<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1998
REGISTRATION NO. 333-47887
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-11
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
CLARION COMMERCIAL HOLDINGS, INC.
(Exact name of Company as specified in its Charter)
335 MADISON AVENUE
NEW YORK, NEW YORK 10017
(212) 883-2500
(Address of Company's principal executive offices)
------------------------
DANIEL HEFLIN
335 MADISON AVENUE
NEW YORK, NEW YORK 10017
(212) 883-2500
(Name and address of agent for service for the Company)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Robert Evans III, Esq. Stuart H. Coleman, Esq.
Shearman & Sterling Stroock & Stroock & Lavan LLP
599 Lexington Avenue 180 Maiden Lane
New York, New York 10022 New York, New York 10038
(212) 848-4000 (212) 806-5400
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. / / ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ____________
If this Form if a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THIS COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION
8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses estimated to be incurred in connection with the issuance and
distribution of the securities being registered are as set forth below:
<TABLE>
<S> <C>
SEC registration fee............................................... $ 67,850
NASD filing fee.................................................... 23,500
NYSE listing fee................................................... 107,350
Directors' and Officers' insurance................................. *
Legal fees and expenses............................................ 350,000
Accounting fees and expenses....................................... *
Blue Sky qualification fees and expenses (including counsel
fees)............................................................ 5,000
Printing and engraving fees........................................ 100,000
Transfer Agent and Registrar fees.................................. 3,000
Miscellaneous...................................................... *
---------
Total.......................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 32. SALES TO SPECIAL PARTIES.
On March 11, 1998, the Company received a commitment for the purchase of
1,000,000 shares of Common Stock, in the aggregate, at the initial public
offering price from Daniel Heflin, Clarion Partners, LLC and Monroe Investment
Corp., a private fund managed by Clarion Capital, LLC. This sale is contingent
only upon, and will be consummated concurrently with, the closing of the
Offering. The foregoing shares were sold without registration under the
Securities Act, in reliance upon the exemption provided by Section 4(2) thereof.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES.
In addition to the commitments described in Item 32, on March 11, 1998, the
Company received a commitment for the purchase of 200,000 shares of Class B
common stock, in the aggregate, from Daniel Heflin and Clarion Partners, LLC in
exchange for a 10% membership interest in Clarion Capital, LLC and an option to
purchase the remaining 90% interest in such entity. This sale is contingent only
upon, and will be consummated concurrently with, the closing of the Offering.
The foregoing shares were sold without registration under the Securities Act, in
reliance upon the exemption provided by Section 4(2) thereof.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 2-418 of the Maryland General Corporation Law provides that a
Maryland corporation may indemnify any director (and any person who, while a
director of the corporation, is or was serving at the request of the corporation
as director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, or other enterprise or
employee benefit plan) who is made a party to any proceeding by reason of
service in that capacity unless it is established that (i) the act or omission
of the director was material to the matter giving rise to the proceeding and was
committed in bad faith or was the result of active and deliberate dishonesty;
(ii) the director actually received an improper personal benefit in money,
property or services; or (iii) in the case of any criminal proceeding, the
director had reasonable cause to believe that the act or omission was unlawful.
Indemnification may be against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by the director
II-1
<PAGE>
in connection with the proceeding. If the proceeding was one by or in the right
of the corporation, indemnification may not be made in respect of any
proceedings in which the director shall have been adjudged to be liable to the
corporation. Such indemnification may not be made unless authorized for a
specific proceeding after a determination has been made, in the manner
prescribed by the law, that indemnification is permissible in the circumstances
because the director has met the applicable standard of conduct. On the other
hand, the director must be indemnified for expenses if he has been successful in
the defense of such proceeding or as otherwise ordered by a court. The law also
permits the circumstances under which the corporation may advance expenses to,
or obtain insurance or similar protection for, directors.
The law also permits for comparable indemnification for corporate officers
and agents.
The Company's Charter provides that its directors and officers shall, and
its agents in the discretion of the Board of Directors may, be indemnified to
the fullest extent required or permitted from time to time by the laws of
Maryland.
The Maryland General Corporation Law permits the charter of a Maryland
corporation to include a provision limiting the liability of its directors and
officers to the corporation and its stockholders for money damages except to the
extent that (i) it is proved that the person actually received an improper
benefit or profit in money, property or services for the amount of the benefit
or profit in money, property or services actually received, or (ii) a judgment
or other final adjudication is entered in a proceeding based on a finding that
the person's action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding. The Company's Charter contains a provision providing for elimination
of the liability of its directors and officers to the Company or its
stockholders for money damages to the maximum extent permitted by Maryland law
from time to time.
Policies of insurance may be obtained and maintained by the Company under
which its directors and officers, will be insured, within the limits and subject
to the limitations of the policies, against certain expenses in connection with
the defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not applicable.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------ --------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement+
3.1 Amended and Restated Charter**
3.2 Bylaws**
4.1 Specimen Common Stock Certificate**
5.1 Opinion of Shulman, Rogers, Gandal, Pordy & Ecker, P.A. (including
consent)*
8.1 Opinion of Shearman & Sterling as to certain tax matters (including
consent)+
10.1 Management Agreement between the Company and Clarion Capital, LLC+
10.2 Agreement between Clarion Capital, LLC and Clarion Partners, LLC*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------ --------------------------------------------------------------------------
<C> <S>
10.3 Employment Agreement between the Clarion Capital, LLC and Daniel Heflin+
10.4 Form of 1998 Stock Incentive Plan+
21.1 Subsidiaries of the Company+
23.1 Consent of Shulman, Rogers, Gandal, Pordy & Ecker, P.A. (to be included in
Exhibit 5.1)*
23.2 Consent of Shearman & Sterling (to be included in Exhibit 8.1)+
23.3 Consent of Independent Auditors**
24.1 Power of Attorney (included in the signature page)**
</TABLE>
- ------------------------
* To be filed by amendment.
+ Filed herewith.
** Previously filed.
ITEM 37. UNDERTAKINGS.
The Company hereby undertakes to provide to the Underwriters specified in
the Underwriting Agreement at the closing, certificates in such denominations
and registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company,
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes that: (i) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of Prospectus filed as a part of this Registration Statement in
reliance upon Rule 430A and contained in a form of Prospectus filed by the
Company pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective; and (ii) for the purpose of determining liability under the
Securities Act, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new Registration Statement, relating to the securities
offered therein and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-11 and has duly caused this Amendment No. 3 to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of New York, State of New York, on the
15th day of May, 1998.
<TABLE>
<S> <C> <C>
CLARION COMMERCIAL HOLDINGS, INC.,
a Maryland corporation
By: /s/ DANIEL HEFLIN
-----------------------------------------
Daniel Heflin
Chief Executive Officer and President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on the 15th day
of May, 1998 in the capacities indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ DANIEL HEFLIN
- ------------------------------ Chief Executive Officer, May 15, 1998
Daniel Heflin President and Director
* Executive Vice President
- ------------------------------ and Chairman of the May 15, 1998
Frank L. Sullivan, Jr. Board
*
- ------------------------------ Director May 15, 1998
Stephen C. Asheroff
*
- ------------------------------ Director May 15, 1998
Steven N. Fayne
*
- ------------------------------ Director May 15, 1998
Harold E. Rosen
* Vice President, Chief
- ------------------------------ Financial Officer and May 15, 1998
William Powell Treasurer
*
- ------------------------------ Vice President and May 15, 1998
Joanne Vitale Secretary
* Daniel Heflin, by signing his name hereto, does sign this document on behalf
of each of the persons indicated above for whom he is attorney-in-fact
pursuant to a power of attorney duly executed by such person and filed with
the Securities and Exchange Commission.
/s/ DANIEL HEFLIN
- ------------------------------
Daniel Heflin
ATTORNEY-IN-FACT
II-4
<PAGE>
TABLE OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ----------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
1.1 Form of Underwriting Agreement+.................................................................
3.1 Amended and Restated Charter**..................................................................
3.2 Bylaws**........................................................................................
4.1 Specimen Common Stock Certificate**.............................................................
5.1 Opinion of Shulman, Rogers, Gandal, Pordy & Ecker, P.A. (including consent)*....................
8.1 Opinion of Shearman & Sterling as to certain tax matters (including consent)+...................
10.1 Management Agreement between the Company and Clarion Capital, LLC+..............................
10.2 Agreement between Clarion Capital, LLC and Clarion Partners, LLC*...............................
10.3 Employment Agreement between the Clarion Capital, LLC and Daniel Heflin+........................
10.4 Form of 1998 Stock Incentive Plan+..............................................................
21.1 Subsidiaries of the Company+....................................................................
23.1 Consent of Shulman, Rogers, Gandal, Pordy & Ecker, P.A. (to be included in Exhibit 5.1)*........
23.2 Consent of Shearman & Sterling (to be included in Exhibit 8.1)+.................................
23.3 Consent of Independent Auditors**...............................................................
24.1 Power of Attorney (included in the signature page)**............................................
</TABLE>
- ------------------------
* To be filed by amendment.
+ Filed herewith.
** Previously filed.
<PAGE>
Exhibit 1.1
10,000,000 SHARES
of
CLASS A COMMON STOCK
CLARION COMMERCIAL HOLDINGS, INC.
UNDERWRITING AGREEMENT
May __, 1998
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
CIBC OPPENHEIMER CORP.
EVEREN SECURITIES, INC.
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
Clarion Commercial Holdings, Inc., a corporation organized and
existing under the laws of Maryland (the "Company"), whose assets are managed
by Clarion Capital, LLC, a limited liability corporation organized and
existing under the laws of New York (the "Manager"), proposes, subject to the
terms and conditions stated herein, to issue and sell to the several
underwriters named in Schedule I attached hereto (the "Underwriters") an
aggregate of 10,000,000 shares (the "Firm Shares") of its Class A common
stock, par value $.001 per share (the "Class A Common Stock"), and for the
sole purpose of covering over-allotments in connection with the sale of the
Firm Shares, at the option of the Underwriters, up to an additional 1,500,000
shares (the "Additional Shares") of Class A Common Stock on the terms set
forth in Section 2(c). The Firm Shares and any Additional Shares purchased
by the Underwriters are referred to herein as the "Shares." Bear, Stearns &
Co. Inc. ("Bear Stearns"), Lehman Brothers Inc., CIBC Oppenheimer Corp. and
EVEREN Securities, Inc. have agreed to act as representatives of the several
Underwriters (in such capacity, the "Representatives") in connection with the
purchase of the Shares. The Shares are more fully described in the
Registration Statement referred to below.
1. Representations and Warranties.
1.1 Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
<PAGE>
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and may have filed an
amendment or amendments thereto, on Form S-11 (No. 333-47887), for the
registration of the Shares under the Securities Act of 1933, as amended (the
"Securities Act"). Such registration statement, including the prospectus,
financial statements and schedules, exhibits and all other documents filed as
a part thereof, as amended at the time of effectiveness of the registration
statement, including any information deemed to be a part thereof as of the
time of effectiveness pursuant to paragraph (b) of Rule 430A or Rule 434 of
the Rules and Regulations of the Commission under the Securities Act (the
"Securities Act Regulations") and including any registration statement filed
pursuant to Rule 462(b) of the Securities Act Regulations (a "Rule 462(b)
Registration Statement") increasing the size of the offering, is herein
called the "Registration Statement" and the prospectus, in the form first
filed with the Commission pursuant to Rule 424(b) of the Securities Act
Regulations or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) or Rule 434 filing is required, is herein
called the "Prospectus." The term "Preliminary Prospectus" as used herein
means any preliminary prospectus relating to the Registration Statement as
described in Rule 430 of the Securities Act Regulations. In addition, all
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a Preliminary Prospectus and the Prospectus, or any
amendments or supplements to any of the foregoing, shall be deemed to include
any copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis, and Retrieval System.
(b) At the time of the effectiveness of the Registration Statement
or the effectiveness of any post-effective amendment to the Registration
Statement, when the Prospectus is first filed with the Commission pursuant to
Rule 424(b) or Rule 434 of the Securities Act Regulations, when any
supplement to or amendment of the Prospectus is filed with the Commission and
at the Closing Date and the Additional Closing Date, if any (as hereinafter
respectively defined), the Registration Statement and the Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Securities Act and
the Securities Act Regulations and do not or will not contain an untrue
statement of a material fact and do not or will not omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein (i) in the case of the Registration Statement, not
misleading and (ii) in the case of the Prospectus, in light of the
circumstances under which they were made, not misleading. When any related
Preliminary Prospectus was first filed with the Commission (whether filed as
part of the Registration Statement for the registration of the Shares or any
amendment thereto or pursuant to Rule 424(a) of the Securities Act
Regulations) and when any amendment thereof or supplement thereto was first
filed with the Commission, such Preliminary Prospectus and any amendments
thereof and supplements thereto complied in all material respects with the
applicable provisions of the Securities Act and the Securities Act
Regulations and did not contain an untrue statement of a material fact and
did not omit to state any material fact necessary in order to make the
statements therein in light of the circumstances under which they were made
not misleading. No representation and warranty is made in this subsection
(b), however, with respect to any information contained in or omitted from
the Registration Statement or the Prospectus or any related Preliminary
Prospectus or any amendment thereof or supplement thereto in reliance upon
and in conformity with information furnished in writing to the Company by or
on behalf of any Underwriter through you as herein stated
2
<PAGE>
expressly for use in connection with the preparation thereof. If Rule 434 is
used, the Company will comply with the requirements of Rule 434.
(c) Deloitte & Touche LLP, whose reports are contained in the
Registration Statement, are independent public accountants with respect to
the Company as required by the Securities Act and the Securities Act
Regulations.
(d) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as set forth
in the Registration Statement and the Prospectus, there has been no material
adverse change in the business, business prospects, properties, operations,
financial condition or results of operations of the Company and its
Subsidiaries (as defined herein), taken as a whole (any such change being
referred to herein as a "Material Adverse Change"), whether or not arising
from transactions in the ordinary course of business, and since the date of
the latest statement of financial condition included in the Registration
Statement and the Prospectus, neither the Company nor any of its Subsidiaries
has incurred or undertaken any liabilities or obligations, direct or
contingent, which are material to the Company and its Subsidiaries, taken as
a whole , except for liabilities or obligations which are set forth in or
contemplated by the Registration Statement and the Prospectus.
(e) This Agreement and the Management Agreement (the "Management
Agreement") to be entered into on or prior to the Closing Date between the
Company and the Manager and the transactions contemplated herein and therein
have been duly and validly authorized by the Company, and this Agreement has
been and the Management Agreement has been or will be duly and validly
executed and delivered by the Company. [Representation and warranty may be
expanded to cover additional agreements between the Company and Clarion
Partners or the Affiliated Funds].
(f) The execution, delivery, and performance of this Agreement and
the Management Agreement and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any
of its Subsidiaries pursuant to any agreement, instrument, franchise, license
or permit to which the Company or any of its Subsidiaries is a party or by
which the Company, any of its Subsidiaries or any of their respective
properties or assets may be bound or (ii) violate or conflict with any
provision of the articles of incorporation or bylaws of the Company or any of
its Subsidiaries or (iii) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental
or regulatory agency or body
3
<PAGE>
having jurisdiction over the Company or any of its Subsidiaries or any of
their respective properties or assets, except, with respect to clauses (i)
and (iii) above, for those violations or conflicts that would not have a
material adverse effect on the business, business prospects, properties,
operations, financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole (any such effect being referred to herein
as a "Material Adverse Effect"), or a material adverse effect on the
transactions contemplated by this Agreement. No consent, approval,
authorization, order, registration, filing, qualification, license or permit
of or with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company, any of its Subsidiaries or any of their
respective properties or assets is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, including the issuance, sale and delivery of the Shares
to be issued, sold and delivered by the Company hereunder, and such consents,
approvals, authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by the
Underwriters. [Representation and warranty may be expanded to cover additional
agreements between the Company and Clarion Partners or the Affiliated Funds.]
(g) Except as otherwise disclosed in the Prospectus, all of the
outstanding shares of Class A Common Stock and the Company's Class B common
stock, par value $.001 per share (the "Class B Common Stock" and together
with the Class A Common Stock, the "Common Stock") are duly and validly
authorized and issued, fully paid and nonassessable and were not issued and
are not now in violation of or subject to any preemptive rights. The Shares,
when issued, delivered and sold in accordance with this Agreement, will be
duly and validly issued and outstanding, fully paid and nonassessable, and
will not have been issued in violation of or be subject to any preemptive
rights. The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "Capitalization." The
Common Stock, including the Shares, conforms to the description thereof
contained in the Registration Statement and the Prospectus.
(h) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Maryland. Each
of the Company and its Subsidiaries has been duly qualified and is in good
standing as a foreign corporation or limited partnership in each jurisdiction
in which the character or location of its properties (owned, leased or
licensed) or the nature or conduct of its business makes such qualification
necessary, except for those failures to be so qualified or in good standing
which will not in the aggregate have a Material Adverse Effect on the Company
or a material adverse effect on the transactions contemplated by this
Agreement. The Company and each of its Subsidiaries has all requisite power
and authority, and all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses and permits of and from all public,
regulatory or governmental agencies and bodies, to own, lease and operate its
properties and conduct its business as now being conducted and as described
in the Registration Statement and the Prospectus, except for the absence of
which in the aggregate would not have a Material Adverse Effect on the
Company or a material adverse effect on the transactions contemplated by this
Agreement, and no such consent, approval, authorization, order, registration,
qualification, license or permit contains a materially burdensome restriction
not adequately disclosed in the Registration Statement and the Prospectus.
(i) Each of CCHI General, Inc. and CCHI Limited, Inc. (together,
the "Corporate Subsidiaries") has been duly organized and is validly existing
under the laws of the State of Delaware with full power and authority to
conduct its business as described in the Registration Statement and the
Prospectus; CCHI Limited Partnership (the "Operating Partnership," and
together with the Corporate Subsidiaries, the "Subsidiaries") has been duly
organized and is validly existing as a limited partnership under the laws of
the State of Delaware under the Delaware Revised Uniform Limited Partnership
Act with full power and authority to own its properties and conduct its
business as described in the Registration Statement and the Prospectus. Other
than the Subsidiaries, the Company
4
<PAGE>
has no other subsidiaries nor does it control any other corporation,
partnership, limited liability company, joint venture, association or other
business organization.
(j) Except as described in the Prospectus, there is no litigation
or governmental proceeding to which the Company or any of its Subsidiaries is
a party or to which any property of the Company or its Subsidiaries is
subject or which is pending or, to the knowledge of the Company or any of its
Subsidiaries, contemplated against the Company which might result in any
Material Adverse Change of the Company, which might materially and adversely
affect the transactions contemplated by this Agreement or which is required
to be disclosed in the Registration Statement or the Prospectus and is not so
disclosed. The description of litigation matters in the Prospectus under the
caption "The Company--Legal Proceedings" is complete and accurate in all
material respects.
(k) The Company has not taken, directly or indirectly, any action
designed to cause or result in, or which constitutes or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale of
any of the Shares.
(l) The statement of financial condition, including the notes
thereto, included in the Registration Statement and the Prospectus presents
fairly the financial position of the Company on the dates indicated and the
results of operations for the periods specified; said statement of financial
condition has been prepared in conformity with generally accepted accounting
principles applied on a consistent basis; and no other statement of financial
condition, financial statements or supporting schedules are required to be
included in the Registration Statement. The financial data set forth in the
Prospectus under the caption "Capitalization" fairly present the information
set forth therein on a basis consistent with that of the audited financial
statements continued in the Registration Statement.
(m) Except as otherwise disclosed in the Prospectus, no holder of
securities of the Company has any rights to the registration of securities of
the Company or securities of any other person that are convertible,
exchangeable or exercisable for securities of the Company because of the
filing of the Registration Statement or otherwise in connection with the sale
of the Shares contemplated hereby other than the right of a lender pursuant
to a registration rights agreement with the Company to demand registration of
Shares that have been pledged by a holder of such Shares as security for a
loan that is in default.
(n) Each of the Company and its Subsidiaries has good and
marketable title to all the properties and assets reflected as owned in the
financial statements referred to in subsection (l) above or elsewhere in the
Prospectus, in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects, except such as are
described in the Prospectus and such as do not materially and adversely
affect the value of such property and do not materially interfere with the
use made or proposed to be made of such property by the Company or its
Subsidiaries. The real property, improvements, equipment and personal
property held under lease by the Company or its Subsidiaries are held under
valid, subsisting and enforceable leases, with such exceptions as are not
material and do not materially interfere with the use made or proposed to be
made of such real property, improvements, equipment or personal property by
the Company or its Subsidiaries, as the case may be.
5
<PAGE>
(o) Each of the Company and its Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns and has
paid all taxes required to be paid by it and, if due and payable, any related
or similar assessment, fine or penalty levied against it, except insofar as
the failure to file such returns would not have a Material Adverse Effect on
the Company or a material adverse effect on the transactions contemplated by
this Agreement. Each of the Company and its Subsidiaries has made adequate
charges, accruals and reserves in their respective financial statements in
respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of the Company or its Subsidiaries, as
the case may be, has not been finally determined, except to the extent of any
inadequacy that would not have a Material Adverse Effect on the Company or a
material adverse effect on the transactions contemplated by this Agreement.
(p) Each of the Company and its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(q) Except as otherwise disclosed in the Prospectus, there are no
business relationships or related-party transactions of the type described in
Item 404 of Regulation S-K of the Commission involving the Company or its
Subsidiaries, except for such transactions that would be considered
immaterial under such Item 404. The descriptions in the Prospectus under the
caption "Certain Transactions with Related Parties" are complete and accurate
in all material respects.
(r) The Company will elect to be taxed as a "real estate
investment trust" (a "REIT") under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code"), effective beginning in its
taxable year 1998. The Company has not taken any action that would prevent
it from qualifying as a REIT under the Code, and from and after the Closing
Date, the Company shall conduct its operations in a manner so as to enable it
to elect to be qualified, and thereafter maintain its qualification, as a
REIT under the Code.
(s) Prior to the date of the Preliminary Prospectus, the Shares
were duly approved (subject to issuance thereof) for listing on the New York
Stock Exchange (the "NYSE").
(t) The Company is not, and after giving effect to the issue and
sale of the Shares by the Company and the application of the net proceeds of
the offering contemplated hereby as described under "Use of Proceeds" in the
Prospectus will not be, an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended (the "Investment Company Act").
(u) Neither the Company nor its officers, directors, employees and
agents have distributed or will distribute prior to the Closing Date any
offering material in connection with the
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offering and sale of the Shares other than the Preliminary Prospectus, the
Prospectus, the Registration Statement or other materials permitted by the
Securities Act.
(v) The Company is not and will not be a "broker" within the
meaning of Section 3(a)(4) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or a "dealer" within the meaning of Section 3(a)(5) of
the Exchange Act or required to be registered pursuant to Section l5(a) of
the Exchange Act.
(w) Neither the Company nor any affiliate has incurred any
liability for a fee, commission or other compensation on account of the
employment of a broker or finder in connection with the transactions
contemplated by this Agreement, other than as disclosed in the Prospectus.
(x) Prior to the filing of the Registration Statement, the Company
entered into purchase agreements (the "Purchase Agreements") in connection
with the issuance and sale by the Company of 1,000,000 shares of Class A
Common Stock (the "Private Shares") to certain purchasers as described in the
Prospectus under the caption "Private Placement." Each Purchase Agreement
upon its execution constituted a legal and binding obligation of the Company,
enforceable in accordance with its terms.
(y) Neither the Company nor any person authorized to act on the
Company's behalf has, directly or indirectly, taken any action which would
prevent the offering and sale of the Private Shares from complying with the
requirements of all applicable securities laws or render unavailable the
exemption from the registration requirements of the Securities Act provided
by Section 4(2) thereof relied upon in making any offer or sale of the
Private Shares, or the state securities or Blue Sky laws of jurisdictions in
which the Private Shares will be offered. The offer and sale of the Private
Shares, in the manner and under the circumstances described in the Prospectus
under the caption "Private Placement," do not require registration of the
Private Shares under the Securities Act.
(z) The offer and sale of the Private Shares should not be
integrated with the offering of the Shares pursuant to the Registration
Statement.
Any certificate signed by an officer of the Company and delivered
to the Representatives or their counsel shall be deemed to be a
representation and warranty by the Company as to the matters covered thereby.
1.2 Representations and Warranties of the Manager. The Manager
represents and warrants to, and agrees with, the Underwriters that:
(a) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as set forth
in the Registration Statement and the Prospectus, there has been no Material
Adverse Change of the Manager whether or not arising from transactions in the
ordinary course of business.
(b) This Agreement and the Management Agreement to be entered into
on or prior to the Closing Date between the Company and the Manager, and the
Clarion Capital Sub-
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Advisory Agreement (the "Clarion Agreement") to be entered into on or prior
to the Closing Date between the Manager and Clarion Partners, LLC, and the
transactions contemplated herein and therein have been duly and validly
authorized by the Manager and this Agreement has been, and each of the
Management Agreement and the Clarion Agreement has been or will be, duly and
validly executed and delivered by the Manager. [Representation and warranty
may be expanded to cover additional agreements, if any, with the Manager.]
(c) The execution, delivery, and performance of this Agreement,
the Management Agreement and the Clarion Agreement and the consummation of
the transactions contemplated hereby and thereby do not and will not (i)
conflict with or result in a breach of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time, or
both, would constitute a default) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Manager pursuant to any agreement, instrument, franchise, license or
permit to which the Manager is a party or by which it or any of its
properties or assets may be bound or (ii) violate or conflict with any
provision of the certificate of incorporation or bylaws of the Manager or
(iii) violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or
body having jurisdiction over the Manager or any of its properties or assets,
except, with respect to clauses (i) and (iii) above, for those violations or
conflicts that would not have a Material Adverse Effect on the Manager, or a
material adverse effect on the transactions contemplated by this Agreement.
No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the
Manager or any of its properties or assets is required for the execution,
delivery and performance of this Agreement by the Manager.
[Representation and warranty may be expanded to cover additional agreements,
if any, with the Manager.]
(d) The Manager has been duly organized and is validly existing as
a limited liability corporation in good standing under the laws of the State
of New York. The Manager has been duly qualified and is in good standing as
a foreign corporation, in each jurisdiction in which the character or
location of its properties (owned, leased or licensed) or the nature or
conduct of its business makes such qualification necessary, except for those
failures to be so qualified or in good standing which will not in the
aggregate have a Material Adverse Effect on the Manager or a material adverse
effect on the transactions contemplated by this Agreement. The Manager has
all requisite power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits
of and from all public, regulatory or governmental agencies and bodies, to
own, lease and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and the Prospectus,
except for the absence of which in the aggregate would not have a Material
Adverse Effect on the Manager or a material adverse effect on the
transactions contemplated by this Agreement, and no such consent, approval,
authorization, order, registration, qualification, license or permit contains
a materially burdensome restriction not adequately disclosed in the
Registration Statement and the Prospectus.
(e) The Manager has no subsidiaries.
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<PAGE>
(f) Except as described in the Prospectus, there is no litigation
or governmental proceeding to which the Manager is a party or to which any
property of the Manager is subject or which is pending or, to the knowledge
of the Manager, contemplated against the Manager which might result in any
Material Adverse Change of the Manager, which might materially and adversely
affect the transactions contemplated by this Agreement or which is required
to be disclosed in the Registration Statement or the Prospectus and is not so
disclosed.
(g) The Manager has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the
sale or resale of the Shares.
(h) The Manager has filed all necessary federal, state and foreign
income and franchise tax returns and has paid all taxes required to be paid
by it and, if due and payable, any related or similar assessment, fine or
penalty levied against it, except insofar as the failure to file such returns
would not have a Material Adverse Effect on the Manager or a material adverse
effect on the transactions contemplated by this Agreement. The Manager has
made adequate charges, accruals and reserves in its financial statements in
respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of the Manager has not been finally
determined, except to the extent of any inadequacy that would not have a
Material Adverse Effect on the Manager or a material adverse effect on the
transactions contemplated by this Agreement.
(i) The Manager is insured by recognized financially sound and
reputable institutions with policies in such amounts and with such
deductibles and covering such risks that the Manager believes are adequate to
insure against potential losses, with such policies including, without
limitation, policies covering errors and omissions and fidelity bonds. The
Manager has no reason to believe that it will not be able (i) to renew its
existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change of the Manager. The Manager has not
been denied any insurance coverage for which it has sought or applied.
(j) Except as otherwise disclosed in the Prospectus, there are no
business relationships or related-party transactions of the type described in
Item 404 of Regulation S-K of the Commission involving the Company or its
Subsidiaries and the Manager, except for such transactions that would be
considered immaterial under such Item 404. The descriptions in the
Prospectus under the caption "Certain Transactions with Related Parties" are
complete and accurate in all material respects.
(k) The Manager is not and will not be an "investment company" or
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act
(l) The Manager is not and will not be a "broker" within the
meaning of Section 3(a)(4) of the Exchange Act or a "dealer" within the
meaning of Section 3(a)(5) of the Exchange Act or required to be registered
pursuant to Section 15(a) of the Exchange Act.
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<PAGE>
Any certificate signed by an officer of the Manager and delivered
to the Representatives or their counsel shall be deemed to be a
representation and warranty by the Manager as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriters and the
Underwriters, severally and not jointly, agree to purchase from the Company,
at a purchase price per share of $_______, the number of Firm Shares set
forth opposite the respective names of the Underwriters in Schedule I hereto
plus any additional number of Shares which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the office of Bear Stearns, 245
Park Avenue, New York, New York, or at such other place as shall be agreed
upon by you and the Company, at 10:00 a.m. on the third or fourth business
day (as permitted under Rule 15c6-1 of the rules and regulations of the
Commission under the Exchange Act (the "Exchange Act Regulations")) (unless
postponed in accordance with the provisions of Section 9 hereof following the
date of the effectiveness of the Registration Statement (or, if the Company
has elected to rely upon Rule 430A of the Securities Act Regulations, the
third or fourth business day (as permitted under Rule 15c6-1 of the Exchange
Act Regulations) after the determination of the public offering price of the
Shares), or such other time not later than ten business days after such date
as shall be agreed upon by you and the Company (such time and date of payment
and delivery being herein called the "Closing Date"). Payment shall be made
to the Company by wire transfer in same-day funds, against delivery to you
for the respective accounts of the Underwriters of certificates for the
Shares to be purchased by them. Certificates for the Shares shall be
registered in such name or names and in such authorized denominations as you
may request in writing at least 48 hours prior to the Closing Date. The
Company will permit you to examine and package such certificates for delivery
at least 24 hours prior to the Closing Date.
(c) In addition, the Company hereby grants to the Underwriters the
option to purchase up to 1,500,000 Additional Shares at the same purchase
price per share to be paid by the Underwriters to the Company for the Firm
Shares as set forth in this Section 2, for the sole purpose of covering
over-allotments in the sale of Firm Shares by the Underwriters. This option
may be exercised at any time, in whole or in part, on or before the thirtieth
day following the date of the Prospectus, by written notice by you to the
Company. Such notice shall set forth the aggregate number of Additional
Shares as to which the option is being exercised and the date and time, as
reasonably determined by you, when the Additional Shares are to be delivered
(such date and time being herein sometimes referred to as the "Additional
Closing Date"); provided, however, that the Additional Closing Date shall not
be earlier than the Closing Date or earlier than the second full business day
after the date on which the option shall have been exercised nor later than
the eighth full business day after the date on which the option shall have
been exercised (unless such time and date are postponed in accordance with
the provisions of Section 9 hereof). Certificates for the Additional Shares
shall be registered in such name or names and in such authorized
denominations as you may request in writing at least 48 hours prior to the
Additional Closing Date. The Company will permit
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<PAGE>
you to examine and package such certificates for delivery at least 24 hours
prior to the Additional Closing Date.
(d) The number of Additional Shares to be sold to each Underwriter
shall be the number which bears the same ratio to the aggregate number of
Additional Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such number
increased as set forth in Section 9 hereof) bears to the total number of Firm
Shares being purchased from the Company, subject, however, to such
adjustments to eliminate any fractional shares as you in your sole discretion
shall make.
(e) Payment for the Additional Shares shall be made by wire
transfer in same-day funds at the office Bear Stearns, 245 Park Avenue, New
York, New York, or such other location as may be mutually acceptable, upon
delivery of the certificates for the Additional Shares to you for the
respective accounts of the Underwriters.
3. Offering. Upon your authorization of the release of the Firm
Shares, the Underwriters propose to offer the Shares for sale to the public
upon the terms set forth in the Prospectus.
4. Covenants of the Company. The Company covenants and agrees with
the Underwriters that:
(a) The Company will notify you immediately (and, if requested by
you, will confirm such notice in writing) (i) when any post-effective
amendment to the Registration Statement becomes effective, (ii) of any
request by the Commission for any amendment of or supplement to the
Registration Statement or the Prospectus or for any additional information,
(iii) of the mailing or the delivery to the Commission for filing of the
Prospectus or any amendment of or supplement to the Registration Statement or
the Prospectus or any document to be filed pursuant to the Exchange Act
during any period when the Prospectus is required to be delivered under the
Securities Act, (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or of the initiation, or the threatening, of
any proceedings therefor, (v) of the receipt of any comments or inquiries
from the Commission relating to the Registration Statement or the Prospectus,
and (vi) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose or enter a stop order at any time,
the Company will make every reasonable effort to prevent the issuance of any
such stop order and, if issued, to obtain the lifting of such order as soon
as possible. The Company will not file any post-effective amendment to the
Registration Statement or use any amendment of or supplement to the
Prospectus (including any revised prospectus which the Company proposes for
use by the Underwriters in connection with the offering of the Shares which
differs from the prospectus filed with the Commission pursuant to Rule 424(b)
of the Securities Act Regulations, whether or not such revised prospectus is
required to be filed pursuant to Rule 424(b) of the Securities Act
Regulations) to which the Representatives or counsel for the Underwriters
shall reasonably object, and will furnish the Representatives with copies of
any such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be.
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<PAGE>
(b) If any event shall occur as a result of which the Prospectus
would, in the judgment of the Underwriters or the Company include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it shall be necessary at any time to
amend or supplement the Prospectus or Registration Statement to comply with
the Securities Act or the Securities Act Regulations, the Company will notify
you promptly and prepare and file with the Commission an appropriate
amendment or supplement (in form and substance reasonably satisfactory to
you) which will correct such statement or omission or which will effect such
compliance.
(c) The Company has delivered to each of you one signed copy of
the Registration Statement as originally filed, including exhibits and all
amendments thereto, and the Company will promptly deliver to each of the
Underwriters, from time to time during the period that the Prospectus is
required to be delivered under the Securities Act or the Exchange Act, such
number of copies of the Prospectus and the Registration Statement, and all
amendments of and supplements to such documents, if any, as you may
reasonably request.
(d) The Company will endeavor in good faith, in cooperation with
you, to qualify the Shares for offering and sale under the securities laws
relating to the offering or sale of the Shares of such jurisdictions as you
may designate and to maintain such qualification in effect for so long as
required for the distribution thereof; provided, however, that in no event
shall the Company be obligated in connection therewith to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified, to
execute a general consent to service of process or subject itself to taxation
in respect of doing business in any jurisdiction in which it is not otherwise
so subject.
(e) The Company will make generally available (within the meaning
of Section 11(a) of the Securities Act) to its security holders and to you as
soon as practicable, but not later than 45 days after the end of its fiscal
quarter in which the first anniversary date of the effective date of the
Registration Statement occurs (or if such fiscal quarter is the Company's
fourth fiscal quarter, not later than 90 days after the end of such quarter),
an earnings statement (in form complying with the provisions of Rule 158 of
the Securities Act Regulations) covering a period of at least twelve
consecutive months beginning after the effective date of the Registration
Statement (as defined in Rule 158(c) of the Securities Act Regulations).
(f) During the period of 180 days from the date of the Prospectus,
the Company will not, directly or indirectly without your prior written
consent, issue, sell, offer or agree to sell, grant any option to purchase,
or otherwise dispose (or announce any offer, sale, grant of an option to
purchase or other disposition) of, any shares of Common Stock (or any
securities convertible into, exchangeable or exercisable for shares of Common
Stock), other than the Company's sale of Shares hereunder, the Company's
issuance of Common Stock upon the exercise of presently outstanding stock
options, the grant of options under the Company's 1998 Stock Incentive Plan
and the Company's issuance of Common Stock upon the exercise of stock options
granted in connection with the offering contemplated hereby under the 1998
Stock Incentive Plan.
(g) The Company will obtain the undertaking of each of its
officers and directors, the Manager and its officers and directors, the
purchasers in the private placement described in the
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<PAGE>
Prospectus under the caption "Private Placement," and such other persons as
have been heretofore designated by you and listed on Schedule II attached
hereto that, during the period of 180 days (or such shorter period as
expressly agreed to by Bear Stearns) from the date of the Prospectus, each of
them will not, directly or indirectly, without your prior written consent,
issue, sell, offer or agree to sell, grant any option to purchase, or
otherwise dispose (or announce any offer, sale, grant of an option to
purchase or other disposition) of, any shares of Common Stock (or any
securities convertible into, exercisable for or exchangeable for shares of
Common Stock) other than in connection with Shares pledged pursuant to a
lending arrangement under which the holder has defaulted and the lender is
exercising its right to dispose of such Shares.
(h) During a period of three years from the date of the
Prospectus, the Company will furnish to you copies of (i) all reports to its
stockholders; and (ii) all reports, financial statements and proxy or
information statements filed by the Company with the Commission or any
national securities exchange or quotation system.
(i) The Company will apply the proceeds from the sale of the
Shares as set forth under the caption "Use of Proceeds" in the Prospectus.
(j) If the Company elects to rely upon Rule 462(b) of the
Securities Act Regulations, the Company shall file the Rule 462(b)
Registration Statement with the Commission in compliance with Rule 462(b) of
the Securities Act Regulations by 10:00 p.m., Washington, D.C. time, on the
date of this Agreement, and the Company shall at the time of filing, either
pay to the Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) of the Securities Act Regulations.
(k) The Company will not at any time, directly or indirectly, take
any action intended, or which might reasonably be expected, to cause or
result in, or which will constitute, stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of any
of the Shares.
(l) The Company will continue to meet the requirements to qualify
as a REIT and will not revoke its election to be a REIT unless and until the
Board determines that such revocation is advantageous to the Company.
(m) The Company will use its best efforts to effect the listing of
the Common Stock on the NYSE.
(n) The Company will not and will not allow any person authorized
to act on the Company's behalf to take any action that would prevent the
offering and sale of the Private Shares from complying in all respects with
the requirements of all applicable securities laws or render unavailable the
exemption from the registration requirements of the Securities Act provided
by Section 4(2) thereof relied upon in making any offer or sale of the
Private Shares, or the state securities or Blue Sky laws of any jurisdiction
in which the Private Shares will be offered.
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<PAGE>
5. Payment of Expenses. Whether or not the transactions contemplated
in this Agreement are consummated or this Agreement is terminated, the
Company hereby agrees to pay all costs and expenses incident to the
performance of the obligations of the Company hereunder, including those in
connection with (i) preparing, printing, duplicating, filing and
distributing the Registration Statement, as originally filed and all
amendments thereof (including all exhibits thereto), any Preliminary
Prospectus, the Prospectus and any amendments or supplements thereto
(including, without limitation, fees and expenses of the Company's
accountants and counsel), the underwriting documents (including this
Agreement and the Agreement Among Underwriters) and all other documents
related to the public offering of the Shares (including those supplied to
the Underwriters in quantities as hereinabove stated), (ii) the issuance,
transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the qualification of the
Shares under state Blue Sky laws, including the costs of printing and
mailing a preliminary and final "Blue Sky Memorandum" and the fees of
counsel in connection therewith and such counsel's disbursements in relation
thereto, (iv) listing the Shares on the NYSE, (v) filing fees of the
Commission and the National Association of Securities Dealers, Inc. (the
"NASD"), (vi) the cost of printing certificates representing the Shares and
(vii) the cost and charges of any transfer agent.
6. Conditions of Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Firm Shares and the Additional
Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company and the Manager herein
contained, as of the date hereof and as of the Closing Date (for purposes of
this Section 6 "Closing Date" shall refer to the Closing Date for the Firm
Shares and any Additional Closing Date, if different, for the Additional
Shares), to the absence from any certificates, opinions, written statements
or letters furnished to you or to Stroock & Stroock & Lavan LLP
("Underwriters' Counsel") pursuant to this Section 6 of any misstatement or
omission, to the performance by the Company and the Manager of their
respective obligations hereunder, and to the following additional
conditions:
(a) On the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
Securities Act or proceedings therefor initiated or threatened by the
Commission. The Prospectus shall have been filed or transmitted for filing
with the Commission pursuant to Rule 424(b) of the Securities Act Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Underwriters of such timely
filing or transmittal.
(b) On the Closing Date you shall have received the opinion of
Shulman, Rogers, Gandal, Pordy & Ecker, P.A., Maryland counsel for the
Company, dated the Closing Date addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Maryland.
(ii) The statements in the Prospectus under the caption
"Certain Provisions of Maryland Law and the Company's Charter and
Bylaws" and in Item 34 of the Registration Statement, to the
extent that such statements constitute matters of law, summaries
of legal matters, the Company's charter or bylaw provisions, legal
14
<PAGE>
proceedings, or legal conclusions, have been reviewed by such
counsel and, as of the date of the Prospectus and as of the date
hereof, fairly present and summarize, in all material respects,
the matters referred to therein.
(c) On the Closing Date you shall have received the opinion of
Shearman & Sterling, counsel for the Company and the Manager, dated the
Closing Date addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) To their best knowledge and information, each of the
Company and its Subsidiaries is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in
which such qualification is required, except for where the failure so
to qualify or to be in good standing would not result in a Material
Adverse Effect on the Company or a material adverse effect on the
transactions contemplated by this Agreement.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and the
Prospectus.
(iii) The Manager has been duly incorporated and is
validly existing as a limited liability company in good standing under
the laws of the State of New York.
(iv) The Manager is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except for
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect on the Manager or a material
adverse effect on the transactions contemplated by this Agreement.
(v) The Manager has all requisite power and authority to
own, lease and operate its properties and conduct its business as now
being conducted and as described in the Registration Statement and the
Prospectus.
(vi) Each of the Corporate Subsidiaries has been duly
organized and is validly existing as a corporation under the laws of
the State of Delaware with corporate power and authority to conduct its
business as described in the Registration Statement and the Prospectus.
The Operating Partnership has been duly organized and is validly
existing as a limited partnership under the laws of the State of
Delaware under the Delaware Revised Uniform Limited Partnership Act
with partnership power and authority to own its properties and conduct
its business as described in the Registration Statement and the
Prospectus.
(vii) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under
"Description of Capital Stock." All of the outstanding shares of
Common Stock are duly and validly authorized and issued, are fully paid
and nonassessable. The issued and outstanding Shares to be delivered
on the Closing Date have been duly authorized and, when delivered by
the Company in accordance with this
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Agreement, will be validly issued and fully paid and nonassessable, and
the issuance of the Shares is not subject to any preemptive rights,
except as otherwise disclosed in the Prospectus. The Common Stock,
including the Shares, conforms to the descriptions thereof contained in
the Registration Statement and the Prospectus.
(viii) The Shares to be sold under this Agreement to the
Underwriters are duly approved for listing on the NYSE, subject only to
official notice of issuance, and such approval has been in effect since
a date prior to the date of the Preliminary Prospectus.
(ix) The Management Agreement and the transactions
contemplated therein have been duly authorized by the Company and the
Manager, and the Management Agreement has been duly authorized,
executed and delivered by the Company and the Manager and constitutes
the valid and binding agreement of the Company and the Manager,
enforceable in accordance with its terms. The Clarion Agreement and the
transactions contemplated therein have been duly authorized by the
Manager, and the Clarion Agreement has been duly authorized, executed
and delivered by the Manager and constitutes the valid and binding
agreement of the Manager, enforceable in accordance with its terms.
(x) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company and the Manager and constitutes
the valid and binding agreement of the Company and the Manager,
enforceable in accordance with its terms.
(xi) To the best of their knowledge and information, except
as disclosed in the Prospectus, there are no actions, suits,
proceedings or investigations pending or threatened against or
affecting the Company, the Subsidiaries or the Manager or any of their
respective properties or businesses, at law or in equity, or before any
government or administrative body or agency, in the State of New York,
which, alone or in the aggregate, could result in any Material Adverse
Effect or challenge the right, power, authority or ability of the
Company, the Subsidiaries or the Manager to carry out the transactions
contemplated in each of the Registration Statement, the Underwriting
Agreement, the Management Agreement and the Clarion Agreement.
(xii) No consent, approval, authorization or order of, or
qualification with any governmental body or agency of the United States
of America or the State of New York is required for the issuance and
sale of the Shares by the Company pursuant to the Underwriting
Agreement or the performance by the Company or the Manager of its
respective obligations under the Underwriting Agreement, the Management
Agreement and the Clarion Agreement or the consummation by the Company,
the Subsidiaries or the Manager of the transactions contemplated
thereby, except (x) such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the
Shares by the Underwriters (as to which such counsel need express no
opinion) and (y) such as have been obtained or made under the
Securities Act or the rules of the New York Stock Exchange.
(xiii) The execution and delivery by the Company and the
Manager of the Underwriting Agreement, the Management Agreement and the
Clarion Agreement (to which
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either is a party) and the consummation of the transactions
contemplated thereby and in the Registration Statement (including the
issuance and sale of the Shares and the use of the proceeds from the
sale of the Shares as described in the Prospectus under the caption
"Use of Proceeds"), and the performance by the Company and the Manager
of their respective obligations under the Underwriting Agreement, the
Management Agreement and the Clarion Agreement, each in accordance with
its terms, do not, to our knowledge, constitute a violation of or a
default under any material contracts of the Company and the Manager
previously identified to us, result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company, any of its Subsidiaries or the Manager pursuant to any
agreement, instrument, franchise, license or permit known to such
counsel to which the Company, the Subsidiaries or the Manager is a
party or by which any of such entities or their respective properties
or assets may be bound that is material to the Company, any of its
Subsidiaries or the Manager or violate or conflict with any provisions
of the articles of incorporation or bylaws of the Company or its
Subsidiaries or the certificate of incorporation or bylaws of the
Manager. We do not express any opinion, however, as to whether the
execution, delivery or performance by the Company and the Manager of
the Underwriting Agreement, the Management Agreement and the Clarion
Agreement will constitute a violation of or a default under any
covenant, restriction or provision with respect to financial ratios or
tests or any aspect of the financial condition or results of operations
of the Company or the Manager.
(xiv) The issuance and sale of the Shares by the Company,
the execution and delivery of the Underwriting Agreement, the
Management Agreement and the Clarion Agreement (to which either is a
party) by the Company and the Manager, the compliance by the Company
with all of the provisions of the Shares, the Underwriting Agreement
and the Management Agreement, and the consummation by the Company of
the transactions therein contemplated in accordance with the terms
thereof, will not violate any Applicable Law or any Applicable Order.
The term "Applicable Laws" means those laws, rules and regulations of
the States of Maryland and New York and of the United States of America
which, in the experience of such counsel, are normally applicable to
transactions of the type contemplated by the Underwriting Agreement,
the Management Agreement and the Clarion Agreement, but without having
made any special investigation concerning any other laws, rules or
regulations. The term "Applicable Orders" means any administrative
order or decree of any State of Maryland or New York or federal court
or governmental authority or agency having jurisdiction over the
Company or the Manager, the existence of which has been specifically
disclosed to such counsel in writing prior to the date hereof.
(xv) The Registration Statement, including any Rule 462(b)
Registration Statement, the Prospectus, excluding the documents
incorporated by reference therein, and each amendment or supplement to
the Registration Statement, excluding the documents incorporated by
reference therein, as of their respective effective or issue dates
(other than the financial statements and schedules and other financial
data included therein or omitted therefrom, as to which no opinion need
be expressed) complied as to form in all material respects with the
requirements of the Securities Act and the Securities Act Regulations.
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(xvi) The Registration Statement, including any Rule
462(b) Registration Statement, has been declared effective under the
Securities Act, and to the best of their knowledge and information, no
stop order suspending the effectiveness of the Registration Statement
or the Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings therefor have been instituted or are
pending or threatened by the Commission. Any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) under the
Securities Act Regulations has been made in the manner and within the
time period required by such Rule.
(xvii) To the best knowledge of such counsel and except as
described in the Prospectus, no holder of securities of the Company has
any rights to the registration of securities of the Company or
securities of any other person that are convertible, exchangeable or
exercisable for securities of the Company because of the filing of the
Registration Statement or otherwise in connection with the sale of the
Shares contemplated hereby.
(xviii) To the best knowledge of such counsel, the
descriptions in the Prospectus under the caption "Certain Relationships
and Related Party Transactions and Conflicts of Interest" are complete
and accurate in all material respects.
(xix) The Company has been organized in conformity with
the requirements for qualification as a REIT under Sections 856 through
860 of the Code, and, to the best knowledge of such counsel, the
Company has not taken any action that would prevent it from qualifying
as a REIT under the Code, and the Company conducts its operations in a
manner so as to enable it to elect to be qualified, and thereafter
maintain its qualification, as a REIT under the Code.
(xx) The Company is not, and after giving effect to the issue
and sale of the Shares by the Company and the application of the
proceeds of the offering contemplated hereby as described under "Use of
Proceeds" in the Prospectus will not be, an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act, or a "broker" within the meaning of Section
3(a)(4) of the Exchange Act or a "dealer" within the meaning of Section
3(a)(5) of the Exchange Act or required to be registered pursuant to
Section 15(a) of the Exchange Act. The Manager is not and will not be
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act or a "broker"
within the meaning of Section 3(a)(4) of the Exchange Act or a "dealer"
within the meaning of Section 3(a)(5) of the Exchange Act or required
to be registered pursuant to Section 15(a) of the Exchange Act.
(xxi) The statements in the Prospectus under the captions
"Risk Factors-- REIT Asset and Income Requirements May Limit the
Company's Investments," " -- REIT Distribution Requirements May Limit
the Company's Operations," " -- Phantom Income May Result in Additional
Tax Liability," " -- Taxable Mortgage Pool Risk; Increased
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Taxation to Stockholders," " -- Failure to Maintain Investment Company
Act Exemption Would Adversely Affect Results of Operations," " --
Ownership Limitation May Restrict Business Combination Opportunities,"
"Federal Income Tax Considerations," "ERISA Considerations," and
"Description of Capital Stock" to the extent that such statements
constitute matters of law, summaries of legal matters, the Company's
charter or bylaw provisions, legal proceedings, or legal conclusions,
have been reviewed by such counsel and, as of the date of the
Prospectus and as of the date hereof, fairly present and summarize, in
all material respects, the matters referred to therein.
(xxii) Each of the Purchase Agreements and the
transactions contemplated therein have been duly and validly authorized
by the Company and the Purchase Agreement have been duly and validly
executed and delivered by the Company and constituted, upon their
execution, valid and binding agreements of the Company, enforceable in
accordance with their terms.
(xxiii) Based upon the prospective Purchasers'
representations contained in the Purchase Agreements and assuming the
offer and sale of the Private Shares has been conducted in the manner
prescribed by the Purchase Agreements, the offer and sale of the
Private Shares is exempt from the registration requirements of the
Securities Act. The offer and sale of the Private Shares should not be
integrated with the offering of the Shares pursuant to the Registration
Statement.
In addition, such opinion shall also contain a statement that such
counsel has participated in conferences with officers and representatives of
the Company and the Manager, representatives of the independent public
accountants for the Company and the Underwriters at which the contents of the
Registration Statement and the Prospectus and related matters were discussed
and, although they are not passing upon, and do not assume any responsibility
for, the accuracy, completeness or fairness of the statements contained in
the Registration Statement or Prospectus, and they have not made any
independent check or verification thereof, on the basis of the foregoing, no
facts have come to the attention of such counsel which would lead such
counsel to believe that either the Registration Statement at the time it
became effective (except for financial statements and schedules and other
financial statistical data included therein or omitted therefrom, as to which
such counsel need express no opinion) or any subsequent amendment thereof
made prior to the Closing Date as of the date of such amendment contained an
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus (except for financial statements and
schedules and other financial or statistical data included therein, as to
which counsel need express no opinion) as of its date (or any subsequent
amendment thereof or subsequent supplement thereto made prior to the Closing
Date as of the date of such amendment or supplement) and as of the Closing
Date contained or contains an untrue statement of a material fact or omitted
or omits to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters
involving the application of laws other than the laws of the United States,
New York and any other jurisdictions in which they are admitted to the extent
such counsel deems proper and to the extent specified in such
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opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' Counsel) of other counsel reasonably
acceptable to Underwriters' Counsel, familiar with the applicable laws;
provided, that such opinion shall expressly state that the Underwriters may
rely on such opinion as if it were addressed to them. In rendering such
opinion, such counsel may rely as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and the
Manager and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting
the existence or good standing of the Company, the Subsidiaries and the
Manager; provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel and such opinion shall state that such
counsel and the Underwriters are justified in so relying upon any such
certificate. The opinion of such counsel for the Company shall state that
the opinion of any such other counsel is in form satisfactory to such counsel
and, in their opinion, you and they are justified in relying thereon.
(d) All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be satisfactory
in form and substance to you and to Underwriters' Counsel, and the
Underwriters shall have received from said Underwriters' Counsel a favorable
opinion, dated as of the Closing Date with respect to the issuance and sale
of the Shares, the Registration Statement and the Prospectus and such other
related matters as you may reasonably require, and the Company shall have
furnished to Underwriters' Counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(e) At the Closing Date you shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Company on
behalf of the Company and a certificate of the Chief Executive Officer and
Chief Financial Officer of the Manager on behalf of the Manager, each dated
the Closing Date, to the effect that (i) the condition set forth in
subsection (a) of this Section 6 has been satisfied, (ii) as of the date
hereof and as of the Closing Date the representations and warranties of the
Company and the Manager, respectively, set forth in Section 1 hereof are true
and correct, (iii) as of the Closing Date the obligations of the Company and
the Manager, respectively, to be performed hereunder on or prior thereto have
been duly performed and (iv) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company and the Manager have not sustained any material loss or interference
with their respective businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or any legal or governmental proceeding, and there has not been
any Material Adverse Change of the Company or the Manager, except in each
case as described in or contemplated by the Prospectus.
(f) You shall have received at the time this Agreement is executed
and at the Closing Date, a letter from Deloitte & Touche LLP, independent
public accountants for the Company, dated as of the date of this Agreement
and as of the Closing Date, respectively, addressed to the Underwriters and
in form and substance satisfactory to you, containing statements and
information of the type ordinarily included in accountants' "comfort letters"
to underwriters with respect to financial statements and certain information
of the Company and its subsidiaries contained in the Registration Statement
and the Prospectus.
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(g) Prior to the Closing Date the Company and the Manager shall
have furnished to you such further information, certificates and documents as
you may reasonably request.
(h) You shall have received from each person who is a director or
officer of the Company, the Manager and its officers and directors, the
purchasers in the private placement described in the Prospectus under the
caption "Private Placement," and such other persons as have been heretofore
designated by you and listed on Schedule II hereto an agreement to the effect
that such person will not, directly or indirectly, without Bear Stearns prior
written consent, issue, sell, offer or agree to sell, grant any option to
purchase, or otherwise dispose (or announce any offer, sale, grant of an
option to purchase or other disposition) of, any shares of Common Stock (or
any securities convertible into, exchangeable or exercisable for shares of
Common Stock) for a period of 180 days (or such shorter period as expressly
agreed to by Bear Stearns) after the date of the Prospectus.
(i) At the Closing Date, the Shares shall have been approved for
listing on the NYSE.
(j) On the Closing Date, the Company shall have delivered
satisfactory evidence to the Underwriters that forthwith following receipt of
the proceeds of the offering contemplated hereby, the Company will complete
the purchase of the Initial Investments described under the caption
"Investment Objectives and Policies--Initial Investments."
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
canceled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
canceled by you at, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone, telecopy, telex or telegraph, confirmed in writing.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act against any and all losses, liabilities, claims, damages and expenses
whatsoever as incurred (including, without limitation, attorneys' fees and
any and all expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
as originally filed or any amendment thereof, or any related Preliminary
Prospectus or the Prospectus, or in any supplement thereto or amendment
thereof, or arise out of or are based upon the omission or alleged omission
to
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state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the
Company will not be liable in any such case (i) to the extent, but only to
the extent, that any such loss, liability, claim, damage or expense arises
out of or is based upon any such untrue statement or alleged untrue statement
or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of any Underwriter through you expressly for use therein and (ii) with
respect to any Preliminary Prospectus to the extent that any such loss,
liability, claim, damage or expense results from the fact that an Underwriter
sold Shares to a person as to whom there was not sent or given, at or prior
to written confirmation of such sale, a copy of the Prospectus as then
amended or supplemented in any case where such delivery is required by the
Securities Act if the Company has previously furnished copies thereof to such
Underwriter and the loss, liability, claim, damage or expense of the
Underwriters results from an untrue statement or omission of a material fact
contained in the Preliminary Prospectus which was corrected in the Prospectus
as then amended. This indemnity agreement will be in addition to any
liability which the Company may otherwise have including under this Agreement.
(b) The Manager agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act against any and all losses, liabilities, claims, damages and expenses
whatsoever as incurred (including, without limitation, attorneys' fees and
any and all expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any related Preliminary
Prospectus or the Prospectus, or in any supplement thereto or amendment
thereof, or arise out of or are based upon the omission or alleged omission
to state thereunder a material fact required to be stated therein or
necessary to make the statements thereunder not misleading; provided,
however, that the Manager will not be liable in any such case (i) to the
extent, but only to the extent, that any such loss, liability, claim, damage
or expense arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information to the Company by or
on behalf of any Underwriter through you expressly for use therein and (ii)
with respect to any Preliminary Prospectus to the extent that any such loss,
liability, claim, damage or expense results from the fact that an Underwriter
sold Shares to a person as to whom there was not sent or given, at or prior
to written confirmation of such sale, a copy of the Prospectus as then
amended or supplemented in any case where such delivery is required by the
Securities Act if the Company has previously furnished copies thereof to such
Underwriter and the loss, liability, claim, damage or expense of the
Underwriters results from an untrue statement or omission of a material fact
contained in the Preliminary Prospectus which was corrected in the Prospectus
as then amended. This indemnity agreement will be in addition to any
liability which the Manager may otherwise have including under this Agreement.
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(c) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the
Company, each of the officers of the Company who shall have signed the
Registration Statement and each other person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, against any losses, liabilities, claims, damages
and expenses whatsoever as incurred (including, without limitation,
attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending, against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they or
any of them may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, as originally filed or any amendment thereof, or any
related Preliminary Prospectus or the Prospectus, or in any amendment thereof
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Underwriter through you expressly for
use therein; provided, however, that in no case shall any Underwriter be
liable or responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder. This
indemnity will be in addition to any liability which any Underwriter may
otherwise have including under this Agreement. The Company acknowledges that
the statements set forth in the last paragraph of the cover page, the
stabilization language on page 2 and the statements set forth in the first
and ninth paragraphs under the caption "Underwriting" in the Prospectus
constitute the only information furnished in writing by or on behalf of any
Underwriter expressly for use in the Registration Statement, as originally
filed or in any amendment thereof, any related Preliminary Prospectus or the
Prospectus or in any amendment thereof or supplement thereto, as the case may
be.
(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve
it from any liability which it may have under this Section 7, except to the
extent that it has been prejudiced in any material respect by such failure,
or from any liability that it may have otherwise). In case any such action
is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with
counsel satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless
(i) the employment of such counsel shall have been authorized in writing by
one of the indemnifying parties in connection with the defense of such
action,
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(ii) the indemnifying parties shall not have employed counsel to have charge
of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded (based on an opinion of counsel) that there may be
defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything
in this subsection to the contrary notwithstanding, an indemnifying party
shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was not
unreasonably withheld.
8. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7 hereof
is for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company,
the Manager and the Underwriters shall contribute to the aggregate losses,
claims, damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claims asserted, but after deducting in
the case of losses, claims, damages, liabilities and expenses suffered by the
Company or the Manager any contribution received by the Company or the
Manager from persons, other than the Underwriters, who may also be liable for
contribution, including persons who control the Company or the Manager within
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration Statement
and directors of the Company) as incurred to which the Company, the Manager
and one or more of the Underwriters may be subject, in such proportions as is
appropriate to reflect the relative benefits received by the Company and the
Manager on the one hand and the Underwriters on the other hand from the
offering of the Shares or, if such allocation is not permitted by applicable
law or indemnification is not available as a result of the indemnifying party
not having received notice as provided in Section 7 hereof, in such
proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Manager
on the one hand and the Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Manager on the one hand and the Underwriters on the other hand shall be
deemed to be in the same proportion as (x) the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and (y) the underwriting discounts and
commissions received by the Underwriters, respectively, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company and the Manager on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company and the Manager on the one hand or the Underwriters on the other
hand and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company
and the Manager on the one hand and the Underwriters on the other hand agree
that it would not be just and equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation (even if the
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Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
Section 8, (i) in no case shall any Underwriter be liable or responsible for
any amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding the provisions
of this Section 8 and the preceding sentence, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. For purposes of
this Section 8, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act shall have the same rights to contribution as such Underwriter, and each
person, if any, who controls the Company or the Manager within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to contribution as
the Company or the Manager, as the case may be, subject in each case to
clauses (i) and (ii) of this Section 8. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution
may be made against another party or parties, notify each party or parties
from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 8 or otherwise. No party shall be liable for contribution with
respect to any action or claim settled without its consent; provided,
however, that such consent was not unreasonably withheld.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares hereunder, and
if the Firm Shares or Additional Shares with respect to which such default
relates do not (after giving effect to arrangements, if any, made by you
pursuant to subsection (b) below) exceed in the aggregate 10% of the number
of Firm Shares or Additional Shares, the Firm Shares or Additional Shares
which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase shall be purchased by the non-defaulting Underwriters in
proportion to the respective proportions which the numbers of Firm Shares set
forth opposite their respective names on Schedule I hereto bear to the
aggregate number of Firm Shares set forth opposite the names of the
nondefaulting Underwriters.
(b) In the event that such default relates to more than 10% of the
Firm Shares or Additional Shares, as the case may be, you may in your
discretion arrange for yourself or for another party or parties (including
any non-defaulting Underwriter or Underwriters who so agree) to purchase such
Firm Shares or Additional Shares, as the case may be, to which such default
relates on the terms contained herein. In the event that within five
calendar days after such a default you do not arrange for the purchase of the
Firm Shares or Additional Shares, as the case may be, to which such default
relates as provided in this Section 9, this Agreement, or in the case of a
default with respect to the
25
<PAGE>
Additional Shares, the obligations of the Underwriters to purchase and of the
Company to sell the Additional Shares, shall thereupon terminate, without
liability on the part of the Company or the Manager with respect thereto
(except in each case as provided in Sections 5, 7(a), 7(b) or 8 hereof) or
the Underwriters, but nothing in this Agreement shall relieve a defaulting
Underwriter or Underwriters of its or their liability, if any, to the other
Underwriters and the Company for damages occasioned by its or their default
hereunder.
(c) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as
aforesaid, you or the Company shall have the right to postpone the Closing
Date or Additional Closing Date, as the case may be, for a period, not
exceeding five business days, in order to effect whatever changes may thereby
be made necessary in the Registration Statement or the Prospectus or in any
other documents and arrangements, and the Company agrees to file promptly any
amendment or supplement to the Registration Statement or the Prospectus
which, in the opinion of Underwriters' Counsel, may thereby be made necessary
or advisable. The term "Underwriter" as used in this Agreement shall include
any party substituted under this Section 9 with like effect as if it had
originally been a party to this Agreement with respect to such Firm Shares or
Additional Shares.
10. Survival of Representations and Agreements. All representations
and warranties, covenants and agreements of the Underwriters, the Company
and the Manager contained in this Agreement, including the agreements
contained in Section 5 hereof, the indemnity agreements contained in Section
7 hereof, and the contribution agreements contained in Section 8 hereof,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling
person thereof or by or on behalf of the Company, any of its officers and
directors, the Manager or any controlling person of the Company or the
Manager, and shall survive delivery of and payment for the Shares to and by
the Underwriters. The representations contained in Section 1 hereof and the
agreements contained in Sections 5, 7, 8 and 11(d) hereof shall survive the
termination of this Agreement, including termination pursuant to Section 9
or 11 hereof.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the execution of
this Agreement.
(b) You shall have the right to terminate this Agreement at any
time prior to the Closing Date or terminate the obligations of the
Underwriters to purchase the Additional Shares at any time prior to the
Additional Closing Date, as the case may be, if (i) any domestic or
international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, the market for the
Company's securities or securities in general; or (ii) if trading on the
NYSE, the American Stock Exchange (the "AMEX") or the Nasdaq National Market
("Nasdaq") shall have been suspended, or minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for securities
shall have been required, on the NYSE, the AMEX or Nasdaq by such exchanges
or by order of the Commission or any other governmental authority having
jurisdiction; or (iii) if a banking moratorium has been declared by a state
or federal authority; or (iv) there shall have occurred any Material Adverse
Change with respect to the Company or the Manager; or (v) (A) if the United
States becomes engaged in hostilities or there is an escalation of
hostilities
26
<PAGE>
involving the United States or there is a declaration of a national
emergency or war by the United States or (B) if there shall have been such
change in political, financial or economic conditions, if the effect of any
such event in clause (A) or (B) in your judgment makes it impracticable or
inadvisable to proceed with the offering, sale and delivery of the Firm
Shares or the Additional Shares, as the case may be, on the terms
contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall be
by telephone, telecopy, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to Section 9(b) or 11(b)(i), (ii),
(iii) or (v) hereof), or if the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth herein is not satisfied or because of any refusal, inability or failure
on the part of the Company to perform any agreement herein or comply with any
provision hereof, the Company will, subject to demand by you, reimburse the
Underwriters for up to $______ of out-of-pocket expenses (including the fees
and expenses of their counsel) incurred by the Underwriters in connection
herewith.
12. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, telecopied, telexed or telegraphed
and confirmed in writing, to such Underwriter c/o Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, New York 10167, Attention: Stephen M. Parish; if
sent to the Company or the Manager, shall be mailed, delivered, telecopied,
telexed or telegraphed and confirmed in writing to the Company or the
Manager, 335 Madison Avenue, New York, New York 10017, Attention: Daniel L.
Heflin.
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters, the Company, the Manager and the
controlling persons, directors, officers, employees and agents referred to
in Sections 7 and 8 hereof, and their respective successors and assigns, and
no other person shall have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of this Agreement
or any provision herein contained. The "term successors and assigns" shall
not include a purchaser, in its capacity as such, of Shares from any of the
Underwriters.
14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
27
<PAGE>
If the foregoing correctly sets forth the understanding among you, the
Company and the Manager, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly yours,
Clarion Commercial Holdings, Inc.
BY:
----------------------------------
Name:
Title:
Clarion Capital, LLC
BY:
----------------------------------
Name:
Title:
Accepted as of the date first above written:
Bear, Stearns & Co. Inc.
Lehman Brothers Inc.
Cibc Oppenheimer Corp.
Everen Securities, Inc.
On behalf of themselves and the other Under-
writers named in Schedule I hereto.
Bear, Stearns & Co. Inc.
By:
------------------------------------------
Name: Stephen Parish
Title: Senior Managing Director
28
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Name of Underwriter Number of Firm
------------------- Shares to be Purchased
----------------------
<S> <C>
Bear, Stearns & Co. Inc.............
Lehman Brothers Inc.................
CIBC Oppenheimer Corp...............
EVEREN Securities, Inc..............
Total............................... 10,000,000
----------
----------
</TABLE>
I-1
<PAGE>
SCHEDULE II
II-1
<PAGE>
Exhibit 8.1
[Shearman & Sterling Letterhead]
May 15, 1998
Clarion Commercial Holdings, Inc.
335 Madison Avenue
New York, New York 10017
Dear Ladies and Gentlemen:
We have acted as counsel to Clarion Commercial Holdings, Inc., a
Maryland corporation (the "Company"), in connection with the preparation of a
Form S-11 registration statement (the "Registration Statement") filed with
the Securities and Exchange Commission on March 13, 1998 (No. 333-47887), as
amended through the date hereof, with respect to the offering and sale (the
"Offering") of up to 11,500,000 shares of common stock, par value $0.001 per
share, of the Company (the "Common Stock"). You have requested our opinion
regarding certain U.S. federal income tax matters in connection with the
Offering.
In giving this opinion letter, we have examined (i) the Company's
Articles of Incorporation, as duly filed with the Secretary of State of the
Commonwealth of Maryland on February 13, 1998 and amended on May 12, 1998;
(ii) the Company's Restated and Amended Articles of Incorporation, a form of
which is filed as an exhibit to the Registration Statement; (iii) the
Company's Bylaws; (iv) the Registration Statement, including the prospectus
contained as part of the Registration Statement (the "Prospectus"); and such
other documents as we have deemed necessary or appropriate for purposes of
this opinion.
In connection with the opinions rendered below, we have assumed, that
(i) each of the documents referred to above has been duly authorized,
executed, and delivered; (ii) each of the documents referred to above is
authentic, if an original, or is accurate, if a copy, and has not been
amended; (iii) during its short taxable year ending December 31, 1998 and
future taxable years, the Company will operate in a manner consistent with
the factual representations contained in the certificate, dated May 15, 1998
and executed by a duly appointed officer of the Company (the "Officer's
Certificate"); (iv) the Company will not make any amendments to its
organizational documents after the date of this opinion that would affect its
qualification as a real estate investment trust (a "REIT") for any taxable
year; and (v) no action will be taken by the Company, after the date
<PAGE>
hereof, that would have the effect of altering the facts upon which we have
based the opinions set forth below.
In connection with the opinions rendered below, we also have relied upon
the correctness of the factual representations contained in the Officer's
Certificate. No facts have come to our attention, however, that would cause
us to question the accuracy and completeness of the facts contained in the
documents and assumptions set forth above, the representations set forth in
the Officer's Certificate, or the Prospectus in a material way.
Based on the documents and assumptions set forth above, the
representations set forth in the Officer's Certificate, and the discussion in
the Prospectus under the caption "Federal Income Tax Considerations" (which
is incorporated herein by reference), we are of the opinion that:
(a) commencing with the Company's short taxable year ending December
31, 1998, the Company will qualify to be taxed as a REIT pursuant to sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Company's organization and proposed method of operation will
enable it to continue to meet the requirements for qualification and taxation
as a REIT under the Code;
(b) the descriptions of the law and the legal conclusions contained
in the Prospectus under the caption "Federal Income Tax Considerations" are
correct in all material respects, and the discussion thereunder fairly
summarizes the federal income tax considerations that are likely to be
material to a holder of the Common Stock.
We will not review on a continuing basis the Company's compliance with
the documents or assumptions set forth above, or the representations set
forth in the Officer's Certificate. Accordingly, no assurance can be given
that the actual results of the Company's operations for any given taxable
year will satisfy the requirements for qualification and taxation as a REIT.
We note that our opinion expressed herein is based on our examination of
the law, our review of the documents described above, the statements and
representations referred to above, the provisions of the Code, the
regulations, published rulings and announcements thereunder, and the judicial
interpretations thereof currently in effect. This opinion will not be
binding on the Internal Revenue Service (the "Service"), and there can be no
assurance that the Service will not challenge the conclusion stated herein or
that, if the issue were decided in court, such a challenge would not
ultimately succeed. Further, there can be no assurance that future
legislative or administrative changes or future court decisions or the
inaccuracy of any statements or representations on which we have relied may
not significantly affect the continuing validity of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the references to Shearman &
Sterling under the caption "Federal Income Tax Considerations" in the
Prospectus. In giving this consent, we do not admit that we are in the
category of persons whose consent is required by Section 7 of the Securities
Act of 1933, as
<PAGE>
amended, or the rules and regulations promulgated thereunder by the
Securities and Exchange Commission.
The foregoing opinions are limited to the U.S. federal income tax
matters addressed herein, and no other opinions are rendered with respect to
other federal tax matters or to any issues arising under the tax laws of any
other country, or any state or locality. We undertake no obligation to
update the opinions expressed herein after the date of this letter.
Very truly yours,
/s/ Shearman & Sterling
<PAGE>
Exhibit 10-1
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT, dated as of May __, 1998, by and between
CLARION COMMERCIAL HOLDINGS, INC., a Maryland corporation (the "Company"),
and CLARION CAPITAL, LLC, a New York limited liability company (the
"Manager").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of investing in
commercial mortgage-backed securities, commercial mortgage loans, mezzanine
investments and other real estate related investments and has elected to be
taxed as a real estate investment trust (a "REIT") under the Internal Revenue
Code of 1986, as amended (the "Code"); and
WHEREAS, the Company desires to retain the Manager to manage the
investments and day-to-day operations of the Company and to perform
administrative services for the Company in the manner and on the terms set
forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used but not defined herein
shall have the respective meanings assigned to them in the Prospectus, dated
May __, 1998 (the "Prospectus"), of the Company included in the Company's
Registration Statement on Form S-11, as amended No. 333-47887, filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended. In addition, the following terms shall have the meanings assigned
to them:
"CLARION Agreement" means that certain agreement, dated as of May ___,
1998, between the Manager and CLARION.
"Clarion Partners" means Clarion Partners, LLC, a New York limited
liability company.
"Closing Date" means the date of closing, dated as of May ____, 1998, of
the Company's initial public offering of common stock.
"Common Stock" means the Class A common stock, par value $.001 per share
of the Company.
"Governing Instruments" means the Company's articles of incorporation
and bylaws, as each may be amended, supplemented and/or restated from time
to time.
<PAGE>
"Incentive Fee" shall have the meaning set forth under Section 6(a)(2)
hereof.
"Management Fee" shall have the meaning set forth under Section 6(a)(1)
hereof.
"Mortgage Assets" means (i) Mortgage Securities and (ii) Mortgage Loans.
"Mortgage Loans" means mortgage loans secured by first or subordinate
liens on single family residential, multi-family residential, commercial
or other real property.
"Mortgage REIT" means an entity the securities of which are publicly
traded, organized and operated in compliance with the REIT Provisions of
the Code, that invests primarily in Mortgage Assets and follows investment
strategies substantially similar to those employed by the Company.
"Mortgage Securities" means securities representing interests in, or
obligations backed by, pools of Mortgage Loans.
"Non-Competition Payment" means the fair market value of this Agreement
(without giving effect to any termination and assuming it is renewed in
accordance with its terms), determined by a nationally recognized
accounting or investment banking firm experienced in the valuation of
investment advisory agreements. Such valuation shall be conducted by a
nationally recognized accounting or investment banking firm mutually
agreed upon by the parties and the costs of such appraisal shall be borne
equally by the parties. If the parties are unable to agree upon such
firm within 30 days following delivery of the notice of termination, then
each party shall, as soon as reasonably practicable, but in no event more
than 45 days following delivery of the notice of termination, choose a
nationally-recognized accounting or investment banking firm to conduct an
appraisal and such firms shall mutually agree upon a third
nationally-recognized accounting or investment banking firm. In such
event, (i) the fair market value amount shall be deemed to be the average
of the appraisals as conducted by each of the three firms; provided,
however, that if the appraisal by any firm is more than 15% greater or
lesser than such average, such firm's appraisal shall be disregarded and
the fair market value amount shall be deemed to be the average of the
remaining appraisal(s) and (ii) each party shall pay the costs of its
chosen accounting or investment banking firm. Any appraisal conducted
hereunder shall be performed no later than 45 days following selection of
the accounting or investment banking firm. The Non-Competition Payment
payable by the Company shall be paid within 30 days following receipt of
the final appraisal obtained hereunder.
"REIT Provisions of the Code" shall mean Sections 856 through 860 of the
Code, or any successor provisions thereto, and the regulations thereunder.
2
<PAGE>
"Return on Average Stockholders' Equity" means the result obtained by
dividing the Company's Net Income for a period by its Average
Stockholders' Equity for such period.
"Ten-Year U.S. Treasury Rate" shall mean the arithmetic average of the
weekly yield to maturity for actively traded current coupon U.S. Treasury
fixed interest rate securities (adjusted to constant maturities of ten
years) as published weekly by the Federal Reserve Board in "Federal
Reserve Statistical Release H.15(519)--Selected Interest Rates" or, if
such rate is not published by the Federal Reserve Board, as published by
any Federal Reserve Bank or agency or department of the federal government
selected by the Company.
"Termination Event" shall mean the occurrence of any of the following
events:
(1) the Manager violating any material provision of this
Agreement, and, if after notice of such violation and such violation
is curable, it shall not have cured such violation within 30 days;
provided, however, that in the event the Manager has commenced curing
such violation within such 30-day period and is diligently pursuing
such cure, the Manager shall have up to an additional 60 days to cure
such violation; or
(2) the Manager ceasing to be registered as an investment adviser
under the Advisers Act, if such registration is required as a matter
of law; or
(3) (i) the Manager generally not paying its obligations as such
obligations become due, or admitting in writing its inability to pay
its obligations generally, or making a general assignment for the
benefit of creditors; or (ii) any proceeding being instituted by or
against the Manager seeking to adjudicate it a bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its
obligations under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of any
order for relief or the appointment of a receiver, trustee, custodian
or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it
(but not instituted by it), such proceedings remaining undismissed or
unstayed for a period of sixty days; or (iii) any of the actions
sought in any proceeding described in (ii) above (including an order
for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of
its property) occurring or (iv) the Manager taking any action to
authorize any of the actions set forth above in this subsection; or
3
<PAGE>
(4) an assignment (as defined in the Advisers Act) of this
Agreement without the approval of the Company; or
(5) the commission by the Manager of fraud, dishonesty, gross
negligence or willful misconduct in connection with this Agreement.
SECTION 2. INVESTMENT MANAGEMENT DUTIES OF THE MANAGER.
(a) Under the ultimate supervision of the Company's Board of Directors
(the "Directors"), the Manager is authorized to invest the assets of the
Company according to the strategies described in the Prospectus and the
strategies and restrictions set forth from time to time by the Directors. In
furtherance of such general grant of authority, the Manager shall have full
discretion and authority, without obtaining the Company's prior approval, to
manage the investment and reinvestment of the assets of the Company in such
manner as the Manager considers appropriate, consistent with the Prospectus
and written instructions of the Directors.
(b) The Manager shall select brokers, dealers, banks and intermediaries
to effect transactions for the Company, and may agree to such commissions,
fees and other charges on behalf of the Company as the Manager shall deem
reasonable under the circumstances taking into account all such factors it
deems relevant. All brokerage commissions and related transaction costs for
transactions on behalf of the Company will be borne by the Company. The
Manager agrees to select brokers and dealers on the basis of obtaining the
best overall terms available, which the Manager shall evaluate based on a
variety of factors, including the ability to achieve prompt and reliable
executions at favorable prices; the operational efficiency with which
transactions are effected; the financial strength, integrity and stability of
the broker, the quality, comprehensiveness and frequency of available
research and related services considered to be of value; and the
competitiveness of commissions and similar charges compared to other brokers
satisfying the Manager's other selection criteria. Research and related
services furnished by brokers to the Manager may be used for the benefit of
clients other than the Company and may include: written information and
analyses concerning specific securities, companies or sectors; market,
financial and economic studies and forecasts, statistics, tax matters and
pricing services; discussions with legal and research personnel; and news,
technical and telecommunications services and equipment utilized in the
investment management process. Subject to seeking the best execution, the
Manager also may consider referrals of potential investors in the Company and
research provided about the Company as factors in the selection of brokers.
The Manager may cause the Company to pay a broker a commission in excess of
that which another broker might have charged for effecting the same
transaction in recognition of the value of the brokerage, research and
related services provided by the broker.
SECTION 3. GENERAL DUTIES OF THE MANAGER. Subject to the supervision
of the Directors, the Manager shall provide services to the Company and will
be
4
<PAGE>
responsible for the day-to-day operations of the Company and will perform (or
cause to be performed) such services and activities relating to the assets
and operations of the Company as may be appropriate, including, among other
things:
(a) serving as the Company's consultant with respect to
formulation of investment criteria and preparation of policy guidelines
by the Board of Directors;
(b) representing the Company in connection with the purchase of,
and commitment to purchase, assets, the sale of, and commitment to
sell, assets, and the maintenance and administration of its portfolio
of assets;
(c) furnishing reports and statistical and economic research to
the Company regarding the Company's activities and the services
performed for the Company by the Manager;
(d) monitoring and providing to the Board of Directors on an
ongoing basis price information and other data obtained from certain
nationally recognized dealers that maintain markets in assets
identified by the Board of Directors from time to time, and providing
data and advice to the Board of Directors in connection with the
identification of such dealers;
(e) providing executive and administrative personnel, office space
and office services required in rendering services to the Company;
(f) administering the day-to-day operations of the Company and
performing and supervising the performance of such other administrative
functions necessary in the management of the Company as may be agreed
upon by the Manager and the Board of Directors, including the
collection of revenues and the payment of the Company's debts and
obligations, the submission of any required public filings by the
Company and maintenance of appropriate computer systems to perform such
administrative functions;
(g) communicating on behalf of the Company with the holders of any
equity or debt securities of the Company as required to satisfy the
reporting and other requirements of any governmental bodies or agencies
or trading markets and to maintain effective relations with such
holders;
(h) designating originators, servicers, property managers,
developers, asset managers and other servicers with respect to the Real
Estate Investments made by the Company and arranging for the monitoring
and administering of such service providers;
5
<PAGE>
(i) counseling the Company in connection with policy decisions to
be made by the Board of Directors;
(j) engaging in hedging and financing activities on behalf of the
Company, consistent with the Company's status as a REIT;
(k) counseling the Company regarding the maintenance of its status
as a REIT and monitoring compliance with the various REIT qualification
tests and other rules set out in the Code and Treasury Regulations
thereunder; and
(l) monitoring and supervising CLARION'S performance under the
CLARION Agreement.
SECTION 4. ADDITIONAL ACTIVITIES OF MANAGER. Nothing herein shall
prevent the Manager, any of its Affiliates or any of their employees from
engaging in other businesses or from rendering services of any kind to any
other person or entity, except that the Manager agrees, during the term of
this Agreement, not to provide any of the services described in Section 3 to
any Mortgage REIT, the stock of which is traded on any public securities
exchange, other than the Company.
SECTION 5. INVESTMENTS FOR THE ACCOUNTS OF OTHERS AND ALLOCATION OF
OPPORTUNITIES. Subject to Section 10 hereof, the Company understands that
the Manager, from time to time, will purchase and sell Real Estate
Investments and other securities of the type in which the Company may invest
for Affiliated Funds. The Company understands that when the Manager
determines that it would be appropriate for the Company and one or more
Affiliated Funds to participate in an investment opportunity, the Manager
will seek to execute orders for the Company and for such Affiliated Funds on
a fair and equitable basis. In such situations, the Manager may place orders
for the Company and each Affiliated Fund simultaneously, and if all such
orders are not filled at the same price, the Manager may cause the Company
and each Affiliated Fund to pay or receive the average of the prices at which
the orders were filled for the Company and all Affiliated Funds. If all such
orders cannot be fully executed under prevailing market conditions, the
Manager may allocate the securities traded among the Company and the
Affiliated Funds in a manner which it considers fair and equitable, taking
into account the size of the order placed for the Company and each such
Affiliated Fund, as well as any other factors which it deems relevant.
SECTION 6. COMPENSATION AND EXPENSES.
(a) For services rendered under this Agreement, the Company agrees to
pay to the Manager the following:
6
<PAGE>
(1) a base management fee (the "Management Fee") payable monthly
at an annual rate of 1.0% of Average Stockholders' Equity;
(2) an incentive fee, payable quarterly (the "Incentive Fee"),
equal to the product of (A) 25% of the dollar amount by which (1)
Adjusted Net Income of the Company per share of common stock of the
Company (based on the weighted average number of shares outstanding)
exceeds (2) an amount equal to (a) the weighted average of the price
per share of the Common Stock at the initial offering and the prices
per share at any secondary offerings of common stock by the Company
multiplied by (b) the Ten-Year U.S. Treasury Rate plus 2.5% per annum
multiplied by (B) the weighted average number of shares of common stock
of the Company outstanding, calculated as a quarterly average over the
prior four quarters; and
(3) in consideration of the Manager's agreement in Section 4, the
Non-Competition Payment, if the Company terminates, or the Directors
fail to approve a continuation of, this Agreement or the Company
engages another person to manage a portion of its assets or manages its
assets internally with personnel other than those previously employed
by the Manager, and, at the time of such action, no Termination Event
has occurred and is continuing.
(b) The Company agrees to pay directly or reimburse the Manager for (i)
all expenses incurred in connection with transactions effected or positions
held on behalf of the Company pursuant to the Manager's exercise of its
duties hereunder (including, without limitation, due diligence costs,
custodial fees, clearing fees, brokerage commissions and related transaction
costs, interest and commitment fees on loans and debit balances and
withholding or transfer taxes); (ii) all fees actually expended by the
Manager under the CLARION Agreement related to the performance of its duties
hereunder; and (iii) out-of-pocket expenses paid or payable to third parties
on behalf of the Company.
(c) The Management Fee and Incentive Fee shall be paid in arrears. The
Management Fee and expenses will be calculated by the Manager as promptly as
practicable after month-end. The Manager's Incentive Fee will be calculated
by the Manager within 45 days after the end of each quarter, commencing with
the end of the fourth quarter of the Company's operating history. Such
calculations shall be promptly delivered to the Company. The Company agrees
to pay all such fees and expenses within 15 days of delivery of such
calculation. In the absence of manifest error, the Manager's calculations of
such amounts shall control.
(d) No Management or Incentive Fee shall accrue or be payable in
respect of any period before the Closing Date. Management Fees for any
partial period shall be pro-rated according to the proportion which such
partial period bears to the full period. The Incentive Fee
7
<PAGE>
for the first four quarters of the Company's operating history shall be paid
at the end of the fourth such quarter.
SECTION 7. LIMITS OF MANAGER RESPONSIBILITY.
(a) The Company agrees that the Manager shall not be liable to the
Company, its Affiliates or their directors, officers or stockholders for any
losses, damages, expenses or claims occasioned by any act or omission of the
Manager, its directors, officers, stockholders, employees or agents in
connection with the performance of its services hereunder, other than as a
result of its own willful misconduct, gross negligence or reckless disregard
of its duties hereunder, or as otherwise required by applicable law.
(b) The Company agrees to indemnify the Manager, its stockholders,
directors, officers, employees or agents against and hold them harmless from
any and all liabilities, losses, damages, expenses or claims arising out of
any claim asserted or threatened to be asserted by any third party in
connection with the Manager's serving or having served as such pursuant to
this Agreement; provided, however, that the Manager shall not be entitled to
indemnification with respect to any liabilities or losses or damages,
expenses or claims which were found by a court of competent jurisdiction (in
a final judgment from which no appeal may be taken) to have been caused by
its own gross negligence, willful misconduct or reckless disregard of its
duties hereunder. The Company shall advance to the Manager the reasonable
costs and expenses of investigating and/or defending any such claim, subject
to receiving a written undertaking from the Manager to repay any such amounts
advanced to it in the event and to the extent of such determination that the
Manager was not entitled to indemnification hereunder. In the event that the
Manager is or becomes a party to any action or proceeding in respect of which
indemnification may be sought hereunder, the Manager shall promptly notify
the Company thereof. Following such notice, the Company shall be entitled to
participate therein and, to the extent that it may wish, to assume the
defense thereof with counsel reasonably satisfactory to the Manager. After
notice from the Company to the Manager of an election so to assume the
defense thereof, the Company will not be liable to the Manager hereunder for
any legal or other expenses subsequently incurred by the Manager in
connection with the defense thereof, other than reasonable costs of
investigation, unless counsel for the Manager reasonably shall determine that
there is a conflict of interest which requires separate representation of the
parties. The Company shall not be liable hereunder for any settlement of any
action or claim effected without its written consent, which consent shall not
be unreasonably withheld, nor shall the Company enter into any settlement
which shall impose any obligation on the Manager without its written consent.
(c) At any time, the Manager may consult with counsel, accountants and
tax advisers for the Company with respect to any matter arising in connection
with the Manager's
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duties and obligations under this Agreement, and the Manager shall not be
liable for any action taken or omitted by it in good faith in accordance with
the advice of such persons.
SECTION 8. TERM; TERMINATION. This Agreement shall commence on the
Closing Date and shall continue for an initial term expiring on the third
anniversary of the Closing Date. Thereafter, successive extensions, each for
a period not to exceed one year, may be made by Agreement between the Manager
and the Company. This Agreement is terminable by the Company, or upon a vote
of the holders of a majority of the outstanding shares of Common Stock,
without cause at any time upon 60 days' written notice to the Manager. This
Agreement will also terminate automatically in the event of its assignment
(as defined in the Advisers Act), unless the assignment is consented to by
the non-assigning party.
SECTION 9. ACTION UPON TERMINATION. From and after the date of
termination of this Agreement, the Manager shall not be entitled to
compensation for further services hereunder, except pursuant to any separate
written management termination agreement that may be negotiated by the
parties, but shall be paid any compensation accruing through the date of
termination, including the Non-Competition Payment. Upon such termination,
the Manager shall forthwith:
(a) after deducting any accrued compensation and reimbursement for its
expenses to which it is then entitled, pay over to the Company or any
subsidiary of the Company any money collected and held for the account of the
Company or any subsidiary of the Company pursuant to this Agreement;
(b) deliver to the Directors a full accounting, including a statement
showing all payments collected by it and a statement of all money held by it,
covering the period following the date of the last accounting furnished to
the Directors with respect to the Company or any subsidiary of the Company;
(c) pay to the Company all sums set forth on the accounting referenced
in (b) above; and
(d) deliver to the Directors all property and documents of the Company
or any subsidiary of the Company then in the custody of the Manager.
SECTION 10. MANAGER'S EXERCISE OF RIGHT OF FIRST REFUSAL OPTION UNDER
THE CLARION AGREEMENT. Notwithstanding anything to the contrary contained
herein, the Manager agrees that in exercising its right of first refusal
under the CLARION Agreement to acquire from CLARION all commercial debt
investment opportunities identified by CLARION, it shall exercise such rights
solely for the benefit of the Company, and not for the benefit of any
Affiliated Fund, until such time as the Company owns assets having a
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market value in excess of the Purchasing Priority Amount. From and after
such time, the Manager agrees that it shall allocate all investments acquired
from CLARION among the Company and the Affiliated Funds on a fair and
equitable basis. In addition, the Manager will not permit the Affiliated
Funds to sell securities or other assets to, or purchase securities or other
assets from, the Company unless such sale or purchase is made at the fair
market value of such security or asset and is approved by the Independent
Directors.
SECTION 11. NOTICES. Unless expressly provided otherwise herein, any
notices, requests, demands and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been
duly given, made and received when delivered against receipt or upon actual
receipt of registered or certified mail, postage prepaid, return receipt
requested. The parties may deliver to each other notice by electronically
transmitted facsimile copies provided that such notice is followed within
twenty-four hours by any type of notice otherwise provided for in this
Section. Any notice shall be duly addressed to the parties as follows:
(a) If to the Company:
Clarion Commercial Holdings, Inc.
335 Madison Avenue
New York, New York 10017
Attention: Daniel Heflin
with a copy given in the manner prescribed above, to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10002
Attention: Real Estate Notices
30144/00005 JLO
(b) If to the Manager
Clarion Capital, LLC
335 Madison Avenue
New York, New York 10017
Attention: Daniel Heflin
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with a copy given in the manner prescribed above, to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10002
Attention: Real Estate Notices
30144/00005 JLO
Either party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
SECTION 12. MISCELLANEOUS.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns as provided
herein.
(b) This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any
nature whatsoever with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified or amended other than by an agreement in writing approved by the
Company (including a majority of the Independent Directors) and the Manager.
(c) This Agreement and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and
construed, interpreted and enforced in accordance with the internal laws of
the State of New York, without giving effect to principles of conflicts of
law.
(d) Neither the failure nor any delay on the part of a party to
exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of
the same or of any other right, remedy, power or privilege, nor shall any
waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it
is in writing and is signed by the party asserted to have granted such waiver.
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(e) The titles of Sections contained in this Agreement are for
convenience only and they neither form a part of this Agreement nor are they
to be used in the construction or interpretation hereof.
(f) This Agreement may be executed in counterparts, each of which when
so executed and delivered shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
(g) The provisions of this Agreement are independent of and separable
from each other, and no provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other or others
of them may be invalid or unenforceable in whole or in part.
(h) Words used herein regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine or neuter, as the context
requires.
(i) The Company and the Manager are not partners or joint venturers
with each other and nothing herein shall be construed to make them such
partners or joint venturers or impose any liability as such on either of them.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CLARION COMMERCIAL HOLDINGS, INC.
By:
-------------------------------------------
Daniel Heflin:
Chief Executive Officer and President
CLARION CAPITAL, LLC
By:
-------------------------------------------
Daniel Heflin
Chief Executive Officer and President
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Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT dated as of January 1, 1998, between Daniel S. Heflin,
residing at 145 West 67th Street, Apartment 41J, New York, New York
10023("Executive") and Clarion Capital, LLC, a New York limited liability
company having its principal office at 335 Madison Avenue, New York, New
York 10017 (the "Company").
RECITALS
WHEREAS:
A. Executive or an entity which Executive controls and in which
at least a ninety-nine percent (99%) equity interest is owned by
Executive and Clarion Partners, LLC ("Clarion; Clarion and Executive are
sometimes referred to herein individually as a "Member", and
collectively the "Members") have jointly formed the Company to provide
certain fixed income investment management services; and
B. The Company desires to employ Executive, and Executive desires
to be employed by the Company.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment, Duties and Acceptance.
<PAGE>
1.1. The Company hereby employs Executive as its President and Chief
Executive Officer with primary responsibility for the general management of
the Company's affairs and its day-to-day operations, in accordance with the
Company's Business Plan (as hereinafter defined), as adopted by the Board
of Managers of the Company (the "Board") pursuant to its Limited Liability
Company Agreement, dated as of January 1, 1998 (the "Operating Agreement").
Without limitation of the generality of the foregoing, Executive's
activities and responsibilities shall include:
(a) No later than sixty (60) days prior to the first day of each
fiscal year beginning with January 1, 1998, Executive shall prepare and
present to the Board for its approval a five (5)-year Business Plan for
the Company, which shall include, but shall not be limited to,
information with respect to the investment performance of the Company
and the performance of all separately reported client accounts for the
prior year and since inception, the investment product(s) which the
Company offers or plans to offer, and an operating budget for the
Company for the next year, including, without limitation, projected
staffing requirements. (Such business plan, once approved by the Board,
is referred to herein as the "Business Plan");
(b) directing the day-to-day operations of the Company in accordance
with the Business Plan;
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(c) acting as portfolio manager of client accounts, including the Funds
listed on Schedule I hereto and such other commercial mortgage backed
securities ("CMBS") hedge funds and such other accounts as the Chairman
shall approve, and in such capacity, developing and implementing client
approved investment strategies for such accounts, subject to approval by
the Chairman who shall consult with the Board with respect to any new
strategy or material change in strategy;
(d) supervising the preparation and delivery of investment reports to
clients, such reports to reflect investment results computed in
accordance with the standards published by the Association for
Investment Management and Research, and such other appropriate standards
as may be requested by the clients of the Company;
(e) developing and overseeing relationships with investment banks and
other entities and individuals involved in the CMBS and asset backed
securities ("ABS") industries;
(f) supervising and implementing trading strategies on behalf of client
accounts;
(g) establishing and implementing appropriate financial control systems
and procedures for the Company and coordinating the preparation of an
annual audit to be performed by Coopers & Lybrand LLP or another "Big-5"
accounting firm acceptable to the Board;
(h) arranging for appropriate hedging and warehousing facilities for
the Company;
(i) directing the marketing efforts of the Company, including the
preparation of marketing materials and participation in
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presentations to prospective clients, including foreign and domestic
institutions and individuals. In performing the foregoing activities,
Executive shall provide such reasonable assistance as is requested by
the Chairman of the Board in order to ensure that there is no conflict
with the marketing efforts of Clarion;
(j) ensuring that the Company is in compliance with all federal, state
and local laws, rules and regulations to which it is subject, including
supervising the preparation of all applicable tax returns by a
professional tax preparer, which shall be Coopers & Lybrand LLP or
another "Big-5" accounting firm acceptable to the Board;
(k) directing the activities of the Company's personnel, with complete
discretion over resource allocation, hiring and termination of officers
and employees, subject to consultation with the Chairman with respect to
the hiring of senior executives and compensation levels, subject to
compliance with the Business Plan (including staffing requirements) and
the annual budget of the Company as approved by the Board;
(l) providing quarterly written reports to the Board, setting forth new
investor capital commitments, investment positions of client accounts,
performance of client accounts and other matters pertinent to the
profitability of the Company; and
(m) coordinating the preparation of the Company's annual budgets and
quarterly financial statements, including comparisons to the budgets.
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<PAGE>
1.2. The Company may assign to Executive such other executive and
administrative duties for the Company or its subsidiaries or funds
established by the Company as may be determined by the Board, provided such
duties will be consistent with Executive's position and will not conflict
with Executive's primary responsibility for the operation of the Company's
business affairs.
1.3. Executive shall have discretion to make expenditures pursuant to
the Company's budget, provided that Executive shall be obligated to obtain
prior approval from the Chairman of the Board for any Company expenditures
whereby any category of expenses or the aggregate amount of expenditures
exceed the respective budgeted amounts by at least ten percent (10%).
1.4. Executive accepts such employment and shall devote such time,
energies and attention as are necessary to the fulfillment of his
responsibilities and duties hereunder, which may include overseas and
domestic travel as may reasonably be required of him.
1.5. Executive may participate, directly or indirectly, in any other
business activity or possess interests in another business venture which is
not competitive with the
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business of the Company or Clarion, provided, however, that (a) such
engagement will not cause a breach of Sections 1.4 or 5.4 hereof, (b) such
engagement will not interfere with the performance of Executive's duties
hereunder, and (c) except for passive investments of personal assets in
securities of another entity, which investment does not result in his
beneficially owning more than ten percent (10%) of the equity securities of
such entity or acquiring a controlling position in such entity. Prior to his
participation in such other business activity or business venture, Executive
shall first provide the Company the opportunity to participate in such
activity or business venture. Executive shall give written notice to Clarion
of his intention to engage in any such activity or venture. Such notice
shall describe the proposed activity or venture in reasonable detail,
including a reasonable estimate of the anticipated capital requirements,
income, expense and profits of such activity or venture. Clarion shall have
ten (10) business days from the receipt of such notice to request any
additional information regarding such proposed activity or venture.
Executive shall promptly respond to any such reasonable requests for
additional information concerning such activity or venture. The Company
shall advise Executive as to whether or not the Company desires
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to participate in such activity or venture as soon as practicable, but in any
event no later than thirty (30) days after the later of (i) the receipt by
Clarion of the written notice of Executive's intention to engage in such
other business activity or venture and (ii) the receipt by Clarion of all
follow-up information, reasonably available to Executive, concerning such
activity or venture and requested by Clarion. The decision as to whether or
not the Company shall participate in such activity or venture shall be made
by the Clarion Designees (as defined in the Operating Agreement) on the
Board. In the event the Company declines to participate therein, Executive
may proceed independently of the Company in such activity or venture provided
that he does not use any of the Company's resources or conduct any such
activity or venture at the Company's office. If Executive determines to
participate in such activity or venture without the participation of the
Company, Clarion shall have the right to initiate the Buy-Sell Option (as set
forth in the Operating Agreement), with the option to either buy Executive's
or his affiliates Membership Interest or sell its Membership Interest to
Executive or his affiliate.
1.6. Executive shall cooperate with the Company, including taking such
medical examinations as the Company
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<PAGE>
reasonably shall deem necessary, if the Company shall desire to obtain
medical, disability or life insurance with respect to Executive. The
premiums for any such policy shall be an expense of the Company.
2. Compensation and Expenses.
2.1. For all Executive's services to be rendered hereunder, the Company
agrees to pay, or cause to be paid, to Executive, compensation in the amount
of US$175,000 per annum ("Base Salary"). All such compensation shall be paid
biweekly or at such other regular intervals, not less frequently than
monthly, as the Company may establish from time to time for executive
employees of the Company.
2.2. Executive shall be entitled to such vacation, medical and other
benefits as are customarily afforded to all senior executives of Clarion.
2.3. For the purposes of this Article 2, Executive's salary and
benefits for any period less than a full fiscal year shall be prorated for
the portion thereof which shall be applicable.
2.4. The Company shall pay or reimburse Executive for all
transportation, hotel and other expenses reasonably incurred by Executive in
the conduct of business for the Company,
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<PAGE>
including, but not limited to, expenses incurred on business trips outside
the metropolitan New York area.
3. Term and Termination.
3.1. The term of this Agreement shall commence on January 1, 1998 and
shall continue until December 31, 2002 ("Expiration Date"), unless sooner
terminated as herein provided, PROVIDED, HOWEVER, that unless either party
gives written notice to the other party of his or its desire not to renew the
term of this Agreement at least one hundred eighty (180) days prior to the
initial Expiration Date or any extension thereof, the term shall be
automatically extended for consecutive periods of twelve (12) months.
3.2. If Executive shall die during the term of this Agreement, this
Agreement shall thereupon terminate, except that the Company shall pay to the
legal representative of Executive's estate all monies due hereunder and all
vested benefits which Executive shall have accrued up to the date of his
death, including Base Salary (prorated through the last day of the month
during which Executive shall have died).
3.3. The Company, by notice to Executive, may terminate this Agreement
if Executive, as a result of illness or Permanent Disability (as hereinafter
defined), shall fail to
9
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render, for six (6) successive months or for shorter periods aggregating six
(6) months or more in any one year, services of the character contemplated by
this Agreement, and if within thirty (30) days after the date on which such
notice is given to Executive, he shall not have returned to full-time
performance of his duties hereunder. (As used herein, "Permanent Disability"
shall mean the inability, by reason of physical or mental reasons, of
Executive to substantially fulfill the requirements of his employment on a
full-time basis for the period(s) set forth immediately above. The
determination of whether Executive is permanently disabled shall be made by a
New York State licensed medical doctor selected by, but not affiliated with
any Member or any members of the Board. Executive agrees to cooperate with
any such doctor and the Board in connection with making such determination.
Upon such termination, the Company shall pay to Executive all monies due
hereunder and Executive shall be entitled to all benefits in effect at the
commencement of such illness or Permanent Disability up to the Date of
Termination (as set forth in Section 4.2 herein) of this Agreement, including
Base Salary.
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3.4. The Company, by notice to Executive, may terminate this Agreement
and Executive's employment hereunder for proper cause. As used herein,
"proper cause" shall mean that Executive has:
(a) Committed a material breach of any material provision of this
Agreement or the Operating Agreement;
(b) Acted fraudulently or dishonestly in his relations with the
Company or any of its Affiliates (as hereinafter defined) or any
client of the Company or its affiliates, or knowingly or recklessly
breached or caused the breach by the Company of any material
agreement between the Company and any of its investment clients; or
(c) Been convicted by a court or arbitration panel of competent
jurisdiction, found liable for or confessed to any act of larceny,
embezzlement, conversion or any act involving the misappropriation of
funds in the course of his employment.
For purposes of this Section 3.4, no act, or failure to act, on Executive's
part shall be deemed "willful" unless done, or omitted to be done by
Executive intentionally and otherwise than in good faith and in a manner that
Executive reasonably believed was in or not opposed to the best interests of
the Company.
Upon such termination for proper cause, the Company shall pay to
Executive all monies due hereunder and other vested benefits which Executive
shall have accrued up to the Date of
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Termination (as set forth in Section 4.2 herein) of this Agreement, including
Base Salary, after which the Company shall have no further obligations to
Executive under this Agreement.
3.5. Executive, by notice to the Company, may terminate this Agreement,
for any reason. Upon such notice, the Company shall pay Executive all monies
due hereunder and other vested benefits which Executive shall have accrued up
to, and only up to, the Date of Termination (as set forth in Section 4.2
herein), including Base Salary, after which the Company shall have no further
obligations to Executive under this Agreement.
3.6. In the event Executive or his affiliate shall sell his or its
interest in the Company pursuant to the Buy-Sell Option (as set forth in the
Operating Agreement), this Agreement shall, unless sooner terminated in
accordance with the terms hereof, automatically terminate upon the closing of
such sale. Upon such termination, the Company shall pay to Executive all
monies due hereunder and other vested benefits, including Base Salary, to
which Executive shall be entitled up to the closing of the sale of
Executive's or his affiliate's interest in the Company, and thereafter, the
Company shall have no further obligations to Executive under this Agreement.
12
<PAGE>
4. Notice of Termination and Date of Termination, Etc.
4.1. Any purported termination of Executive's employment by the Company
or by Executive as set forth in Sections 3.3, 3.4, or 3.5 herein shall be
communicated by a written Notice of Termination (as hereinafter defined) to
the other party hereto in accordance with Section 7.1 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision
so indicated.
4.2. "Date of Termination" shall be the effective date on which
Executive shall no longer be employed by the Company, which shall be
determined as follows:
(a) if Executive's employment is terminated for illness or
Permanent Disability as set forth in Section 3.3 herein, thirty (30)
days after Notice of Termination is given (provided that Executive shall
not have returned to the full-time performance of his duties during such
thirty (30)-day period);
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<PAGE>
(b) if Executive's employment is terminated for proper cause as
set forth in Section 3.4 herein, the date specified in the Notice of
Termination; and
(c) if Executive elects to terminate his employment hereunder as
set forth in Section 3.5 herein, the date specified in the Notice of
Termination, which shall be not less than thirty (30) days from the date
such Notice of Termination is given, provided, however, upon receipt of
such Notice of Termination, the Company shall have the option to
terminate Executive's employment hereunder, effective immediately, at
any time prior to the expiration of such thirty (30)-day period.
5. Protection of Confidential Information; Non-competition.
5.1. Executive acknowledges that:
(a) The nature of the Company's business, including, without
limitation, its business strategies and its customer base, is material
to its survival and profitability.
(b) As a result of his employment by the Company, Executive is
likely to obtain secret and confidential
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information concerning the business of the Company and its Affiliates
(as hereinafter defined), including, without limitation, key business,
investment and marketing strategies of the Company or its Affiliates,
the identity of customers and their needs and requirements, the nature
and extent of contracts with customers, and information relating to
various investment products and tools. (As used herein, "Affiliate"
shall mean an entity that is, directly or indirectly, controlled by,
controlling, or under common control with the Company.)
(c) The Company and its Affiliates may suffer substantial damage
which will be difficult to compute if, during the period of his
employment with the Company or thereafter, Executive should (i) enter a
competitive business or (ii) divulge secret and confidential information
relating to the business of the Company heretofore or hereafter acquired
by him in the course of his employment with the Company or (iii)
maliciously divulge any negative information with respect to the Company
or its Affiliates, with the intention of, or which could reasonably be
anticipated
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to have the effect of, damaging the Company's or its Affiliates'
reputation and good name ("Slanderous Activity").
(d) The provisions of this Agreement are reasonable and necessary for
the protection of the business of the Company and its Affiliates.
5.2. Executive agrees that he will not at any time, either during the
term of this Agreement or for two (2) years thereafter, (a) divulge to any
person, firm or corporation any confidential information obtained or learned
by him during the course of his employment with the Company, or prior thereto
in the course of forming the Company with Clarion, with regard to the
operational, financial, business or other affairs of the Company or its
Affiliates, their officers and directors, including, without limitation,
trade "know how," secrets, customer lists, business, marketing and investment
strategies, operational methods or technical processes, except (i) in the
course of performing his duties for the Company hereunder, (ii) with the
Company's express written consent, (iii) to the extent that any such
information is in the public domain other than as a result of Executive's
breach of any of his obligations hereunder or any breach by Executive of his
obligations under the Operating
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Agreement, or (iv) where required to be disclosed by court order, subpoena or
other government process, or (b) participate in any Slanderous Activity. In
the event that Executive shall be required to make disclosure pursuant to the
provisions of clause (iv) of the preceding sentence, Executive promptly, but
in no event more than forty-eight (48) hours after learning of such subpoena,
court order, or other government process, shall notify the Company, by
personal delivery or by cablegram, confirmed by mail, and, at the Company's
expense, Executive shall: (x) take all steps reasonably requested by the
Company at the Company's expense, to defend against the enforcement of such
subpoena, court order or other government process and (y) permit the Company
to intervene and participate with counsel of its choice in any proceeding
relating to the enforcement thereof.
5.3. Upon termination of his employment with the Company, or at any
time the Company may so request, Executive will promptly deliver to the
Company all memoranda, notes, records, reports, and other documents (and all
copies thereof) relating to the business of the Company and its Affiliates
and all property associated therewith, which he may then possess or have
under his control, except for such documents as shall constitute publicly
available information.
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5.4. (a) During the term of his employment with the Company and
subject to the provisions of Section 5.4(b) hereof, for a period of two (2)
years thereafter, Executive, without the prior written permission of the
Company, shall not, directly or indirectly, (i) solicit the business of or
provide services to any person or entity which has been a client of the
Company or any subsidiary of or fund managed by the Company within the six
(6)-month period prior to his termination of employment, or with whom the
Company or any subsidiary of or fund managed by the Company conducted
negotiations within the six (6)-month period prior to his termination of
employment, with respect to CMBS or other investment products or businesses
which are at the time provided or being marketed by the Company or any
subsidiary of or fund managed by the Company; (ii) use any of his personal
assets to engage in any competitive business except as set forth in the last
sentence of this Section 5.4(a); (iii) employ or retain, or have or cause any
other person or entity to employ or retain, any person whose annual
compensation exceeds US$50,000, other than his personal secretary or
assistant, who was employed or retained by the Company or any of its
Affiliates while Executive was employed by the Company; or (iv) solicit,
interfere with, or endeavor to entice away from the Company or its Affiliates
any of
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their customers. Nothing in this Agreement, however, shall preclude
Executive from investing his personal assets in CMBS, ABS or the securities
of any corporation or other business entity which is engaged in a Competitive
Business if such securities are traded on a national stock exchange or in the
over-the-counter market and if such investment does not result in his
beneficially owning, at any time, more than one percent (1%) of the
publicly-traded equity securities of such competitor.
(b) The Company agrees with Executive that the provisions of Section
5.4(a) hereof will not apply to Executive following a termination of
Executive's employment pursuant to Section 3.6 hereof unless, in connection
with the sale of Executive's or his affiliate's interest in the Company
giving rise to such termination, Executive or his affiliate is entitled to
receive from such sale, or otherwise from Clarion as set forth in the last
sentence of this Section 5.4(b), at least the Minimum Buyout Amount (as
hereinafter defined). The "Minimum Buyout Amount" means an amount equal to
US$600,000 for each full year that the Executive has been employed by the
Company, commencing with the year beginning January 1, 1997, but not more
than US$4,000,000. In the event the sale of Executive's or his affiliate's
interest in the Company does not yield such Minimum
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Buyout Amount, Clarion may elect to pay to Executive or his affiliate an
amount equal to such shortfall, and upon receipt of such payment, Executive
shall abide by the non-compete provisions set forth herein.
(c) If any court of competent jurisdiction holds the scope of any
provision contained in this Section 5.4 to be too broad to permit
enforcement thereof, Executive and the Company shall consent to the
modification of any such provision to permit enforcement thereof to the
maximum extent permitted by law.
5.5. If Executive commits a breach, of any of the provisions of
Sections 5.2, 5.3 or 5.4 hereof, the Company shall have the right and
remedy:
(a) to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and
agreed by Executive that the services being rendered hereunder to the
Company are of a special, unique and extraordinary character and that
any such breach may cause irreparable injury to the Company and that
money damages may not provide an adequate remedy to the Company; and
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(b) to require Executive to account for and pay over to the
Company all compensation, profits, monies, accruals, increments or other
benefits (collectively "Benefits") derived or received by Executive as
the result of any transactions constituting a breach of any of the
provisions of Sections 5.2 or 5.4 hereof, and Executive hereby agrees to
account for and pay over such Benefits to the Company.
Each of the rights and remedies enumerated in this Section 5.5 shall be
independent of the other, and shall be severally enforceable, and such rights
and remedies shall be in addition to, and not in lieu of, any other rights
and remedies available to the Company under law or equity.
5.6. If it shall be judicially determined that Executive shall have
violated any covenant contained in Section 5.4, the duration of such covenant
so violated shall be automatically extended for a period of two (2) years
from the date on which Executive permanently ceases such violation.
5.7. If any provision of Sections 5.2 or 5.4 is held to be
unenforceable because of the scope, duration or area of its applicability,
the tribunal making such determination shall have the power to modify such
scope, duration, or area, or all of
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them, and such provision or provisions shall then be applicable in such
modified form.
6. Arbitration.
Any dispute, controversy or claim arising out of or relating to this
Agreement, the making, interpretation or the breach thereof, other than a
claim solely for injunctive relief for any alleged breach of the provisions
of Sections 5.2 or 5.4, as to which the parties shall have the right to apply
for specific performance to any federal or state court sitting in the State
of New York having equity jurisdiction, shall be submitted to arbitration in
New York City before a panel of three (3) arbitrators in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, which
panel shall be composed of one (1) independent, non-affiliated arbitrator
selected by each party to the arbitration and a third independent,
non-affiliated arbitrator being jointly selected by the other two (2)
arbitrators. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof and any party to the
arbitration may, if he or it so elects, institute proceedings in any court
having jurisdiction for the specific performance of any such award. The
powers of the arbitrators shall include, but not be limited to, the awarding
of injunctive
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relief. The arbitrators shall include in any award in the prevailing party's
favor the amount of his or its reasonable attorneys' fees and expenses and
all other reasonable costs and expenses of the arbitration. In the event that
the arbitrators do not rule in favor of the prevailing party in respect of
all the claims alleged by such party, the arbitrators shall include in any
award in favor of the prevailing party the amount of his or its reasonable
attorneys' fees and other expenses and such other reasonable costs and
expenses of the arbitration as they deem just and equitable under the
circumstances. Except as provided above, each party shall bear his or its
own attorneys' fees and expenses and the parties shall bear equally all other
costs and expenses of the arbitration.
7. Miscellaneous Provisions.
7.1. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when (a) delivered by hand, (b)
sent by telecopier provided that a copy is mailed by registered or certified
mail, return receipt requested, postage prepaid, (c) sent by Express Mail,
Federal Express or other overnight courier delivery service (receipt
requested), (d) sent by telegram or (e) the mailing thereof by
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first-class registered or certified mail, return receipt requested, postage
prepaid, addressed to the party to receive the same at his or its address
above set forth, or such other address as the party to receive the same shall
have specified by written notice given in the manner provided for in this
Section 7.1. Notices to the Company shall be sent to the attention of
Stephen J. Furnary or such other person as may be designated in writing by
Clarion. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
7.2. This Agreement sets forth the entire agreement of the parties and
is intended to supersede all prior negotiations, understandings and
agreements. No provisions of this Agreement may be waived or changed except
by a writing by the party against whom such waiver of change is sought to be
enforced. The failure of any party to require performance of any provision
hereof shall in no manner affect the right at a later time to enforce such
provision.
7.3. All questions with respect to the construction of this Agreement,
and the rights and obligations of the parties hereunder, shall be determined
in accordance with the laws of the State of New York, without regard to
conflicts of law principles.
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7.4. Article headings are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope or intent of
any provision of this Agreement.
7.5. This Agreement shall inure to the benefit of and be enforceable
and binding upon the successors and assigns of the Company. This Agreement
shall not be assignable by Executive and shall inure to the benefit of and be
binding upon Executive and his legal representatives.
7.6. If any provision in this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any way render invalid or unenforceable any other
provision of this Agreement.
7.7. This Agreement may be executed in any number of counterparts,
which, taken together, shall constitute one, and only one, instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DANIEL S. HEFLIN
----------------------------------
CLARION CAPITAL, LLC
----------------------------------
By:
Title:
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SCHEDULE I
FUNDS/SEPARATE ACCOUNTS MANAGED BY CLARION CAPITAL, LLC
13A Commercial Mortgage Securities, Inc.
Clarion Commercial Holdings, Inc.
Creston Fund (BVI), L.P.
Gramercy Fund (QP), L.L.C.
Gramon Fund (BVI), L.P.
Hamilton Investors Limited
Hammond Fund, LLC
Hillcrest Fund (QP), LLC
Monroe Investors Limited
Monroe Investment Corp.
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Exhibit 10.4
CLARION COMMERCIAL HOLDINGS, INC.
1998 STOCK INCENTIVE PLAN
<PAGE>
CLARION COMMERCIAL HOLDINGS, INC.
1998 STOCK INCENTIVE PLAN
1. Purposes
The purposes of the Plan are to (a) promote the long-term success of the
Company and to increase stockholder value by providing Eligible Individuals,
with incentives to contribute to the long-term growth and profitability of the
Company; (b) reward Eligible Individuals for contributing to the success of the
Company; and (c) assist the Company in attracting, retaining and motivating
highly qualified individuals. The Plan permits the Committee to make Awards
which constitute "qualified performance-based compensation" for purposes of
Section 162(m) of the Code.
2. Definitions and Rules of Construction
(a) Definitions. For purposes of the Plan, the following capitalized
terms shall have the meanings set forth below:
"Administrator" means the individual or individuals to whom the
Committee delegates authority under the Plan in accordance with Section
3(d).
"Award" means an award made pursuant to the terms of the Plan to an
Eligible Individual in the form of Stock Options, Stock Appreciation
Rights, Deferred Stock Awards, Stock Awards, Restricted Stock, Performance
Units, Dividend Equivalents or Other Awards.
"Award Document" means a written document approved in accordance with
Section 3 which sets forth the terms and conditions of the Award to the
Participant. An Award Document may be in the form of (i) an agreement
between the Company which is executed by an officer on behalf of the
Company and is signed by a Participant or (ii) a certificate issued by the
Company which is executed by an officer on behalf of the Company but does
not require the signature of a Participant.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations promulgated thereunder.
"Committee" means the Compensation Committee of the Board, any
successor committee thereto or any other committee appointed from time to
time by the Board to administer the Plan.
"Common Stock" means the common stock, par value $.001 per share, of
the Company.
<PAGE>
"Company" means Clarion Commercial Holdings, Inc., a Maryland
corporation.
"Consultant" means any person, including an advisor, engaged by the
Company to render services and who is compensated for such services;
provided, however, that the term Consultant shall not include a
non-employee director of the Board.
"Deferred Stock Award" means a right to receive a specified number of
shares of Common Stock upon the expiration of a deferral period pursuant to
Section 13 of the Plan.
"Director" means a member of the Board (or a member of the Board of
Directors of the Manager who performs services for the Company) who is not
an employee of the Company or a Subsidiary.
"Dividend Equivalents"means a right to receive cash, Common Stock or
an Award equal in value to the dividends paid in respect of a specified
number of shares of Common Stock pursuant to Section 14 of the Plan.
"Eligible Individuals" means the individuals described in Section 6
who are eligible for Awards under the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the applicable rulings and regulations thereunder.
"Fair Market Value" means, with respect to a share of Common Stock,
the fair market value thereof as of the relevant date of determination, as
determined in accordance with a valuation methodology approved by the
Committee. In the absence of any alternative valuation methodology
approved by the Committee, the Fair Market Value of a share of Common Stock
shall equal the average of the highest and the lowest quoted selling price
of a share of Common Stock as reported on the New York Stock Exchange, or
such other national securities exchange as may be designated by the
Committee.
"Incentive Stock Option" means a Stock Option which is an "incentive
stock option" within the meaning of Section 422 of the Code and designated
by the Committee as an Incentive Stock Option in an Award Document.
"Manager" means Clarion Partners, LLC and Clarion Capital, LLC and
their affiliates.
"Nonqualified Stock Option" means a Stock Option which is not an
Incentive Stock Option.
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"Other Award" means any other form of award authorized under Section
15 of the Plan.
"Participant" means an Eligible Individual to whom an Award has been
granted under the Plan.
"Performance Unit" means a performance unit granted to an Eligible
Individual pursuant to Section 12 hereof which is subject to the
satisfaction of certain performance criteria as the Committee shall
determine.
"Plan" means this Clarion Commercial Holdings, Inc.1998 Stock
Incentive Plan, as described herein.
"Restricted Stock" means Common Stock granted to an Eligible
Individual pursuant to Section 11 hereof which is subject to transfer
restrictions and risk of forfeiture as the Committee shall determine at the
time of grant.
"Restoration Option" means a Stock Option that is awarded upon the
exercise of a Stock Option earlier awarded under the Plan (an "Underlying
Option") for which the exercise price is paid in whole or in part by
tendering shares of Common Stock previously owned by the Participant, where
such Restoration Option (i) covers a number of shares of Common Stock no
greater than the number of previously owned shares tendered in payment of
the exercise price of the Underlying Option plus the number of shares
withheld to pay taxes arising upon such exercise, (ii) the expiration date
of the Restoration Option is no later than the expiration date of the
Underlying Option and (iii) the exercise price per share of the Restoration
Option is no less than the Fair Market Value per share of Common Stock on
the date of exercise of the Underlying Option.
"Stock Appreciation Right" means a right to receive all or some
portion of the appreciation on shares of Common Stock granted to an
Eligible Individual pursuant to Section 9 hereof.
"Stock Award" means a share of Common Stock granted to an Eligible
Individual for no consideration other than the provision of services or
offer for sale to an Eligible Employee at a purchase price determined by
the Committee, in either case pursuant to Section 10 hereof.
"Stock Option" means an Award to purchase shares of Common Stock
granted to an Eligible Individual pursuant to Section 8 hereof, which Award
may be either an Incentive Stock Option or a Nonqualified Stock Option.
"Subsidiary" means (i) a corporation or other entity with respect to
which the Company, directly or indirectly, has the power, whether through
the ownership of voting
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<PAGE>
securities, by contract or otherwise, to elect at least a majority of the
members of such corporation's board of directors or analogous governing
body, or (ii) any other corporation or other entity in which the Company,
directly or indirectly, has an equity or similar interest and which the
Committee designates as a Subsidiary for purposes of the Plan. For
purposes of determining eligibility for the grant of Incentive Stock
Options, the term Subsidiary shall be defined in the manner required by
Section 424(f) of the Code.
"Substitute Award" means an Award granted upon assumption of, or in
substitution for, outstanding awards previously granted by a company or
other entity in connection with a corporate transaction, such as a merger,
combination, consolidation or acquisition of property or stock.
(b) Rules of Construction. The masculine pronoun shall be deemed to
include the feminine pronoun and the singular form of a word shall be deemed
to include the plural form, unless the context requires otherwise. Unless
the text indicates otherwise, references to sections are to sections of the
Plan.
3. Administration of the Plan
(a) Power and Authority of the Committee. The Plan shall be
administered by the Committee, which shall have full power and authority,
subject to the express provisions hereof:
(i) to select Participants from the Eligible Individuals;
(ii) to make Awards in accordance with the Plan;
(iii) to determine the number of shares of Common Stock subject to
each Award or the cash amount payable in connection with an Award;
(iv) to determine the terms and conditions of each Award,
including, without limitation, those related to vesting, forfeiture,
payment and exercisability, and the effect, if any, of a Participant's
termination of employment with the Company or such Participant's
termination of service for the Company, and including the authority to
amend the terms and conditions of an Award after the granting thereof to a
Participant in a manner that is not, without the consent of the
Participant, prejudicial to the rights of such Participant in such Award;
(v) to specify and approve the provisions of the Award Documents
delivered to Participants in connection with their Awards;
(vi) to construe and interpret any Award Document delivered under
the Plan;
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<PAGE>
(vii) to prescribe, amend and rescind rules and procedures
relating to the Plan;
(viii) subject to the provisions of the Plan and subject to such
additional limitations and restrictions as the Committee may impose, to
delegate to one or more officers of the Company some or all of its
authority under the Plan;
(ix) to employ such legal counsel, independent auditors and
consultants as it deems desirable for the administration of the Plan;
(x) to make all factual determinations in connection with the
administration or interpretation of the Plan or any Award Document; and
(xi) to make all other determinations and to formulate such
procedures as may be necessary or advisable for the administration of the
Plan.
Notwithstanding the foregoing, prior to the consummation of the
Company's initial public offering of the Common Stock, the Plan shall be
administered by the Board. During such time as the Plan is administered by
the Board, all references in the Plan to the Committee shall be deemed to
refer to the Board.
(b) Plan Construction and Interpretation. The Committee shall have
full power and authority, subject to the express provisions hereof, to
construe and interpret the Plan.
(c) Determinations of Committee Final and Binding. All determinations
by the Committee in carrying out and administering the Plan and in construing
and interpreting the Plan shall be final, binding and conclusive for all
purposes and upon all persons interested herein.
(d) Delegation of Authority. The Committee may, but need not, from
time to time delegate some or all of its authority under the Plan to an
Administrator consisting of one or more members of the Committee or of one or
more officers of the Company; provided, however, that the Committee may not
delegate its authority (i) to make Awards to individuals who are subject to
Section 16 of the Exchange Act, (ii) to make Awards under Sections 8, 9 and
12 which are intended to constitute "qualified performance-based
compensation" under Section 162(m) of the Code or (iii) to amend or terminate
the Plan in accordance with Section 19. Any delegation hereunder shall be
subject to the restrictions and limits that the Committee specifies at the
time of such delegation or thereafter. Nothing in the Plan shall be
construed as obligating the Committee to delegate authority to an
Administrator, and the Committee may at any time rescind the authority
delegated to an Administrator appointed hereunder or appoint a new
Administrator. At all times, the Administrator appointed under this Section
3(d) shall serve in such capacity at the pleasure of the Committee. Any
action undertaken by the Administrator in accordance with the Committee's
delegation of authority shall have the same force and effect as if undertaken
directly by the Committee, and any reference in the Plan to the Committee
shall, to the extent
5
<PAGE>
consistent with the terms and limitations of such delegation, be deemed to
include a reference to the Administrator.
(e) Termination of Employment and Change in Control. The Committee
shall also have full authority to determine and specify in the applicable
Award Document the effect, if any, that a Participant's termination of
employment for any reason will have on the vesting, exercisability, payment
or lapse of restrictions applicable to an Award. The date of a Participant's
termination of employment for any reason shall be determined in the sole
discretion of the Committee. Similarly, the Committee shall have full
authority to determine the effect, if any, of a change in control of the
Company on the vesting, exercisability, payment or lapse of restrictions
applicable to an Award, which effect may be specified in the applicable Award
Document or determined at a subsequent time.
(f) Liability of Committee. No member of the Committee shall be liable
for any action nor determination made in good faith, and the members of the
Committee shall be entitled to indemnification and reimbursement in the
manner provided in the Company's certificate of incorporation as it may be
amended from time to time. In the performance of its responsibilities with
respect to the Plan, the Committee shall be entitled to rely in good faith
upon information and advice furnished by the Company's officers, the
Company's accountants, the Company's counsel and any other party the
Committee deems necessary, and no member of the Committee shall be liable for
any action taken or not taken in reliance upon any such advice.
(g) Action by the Board. Anything in the Plan to the contrary
notwithstanding, any authority or responsibility which, under the terms of
the Plan, may be exercised by the Committee may alternatively be exercised by
the Board.
4. Effective Date and Term
The Plan shall become effective upon its adoption by the Board subject
to its approval by the stockholders of the Company. Prior to such
stockholder approval, the Committee may grant Awards conditioned on
stockholder approval. If such stockholder approval is not obtained at or
before the first annual meeting of stockholders to occur after the adoption
of the Plan by the Board (including any adjournment or adjournments thereof),
the Plan and any Awards made thereunder shall terminate ab initio and be of
no further force and effect. In no event shall any Awards be made under the
Plan after the fifth anniversary of the date of stockholder approval.
5. Shares of Common Stock Subject to the Plan
(a) General. Subject to adjustment as provided in Section 18(b)
hereof, the number of shares of Common Stock that may be subject to Awards
under the Plan (the "Plan Limit") shall not exceed, in the aggregate,
1,300,000 shares of Common Stock (1,495,000 shares if the underwriter's
over-allotment option is exercised in full in connection with the initial
public
6
<PAGE>
offering of the Common Stock). Shares issued under this Plan may be either
authorized but unissued shares, treasury shares or any combination thereof.
(b) Rules Applicable to Determining Shares Available for Issuance. For
purposes of determining the number of shares of Common Stock that remain
available for issuance, the following shares shall be added back to the Plan
Limit and again be available for Awards:
(i) The number of shares tendered to pay the exercise price of a
Stock Option or other Award; and
(ii) The number of shares withheld from any Award to satisfy a
Participant's tax withholding obligations or, if applicable, to pay the
exercise price of a Stock Option or other Award.
In addition, any shares issued underlying Substitute Awards shall not be
counted against the Plan Limit and shall not be subject to Section 5(d) below.
(c) Reserve. In administering the Plan, the Committee may establish
reserves against the Plan Limit for amounts payable in settlement of Awards.
The Committee may also promulgate additional rules and procedures for
calculating the portion of the Plan Limit available for Awards.
(d) Special Limits. Anything to the contrary in Section 5(a) above
notwithstanding, but subject to Section 18(b) below, the following special
limits shall apply to shares of Common Stock available for Awards under the
Plan:
(i) The maximum number of shares of Common Stock that may be subject
to Stock Options or free-standing Stock Appreciation Rights granted to any
Eligible Individual in any fiscal year of the Company shall equal 300,000
shares plus any shares which were available under this Section 5(d)(i) for
Awards of Stock Options or free-standing Stock Appreciation Rights to such
Eligible Individual in any prior fiscal year but which were not covered by
such Awards.
(ii) In no event will the number of shares of Common Stock issued in
connection with this Plan for Incentive Stock Options exceed 500,000
shares.
6. Eligible Individuals
Awards may be granted in the sole discretion of the Committee to
Eligible Individuals who are (i) Directors (including a member of the Board
of Directors of the Manager who performs services for the Company), (ii)
Consultants and (ii) key employees of the Company, a Subsidiary or the
Manager. The parties to whom Awards are granted under this
7
<PAGE>
Plan, and the number of shares subject to each such Award, shall be determined
by the Committee in its sole discretion, subject, however, to the terms and
conditions of this Plan. An individual's status as an Administrator will not,
by itself, affect his or her eligibility to participate in the Plan.
7. Awards in General
(a) Types of Award and Award Document. Awards under the Plan may
consist of Stock Options, Stock Appreciation Rights, Stock Awards, Deferred
Stock Awards, Restricted Stock, Performance Units, Dividend Equivalents or
Other Awards. Any Award described in Sections 8 through 15 of the Plan may
be granted singly or in combination or in tandem with any other Award, as the
Committee may determine. Awards may be made in combination with, in
replacement of, or as alternatives to grants of rights under any other
employee compensation plan of the Company, including the plan of any acquired
entity, or may be granted in satisfaction of the Company's obligations under
any such plan.
(b) Terms Set Forth in Award Document. The terms and provisions of an
Award shall be set forth in a written Award Document approved by the
Committee and delivered or made available to the Participant as soon as
administratively practicable following the date of such Award. The vesting,
exercisability, payment and other restrictions applicable to an Award (which
may include, without limitation, restrictions on transferability or provision
for mandatory resale to the Company) shall be determined by the Committee and
set forth in the applicable Award Document. Notwithstanding the foregoing,
the Committee may accelerate (i) the vesting or payment of any Award, (ii)
the lapse of restrictions on any Award or (iii) the date on which any Stock
Option, Stock Appreciation Right or Other Award first becomes exercisable.
(c) Dividends and Dividend Equivalents. The Committee may provide
Participants with the right to receive dividends or payments equivalent to
dividends or interest with respect to outstanding Awards, which payments can
either be paid currently or deemed to have been reinvested in shares of
Common Stock, and can be made in Common Stock, cash or a combination thereof,
as the Committee shall determine.
8. Stock Options
(a) Terms of Stock Options Generally. The Committee is authorized to
grant Stock Options to Eligible Individuals. A Stock Option shall entitle
the Participant to whom the Stock Option was granted to purchase a specified
number of shares of Common Stock during a specified period at a price that is
determined in accordance with Section 8(b) below. Stock Options may be
either Nonqualified Stock Options or Incentive Stock Options as determined by
the Committee and as set forth in the applicable Award Document. The
Committee will fix the vesting and exercisability conditions applicable to a
Stock Option.
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(b) Exercise Price. The exercise price per share of Common Stock
purchasable under a Stock Option shall be fixed by the Committee at the time
of grant or, alternatively, shall be determined by a method specified by the
Committee at the time of grant; provided, however, that the exercise price
per share shall be no less than 100% of the Fair Market Value per share on
the date of grant (or if the exercise price is not fixed on the date of
grant, then on such date as the exercise price is fixed); and provided
further that, except as provided in Section 18(b) below, the exercise price
per share of Common Stock applicable to a Stock Option may not be adjusted or
amended, including by means of amendment, cancellation or the replacement of
such Stock Option with a subsequently awarded Stock Option. Notwithstanding
the foregoing, the exercise price per share of a Stock Option that is a
Substitute Award may be less than the Fair Market Value per share on the date
of award, as determined by the Committee.
(c) Option Term. The term of each Stock Option shall be fixed by the
Committee and shall not exceed ten years from the date of grant.
(d) Incentive Stock Options. Each Stock Option granted pursuant to the
Plan shall be designated at the time of grant as either an Incentive Stock
Option or as a Nonqualified Stock Option. No Incentive Stock Option may be
issued pursuant to the Plan to any individual who, at the time the Stock
Option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any of its
Subsidiaries, unless (A) the exercise price determined as of the date of
grant is at least 110% of the Fair Market Value on the date of grant of the
shares of Common Stock subject to such Stock Option, and (B) the Incentive
Stock Option is not exercisable more than five years from the date of grant
thereof. No Incentive Stock Option may be granted under the Plan after the
fifth anniversary of the Effective Date.
(e) Method of Exercise. Subject to the provisions of the applicable
Award Document, the exercise price of a Stock Option may be paid in cash or
previously owned shares or a combination thereof and, if the applicable Award
Document so provides, in whole or in part through the withholding of shares
subject to the Stock Option with a value equal to the exercise price. In
accordance with the rules and procedures established by the Committee for
this purpose, the Stock Option may also be exercised through a "cashless
exercise" procedure approved by the Committee involving a broker or dealer
approved by the Committee, that affords Participants the opportunity to sell
immediately some or all of the shares underlying the exercised portion of the
Stock Option in order to generate sufficient cash to pay the Stock Option
exercise price and/or to satisfy withholding tax obligations related to the
Stock Option.
9. Stock Appreciation Rights
(a) General. The Committee is authorized to grant Stock Appreciation
Rights to Eligible Individuals. A Stock Appreciation Right shall entitle a
Participant to receive, upon satisfaction of the conditions to the payment
specified in the applicable Award Document, (i) an amount in cash equal to
the excess, if any, of the Fair Market Value on the exercise date of the
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number of shares of Common Stock for which the Stock Appreciation Right is
exercised, over the Fair Market Value of such number of shares on the date of
grant (or, in the case of a Stock Appreciation Right granted in tandem with a
Stock Option, the aggregate exercise price which the Participant would
otherwise have been required to pay under the terms of the Stock Option in
order to purchase such shares), (ii) a number of shares of Common Stock
having an aggregate Fair Market Value, as of the date of exercise, equal to
the amount determined as in the preceding clause (i), or (iii) a combination
of cash and shares having an aggregate value equal to the amount determined
as in the preceding clause (i). The exercise price per share of Common Stock
covered by a Stock Appreciation Right shall be fixed by the Committee at the
time of grant or, alternatively, shall be determined by a method specified by
the Committee at the time of grant; provided, however, that, except as
provided in Section 9(b) below, the exercise price per share shall be no less
than 100% of the Fair Market Value per share on the date of grant (or if the
exercise price is not fixed on the date of grant, then on such date as the
exercise price is fixed); and provided further, that, except as provided in
Section 18(b) below, the exercise price per share of Common Stock subject to
a Stock Appreciation Right may not be adjusted or amended, including by means
of amendment, cancellation or the replacement of such Stock Appreciation
Right with a subsequently awarded Stock Appreciation Right. A Stock
Appreciation Right may be granted alone or in addition to other Awards, or in
tandem with a Stock Option.
(b) Stock Appreciation Rights in Tandem with Stock Options. A Stock
Appreciation Right granted in tandem with a Stock Option may be granted
either at the same time as such Stock Option or subsequent thereto. If
granted in tandem with a Stock Option, a Stock Appreciation Right shall cover
the same number of shares of Common Stock as covered by the Stock Option (or
such lesser number of shares as the Committee may determine) and shall be
exercisable only at such time or times and to the extent the related Stock
Option shall be exercisable, and shall have the same term and exercise price
as the related Stock Option (which, in the case of a Stock Appreciation Right
granted after the grant of the related Stock Option, may be less than the
Fair Market Value per share on the date of grant of the tandem Stock
Appreciation Right). Upon exercise of a Stock Appreciation Right granted in
tandem with a Stock Option, the related Stock Option shall be canceled
automatically to the extent of the number of shares covered by such exercise;
conversely, if the related Stock Option is exercised as to some or all of the
shares covered by the tandem grant, the tandem Stock Appreciation Right shall
be canceled automatically to the extent of the number of shares covered by
the Stock Option exercise.
10. Stock Awards
(a) General. The Committee is authorized to grant shares of Common
Stock to an Eligible Individual. A Stock Award shall consist of one or more
shares of Common Stock granted to a Participant for no consideration other
than the provision of services (or, if required by applicable law in the
reasonable judgment of the Company, for payment of the par value of such
shares). Stock Awards shall be subject to such restrictions (if any) on
transfer or other incidents of ownership for such periods of time, and shall
be subject to such conditions of
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vesting, as the Committee may determine and as shall be set forth in the
applicable Award Document.
(b) Distributions. Any shares of Common Stock or other securities of
the Company received by a Participant to whom a Stock Award has been granted
as a result of a stock distribution to holders of Common Stock or as a stock
dividend on Common Stock shall be subject to the same terms, conditions and
restrictions as such Stock Award.
11. Restricted Stock
(a) General The Committee is authorized to grant Restricted Stock to
Eligible Individuals. An Award of Restricted Stock shall consist of a grant
of one or more shares of Common Stock to a Participant for no consideration
other than the provision of services or may be offered for sale to a
Participant at a purchase price determined by the Committee, subject to the
terms and conditions established by the Committee in connection with the
Award and as set forth in the applicable Award Document. Such shares of
Common Stock shall be subject to such restrictions on transfer or other
incidents of ownership for such periods of time, and shall be subject to such
conditions of vesting, as the Committee may determine and as shall be set
forth in the Award Document relating to such stock. If shares of Common
Stock are offered for sale under the Plan, the purchase price shall be
payable in cash, or, in the sole discretion of the Committee and to the
extent provided in any applicable Award Document, in shares of Common Stock
already owned by the Participant, for other consideration acceptable to the
Committee or in any combination of cash, shares of Common Stock or such other
consideration.
(b) Share Certificates; Rights and Privileges. At the time Restricted
Stock is granted or sold to a Participant, share certificates representing
the appropriate number of shares of Restricted Stock shall be registered in
the name of the Participant but shall be held by the Company in custody for
the account of such person. The certificates shall bear a legend restricting
their transferability as provided herein. Except for such restrictions on
transfer or other incidents of ownership as may be determined by the
Committee and set forth in the Award Document relating to an award or sale of
Restricted Stock, a Participant shall have the rights of a stockholder as to
such Restricted Stock, including the right to receive dividends and the right
to vote in accordance with the Company's certificate of incorporation.
(c) Distributions. Unless the Committee determines otherwise at or
after the time of grant, any shares of Common Stock or other securities of
the Company received by a Participant to whom Restricted Stock has been
granted or sold as a result of a stock distribution to holders of Common
Stock or as a stock dividend on Common Stock shall be subject to the same
terms, conditions and restrictions as such Restricted Stock.
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12. Performance Units
The Committee is authorized to grant Performance Units to Eligible
Individuals. Performance Units may be granted as fixed or variable share- or
dollar-denominated units subject to such conditions of vesting and time of
payment as the Committee may determine and as shall be set forth in the
applicable Award Document relating to such Performance Units. Performance
Units may be paid in Common Stock upon the satisfaction of the applicable
performance criteria as described in the Award Document, cash or a
combination of Common Stock and cash, as the Committee may determine.
13. Deferred Stock Awards
The Committee shall have the authority to grant to any Eligible Individual
a Deferred Stock Award, subject to the following terms and conditions:
(i) The delivery of, and the issuance of certificates representing,
Common Stock issuable pursuant to a Deferred Stock Award shall occur upon
expiration of the deferral period specified by the Committee (or, if
permitted by the Committee, as elected by the Eligible Individual); and
(ii) Deferred Stock Awards shall be subject to such restrictions as
the Committee may impose, which restrictions may lapse at the expiration
of the deferral period or at earlier specified times, separately or in
combination, in installments, or any combination thereof, as the Committee
may determine.
14. Dividend Equivalents
The Committee is authorized to grant a Participant Dividend Equivalents
in connection with an outstanding Award which entitle the Participant to
receive cash, Common Stock, Awards or other property equal in value to the
dividends paid in respect of a specified number of shares of Common Stock.
The Committee may provide that Dividend Equivalents will be paid or
distributed when accrued or will be deemed reinvested in additional shares of
Common Stock, Awards, or other investment vehicles as the Committee may
specify. Dividend Equivalents may be subject to the same terms and
conditions as any Award granted in connection therewith or to such other
terms and conditions as the Committee specifies in connection with the
granting of the Dividend Equivalents.
15. Other Awards
The Committee shall have the authority to specify the terms and
provisions of other forms of equity-based or equity-related Awards not in
Sections 8 through 14 which the Committee determines to be consistent with
the purpose of the Plan and the interests of the Company. Other Awards may
provide for cash payments based in whole or in part on the value
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or future value of Common Stock, for the acquisition or future acquisition of
Common Stock, or any combination thereof. Other Awards shall also include
cash payments (including the cash payment of dividend equivalents) under the
Plan which may be based on one or more criteria determined by the Committee
which are unrelated to the value of Common Stock and which may be granted in
tandem with, or independent of, other Awards under the Plan.
16. Vesting; Forfeiture; Termination of Employment and Change in Control
The Committee shall specify at or after the time of grant of an Award
the vesting, forfeiture and other conditions applicable to the Award and the
provisions governing the disposition of an Award in the event of a
Participant's termination of employment with the Manager, the Company or a
Subsidiary or such Participant's termination of service for the Manager, the
Company or a Subsidiary; provided, however, that the Committee may vary the
vesting, exercisability and settlement provisions of an Award relative to the
circumstances resulting in such termination of employment or service. The
Committee shall have the discretion to accelerate the vesting or
exercisability of, eliminate the restrictions and conditions applicable to,
or extend the post-termination exercise period of an outstanding Award.
Similarly, the Committee shall have full authority to determine the effect,
if any, of a change in control of the Company on the vesting, exercisability,
payment or lapse of restrictions applicable to an Award, which effect may be
specified in the applicable Award Document or determined at a subsequent time.
17. Certain Restrictions
Unless the Committee determines otherwise, no Award or amount payable
under the Plan shall be transferable by a Participant other than by will or
by the laws of descent and distribution or pursuant to a domestic relations
order; provided, however, that the Committee may, in its discretion and
subject to such terms and conditions as it shall specify, permit the transfer
of an Award (other than an Incentive Stock Option) for no consideration to a
Participant's family members or to one or more trusts or partnerships
established in whole or in part for the benefit of one or more of such family
members (collectively, "Permitted Transferees"). Any Award transferred to a
Permitted Transferee shall be further transferable only by will or the laws
of descent and distribution or, for no consideration, to another Permitted
Transferee of the Participant. The Committee may in its discretion permit
transfers of Awards other than those contemplated by this Section 17. During
the lifetime of the Participant, a Stock Option, Stock Appreciation Right or
similar-type Other Award shall be exercisable only by the Participant or by a
Permitted Transferee to whom such Stock Option, Stock Appreciation Right or
Other Award has been transferred.
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18. Recapitalization or Reorganization
(a) Authority of the Company and Stockholders. The existence of the
Plan, the Award Documents and the Awards granted hereunder shall not affect
or restrict in any way the right or power of the Company or the stockholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of stock or
of options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or affect
the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) Change in Capitalization. Notwithstanding any provision of the
Plan or any Award Document, the number and kind of shares authorized for
issuance under Section 5(a) above, including the maximum number of shares
available under the special limits provided for in Section 5(d) above, may be
equitably adjusted in the sole discretion of the Committee in the event of a
stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, extraordinary dividend, split-up, spin-off, combination,
exchange of shares, warrants or rights offering to purchase Common Stock at a
price substantially below Fair Market Value or other similar corporate event
affecting the Common Stock in order to preserve, but not increase, the
benefits or potential benefits intended to be made available under the Plan.
In addition, upon the occurrence of any of the foregoing events, the number
of outstanding Awards and the number and kind of shares subject to any
outstanding Award and the purchase price per share, if any, under any
outstanding Award may be equitably adjusted (including by payment of cash to
a Participant) in the sole discretion of the Committee in order to preserve
the benefits or potential benefits intended to be made available to
Participants granted Awards. Such adjustments shall be made by the
Committee, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final. Unless otherwise determined by the
Committee, such adjusted Awards shall be subject to the same vesting schedule
and restrictions to which the underlying Award is subject.
19. Amendments; Termination
The Board or Committee may at any time and from time to time alter,
amend, suspend or terminate the Plan in whole or in part; provided, however,
that any amendment which under the requirements of any applicable law or
stock exchange rule must be approved by the stockholders of the Company shall
be subject to stockholder approval in compliance with such law or rule; and
provided further that, except as contemplated by Section 18(b) above, the
Board or Committee may not, without the approval of the Company's
stockholders, increase the maximum number of shares that may be issuable
under the Plan, or that may be subject to a Stock Option or Stock
Appreciation Right granted to an Eligible Individual, or reduce the exercise
price of a Stock Option or Stock Appreciation Right. No termination or
amendment of the Plan may, without the consent of the Participant to whom an
Award has been granted, adversely affect the
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rights of such Participant under such Award. Notwithstanding any provision
herein to the contrary, the Board or Committee shall have broad authority to
amend the Plan or any Award under the Plan to take into account changes in
applicable tax laws, securities laws, accounting rules and other applicable
state and federal laws.
20. Miscellaneous
(a) Tax Withholding. The Company may require any individual entitled
to receive a payment in respect of an Award to remit to the Company, prior to
such payment, an amount sufficient to satisfy any Federal, state or local tax
withholding requirements. The Company shall also have the right to deduct
from all cash payments made pursuant to or in connection with any Award any
Federal, state or local taxes required to be withheld with respect to such
payments. In addition, the Company may permit any individual to whom an
Award has been made to satisfy, in whole or in part, such obligation to remit
taxes, by directing the Company to withhold shares of Common Stock that would
otherwise be received by such individual upon settlement or exercise of such
Award or by delivering to the Company shares of Common Stock owned by the
individual prior to exercising the option, subject to such rules as the
Committee may establish from time to time. The value of any share of Common
Stock to be withheld by the Company pursuant to this Section 20 (a) shall be
the Fair Market Value on the date to be used to determine the amount of tax
to be withheld.
(b) No Right to Grants, Employment or Service with the Company or
Manager. No Eligible Individual or Participant shall have any claim or right
to receive grants of Awards under the Plan. Nothing in the Plan or in any
Award or Award Document shall confer upon any employee of the Company or the
Manager any right to continued employment with the Company or interfere in
any way with the right of the Company or the Manager to terminate the
employment of any of its employees at any time, with or without cause. In
addition, nothing in the Plan or in any Award or Award Document shall be
deemed to create any obligation on the part of the Company to retain any
Consultant or to confer upon any Director (including a member of the Board of
Directors of the Manager) the right to remain as a Director for any period of
time.
(c) Other Compensation. Nothing in this Plan shall preclude or limit
the ability of the Company to pay any compensation to a Participant under the
Company's other compensation and benefit plans and programs.
(d) Other Employee Benefit Plans. Payments received by a Participant
under any Award made pursuant to the Plan shall not be included in, nor have
any effect on, the determination of benefits under any other employee benefit
plan or similar arrangement provided by the Company, unless otherwise
specifically provided for under the terms of such plan or arrangement or by
the Committee.
(e) Rights with Respect to Shares. A Participant shall have no rights
as a stockholder with respect to shares of Common Stock covered by an Award
until the date the
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Participant or his nominee becomes the holder of record of such shares, and,
except as provided in Section 14, no adjustments shall be made for cash
dividends or other distributions or other rights as to which there is a
record date preceding the date such person becomes the holder of record of
such shares.
(f) Unfunded Plan. The Plan is intended to constitute an unfunded plan
for incentive compensation. Prior to the payment or settlement of any Award,
nothing contained herein shall give any Participant any rights that are
greater than those of a general creditor of the Company. In its sole
discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Common
Stock or payments in lieu thereof with respect to Awards hereunder.
(g) Securities Law Restrictions. The Committee may require each
Eligible Individual purchasing or acquiring shares of Common Stock pursuant
to a Stock Option or other Award under the Plan to represent to and agree
with the Company in writing that such Eligible Individual is acquiring the
shares for investment and not with a view to the distribution thereof. All
certificates for shares of Common Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of
the Securities and Exchange Commission, any exchange upon which the Common
Stock is then listed, and any applicable federal or state securities law, and
the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions. No shares
of Common Stock shall be issued hereunder unless the Company shall have
determined that such issuance is in compliance with, or pursuant to an
exemption from, all applicable federal and state securities laws.
(h) Compliance with Rule 16b-3. Notwithstanding anything contained in
the Plan or in any Award Document to the contrary, if the consummation of any
transaction under the Plan would result in the possible imposition of
liability on a Participant pursuant to Section 16(b) of the Exchange Act, the
Committee shall have the right, in its sole discretion, but shall not be
obligated, to defer such transaction or the effectiveness of such action to
the extent necessary to avoid such liability, but in no event for a period
longer than six months.
(i) Award Document. In the event of any conflict or inconsistency
between the Plan and any Award Document, the Plan shall govern, and the Award
Document shall be interpreted to minimize or eliminate any such conflict or
inconsistency.
(j) Expenses. The costs and expenses of administering the Plan shall
be borne by the Company.
(k) Application of Funds. The proceeds received from the Company from
the sale of Common Stock or other securities pursuant to Awards will be used
for general corporate purposes.
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(l) Governing Law. Except as to matters of federal law, the Plan and
all actions taken thereunder shall be governed by and construed in accordance
with the laws of the State of Maryland applicable to contracts to be
performed entirely within such state and without giving effect to conflicts
of law principles.
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Exhibit 21.1
Subsidiaries of the Company
CCHI General, Inc., a Delaware corporation*
CLARCOMM Limited, Inc., a Delaware corporation*
CLARCOMM Holdings, L.P., a Delaware limited partnership**
______________
* Owned 100% directly by the Company
** Owned 100% indirectly by the Company
