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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _)*
Great Lakes REIT, Inc.
_________________________________________________________________
(Name of Issuer)
Common Stock, $.01 par value
_________________________________________________________________
(Title of Class of Securities)
390752 10 3
_________________________________________________________________
(CUSIP Number)
Alan S. Pearce
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Tel. No.: (212) 541-2000
_________________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 20, 1996
_________________________________________________________________
(Date of event which requires filing of this statement)
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), check the following
box /__/.
Check the following box if a fee is being paid with the statement /X/.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
Note. Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
____________________
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 (the "Act") or otherwise subject to the liabilities
of that section of the Act but shall be subject to all other provisions
of the Act (however, see the Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 390752 10 3
-----------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Wellsford Karpf Zarrilli Ventures, L.L.C.
- -----------------------------------------------------------------
__
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /__/
__
(b) /X_/
- -----------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- -----------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED __
PURSUANT TO ITEMS 2(d) or 2(E) |__|
- -----------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,054,339**
SHARES -------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
0
OWNED BY -------------------------------------------------------
9
EACH SOLE DISPOSITIVE POWER
REPORTING 1,054,339**
PERSON -------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH 0
- -----------------------------------------------------------------
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* /__/
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%**
- -----------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- ----------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
** Includes 350,000 shares of Common Stock ("Common Shares") and 19,019
shares of Class A Convertible Preferred Stock ("Preferred Shares")
purchased on August 20, 1996, 350,000 Common Shares and 19,019 Preferred
Shares to be purchased on October 3, 1996 and 300,000 Common Shares and
16,301 Preferred Shares to be purchased on November 19, 1996, all
pursuant to a Stock Purchase Agreement, dated as of August 20, 1996.
The Preferred Shares automatically convert into Common Shares upon the
occurrence of certain events. These calculations all assume conversion
of all outstanding Preferred Shares into Common Shares.
<PAGE>
Item 1. Security and Issuer.
This statement on Schedule 13D (the "Schedule 13D") relates to the
shares of Common Stock, par value $.01 per share ("Common Shares") of Great
Lakes REIT, Inc., a Maryland corporation ("Great Lakes") and the shares of
Class A Convertible Preferred Stock ("Preferred Shares") of Great Lakes.
Some or all of the Preferred Shares automatically convert into Common
Shares on a one-to-one basis if either of the following events have not
occurred by dates specified set forth in the Articles Supplementary for the
Preferred Shares (the "Articles Supplementary"): (a) the consummation of an
initial public offering by Great Lakes of newly issued Common Shares in which
Great Lakes receives at least $60 million of gross proceeds, in which such
Common Shares are listed for trading on a national stock exchange (an
"Initial Public Offering") and in which Great Lakes receives a specified
minimum price per share or (b) the occurrence of any transaction in which
substantially all of the Common Shares are exchanged for, converted into, or
constitute the right to receive cash or freely tradeable securities listed on
a national stock exchange, provided that after giving effect to such
transaction the aggregate market value of all securities of the class
received by the holders of Common Shares held by non-affiliates of the issuer
is at least $100 million (each of the events described in clauses (a) and (b)
is referred to as a "Qualifying Event"). Some or all of the Preferred Shares
are automatically cancelled upon the occurrence of either Qualifying Event by
dates specified in the Articles Supplementary. The foregoing description is
qualified in its entirety by reference to the Articles Supplementary attached
as an Annex to the Stock Purchase Agreement in Exhibit 7.1.
The principal executive offices of Great Lakes are located at 823
Commerce Drive, Suite 300, Oak Brook, Illinois 60521.
Item 2. Identity and Background.
This Schedule 13D is being filed by Wellsford Karpf Zarrilli Ventures,
L.L.C. ("WKZV"), a Delaware limited liability company, with a principal
business and principal office located at c/o Edward Lowenthal, 201 Hamilton
Road, Ridgewood, New Jersey 07450. WKZV was formed for the purpose of
entering into the Stock Purchase Agreement described in Item 6 of this
Schedule 13D, and to acquire, own, manage, transfer and otherwise deal in and
with the Common Shares and Preferred Shares of Great Lakes and any securities
received in exchange therefor or as a distribution to the holders thereof.
The members (the "Members") of WKZV are: (i) Mr. Edward Lowenthal
("Lowenthal"), with a business address at c/o Wellsford Residential Property
Trust, 610 Fifth Avenue, New York, New York 10020, (ii) Mr. Jeffrey H.
Lynford ("Lynford"), with a business address at c/o Wellsford Residential
Property Trust, 610 Fifth Avenue, New York, New York 10020, (iii) Mr.
Steven A. Karpf ("Karpf"), with a business address at c/o Karpf,
Zarrilli & Co. Incorporated, 730 Fifth Avenue, Suite 900, New York, New York
10019, (iv) Mr. Frederick P. Zarrilli ("Zarrilli"), with a business address at
c/o Karpf, Zarrilli & Co. Incorporated, 730 Fifth Avenue, Suite 900, New York,
New York 10019, (v) Blackacre Holdings, L.L.C. ("Blackacre"), a Delaware
limited liability company, (vi) Renafa, Inc. ("Renafa"), a Georgia corporation,
and (vii) Texlyn Investments, Inc. ("Texlyn"), a Texas corporation.
The business and affairs of WKZV are managed and directed by Messrs.
Lowenthal, Lynford, Karpf and Zarrilli, who are the managers (the "Managers")
of WKZV. Certain major decisions, including the decision to sell, transfer
or otherwise dispose of the Common Shares and Preferred Shares owned by WKZV,
may only be made in conjunction with Blackacre.
Edward Lowenthal and Jeffrey H. Lynford are currently the President and
Chairman of the Board, respectively, of Wellsford Residential Property Trust
("Wellsford"), a Maryland real estate investment trust engaged in the
acquisition, development and operation of multifamily properties. The
address of Wellsford is 610 Fifth Avenue, New York, New York 10020. Steven
A. Karpf and Frederick P. Zarrilli are President and Executive Vice
President, respectively, of Karpf, Zarrilli & Co. Incorporated, a Delaware
corporation engaged in real estate investment banking. The address of Karpf,
Zarrilli & Co. Incorporated is 730 Fifth Avenue, Suite 900, New York,
New York 10019.
The managing member of Blackacre is Blackacre Capital Management Corp.,
a Delaware corporation. Mr. Jeffrey Citrin is the President, sole director
and sole shareholder of Blackacre Capital Management Corp. The address of
the principal business and office of both Blackacre and Blackacre Capital
Management Corp. is 950 Third Avenue, New York, New York 10022. Blackacre
and Blackacre Capital Management Corp. are primarily engaged in the investment
in personal property and securities. The business address of Jeffrey Citrin,
a United States citizen, is 950 Third Avenue, New York, New York 10022 and
his present principal employment is as President of Blackacre Capital
Management Corp.
The address of the principal business and principal office of Renafa is
3390 Peachtree Road NE, 10th Floor - Lennox Towers, Atlanta, Georgia 30326.
The principal business of Renafa is real estate investment and development.
The address of the principal business of Texlyn is 3040 Post Oak
Boulevard, Suite 400, Houston, Texas 77056 and the address of Texlyn's
principal office is c/o Atlantic Holding Company, S.A., One Rockefeller
Plaza, Suite 1508, New York, New York 10020. The principal business of
Texlyn is the investment in securities and other assets in the United States.
Neither WKZV nor, to the knowledge of WKZV, any of the Members,
Blackacre Capital Management Corp. or Jeffrey Citrin has, during the last
five (5) years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or been a party to a civil proceeding
resulting in its or his or her being subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, the federal or state securities laws or finding any violations
with respect to such laws.
Item 3. Source and Amount of Funds
Pursuant to a Stock Purchase Agreement described more fully in Item 6
below, Great Lakes has granted WKZV the right to acquire an aggregate of
1,000,000 Common Shares and an aggregate of 54,339 Preferred Shares for a
total purchase price of $13,000,000, payable in cash. On August 20, 1996,
WKZV purchased 350,000 Common Shares and 19,019 Preferred Shares for a total
purchase price of $4,550,000 paid in cash. On October 3, 1996, WKZV shall
purchase an additional 350,000 Common Shares and an additional 19,019
Preferred Shares for a total purchase price of $4,550,000 in cash, and on
November 19, 1996, WKZV shall purchase the remaining 300,000 Common Shares
and the remaining 16,301 Preferred Shares for a total purchase price of
$3,900,000 in cash.
The funds used by WKZV to purchase the Company Shares and the Preferred
Shares have and will come from capital contributions made by the Members.
WKZV has pledged and will pledge 76,923 Common Shares to Emigrant Savings
Bank, a New York banking corporation, to secure loans made by Emigrant
Savings Bank to Messrs. Lowenthal, Lynford, Karpf and Zarrilli, the proceeds
of which have been and will be contributed to WKZV by Messrs. Lowenthal,
Lynford, Karpf and Zarrilli.
Item 4. Purpose of the Transaction
WKZV is acquiring the Common Shares and Preferred Shares for investment
purposes and not for the purpose of acquiring control of Great Lakes. Except
as disclosed in Item 6 of this Schedule 13D with regard to (i) WKZV's right
to purchase Common Shares and Preferred Shares at the second and third
closings which are scheduled to occur subsequent hereto and (ii) WKZV's
designation of one member of the Board of Directors of Great Lakes, WKZV does
not have any current plans or proposals which relate to or would result in
any of the events described in Items (a) through (j) of Item 4 of Schedule
13D. In addition, depending on market and other considerations, WKZV may
elect to acquire additional Common Shares or other securities of Great Lakes
or to dispose of all or a portion of the Common Shares or other securities it
now owns or may hereinafter acquire.
Item 5. Interest in the Securities of the Issuer
By reason of the execution of the Stock Purchase Agreement described
more fully in Item 6 below, WKZV will acquire up to 1,000,000 Common Shares
and 54,339 Preferred Shares. If WKZV acquires all such Common Shares and
Preferred Shares, and all outstanding Preferred Shares, including those held
by WKZV, are converted to Common Shares, WKZV will hold approximately 11.8%
of the outstanding Common Shares.
Upon consummation of all the transactions contemplated by the Stock
Purchase Agreement, WKZV will have sole voting and dispositive power with
respect to the Common Shares acquired by WKZV pursuant to the Stock Purchase
Agreement. Upon conversion of the Preferred Shares, WKZV will have sole
voting and dispositive power with respect to the Common Shares into which the
Preferred Shares are converted.
Other than WKZV's acquisition of Common Shares and Preferred Shares
pursuant to the Stock Purchase Agreement described in Item 6 below, neither
WKZV nor, to the knowledge of WKZV, any of the Members or any of the persons
listed on Schedule I hereto, presently owns any Common Shares or Preferred
Shares or has effected any transaction in the Common Shares or Preferred
Shares during the past sixty (60) days.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer
Great Lakes and each of WKZV, Fortis Benefits Insurance Company, Morgan
Stanley Institutional Fund, Inc. -- U.S. Real Estate Portfolio, Morgan
Stanley SIVAC Subsidiary SA, Logan, Inc., and Pension Trust Account No.
104972 Held by Bankers Trust Company as Trustee (WKZV and all of such other
investors are collectively referred to herein as the "Investors") have
entered into a Stock Purchase Agreement dated as of August 20, 1996 (the
"Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement, WKZV
has the right to purchase an aggregate of 1,000,000 Common Shares and 54,339
Preferred Shares in three separate closings for an aggregate purchase price
of $13,000,000 in cash. The first closing (the "First Closing") was held on
August 20, 1996 at which time WKZV purchased 350,000 Common Shares and 19,019
Preferred Shares for $4,550,000 in cash. The second closing will be held on
October 3, 1996, at which time WKZV shall purchase 350,000 Common Shares and
19,019 Preferred Shares for $4,550,000 in cash. The third closing will be
held on November 19, 1996, at which time WKZV shall purchase 300,000 Common
Shares and 16,301 Preferred Shares for $3,900,000 in cash.
WKZV's obligations to consummate the second and third closings discussed
above are contingent upon the satisfaction of certain conditions, specified
in the Stock Purchase Agreement.
Pursuant to the Stock Purchase Agreement, WKZV is entitled, subject to
certain restrictions, to designate one individual to be nominated as a member
of the Company's Board of Directors. The Company nominated Edward Lowenthal
as its designee, and he was elected to the Board of Directors effective as of
the date of the First Closing. If WKZV does not have a representative on the
Board of Directors of Great Lakes, Great Lakes must permit a representative
of WKZV to attend, but not to vote, as an observer at each meeting of the
Board of Directors or any committee meeting of the Board of Directors,
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 Common Shares.
The Company and each of the Investors are also parties to a Registration
Rights Agreement, dated as of August 20, 1996 (the "Registration Rights
Agreement"). Pursuant to the terms of the Registration Rights Agreement,
each of the Investors is entitled to certain rights with respect to the
registration of all Common Shares purchased pursuant to the Stock Purchase
Agreement (the "Registrable Shares") under the Securities Act of 1933, as
amended (the "Securities Act"), generally as follows:
Shelf Registration Rights. Not later than the earlier of (i) the
third anniversary of the date of the First Closing or (ii) the date that
is 180 days after the settlement of the initial sale pursuant to Great
Lake's first public offering of newly issued Common Shares, Great Lakes
shall use its best efforts to effect a shelf registration pursuant to
Rule 415 of the Securities Act covering the Registrable Shares. Great
Lakes is obligated to use its best efforts to cause such shelf
registration statement to remain in effect until the earlier of (i) the
date on which all Registrable Shares have been sold under such shelf
registration statement, or (ii) if an Initial Public Offering by Great
Lakes has been consummated, the later of (A) the date that is 12 months
after such shelf registration statement becomes effective and (B) the
date that all Registrable Shares are freely transferable pursuant to
Rule 144(k) of the regulations promulgated under the Securities Act
(assuming for purposes of calculating such period that no holder thereof
is an "affiliate" of Great Lakes).
Right to Incidental Registration. The Registration Rights
Agreement provides that if Great Lakes at any time proposes to register
any of its Common Shares under the Securities Act on a Form S-1, Form S-
2, Form S-3 or Form S-11 or any equivalent form, the holders of
Registrable Securities are entitled to have their shares included in
such registration statement on a pro rata basis, subject to certain
other terms and conditions.
Pursuant to the Operating Agreement of WKZV, the Managers have the power
to vote the shares of Great Lakes held by WKZV (other than with respect to
any tax matter of Great Lakes) and the Managers, in conjunction with
Blackacre, have the power to sell, transfer or otherwise dispose of the
shares of Great Lakes held by WKZV.
Except as stated in this Item 6, WKZV does not have any contracts,
arrangements, understandings or relationships (legal or otherwise) with any
other person with respect to the securities of Great Lakes, including,
without limitation, any agreements concerning (i) transfer or voting of any
Common Shares, (ii) finder's fees, (iii) joint ventures, (iv) loan or option
arrangements, (v) puts or calls, (vi) guarantees of profits, (vii) division
of profits or losses or (viii) the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit 7.1 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.
Exhibit 7.2 Registration Rights Agreement, dated as of
August 20, 1996, 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.
<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 29, 1996
WELLSFORD KARPF ZARRILLI
VENTURES, L.L.C.
By: /s/ Edward Lowenthal
_______________________________
Name: Edward Lowenthal
Title: Manager
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:
"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.
"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.
"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.
"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 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.
"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 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 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, 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:
(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 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 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 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 (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 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 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 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.
(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;
(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 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, 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.
(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) 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 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.
(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 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;
(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 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 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 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 (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 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 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.
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, 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.
(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 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.
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
(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.
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;
(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;
(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 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 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 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
By: FORTIS ADVISERS,
INC., UNDER
POWER OF ATTORNEY
By:/s/ James J. Brinkerhoff
"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
<PAGE>
"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
By: FIDELITY MANAGEMENT TRUST
COMPANY, UNDER POWER OF
ATTORNEY
By:/s/ Thomas P. Lavin
Its: Vice President
<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.
"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.
"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
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 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
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 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 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 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 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, 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.
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
Common Restricted
Investor Shares Shares Purchase Price
- -------- ------ ---------- --------------
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
========= ======= ==============
Third Closing
-------------
Common Restricted
Investor Shares Shares Purchase Price
- -------- ------ ---------- --------------
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
========= ====== ==============
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"),
dated as of August 20, 1996, is 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, together with their
successors and assigns, are hereinafter sometimes referred to
individually as a "Holder" and together as the "Holders").
RECITALS:
WHEREAS, the Company and the Holders are parties to a
Stock Purchase Agreement dated as of August 20, 1996 (the "Stock
Purchase Agreement"), and pursuant to such Stock Purchase
Agreement, the Company has issued or may issue to the Holders
shares of Common Stock representing Registrable Shares (as such
terms is defined herein);
WHEREAS, the Company has agreed to provide to the
Holders certain registration rights with respect to such
Registrable Shares; and
WHEREAS, the Company and the Holders are entering into
this Agreement to set forth the terms and conditions applicable
to the grant and exercise of such registration rights;
NOW, THEREFORE, in consideration of the premises and
mutual covenants contained herein, the Holders and the Company do
hereby agree as follows:
AGREEMENTS:
Section 1. Definitions.
In addition to the terms that are defined in the
Preamble hereto, capitalized terms not defined herein shall have
the meanings ascribed thereto in the Stock Purchase Agreement and
the following terms shall have the following meanings as used in
this Agreement:
"First Public Offering" means the sale of newly issued
Common Stock by the Company pursuant to the Company's first
effective Registration Statement covering the sale by the Company
of such shares filed under the 1933 Act.
"Form S-1" means a Registration Statement on Form S-1
as promulgated by the SEC or any successor form that is
substantially similar thereto.
"Form S-2" means a Registration Statement on Form S-2
as promulgated by the SEC or any successor form that is
substantially similar thereto.
"Form S-3" means a Registration Statement on Form S-3
as promulgated by the SEC or any successor form that is
substantially similar thereto.
"Form S-11" means a Registration Statement on Form S-11
as promulgated by the SEC or any successor form that is
substantially similar thereto.
"Incidental Registration" is defined in Section 3(a)
hereof.
"Interruption Notice" is defined in Section 4 hereof.
"Permitted Interruption" is defined in Section 4
hereof.
"Prospectus" means the prospectus included in any
Registration Statement, as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering
of any portion of the Registrable Shares covered by such
Registration Statement and all other amendments and supplements
to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"Registrable Shares" means: (i) shares of Common Stock
now or hereafter issued by the Company to any Holder pursuant to
or in connection with the Stock Purchase Agreement (including
without limitation any shares of Common Stock issued (A) upon
conversion of the Restricted Shares, (B) pursuant to Sections
6.13 or 6.14 of the Stock Purchase Agreement or (C) in connection
with or in consideration for the waiver or modification of
Section 6.12 of the Stock Purchase Agreement), (ii) shares of
Common Stock issued as, or upon the conversion or exercise of
other securities issued as, a dividend or other distribution with
respect to or in replacement of other Registrable Shares, and
(iii) any equity securities of the Company issued or issuable
with respect to the securities referred to in clauses (i) and
(ii) by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger,
consolidation or other reorganization. For purposes of this
Agreement, a Person will be deemed to be a holder of Registrable
Shares whenever such Person has the unqualified right to acquire
such Registrable Shares (by conversion or otherwise, but
disregarding any legal restrictions upon the exercise of such
right), whether or not such acquisition has actually been
effected.
"Registration Expenses" is defined in Section 6 of this
Agreement.
"Registration Statement" means any appropriate
Registration Statement of the Company in a registration that
covers the sale of any of the Registrable Shares pursuant to the
provisions of Sections 2 or 3 of this Agreement, including the
Prospectus, amendments and supplements to such Registration
Statement, post-effective amendments, all exhibits and all
material incorporated by reference in such Registration
Statement.
"Regulations" means the rules and regulations of the
SEC promulgated under the 1933 Act.
"Required Registration" is defined in Section 2(a)
hereof.
"Shelf Registration Statement" is defined in Section
2(a) hereof.
Section 2. Required Registration.
(a) Shelf Registration Rights. The Company shall use
its best efforts to effect not later than the earlier of (i) the
third anniversary of the date hereof or (ii) the date that is 180
days after the settlement of the initial sale pursuant to the
First Public Offering, the registration in a manner reasonably
acceptable to the Holders of a majority of the Registrable Shares
of all of the Registrable Shares on a continuous basis during the
period specified in Section 2(d) hereof under Rule 415 or any
successor rule of the Regulations by preparing and filing with
the SEC a Registration Statement on Form S-3 or, if the Company
is not eligible to register the Registrable Shares on such form,
a Registration Statement on Form S-11, Form S-2 or Form S-1 (the
"Shelf Registration Statement"); provided, however, that if,
prior to the effective date of such registration, circumstances
arise that would, after such date, constitute a Permitted
Interruption, the Company shall be entitled to delay the
Registration for a period not to exceed the Permitted
Interruption. The Company will give each Holder not less than
ten days prior written notice of its intention to comply with the
provisions of this Section 2(a) and, in reasonable detail, the
date and circumstances relating thereto. The Company shall use
its best efforts to become, and thereafter to remain, eligible to
register its securities on Form S-3, including, without
limitation, remaining current in all filings under the 1934 Act.
Such registration is referred to herein as a "Required
Registration."
(b) Selection of Underwriters. If all or any part of
the Registrable Shares registered pursuant to a Required
Registration is an underwritten offering, the Holders of a
majority of the Registrable Shares that comprise such
underwritten offering will have the right to select the
underwriter(s) to administer the offering; provided that the
selection of the underwriter(s) shall be reasonably acceptable to
the Company.
(c) Priority on Required Registration. If all or any
part of a Required Registration is an underwritten offering and
the managing underwriters advise the Company that in their
opinion the number of Registrable Shares and, if permitted
pursuant to this Agreement, other securities requested to be
included in such underwritten offering exceeds the number of
Registrable Shares and other securities, if any, that can be sold
in an orderly manner in such offering within a price range
acceptable to the Holders of a majority of the Registrable Shares
that comprise such underwritten offering, the Company will
include in such registration prior to the inclusion of any
securities that are not Registrable Shares the maximum number of
Registrable Shares that in the opinion of such underwriters can
be sold in an orderly manner within the price range of such
offering, pro rata among the respective Holders thereof on the
basis of the amount of Registrable Shares owned or deemed to be
owned by each such Holder.
(d) Duration of Registration. The Company shall use
its best efforts (subject to any Permitted Interruption) to cause
the Required Registration to remain in effect until the earlier
of (i) the date on which all Registrable Shares have been sold
under the Registration Statement and (ii) if a Liquid IPO has
been consummated, the later of (A) the date that is twelve months
after such Shelf Registration Statement becomes effective and (B)
the date that all Registrable Shares are freely transferable
pursuant to Rule 144(k) or any successor rule of the Regulations
that is substantially similar thereto (assuming for purposes of
calculating such period that no Holder of Registrable Shares is
an Affiliate of the Company) in any such case, as extended by the
period of any Permitted Interruption.
Section 3. Incidental Registrations.
(a) Right to Incidental Registration. Subject to the
remaining provisions of this Section 3, whenever the Company
proposes to register its Common Stock under the 1933 Act on a
Form S-1, Form S-2, Form S-3 or Form S-11 or any equivalent form,
the Company will give prompt written notice to all Holders of
Registrable Shares of its intention to effect such a registration
and, subject to Sections 3(b) and (c) hereof, will include in
such registration all Registrable Shares with respect to which
the Company has received written requests for inclusion therein
within 30 days after the receipt of the Company's notice (an
"Incidental Registration"). The Holders of Registrable Shares
shall have unlimited rights to participate in Incidental
Registrations.
(b) Priority on Primary Registrations. If an
Incidental Registration is an underwritten primary offering on
behalf of the Company and the managing underwriters for the
offering advise the Company in writing that in their opinion the
number of securities requested to be included in such
registration exceeds the number that can be sold in such
offering, the Company will include in such registration
(i) first, the securities the Company proposes to sell,
(ii) second, the Registrable Shares requested to be included in
such registration that in the opinion of such underwriters can be
sold, prorated among the Holders of such Registrable Shares who
request that Registrable Shares be included in such offering, on
the basis of the number of Registrable Shares owned or deemed to
be owned by such Holders, with further successive pro rata
allocations, if any such Holder has requested the registration of
less than all such Registrable Shares such Holder is so entitled
to register, among such Holders (other than the Holder who
requested less than all such Registrable Shares such Holder is so
entitled to register) and (iii) third, other securities requested
to be included in such registration.
(c) Priority on Secondary Registrations. If an
Incidental Registration is an underwritten secondary offering on
behalf of holders of the Company's securities and the managing
underwriters advise the Company in writing that in their opinion
the number of securities requested to be included in such
registration exceeds the number that can be sold in such
offering, the Company will include in such registration (i)
first, the Registrable Shares requested to be included in such
registration which in such opinion of such underwriters can be
sold, prorated among the Holders of such Registrable Shares on
the basis of the number of Registrable Shares owned or deemed to
be owned by such Holders, with further successive pro rata
allocations among the Holders of Registrable Shares if any Holder
of Registrable Shares has requested the registration of less than
all such Registrable Shares such Holder is so entitled to
register and (ii) second, other securities requested to be
included in such registration.
Section 4. Interruptions of Continuous Registration.
The Company shall be entitled, effective on the second
business day after notice is given in conformity with Section
10(g) hereof (an "Interruption Notice"), to require the Holders
to cease to make any offers or sales of the Registrable Shares
under any Registration Statement then in effect covering such
shares in the event that: (a) the Company determines, in good
faith and reasonable judgment, that the offering of any
Registrable Shares would materially impede, delay or interfere
with any proposed financing, offer or sale of securities,
acquisition, corporate reorganization or other significant
transaction involving the Company (in which case the interruption
shall not exceed 45 days from the date the Company makes such
determination) or (b) the Company has initiated bona fide
discussions with an underwriter regarding the sale of its Common
Stock in a registered primary public offering and in such
underwriter's opinion, the continuation of offers or sales in the
registration would have a material adverse effect on such
offering under discussion (in which case the interruption shall
not exceed 45 days from the date the Company makes such
determination).
Each of the foregoing events or any combination thereof
shall be hereinafter referred to as a "Permitted Interruption."
In no event shall the Holders be required to cease offers or
sales under any Registration Statement for more than 45 days or
more than twice in any consecutive twelve-month period pursuant
to Permitted Interruptions.
Section 5. Registration Procedures.
Whenever any Registrable Shares are to be registered
pursuant to Section 2 or Section 3 hereof, the Company will use
its best efforts to effect the registration of such Registrable
Shares in accordance with the intended method of disposition
thereof, and pursuant to which the Company will as expeditiously
as possible:
(a) Prepare and file with the SEC a Registration
Statement with respect to such Registrable Shares and use its
best efforts to cause such Registration Statement to become
effective as soon as practicable, and in the case of a
Registration Statement filed pursuant to Section 2 hereof, no
later than the date specified in Section 2(a) hereof, which
Registration Statement shall remain effective for the period
specified in Section 2(d) hereof; provided that, at least seven
days prior to filing a Registration Statement or Prospectus or
any amendments or supplements thereto, including documents
incorporated by reference after the initial filing of the
Registration Statement, the Company shall furnish to the Holders
of the Registrable Shares covered by such Registration Statement,
such Holders' counsel and the underwriters, if any, draft copies
of all such documents proposed to be filed, which documents will
be subject to the review of such Holders' counsel and the
underwriters, if any, and the Company will not, unless required
by law, file any Registration Statement or amendment thereto or
any Prospectus or any supplement thereto to which Holders holding
a majority in interest of the Registrable Shares covered by such
Registration Statement or the underwriters with respect to such
Securities, if any, shall object; any such objection to be made
by written notice delivered to the Company no later than seven
days after the party or parties asserting such objection receives
draft copies of the documents that the Company proposes to file.
(b) Furnish to each Holder of Registrable Shares
included in a Registration Statement and any underwriter(s) of
the securities being registered such number of copies of the
Registration Statement, the Prospectus and such other documents
as such Holder or underwriter(s) may reasonably require or
request in order to facilitate the disposition of the Registrable
Shares owned by such Holder or the offer or sale of such
securities by such underwriter(s);
(c) Use its best efforts to register or qualify such
Registrable Shares under such other securities or "blue sky" laws
of such jurisdictions as any Holder of Registrable Shares
included in a Registration Statement reasonably requests and do
any and all other acts and things that may be reasonably
necessary or advisable to enable such Holder to consummate the
disposition in such jurisdictions of the Registrable Shares owned
by such Holder (provided, however, that the Company will not be
required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this Section 5(c), (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process
in any such jurisdiction);
(d) Cause all such Registrable Shares to be listed on
a Major Stock Exchange;
(e) Provide a transfer agent and registrar for all
such Registrable Shares not later than the effective date of the
Registration Statement;
(f) Enter into such customary agreements (including
underwriting agreements in customary form) and take all such
other actions as the Holders of a majority of the Registrable
Shares being sold or the underwriter(s), if any, reasonably
request in order to expedite or facilitate the disposition of
such Registrable Shares (including, without limitation, effecting
a stock split or a combination of shares);
(g) Make available at reasonable times for inspection
by Holders of Registrable Shares included in such Registration
Statement, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney,
accountant or other agent retained by any such Holder or
underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors, employees, independent accountants
and other agents to supply all information reasonably requested
by any such Holder, underwriter, attorney, accountant or agent in
connection with such Registration Statement;
(h) Notify each Holder of Registrable Shares, promptly
after it shall receive notice thereof, of the time when such
Registration Statement has become effective;
(i) Notify each Holder of such Registrable Shares to
be included in such Registration Statement of any request by the
SEC for the amending or supplementing of such Registration
Statement or for additional information;
(j) Prepare and file with the SEC, promptly upon the
request of any Holder of Registrable Shares to be included in
such Registration Statement, any amendments or supplements to
such Registration Statement that, in the opinion of counsel
selected by the Holders of a majority of the Registrable Shares
being registered, is reasonably required under the 1933 Act or
the Regulations in connection with the distribution of
Registrable Shares by such Holder;
(k) Prepare and promptly file with the SEC and any
other applicable regulatory department or agency and promptly
notify each Holder of such Registrable Shares of the filing of
such amendment or supplement to such Registration Statement as
may be necessary to correct any statements or omissions if,
during the period specified in Section 2(d) hereof or at any
other time when a prospectus relating to such securities is
required to be delivered under the 1933 Act, any event shall have
occurred as the result of which any Registration Statement as
then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which
they were made, not misleading;
(l) Advise each Holder of Registrable Shares included
in such Registration Statement, promptly after it shall receive
notice or obtain knowledge thereof, (i) if, during the period
specified in Section 2(d) hereof or at any other time when a
prospectus relating to such securities is required to be
delivered under the 1933 Act, any event shall have occurred as
the result of which any Registration Statement as then in effect
fails to satisfy the requirements of the 1933 Act and the
Regulations (including the requirements of Regulation S-X of the
Regulations) or would include an untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which
they were made, not misleading and (ii) of the issuance of any
stop order by the SEC or any state authority or agency suspending
the effectiveness of such Registration Statement or the
initiation or threatening of any proceeding for such purpose and
promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be
issued; and
(m) At the request of any Holder of Registrable Shares
included in a Registration Statement or any underwriter in
connection with an underwritten offering, furnish on the
effective date of such Registration Statement and the date of
each subsequent amendment or supplement thereto, or in the case
of an underwritten offering, on the date or dates provided for in
the underwriting agreement: (i) an opinion of counsel, addressed
to the Holders (and, if applicable, the underwriters), covering
such matters as such Holders (and, if applicable, such
underwriters) may reasonably request and (ii) a letter or letters
from the independent certified public accountants of the Company
addressed to the Holders (and, if applicable, such underwriters),
covering such matters as such Holders (and, if applicable, such
underwriters) may reasonably request, in which letters such
accountants shall state, without limiting the generality of the
foregoing, that they are independent certified public accountants
within the meaning of the 1933 Act, that in the opinion of such
accountants the financial statements and other financial data of
the Company included in the Registration Statement comply in all
material respects with the applicable accounting requirements of
the SEC and that such accountants have reviewed certain other
financial and statistical information included in the
Registration Statement.
(n) Provide a CUSIP number for all Registrable Shares
covered by a Registration Statement not later than the effective
date of such Registration Statement.
(o) Cooperate with each Holder and each underwriter
participating in the disposition of the Registrable Shares and
their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers,
Inc.
(p) During the period when the Prospectus is required
to be delivered under the 1933 Act, promptly file all documents
required to be filed with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act.
(q) In connection with an underwritten offering,
participate, to the extent reasonably requested by the managing
underwriter for the offering or the Holders, in customary efforts
to sell the securities under the offering, including without
limitation, participating in "road shows."
Section 6. Registration Expenses.
All expenses incident to the Company's performance of
or compliance with this Agreement, including, without limitation,
all registration and filing fees, fees and expenses of compliance
with securities or "blue sky" laws, printing expenses, messenger
and delivery expenses, fees and disbursements of counsel for the
Company and its independent certified public accountants
(including, without limitation, the fees and disbursements
related to the provision of a "comfort" letter addressed to the
Holders of the Registrable Shares), reasonable fees and
disbursements of one counsel for the Holders in connection with
each Required Registration or Incidental Registration, reasonable
fees and disbursements of one business advisor for the Holders in
connection with each Required Registration or Incidental
Registration and other Persons retained by the Company (all such
expenses being herein called "Registration Expenses"), will be
borne by the Company. In addition, the Company will pay its
internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance obtained by the
Company and the expenses and fees for listing the securities in
accordance with Section 5(d) hereof.
Section 7. Indemnification.
For the purpose of this Section 7 the term "Holder"
shall include the Holder and any Affiliate of such Holder.
(a) The Company agrees to indemnify and hold harmless
each of the Holders, any underwriters thereof and each Person, if
any, who controls any Holder or any such underwriter within the
meaning of the 1933 Act, against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Holders,
any such underwriter or such controlling Person may become
subject, under the 1933 Act, the 1934 Act or any other federal or
state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as
such losses, claims, damages, liabilities or expense (or actions
in respect thereof as contemplated below) (i) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in a Registration Statement,
including the prospectus, financial statements and schedules, and
all other documents filed as a part thereof, or any amendment or
supplement thereto, (ii) arise out of or are based upon the
omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the
statements in any of them not misleading or (iii) arise out of or
are based in whole or in part on any inaccuracy in the
representations and warranties of the Company contained in this
Agreement, any underwriting agreement or any related agreements,
or any failure of the Company to perform its obligations
hereunder or under law, and will reimburse each Holder, any such
underwriter and each such controlling Person for any legal and
other expenses as such expenses are reasonably incurred by such
Holder, any such underwriter or such controlling Person in
connection with investigating, defending, settling, compromising
or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in a Registration Statement, a Prospectus or any
amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by
or on behalf of such Holder expressly for use therein or any
statement or omission in any Prospectus that is corrected in any
subsequent Prospectus that was delivered to the Holder prior to
the pertinent sale or sales by the Holder.
Except as provided in the last sentence of Section 7(c)
hereof, in addition to its other obligations under this Section
7(a), the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, or any inaccuracy
in the representations and warranties of the Company in this
Agreement or failure to perform its obligations in this
Agreement, all as described in this Section 7(a), it will
reimburse each Holder on a quarterly basis for all reasonable
legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the
Company's obligation, to reimburse each Holder for such expenses
and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. This
indemnity agreement will be in addition to any liability which
the Company may otherwise have.
(b) Each Holder of Registrable Shares included in a
Registration Statement will severally and not jointly indemnify
and hold harmless the Company, each other Holder, each of their
respective directors, each of their respective officers who
signed a Registration Statement and each Person, if any, who
controls the Company and such other Holders within the meaning of
the 1933 Act, against any losses, claims, damages, liabilities or
expenses to which such Person may become subject, under the 1933
Act, the 1934 Act or any other federal or state statutory law or
regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with
the written consent of such Holder) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained
in a Registration Statement, a Prospectus or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in a
Registration Statement, a Prospectus or any amendment or
supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by such indemnifying
Holder expressly for use therein, and will reimburse the Company,
each other Holder, each of their respective directors, each of
their respective officers who signed a Registration Statement or
controlling Person for any legal and other expense reasonably
incurred by such Person in connection with investigating,
defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. Except as otherwise
provided in the last sentence of Section 7(c) hereof, in addition
to its other obligations under this Section 7(b), each Holder
severally and not jointly agrees that, as an interim measure
during the pendency of any claim, investigation, inquiry or other
proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in this
Section 7(b) that relates to written information furnished to the
Company by such Holder, it will reimburse the Company and each
other Holder (and, to the extent applicable, each officer,
director or controlling Person) on a quarterly basis for all
reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of
such Holder's obligations to reimburse the Company and each other
Holder (and, to the extent applicable, each officer, director or
controlling Person) for such expenses and the possibility that
such payments might later be held to have been improper by a
court of competent jurisdiction.
(c) Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party under this Section 7,
notify the indemnifying party in writing of the commencement
thereof; but the omission to so notify the indemnifying party
will not relieve it from any liability that it may have to any
indemnified party for contribution or otherwise under the
indemnity agreement contained in this Section 7 to the extent it
is not prejudiced as a proximate result of such failure. In case
any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any
such action include both the indemnified party and the
indemnifying party and the indemnified party shall have
reasonably concluded that there may be a conflict between the
positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be
legal defenses available to it or other indemnified parties that
are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have
the right to select separate counsel, to assume such legal
defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnified
party shall have the right to participate in the defense of such
action using counsel selected in its discretion, but the
indemnifying party will not be liable to such indemnified party
under this Section 7 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such
counsel in connection with the assumption of legal defenses in
accordance with the provision to the preceding sentence or (ii)
the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying
party.
(d) If the indemnification provided for in this
Section 7 is required by its terms but is for any reason held to
be unavailable to or otherwise insufficient to hold harmless an
indemnified party under Sections 7(a), (b) or (c) of this Section
7 in respect to any losses, claims, damages, liabilities or
expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such
indemnified party as a result of any losses, claims, damages,
liabilities or expenses referred to herein (i) in such proportion
as is appropriate to reflect the relative benefits received by
the Company and the Holder from the placement of Common Stock or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate
to reflect the relative fault of the Company and the Holder in
connection with the statements or omissions or inaccuracies in
the representations and warranties in this Agreement that
resulted in such losses, claims, damages, labilities or expenses,
as well as any other relevant equitable considerations. The
relative fault of such Holder shall be determined by reference
to, among other things, whether the untrue or alleged
misstatement of a material fact or the omission or alleged
omission to state a material fact or the inaccurate or the
alleged inaccurate representation or warranty relates to
information supplied by the Company or by such Holder and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in
Section 7(c) hereof, any legal or other fees or expenses
reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions
set forth in Section 7(c) hereof with respect to notice of
commencement of any action shall apply if a claim for
contribution is to be made under this Section 7(d); provided,
however, that no additional notice shall be required with respect
to any action for which notice has been given under Section 7(c)
hereof for purposes of indemnification. The Company and each
Holder agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined solely by
pro rata allocation (even if the Holder were treated as one
entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations
referred to in this Section 7(d). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation. Each
Holder's obligations to contribute pursuant to this Section 7 are
several and not joint.
Section 8. Compliance with Rule 144.
The Company shall use its best efforts to comply with
the filing requirements of the SEC as set forth in Rule 144 of
the Regulations and, at the request of any Holder who proposes to
sell securities in compliance with Rule 144 of the Regulations or
any successor rule, the Company will (i) forthwith furnish to
such Holder a written statement of its compliance with the
Company's SEC filing requirements as set forth in Rule 144 of the
Regulations as such rule may be amended from time to time if it
is in such compliance and (ii) make available to the public and
such Holders such information as will enable the Holders to make
sales pursuant to Rule 144 of the Regulations.
Section 9. Participation in Underwritten Registrations.
The Holders of a majority of the Registrable Shares
that are participating in the underwritten registration will have
the right to select the managing underwriters to administer any
Registration effected pursuant to Section 2(b) or 3(c) hereof,
subject to the reasonable approval of the Company of such
managing underwriters and the Company will have the right to
select the managing underwriters to administer any registration
pursuant to Section 3(b) hereof, subject to the reasonable
approval of the Holders of a majority of the Registrable Shares
that are participating in the underwritten registration.
Section 10. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders of
Registrable Shares in this Agreement.
(b) Remedies. Any Person having rights under any
provision of this Agreement will be entitled to enforce such
rights specifically, to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all
other rights granted by law.
(c) Waivers and Amendments. This Agreement may be
amended or modified in whole or in part only by a writing that
makes reference to this Agreement and is executed by the Holders
as and to the extent required by Section 10(l) 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.
(d) Entire Agreement. This Agreement, the Stock
Purchase Agreement, the Certificate of Designation and the other
agreements and instruments expressly provided for herein and
therein, together set forth the entire 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.
(e) Severability. Whenever possible, each provision
of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of this Agreement.
(f) 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.
(g) Notices. Any notices required or permitted to be
sent hereunder shall be delivered in the manner and to the
parties at their respective addresses set forth in Section 9.6 of
the Stock Purchase Agreement.
(h) 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.
(i) 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 Holders. Each of the Holders
shall be entitled to assign all of its rights, benefits and
obligations hereunder to any Person that acquires Registrable
Shares from such Holder without the prior consent of any party
and such Person shall become a Holder and be entitled to all
rights and benefits of a Holder hereunder. Promptly following
any such assignment, the Holder(s) shall provide the Company with
written notice of such assignment, but the failure to provide
such notice will not affect such assignment.
(j) 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.
(k) 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.
(l) Consent of Holders. Whenever this Agreement
requires or otherwise provides for the written consent of the
Holders, unless a greater or lesser percentage is specified, the
written consent of the Holders holding at least 66 2/3% of the
Registrable Shares then held by all the Holders shall constitute
the written consent of the Holders.
[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
By: FORTIS ADVISERS, INC.,
UNDER POWER OF
ATTORNEY
By:/s/ James J. Brinkerhoff
----------------------------
"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
----------------------------
"WKZV"
WELLSFORD KARPF ZARRILLI
VENTURES, L.L.C., a Delaware
limited liability company
By:/s/ Edward Lowenthal
---------------------------
"NML"
LOGAN, INC., a Delaware
corporation
By:/s/ Lois A. Smith
----------------------------
"Fidelity"
PENSION TRUST ACCOUNT NO.
104972 HELD BY BANKERS TRUST
COMPANY AS TRUSTEE
By: FIDELITY MANAGEMENT TRUST
COMPANY, UNDER POWER OF
ATTORNEY
By:/s/ Thomas P. Lavin
---------------------------
Its: Vice President
-------------------------
