SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
GREAT LAKES REIT, INC.
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class of Securities)
390752 10 3
(Cusip Number)
HAROLD J. SCHAAFF, JR.
MORGAN STANLEY ASSET MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 296-7000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
COPY TO:
LEONARD B. MACKEY, JR., ESQ.
ROGERS & WELLS
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
AUGUST 20, 1996
(Date of event which requires filing of this statement)
<square> Check box if the filing person has previously filed a
statement on Schedule 13G to report the acquisition which is the
subject of this Schedule 13D, and is filing this schedule because of
Rule 13d-1(b)(3) or (4).
<checked-box> Check box if a fee is being paid with the statement.
Page 1 of [ ]
Exhibit Index at Page 12
<PAGE>
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CUSIP No. 390752 10 3 13D Page 2
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<CAPTION>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
MORGAN STANLEY INSTITUTIONAL FUND, INC. - U.S. REAL ESTATE
PORTFOLIO
I.R.S.# 13-3808424
<S> <C> <C> <C>
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) <checked-box>
(b) <square>
3. SEC USE ONLY
4. SOURCES OF FUNDS
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) <square>
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
7. SOLE VOTING POWER
NUMBER OF 0
UNITS 8. SHARED VOTING POWER
BENEFICIALLY 590,430*
OWNED BY 9. SOLE DISPOSITIVE POWER
EACH 0
REPORTING 10. SHARED DISPOSITIVE POWER
PERSON WITH 590,430*
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
590,430*
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES <square>
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.6%*
14. TYPE OF REPORTING PERSON
IV, CO
</TABLE>
* Includes 30,430 Class A Convertible Preferred shares of the Issuer that
are exercisable on a one-to-one basis into Common Stock of the Issuer.
<PAGE>
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CUSIP No. 390752 10 3 13D Page 3
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<CAPTION>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
MORGAN STANLEY SICAV SUBSIDIARY S.A.
<S> <C> <C> <C>
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) <checked-box>
(b) <square>
3. SEC USE ONLY
4. SOURCES OF FUNDS
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e)
<square>
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Luxembourg
</TABLE>
<TABLE>
<S> <C> <C>
7. SOLE VOTING POWER
NUMBER OF 0
UNITS 8. SHARED VOTING POWER
BENEFICIALLY 463,909*
OWNED BY 9. SOLE DISPOSITIVE POWER
EACH 0
REPORTING 10. SHARED DISPOSITIVE POWER
PERSON WITH 463,909*
</TABLE>
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<S> <C> <C>
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
463,909*
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
<square>
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.2%*
14. TYPE OF REPORTING PERSON
OO
</TABLE>
* Includes 23,909 Class A Convertible Preferred shares that are exercisable
on a one-to-one basis of Common Stock.
<PAGE>
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CUSIP No. 390752 10 3 13D Page 4
</TABLE>
<TABLE>
<CAPTION>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
MORGAN STANLEY SICAV - U.S. REAL ESTATE SECURITIES FUND
<S> <C> <C> <C>
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)<checked-box>
(b)<square>
3. SEC USE ONLY
4. SOURCES OF FUNDS
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e)
<square>
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Luxembourg
7. SOLE VOTING POWER
NUMBER OF 0
8. SHARED VOTING POWER
UNITS
463,909*
BENEFICIALLY
9. SOLE DISPOSITIVE POWER
OWNED BY
0
EACH
10. SHARED DISPOSITIVE POWER
REPORTING
463,909*
PERSON WITH
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
463,909*
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
<square>
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.2%*
14. TYPE OF REPORTING PERSON
OO
</TABLE>
* Includes 23,909 Class A Convertible Preferred shares of the Issuer that
are exercisable on a one-to-one basis into Common Stock of the Issuer.
Morgan Stanley SICAV beneficially owns the shares reported herein as the
owner of all outstanding capital of Morgan Stanley SICAV Subsidiary S.A.
This holding is being simultaneously reported herein by Morgan Stanley
SICAV Subsidiary S.A.
<PAGE>
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<CAPTION>
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CUSIP No. 390752 10 3 13D Page 5
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<CAPTION>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
MORGAN STANLEY ASSET MANAGEMENT INC.
I.R.S.# 13-3040307
<S> <C> <C> <C>
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)<checked-box>
(b)<square>
3. SEC USE ONLY
4. SOURCES OF FUNDS
OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e)
<square>
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7. SOLE VOTING POWER
UNITS 0
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 1,054,339*
EACH 9. SOLE DISPOSITIVE POWER
REPORTING 0
PERSON WITH 10. SHARED DISPOSITIVE POWER
1,054,339*
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,054,339*
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
<square>
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%*
14. TYPE OF REPORTING PERSON
IA, CO
</TABLE>
* Includes 54,339 Class A Convertible Preferred shares of the Issuer,
exercisable on a one-to-one basis into Common Stock. Morgan Stanley Asset
Management Inc. may be deemed to beneficially own the shares reported
herein in its capacity as the investment adviser of Morgan Stanley
Institutional Fund, Inc. and Morgan Stanley SICAV Subsidiary S.A., whose
holdings are being simultaneously reported herein.
<PAGE>
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CUSIP No. 390752 10 3 13D Page 6
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<CAPTION>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
MORGAN STANLEY GROUP INC.
IRS# 13-283-8811
<S> <C> <C> <C>
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)<checked-box>
(b)<square>
3. SEC USE ONLY
4. SOURCES OF FUNDS
OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e)
<square>
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. SOLE VOTING POWER
NUMBER OF 0
UNITS 8. SHARED VOTING POWER
BENEFICIALLY 1,054,339*
OWNED BY 9. SOLE DISPOSITIVE POWER
EACH 0
REPORTING 10. SHARED DISPOSITIVE POWER
PERSON WITH 1,054,339*
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,054,339*
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
<square>
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%*
14. TYPE OF REPORTING PERSON
IA, CO
</TABLE>
* Includes 54,339 Class A Convertible Preferred shares of the Issuer,
exercisable on a one-to-one basis into Common Stock. Morgan Stanley Group
Inc. may be deemed to beneficially own the shares reported herein in its
capacity as the owner of all the outstanding capital of Morgan Stanley
Asset Management Inc. This holding is being simultaneously reported
herein by Morgan Stanley Asset Management Inc.
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D (this "Schedule") relates to shares of common stock, par
value $.01 per share ("Shares"), of Great Lakes REIT, Inc., a Maryland
Corporation (the "Issuer"). The principal executive offices of the Issuer are
located at 823 Commerce Drive, Suite 300, Oak Brook, IL 60521.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) The persons filing this statement are (i) Morgan Stanley
Institutional Fund, Inc., a Maryland corporation ("MSIF"), on behalf of its
U.S. Real Estate Fund portfolio, (ii) Morgan Stanley SICAV Subsidiary S.A., a
public limited company organized under the laws of the Grand Duchy of
Luxembourg (the "SICAV Subsidiary"), (iii) Morgan Stanley SICAV, an investment
company with variable capital ("SOCI<e'>T<e'> D'INVESTISSEMENT <a`> CAPITAL
VARIABLE") incorporated with limited liability under the laws of the Grand
Duchy of Luxembourg ("MSSICAV"), on behalf of its U.S. Real Estate Securities
Fund, a sub-fund of MSSICAV, (iv) Morgan Stanley Asset Management Inc.
("MSAM"), a Delaware corporation and (v) Morgan Stanley Group Inc., a Delaware
corporation ("MSGI") (each, a "Filing Person" and collectively, the "Filing
Persons"). MSIF is a U.S. registered management investment company organized
as an open-end series company of which the U.S. Real Estate Portfolio
constitutes one series. The SICAV Subsidiary is a wholly-owned subsidiary of
MSSICAV which is an open-end umbrella fund with a number of sub-funds. The
SICAV Subsidiary was created principally for the purpose of investing in
securities of companies in the U.S. real estate industry for the benefit of
stockholders of Morgan Stanley SICAV U.S. Real Estate Securities Fund, a sub-
fund of MSSICAV. Each of MSAM and MSGI is an investment adviser registered
with the Securities and Exchange Commission, and MSAM is a wholly-owned
subsidiary of MSGI. MSAM, in its capacity as the investment adviser of MSIF
and in its capacity as sub-adviser of the SICAV Subsidiary, has investment
discretion with respect to the investment by MSIF and the SICAV Subsidiary in
the Issuer.
MSIF and MSAM maintain their principal office at 1221 Avenue of
the Americas, New York, New York 10020. MSSICAV and the SICAV subsidiary
maintain their principal office at 6C route de Tr`eves,
L-2633 Senningerberg, Grand Duchy of Luxembourg. MSGI maintains its
principal office at 1585 Broadway, New York, New York 10036.
(d)-(e) During the last five years, neither MSIF, MSSICAV, the SICAV
Subsidiary, MSAM nor MSGI (i) have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) were parties to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining further violations of or prohibiting
activities subject to federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
MSIF has obtained the proceeds of its investment in the Issuer from the
U.S. Real Estate Portfolio, one of the series funds of MSIF. The SICAV
Subsidiary has obtained the proceeds of its investment in the Issuer from the
assets of Morgan Stanley SICAV U.S. Real Estate Securities Fund, a sub-fund of
MSSICAV. The amount of the consideration for the acquisition is set forth in
Item 5. Neither MSAM nor MSGI has or will contribute its own assets to the
Issuer in connection with the transactions discussed herein.
<PAGE>
ITEM 4. PURPOSE OF THE TRANSACTION.
The Filing Persons acquired the Shares described at Item 5(c) below
for investment purposes, and in order to protect the investment in the Issuer,
the Filing Persons have obtained the right to nominate for election one
Director to the Issuer's Board of Directors. The Filing Persons intend to
continue to consider various alternative courses of action and will in the
future take such actions with respect to their respective equity ownership in
the Issuer as each Filing Person deems appropriate in light of the
circumstances existing from time to time. Such actions may include making
recommendations to management concerning various business strategies,
acquisitions, dividend policies and other matters, pursuing a transaction or
transactions involving a change in control of the Issuer or such other actions
as each Filing Person may deem appropriate. Such actions also may involve the
purchase of additional Shares or, alternatively, may involve the sale of all or
a portion of the Shares beneficially owned by such Filing Person in the open
market or in privately negotiated transactions to one or more purchasers.
The Shares beneficially owned by the Filing Persons include the right to
acquire, subject to certain conditions, 650,000 shares of Common Stock and
35,320 shares of Class A Convertible Preferred Stock exercisable on a one-to-
one basis into Common Stock (the "Preferred Stock") of the Issuer on October 3,
1996 and November 19, 1996. Except as described herein, the Filing Persons do
not have any plans or proposals which relate to or would result in (a) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Issuer or any of its subsidiaries, (b) a sale or
transfer of a material amount of assets of the Issuer or any of its
subsidiaries, (c) any change in the present management of the Issuer, (d) any
material change in the present capitalization or dividend policy of the Issuer,
(e) any other material change in the Issuer's business or corporate structure,
(f) any other material change in the Issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person, (g) causing a class of securities of the
Issuer to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association, (h) a class of equity securities of the Issuer
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Securities Exchange Act of 1934, or (i) any action similar to any of the
enumerated in (a) through (i) above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) Incorporated by reference to Items (7)-(11) and (13) of the
cover page pertaining to each reporting person.
(c) Pursuant to the Stock Purchase Agreement, dated August 20, 1996 (the
"Stock Purchase Agreement"), a copy of which is attached hereto as Exhibit 7.2,
MSIF and the SICAV Subsidiary, in a transaction effected by MSAM as their
investment adviser, have acquired 350,000 shares of Common Stock and 19,019
shares of Preferred Stock, of which MSIF owns 196,000 shares of Common Stock
and 10,651 shares of Preferred stock (for an aggregate purchase price of
$2,548,000) and the SICAV Subsidiary owns 154,000 shares of Common Stock and
8,368 shares of Preferred Stock (for an aggregate purchase price of
$2,002,000). The Common Stock and the Preferred Stock were purchased in the
aggregate and not for a specific price per share. The transaction described
herein took place in Chicago, Illinois.
Under the Stock Purchase Agreement, MSIF and the SICAV Subsidiary have
agreed, subject to certain conditions, to acquire on October 3, 1996 (the
"Second Closing") 350,000 shares of Common Stock and 19,019 shares of Preferred
Stock, of which MSIF intends to acquire 196,000 shares of Common Stock and
10,651 shares of Preferred stock (for an aggregate purchase price of
$2,548,000) and the SICAV Subsidiary intends to acquire 154,000 shares of
Common Stock and 8,368 shares of Preferred Stock (for an aggregate purchase
price of $2,002,000). The Common Stock and the Preferred Stock will be
purchased in the aggregate and not for a specific price per share. Prior to
<PAGE>
the Second Closing, MSAM may make such adjustments in the aforementioned
acquisition by MSIF and the SICAV Subsidiary as it determines is appropriate,
including reallocating the amount to be purchased by MSIF or the SICAV
Subsidiary as between each other or allocating all or a portion of the amount
to be purchased by MSIF or the SICAV Subsidiary on the Second Closing to
another party advised by MSAM.
Under the Stock Purchase Agreement, MSIF and the SICAV Subsidiary have
agreed, subject to certain conditions, to acquire on November 19, 1996 (the
"Third Closing") 300,000 shares of Common Stock and 16,301 shares of Preferred
Stock, of which MSIF intends to acquire 168,000 shares of Common Stock and
9,128 shares of Preferred stock (for an aggregate purchase price of $2,184,000)
and the SICAV Subsidiary intends to acquire 132,000 shares of Common Stock and
7,173 shares of Preferred Stock (for an aggregate purchase price of
$1,716,000). The Common Stock and the Preferred Stock will be purchased in the
aggregate and not for a specific price per share. Prior to the Third Closing,
MSAM may make such adjustments in the aforementioned acquisition by MSIF and
the SICAV Subsidiary as it determines is appropriate, including reallocating
the amount to be purchased by MSIF or the SICAV Subsidiary as between each
other or allocating all or a portion of the amount to be purchased by MSIF or
the SICAV Subsidiary on the Third Closing to another party advised by MSAM.
For purposes of this filing, the Filing Persons have treated all shares of
Common Stock and Preferred Stock issued and to be issued under the Stock
Purchase Agreement as outstanding as of the date of this filing.
(d)-(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
There exists an agreement of Joint Filing (attached hereto as
Exhibit 7.1) between the Filing Persons with respect to the filing of this
Schedule 13D.
There also exists the Stock Purchase Agreement (attached hereto as
Exhibit 7.2) pursuant to which MSIF and the SICAV Subsidiary have been granted
the right to designate one individual to be nominated as a member of the Board
of Directors of the Issuer. Morgan Stanley Asset Management Inc., as
investment adviser to MSIF and the SICAV Subsidiary, has designated one
individual to be nominated as a member of the Board of Directors of the Issuer
and the Issuer will recommend such nominee for election to the Board of
Directors.
If MSIF and the SICAV Subsidiary do not have a representative on the
Board of Directors of the Issuer, the Issuer must permit a representative of
MSIF and the SICAV Subsidiary to attend, but not vote, as an observer at each
meeting of the Board of Directors or any committee meeting of the Board of
Directors of the Issuer provided that the right to be an observer is not
transferable to more than one person and such person must hold at least 200,000
shares of Common Stock of the Issuer.
Pursuant to a Registration Rights Agreement, dated August 20, 1996,
by and among the Issuer, Fortis Benefits Insurance Company, Morgan Stanley
Institutional Fund, Inc. - U.S. Real Estate Portfolio, Morgan Stanley SICAV
Subsidiary S.A., Wellsford Karpf Zarrilli Ventures, L.L.C., Logan, Inc. and
Pension Trust Account No. 104972 held by Bankers Trust Company as Trustee, the
Issuer is required to effect a shelf registration, subject to certain
conditions, of shares of the Common Stock of the Issuer held by the Filing
Persons no later than the earlier of (i) August 20, 1999 or (ii) 180 days after
the settlement of the initial sale of shares of Common Stock of the Issuer
pursuant to the Issuer's first effective registration statement under the
Securities Act of 1933, as amended. Moreover, subject to certain conditions,
the shares of Common Stock held by the Filing Persons may be includedin the
registration of the Issuer's Common Stock when the Company proposes to
register its Common Stock or the shares of other holders of Common Stock.
<PAGE>
However, there exists no contracts, arrangements, understandings or
relations (legal or otherwise) between any Filing Person and other persons with
respect to finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 7.1 Agreement of Joint Filing between Morgan Stanley
Institutional Fund, Inc. - U.S. Real Estate
Portfolio, Morgan Stanley SICAV - U.S. Real Estate
Securities Fund, Morgan Stanley SICAV Subsidiary
S.A., Morgan Stanley Asset Management and Morgan
Stanley Group Inc., dated August 20, 1996.
Exhibit 7.2 Stock Purchase Agreement by and among the Issuer,
Fortis Benefits Insurance Company, Morgan Stanley
Institutional Fund, Inc. - U.S. Real Estate
Portfolio, Morgan Stanley SICAV Subsidiary S.A.,
Wellsford Karpf Zarrilli Ventures, L.L.C., Logan,
Inc. and Pension Trust Account No. 104972 held by
Bankers Trust Company as Trustee, dated August 20,
1996.
Exhibit 7.3 Secretary's Certificate Authorizing Stuart Breslow
to sign on Behalf of Morgan Stanley Group Inc.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: August 20, 1996
MORGAN STANLEY INSTITUTIONAL FUND, INC. -
U.S. REAL ESTATE PORTFOLIO
/S/ HAROLD J. SCHAAFF, JR.
Name: Harold J. Schaaff, Jr.
Title: Vice President
MORGAN STANLEY SICAV - U.S. REAL ESTATE SECURITIES
FUND
/S/ KAREN FROST
Name: Karen Frost
Title: Vice President
MORGAN STANLEY SICAV SUBSIDIARY S.A.
/S/ KAREN FROST
Name: Karen Frost
Title: Vice President
MORGAN STANLEY ASSET MANAGEMENT INC.
/S/ HAROLD J. SCHAAFF, JR.
Name: Harold J. Schaaff, Jr.
Title: General Counsel
MORGAN STANLEY GROUP INC.
/S/ STUART BRESLOW
Name: Stuart Breslow
Title: Principal
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C> <C> <C>
7.1 Agreement of Joint Filing between Morgan
Stanley Institutional Fund, Inc. - U.S. Real
Estate Portfolio, Morgan Stanley SICAV - U.S.
Real Estate Securities Fund, Morgan Stanley
SICAV Subsidiary S.A., Morgan Stanley Asset
Management Inc. and Morgan Stanley Group Inc.,
dated August 20, 1996.
7.2 Stock Purchase Agreement by and among the
Issuer, Fortis Benefits Insurance Company,
Morgan Stanley Institutional Fund, Inc. - U.S.
Real Estate Portfolio, Morgan Stanley SICAV
Subsidiary S.A., Wellsford Karpf Zarrilli
Ventures, L.L.C., Logan, Inc. and Pension
Trust Account No. 104972 held by Bankers Trust
Company as Trustee, dated August 20, 1996
7.3 Secretary's Certificate Authorizing Stuart
Breslow to Sign on Behalf of Morgan Stanley
Group Inc.
</TABLE>
<PAGE>
EXHIBIT 7.1
AGREEMENT OF JOINT FILING
Morgan Stanley Institutional Fund, Inc. - U.S. Real Estate Portfolio,
Morgan Stanley SICAV - U.S. Real Estate Securities Fund, Morgan Stanley SICAV
Subsidiary S.A., Morgan Stanley Asset Management Inc. and Morgan Stanley Group
Inc. hereby agree that the Statement on Schedule 13D to which this agreement is
attached as an exhibit, as well as all future amendments to such Statement,
shall be filed jointly on behalf of each of them. This agreement is intended
to satisfy the requirements of Rule 13d-1(f)(1)(iii) under the Securities
Exchange Act of 1934, as amended.
Dated: August 20, 1996
MORGAN STANLEY INSTITUTIONAL FUND, INC. -
U.S. REAL ESTATE PORTFOLIO
/S/ HAROLD J. SCHAAFF, JR.
Name: Harold J. Schaaff, Jr.
Title: Vice President
MORGAN STANLEY SICAV - U.S. REAL ESTATE SECURITIES
FUND
/S/ KAREN FROST
Name: Karen Frost
Title: Vice President
MORGAN STANLEY SICAV SUBSIDIARY S.A.
/S/ KAREN FROST
Name: Karen Frost
Title: Vice President
<PAGE>
MORGAN STANLEY ASSET MANAGEMENT INC.
/S/ HAROLD J. SCHAAFF, JR.
Name: Harold J. Schaaff, Jr.
Title: General Counsel
MORGAN STANLEY GROUP INC.
/S/ STUART BRESLOW
Name: Stuart Breslow
Title: Principal
<PAGE>
EXHIBIT 7.2
STOCK PURCHASE AGREEMENT
by and among
GREAT LAKES REIT, INC.,
FORTIS BENEFITS INSURANCE COMPANY,
MORGAN STANLEY INSTITUTIONAL FUND, INC. -
U.S. REAL ESTATE PORTFOLIO,
MORGAN STANLEY SICAV SUBSIDIARY SA,
WELLSFORD KARPF ZARRILLI VENTURES, L.L.C.,
LOGAN, INC.
and
PENSION TRUST ACCOUNT NO. 104972 HELD BY
BANKERS TRUST COMPANY AS TRUSTEE
Dated as of August 20, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Recitals.................................................... 1
Section 1. DEFINITIONS................................... 1
Section 2. PURCHASE AND SALE OF SHARES................... 8
2.1 First Closing and Second Closing................... 8
2.2 Third Closing...................................... 8
Section 3. THE CLOSINGS.................................. 8
3.1 First Closing...................................... 8
3.2 Second Closing..................................... 8
3.3 Third Closing...................................... 8
3.4 Deliveries by the Company.......................... 8
3.5 Deliveries by the Investors........................ 10
Section 4. REPRESENTATIONS AND WARRANTIES................ 11
4.1 Representations and Warranties of
the Company...................................... 11
4.2 Representations of the Investors................... 29
Section 5. INDEMNIFICATION............................... 31
5.1 Indemnification by the Company..................... 31
5.2 Indemnification Notice............................. 31
5.3 Remedies Cumulative................................ 32
5.4 Remedies Not Waived................................ 32
Section 6. COVENANTS..................................... 33
6.1 Furnishing of Financial Statements
and Information.................................. 33
6.2 Inspection and Meeting............................. 35
6.3 Merger, Disposition or Acquisition................. 35
6.4 Registration Rights................................ 35
6.5 Use of Proceeds.................................... 35
6.6 No Conflicts of Interest........................... 36
6.7 Board of Directors Meetings; Nominees;
Observers........................................ 36
6.8 Maintenance of Corporate Existence
and Properties................................... 37
6.9 Further Assurances................................. 37
6.10 Taxes and Assessments; Compliance with Laws........ 37
6.11 Continued Qualification as a REIT.................. 38
6.12 Issuance of Securities............................. 38
6.13 Anti-Dilution Provision............................ 38
6.14 Rights of First Refusal............................ 39
<PAGE>
PAGE
6.15 Conflicting Agreements............................. 40
6.16 Books of Account................................... 40
6.17 Director Liability Insurance....................... 40
6.18 Bylaws............................................. 40
6.19 Expiration of Covenants............................ 40
6.20 Continued Existence as a Real Estate
Operating Company................................ 40
Section 7. EVENTS OF NONCOMPLIANCE....................... 40
7.1 Events of Noncompliance............................ 40
7.2 Remedies Upon An Event of Noncompliance............ 41
7.3 Notice of Noncompliance............................ 42
7.4 Suits for Enforcement.............................. 42
7.5 Remedies Cumulative................................ 42
7.6 Remedies Not Waived................................ 42
Section 8. CONDITIONS TO CLOSINGS........................ 42
8.1 Conditions to Closing by the Investors............. 42
8.2 Conditions to Closing by the Company............... 44
Section 9. MISCELLANEOUS................................. 44
9.1 Termination........................................ 44
9.2 Waivers and Amendments............................. 45
9.3 Costs, Expenses and Taxes.......................... 45
9.4 Entire Agreement................................... 46
9.5 Governing Law...................................... 46
9.6 Notices............................................ 46
9.7 Counterparts....................................... 48
9.8 Successors and Assigns............................. 48
9.9 Third Parties...................................... 49
9.10 Schedules and Exhibits............................. 49
9.11 Headings........................................... 49
9.12 Consent of Investors............................... 49
ANNEXES
ANNEX I Articles Supplementary
ANNEX II Participation of Investors
EXHIBITS
EXHIBIT A Articles of Incorporation
EXHIBIT B Bylaws
EXHIBIT C Registration Rights Agreement
EXHIBIT D Legal Opinion of McBride Baker & Coles
EXHIBIT E Tax Opinion of McBride Baker & Coles
EXHIBIT F Legal Opinion of Ballard Spahr
Andrews & Ingersoll
SCHEDULES
4.1(a) Organization and Standing
4.1(b) Capitalization; Subsidiaries
4.1(c) Shareholders of the Company
4.1(d) Capacity of the Company; Consents;
Execution of Agreements
4.1(g) Financial Statements
4.1(h) Reports Filed with the SEC
4.1(i) Changes in Circumstances
4.1(l) Litigation
4.1(m) Brokers, Finders and Agents
4.1(n) Taxes
4.1(o) Employee Plans
4.1(q) Affiliate Contracts
4.1(r) Contracts
4.1(s) Affiliated Transactions
4.1(t) Environmental Compliance
4.1(z) Title to Properties
4.1(aa) Title Insurance
4.1(cc) Defects
4.1(dd) Condemnation
4.1(ff) Properties and Leases
4.1(gg) Mortgages
6.5 Use of Proceeds
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
August 20, 1996, is made by and among Great Lakes REIT, Inc., a Maryland
corporation (the "Company"), Fortis Benefits Insurance Company, a
Minnesota corporation ("Fortis"), Morgan Stanley Institutional Fund, Inc.
- - U.S. Real Estate Portfolio, a Maryland corporation ("MS Institutional
Fund"), Morgan Stanley SICAV Subsidiary SA, a Luxembourg corporation ("MS
SICAV") (MS Institutional Fund and MS SICAV are collectively referred to
as "Morgan Stanley"), Wellsford Karpf Zarrilli Ventures, L.L.C., a
Delaware limited liability company, ("WKZV"), Logan, Inc., a Delaware
corporation ("NML") and Pension Trust Account No. 104972 Held by Bankers
Trust Company as Trustee ("Fidelity;" Fortis, Morgan Stanley, WKZV, NML
and Fidelity and their respective successors and assigns are sometimes
referred to individually as an "Investor" and together with their
respective successors and assigns as the "Investors").
RECITALS:
WHEREAS, the Company is currently authorized to issue 20,000,000
shares of Common Stock, par value $0.01 per share ("Common Stock") and
10,000,000 shares of Preferred Stock, par value $0.01 per share
("Preferred Stock") and currently has issued and outstanding 4,824,392
shares of Common Stock and no shares of Preferred Stock;
WHEREAS, each of the Investors desires to acquire from the
Company, and the Company desires to issue and sell to the Investors, in
the manner and on the terms and conditions hereinafter set forth, an
aggregate of 3,867,000 shares of Common Stock (the "Common Shares") and
210,128 shares of Class A Convertible Preferred Stock having the rights,
preferences and designations set forth in the Articles Supplementary
attached hereto as ANNEX I (the "Restricted Shares" and together with the
Common Shares, the "Shares"); and
WHEREAS, in connection with the Investors' purchase of the Shares
the parties hereto desire to establish certain rights and obligations
among themselves and the Company;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties do hereby agree as follows:
AGREEMENTS:
SECTION 1. DEFINITIONS.
In addition to the terms that are defined in the Preamble hereto,
the following terms when used in this Agreement shall have the following
respective meanings:<PAGE>
<PAGE>
"ADVERSE CLAIM" means any Lien, charge, encumbrance, restriction
or other adverse claim.
"AFFILIATE" of a Person means (i) with respect to a Person that
is a corporation, the shareholders of such corporation owning in excess of
10% of the outstanding voting securities of such Person, (ii) any other
Person controlling, controlled by, or under common control with such
Person or (iii) any other Person who is a director, officer or employee,
or a former director, officer or employee of such Person. A Person shall
be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management
and policies of the "controlled" Person, whether through ownership of
voting securities, by contract or otherwise.
"ANTI-DILUTION EVENT" means the issuance by the Company of any
additional shares of Common Stock, or warrants, options, securities
convertible into Common Stock or other Common Stock equivalents, prior to
the consummation of a Qualifying IPO, at a price below $13.00 per share
(such price to be adjusted proportionately in the event of any stock
dividend, subdivision, combination or similar event with respect to the
Common Stock).
"APPLICABLE LAWS" is defined in Section 4.1(k) hereof.
"ARTICLES OF INCORPORATION" means the Articles of Incorporation
of the Company as filed with the Department of Assessments and Taxation of
the State of Maryland, attached hereto as EXHIBIT A.
"ARTICLES SUPPLEMENTARY" means the Articles Supplementary for the
Restricted Shares attached hereto as ANNEX I.
"AUDITED FINANCIAL STATEMENTS" is defined in Section 4.1(g)
hereof.
"BOARD OF DIRECTORS" means the board of directors of the Company.
"BYLAWS" means the Bylaws of the Company attached hereto as
EXHIBIT B.
"CLOSING" is defined in Section 3.3 hereof.
"CLOSING DATE" is defined in Section 3.3 hereof.
"COMMON SHARES" is defined in the Recitals.
"COMPANY" is defined in the Preamble and, unless the context
otherwise requires, such term includes the Subsidiaries of the Company.
<PAGE>
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" is defined in the Recitals.
"COMPANY LEASE" is defined in Section 4.1(ff) hereof.
"COMPANY MORTGAGE" is defined in Section 4.1(gg) hereof.
"COMPANY PERMITTED ENCUMBRANCES" is defined in Section 4.1(z)
hereof.
"COMPANY PROPERTY" is defined in Section 4.1(z) hereof.
"CONTAMINANT" is defined in Section 4.1(t) hereof.
"CONTRACT" means any contract, agreement, undertaking or
commitment (written or oral, formal or informal, firm or contingent) 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 assets is
bound.
"COURT OFFICE BUILDING" means the real property commonly known as
16601 South Kedzie, Markham, Illinois.
"COURT OFFICE PROPERTY PERMITTED ENCUMBRANCE" is defined in
Section 4.1(z) hereof.
"ELGIN OFFICE PROPERTY" means the real property commonly known as
1675 Holmes Road, Elgin, Illinois.
"ELGIN OFFICE PROPERTY PERMITTED ENCUMBRANCE" is defined in
Section 4.1(z) hereof.
"EMPLOYEE PLAN" is defined in Section 4.1(o) hereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ENVIRONMENTAL LAWS" is defined in Section 4.1(t) hereof.
"EVENT OF NONCOMPLIANCE" means any of the events described in
Section 7.1 hereof.
"FINANCIAL STATEMENTS" is defined in Section 4.1(g) hereof.
"FIRST CLOSING" is defined in Section 3.1 hereof.
"FIRST CLOSING DATE" is defined in Section 3.1 hereof.
"FORFEITURE PRICE" is defined in the Articles Supplementary.
<PAGE>
<PAGE>
"FORM 10" is defined in Section 4.1(h) hereof.
"GAAP" means generally accepted accounting principles as in
effect on the date of measurement. Whenever any accounting term is used
herein which is not otherwise defined, it shall have the meaning ascribed
thereto under GAAP.
"GOVERNMENTAL AUTHORITY" means the United States, any state or
municipality, the government of any foreign country, any subdivision of
any of the foregoing, or any authority, department, commission, board,
bureau, agency, court or instrumentality of any of the foregoing.
"INDEBTEDNESS" means all items, except retained earnings and
items of capital shares and surplus and reserves which are mere
segregations of surplus, which would be included on the liability side of
the consolidated balance sheet of the Company in accordance with GAAP as
of the date on which Indebtedness is to be determined.
"INDEBTEDNESS FOR BORROWED MONEY" means with respect to any
Person (i) Indebtedness incurred by such Person as the result of a direct
borrowing of money, (ii) Indebtedness arising from capitalized lease
obligations, (iii) Indebtedness that has been incurred by such Person in
connection with the acquisition of property or assets, (iv) Indebtedness
secured by any Lien upon property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Indebtedness, (v) Indebtedness created or arising under the
conditional sale or other title retention agreement with respect to
property acquired by such Person, notwithstanding the fact the rights and
remedies of the seller, lender or lessor under such agreement in the event
of default are limited to repossession or sale of such property and (vi)
guarantees of Indebtedness of others of the character referred to in this
definition, and shall not include any other Indebtedness including, but
not limited to, Indebtedness incurred with respect to trade accounts or
with respect to employee wages and fringe benefits.
"INITIAL PUBLIC OFFERING" means the sale of Common Stock pursuant
to the Company's first effective registration statement covering the sale
of such shares filed under the 1933 Act.
"INTERIM FINANCIAL STATEMENTS" is defined in Section 4.1(g)
hereof.
"INVESTOR INDEMNITEES" is defined in Section 5.1 hereof.
"LIEN" means any mortgage, lien, pledge, security interest,
easement, conditional sale or other title retention agreement, or other
encumbrance of any kind.
<PAGE>
"LIQUIDITY EVENT" is defined in the Articles Supplementary.
"LIQUID IPO" means the consummation of (i) an Initial Public
Offering by the Company of newly issued shares of Common Stock in which
the Company receives no less than $60 million of gross proceeds and (ii)
the listing for trading of the Common Stock on a Major Stock Exchange.
"LOSS" is defined in Section 5.1 hereof.
"MAJOR STOCK EXCHANGE" means the New York Stock Exchange, the
American Stock Exchange or other similar or successor national stock
exchange.
"OFFERING MEMORANDUM" means the offering memorandum of the
Company dated February 1996 relating to the offering of Common Stock.
"PERMITTED ISSUANCE" means (i) the issuance and sale of the
Shares pursuant to this Agreement, (ii) the conversion of the Restricted
Shares into shares of Common Stock pursuant to the terms of the Articles
Supplementary, (iii) the issuance of shares of Common Stock pursuant to
(A) stock options outstanding as of the date of this Agreement granted
under the Stock Option Plans or (B) additional stock options granted at an
exercise price of not less than $13.00 per share under the Stock Option
Plans out of shares currently available under any such Plan or if
shareholder approval is obtained to expand the number of shares available
under any Stock Option Plan, under such expanded Plan and (iv) convertible
operating partnership units that are (A) committed or outstanding as of
the date of this Agreement or (B) granted after the date of this Agreement
in an aggregate amount not to exceed the equivalent of 1,000,000 shares of
Common Stock at an equivalent per share price, valued in good faith by the
Board of Directors, of not less than: $13.00 before the first anniversary
of this Agreement; $14.00 thereafter but before the second anniversary of
this Agreement; $15.00 thereafter but before the third anniversary of this
Agreement; and $16.00 thereafter.
"PERMITTED LIENS" means (i) Liens for Taxes; (ii) Liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation, carrier's, warehousemen's, mechanic's, laborer's and
materialmen's, landlord's, and statutory and similar Liens, if the
obligations secured by such Liens are not delinquent; (iii) Liens in
respect of pledges or deposits to secure the performance of bids, tenders,
Contracts (other than for the payment of money) or leases to which the
Company is a party; (iv) Liens arising from transactions in which the
Company obtains Indebtedness for Borrowed Money, PROVIDED that the amount
of the Lien does not exceed the Indebtedness to which it relates; (v)
easements that do not impair or restrict the Company's use and enjoyment
of the property affected thereby; (vi) Liens being contested in good faith
<PAGE>
and by appropriate proceedings in such manner as not to cause any material
adverse effect upon the Company, or the loss of any right of redemption
from any sale thereunder, to the extent and so long as the Company shall
have set aside on its books adequate reserves with respect thereto and
(vii) any other Liens in an aggregate amount not to exceed $50,000.
"PERSON" means an individual, corporation, partnership, limited
liability company, estate, trust (including a trust qualified under
Section 401(a) or 501(c)(17) of the Code), a portion of a trust
permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private foundation
within the meaning of Section 509(a) of the Code, joint stock company or
other entity, and also includes a group as that term is used for purposes
of Section 13(d)(3) of the 1934 Act.
"PREFERRED STOCK" is defined in the Recitals.
"QUALIFYING IPO" means a Liquid IPO at a per share price at least
equal to the applicable Forfeiture Price.
"QUALIFYING NON-IPO LIQUIDITY EVENT" means a Liquidity Event
other than a Liquid IPO in which the Investors receive consideration in an
amount at least equal (computed on a per share price) to the applicable
Forfeiture Price for their Shares in the form of cash or freely tradable
securities listed and traded on a Major Stock Exchange; PROVIDED THAT, the
aggregate market value immediately after giving effect to such Event of
all securities of the class received by the Investors held by non-
Affiliates of the issuer thereof is at least $100 million.
"REGISTRABLE SHARES" is defined in the Registration Rights
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement among the Company and the Investors in substantially the form
attached as EXHIBIT C hereto.
"RESTRICTED SHARES" is defined in the Recitals.
"RESTRICTED STOCK" means shares of Class A Convertible Preferred
Stock to be issued pursuant to this Agreement which Class A Convertible
Preferred Stock shall have the rights, privileges and designations as set
forth in the Articles Supplementary attached hereto as ANNEX I.
"SEC" means the Securities and Exchange Commission or any
successor agency thereto.
"SECOND CLOSING" is defined in Section 3.2 hereof.
"SECOND CLOSING DATE" is defined in Section 3.2 hereof.
<PAGE>
"SECTION 16 PERSON" means an Investor or its respective
successors and assigns that is (i) a "ten percent beneficial owner" (as
such term is defined in Rule 16a-2 under the 1934 Act) of the Company or
(ii) has a representative that is a member of the Board of Directors.
"SHARES" is defined in the Recitals.
"STOCK OPTION PLANS" means the Plan for Independent Directors and
Brokers, the Advisor Stock Option Plan and the 1996 Incentive Stock Option
Plan of the Company.
"SUBSIDIARY" means any Person or business in which the Company
owns, directly or indirectly, an equity interest representing at least a
majority of the voting stock or voting interests of such Person or
business.
"TAXES" means all taxes, charges, fees, levies or other
assessments, including without limitation all net income, gross income,
franchise, sales and use, service and service use, ad valorem, transfer,
recording, gains, profits, excise, franchise, real and personal property,
gross receipts, capital stock, production, business and occupation,
disability, social security, employment, payroll, license, estimated,
alternative minimum, stamp, custom duties, severance or withholding taxes
or charges imposed by any Governmental Authority and shall include any
interest, fines, penalties or additional amounts attributable to or
imposed with respect to any such taxes, charges, fees, levies or other
assessments.
"TAX RETURNS" means any return, report, declaration or other
document or information required to be supplied to any Governmental
Authority with respect to Taxes.
"THIRD CLOSING" is defined in Section 3.3 hereof.
"THIRD CLOSING DATE" is defined in Section 3.3 hereof.
"1940 ACT" means the Investment Company Act of 1940, as amended.
"1934 ACT" means the Securities Exchange Act of 1934, as amended.
"1933 ACT" means the Securities Act of 1933, as amended.
SECTION 2. PURCHASE AND SALE OF SHARES
2.1 FIRST CLOSING AND SECOND CLOSING. At each of the First
Closing and the Second Closing, based upon the representations,
warranties, covenants and agreements of the parties set forth in this
<PAGE>
Agreement, the Company shall issue and sell to each of the Investors and
the Investors shall purchase from the Company, the number of Common Shares
and Restricted Shares set opposite each such Investor's name under the
heading "First and Second Closing" on ANNEX II hereto at the purchase
prices set forth under such heading.
2.2 THIRD CLOSING. At the Third Closing, based upon the
representations, warranties, covenants and agreements of the parties set
forth in this Agreement, the Company shall issue and sell to each of the
Investors and the Investors shall purchase from the Company, the number of
Common Shares and Restricted Shares set opposite each such Investor's name
under the heading "Third Closing" on ANNEX II hereto at the purchase
prices set forth under such heading.
SECTION 3. THE CLOSINGS.
3.l FIRST CLOSING. The closing of the initial issuance and sale
of Shares pursuant to Section 2.1 hereof and certain of the other
transactions contemplated hereby (the "First Closing") shall take place at
the offices of Jones, Day, Reavis & Pogue, 77 West Wacker, Chicago,
Illinois, at 10:00 a.m. (Chicago time) on August 20, 1996 (the "First
Closing Date"), or at such other time or place as the parties shall
mutually agree.
3.2 SECOND CLOSING. The closing of the second issuance and sale
of Shares pursuant to Section 2.1 hereof (the "Second Closing") shall take
place at the offices of Jones, Day, Reavis & Pogue, 77 West Wacker,
Chicago, Illinois, at 10:00 a.m. (Chicago time) on October 3, 1996 (the
"Second Closing Date"), or at such other time or place as the parties
shall mutually agree.
3.3 THIRD CLOSING. The closing of the third issuance and sale
of Shares pursuant to Section 2.2 hereof (the "Third Closing") (the First
Closing, the Second Closing and the Third Closing are hereinafter
sometimes referred to individually as a "Closing" and together as the
"Closings") shall take place at the offices of Jones, Day, Reavis & Pogue,
77 West Wacker, Chicago, Illinois, at 10:00 a.m. (Chicago time) on
November 19, 1996 (the "Third Closing Date") (the First Closing Date, the
Second Closing Date and the Third Closing Date are hereinafter sometimes
referred to individually as a "Closing Date" and together as the "Closing
Dates"), or at such other time or place as the parties shall mutually
agree.
3.4 DELIVERIES BY THE COMPANY. On each Closing Date, the
Company shall deliver or cause to be delivered to each Investor the
following items (in addition to any other items required to be delivered
to the Investors pursuant to any other provision of this Agreement);
PROVIDED THAT in the case of the Second Closing and the Third Closing,
"bring down" certificates or similar documents reasonably acceptable to
<PAGE>
the Investors may be delivered in place of the certificates contemplated
by Sections 3.4(c) and (e) through (j) hereof:
(a) CERTIFICATES. Certificates representing the Shares being
issued and sold on such Closing Date by the Company to the Investors
pursuant to Section 2 hereof, duly recorded on the books of the Company in
such name or names and such denomination or denominations and delivered at
such address or addresses as such Investor shall request, together with
such other supporting documents as may in the opinion of the Investors'
counsel be reasonably necessary to permit the Investors to acquire title
to the Shares free of any Adverse Claim;
(b) RECEIPTS. Receipts dated such Closing Date for the payments
delivered to the Company by the Investors pursuant to Section 3.5(a)
hereof;
(c) CHARTER DOCUMENTS. (i) The Articles of Incorporation of the
Company, certified by the Department of Assessments and Taxation of the
State of Maryland as of a date within five days prior to such Closing Date
and (ii) the articles of incorporation for each Subsidiary, certified by
the Secretary of State of the State of Illinois as of a date within five
days prior to such Closing Date;
(d) GOOD STANDING CERTIFICATE. A certificate as to the good
standing of the Company from the Department of Assessments and Taxation of
the State of Maryland and, as to the good standing of each Subsidiary,
from such Subsidiary's state of incorporation, each dated within three
days prior to such Closing Date;
(e) FOREIGN QUALIFICATIONS; GOOD STANDING. Certificates of
existence in good standing and qualification to transact business as a
foreign corporation (or similar documents) of the Company and each
Subsidiary from the Secretary of State of each state in which the failure
to so qualify could have a material adverse effect upon the Company's or
the respective Subsidiary's assets, properties, liabilities, financial
condition, results of operations or business;
(f) SECRETARY CERTIFICATE. A certificate of the Secretary of
the Company, in form and substance satisfactory to counsel for the
Investors, dated such Closing Date, certifying that attached thereto are
true and correct copies of (i) the Company's Bylaws and each Subsidiary's
bylaws as then in effect and (ii) the resolutions duly and validly adopted
by the Board of Directors of the Company approving the execution, delivery
and performance of this Agreement, the Registration Rights Agreement, the
Articles Supplementary and the transactions contemplated hereby and
thereby;
(g) COMPANY CERTIFICATE. A certificate of the President of the
Company, dated such Closing Date, certifying that (i) each of the
representations and warranties of the Company contained in Section 4.1
hereof are true and correct as of such Closing Date, (ii) all agreements,
<PAGE>
undertakings and obligations to be performed or complied with by the
Company as of or prior to such Closing, unless waived in writing, have
been duly performed or complied with by the Company in accordance with the
terms of this Agreement and (iii) all conditions set forth in Section 8.1
hereof have been satisfied;
(h) LEGAL OPINION. A legal opinion of McBride Baker & Coles,
counsel to the Company, dated such Closing Date, in the form attached as
EXHIBIT D hereto;
(i) TAX OPINION. A tax opinion of McBride Baker & Coles, tax
counsel to the Company, dated such Closing Date, with respect to the
Company's qualification for taxation as a "real estate investment trust"
under the Code, in the form attached as EXHIBIT E hereto;
(j) MARYLAND OPINION. A legal opinion of Ballard Spahr Andrews
& Ingersoll, Maryland counsel to the Company, dated such Closing Date, in
the form attached as EXHIBIT F hereto;
(k) REGISTRATION RIGHTS AGREEMENT. In the case of the First
Closing, a counterpart of the Registration Rights Agreement and, in the
case of the Second Closing and the Third Closing, an acknowledgement of
the inclusion within the definition of Registrable Shares of the Shares
issued pursuant to such Closing, duly executed by the Company;
(l) SECTION 8.1 CLOSING CONDITIONS. The items required by
Section 8.1 of this Agreement; and
(m) OTHER DOCUMENTS. Copies of any other documents reasonably
requested by the Investors.
3.5 DELIVERIES BY THE INVESTORS. At each of the Closings, each
Investor shall deliver or cause to be delivered to the Company the
following items:
(a) PURCHASE PRICE. Payment by wire transfer of immediately
available funds in the respective amounts set forth under the applicable
"Purchase Price" heading on ANNEX II hereto; and
(b) REGISTRATION RIGHTS AGREEMENT. In the case of the First
Closing, a counterpart of the Registration Rights Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
4.l REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce
each of the Investors to enter into this Agreement and to purchase the
Shares they are purchasing hereunder, the Company represents and warrants
to each of the Investors that:
<PAGE>
(a) ORGANIZATION AND STANDING. The Company is duly incorporated
and validly existing under the laws of the State of Maryland, and has all
requisite corporate power and authority to own or lease its properties and
assets and to conduct its business as it is presently being conducted.
Except as set forth on SCHEDULE 4.1(A) hereto, the Company does not own
any equity interest, directly or indirectly, in any other Person or
business enterprise, has never owned any such equity interest, and has
never operated as a subsidiary or a division of any other Person.
SCHEDULE 4.1(A) sets forth each state other than Illinois in which the
Company maintains an office, has employees, conducts business or owns or
leases property. The Company is qualified to do business and in good
standing in each jurisdiction in which the failure to so qualify could
have a material adverse effect upon its assets, properties, liabilities,
financial condition, results of operations or business.
(b) CAPITALIZATION; SUBSIDIARIES. As of the Closing, except, in
the case of the Second Closing and the Third Closing, as affected by the
exercise or termination of any stock options granted under the Stock
Option Plans, any other Permitted Issuance and the transactions
contemplated hereby, immediately prior to the consummation of the Closing,
the authorized capital stock of the Company consists of (i) 20,000,000
shares of Common Stock, of which 4,824,392 shares are validly issued and
outstanding, fully paid and nonassessable, (ii) 10,000,000 shares of
Preferred Stock, none of which are issued or outstanding, (iii) 687,590
authorized but unissued shares of Common Stock reserved for issuance
pursuant to outstanding but unexercised stock options under the Stock
Option Plans and (iv) 210,128 authorized but unissued shares of Common
Stock reserved for issuance upon the conversion of any Restricted Stock.
Except as described on SCHEDULE 4.1(B) hereto, the Company has no other
equity securities of any class issued, reserved for issuance or
outstanding. Except as provided to the Investors in this Agreement and as
described on SCHEDULE 4.1(B) hereto, there are (i) no outstanding options,
offers, warrants, conversion rights, Contracts, or other rights to
subscribe for or to purchase from the Company, or commitments by the
Company to issue, transfer or sell (whether formal or informal, written or
oral, firm or contingent), shares of capital stock or other securities of
the Company (whether debt, equity, or a combination thereof) or obligating
the Company to grant, extend, or enter into any such agreement or
commitment and (ii) no Contracts or other understandings (whether formal
or informal, written or oral, firm or contingent) which require or may
require the Company to repurchase or otherwise acquire or retire any of
its capital stock. Except as provided pursuant to this Agreement, there
are no pre-emptive or similar rights with respect to the Company's capital
stock, including, without limitation, with respect to the issuance of the
Shares to the Investors and the issuance of Common Stock upon the
conversion of the Restricted Stock. The Company is not a party to, and to
its knowledge, no shareholder of the Company is a party to, any voting
<PAGE>
agreements, voting trusts, proxies or any other agreements, instruments or
understandings with respect to the voting of any shares of the capital
stock of the Company, or any agreement with respect to the
transferability, purchase or redemption of any shares of capital stock of
the Company. The Company has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any of
its capital stock. Except as disclosed on SCHEDULE 4.1(B) hereto, (i)
the Company has no other Subsidiaries, (ii) all of the outstanding shares
of capital stock of each Subsidiary are validly issued, fully paid and
nonassessable and all such shares are owned by the Company, free and clear
of any Lien and (iii) neither the Company nor any of its Subsidiaries is a
partner in any partnership or joint venture.
(c) SHAREHOLDERS OF THE COMPANY. SCHEDULE 4.1(C) hereto sets
forth a true and complete list of the name and number of shares held by
each holder of Common Stock as of the First Closing Date and such holders
collectively constitute all of the holders of record of the outstanding
equity securities of the Company.
(d) CAPACITY OF THE COMPANY; CONSENTS; EXECUTION OF AGREEMENTS.
The Company has all requisite power, authority and capacity to enter into
this Agreement and the Registration Rights Agreement and to consummate the
transactions and obligations contemplated by this Agreement, the
Registration Rights Agreements and the Articles Supplementary. Except as
described on SCHEDULE 4.1(D) hereto, no consent, authorization, approval,
license, permit or order of, or filing with, any Person or Governmental
Authority is required in connection with the execution and delivery of
this Agreement and the Registration Rights Agreement or the consummation
by the Company of the transactions contemplated hereby, thereby and by the
Articles Supplementary. The execution and delivery of this Agreement and
the Registration Rights Agreement by the Company, the performance of the
transactions and obligations contemplated hereby, thereby and by the
Articles Supplementary, including, without limitation, the issuance and
delivery of the Shares to the Investors and the issuance of shares of
Common Stock upon the conversion of Restricted Stock, have been duly
authorized by the Board of Directors of the Company and no other
proceedings on the part of the Company are necessary to consummate the
transactions so contemplated. This Agreement and the Registration Rights
Agreement have been duly executed and delivered by a duly authorized
officer of the Company and constitute valid and legally binding agreements
of the Company, enforceable in accordance with their respective terms.
(e) STATUS OF SHARES. The Shares to be issued and purchased
hereunder, when issued by the Company to the Investors pursuant to the
terms of this Agreement, and the Common Stock to be issued upon the
conversion of the Restricted Stock, will (i) be duly authorized, validly
issued, fully paid and nonassessable, (ii) based in part on the accuracy
of the representations of the Investors contained in Section 4.2 of this
<PAGE>
Agreement, have been issued in compliance with all federal and state
securities laws, and (iii) be free and clear of all Adverse Claims.
(f) CONFLICTS; DEFAULTS. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions and obligations
contemplated hereby, thereby and by the Articles Supplementary will not
(i) violate, conflict with, or constitute a default under any of the terms
or provisions of the Articles of Incorporation, the Bylaws, or any
provisions of, or result in the acceleration of any obligation under, any
Contract, note, debt instrument, security agreement or other instrument to
which the Company is a party or by which the Company or any of its assets
are bound; (ii) result in the creation or imposition of any Liens or
claims upon the assets or equity securities of the Company;
(iii) constitute a violation of any law, statute, judgment, decree, order,
rule or regulation of a Governmental Authority applicable to the Company
or (iv) constitute an event which, after notice or lapse of time or both,
would result in any of the foregoing. The Company is not presently in
violation of its Articles of Incorporation, Bylaws or the Articles
Supplementary. The Company is not presently in default in any material
respect under any of the terms or provisions of any of its Contracts,
notes, debt instruments, security agreements or other instruments, or any
order, judgment or decree relating to it or its business or by which it or
any of its assets is bound, or in default in the payment of any of its
monetary obligations or debts, and there exists no condition or event
which, after notice or lapse of time or both, would result in any such
violation or default.
(g) FINANCIAL STATEMENTS. (i) The audited balance sheets of the
Company as of December 31, 1995, 1994 and 1993 and the related audited
statements of income, changes in stockholders' equity and cash flows for
the years then ended (including the notes thereto) (collectively, the
"Audited Financial Statements") and the interim balance sheets of the
Company as of June 30, 1996 and 1995 and the related interim statements of
income, changes in stockholders' equity and cash flows for the six month
periods then ended (including the notes thereto) (the "Interim Financial
Statements" and, collectively with the Audited Financial Statements, the
"Financial Statements"), true and correct copies of which were previously
delivered to the Investors, were prepared from the books and records kept
by the Company, and present fairly in all material respects the financial
position of the Company as of such dates and the results of its operations
and cash flows for the periods then ended and, except as set forth in the
notes thereto, the Financial Statements were prepared in accordance with
GAAP (except, in the case of the Interim Financial Statements, for normal
year-end adjustments) applied on a consistent basis as of and for the
periods set forth therein. Except as set forth in SCHEDULE 4.1(G) hereto,
the Company has no debts, liabilities or obligations of any nature
whatsoever, whether absolute, accrued, contingent or otherwise, except for
(i) liabilities and obligations reflected on the Financial Statements,
(ii) liabilities and obligations incurred since June 30, 1996 in the
ordinary course of business consistent with past practice for the purchase
or sale of goods, materials or supplies delivered to or by the Company, or
<PAGE>
for services rendered to the Company and (iii) other liabilities and
obligations of the Company's business which, in the aggregate, do not and
will not involve amounts payable by the Company in excess of $50,000.
(h) REPORTS FILED WITH THE SEC. The Company has heretofore
furnished to the Investors complete and accurate copies of its Report on
Form 10, as filed with the SEC on April 29, 1996, together with all
amendments thereto (the "Form 10"), and all other reports or documents
required to be filed by the Company pursuant to Section 13(a) or 15(d) of
the Exchange Act since the filing of the Form 10. At the time of filing,
such reports did not contain any materially false statements or any
misstatement of any material fact and did not omit to state any fact
necessary to make the statements set forth therein not misleading. Since
the filing of its Form 10, the Company has made all filings with the
Commission which it is required to make, and, except as provided on
SCHEDULE 4.1(H), the Company has not received any request from the SEC to
file any amendment or supplement to any of the reports described in this
paragraph.
(i) CHANGES IN CIRCUMSTANCES. Except as set forth on
SCHEDULE 4.1(I) hereto, since December 31, 1995, the Company has not (i)
sold, transferred, or otherwise disposed of any of its properties or
assets outside the ordinary course of its business consistent with past
practice or to any of its Affiliates; (ii) mortgaged, pledged or subjected
to any Lien any of its properties or assets other than in the ordinary
course of its business consistent with past practice; (iii) acquired any
properties or assets outside the ordinary course of its business
consistent with past practice or from any of its Affiliates; (iv)
sustained any material damage, loss or destruction of or to any of its
assets or properties (whether or not covered by insurance); (v) entered
into any transaction or otherwise conducted any business other than in the
ordinary course of its business consistent with past practice; (vi)
modified, amended, cancelled or terminated any Contracts listed or which
are required to be listed on SCHEDULE 4.1(R) hereto or any Employee Plan
under circumstances which could reasonably be anticipated to have a
material adverse effect on the Company's assets, properties, liabilities,
financial condition, results of operations, business or prospects; (vii)
suffered any material adverse change in its assets, properties,
liabilities, financial condition, results of operations, business or
prospects; (viii) declared or paid any dividend or made any other
distribution to its shareholders or repurchased any of its outstanding
capital shares; (ix) made any loan or advance to any Affiliate of the
Company; (x) experienced any material adverse change in its personnel; or
<PAGE>
(xi) agreed to or obligated itself to take any of the actions identified
in clauses (i) through (x) above.
(j) TITLE TO AND SUFFICIENCY OF ASSETS. The properties and
assets of the Company (including, without limitation, the assets and
properties reflected on the Financial Statements) are in good operating
condition and repair (subject to normal wear and tear consistent with the
age of the properties or assets) and are sufficient for all operations of
the Company as currently conducted. The Company has good and marketable
title to all of its tangible and intangible personal properties and
assets, free and clear of any and all Liens except for Permitted Liens and
those disclosed on SCHEDULE 4.1(Z). The Court Office Building and the
Elgin Office Property are in good operating condition and repair (subject
to normal wear and tear consistent with the age of the Court Office
Building and the Elgin Office Property, as applicable) and are sufficient
for all operations currently conducted thereon.
(k) COMPLIANCE WITH LAWS. The Company is not in violation of,
nor do any of its operations violate in any respect, any statute, law or
regulation of any Governmental Authority applicable to the Company, any of
its assets, or the conduct of its business ("Applicable Laws"), the
violation of which reasonably could be anticipated to have a material
adverse effect upon the Company's assets, properties, liabilities,
financial condition, results of operations or business, and no material
expenditures are or, based on present requirements, will be required of
the Company in order for it to comply or remain in compliance with any
Applicable Laws. The operations of the Court Office Building and the
Elgin Office Property do not violate in any respect any Applicable Laws,
the violation of which reasonably could be anticipated to have a material
adverse effect upon the Company's liabilities, financial condition,
results of operations or business, and no material expenditures are or,
based on present requirements, will be required of the Company in order
for it to comply or remain in compliance with any Applicable Laws.
(l) LITIGATION. Except as set forth on SCHEDULE 4.1(L) hereto
(i) the Company is not subject to any order of, or written agreement or
memorandum of understanding with, any Governmental Authority; (ii) there
are no actions, suits, claims, investigations or proceedings pending at
law or in equity or before or by any Governmental Authority, or, to the
best of the Company's knowledge and belief after due inquiry, threatened,
against the Company or adversely affecting the Company or any of its
assets or properties, the Court Office Building, the Elgin Office
Property, any Employee Plan, or the transactions contemplated by this
Agreement, the Registration Rights Agreement or the Articles Supplementary
and, to the best of the Company's knowledge and belief after due inquiry,
there exist no facts or circumstances which reasonably could be
anticipated to result in any such action, suit, claim, investigation or
proceeding; and (iii) no Person has asserted and, to the best of the
<PAGE>
Company's knowledge and belief after due inquiry, no Person has a valid
basis upon which to assert, any claims against the Company which would
adversely affect the transactions contemplated by this Agreement, the
Registration Rights Agreement or the Articles Supplementary or result in
or form the basis of any such action, suit, claim, investigation or
proceeding.
(m) BROKERS, FINDERS AND AGENTS. Except as described on
SCHEDULE 4.1(M) hereto, the Company is not, directly or indirectly,
obligated to anyone acting as broker, finder or in any other similar
capacity in connection with this Agreement or the transactions
contemplated hereby.
(n) TAXES. The Company has timely filed (or there has been
filed on its behalf) all Tax Returns required to be filed under Applicable
Law, or requests for extensions to file such Tax Returns have been timely
filed and granted and have not expired, and all such Tax Returns were at
the time of filing and are as of the date hereof true, correct and
complete in all material respects. The Company has, within the time and
in the manner prescribed by law, paid all Taxes that are currently due and
payable except for those being contested in good faith and for which
adequate reserves have been taken. The Financial Statements reflect
adequate reserves for all Taxes payable by the Company for all the taxable
periods and portions thereof accrued through the respective dates of such
financial statements. Except as set forth on SCHEDULE 4.1(N) hereto, the
statute of limitations for the assessment of all Taxes has expired for all
applicable Tax Returns of the Company or those Tax Returns have been
examined by the appropriate taxing authorities for all periods through the
date hereof, and no deficiency for any Taxes has been proposed, asserted
or assessed against the Company that has not been resolved and paid in
full. The Company is not a party to any pending audit, action or
proceeding, nor, to the knowledge of the Company, is any such audit,
action or proceeding threatened, by any Governmental Authority for the
assessment or collection of any Taxes of the Company or relating to any of
its activities. None of the Company, any of its Subsidiaries or any of
their respective officers (including the employee responsible for Tax
matters) expects any Governmental Authority to assess any additional Taxes
for any period for which Tax Returns have been filed. The Company is not
subject to any agreements, waivers or other arrangements extending the
period for assessment, levy or collection of any Taxes. There are no
Liens for Taxes upon any property or asset of the Company, except for
Permitted Liens. All Taxes which the Company is required by law to
withhold or to collect have been withheld or collected and paid over to
the proper Governmental Authorities or segregated and set aside for such
payment. The Company has not, with regard to any assets or property held,
acquired or to be acquired by it, filed a consent to the application of
Section 341(f) of the Code. The Company is not a party to or bound by any
agreement providing for the allocation or sharing of Taxes with any Person
<PAGE>
except for certain of the Company's real property leases which provide
that the lessee thereunder shall pay all Taxes assessed with respect to
the leased Company Property. The Company has not been a member of any
affiliated or combined group of companies that files a consolidated,
affiliated or other combined group Tax Return (other than a group the
common parent of which was the Company), and the Company has no liability
for the Taxes of any Person (other than any of the Company and its
Subsidiaries) under Treasury Regulation <section> 1.1502-6 (or any similar
provision of state, local or foreign law) as a transferee or successor, by
contract, or otherwise.
(o) EMPLOYEE PLANS. The Company is not and has never been a
party to any collective bargaining agreement or union contract. Except
for the plans as described on SCHEDULE 4.1(O) hereto, (i) the Company has
no employee benefit plans, as defined in the ERISA, or any other welfare,
bonus, deferred compensation, stock option, restricted stock, pension,
profit sharing, severance or fringe benefit plan, formal or informal,
written or oral, covering any employee or former employee of the Company
(collectively, "Employee Plans"), (ii) the Company has never maintained
any such plan with respect to which the Company has any obligations other
than the Employee Plans (the "Prior Employee Plans") and (iii) neither the
Company nor any of its officers or directors has taken any action that
would directly or indirectly obligate the Company to institute any
Employee Plan. The Company has reserved all rights necessary to amend or
terminate each of the Employee Plans. Each Employee Plan and Prior
Employee Plan has been maintained, operated, and administered in
compliance with its terms and in compliance with any and all related
documents or agreements, and in compliance with all applicable laws. Each
Employee Plan and Prior Employee Plan intended to qualify under
Section 401(a) of the Code, is so qualified and has received a favorable
Internal Revenue Service determination letter covering the Tax Reform Act
of 1986, and each trust maintained in connection with each such plan is
tax exempt under Section 501(a) of the Code. All insurance premiums
required to be paid by the Company with respect to any Employee Plan, and
all benefits, expenses and other amounts due and payable by the Company
under any Employee Plan, and all contributions, transfers or payments
required to be made by the Company to any Employee Plan through or before
the Closing Date have been paid, made or accrued as liabilities on the
latest balance sheet included in the Interim Financial Statements. With
respect to any insurance policy providing funding for benefits under any
Employee Plan, there will be no liability of the Company in the nature of
a retroactive rate adjustment arising wholly or partially out of events
occurring prior to the Closing Date. No "prohibited transaction" within
the meaning of Section 406 of ERISA or Section 4975 of the Code, nor any
breach of a duty imposed by Title I of ERISA, (i) which would result in
any material liability to the Company has occurred with respect to any
<PAGE>
Employee Plan or Prior Employee Plan, or (ii) would occur as a result of
the consummation of the transactions contemplated by this Agreement, the
Registration Rights Agreement or the Articles Supplementary. The Company
is a "real estate operating company" within the meaning of Department of
Labor Reg. <section> 2510. 3-101(e). No employee benefit plan intended to
be qualified under Section 401(a) of the Code owns, or, as a result of the
consummation of the transactions contemplated by this Agreement, the
Registration Rights Agreement or the Articles Supplementary will own, more
than 10% of the outstanding Common Stock. Except as described on SCHEDULE
4.1(O), no Employee Plan or Prior Employee Plan (i) is or at any time was
funded through a "welfare benefit fund" as defined in Section 419(e) of
the Code; (ii) is or at any time was subject to Title IV of ERISA; or
(iii) is or at any time was a "multiemployer plan" within the meaning of
Section 3(37) or Section 4001(a)(13) of ERISA, or Section 414(f) of the
Code, or a "multiple employer plan" within the meaning of Section 413(c)
of the Code. Each Employee Plan that is or at any time was subject to the
minimum funding standards of Section 302 of ERISA or Section 412 of the
Code is and has always been in compliance with the requirements of such
sections and has incurred no "accumulated funding deficiency" within the
meaning of such sections. Except as described on SCHEDULE 4.1(O), the
Company is not and has never been under common control with any other
trade or business within the meaning of Section 4001(b)(1) of ERISA, and
the Company has never been treated, along with any other trade or
business, as a single employer for purposes of Section 414(b), 414(c),
414(m), 414(n), or 414(o) of the Code. Each Employee Plan that is a group
health plan is in compliance with and has at all times been in compliance
with (i) the continuation coverage requirements of Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA so as not to result in
any material liability of the Company for any noncompliance, and (ii) the
secondary payer requirements of Section 1862(b)(1) of the Social Security
Act. No Employee Plan provides benefits, including, without limitation,
death or medical benefits, beyond termination of service or retirement
other than coverage mandated by law, group term life insurance proceeds,
group long term disability benefits, death or retirement benefits under
any qualified plan, or any deferred compensation benefits reflected on the
Balance Sheet. No claim for medical expenses has been incurred that would
result in payments under any Employee Plan or Prior Employee Plan in
excess of $25,000. No facts or circumstances exist, no actions have been
taken or omitted to be taken, nothing has occurred, and nothing will occur
as a result of the execution and performance of this Agreement and the
transactions contemplated hereby, such that the Company could be subject
(directly or indirectly) to any material liability for any claims,
judgments, damages, penalties, taxes (including excise taxes), assessments
or similar items with respect to any of the Employee Plans or Prior
Employee Plans covering any employee or former employee of the Company
(other than liability for benefit payments incurred in the normal
operations of any such plan), nor does the Company have any such
liability.
(p) REGISTRATION RIGHTS. Except for the registration rights
granted in the Registration Rights Agreement, the Company has not agreed
to register the sale of any of its securities under the 1933 Act.
<PAGE>
(q) AFFILIATE CONTRACTS. Except as described on SCHEDULE 4.1(Q)
the Company has no Contracts, directly or indirectly, with any employee,
director, officer, shareholder or Affiliate of the Company.
(r) CONTRACTS. SCHEDULE 4.1(R) hereto sets forth each Contract
or other instrument that is of a type described below:
(i) Any Contract, or series of Contracts directly related to the
same matter or project, for capital expenditures or the acquisition or
construction of fixed assets which requires aggregate payments by the
Company in excess of $75,000;
(ii) Any Contract relating to cleanup, abatement or other
actions in connection with environmental liabilities;
(iii) Any indenture, mortgage, loan or credit Contract under
which the Company has borrowed any money or issued any note, bond,
indenture or other evidence of Indebtedness for Borrowed Money, or
guaranteed indebtedness for money borrowed by others;
(iv) Any Contract with any representative, distributor or sales
agent which is not terminable without cost or penalty to the Company
on 90 days' or less notice;
(v) Any Contract under which the Company is (A) a lessee of, or
holds or uses, any real property or any machinery, equipment, vehicle
or other tangible personal property owned by a third party or (B)
except for Company Leases, a lessor of, or makes available for use by
any third party, any real property or any tangible personal property
owned by the Company, in either such case which requires aggregate
annual payments in excess of $75,000;
(vi) Any executory Contract, or series of executory Contracts
directly related to the same matter or project, for the purchase of
materials or services for an aggregate consideration in excess of
$75,000 or which is not terminable by the Company without cost,
penalty or forfeiture;
(vii) Any permits, licenses, authorizations, approvals,
franchises, consents, grants, or similar documents or authority of any
Governmental Authority required or used for the conduct of the
Company's business;
(viii) Any Contracts with any Governmental Authority;
(ix) Any Contracts not made in the ordinary course of business
and involving remaining payments or receipts in excess of $25,000 and
that are not terminable in 90 days or less by the Company without
cost, penalty or forfeiture;
(x) Any Contracts containing a covenant not to compete or
restricting in any material respect the Company's ability to transact
business in any jurisdiction of the United States or a foreign
country;
(xi) Any Contracts or other agreements for indemnification;
<PAGE>
(xii) Any other Contracts material to the assets, properties,
liabilities, financial condition, results of operations, business or
prospects of the Company; and
(xiii) Any Contract or arrangement the performance of which by
the Company, under circumstances now reasonably foreseeable by the
Company, is likely to have a material adverse effect on the assets,
properties, liabilities, financial condition, results of operations,
business or prospects of the Company.
Except as expressly set forth on SCHEDULE 4.1(R) hereto, each Contract
listed or described on SCHEDULE 4.1(R) is a valid and binding obligation
of the Company and is in full force and effect. Except as expressly set
forth on SCHEDULE 4.1(R), the Company has performed all of its material
obligations required to be performed through the date hereof under the
Contracts so listed or described and the Company is not in breach or
default in any respect thereunder nor has any event or circumstance
occurred which, with notice or lapse of time or both, would constitute any
such breach or default, except in any such case for such breaches or
defaults which, individually or in the aggregate, do not, and, insofar as
reasonably can be foreseen, in the future will not, have a material
adverse effect on the assets, properties, liabilities, financial
condition, results of operations, business or prospects of the Company.
To the best of the Company's knowledge and belief after due inquiry, none
of the other parties to such Contracts is in breach or default in any
respect thereunder nor has any event or circumstance occurred which, with
notice or lapse of time or both, would constitute any such breach or
default, except in any such case for such breaches or defaults which,
individually or in the aggregate, do not, and, insofar as reasonably can
be foreseen, in the future will not, have a material adverse effect on the
assets, properties, liabilities, financial condition, results of
operations, business or prospects of the Company.
(s) AFFILIATED TRANSACTIONS. Except as set forth on
SCHEDULE 4.1(S) hereto, no Affiliate of the Company has any interest
(other than as a non-controlling holder of securities of a publicly-traded
company), either directly or indirectly, in any Person (whether as an
employee, officer, director, shareholder, agent, independent contractor,
security holder, creditor, consultant or otherwise) that presently (i)
provides any services or designs, produces or sells any products or
engages in any activity which is the same, similar to or competitive with
any activity or business in which the Company is now engaged; (ii) is a
supplier of, customer of, creditor of, or has an existing contractual
relationship with, the Company; or (iii) has any direct or indirect
<PAGE>
interest in any asset or property used by the Company or any property,
real or personal, tangible or intangible, that is necessary or desirable
for the conduct of the business of the Company.
(t) ENVIRONMENTAL COMPLIANCE. The Company is and has at all
times been in compliance with all applicable federal, state and local
laws, regulations, rules, ordinances, by-laws, orders or determinations
(including permit requirements) relating to the protection of health,
safety or the environment in connection with the ownership, operation and
condition of its properties and business ("Environmental Laws"). The
Company has never been issued any permits, licenses or other
authorizations pursuant to any Environmental Law. The Company has no
knowledge of any facts or circumstances that could adversely affect or
render significantly more costly in the future the Company's compliance
with existing Environmental Laws. Except as disclosed on SCHEDULE 4.1(T),
to the best of the Company's knowledge and belief after due inquiry, no
Contaminant (as such term is defined below) has ever been generated,
handled, discharged, disposed of, released, placed or dumped on or under
any premises or facilities presently or previously owned, leased or used
by the Company or the Court Office Building or the Elgin Office Property,
whether by the Company or any other Person, in a manner that violates any
Environmental Law. Except as disclosed on SCHEDULE 4.1(T), to the best of
the Company's knowledge and belief after due inquiry, no PCB's
(polychlorinated biphenyls), asbestos or underground storage tanks are or
were ever used in the construction or operation of, or located on, the
premises or facilities presently or previously owned, leased or used by
the Company or the Court Office Building or the Elgin Office Property.
For purposes of this Section 4.1(t), the term "Contaminant" means any
pollutant, contaminant, toxic substance, hazardous waste, hazardous
material, hazardous substance, petroleum, crude oil or any fraction
thereof or any other substance regulated by any Environmental Law.
(u) SECURITIES LAWS. No consent, authorization, approval,
permit, or order of or filing with any Governmental Authority is required
for (i) the Company to execute and deliver this Agreement or the
Registration Rights Agreement (ii) the Company to offer, issue, sell or
deliver the Shares, or (iii) the issuance of shares of Common Stock upon
the conversion of the Restricted Stock. Based in part on the accuracy of
the representations of the Investors and under the circumstances
contemplated hereby and under current laws and regulations, the offer,
<PAGE>
issuance, sale and delivery of the Shares to the Investors and the
issuance of shares of Common Stock upon the conversion of the Restricted
Stock is exempt from the prospectus delivery and registration requirements
of the 1933 Act.
(v) ABSENCE OF CERTAIN COMMERCIAL PRACTICES. To the best of the
Company's knowledge and belief after due inquiry, neither the Company nor
any officer, director, employee or agent of the Company (or any Person
acting on behalf of any of the foregoing) has (i) given or agreed to give
any gift or similar benefit of more than nominal value on behalf of the
Company to any customer, supplier, employee or official of any
Governmental Authority (domestic or foreign), to induce the recipient or
his employer to do business, grant favorable treatment or compromise or
forego any claim or (ii) made any significant payment which might be
improper under prevailing laws (regardless of the jurisdiction in which
such payment was made) to promote or retain tenants or properties or to
help, procure or maintain good relations with suppliers.
(w) EMPLOYEE MATTERS. The Company is not aware that any officer
or key employee, or that any group of key employees, intends to terminate
their employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. The
Company is in compliance with all applicable material laws and regulations
respecting labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours, and there are no charges of
employment discrimination or unfair labor practices pending, or, to the
best knowledge of the Company after due inquiry, threatened against, the
Company.
(x) DISCLOSURE. The Company has fully responded to all written
requests for information and has accurately answered, to the best of the
Company's knowledge and belief after due inquiry, all inquiries from the
Investors concerning the Court Office Building, the Elgin Office Property,
and the assets, properties, liabilities, financial condition, results of
operations, business and prospects of the Company, and has not withheld
any facts relating thereto that it reasonably believed to be material with
respect to the Court Office Building, the Elgin Office Property, and the
assets, properties, liabilities, financial condition, results of
operations, business or prospects of the Company. No information in this
Agreement, in any Schedule or Exhibit attached to this Agreement, in the
Registration Right Agreement, in the Offering Memorandum or in any other
document delivered to the Investors in connection herewith, contains any
untrue statement of a material fact or when considered together with all
such information delivered to the Investors omits to state any material
fact necessary in order to make the statements made, in the light of the
circumstances under which they were made, when taken as a whole, not
misleading. There is no fact or circumstance relating to the Company that
materially and adversely affects or in the future may, in the reasonable
business judgment of the Company, be expected materially and adversely to
affect the same which has not been set forth in this Agreement, the
Schedules hereto or the Offering Memorandum.
<PAGE>
(y) REIT QUALIFICATION. Commencing with the Company's taxable
year ended December 31, 1993 and at all times thereafter, the Company has
been, and as of each Closing Date the Company will be, organized and
operated in conformity with the requirements for qualification, and as of
the date hereof for all taxable periods commencing with its taxable year
ended December 31, 1993 has qualified for taxation, as a "real estate
investment trust" under the Code and the rules and regulations thereunder,
and under all income tax laws, rules, regulations and provisions of each
of the states in which it owns property or conducts business (to the
extent that any such state recognizes REIT status). The Company filed
with its federal income tax return for the taxable year ended December 31,
1993 an election to be a "real estate investment trust," and as of the
date hereof such election has not been terminated or revoked. At no time
during the period commencing with the Company's taxable year ended
December 31, 1993, and continuing through the date hereof has the Company
been, and as of the Closing Date the Company will not be, closely held
within the meaning of Section 856(a)(6) and Section 856(h) of the Code.
The Company has at all times during the period commencing with its taxable
year ended December 31, 1993 and continuing through the date hereof (i)
satisfied the 75%, 95% and 30% gross income tests set forth in Section
856(c)(5) of the Code, and (iii) satisfied the 95% distribution
requirements of Section 857(a)(1) of the Code. The Company has for all
taxable periods commencing with its taxable year ended December 31, 1993
complied in full with the provisions of Treasury Regulation
<section> 1.857-8 for the purpose of ascertaining the actual ownership of
the outstanding shares of the Company. At no time during the period
commencing with the Company's taxable year ended December 31, 1993, and
continuing through the date hereof has the Company engaged in any
transaction that would constitute a "prohibited transaction" within the
meaning of Section 857(b)(6)(B) of the Code. As of the close of the
Company's taxable year ended December 31, 1993, the Company had no
earnings and profits accumulated in any "non-REIT year" within the meaning
of Section 857(a)(3). Prior to the commencement of the Company's taxable
year ended December 31, 1993, the Company did not own any assets other
than cash and cash equivalents. Each Subsidiary of the Company is a
"qualified REIT subsidiary" within the meaning of Section 856(i)(2) of the
Code. The issuance of the Shares to the Investors as contemplated by this
Agreement will not jeopardize the status of the Company as a "real estate
investment trust" under the Code and the rules and regulations thereunder.
(z) TITLE TO PROPERTIES. (i) The Company has good and
marketable title in fee simple to all real property owned by it
(individually, a "Company Property" and collectively, the "Company
Properties"), and good and marketable title to all personal property owned
by it that is material to its business, in each case free and clear of all
Liens other than Permitted Liens and those disclosed on SCHEDULE 4.1(Z)
<PAGE>
hereto and those which would not, either individually or in the aggregate,
have a material adverse effect on any Company Property (including the
present maintenance, operation, occupancy or use of any such Company
Property) (collectively, the "Company Permitted Encumbrances").
(ii) GLR No. 1, Inc., an Illinois corporation and a wholly-owned
Subsidiary of the Company, is the holder of a 2.5% general partnership
interest in JMG Fox Valley Limited Partnership, an Illinois limited
partnership ("JMG Fox Valley") free and clear of all Liens. JMG Fox
Valley is a general partner in Elgin Industrial Joint Venture, an
Illinois joint venture ("EIJV") free and clear of all Liens. EIJV has
good and marketable title in fee simple to the Elgin Office Property,
and good and marketable title to all personal property used in
connection with the ownership, maintenance, occupancy, and operation
of the Elgin Office Property in each case free and clear of all Liens
other than Permitted Liens and those disclosed on SCHEDULE 4.1(Z)
hereto and those which would not, either individually or in the
aggregate, have a material adverse effect on the Elgin Office Property
(including the maintenance, operation, occupancy or use of the Elgin
Office Property) (collectively, the "Elgin Office Property Permitted
Encumbrances").
(iii) GLR No. 2, Inc., an Illinois corporation and a wholly-
owned Subsidiary of the Company, is the holder of a 2.5% general
partnership interest in JMG Court Office Center Limited Partnership,
an Illinois limited partnership ("JMG Court Office Center") free and
clear of all Liens. JMG Court Office Center has good and marketable
title in fee simple to the Court Office Building, and good and
marketable title to all personal property used in connection with the
ownership, maintenance, occupancy, and operation of the Court Office
Building in each case free and clear of all Liens other than Permitted
Liens and those disclosed on SCHEDULE 4.1(Z) hereto and those which
would not, either individually or in the aggregate, have a material
adverse effect on the Court Office Building (including the
maintenance, operation, occupancy or use of the Court Office Building)
(collectively, the "Court Office Building Permitted Encumbrances").
(aa) TITLE INSURANCE. Except as set forth on SCHEDULE 4.1(AA)
hereto, an owner's policy of title insurance issued by a nationally
recognized title insurance company in a form and containing coverages
customarily approved and required by institutional investors has been
obtained for each Company Property and if a majority interest in the Elgin
Office Property and/or the Court Office Building are acquired by the
Company, any Subsidiary or any of their Affiliates (other than an officer
or director of the Company), at or prior to such acquisition such title
insurance will be obtained. Except as set forth on SCHEDULE 4.1(AA), each
owner's policy of title insurance insures the fee simple ownership
interest of the Company in each Company Property subject only to the
Company Permitted Encumbrances and is in an amount at least equal to the
sum of (i) the cost of the acquisition of such Company Property and (ii)
for the Company Property located in Oak Brook, Illinois and the Company
<PAGE>
Property located in Springfield, Ohio, the subsequent cost of the
construction and installation of the improvements made by the Company
located on such Company Property (measured at the time of such
construction). The owner's policy of title insurance for the Elgin Office
Property and the Court Office Building will insure the fee simple
ownership interest of the Company in the Elgin Office Property and the
Court Office Building subject only to the Elgin Office Property Permitted
Encumbrances and the Court Office Building Permitted Encumbrances, as
applicable, and will be in the amount at least equal to the sum of (A) the
cost of the acquisition of the Elgin Office Property and the Court Office
Building, as applicable, and (B) the subsequent cost of the construction
and installation of the improvements made by the Company located on the
Elgin Office Property and the Court Office Building, as applicable
(measured at the time of such construction).
(bb) OVER FINANCING. The Company has not incurred any financing
or any portion thereof for the sole purpose of distributing the proceeds
of the same to its stockholders.
(cc) DEFECTS. Except as set forth on SCHEDULE 4.1(CC) hereto,
to the best of the Company's knowledge and belief after due inquiry, there
are no material defects in the improvements located on the Elgin Office
Property, the Court Office Building or any Company Property including,
without limitation, any defect in the foundation, structural systems, roof
or the electrical, plumbing, heating, ventilating or air conditioning
systems included within the improvements located on such Elgin Office
Property, Court Office Building or Company Property and there are no
material repairs or deferred maintenance required to be made thereto.
(dd) CONDEMNATION. Except as set forth on SCHEDULE 4.1(DD)
hereto, there is no pending or, to the best of the Company's knowledge and
belief after due inquiry, threatened public or private condemnation or
similar proceeding affecting the Elgin Office Property, the Court Office
Building or a Company Property or any part thereof that could have a
material adverse effect upon the present maintenance, operation, occupancy
or use of the Elgin Office Property, the Court Office Building or such
Company Property.
(ee) TAXES AND ASSESSMENTS ON COMPANY PROPERTIES. There are no
material unpaid real estate property taxes or assessments due and payable
against the Elgin Office Property, the Court Office Building or a Company
Property. The Company has not received any notice of assessment for
public improvements with respect to or relating to the Elgin Office
Property, the Court Office Building or a Company Property.
<PAGE>
(ff) PROPERTIES AND LEASES. SCHEDULE 4.1(FF) hereto sets forth
a complete and correct list of (i) all Company Properties and (ii) all
leases of the Elgin Office Property, the Court Office Building and the
Company Properties or any part thereof in effect on the date hereof
(individually, a "Company Lease" and collectively, the "Company Leases")
and sets forth a complete and correct description of the following:
(i) the land, building and approximate square footage of the
demised premises under each Company Lease;
(ii) the name of the tenant and any guarantor under each Company
Lease;
(iii) the expiration date of the term of each Company Lease;
(iv) the amount of annual or monthly base rent and additional
rent due under each Company Lease and the amount, or the basis of
calculation thereof, of any scheduled increase or other escalation in
the annual and monthly base rent or additional rent;
(v) any renewal, extension, expansion or cancellation right of
the tenant under each Company Lease; and
(vi) any option or first refusal purchase right of the tenant
under each Company Lease.
There are no leases, tenancies, licenses or other rights of occupancy or
use of the Company Properties or any portion thereof except for the
Company Leases and except as set forth on SCHEDULE 4.1(FF) hereto. Each
Company Lease is valid and enforceable, is in full force and effect, has
not been amended, modified or supplemented except as set forth on SCHEDULE
4.1(FF) hereto, and the tenant thereunder has accepted its demised
premises, is in actual possession in the normal course and has commenced
payment of rent and additional rent, if applicable, therefor. Except as
set forth on SCHEDULE 4.1(FF) hereto, each Company Lease provides that the
tenant thereunder is required to pay all operating expenses, repairs and
maintenance, and taxes and insurance in connection with the maintenance,
ownership, use and occupancy of the Company Property demised thereunder.
The Company is not in default in the payment or performance of any
obligation binding on the Company under a Company Lease and the Company
has not given notice of default to a tenant (which default has not
previously been cured), nor does any condition or event exist that with
the giving of notice or the passage of time, or both, would constitute a
default by the Company or, to the best of the Company's knowledge and
belief after due inquiry, by a tenant under a Company Lease. The Company
does not have any knowledge of any claim, offset, right of recoupment or
defense available to a tenant under a Company Lease. There have been no
material waivers by the Company of any default under or breach of a
Company Lease by a tenant. Except for the Company Mortgages, the Company
has not assigned, pledged, hypothecated or otherwise encumbered any of its
<PAGE>
right, title or interest in and to a Company Lease or any rents payable
thereunder. No tenant has an option or first refusal purchase right under
a Company Lease except as set forth on SCHEDULE 4.1(FF) hereto.
(gg) MORTGAGES. SCHEDULE 4.1(GG) hereto sets forth a complete
and correct list of all mortgages, deeds of trust, deeds to secure debt
and other similar security interests encumbering the Elgin Office
Property, the Court Office Building, and the Company Properties or any
part thereof (individually, a "Company Mortgage" and collectively, the
"Company Mortgages") and sets forth a complete and correct description of
the following:
(i) the Company Property encumbered by each Company Mortgage;
(ii) the name of the obligor, guarantor and the holder of each
Company Mortgage;
(iii) the priority of each Company Mortgage and any mortgage,
deed of trust or other similar instrument that is either prior to or
subordinate to each Company Mortgage;
(iv) the date of each Company Mortgage and any amendment or
modification thereof;
(v) the original principal amount of the debt secured by each
Company Mortgage, the current rate of interest thereunder and the
current outstanding principal balance thereof;
(vi) the maturity date of the debt secured by each Company
Mortgage, the type of debt secured thereby and whether any balloon
payment is due at the maturity of the debt secured thereby;
(vii) the amount of the current monthly payment of interest,
principal or other amounts due under each Company Mortgage and the
amount of any other mandatory principal or other payment due
thereunder prior to the maturity date of the debt secured thereby;
(viii) any amount that has not been disbursed or advanced to the
Company by the holder of a Company Mortgage that such holder is
obligated to disburse or advance;
<PAGE>
(ix) any prepayment premiums with respect to the prepayment
(full or partial) of the debt secured by each Company Mortgage and the
current penalty payable in connection with any such prepayment; and
(x) the amount of any escrow deposits or other deposits or
payments held under each Company Mortgage by the holder of each
Company Mortgage.
There are no mortgages, deeds of trusts, deeds to secure debt or other
similar instruments encumbering the Company Properties or any portion
thereof except for the Company Mortgages. Each Company Mortgage is valid
and enforceable, is in full force and effect, and has not been amended,
modified or supplemented except as set forth in SCHEDULE 4.1(GG) hereto.
All payments, installments and charges due and payable under a Company
Mortgage have been paid in full. The Company has not received notice of
default by the Company (which default has not previously been cured) from
the holder of a Company Mortgage nor, to the best of the Company's
knowledge and belief after due inquiry, does any condition or event exist
which with the giving of notice or the passage of time, or both, would
constitute a default by the Company under a Company Mortgage. Except as
set forth on SCHEDULE 4.1(GG) hereto, the consummation of any of the
transactions contemplated by this Agreement, the Registration Rights
Agreement or the Articles Supplementary will not require the consent or
approval of the holder of a Company Mortgage and will not violate,
conflict with or constitute a default by the Company under a Company
Mortgage or result in a condition or event which with the giving of notice
or the passage of time, or both, would constitute a default by the Company
under a Company Mortgage.
(hh) COMPANY MORTGAGE LOANS. The Company has not made any loans
to others secured by a mortgage, deed of trust, deed to secure debt or
other similar instrument encumbering real property and personalty related
to such real property.
(ii) INVESTMENT COMPANY ACT. The Company is not an "investment
company" or a company "controlled" by "an investment company" within the
meaning of the 1940 Act and the rules and regulations thereunder and is
not deemed to be an "investment company" for purposes of Section 12(d)(1)
of the 1940 Act.
(jj) INSURANCE. The Company: (i) keeps or causes all of its
insurable property or properties (including without limitation, the
Company Properties, the Court Office Building and the Elgin Office
Property) to be kept insured against loss or damage against fire and other
material risks; (ii) maintains public liability insurance against claims
for personal injury, death, or property damage suffered by others upon or
in or about any premises occupied by it or owned by it or occurring as a
result of its maintenance or operation of any automobiles, trucks, or
other vehicle or other facilities (iii) causes public liability insurance
against claims for personal injury, death, or property damage suffered by
<PAGE>
others upon or in or about the Court Office Building and the Elgin Office
Property to be maintained, and (iv) maintains or causes to be maintained
all such workers' compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which it may be engaged in
business. All insurance for which provision has been made in this Section
4.1(jj) is maintained with such insurers, in such amounts and to such
extent as is standard for businesses such as or similar to the Company's
business.
4.2 REPRESENTATIONS OF THE INVESTORS. Each Investor hereby
severally, and not jointly, represents to the Company that:
(a) INVESTMENT INTENT. The Shares to be purchased by such
Investor hereunder are being purchased for its own account or as a
fiduciary for a fiduciary account and not with the view to, or for resale
in connection with, any distribution or public offering thereof within the
meaning of the 1933 Act except (i) in compliance with the 1933 Act and
(ii) that disposition of the Shares shall at all times be within such
Investor's control. Such Investor understands that the Shares have not
been registered under the 1933 Act by reason of their issuance in
transactions exempt from the registration and prospectus delivery
requirements of the 1933 Act pursuant to Section 4(2) thereof. Such
Investor further understands that the certificates representing the Shares
will bear the following legend and agrees that it will hold such Shares
subject thereto:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE.
SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT
TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144
OR RULE 144A UNDER SUCH ACT OR (iii) ANY OTHER EXEMPTION
FROM REGISTRATION UNDER SUCH ACT, PROVIDED THAT IN A
TRANSACTION PURSUANT TO (iii) ABOVE, IF REQUESTED BY THE
COMPANY, AN OPINION OF COUNSEL (WHICH MAY BE INTERNAL
COUNSEL OF THE HOLDER) REASONABLY SATISFACTORY IN FORM AND
SUBSTANCE IS FURNISHED TO THE COMPANY STATING THAT AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Whenever the legend requirement imposed by this Section 4.2(a) shall
terminate or a holder shall provide an opinion of counsel stating
that such legend is no longer required, the respective holders of the
Shares for which such legend requirements have terminated shall be
entitled to receive from the Company, at the Company's expense,
certificates without such legend. In the event any disagreement
arises regarding whether the legend requirement imposed by this
Section 4.2(a) has terminated, the holders of such Shares shall be
entitled to receive from the Company, at the Company's expense,
certificates without such legend if any such holder provides the
<PAGE>
Company with a written opinion of counsel (which may be internal
counsel of such holder) stating that such legend is not, or is no
longer, necessary or required.
(b) CAPACITY OF THE INVESTORS; EXECUTION OF AGREEMENT. Such
Investor has all requisite power, authority and capacity to enter into
this Agreement and the Registration Rights Agreement, and to perform the
transactions and obligations to be performed by it hereunder and
thereunder. This Agreement and the Registration Rights Agreement have
been duly authorized, executed and delivered by it and constitute its
valid and legally binding obligations, enforceable in accordance with
their respective terms.
(c) ACCREDITED INVESTOR. Such Investor is an "accredited
investor" as defined in Rule 501(a) of Regulation D promulgated under the
1933 Act.
(d) SUITABILITY AND SOPHISTICATION. (i) Such Investor has such
knowledge and experience in financial and business matters that it is
capable of independently evaluating the risks and merits of purchasing the
Shares; (ii) it has independently evaluated the risks and merits of
purchasing the Shares and has independently determined that the Shares are
a suitable
investment for it and (iii) it has sufficient financial resources to bear
the loss of its entire investment in the Shares.
(e) SHARES HELD BY EMPLOYEE PLANS. Each of Fortis, Morgan
Stanley and WKZV represents that no more than 860,000 of the Shares to be
purchased by each such Investor will be held by an employee benefit plan
intended to be qualified under Section 401(a) of the Code.
SECTION 5. INDEMNIFICATION
5.l INDEMNIFICATION BY THE COMPANY. Notwithstanding anything in
this Agreement to the contrary, but subject to the other provisions of
this Section 5, the Company shall indemnify, defend, and hold each of the
Investors, each Investor's respective directors, trustees, partners,
officers, employees, manager, members, representatives and Affiliates, and
<PAGE>
each of such partners' and Affiliates' officers, directors, trustees,
partners, employees, representatives and Affiliates, (collectively, the
"Investor Indemnitees") harmless from and against, and shall reimburse
them for, any and all demands, claims, losses, liabilities, damages, costs
and expenses whatsoever (including, without limitation, any fines,
penalties, reasonable fees and disbursements of counsel incurred by the
Investor Indemnitees in investigating or defending any of the foregoing
and other reasonable expenses incurred in investigating or defending any
of the foregoing or enforcing this Agreement, the Registration Rights
Agreement or the Articles Supplementary) (individually a "Loss" and
collectively "Losses") sustained or incurred by an Investor Indemnitee
resulting from or arising in connection with (a) any inaccuracy in or
breach of any of the representations or warranties of the Company set
forth in this Agreement or the Schedules or Exhibits hereto or (b) any
breach by the Company of any of its covenants, obligations, or agreements
contained herein or in the Registration Rights Agreement or the Articles
Supplementary in each case whether or not such loss results from a third
party claim.
5.2 INDEMNIFICATION NOTICE. In the event that (a) an event
occurs which gives an Investor a right to indemnification hereunder or (b)
any third party claim is asserted against a Person with respect to which
such Investor is entitled to indemnification hereunder, such Investor (the
"indemnified party") shall, within 60 days of the later of the occurrence
of the event giving rise to the claim or the date that the indemnified
party learned of such claim, notify the Company (the "indemnifying party")
of such claim by delivery of a written notice describing the claim and
indicating the basis for indemnification hereunder. The indemnifying
party shall have the right, upon written notice to the indemnified party
within 10 days after receipt from the indemnified party of notice of such
claim, to conduct at its expense the defense against such claim in its own
name, or if necessary in the name of the indemnified party. In the event
that the indemnifying party fails to give such notice, it shall be deemed
to have elected not to conduct the defense of the subject claim, and in
such event the indemnified party shall have the right to conduct such
defense and only with the prior consent of the indemnifying party, which
consent shall not be unreasonably withheld, to compromise and settle the
claim. In the event that the indemnifying party does elect to conduct the
defense of the subject claim, the indemnified party shall cooperate with
and make available to the indemnifying party such assistance and materials
as may be reasonably requested by it, all at the expense of the
indemnifying party and the indemnified party shall have the right to
participate in the defense, provided that the indemnifying party will have
the right to compromise and settle the claim only with the prior written
consent of the indemnified party. The indemnified party will have the
right to employ its own counsel in any such action, but the fees, expenses
and other charges of such counsel will be at the expense of such
indemnified party unless (x) the employment of counsel by the indemnified
party has been authorized in writing by the indemnifying party, (y) the
indemnified party has reasonably concluded that there may be legal
defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party or
<PAGE>
(z) the indemnified party reasonably concludes that a conflict or
potential conflict exists between the indemnified party and the
indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified
party), in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the indemnifying party
or parties. Any settlement to which the indemnifying party shall have
consented in writing shall conclusively be deemed to be an obligation with
respect to which the indemnified party is entitled to indemnification
hereunder.
5.3 REMEDIES CUMULATIVE. No specific right, power or remedy
conferred by this Agreement shall be exclusive, and each such right, power
or remedy shall be cumulative and in addition to every other right, power
or remedy, whether conferred hereby or by any security of the Company, now
or hereafter available, at law or in equity, by statute or otherwise.
5.4 REMEDIES NOT WAIVED. No course of dealing between the
Company and the Investors, and no delay in exercising any right, power or
remedy conferred hereby or by any security issued by the Company, or now
or hereafter available at law or in equity, by statute or otherwise, shall
operate as a waiver of or otherwise prejudice any such right, power or
remedy.
<PAGE>
SECTION 6. COVENANTS
The Company covenants and agrees with the Investors to provide
for the following:
6.l FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. The
Company shall deliver the following information to the Investors
(PROVIDED, HOWEVER that, by written notice to the Company each Investor
may elect not to receive any or all of the information that the Company is
required to deliver pursuant to this Section 6.1):
(a) as soon as they become available, (i) but in any event
within 45 days after the close of the fiscal quarter commencing with the
quarter ended June 30, 1996, the Company's Quarterly Report on Form 10-Q
(or any successor form) as filed with the SEC or (ii) if the Company is
not required to file such form with the SEC or does not file such form,
unaudited consolidated balance sheets of the Company as of the end of such
quarter, together with the related unaudited consolidated statements of
income, changes in shareholders' equity and cash flows for such quarter
and for the period from the beginning of the fiscal year to the end of
such quarter setting forth comparative amounts for the previous periods
and (iii) as soon as they become available, but in any event within 60
days after the close of the fiscal quarter commencing with the quarter
ended June 30, 1996, a reconciliation of such results with the budgeted
amounts in comparative form, all in reasonable detail and the statements
as of the end of each fiscal quarter shall be certified by the President
or chief financial officer of the Company to be accurate to the best of
such officer's knowledge, subject to year-end adjustments;
(b) within 15 days after the end of each fiscal quarter
commencing with the quarter ended June 30, 1996, a certificate from the
President or Chief Executive Officer of the Company stating that such
officer has no knowledge of the occurrence or the existence of an Event of
Noncompliance or an event or circumstance that, given notice or lapse of
time, or both, would constitute an Event of Noncompliance, or if an Event
of Noncompliance or such an event or circumstance shall have occurred a
detailed description thereof, together with a brief narrative from the
President or Chief Executive Officer of the Company describing the
critical events of said quarter;
(c) as soon as they become available, but in any event within 90
days after the end of each fiscal year, (i) the Company's Annual Report on
Form 10-K (or any successor form) as filed with the SEC or (ii) if the
Company is not required to file such form with the SEC or does not file
such form, the audited consolidated balance sheets of the Company, as of
the end of such fiscal year, together with the related audited
consolidated statements of income, changes in shareholders' equity and
cash flows for such fiscal year, setting forth in comparative amounts for
the previous fiscal year, all in reasonable detail and duly certified by a
firm of independent public accountants of national standing reasonably
acceptable to the Investors, which accountants shall have given the
<PAGE>
Company an opinion, unqualified as to the scope of the audit, regarding
such statements;
(d) within five days after the Company learns of the
commencement or overtly threatened commencement of any material claim or
suit, legal or equitable, or of any material administrative, arbitration,
or other similar proceeding against the Company, or any of its operations,
assets or properties, written notice of the nature and extent of such suit
or proceeding;
(e) within five days after the Company learns of any
circumstance or event which reasonably can be expected to have a material
adverse effect on the assets, properties, liabilities, financial
condition, results of operations, business or prospects of the Company,
written notice of the nature and extent of such circumstance or event;
(f) at least 15 days prior to the end of each fiscal year of the
Company, commencing with the fiscal year beginning January 1, 1997, an
annual budget for the Company for the next succeeding fiscal year,
prepared in good faith and submitted to the Board of Directors of the
Company, which annual budget shall include monthly capital and operating
expense budgets, cash flow statements, capital expenditure budgets, profit
and loss projections and employee hiring projections;
(g) within two days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Company sends to its shareholders and
copies of all registration statements and all regular, special or periodic
reports which it files with the SEC or with any securities exchange on
which any of its securities are then listed, and copies of all press
releases and other statements made available generally by the Company to
the public concerning material developments in the Company's businesses;
and
(h) within 10 days after an Investor makes a reasonable request
therefor, such other data relating to the business, affairs and financial
condition of the Company.
Each of the financial statements referred to in Sections 6.1(a) and (c)
hereof shall be prepared in accordance with GAAP (except, in the case of
interim financial statements, for normal year-end adjustments)
consistently applied and shall present fairly, in all material respects,
the consolidated financial position of the Company, and the results of its
operations and its cash flows, as of the dates and for the periods stated
therein, subject in the case of the unaudited financial statements to
changes resulting from the normal year-end audit adjustments, none of
which would, alone or in the aggregate, be materially adverse to the
<PAGE>
assets, properties, liabilities, financial condition, results of
operations, business or prospects of the Company.
6.2 INSPECTION AND MEETING. The Company shall, upon receipt of
reasonable notice, permit each of the Investors and any of their
respective representatives to meet with an officer of the Company and to
visit and inspect any of the properties of the Company during normal
business hours, including, without limitation, their respective books and
records (and to make extracts therefrom and copies thereof; PROVIDED,
HOWEVER, that the Investor or its representative shall advise the Company
of any copies made and shall agree that it will not use or disseminate
such information except as reasonably required in connection with the
Investors' rights and benefits under this Agreement) and to discuss the
Company's affairs, finances and accounts with its officers, employees and
independent public accountants.
6.3 MERGER, DISPOSITION OR ACQUISITION. Prior to the
consummation of a Qualifying IPO, the Company shall not, without the
approval of (a) a majority of the independent members of the Board of
Directors and (b) two-thirds of the holders of Common Stock (w) merge into
or with, or consolidate with, any Person, except that a Subsidiary that is
wholly-owned by the Company may merge into the Company in a transaction
where the Company is the surviving corporation or may merge into another
Subsidiary that is wholly-owned by the Company, (x) sell, lease, transfer
or otherwise dispose of all or substantially all of its assets in any
transaction or series of related transactions, (y) dissolve or (z)
liquidate (except for a liquidation effected on or after December 31, 2002
pursuant to the standing resolution of the Board of Directors to such
effect); PROVIDED that any transaction of the type described in this
Section 6.3 that has received the requisite approval prior to the date
hereof, but which transaction has not been consummated prior to the First
Closing Date shall also require the prior approval of the holders of two-
third of the Shares.
6.4 REGISTRATION RIGHTS. The Company shall not give to any
Person the right to cause a registration with the SEC of the sale of such
Person's securities without the prior written consent of the Investors if
such right is equal to or greater than, conflicts with, or precedes in
time the registration rights granted to the Investors in the Registration
Rights Agreement.
6.5 USE OF PROCEEDS. The Company shall use all proceeds
received from the Investors in connection with the issuance and sale of
the Shares hereunder to repay outstanding indebtedness as described
on SCHEDULE 6.5 hereto and for general corporate purposes, including
costs associated with acquisitions.
<PAGE>
6.6 NO CONFLICTS OF INTEREST. All transactions by and between
the Company and any officer or employee whose annual cash compensation
exceeds $20,000, or by and between the Company and any shareholder of the
Company or any Person(s) controlled by or affiliated with any such
officer, employee or shareholder, shall be conducted on an arm's-length
basis, shall be on terms and conditions no less favorable to the Company
than could be obtained from unrelated Persons and (except for transactions
involving changes to such Person's compensation where the aggregate annual
compensation to such Person does not exceed $75,000) shall be approved in
advance by a majority of the directors then serving on the Board of
Directors or a committee of the Board of Directors to which such
responsibility has been delegated after full disclosure of the terms
thereof, for which purpose the interested party, if a director, and any
Affiliate of the interested party who is a director, shall not be entitled
to vote.
6.7 BOARD OF DIRECTORS MEETINGS; NOMINEES; OBSERVERS. (a) The
Company shall ensure that meetings of the Board of Directors are held
regularly, but in no event less than four times per year, and shall
reimburse members of the Board of Directors for their reasonable travel
expenses, including the cost of air fare and any necessary meals and
lodging, incurred in connection with attending meetings of the Board of
Directors or performing such other business on behalf of the Company as
may be approved by the Company in advance.
(b) Each of Fortis, Morgan Stanley and WKZV shall be entitled to
designate one individual to be nominated as a member of the Board of
Directors and the Company shall recommend each such nominee for election
to the Board of Directors; PROVIDED, HOWEVER, that the Company not be
obligated to nominate or recommend more than three representatives of the
Investors for election to the Board of Directors pursuant to this Section
6.7(b) and PROVIDED FURTHER that after the consummation of the Third
Closing, the Company shall not be required to nominate a representative of
such Investor unless such Investor holds at least 750,000 shares of Common
Stock or 5% of the issued and outstanding shares of Common Stock. At
least 60 days prior to the date the Company submits nominees for the Board
of Directors to its shareholders, the Company shall notify each Investor
entitled to have a representative nominated hereunder and thereafter such
Investor shall have 30 days to submit the name of such Investor's nominee,
together with such other information regarding such nominee as reasonably
requested by the Company in order to prepare the related proxy statement.
(c) In the event that an Investor does not have a representative
on the Board of Directors, the Company shall permit one representative of
such Investor to attend, but not vote, as an observer at each meeting of
the Board of Directors or any committee of the Board of Directors
empowered to act with the full authority of the Board of Directors,
<PAGE>
including telephone meetings; PROVIDED, HOWEVER that the rights hereunder
shall not be transferable to more than one Person and PROVIDED FURTHER
that such Person shall hold at least 200,000 shares of Common Stock. The
Company shall cause notice of any meeting of the Board of Directors or any
such committee of the Board of Directors to be delivered to any such
observer representative identified by an Investor at the same time and in
the same manner as notice is given to the members of the Board of
Directors. Such representative will be entitled to receive all written
materials given to the members of the Board of Directors in connection
with such meetings at the time such materials and information are given to
the Board of Directors. The Company shall reimburse such representatives
for their reasonable out-of-pocket expenses incurred in connection with
attending meetings of the Board of Directors.
6.8 MAINTENANCE OF CORPORATE EXISTENCE AND PROPERTIES. (a) The
Company shall preserve, renew and keep in full force and effect its
corporate existence and qualification in requisite jurisdictions and all
rights and privileges necessary or desirable for the normal conduct of its
business or to permit the Company to comply with the terms of this
Agreement, the Registration Rights Agreement and the Articles
Supplementary.
(b) The Company shall maintain and keep, or cause to be
maintained and kept, its properties used in the operation of its business
in good repair and working order (normal wear and tear excepted), and from
time to time make, or cause to be made, all repairs, renewals and
replacements which in the Company's opinion are necessary and proper so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
6.9 FURTHER ASSURANCES. The Company shall cure promptly any
defects in the creation and issuance of the Shares, and in the execution
and delivery of this Agreement and the Registration Rights Agreement. The
Company, at its expense, shall promptly execute and deliver to each
Investor upon reasonable request all such other and further documents,
agreements and instruments in compliance with or pursuant to its covenants
and agreements herein, and shall make any recordings, file any notices and
obtain any consents as may be reasonably necessary or appropriate in
connection therewith.
6.10 TAXES AND ASSESSMENTS; COMPLIANCE WITH LAWS. (a) The
Company shall pay and discharge, before the same become delinquent and
before penalties accrue thereon, all Taxes upon or against the Company, or
any of its respective properties, and all other material liabilities at
any time existing, except to the extent and so long as (i) the same are
being contested in good faith and by appropriate proceedings in such
manner as not to cause any material adverse effect upon the Company,
including, with limitation, any material adverse effect upon the ability
of the Company to comply with this Agreement, the Registration Rights
Agreement or the Articles Supplementary, or the loss of any right of
redemption from any sale thereunder and (ii) the Company shall have set
aside on its books adequate reserves with respect thereto.
<PAGE>
(b) The Company will promptly comply with all laws, ordinances
or governmental rules and regulations to which it is subject, except to
the extent and so long as applicability of the same are being contested in
good faith and by appropriate proceedings in such a manner as not to cause
any material adverse effect upon the ability of the Company to comply with
this Agreement, the Registration Rights Agreement or the Articles
Supplementary, or the loss of any right of redemption from any sale
thereunder.
6.11 CONTINUED QUALIFICATION AS A REIT. From and after the date
hereof, the Company will maintain its qualification for taxation as a
"real estate investment trust" under the Code and the rules and
regulations thereunder and under all applicable state income tax laws,
rules, regulations and provisions. The Company will make dividend
distributions during each of the Company's taxable years sufficient to
satisfy the distribution requirement of Section 857(a)(1) of the Code.
6.12 ISSUANCE OF SECURITIES. Prior to the consummation of a
Qualifying IPO or a Qualifying Non-IPO Liquidity Event, except for
Permitted Issuances, the Company shall not, without the prior written
consent of each Section 16 Person, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of any Preferred
Stock, Common Stock or other shares of its capital stock, or other
securities exchangeable for or convertible into Preferred Stock, Common
Stock or other capital shares, or grant any options or other rights that
are exercisable for or convertible into Preferred Stock, Common Stock or
other shares of its capital stock. In addition, prior to the
effectiveness of a registration statement that was filed with the SEC by
the Company pursuant to the terms of the Registration Rights Agreement
covering the sale of the Registrable Shares, the Company shall not issue
or enter into any agreement providing for the issuance of any Preferred
Stock or any other securities ranking prior to the Common Stock or any
other securities exchangeable for or convertible into Preferred Stock or
such other securities.
6.13 ANTI-DILUTION PROVISION. (a) Prior to the consummation of
a Qualifying IPO, except for Permitted Issuances, upon the occurrence of
an Anti-Dilution Event, each non-Section 16 Person shall be entitled to
receive additional shares of Common Stock to be issued by the Company to
the extent necessary to cause the average per share price of such Person's
investment in the Common Stock, including, for purposes of this
calculation, any shares of Common Stock issued upon conversion of the
Restricted Stock, to equal the lowest gross per share price received by
the Company pursuant to such Anti-Dilution Event; PROVIDED, HOWEVER, that
if, in connection with any issuance to which this Section 6.13(a) applies,
any Section 16 Person receives consideration different from that which
they would have received if this Section 6.13(a) applied to them, each
non-Section 16 Person shall be entitled to receive similar proportionate
consideration (based on a comparison of the number of shares purchased
<PAGE>
pursuant to this Agreement of such non-Section 16 Person and such Section
16 Person) in exchange for the Common Stock each non-Section 16 Person
would have otherwise received pursuant to this Section 6.13(a).
(b) NETTING OF SHARE ISSUANCE. If Common Stock is issued to an
Investor as a result of an Anti-Dilution Event, the number of Restricted
Shares then held by such Investor, if any, shall be reduced by the number
of shares of Common Stock issued to such Investor pursuant to such Anti-
Dilution Event. If in connection with an Anti-Dilution Event, any
Investor receives consideration other than Common Stock, the number of
Restricted Shares then held by such Investor, if any, shall be reduced by
the number of shares of Common Stock that would have been issuable to such
Investor if Section 6.13(a) had been applied.
6.14 RIGHTS OF FIRST REFUSAL. Except for a Permitted Issuance,
in the event that the Company intends to issue any equity securities prior
to the consummation of a Qualifying IPO or a Qualifying Non-IPO Liquidity
Event, each non-Section 16 Person shall have the first right to purchase a
ratable portion of such shares equal to the percentage participation in
the purchase of the Shares pursuant to this Agreement of such non-Section
16 Person. Such rights of first refusal shall be exercisable within 30
days after each Investor receives notice of such issuance, initially on a
pro rata basis, and, to the extent that such additional shares are not
purchased by other Investors, any remaining shares, subject to allocation
in accordance with each Investor's percentage participation in the
purchase of the Share pursuant to this Agreement; PROVIDED, HOWEVER, that
if, in connection with any issuance to which this Section 6.14 applies,
any Section 16 Person receives consideration different from that which
such Section 16 Person would have received if this Section 6.14 were
applied to such Section 16 Person, each non-Section 16 Person shall be
entitled to receive similar consideration (based on a comparison of the
number of Shares purchased pursuant to this Agreement of such non-Section
16 Person and such Section 16 Person) on a ratable basis rather than the
shares that such non-Section 16 Person would have been entitled to
purchase pursuant to this Section 6.14.
6.15 CONFLICTING AGREEMENTS. The Company shall not enter into
or become subject to any amendment to its Articles of Incorporation,
Bylaws or the Articles Supplementary or enter into or become subject to
any Contract or instrument which by its terms would (in any such case and
under any circumstances) restrict the Company's right to perform any of
the provisions of this Agreement, the Registration Rights Agreement or the
Articles Supplementary.
<PAGE>
6.16 BOOKS OF ACCOUNT. The Company shall keep books of record
and account in which full, true and correct entries are made of all of its
and their respective dealings, business and affairs, in accordance with
GAAP consistently applied.
6.17 DIRECTOR LIABILITY INSURANCE. The Company shall maintain
directors and officers' liability insurance in an amount not less than
$3,000,000 to cover any nominee of any of the Investors who has been
elected to the Board of Directors pursuant to Section 6.7(b) hereof.
6.18 BYLAWS. The size of the Board of Directors shall not
exceed 10 members except as provided by Section 7.2 hereof.
6.19 EXPIRATION OF COVENANTS. The covenants of the Company
contained in this Section 6 shall expire upon the occurrence of the
closing of a Qualifying IPO or a Qualifying Non-IPO Liquidity Event.
6.20 CONTINUED EXISTENCE AS A REAL ESTATE OPERATING COMPANY.
From and after the date hereof, and prior to the consummation of a
Qualifying IPO, the Company will maintain its status as a "real estate
operating company" within the meaning of ERISA and Labor Reg.
<section> 2510.3-101(e).
SECTION 7. EVENTS OF NONCOMPLIANCE.
7.1 EVENTS OF NONCOMPLIANCE. Prior to the closing of a
Qualifying IPO or a Qualifying Non-IPO Liquidity Event, the following
events shall be Events of Noncompliance for purposes of this Agreement:
(a) the Company shall have been declared in default under any
covenant or agreement in any material Contract, note, bond, indenture,
loan agreement, or other instrument evidencing or related to any material
amount of Indebtedness for Borrowed Money of the Company, such default
shall not have been waived, and such default shall have caused the payment
terms of such Indebtedness for Borrowed Money to be accelerated; or
(b) (i) any representation or warranty made by the Company in
this Agreement or any of the Schedules hereto shall prove to have been
untrue or incorrect in any material respect as of the Closing Date and, in
the reasonable judgment of the Investors, such breach has a material
adverse effect on the Company or the value of the Shares or (ii) any
report, certificate, financial statement, financial schedule, or other
document prepared or purported to be prepared by the Company or any of its
officers and furnished or delivered pursuant to this Agreement or
hereafter shall prove to contain a material misrepresentation, or shall
prove to have had intentionally omitted from it any material fact
necessary to make the information provided therein, when taken as a whole,
not misleading; or
<PAGE>
(c) the Company shall fail to perform or comply with any of its
covenants and agreements contained in this Agreement, the Registration
Rights Agreement or the Articles Supplementary and such failure (i) shall
have continued unremedied for a period of 20 days after the earlier of (A)
the date on which the Company should have given notice thereof in
accordance with Section 7.3 hereof or (B) the date on which the Company
receives notice thereof from an Investor or (ii) is the third such failure
since the date of this Agreement; or
(d) the Company shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit or
creditors, or any proceeding shall be instituted by or against the Company
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief,
or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and,
in the case of any such proceeding instituted against the Company (but not
instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for
relief against, or the appointment of a receiver, trustee, custodian or
similar official for, it or for any substantial part of its property)
shall occur, or the Company shall take any corporate action to authorize
any of the actions set forth above in this subsection.
7.2 REMEDIES UPON AN EVENT OF NONCOMPLIANCE. Upon the
occurrence of an Event of Noncompliance, then, unless such Event of
Noncompliance shall have been waived in the manner provided in Sections
9.2 and 9.12 hereof, in addition to all other remedies that may be
available to them at law or in equity in accordance with Section 7.4
hereof, the size of the Board of Directors shall be automatically
increased to 15 members and the Investors, voting ratably in accordance
with their interests in the Shares, shall be entitled to designate the
Persons to fill the vacancies on such enlarged Board of Directors;
PROVIDED, HOWEVER, that any Investor by notice to the other Investors may
elect not to participate in the designation of any member of the Board of
Directors pursuant to this Section 7.2; and PROVIDED, FURTHER that, in the
case of an Event of Noncompliance under Sections 7.1(b) or (c) hereof,
prior to the Investors' designation of the additional members of the Board
of Directors, the Investors shall use reasonable efforts to discuss the
circumstances surrounding such Event of Noncompliance with the then
existing non-management members of the Board of Directors.
7.3 NOTICE OF NONCOMPLIANCE. When any Event of Noncompliance
has occurred or exists, the Company shall give written notice to the
Investors within five business days after such Event of Noncompliance has
occurred or begun to exist.
<PAGE>
7.4 SUITS FOR ENFORCEMENT. The parties hereto agree that upon
an Event of Noncompliance a remedy at law would not be adequate. In case
any one or more Events of Noncompliance shall have occurred and be
continuing, unless such Events of Noncompliance shall have been waived in
the manner provided in Sections 9.2 and 9.12 hereof, the Investors may
proceed to protect and enforce their rights under this Section 7 by suit
in equity or action at law, including, without limitation, by suit for
specific performance or injunctive relief. It is agreed that if the
Investors prevail in any such action, the Investors shall be entitled to
receive from the Company all reasonable fees, costs, and expenses incurred
by them, including, without limitation, such reasonable fees and expenses
of attorneys (whether or not litigation is commenced) and reasonable fees,
costs, and expense of appeals.
7.5 REMEDIES CUMULATIVE. No specific right, power, or remedy
conferred by this Agreement shall be exclusive, and each such right,
power, or remedy shall be cumulative and in addition to every other right,
power, or remedy, whether conferred hereby or by any security of the
Company or now or hereafter available, at law or in equity, by statute or
otherwise.
7.6 REMEDIES NOT WAIVED. No course of dealing between the
Company and the Investors, and no delay in exercising any right, power, or
remedy conferred hereby or by any security issued by the Company, or now
or hereafter available at law or in equity, by statute or otherwise, shall
operate as a waiver of or otherwise prejudice any such right, power, or
remedy.
SECTION 8. CONDITIONS TO CLOSINGS.
8.l CONDITIONS TO CLOSING BY THE INVESTORS. The obligations of
the Investors to consummate the purchase of the Shares pursuant to Section
2 hereof and certain of the transactions contemplated by this Agreement
are subject to the satisfaction on or prior to each Closing of the
following conditions, any of which may be waived in whole or in part in
writing by all of the Investors purchasing Shares in such Closing:
(a) all representations and warranties of the Company contained
in this Agreement shall be true and correct as of the date of this
Agreement and as of each Closing Date as though made anew as of such date;
(b) the Company shall have delivered to the Investors the items
required by Section 3.4 of this Agreement;
(c) each of the other Investors shall have purchased and paid at
each Closing for the Common Stock to be acquired by it on each Closing
Date;
<PAGE>
(d) the Company shall have paid the costs, expenses, taxes and
fees identified in Section 9.3 of this Agreement;
(e) the Company shall have performed and complied with all
agreements and conditions required by this Agreement to be performed and
complied with by it prior to or as of each Closing;
(f) each Investor's purchase of the Shares shall be permitted by
the laws and regulations of the jurisdiction to which such Investor is
subject (including, without limitation, Section 5 of the 1933 Act), and
credit controls (whether voluntary or mandatory) or similar restraints
applicable to such Investor shall not subject such Investor to any tax,
penalty, liability or other onerous condition under or pursuant to any
Applicable Law, and shall not be enjoined (temporarily or permanently)
under, prohibited by or contrary to any injunction, order or decree
applicable to such Investor;
(g) (i) No legislation, order, rule, ruling or regulation shall
have been made by or on behalf of any Governmental Authority, nor shall
any legislation have been introduced and favorably reported for passage to
either House of Congress by any committee of either such House to which
such legislation has been referred for consideration, nor shall any
decision of any court of competent jurisdiction within the United States
have been rendered that, in any Investor's reasonable judgment, could
materially and adversely affect any of the Shares or any part thereof as
an investment and (ii) there shall be no action, suit, investigation or
proceeding pending or threatened, against or affecting any of the Company,
the Investors, any of their respective properties or rights, or any of
their Affiliates, associates, officers, trustees or directors, before any
court, arbitrator or administrative or governmental body that (A) seeks to
restrain, enjoin, prevent the consummation of or otherwise affect the
transactions contemplated by this Agreement, the Registration Rights
Agreement or the Articles Supplementary or (B) questions the validity or
legality of any such transactions or seeks to recover damages or to obtain
other relief in connection with any
such transactions, and, to each Investor's knowledge, there shall be no
valid basis for any such action, proceeding or investigation;
(h) all pre-issuance registrations, qualifications, permits, and
approvals required, if any, under applicable state securities laws for the
lawful execution and delivery of this Agreement and the offer, sale,
issuance, and delivery of the Common Stock shall have been obtained;
(i) each of the representatives nominated by Fortis, Morgan
Stanley and WKZV shall have been elected to be members of the Board of
Directors effective no later than the consummation of the First Closing;
<PAGE>
(j) the Articles Supplementary shall have been filed with and
accepted by the Department of Assessments and Taxation of the State of
Maryland;
(k) the Company shall have obtained the consents described on
SCHEDULE 4.1(D); and
(l) the Company shall have or shall have caused to be duly made
the appropriate filings with Standard & Poor's CUSIP Service Bureau, as
agent for the National Association of Insurance Commissioners, in order to
obtain a private placement number for the Shares.
8.2 CONDITIONS TO CLOSING BY THE COMPANY. The obligations of
the Company to consummate the issuance and sale of the Shares pursuant to
Section 2 hereof and certain of the transactions contemplated by this
Agreement are subject to the satisfaction on or prior to the Closing Date
of the following conditions, any of which may be waived in whole or in
part in writing by the Company:
(a) all representations of the Investors contained in this
Agreement shall be true and correct as of the date of this Agreement and
as of each Closing Date as though made anew as of such date;
(b) the Investors shall have delivered to the Company the items
required by Section 3.5 of this Agreement; and
(c) all pre-issuance registrations, qualifications, permits, and
approvals required, if any, under applicable state securities laws for the
lawful execution and delivery of this Agreement and the offer, sale,
issuance, and delivery of the Common Stock shall have been obtained.
SECTION 9. MISCELLANEOUS
9.1 TERMINATION. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time by
the mutual written consent of the Company and each of the Investors.
There shall be no further obligation hereunder on the part of the parties
hereto if this Agreement shall be so terminated; PROVIDED, HOWEVER, that
the termination of this Agreement pursuant to this Section 9.1 shall not
relieve any party of any liability for breach of any representation,
warranty or covenant contained herein prior to the date of such
termination.
9.2 WAIVERS AND AMENDMENTS. This Agreement may be amended or
modified in whole or in part only by a writing which makes reference to
this Agreement and, if entered into prior to the Third Closing Date,
executed by all of the parties to this Agreement or, if entered into on or
after the Third Closing Date, executed by the Investors as and to the
<PAGE>
extent required by Section 9.12 hereof and the Company. The obligations
of any party hereunder may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the party claimed to have given the waiver; PROVIDED, HOWEVER,
that any waiver by any party of any violation of, breach of, or default
under any provision of this Agreement or any other agreement provided for
herein shall not be construed as, or constitute, a continuing waiver of
such provision, or waiver of any other violation of, breach of or default
under any other provision of this Agreement or any other agreement
provided for herein.
9.3 COSTS, EXPENSES AND TAXES. Whether or not all or any part
of the Shares are purchased by the Investors pursuant to this Agreement,
the Company agrees to pay all costs and expenses of the Investors in
connection with the preparation, execution, and delivery of this Agreement
and other instruments and documents to be delivered hereunder and
thereunder, including, without limitation, the reasonable fees and
expenses of Jones, Day, Reavis & Pogue, counsel to the Investors, and the
reasonable fees and expenses of an engineering firm or an environmental
consultant, PROVIDED THAT the aggregate costs of such firm and consultant
shall not exceed $20,000 without the Company's written consent. In
addition, the Company agrees to pay on demand all out-of-pocket expenses
of the Investors, including without limitation, the reasonable fees and
out-of-pocket expenses of legal counsel, independent public accountants,
and other outside experts reasonably retained by the Investors in
connection with any amendments, waivers or consents pursuant to the
provisions of this Agreement, the Registration Rights Agreement or the
Articles Supplementary (whether or not the same are actually executed and
delivered), including, without limitation, such amendments, waivers or
consents resulting from any work-out, renegotiation or restructuring
relating to the performance by the Company of its obligations under this
Agreement, the Registration Rights Agreement or the Articles
Supplementary. The Company shall also pay any and all stamp and other
taxes payable or determined to be payable in connection with the execution
and delivery of this Agreement and the other instruments and documents to
be delivered under this Agreement, and the transactions contemplated
hereby and agrees to save the Investors harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and filing fees following demand therefor by
the Investors.
9.4 ENTIRE AGREEMENT. This Agreement, the Registration Rights
Agreement, the Articles Supplementary and the other agreements and
instruments expressly provided for herein, together set forth the entire
<PAGE>
understanding of the parties hereto and supersede in their entirety all
prior contracts, agreements, arrangements, communications, discussions,
representations, and warranties, whether oral or written, among the
parties.
9.5 GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the internal substantive laws
of the State of Illinois without giving effect to the principles of
conflicts of law thereof.
9.6 NOTICES. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall become
effective (a) upon personal delivery thereof, including, without
limitation, by prepaid overnight mail or courier service, (b) in the case
of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of
notice by telecopy, upon confirmation of receipt thereof, in each case
addressed.
If to the Company:
Great Lakes REIT, Inc.
823 Commerce Drive
Suite 300
Oak Brook, Illinois 60521
Attention: Richard A. May
Telecopy No.: (630) 368-2929
with a copy of each notice to the Company to:
McBride, Baker & Coles
500 West Madison Street
Chicago, Illinois 60661-2511
Attention: Anne Hamblin Schiave
Telecopy No.: (312) 993-9350
<PAGE>
If to Fortis, at:
Fortis Benefits Insurance Company
c/o Fortis Advisers, Inc.
1 Chase Manhattan Plaza
41st Floor
New York, New York 10005
Attention: James J. Brinkerhoff
Jerome A. Atkinson, Esq.
Telecopy No.: (212) 859-7069
If to Morgan Stanley, at:
Morgan Stanley Institutional Fund, Inc. -
U.S. Real Estate Portfolio
Morgan Stanley SICAV Subsidiary SA
c/o Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
21st Floor
New York, New York 10020
Attention: Ted Bigman
Telecopy No.: (212) 296-7536
If to WKZV, at:
Wellsford Karpf Zarrilli Ventures, L.L.C.
201 Hamilton Road
Ridgewood, New Jersey 07450
Attention: Edward Lowenthal
Telecopy No.: (201) 445-3875
with a copy of each notice to WKZV to:
Wellsford Group
610 Fifth Avenue
New York, New York 10020
Attention: Edward Lowenthal
Telecopy No.: (212) 333-2323
If to NML, at:
Logan, Inc.
c/o The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Real Estate Department
Telecopy No.: (414) 299-1557
<PAGE>
If to Pension Trust Account No. 104972 Held by Bankers Trust Company as
Trustee, at Fidelity, at:
Pension Trust Account No. 104972
Held by Bankers Trust Company as Trustee
c/o Fidelity Management & Research Co.
82 Devonshire Street - F9D
Boston, Massachusetts 02109
Attention: Tom Lavin
Telecopy No.: (617) 476-7250
with a copy of each notice to Fidelity to:
Fidelity Management & Research Co.
82 Devonshire Street - E20E
Boston, Massachusetts 02109
Attention: Robert Gervis
Telecopy No.: (617) 476-7774
and to:
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Attention: Laura Hodges Taylor
Telecopy No.: (617) 227-8591
with a copy of each notice to any Investor to:
Jones, Day, Reavis & Pogue
77 West Wacker
Suite 3500
Chicago, Illinois 60601-1692
Attention: Timothy J. Melton
Telecopy No.: (312) 782-8585
Any party by written notice to the others may change the address of the
persons to whom notices or copies thereof shall be directed.
9.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all
of which together will constitute one and the same instrument.
9.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign
or transfer its rights hereunder without the prior written consent of the
Investors. Each of the Investors shall be entitled to assign all of its
rights, benefits and obligations hereunder to any Person that acquires
Shares from such Investor without the prior consent of any party and such
<PAGE>
Person shall become an Investor and be entitled to all rights and benefits
of an Investor hereunder. Promptly following any such assignment, the
Investor(s) shall provide the Company with written notice of such
assignment.
9.9 THIRD PARTIES. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any
person or entity other than the parties hereto any rights or remedies
under or by reason of this Agreement.
9.10 SCHEDULES AND EXHIBITS. The schedules and exhibits
attached to this Agreement are incorporated herein and shall be part of
this Agreement for all purposes.
9.11 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement.
9.12 CONSENT OF INVESTORS. Whenever this Agreement requires or
otherwise provides for the written consent of the Investors, unless a
greater or lesser percentage is specified, the written consent of the
Investors holding at least 66 2/3 % of the Shares then held by all the
Investors shall constitute the written consent of the Investors; PROVIDED
HOWEVER, that Section 6.12 hereof may not be waived, modified or amended
except by a writing signed by all of the Section 16 Persons.
[signatures appear on next page]
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed, or have
caused their duly authorized officer or representative to execute, this
Agreement as of the date first above written.
GREAT LAKES REIT, INC.,
a Maryland corporation
By:/S/ RICHARD A. MAY
---------------------------
"FORTIS"
FORTIS BENEFITS INSURANCE
COMPANY, a Minnesota
corporation
<TABLE>
<CAPTION>
<S> <C> <C>
By: FORTIS ADVISERS,
INC., UNDER
POWER OF ATTORNEY
By:/S/ JAMES J. BRINKERHOFF
--------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C><C>
"MORGAN STANLEY"
MORGAN STANLEY INSTITUTIONAL
FUND, INC. - U.S. REAL ESTATE
PORTFOLIO, a Maryland
corporation
By: MORGAN STANLEY ASSET
MANAGEMENT INC., AS
INVESTMENT ADVISER
By:/S/ RUSSELL C. PLATT
---------------------------
MORGAN STANLEY SICAV SUBSIDIARY
SA, a Luxembourg corporation
By: MORGAN STANLEY ASSET
MANAGEMENT INC., AS
INVESTMENT ADVISER
By:/S/ RUSSELL C. PLATT
--------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
"WKZV"
WELLSFORD KARPF ZARRILLI
VENTURES, L.L.C., a Delaware
limited liability company
By:/S/ FREDERICK P. ZARRILLI
------------------------------
"NML"
LOGAN, INC., a Delaware
corporation
By:/S/ LOIS A. SMITH
------------------------------
"FIDELITY"
PENSION TRUST ACCOUNT NO. 104972
HELD BY BANKERS TRUST COMPANY
AS TRUSTEE
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
By: FIDELITY MANAGEMENT TRUST
COMPANY, UNDER POWER OF
ATTORNEY
By:/S/ THOMAS P. LAVIN
--------------------------------
Its: VICE PRESIDENT
--------------------------------
</TABLE>
<PAGE>
ANNEX I
GREAT LAKES REIT, INC.
ARTICLES SUPPLEMENTARY
Great Lakes REIT, Inc., a corporation organized and existing
under the laws of the State of Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to the authority granted to and vested in the
Board of Directors of the Corporation (the "Board of Directors") in
accordance with Article Third of the charter of the Corporation, including
these Articles Supplementary (the "Charter"), the Board of Directors
adopted resolutions reclassifying 210,128 shares (the "Shares") of
Preferred Stock (as defined in the Charter) as a separate class of stock,
Class A Convertible Preferred Stock, $.01 par value per share (the "Class A
Preferred Stock"), with the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends or other
distributions, qualifications, and terms and conditions of redemption set
forth below. Upon any restatement of the Charter, the immediately
following heading and Sections A through K of this Article FIRST shall
become Section A(3) of Article THIRD of the Charter.
CLASS A CONVERTIBLE PREFERRED STOCK
A. DESIGNATION AND AMOUNT. Of the 10,000,000 shares of Preferred Stock,
210,128 shares are reclassified and designated Class A Convertible
Preferred Stock (the "Class A Preferred Stock").
B. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
Section (B) shall have, for all purposes of the provisions of the Charter
in respect of the Class A Preferred Stock, the meanings herein specified
(with terms defined in the singular having comparable meanings when used in
the plural).
"Affiliate" of a Person shall have the meaning given to such term in
the Stock Purchase Agreement (as hereinafter defined).
"Cancellation Date" shall have the meaning set forth in Section E(3)
hereof below.
<PAGE>
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Common Stock" shall mean the Common Stock, $.01 par value per share,
of the Corporation.
"Conversion Date" shall mean the date on which the Shares are
converted in accordance with Section G hereof.
"Conversion Rate" shall initially be equal to one, subject to
modification in accordance with the provisions of Section G(6) hereof.
"Forfeiture Price" shall mean $14.50 on or before December 31, 1997,
$14.75 after December 31, 1997 and on or before March 31, 1998, $15.00
after March 31, 1998 and on or before June 30, 1998, and $15.25 after June
30, 1998 and on or before September 30, 1998.
"Holders" shall mean the holders of Common Stock issued pursuant to
the Stock Purchase Agreement.
"Initial Public Offering" shall mean the sale of Common Stock pursuant
to the Corporation's first effective registration statement covering the
sale of such shares filed under the 1933 Act.
"IRS" shall mean the United States Internal Revenue Service.
"Liquidation Preference" shall mean $.01 per share.
"Liquid IPO" shall mean the consummation of (i) an Initial Public
Offering by the Corporation of newly issued shares of Common Stock in which
the Corporation receives no less than $60 million of gross proceeds and
(ii) the listing for trading of the Common Stock on a Major Stock Exchange.
"Liquidity Event" shall mean the occurrence of any transaction or
event in connection with which all or substantially all of the Common Stock
of the Corporation shall be exchanged for, converted into, acquired for or
constitute solely the right to receive cash, securities, property or other
assets, whether by means of exchange offer, liquidation, dissolution,
consolidation, merger, combination, reclassification, recapitalization or
otherwise, including, without limitation, any of the transactions or events
specified in Section D hereof; HOWEVER, the conversion of the Company from
a corporation to a real estate investment trust formed under the laws of
the State of Maryland shall not be considered to be a Liquidity Event.
"Liquidity Event Price" shall mean the per share consideration
received by (i) the Holders in connection with a Non-Qualifying Non-IPO
Liquidity Event or (ii) by the Corporation in connection with a Liquid IPO.
<PAGE>
<PAGE>
"Major Stock Exchange" shall mean the New York Stock Exchange, the
American Stock Exchange or other similar or successor national stock
exchange.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"Non-Qualifying Non-IPO Liquidity Event" shall mean a Liquidity Event
in which the Holders receive consideration for their shares of Common Stock
in an amount less than the applicable Forfeiture Price in the form of cash
or freely tradeable securities listed and traded on a Major Stock Exchange;
PROVIDED THAT the aggregate market value of all securities of the class
received by the Holders held by non-Affiliates of the issues thereof is at
least $100 million.
"Person" shall mean an individual, corporation, partnership, limited
liability company, estate, trust (including a trust qualified under Section
401(a) or 501(c)(17) of the Code), a portion of a trust permanently set
aside for or to be used exclusively for the purposes described in Section
642(c) of the Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity, and also
includes a group as that term is used for purposes of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
"Qualifying IPO" shall mean a Liquid IPO at a price per share at least
equal to the applicable Forfeiture Price.
"Qualifying Non-IPO Liquidity Event" shall mean a Liquidity Event in
which the Holders receive consideration for their shares of Common Stock in
an amount at least equal to the applicable Forfeiture Price in the form of
cash or freely tradeable securities listed and traded on a Major Stock
Exchange; PROVIDED THAT, the aggregate market value immediately after
giving effect to such Liquidity Event of all securities of the class
received by the Holders held by non-Affiliates of the issuer thereof is at
least $100 million.
"Stock Purchase Agreement" shall mean that certain Stock Purchase
Agreement dated as of August 20, 1996 among the Corporation and the
Investors named therein.
C. DIVIDENDS. The holders of Class A Preferred Stock are not entitled to
receive dividends.
D. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
1. Subject to Section G hereof, upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation,
subject to the prior preferences and other rights of any class or series of
stock ranking senior to the Class A
<PAGE>
<PAGE>
Preferred Stock as to the distribution
of assets upon liquidation, dissolution or winding up of the affairs of the
Corporation, but before any distribution or payment shall be made to the
holders of any class or series of stock ranking junior to the Class A
Preferred Stock as to the distribution of assets upon any liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
Class A Preferred Stock shall be entitled to receive out of the assets of
the Corporation legally available for distribution to its stockholders
liquidating distributions in cash or property at its fair market value as
determined by the Board of Directors of the Corporation in the amount per
share equal to the Liquidation Preference. After payment of the full
amount of the liquidating distributions to which they are entitled, the
holders of Class A Preferred Stock shall have no right or claim to any of
the remaining assets of the Corporation and shall not be entitled to any
other distribution in the event of liquidation, dissolution or winding up
of the affairs of the Corporation.
2. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Corporation are insufficient to pay the amount of the Liquidation
Preference per share plus the corresponding amounts payable on each class
or series of other stock ranking on a parity with the Class A Preferred
Stock as to the distribution of assets upon liquidation, dissolution or
winding up of the affairs of the Corporation, then the holders of the Class
A Preferred Stock and all such other stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions
to which they otherwise would be respectively entitled. Neither the
consolidation or merger of the Corporation into or with another corporation
or corporations or trust or trusts nor the sale, lease, transfer or
conveyance of all or substantially all of the assets of the Corporation to
another corporation or any other entity shall be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation within the
meaning of this Section D.
E. CANCELLATION OF THE SHARES.
Shares of Class A Preferred Stock shall be canceled by the Corporation
on the Cancellation Date in accordance with the provisions of this section.
1. If a Qualifying IPO or Qualifying Non-IPO Liquidity Event (either
being a "Qualifying Event") occurs prior to January 1, 1998, all shares of
Class A Preferred Stock then outstanding shall be canceled automatically on
the date of closing of such Qualifying Event. If a Qualifying Event occurs
on or after January 1, 1998 and prior to April 1, 1998, 157,596 shares of
Class A Preferred Stock shall be canceled automatically on the date of
closing of such Qualifying Event. If a Qualifying Event occurs on or after
<PAGE>
<PAGE>
April 1, 1998 and prior to July 1, 1998, 105,064 shares of Class A
Preferred Stock shall be canceled automatically on the date of closing of
such Qualifying Event. If a Qualifying Event occurs on or after July 1,
1998 and prior to October 1, 1998, 52,532 shares of Class A Preferred Stock
shall be canceled automatically on the date of closing of such Qualifying
Event. Thereafter, the Corporation shall have no right to cancel issued
and outstanding shares of Class A Preferred Stock. Such numbers of shares
of Class A Preferred Stock subject to cancellation shall be adjusted
appropriately any time that the Corporation shall pay a dividend or make a
distribution in shares of Class A Preferred Stock or subdivide or combine
the outstanding Class A Preferred Stock into a greater or lesser number of
shares.
2. If a Liquid IPO or a Non-Qualifying Non-IPO Liquidity Event
occurs on or before September 30, 1998 at a price per share below the
applicable Forfeiture Price, any shares of Class A Preferred Stock not
converted into Common Stock pursuant to the provisions of Section G(2)
below shall be canceled automatically on the date of closing of such Liquid
IPO or a Qualifying Non-IPO Liquidity Event.
3. Each date on which shares of Class A Preferred Stock are canceled
pursuant to paragraph (1) or (2) of this Section E is called a
"Cancellation Date".
4. In case of cancellation of less than all the shares of Class A
Preferred Stock at the time outstanding, the shares shall be canceled pro
rata among the holders of record of such shares in proportion to the number
of shares held by such holders (with adjustments to avoid cancellation of
fractional shares).
5. Notice of any cancellation shall be mailed by the Corporation,
postage prepaid, not more than 10 days after the Cancellation Date,
addressed to the respective holders of record of the Class A Preferred
Stock to be canceled at their respective addresses as they appear on the
stock transfer records of the Corporation. No failure to give such notice
or any defect therein or in the mailing thereof shall affect the validity
of the cancellation of any shares of Class A Preferred Stock. In addition
to any information required by law, such notice shall state: (i) the
number of shares of Class A Preferred Stock to be canceled; and (ii) the
place or places where the certificate or certificates representing such
shares are to be surrendered.
6. Notwithstanding the Corporation's failure to comply with any of
the provisions of paragraph (5) above and regardless of when any holder
actually surrenders the certificate or certificates representing shares of
Class A Preferred Stock to be canceled pursuant to this Section E, from and
after the Cancellation Date any shares of Class A Preferred Stock canceled
pursuant to this
<PAGE>
<PAGE>
Section E shall no longer be deemed to be outstanding and
shall not have the status of shares of Class A Preferred Stock, and all
rights of the holders thereof as stockholders of the Corporation shall
cease. Upon surrender, in accordance with said notice, of the certificates
for any shares so canceled (properly endorsed or assigned for transfer, if
the Corporation shall so require and the notice shall so state), such
shares shall be canceled by the Corporation. In case fewer than all the
shares represented by any such certificate are canceled, a new certificate
or certificates shall be issued representing the uncancelled shares without
cost to the holder thereof.
7. All shares of Class A Preferred Stock canceled pursuant to this
Section E shall be retired and shall be reclassified as authorized and
unissued shares of Preferred Stock, without designation as to class or
series and may thereafter be reissued as shares of any class or series of
Preferred Stock.
F. VOTING RIGHTS. The holders of shares of Class A Preferred Stock shall
not be entitled to any voting rights. However, shares of Class A Preferred
Stock shall be deemed to be "Voting Shares" as such term is defined in, and
for the purposes of, Article Eighth of the Charter.
G. CONVERSION RIGHTS. Shares of Class A Preferred Stock shall
automatically convert into shares of Common Stock in accordance with the
following provisions:
1. If a Qualifying Event has not occurred prior to January 1, 1998,
52,532 shares of Class A Preferred Stock shall immediately and
automatically convert into shares of Common Stock. If a Qualifying Event
has not occurred prior to April 1, 1998, an additional 52,532 shares of
Class A Preferred Stock shall immediately and automatically convert into
shares of Common Stock. If a Qualifying Event has not occurred prior to
July 1, 1998, an additional 52,532 shares of Class A Preferred Stock shall
immediately and automatically convert into shares of Common Stock. If a
Qualifying Event has not occurred prior to October 1, 1998, any remaining
shares of Class A Preferred Stock shall immediately and automatically
convert into shares of Common Stock. Such numbers of shares of Class A
Preferred Stock subject to conversion shall be adjusted appropriately any
time that the Corporation shall pay a dividend or make a distribution in
shares of Class A Preferred Stock or subdivide or combine the outstanding
Class A Preferred Stock into a greater or lesser number of shares.
2. If a Liquid IPO at a price per share below the Forfeiture Price
or a Non-Qualifying Non-IPO Liquidity Event occurs on or before September
30, 1998, some or all of the shares of Class A Preferred Stock shall
immediately and automatically convert into shares of Common Stock based
upon the formula set forth <PAGE>
<PAGE>
in the following sentence and the remaining
shares of Class A Preferred Stock, if any, shall be canceled in accordance
with the provisions of Section E(2) above. The number of shares of Class A
Preferred Stock to be converted into shares of Common Stock shall be
determined by (i) dividing the Forfeiture Price by the Liquidity Event
Price, (ii) subtracting the integer one from the result of the calculation
set forth in clause (i), and (iii) multiplying the result of the
calculation set forth in clause (ii) by 3,867,000; provided that such
number shall not exceed the number of shares of Class A Preferred Stock
outstanding on the date of such Liquid IPO or Non-Qualifying Non-IPO
Liquidity Event.
The occurrence of any Liquidity Event other than a Liquid IPO, a
Qualifying IPO, a Non-Qualifying Non-IPO Liquidity Event or a Qualifying
Non-IPO Liquidity Event shall cause the immediate automatic conversion of
all of the outstanding shares of Class A Preferred Stock into shares of
Common Stock.
3. The shares of Class A Preferred Stock shall be convertible at the
principal office of the Corporation, and at such other office or offices,
if any, as the Board of Directors may designate, into fully paid and non-
assessable shares of Common Stock of the Corporation (calculated as to each
conversion to the nearest whole share with any fraction of a share which
would otherwise be issuable to be paid for as provided in Section G(5)
below). The number of shares of Common Stock to be issued upon conversion
shall be determined by multiplying the number of shares of Class A
Preferred Stock to be converted by the Conversion Rate in effect at the
time of conversion. The Conversion Rate shall be adjusted in certain
instances as provided in Section G(6) below.
4. In order to receive certificates representing shares of Common
Stock upon conversion of shares of Class A Preferred Stock into shares of
Common Stock, the holder thereof shall surrender at the office or offices
hereinabove mentioned the certificate or certificates therefor, duly
endorsed or assigned to the Corporation or in blank, and give written
notice to the Corporation at said office or offices that such holder elects
to receive such Common Stock certificates.
Shares of Class A Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day of the
Conversion Date and the Person or Persons entitled to receive the Common
Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such Common Stock at such time. As
promptly as practicable on or after the Conversion Date, the Corporation
shall issue and shall deliver at such office a certificate or certificates
representing the number of full shares of Common Stock issuable upon such
conversion, together with payment in lieu of any fraction of a share, as<PAGE>
<PAGE>
hereinafter provided, to the Person or Persons entitled to receive the
same.
5. No fractional shares of Common Stock shall be issued upon
conversion of shares of Class A Preferred Stock, but, instead of any
fraction of a share which would otherwise be issuable, the Corporation
shall pay cash in respect of such fraction in an amount equal to the same
fraction of the applicable Forfeiture Price.
6. The Conversion Rate shall be adjusted from time to time as
follows:
a. At any time on or after the date of issuance of any shares
of Class A Preferred Stock that the Corporation shall (i) pay a
dividend or make a distribution on its outstanding Common Stock in
shares of its stock, (ii) subdivide its outstanding Common Stock into
a greater number of shares, (iii) combine its outstanding Common Stock
into a smaller number of shares or (iv) issue by reclassification of
its Common Stock (whether pursuant to a merger or consolidation or
otherwise) any other shares of the Corporation, the holder of any
shares of Class A Preferred Stock surrendered for conversion at any
time after the record date fixed by the Board of Directors for such
dividend, distribution, subdivision, combination or reclassification
shall be entitled to receive the aggregate number and kind of shares
of stock of the Corporation which, if such shares of Class A Preferred
Stock had been converted immediately prior to such record date at the
Conversion Rate then in effect, such holder would have been entitled
to receive by virtue of such dividend, distribution, subdivision,
combination or reclassification; and the Conversion Rate shall be
deemed to have been adjusted after such record date to apply to such
aggregate number and kind of shares. Such adjustment shall be made
whenever any of the events listed above shall occur.
b. At any time on or after the date of issuance of any shares
of Class A Preferred Stock that the Corporation shall fix a record
date for the distribution to all holders of Common Stock (whether
pursuant to a merger or consolidation or otherwise) of evidences of
its indebtedness or assets (excluding regular cash dividends), then in
each such case the Conversion Rate in effect from and after such
record date shall be adjusted so that the same shall be equal to the
rate determined by multiplying the Conversion Rate in effect
immediately prior to such record date by an amount equal to a fraction
(i) of which the numerator shall be the fair market value (as
determined by the Board of Directors in good faith) of the Common
Stock immediately prior to such record date and (ii) the denominator
of which is such fair market value of the Common Stock immediately
prior to such record date minus the <PAGE>
<PAGE>
fair market value (as determined
by the Board of Directors in good faith) of the portion of the
evidences of indebtedness or assets so distributed. Such adjustment
shall be made whenever any such record date is fixed. In case such
distribution is not made after such record date has been fixed, the
Conversion Rate shall be readjusted to the Conversion Rate which would
have been in effect if such record date had not been fixed.
c. In any case in which this Section G(6) shall require that an
adjustment as a result of any event becoming effective from and after
a record or issue date, the Corporation may elect to defer until
immediately after the occurrence of such event (i) issuing to the
holder of any shares of Class A Preferred Stock converted after such
record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion over and above
the shares issuable on the basis of the Conversion Rate in effect
immediately prior to adjustment and (ii) paying to such holder any
amount in cash in lieu of a fractional share of Common Stock pursuant
to Section G(5) above. In lieu of the shares the issuance of which is
deferred pursuant to clause (i) above, the Corporation shall issue or
cause one of its transfer agents to issue due bills or other
appropriate evidence of the right to receive such shares.
d. Any adjustment in the Conversion Rate otherwise required by
this Section G(6) to be made may be postponed until the date of the
next adjustment otherwise required to be made up to, but not beyond,
one year from the date on which it would otherwise be required to be
made, if such adjustment (together with any other adjustments
postponed pursuant to this Section G(6)(d) and not theretofore made)
would not require an increase or decrease of more than 1% in such rate
and would not, if made, entitle the holders of all then outstanding
shares of Class A Preferred Stock upon conversion to receive
additional shares of Common Stock equal in the aggregate to one-tenth
of one percent (0.1%) or more of the then issued and outstanding
shares of Common Stock. All calculations under this Section G(6)
shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be.
e. In case at any time, as a result of an adjustment made
pursuant to Section G(6)(a) above, the holder of any shares of Class A
Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any shares of stock of the Corporation other than
Common Stock, thereafter the number of such other shares so receivable
upon conversion of such shares of Class A Preferred Stock shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with <PAGE>
<PAGE>
respect to the
Common Stock contained in paragraphs (a) and (b), inclusive, above,
and the other provisions of this Section G(6) with respect to the
Common Stock shall apply on like terms to any such other shares.
f. The Board of Directors may make such adjustments in the
Conversion Rate, in addition to those required by this Section G(6),
as shall be reasonably determined by the Board of Directors to be
advisable in order to avoid taxation so far as practicable of any
dividend of stock or stock rights or any event treated as such for
Federal income tax purposes to the recipients.
7. In case of conversion of less than all shares of Class A Preferred
Stock at the time outstanding, the shares shall be converted pro rata among
the holders of record of such shares in proportion to the number of shares
held by such holders (with adjustments to avoid conversion of fractional
shares).
H. STATUS.
Upon any conversion or cancellation of shares of Class A Preferred
Stock, the shares of Class A Preferred Stock which are converted or
canceled will be reclassified as authorized and unissued shares of
Preferred Stock, and the number of shares of Class A Preferred Stock which
the Corporation has the authority to issue will be decreased by the
conversion or cancellation of shares of Class A Preferred Stock, so that
the shares of Class A Preferred Stock which were converted or canceled may
not be reissued as Class A Preferred Stock.
I. EXCLUSION OF OTHER RIGHTS.
Except as may otherwise be required by law, the shares of Class A
Preferred Stock shall not have any preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications or terms or conditions of redemption other
than those specifically set forth in the Charter. The shares of Class A
Preferred Stock shall have no preemptive or subscription rights.
J. HEADINGS OF SUBDIVISIONS.
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the
provisions hereof.
K. SEVERABILITY OF PROVISIONS.
If any preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions,<PAGE>
<PAGE>
qualifications or terms or conditions of redemption of the Class A
Preferred Stock set forth in the Charter are invalid, unlawful or incapable
of being enforced by reason of any rule of law or public policy, all other
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms
or conditions of redemption of Class A Preferred Stock set forth in the
Charter which can be given effect without the invalid, unlawful or
unenforceable provision thereof shall, nevertheless, remain in full force
and effect, and no preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions,
qualifications or terms or conditions of redemption of Class A Preferred
Stock herein set forth shall be deemed dependent upon any other provision
thereof unless so expressed therein.
SECOND: The Shares have been reclassified by the Board of
Directors pursuant to Article Third of the Charter.
THIRD: These Articles Supplementary have been approved by the
Board of Directors in the manner and by the vote required by law.
FOURTH: The undersigned President of the Corporation
acknowledges these Articles Supplementary to be the corporate act of the
Corporation and, as to all matters or facts required to be verified under
oath, the undersigned President acknowledges that to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties for
perjury.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its name and on its behalf by its President
and attested to by its Secretary on this 20th day of August, 1996.
ATTEST: GREAT LAKES REIT, INC.
_________________________ By:_________________________(SEAL)
Richard L. Rasley Richard A. May
Secretary President
<PAGE>
ANNEX II
ALLOCATION OF INVESTMENTS AT VARIOUS CLOSINGS
FIRST AND SECOND CLOSINGS
<TABLE>
<CAPTION>
COMMON RESTRICTED
INVESTOR SHARES SHARES PURCHASE PRICE
<S> <C> <C> <C>
Fortis 350,000 19,019 $ 4,550,000.00
Morgan Stanley 350,000 19,019 $ 4,550,000.00
WKZV 350,000 19,019 $ 4,550,000.00
NML 168,700 9,169 $ 2,193,100.00
Fidelity 134,750 7,322 $ 1,751,750.00
--------- ------ --------------
1,353,450 73,548 $17,594,850.00
========= ====== ==============
</TABLE>
THIRD CLOSING
<TABLE>
<CAPTION>
COMMON RESTRICTED
INVESTOR SHARES SHARES PURCHASE PRICE
<S> <C> <C> <C>
Fortis 300,000 16,301 $3,900,000.00
Morgan Stanley 300,000 16,301 $3,900,000.00
WKZV 300,000 16,301 $3,900,000.00
NML 144,600 7,853 $1,879,800.00
Fidelity 115,500 6,276 $1,501,500.00
------- ------ --------------
1,160,100 63,032 $15,081,300.00
========= ====== ==============
</TABLE>
<PAGE>
EXHIBIT 7.3
SECRETARY'S CERTIFICATE
I, Charlene R. Herzer, a duly elected and acting Assistant Secretary of
Morgan Stanley Group Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), certify that the following
resolutions were duly and validly adopted by a Consent in Lieu of a Meeting of
the Executive Committee of the Board of Directors of the Corporation dated as
of October 19, 1995 and that such resolutions are in full force and effect on
the date hereof:
RESOLVED, that the resolutions adopted on September 8, 1993 and
April 17, 1995 relating to signatories to certain reports to be filed
with the Securities and Exchange Commission (the "SEC") are
superseded in their entirety by these resolutions and Stuart J. M.
Breslow, Robert G. Koppenol and Edward J. Johnsen are severally
authorized and directed to sign on behalf of the Corporation any
reports to be filed under Section 13 and Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
thereunder, with the Securities and Exchange Commission, such
authorizations to cease automatically upon termination of employment
with any affiliate of the Corporation; and
RESOLVED FURTHER, that all actions heretofore taken by Stuart J.
M. Breslow, Robert G. Koppenol and Edward J. Johnsen that are within
the authority conferred by the foregoing resolution are approved,
ratified and confirmed in all respects.
RESOLVED, that any and all actions to be taken, caused to be
taken or heretofore taken by any officer of the Corporation in
executing any and all documents, agreements and instruments and in
taking any and all steps (including the payment of
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all expenses) deemed by such officer as necessary or desirable to carry
out the intents and purposes of the foregoing resolutions are
authorized, ratified and confirmed.
IN WITNESS WHEREOF, I have hereunto set my name and affixed the seal of
the Corporation as of the 28th day of August, 1996.
/S/ CHARLENE R. HERZER
CHARLENE R. HERZER
ASSISTANT SECRETARY
[SEAL]
