apollo has all requisite power and authority and has all
necessary approvals, licenses, permits and authorizations to own its properties
and to carry on its business as now conducted. Apollo has all requisite power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder.
(c) Apollo has filed all necessary documents to qualify to
do business as a foreign limited liability company in, and Apollo is in good
-9-
standing under the laws of, each jurisdiction in which the conduct of Apollo's
business or the nature of its properties requires such qualification, except
where the failure to so qualify would not have a material adverse effect on the
business, properties, results of operations or financial condition of Apollo and
its Affiliates taken as a whole (an "Apollo Material Adverse Effect").
3.2. Apollo's Ownership of the Company Securities
--------------------------------------------
As of the date hereof, Apollo and its Affiliates Beneficially Own
1,713,240 shares of the Company's Common Stock, which include (a) 582,598 shares
of the Company's Common Stock owned outright, which are the "Existing Apollo
Shares" and (b) options to purchase a total of 1,130,642 additional shares of
Common Stock, which are the Option Shares, under and pursuant to Apollo's right
under (i) that certain Option Agreement, dated as of May 22, 1996 by and between
Kronus Property Holdings, L.L.C., an Affiliate of Apollo ("Kronus"), and TCW
Special Credits, for itself and as general partner or investment manager for
certain entities (the "TCW Option") and (ii) that certain Option Agreement dated
as of May 24, 1996 by and between Kronus and ▇▇▇▇▇▇▇ Partners (the "▇▇▇▇▇▇▇
Option") (collectively, the TCW Option and the ▇▇▇▇▇▇▇ Option are referred to
herein as the "Options"). The information contained in the Schedule 13D filed on
behalf of Apollo Real Estate Investment Fund II, L.P. on June 25, 1996, as
amended by Amendment No. 1 thereto dated August 20, 1996 describes all shares of
the Company's Common Stock and its Affiliates Beneficially Owned by Apollo and
its Affiliates other than the Shares and is true and correct in all material
respects.
3.3. Corporate Proceedings, etc.
---------------------------
Apollo has authorized the execution, delivery and performance of this
Agreement and each of the transactions and agreements contemplated hereby. No
other company action is necessary to authorize such execution, delivery and
performance, and upon such execution and delivery this Agreement and the
Registration Rights Agreement shall constitute the valid and binding obligations
of Apollo, enforceable against Apollo in accordance with their terms.
3.4. Consents and Approvals
----------------------
Except for the filing of an amendment to its Schedule 13D with the SEC
reporting the acquisition of the Shares and in reliance on the accuracy of the
representation made by the Company in Section 2.16, the execution and delivery
by Apollo of this Agreement, the performance by Apollo of its obligations
hereunder and the consummation by Apollo of the transactions contemplated hereby
do not require Apollo to obtain any consent, approval or action of, or make any
filing with or give any notice to, any corporation, person or firm or any
public, governmental or judicial authority except such as have been duly
obtained or made, as the case may be, and are in full force and effect on the
date hereof and will continue to be in full force and effect on the Closing
Date.
-10-
3.5. Absence of Defaults, Conflicts, etc.
------------------------------------
The execution and delivery of this Agreement does not, and the
fulfillment of the terms hereof by Apollo will not, (i) result in a breach of
any of the terms, conditions or provisions of, or (ii) constitute a default
under, or (iii) permit the acceleration of rights under or termination of, any
indenture, mortgage, deed of trust, credit agreement, note or other evidence of
indebtedness, or other agreement of Apollo, or the operating agreement, or any
rule or regulation of any court or federal, state or foreign regulatory board or
body or administrative agency having jurisdiction over Apollo or over its
properties or businesses. No event has occurred and no condition exists which,
upon notice or the passage of time (or both), would constitute a default under
any such indenture, mortgage, deed of trust, credit agreement, note or other
evidence of indebtedness, or other agreement of Apollo or in any license, permit
or authorization to which Apollo is a party or by which it may be bound.
3.6. Compliance with Law
-------------------
Apollo is not in material violation of any laws, ordinances,
governmental rules or regulations to which it is subject, including without
limitation laws or regulations relating to the environment or to occupational
health and safety, and no material expenditures are or will be required in order
to cause its current operations or properties to comply with any such law,
ordinances, governmental rules or regulations. There is no continuing order,
injunction or decree to which Apollo is subject or by which any of its assets is
bound, and to the best knowledge of Apollo it is not subject to, or the target
of, any inquiry or investigation which could result in any such order,
injunction or decree.
3.7. Litigation
----------
(a) There are no actions, suits, investigations or
proceedings pending, or to the knowledge of Apollo, threatened, against Apollo,
or any of its properties or assets, by or before any court, arbitrator or
governmental body, department, commission, board, bureau, agency or
instrumentality (i) which would question the validity of this Agreement or the
Registration Rights Agreement or any action taken or to be taken pursuant hereto
or thereto, or (ii) that would have an Apollo Material Adverse Effect.
(b) Apollo is not in default with respect to any judgment,
order, writ, injunction, decree or award which would result in an Apollo
Material Adverse Effect.
3.8. Private Offering
----------------
Apollo is acquiring the Shares for its own account for investment and
not with a view towards the resale, transfer or distribution thereof, nor with
any present intention of reselling, transferring or distributing the Shares;
provided, however, that subject to Section 5.2(a), any resale, transfer or
distribution of Apollo's property shall at all times be within Apollo's control,
and without prejudice to Apollo's right at all times to sell or otherwise
-11-
dispose of all or any part of such Shares under a registration under the
Securities Act or under an exemption from said registration available under the
Securities Act.
SECTION 4. COMPANY COVENANTS
-----------------
4.1. Use of Proceeds
---------------
The Company will apply all proceeds from the sale and issuance of the
Shares to the repayment of existing indebtedness to the extent required under
its existing agreements with lenders, except to the extent that any lenders may
waive such repayment. All remaining proceeds will be held by the Company for
general corporate purposes.
4.2. Board of Directors
------------------
(a) For so long as Apollo and its Affiliates Beneficially
Own at least 3,535,199 shares of Common Stock (before giving effect to any stock
dividends, stock splits or reverse stock splits), the Company will (i) cause the
Board of Directors to consist of no more than twelve (12) directors and (ii)
nominate and use its best efforts to elect and to cause to remain as
Disinterested Directors on the Board of Directors three (3) Apollo Directors.
(b) For so long as Apollo and its Affiliates Beneficially
Own at least 2,356,799 (but less than 3,535,199) shares of Common Stock (before
giving effect to any stock dividends, stock splits or reverse stock splits), the
Company will (i) cause the Board of Directors to consist of no more than twelve
(12) directors and (ii) nominate and use its best efforts to elect and to cause
two Apollo Directors to remain as Disinterested Directors on the Board of
Directors.
(c) For so long as Apollo and its Affiliates Beneficially
Own at least 1,178,400 (but less than 2,356,799) shares of Common Stock (before
giving effect to any stock dividends, stock splits or reverse stock splits), the
Company will (i) cause the Board of Directors to consist of no more than twelve
(12) directors and (ii) nominate and use its best efforts to elect and to cause
one Apollo Director to remain as a Disinterested Director on the Board of
Directors.
(d) The Company agrees to use its best efforts to cause a
majority of the Disinterested Directors to elect or designate an individual
designated by Apollo to fill any vacancy created by the death, disability,
retirement, resignation or removal of any Apollo Director, provided that each
such designee is reasonably acceptable to the Board of Directors.
(e) The Company will establish and maintain executive,
finance, audit and compensation committees of the Board of Directors, and shall
use its best efforts to elect, appoint or designate to each of such committees
and to any other committees maintained by the Company that number of Apollo
Directors that gives the Apollo Directors the same proportional representation
-12-
on any such committee as they otherwise have on the Board of Directors (but in
no case less than one Apollo Director). Notwithstanding the foregoing, no Apollo
Director shall be elected, appointed or designated to an independent committee
of the Board of Directors established for the purpose of reviewing (i) a
material proposed transaction between the Company and Apollo or any of its
Affiliates or Associates or (ii) compliance by the Company or Apollo or any of
its Affiliates with the terms of this Agreement (an "Independent Committee").
4.3. Takeover Defenses
-----------------
(a) So long as Apollo and its Affiliates Beneficially Own
only Permitted Securities, the Company shall take all such further actions under
Florida law as are necessary such that Sections 607.0901 and 607.0902 of the
Florida Business Corporation Act (or their successor provisions) relating to
affiliated transactions and control share acquisitions shall not apply to Apollo
and its Affiliates or the Company as a result of either the acquisition or
ownership by Apollo or its Affiliates of any Permitted Securities; provided,
however, that: (a) nothing in this Agreement shall cause the Company to take any
such actions to preclude the application of either of ss.607.0901 or ss.607.0902
to any other transaction not expressly permitted under this Agreement, whether
involving Apollo or its Affiliates or otherwise; and (b) in the event that
Apollo or any of its Affiliates shall, at any time, become the Beneficial Owner
of a Prohibited Security, then all Permitted Securities shall be aggregated with
all Prohibited Securities in calculating whether Apollo or its Affiliates engage
or have engaged in an "affiliated transaction" or a "control share acquisition",
as the case may be.
(b) So long as Apollo and its Affiliates Beneficially Own
only Permitted Securities, the Company will not, without the prior written
consent of Apollo, amend the Rights Agreement or adopt any new rights agreement;
provided, however, that: (a) nothing in this Agreement shall prevent the Company
from extending the expiration date of Rights granted under the Rights Agreement;
and (b) in the event that Apollo or any of its Affiliates shall, at any time,
become the Beneficial Owner of a Prohibited Security, then all Permitted
Securities shall be aggregated with all Prohibited Shares in calculating the
number of shares of securities of the Company, including, without limitation,
Common Stock, of which Apollo and its Affiliates are Beneficial Owners for
purposes of the Rights Agreement.
(c) So long as Apollo and its Affiliates Beneficially Own
only Permitted Securities, the Company will not, without the prior written
consent of Apollo, take, or fail to take, any action that causes any Permitted
Securities to be deemed "Excess Shares" under the Articles; provided, however,
that (a) nothing in this Agreement shall require the Company to take any such
actions to preclude the application of the Excess Share provision of the
Articles to any other transaction not expressly permitted under this Agreement,
whether involving Apollo or its Affiliates or otherwise; and (b) in the event
that Apollo shall, at any time, become the beneficial owner of any Prohibited
Security, then the Permitted Securities may, to the extent provided in the
-13-
Articles, be aggregated with any Prohibited Securities in calculating the number
of shares of securities of the Company, including, without limitation, Common
Stock for purposes of any calculation under the Articles, including, without
limitation, a so-called Excess Share calculation.
4.4. Subscription Right
------------------
If at any time during the term of this Agreement the Company issues
equity securities of any kind (the term "equity securities" shall include for
these purposes Common Stock and any warrants, options or other rights to acquire
equity securities (including Common Stock) and debt securities convertible into
equity securities) of the Company (other than the issuance of (a) securities
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other form of reorganization, (b)
shares of Common Stock issued pursuant to the Rights Agreement, to the extent
that Apollo is expressly excluded from receiving such shares by the terms of the
Rights Agreement, (c) Common Stock (or options or warrants to acquire Common
Stock) pursuant to an employee stock option plan, stock bonus plan, stock
purchase plan, stock investment plan, benefit plan or other management or
director equity program approved by the Board of Directors or (d) Common Stock
issued as a result of the exercise of warrants outstanding on the Closing Date),
then, as to Apollo, the Company shall, no later than the date of any such
issuance:
(i) give written notice setting forth in reasonable
detail (A) the designation and all of the terms and provisions of the securities
to be issued (the "New Securities"), including, where applicable, the voting
powers, preferences and relative participating, optional or other special
rights, and the qualification, limitations or restrictions thereof and interest
rate and maturity; (B) the price and other terms of the sale of such securities;
(C) the amount of such securities to be issued; and (D) such other information
as Apollo may reasonably request within ten (10) Business Days of such notice in
order to evaluate the issuance; and
(ii) offer to sell to Apollo on the terms and at such
price as set forth in the notice required by clause (i) of this Section 4.4 that
number of additional New Securities that would cause Apollo and its Affiliates
to Beneficially Own (A) in the case of New Securities consisting of Common Stock
or securities exercisable into, exchangeable for or convertible into Common
Stock, 25% of the sum of (1) the number of shares of Common Stock outstanding on
such date and (2) if applicable, the number of shares of Common Stock issuable
upon the exercise, exchange or conversion of such New Securities, and (B) in the
case of New Securities consisting of any other equity security, 25% of the
number of New Securities outstanding.
Apollo shall be entitled to exercise its purchase rights hereunder at
any time on or prior to the later to occur of (A) ten (10) Business Days after
receipt of such notice from the Company or (B) ten (10) Business Days after
Apollo has received any information requested by it pursuant to Section
4.4(i)(D) that is reasonably accessible to the Company. If Apollo shall not have
exercised its purchase rights within the applicable ten (10) Business Day
-14-
period, Apollo will be deemed to have forfeited such rights with respect to such
issuance of New Securities, provided, however, that the election by Apollo not
to exercise its subscription rights under this Section 4.4 in any one instance
shall not affect its right as to any subsequent issuance.
4.5. Termination of Company Covenants
--------------------------------
In addition to such remedies as the Company may otherwise have under
this Agreement or in law or equity, the obligations of the Company under
Sections 4.2 and 4.4 shall cease in the event that Apollo or any Affiliate shall
breach its obligations under any of Sections 5.1(a), 5.1(b), 5.1(d), 5.2, 5.4,
5.5 or 5.6(a).
SECTION 5. APOLLO COVENANTS
----------------
5.1. Standstill Agreements
---------------------
(a) Apollo and its Affiliates will not (i) acquire, or seek
to acquire, shares of Common Stock, or rights to acquire such shares if as a
result of any such acquisition Apollo or its Affiliates would Beneficially Own
any Prohibited Securities or (ii) acting alone or in concert with any Person,
commence or solicit support for a takeover of or merger with the Company, in
either case without the prior written consent of the Board of Directors.
(b) Following the Closing and until January 1, 1997, Apollo
agrees that Apollo and its Affiliates will become the Beneficial Owner of
additional shares of Common Stock only in (i) acquisitions directly from the
Company and/or with the prior written consent of the Board of Directors or (ii)
acquisitions of shares of Common Stock resulting from the exercise of the
Options.
(c) Apollo further agrees that if Apollo or its Affiliates
intend or propose to become the Beneficial Owner of additional shares of Common
Stock as otherwise permitted by Section 5.1(a), Apollo will (i) notify the
Company in writing of such intention or proposal at least three (3) Business
Days prior to making any such purchase and (ii) discuss with the Company during
such three (3) Business Day period the possibility of purchasing such additional
shares directly from the Company.
(d) Apollo and its Affiliates agree to vote all shares of
Common Stock Beneficially Owned by any of them (i) in accordance with the
recommendation of the Board of Directors or (ii) proportionately with all other
voting shareholders, provided, however, that Apollo and its Affiliates may vote
shares of Common Stock Beneficially Owned by them without restriction in
connection with (x) any proposal by the Board of Directors to change the
Company's status as a REIT, (y) amendments to the Organizational Documents
(other than pursuant to Section 5.4), and (z) any Extraordinary Transaction (the
covenants and agreements contained in Subsections 5.1(a), 5.1(b), 5.1(c) and
5.1(d) being herein referred to as the "Standstill Agreements").
-15-
(e) The Standstill Agreements shall cease to be in effect
if
(i) Covenant Breach -- the Company breaches any
covenant contained in Sections 4.2, 4.3 or 4.4 of this Agreement; or
(ii) Unimpeded Market Purchases -- any person (other
than Apollo or its Affiliates) files with the SEC (A) a Schedule 13D announcing
that it Holds 15% or more of the Common Stock with an intent other than solely
for investment or (B) a Schedule 14D-1 announcing a tender offer for Common
Stock or rights to acquire shares of Common Stock or securities convertible into
shares of Common Stock in an amount which, together with the shares of Common
Stock then owned by such person, would result in such person Holding 15% or more
of the Common Stock and, in either case, the Board of Directors does not
promptly employ an available takeover defense with respect to such person; or
(iii) Amendment of Organizational Documents --
without the prior written consent of Apollo, the Company amends, modifies or
changes, or puts to a shareholder vote a proposal to amend, modify or change,
any of the Organizational Documents (including, without limitation, by the
filing of any certificate of designation) other than pursuant to Section 5.4,
provided, however, that the Company may amend its Organizational Documents by
filing certificates of designation or amendment which solely allow the Company
to obtain preferred stock financing upon customary and usual terms and
conditions for REITs; or
(iv) Significant Corporate Actions
(A) without the prior written consent of Apollo,
the Company winds up, liquidates or dissolves its affairs or enters into any
transaction of merger or consolidation involving, or conveys, sells, leases or
otherwise disposes of, all or substantially all of its assets (or agrees to do
any of the foregoing at any future time), whether in a single transaction or a
series of related transactions (or puts to a shareholder vote a proposal to take
any of the foregoing actions), except that the Company and its subsidiaries may
transfer assets among themselves (each an "Extraordinary Transaction"),
(B) without the prior written consent of Apollo,
the Company or any of its subsidiaries enters into an agreement for, or takes
corporate action to approve, the purchase, acquisition, sale, development or
disposition of (1) property or assets in one or a series of related transactions
that has a fair market value in excess $30,000,000 or (2) stock of another
entity in one or a series of related transactions in which the underlying assets
of such entity have a fair market value in excess $30,000,000, or
(C) without the prior written consent of Apollo,
the Company or any of its subsidiaries enters into an agreement for, or takes
-16-
corporate action to approve, the issuance of shares of Common Stock in one or a
series of related issuances to any person or "group" (within the meaning of Rule
13d-5(b)(1) under the Exchange Act) in an amount exceeding 9.8% of the total
number of outstanding shares of Common Stock; or
(v) Management Matters --
(A) without the prior written consent of Apollo,
which shall not be unreasonably withheld, the Company (1) hires, terminates or
significantly alters the duties or terms and conditions of employment of any
Senior Executive or (2) amends any employment agreement, compensation agreement
or other arrangement with any Senior Executive, or
(B) without the prior written consent of Apollo,
the Company (1) pays bonuses or any other discretionary compensation (whether in
cash, stock, property or otherwise but excluding stock options) to any Senior
Executive that are in excess of 200% of the base salary of such Senior Executive
for the fiscal year with respect to which such bonuses or other discretionary
compensation are paid or (2) grants stock options to Senior Executives in excess
of industry standards at below market prices; or
(vi) REIT Status -- without the prior written consent
of Apollo, the Company elects not to be taxed as a REIT on its federal income
tax returns or knowingly fails to comply with all applicable laws, rules and
regulations of the Code relating to a REIT, or knowingly takes any action or
fails to take any action which results in the loss of its status as a REIT for
federal income tax purposes.
5.2. Lockup Agreement
----------------
(a) For a period of one year following the Closing Date,
Apollo and its Affiliates will not directly or indirectly sell, offer, contract
or grant any option to sell (including without limitation any short sale),
pledge, transfer or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock Beneficially Owned by them, other
than transfers to any of their Affiliates, which transfers shall be subject to
Section 9.4. Notwithstanding the foregoing, Apollo may pledge its shares of
Common Stock to any Eligible Institution (each a "Permitted Assignee"), which
may exercise all its rights in accordance with such pledge, provided that such
Permitted Assignee has complied with Section 9.4.
(b) The covenants contained in Section 5.2(a) shall cease to
be in effect upon the earlier of (i) one year following the Closing Date or (ii)
such time as the Standstill Agreements cease to be in effect.
-17-
5.3. Resale of Securities
--------------------
Apollo covenants that it will not sell or otherwise transfer the Shares
except pursuant to an effective registration under the Securities Act or in a
transaction which, in the opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under the Securities Act and the
rules and regulations promulgated thereunder.
The certificates evidencing the Shares will bear the following legend
reflecting the foregoing restrictions on the transfer of such securities:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be
transferred except pursuant to an effective registration under the Act
or in a transaction which, in the opinion of counsel reasonably
satisfactory to the Company, qualifies as an exempt transaction under
the Act and the rules and regulations promulgated thereunder."
5.4. Consent Solicitation
--------------------
If the Standstill Agreements are in effect at the time of the Company's
1999 Annual Meeting of Shareholders (which meeting shall be held in the year
▇▇▇▇), ▇▇▇▇▇▇ and its Affiliates shall vote all of their shares of Common Stock
in favor of any proposal of the Board of Directors to amend the Organizational
Documents to limit or eliminate the ability of shareholders of the Company to
act by written consent in lieu of a shareholder meeting.
5.5. Special Purpose Entity
----------------------
Advisors will not transfer control of Apollo to any entity other than
an Affiliate of Advisors.
5.6. Limitations on Ownership and Voting
-----------------------------------
(a) For so long as the Standstill Agreements are in effect,
Apollo and its Affiliates shall Beneficially Own only Permitted Securities and
shall not Beneficially Own any share of Common Stock which is a Prohibited
Security. If Apollo or any Affiliate becomes aware of the Beneficial Ownership
by an Associate of Apollo or an Associate of an Affiliate of Apollo of
securities of the Company, Apollo shall report such Beneficial Ownership to the
Company within five (5) business days of the time that Apollo or such Affiliate
had knowledge of such Beneficial Ownership. In addition, Apollo and its
Affiliates shall provide such other and further information as the Company may
reasonably request so that the Company can determine whether such Associate is
an Affiliate of Apollo or any Affiliate of Apollo or whether Apollo or any
Affiliate Beneficial Owns securities of the Company Beneficially Owned by such
Associate.
-18-
(b) To the extent that Permitted Securities Held by Apollo
and its Affiliates may include, from time to time, and for any reason
(including, without limitation, the exercise, exchange, or conversion of New
Securities or the Beneficial Ownership of Inadvertent Shares), shares of Common
Stock or other voting securities of the Company which are entitled to more than
twenty-five (25%) percent (the "Voting Limit") of the voting rights of any class
of voting securities of the Company, then Apollo and its Affiliates shall vote,
or cause to be voted, that number of such voting securities equal to the
difference between (x) the Voting Limit and (y) the number of shares of voting
securities Beneficially Owned by Apollo and its Affiliates in such class
proportionately with the vote of all other voting holders of the voting
securities in such class, excluding Apollo and its Affiliates.
(c) Any Permitted Assignee agrees to vote all of its shares
of Common Stock (i) in accordance with the recommendation of the Board of
Directors or (ii) proportionately with all other voting shareholders, provided,
however, that such Permitted Assignee may vote its shares without restriction in
connection with (x) any proposal by the Board of Directors to change the
Company's status as a REIT, (y) amendments to the Organizational Documents
(other than pursuant to Section 5.4), and (z) any Extraordinary Transaction.
SECTION 6. ADDITIONAL COVENANTS
--------------------
6.1. Further Assurance
-----------------
Each of the parties shall, from time to time, whether before or after
the Closing, execute such documents and other papers and take such further
actions as may be reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated hereby.
6.2. Financial and Business Information
----------------------------------
From and after the date hereof and for so long as Apollo is entitled to
at least one Apollo Director on the Board of Directors pursuant to Section 4.2,
the Company shall deliver to Apollo:
(a) Quarterly Statements - as soon as practicable following
the filing thereof with the SEC, a copy of each Form 10-Q of the Company.
(b) Annual Statements - as soon as practicable following the
filing thereof with the SEC, a copy of each Form 10-K of the Company.
(c) Business Plan; Projections - when and as provided to the
Board of Directors, an annual business plan of the Company and any projections
of operating results.
(d) Audit Reports - when and as provided to the Board of
Directors, one copy of each other financial report and internal control letter
submitted to the Company, or any
-19-
committee of the Board of Directors, by independent accountants in connection
with any annual, interim or special audit made by them of the books of the
Company.
(e) Other Reports - promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement sent by
the Company to stockholders generally, of each financial statement, report,
notice or proxy statement sent by the Company or any of its subsidiaries to the
SEC or any successor agency, if applicable, of each regular or periodic report
and any registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by the Company or any subsidiary
with, or received by such Person in connection therewith from, any domestic or
foreign securities exchange, the SEC or any successor agency or any foreign
regulatory authority performing functions similar to the SEC, of any press
release issued by the Company or any subsidiary, and of any material of any
nature whatsoever prepared for the SEC or any successor agency thereto or any
state blue sky or securities law commission which relates to or affects in any
way the Company or any subsidiary.
(f) Requested Information - with reasonable promptness, the
Company shall furnish Apollo with such other data and information as from time
to time may be reasonably requested subject to the restrictions in Section 6.3.
6.3. Inspection
----------
From the date of this Agreement and for so long as Apollo is entitled
to at least one Apollo Director on the Board of Directors pursuant to Section
4.2, the Company shall permit Apollo, its nominee, assignee, and its
representative to visit and inspect any of the properties of the Company and its
subsidiaries, to examine all its books of account, records, reports and other
papers not contractually or legally required of the Company to be confidential
or secret, to make copies and extracts therefrom, and to discuss its affairs,
finances and accounts with its officers, directors, key employees and
independent public accountants or any of them (and by this provision the Company
authorizes said accountants to discuss with Apollo, its nominees, assignees and
representatives the finances and affairs of the Company and any subsidiaries),
all at such reasonable times and as often as may be reasonably requested,
provided, however, that Apollo shall not be entitled to the minutes of, or any
information or advise provided to, an Independent Committee.
6.4. Keeping of Books
----------------
The Company will keep proper books of record and account, in which full
and correct entries shall be made of all financial transactions and the assets
and business of the Company and its subsidiaries in accordance with GAAP.
-20-
6.5. Lost, etc. Certificates Evidencing Shares; Exchange
---------------------------------------------------
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any certificate evidencing any
Shares owned by one of Apollo, and (in the case of loss, theft or destruction)
of an indemnity from an Apollo in the form of an open penalty indemnity bond
issued in favor of ▇▇▇▇▇ Equity, Inc. or its successors and the Company's Common
Stock Transfer Agent, First Union National Bank of North Carolina, or its
successor, with sufficient surety to indemnify it against any loss or claim
which may arise by reason of the issuance of a new certificate, and upon
surrender and cancellation of such certificate, if mutilated, the Company will
make and deliver in lieu of such certificate a new certificate of like tenor and
for the number of shares evidenced by such certificate which remain outstanding.
Upon surrender of any certificate representing any Shares for exchange at the
office of the Company, the Company at its expense will cause to be issued in
exchange therefor new certificates in such denomination or denominations as may
be requested for the same aggregate number of Shares represented by the
certificate so surrendered and registered as such holder may request.
6.6. Confidentiality
---------------
The terms of the Confidentiality Agreement, dated September 9, 1996,
between the Company and Advisors are incorporated by reference herein and each
of the Company and Apollo agrees to be bound by the terms thereof, provided,
however, that notwithstanding the terms of such agreement, if the Standstill
Agreements are not terminated before the termination of this Agreement Apollo
shall be prohibited from disclosing any confidential information provided to it
by the Company until the earlier of (i) the ninetieth (90th) day following the
termination of the Standstill Agreements and (ii) the date of filing by the
Company of the first Form 10-Q with the SEC following the termination of the
Standstill Agreements.
SECTION 7. INTERPRETATION OF THIS AGREEMENT
--------------------------------
7.1. Terms Defined
-------------
As used in this Agreement, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such term:
Advisors: shall have the meaning set forth in Section 3.1(a).
Affiliate: An "affiliate" of, or a person "affiliated" with, a
specified person is (1) a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with the person specified or (2) any relative or spouse of such person, or any
relation of such spouse, who has the same home as such person. As used in this
definition, the term "control" (including the terms "controlling", "controlled
by" and "under common control") means the possession, direct or indirect, of the
-21-
power, whether exercised or not, to direct or cause the acquisition and/or
disposition by such person of securities of the Company, whether through the
ownership of voting securities or otherwise. To clarify the foregoing, a Person
(including, without limitation, partners, members of limited liability
companies, or co-investors) which would, under the foregoing definitions, be an
"Affiliate" solely by reason of its common control with a specified person of an
Affiliate of such specified person shall not be an "Affiliate" of such specified
person. The term Affiliates of Apollo includes, without limitation, (i), as of
the Closing Date, the persons and entities listed on Schedule 7.1; (ii) any
person employed by Apollo or any of its Affiliates who replaces any individual
named on Schedule 7.1 or who holds the same or any comparable position for
Apollo or any of its Affiliates listed on Schedule 7.1; and (iii) any Associate
which satisfies the provisions of clauses (1) and (2) of the first sentence of
this definition.
Amended Rights Agreement: shall have the meaning set forth in Section
2.8(c).
Apollo Director: shall have the meaning set forth in Section 2.9.
Apollo Material Adverse Effect: shall have the meaning set forth in
Section 3.1(c).
Articles: shall have the meaning set forth in Section 2.8(d).
Associate: The term "Associate" used to indicate a relationship with
any person means (1) any corporation or organization of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, and (2) any trust or other
estate in which such person has a substantial beneficial interest or as to which
such person serves as trustee or in a similar fiduciary capacity. To clarify the
foregoing, the Company may assert, in accordance with the definitions set forth
herein, that an Associate is an Affiliate of Apollo or any of its Affiliates or
that securities of the Company Beneficially Owned by such Associate are
Beneficially Owned by Apollo or any of its Affiliates.
Beneficial Owner: The term "Beneficial Owner" (including, without
limitation, "Beneficial Ownership" and "Beneficially Own") shall have the
meanings provided in Section 1(d) of the Rights Agreement, except that the term
"Affiliate" therein shall be defined for purposes of this Agreement as set forth
herein. In addition, for purposes of this Agreement, if Apollo or any of its
Affiliates shall form a "group" (as contemplated by Rule 13d-5(b)(1) under the
Exchange Act) with any person, including, without limitation, any Associate of
Apollo or any of its Affiliates, for the purpose of acquiring, holding, voting
or disposing of any Common Stock of the Company, Apollo and its Affiliates shall
be deemed to have acquired Beneficial Ownership of Common Stock Beneficially
Owned by such person.
Board of Directors: shall have the meaning set forth in Section 2.9.
-22-
Business Day: shall mean a day other than a Saturday, Sunday or other
day on which banks in the State of New York are not required or authorized to
close.
Closing: shall have the meaning set forth in Section 1.3.
Closing Date: shall have the meaning set forth in Section 1.3.
Code: shall mean the Internal Revenue Code of 1986, as amended.
Common Stock: shall have the meaning set forth in Section 1.1.
Disinterested Director: shall mean "disinterested directors" as such
term is defined in Section 607.0901(1)(h) of the FBCA.
Eligible Institution: shall mean (a) a commercial bank or investment
bank organized under the laws of the United States, or any State thereof, and
having total assets in excess of $1,000,000,000; (b) a savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof, and having total assets in excess of $1,000,000,000; or (c) a
finance company, insurance company or other financial institution organized
under the laws of the United States, or any State thereof, that is engaged in
purchasing or otherwise investing in commercial loans in the ordinary course of
business, having total assets in excess of $100,000,000.
Exchange Act: shall mean the Securities Exchange Act of 1934, as
amended.
Existing Apollo Shares: shall have the meaning set forth in Section
3.2.
Extraordinary Transaction: shall have the meaning set forth in Section
5.1(e)(iv)(A).
FBCA: shall have the meaning set forth in Section 2.8(b).
Fund: shall have the meaning set forth in Section 3.1(a).
Hold: shall mean to own beneficially (within the meaning of Rule 13d-3
under the Exchange Act).
Inadvertent Shares: shall have the meaning set forth in the definition
of Permitted Securities.
Independent Committee: shall have the meaning set forth in Section
4.2(e).
Material Adverse Effect: shall have the meaning set forth in Section
2.1(c).
New Securities: shall have the meaning set forth in Section 4.4.
-23-
Options: shall have the meaning set forth in Section 3.2.
Permitted Assignee: shall have the meaning set forth in Section 5.2(a).
Permitted Securities: shall mean (a) the Shares; (b) Existing Apollo
Shares; (c) the Options and shares of Common Stock acquired by the exercise of
Options; (d) that number of shares of Common Stock, which when added to the
number of shares of Common Stock Beneficially Owned by Apollo and its Affiliates
under clauses (a), (b) and (c) above, does not exceed twenty five percent (25%)
of the total number of outstanding shares of Common Stock (determined at the
time of any acquisition of Common Stock by Apollo and its Affiliates); (e) any
securities acquired by Apollo pursuant to Section 4.4, including any securities
received upon exercise, exchange or conversion thereof; (f) any other shares of
Common Stock Beneficially Owned by Apollo or its Affiliates in excess of the
total permitted under clauses (a), (b), (c) and (d) (the "Limit") and without
actual knowledge of the fact that such shares were acquired in excess of the
Limit (the "Inadvertent Shares") and (g) any non-voting securities of the
Company Beneficially Owned by Apollo or its Affiliates that are not
exchangeable, exercisable or convertible into voting securities of the Company;
provided, however, that Inadvertent Shares shall become Prohibited Securities
unless disposed of by Apollo or its Affiliates, as the case may be, within
twenty (20) Business Days from the time that Apollo or such Affiliate has actual
knowledge that such Inadvertent Shares are owned in violation of the Limit. In
the event that a Permitted Assignee shall exercise its right to transfer
Permitted Securities to itself, the term "Permitted Securities" as to such
Permitted Assignee shall include other shares of Common Stock Beneficially Owned
by such Permitted Assignee.
Person: shall mean an individual, partnership, joint-stock company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
Prohibited Security: shall have the meaning set forth in Section
2.8(b).
REIT: shall have the meaning set forth in Section 2.13(b)(1).
Rights Agreement: shall have the meaning set forth in Section 2.7(c).
SEC: shall mean the Securities and Exchange Commission.
SEC Reports: shall have the meaning set forth in Section 2.3.
Securities Act: shall mean the Securities Act of 1933, as amended.
Senior Executive: shall mean (a) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. and ▇.▇. ▇▇▇▇▇▇,
and any individuals named by the Board of Directors as their successors, and (b)
any person whose duties to the Company consist of all or a portion of the duties
performed by the persons referred to in clause (a).
-24-
Shares: shall have the meaning set forth in Section 1.1.
Standstill Agreements: shall have the meaning set forth in Section
5.1(d).
Subsidiary: shall mean any Person (a) of which the Company (or other
specified Person) shall own directly or indirectly through a subsidiary, a
nominee arrangement or otherwise (i) at least a majority of the outstanding
capital stock (or other shares of beneficial interest) or (ii) at least a
majority of the partnership, joint venture or similar interests, or (b) in which
the Company (or other specified Person) is a general partner or joint venturer.
Voting Stock: shall mean securities of any class or classes of a
corporation or other entity the holders of which are ordinarily, in the absence
of contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
Unaudited Consolidated Balance Sheet: shall have the meaning set forth
in Section 2.4.
7.2. Accounting Principles
---------------------
Where the character or amount of any asset or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with U.S. generally
accepted accounting principles at the time in effect, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Agreement.
7.3. Directly or Indirectly
----------------------
Where any provision in this Agreement refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
7.4. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed entirely within such State.
7.5. Paragraph and Section Headings
------------------------------
The headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
thereof.
-25-
SECTION 8. TERMINATION AND SURVIVAL
------------------------
8.1. Termination
-----------
This Agreement shall terminate on the third anniversary of the Closing
Date.
8.2. Survival of Representations and Warranties
------------------------------------------
(a) Except as otherwise provided in clauses (b), (c) and (d)
of this Section, all representations and warranties made by the Company or
Apollo herein or in any certificate or other instrument delivered by the Company
or Apollo under this Agreement shall be considered to have been relied upon by
the Company or Apollo, as the case may be, and shall survive for the term of
this Agreement, regardless of any investigation made by the Company or Apollo.
(b) The representations and warranties contained in Sections
2.1(a), 2.7, 2.8 and 3.1(a) shall survive beyond the termination of this
Agreement, regardless of any investigation made by the claiming party, or on its
behalf. The representations and warranties contained in Section 2.13 of the
Company shall survive until December 31, 2000, regardless of any investigation
made by Apollo, or on Apollo's behalf.
(c) The covenants contained in Sections 4.3, 5.6, 6.6 and
9.4 shall survive beyond the termination of this Agreement.
(d) The parties agree that the sole remedy for a breach of
any representation or warranty made by the Company or Apollo herein or in any
certificate or other instrument delivered by the Company or Apollo shall be
money damages.
SECTION 9. MISCELLANEOUS
-------------
9.1. Notices.
--------
All communications under this Agreement shall be in writing and shall
be delivered by hand or mailed by overnight courier:
1) if to ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, marked
for the attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, or at such other address as
Apollo may have furnished the Company in writing, with copies to (A)
Apollo Real Estate Management II, Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, marked for the attention of W. ▇▇▇▇▇▇
▇▇▇▇▇▇▇, (B) ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, marked for the attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. and (C) Battle ▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, marked for the attention of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Esq., or
-26-
2) if to the Company, at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, marked for the attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., or at such
other address as it may have furnished in writing to Apollo, with
copies to (A) Ropes & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, marked for the attention of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Esq. and (B) ▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, marked for the attention of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ ▇▇., Esq.
(a) Any notice so addressed shall be deemed to be given: if
delivered by hand, on the date of such delivery; if mailed by courier, on the
first business day following the date of such mailing.
9.2. Expenses and Taxes
------------------
Unless otherwise specified in this Agreement, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
transactions contemplated by this Agreement are consummated.
The Company will pay, and save and hold Apollo harmless from any and
all liabilities (including interest and penalties) with respect to, or resulting
from any delay or failure in paying, stamp and other taxes (other than income
taxes), if any, which may be payable or determined to be payable by the Company
on the execution and delivery or acquisition of the Shares.
9.3. Reproduction of Documents
-------------------------
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by Apollo on the Closing Date (except for
certificates evidencing the Shares themselves), and (c) financial statements,
certificates and other information previously or hereafter furnished to Apollo,
may be reproduced by Apollo by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process and either Investor
may destroy any original document so reproduced. All parties hereto agree and
stipulate that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by an
Investor in the regular course of business) and that any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible in
evidence.
9.4. Successors and Assigns
----------------------
This Agreement shall inure to the benefit of and be binding upon the
successors of the parties hereto. Neither party hereto may assign any part of
this Agreement to a third party, provided, however, that Apollo may assign its
rights and obligations hereunder to any of its
-27-
Affiliates in connection with a transfer of Permitted Securities to such
Affiliate and provided further that (i) Apollo may assign its rights under
Section 4.3 to a Permitted Assignee and (ii) any such Permitted Assignee shall
not assign any part of this Agreement to a third party. No transfer or
assignment under this Agreement shall be valid until such Affiliate or Permitted
Assignee executes an Assignment and Assumption Agreement, in the form of which
is attached as Exhibit E(1) or E(2) hereto, as the case may be.
9.5. Notice of Proposed Action; Equitable Remedies
---------------------------------------------
(a) Upon the occurrence and during the continuance of any
breach of a representation or warranty by a party to this Agreement, the
nonbreaching party shall provide the breaching party with notice of such breach.
The nonbreaching party may, fifteen (15) Business Days after providing the
breaching party with such notice, take any of the actions permitted under this
Agreement or by law.
(b) Upon the occurrence and during the continuance of any
breach of a covenant by a party to this Agreement, the nonbreaching party shall
provide the breaching party with notice of such breach. The nonbreaching party
may, three (3) Business Days after providing the breaching party with such
notice, take any of the actions permitted under this Agreement or by law or
equity.
(c) Upon the occurrence and during the continuance of any
event that would cause the Standstill Agreements to cease to be in effect
pursuant to Sections 5.1(e)(ii), 5.1(e)(iii), 5.1(e)(iv) or 5.1(e)(v), Apollo
shall provide the Company with notice of such event. Apollo may, three (3)
Business Days after providing the Company with such notice, take any of the
actions permitted under this Agreement or by law.
(d) Each of the parties acknowledges and agrees that the
other party would be damaged irreparably in the event any of Sections 4.2, 4.3,
4.4, 4.5, 5.1(a), 5.1(c), 5.1(e)(vi), 5.2, 5.3, 5.4, 5.5 and 5.6 of this
Agreement are not performed in accordance with the specific terms or otherwise
are breached. Accordingly, each of the parties agrees that, in addition to any
other remedies available in law, the other party shall be entitled to seek
equitable relief with respect to such breaches of said Sections. The sole remedy
for breach of the provisions of Sections 5.1(e)(ii), 5.1(e)(iii), 5.1(e)(iv) and
5.1(e)(v) shall be termination of the Standstill.
9.6. Attorneys' Fees
---------------
In the event any party hereto finds it necessary to bring any suit,
action, or other proceeding at law or equity to interpret, enforce or implement
any of the terms, covenants or conditions hereof or of any instrument executed
pursuant to this Agreement, or by reason of any breach or default hereunder or
thereunder, the party prevailing in any such action or proceeding, including any
bankruptcy proceeding and/or any appeal, shall be paid all costs and reasonable
attorneys' fees by the non-prevailing party, and in the event any judgment is
secured by such prevailing party, all such costs and attorneys' fees shall be
included in any
-28-
such judgment (attorneys' fees to be set by the court and not by the jury). No
termination of this Agreement upon any grounds or in any circumstances addressed
herein or otherwise will impair or limit a prevailing party's right to recover
from the other party its attorneys' fees and costs in accordance with the
provisions of this Section.
9.7. Entire Agreement; Amendment and Waiver
--------------------------------------
Except as expressly provided or contemplated herein, this Agreement
constitutes the entire understanding of the parties hereto and supersedes all
prior agreements or understandings with respect to the subject matter hereof
among such parties. This Agreement may be amended, and the observance of any
term of this Agreement may be waived, with (and only with) the written consent
of the Company and Apollo or their successors or assigns.
9.8. Limitation on Enforcement of Remedies
-------------------------------------
The Company hereby agrees that it will not assert against the limited
partners of Advisors or the limited partners of the Fund any claim it may have
under this Agreement by reason of any failure or alleged failure by Apollo to
meet its obligations hereunder.
-29-
9.9. 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 be considered
one and the same agreement.
Very truly yours,
▇▇▇▇▇ EQUITY, INC.
By_________________________________
Name:
Title:
AP-KEI HOLDINGS, LLC
By AP-MM KEI HOLDINGS, LLC,
its Managing Member
By KRONUS PROPERTY, INC
its Managing Member
By___________________________
Name:
Title:
Section 5.5 is hereby acknowledged
and agreed to by the undersigned:
APOLLO REAL ESTATE ADVISORS II, L.P.
By APOLLO REAL ESTATE CAPITAL
ADVISORS II, INC.,
its General Partner
By______________________________
Name:
Title:
-30-
