SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
[X] Current Report Pursuant to Section 13 OR 15(d)
of the Securities Exchange Act of 1934
Date of Report August 28, 1996
Commission file number: 0-28354
Great Lakes REIT, Inc.
(Exact name of Registrant as specified in its Charter)
Maryland 36-3844714
(State or other jurisdiction(I.R.S. Employer identification no.)
of incorporation organization)
823 Commerce Drive, Suite 300, Oak Brook, IL 60521
(Address of principal executive offices) (Zip Code)
(630) 368 - 2900
(Registrant's telephone number, including area code)
2311 West 22nd St., Suite 109, Oak Brook, IL 60521
(Former address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
The Exhibits Index appears at Page 3
<PAGE>
Item 5. Other events.
Great Lakes REIT, Inc. entered into a Stock Purchase agreement dated August
20, 1996 with six institutional investors pursuant to which such investors
have agreed to purchase a total of 3,867,000 shares of Common Stock and
210,128 shares of Class A Convertible Preferred Stock for $50,271,000.
Pursuant to the first closing under the Stock Purchase Agreement dated August
20, 1996, Morgan Stanley Institutional Fund, Inc.- U.S. Real Estate Portfolio,
Morgan Stanley SICAV Subsidiary SA, Wellsford Karpf Zarrilli Ventures L.L.C.,
Fortis Benefits Insurance Co., Logan, Inc. and Pension Trust Account No.
104972 held by Bankers Trust Company as Trustee, collectively acquired
1,353,450 shares of Common Stock and 73,545 shares of Class A Convertible
Preferred Stock for $17,594,850 cash.
Under the terms of the Stock Purchase Agreement, these stockholders will
acquire 1,353,450 and 1,160,000 shares of Common Stock in the aggregate on
October 3, 1996 and November 19, 1996, respectively. In addition, pursuant to
the Stock Purchase Agreement, these stockholders will acquire 73,545 and
63,038 shares of the Company's Class A Preferred Stock in the aggregate on
October 3, 1996 and November 19, 1996, respectively. Shares of the Company's
Class A Preferred Stock are convertible on a one-for-one basis into shares of
the Company's Common Stock if certain contingent events occur.
Item 7 Financial Statements and Exhibits
(c) Exhibits:
1. Stock Purchase Agreement dated August 20, 1999 and
2. Registration Rights Agreement dated August 20, 1996
3. Articles Supplementary to Articles of Incorporation dated August 20, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Great Lakes REIT, Inc.
(Registrant)
Date: August 28, 1996
/s/Richard L. Rasley
Executive Vice President
<PAGE>
Exhibits Index:
Exhibit No. Description Page No.
1.Stock Purchase Agreement dated August 20, 1996 4
2.Registration Rights Agreement dated
August 20, 1996 47
3.Articles Supplementary for Articles of
Incorporation 62
dated August 20, 1996
<PAGE>
EXHIBIT 1
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 Paragraph 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.
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
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 U.S. Real Estate Portfolio
MS SICAV Real Estate
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
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]
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 ADVISOR
By:/s/ Russell Platt
MORGAN STANLEY SICAV SUBSIDIARY SA,
a Luxembourg corporation
By: MORGAN STANLEY ASSET MANAGEMENT INC., AS INVESTMENT ADVISOR
By:/s/ Russell 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>
EXHIBIT 2
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:v MORGAN STANLEY ASSET MANAGEMENT INC., AS INVESTMENT ADVISOR
By:/s/ Russell Platt
MORGAN STANLEY SICAV SUBSIDIARY SA,
a Luxembourg corporation
By:MORGAN STANLEY ASSET MANAGEMENT INC., AS INVESTMENT ADVISOR
By:/s/ Russell Platt
<PAGE>
"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 <PAGE>
EXHIBIT 3
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 Corporation
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 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.
"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 Non
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.
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.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be signed in its name and on its behalf by its President and attested to
by its Secretary on this 20th day of August, 1996.
ATTEST: GREAT LAKES REIT, INC.
/s/Richard L. Rasley /s/Richard A.May (SEAL)
Richard L. Rasley Richard A. May
Secretary President
