- ---------------------------------------------------------------------------
Exhibit Index
on Page 8
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 14, 1997
GROVE PROPERTY TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-13080 06-1391084
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
598 Asylum Avenue Hartford, Connecticut 06105
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 246-1126
N/A
(Former name or former address, if changed since
last report.)
- ------------------------------------------------------------------------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On March 14, 1997, the Registrant consummated a series of
transactions (the "Consolidation Transactions") pursuant to which it became a
self-administered and self-managed real estate investment trust with control
over a portfolio of 23 multi-family residential apartment projects and one
neighborhood shopping center in the Northeastern United States.
The Consolidation Transactions are summarized below:
(1) The Registrant formed Grove Operating, L.P., a Delaware
limited partnership (the "Operating Partnership"), to serve as the operating
partnership of the Registrant.
(2) The Operating Partnership consummated an Exchange Offer
for the tender of any or all of the limited partnership interests of certain
limited partnerships (the "Property Partnerships") in exchange for an aggregate
of 1,082,519 units of limited partnership interest of the Operating Partnership
("Common Units") and an aggregate of $3,457,561 in cash.
(3) The Registrant and the Operating Partnership entered into
a Contribution Agreement, dated March 14, 1997, with Grove Investment Group,
Inc. ("GIG"), Damon Navarro, Joseph LaBrosse, Brian Navarro, Edmund Navarro,
certain of their affiliates and certain other persons (the "Contributors"),
pursuant to which:
(a) The Registrant contributed its four multi-family residential
apartment projects to the Operating Partnership in exchange for
620,130 Common Units;
(b) The Registrant contributed to the Operating Partnership
$30,000,000, representing the gross proceeds of the private placement
of the Registrant's common shares of beneficial interest, par value
$.01 per share ("Common Shares"), described below, in exchange for
3,333,333 Common Units;
(c) Grove Property Services Limited Partnership contributed its assets
and liabilities relating to its property management business to the
Operating Partnership in exchange for 687,076 Common Units;
(d) Burgundy Associates Limited Partnership contributed its property
known as Burgundy Studio Apartments to the Operating Partnership in
exchange for 99,814 Common Units;
(e) Certain Contributors contributed their interests in the Property
Partnerships in exchange for aggregate consideration of 923,104
Common Units; and
2
<PAGE>
(f) Certain Contributors contributed seven multi-family residential
apartment projects to the Operating Partnership in exchange for an
aggregate of 167,758 Common Units.
As a result of the foregoing transactions, the Operating Partnership
acquired (i) 100% of the following properties: Dogwood Hills Apartments, Hamden
Center Apartments, Baron Apartments, Cambridge Estates, Arbor Commons, 208-210
Main Street Apartments, Dean Estates II Apartments, Colonial Village Apartments
and Park Place West; and (ii) a controlling interest in Avonplace Condominiums,
Burgundy Studio Apartments, Fox Hill Apartments, The Longmeadow Shops, Loomis
Manor, Woodbridge Apartments, Royale Apartments, Bradford Commons, Dean Estates
Apartments Fox Hill Commons, Van Deene Manor, Security Manor, Westwynd
Apartments, Ocean Reef Apartments and Sandalwood Apartments.
(4) Certain amendments to the Declaration of Trust of the
Registrant and the Registrant's 1996 Share Incentive Plan were adopted following
approval of shareholders of the Registrant.
(5) The Registrant declared and issued a stock dividend
aggregating 26,250 Common Shares and concurrently effectuated a 1.125 to 1 stock
split, thereby issuing, on a pro rata basis, a total of 95,130 Common Shares to
the holders of the then outstanding Common Shares.
In determining the amount of consideration paid for the
acquired properties, the value of each property wasdetermined by (i)
capitalizing the pro forma net operating income for such property less a reserve
for capital expenditures at a capitalization rate ranging from 9% to 11% (ii)
deducting the amount of debt of the Property Partnership holding such property
(iii) adding the other assets of the Property Partnership, net of liabilities
(such as cash, accounts receivable, accounts payable and security deposits) and
(iv) deducting any transfer taxes due upon the restructuring of the Property
Partnership. Each Common Unit was valued at $9.00 per share.
The Consolidation Transactions were financed, in part, through
a private placement of 3,333,333 Common Shares, yielding gross proceeds to the
Registrant of $30,000,000 (the "Private Placement"). Common Shares issued in the
Private Placement were purchased by a number of investors, including Morgan
Stanley Group Inc. and ABKB/LaSalle Securities Limited (the "Investors").
The Consolidation Transactions were also financed through a
$15,084,000 Term Loan entered into by the Registrant, the Operating Partnership,
certain affiliated limited partnerships, the general partners of such limited
partnerships and Citicorp Real Estate, Inc., as lender.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
Financial statements and supplementary information are contained on
pages F-1 to F-47 of this report.
(b) Pro Forma Financial Information
Financial statements and supplementary information are contained on
pages F-1 to F-47 of this report.
(c) The following Exhibits are filed as a part of this Report:
Exhibit No. Exhibit
3.1 Third Amended and Restated Declaration of
Trust of the Registrant.
3.2 Amended and Restated By-laws of the Registrant.
10.1 Securities Purchase Agreement, dated March 14,
1997, between the Registrant and Morgan Stanley
Group Inc.
4
<PAGE>
10.2 Securities Purchase Agreement, dated March 14,
1997, between the Registrant and ABKB/LaSalle
Securities Limited.
10.3 Form of Securities Purchase Agreement executed
by other Investors in the Private Placement.
10.4 Registration Rights Agreement executed by the
Investors.
10.5 Multifamily Note, dated March 14,
1997, among Citicorp Real Estate,
Inc., GR-Properties III Limited
Partnership, Foxwoodburg, L.P.,
Grove-Westfield Associates Limited
Partnership, Grove-West Springfield
Associates Limited Partnership and
GR-Westwynd Associates Limited
Partnership.
10.6 Cash Management Agreement, dated as of
March 14, 1997, among Citicorp Real
Estate, Inc., GR-Properties III
Limited Partnership, Foxwoodburg,
L.P., Grove-Westfield Associates
Limited Partnership, Grove-West
Springfield Associates Limited
Partnership and GR-Westwynd Associates
Limited Partnership.
10.7 Form of Multifamily Open-End Mortgage Deed,
Assignment of Rents and Security Agreement,
executed by Citicorp Real Estate, Inc. and each of
GR-Properties III Limited Partnership,
Foxwoodburg, L.P., Grove-Westfield Associates
Limited Partnership, Grove-West Springfield
Associates Limited Partnership and GR-
Westwynd Associates Limited Partnership.
10.8 Pledge Agreement, dated as of March 14, 1997,
between the Operating Partnership and Citicorp
Real Estate, Inc.
- --------
Incorporated by reference from the
Registrant's Current Report on Form 8-K, dated February 13, 1997.
5
<PAGE>
10.9 Registration Rights Agreement, dated
March 14, 1997, between the Registrant
and certain partners of the Operating
Partnership.
10.10 1996 Share Incentive Plan, dated March 14, 1997.
10.11 Pledge Agreement, dated March 14, 1997, among Damon Navarro, Brian
Navarro, Edmund Navarro, Joseph LaBrosse, Gerald McNamara,
National Realty Services Limited Partnership, GIG, Burgundy
Associates Limited Partnership, Grove Equity Partnership, Grove
Holding Co.
Inc. and the Registrant.
10.12 Noncompetition Agreement among the
Registrant, the Operating Partnership, National
Realty Services Limited Partnership, GIG and
Burgundy Associates Limited Partnership.
10.13 Form of Noncompetition Agreement executed by
each of Damon Navarro, Brian Navarro, Joseph
LaBrosse, Edmund Navarro and Gerald
McNamara.
10.14 Employment Agreement, dated March 14, 1997,
between the Registrant and Damon Navarro.
10.15 Employment Agreement, dated March 14, 1997,
between the Registrant and Brian Navarro.
10.16 Employment Agreement, dated March 14, 1997,
between the Registrant and Edmund Navarro.
10.17 Employment Agreement, dated March 14, 1997,
between the Registrant and Joseph LaBrosse.
10.19 Employment Agreement, dated March 14, 1997,
between the Registrant and Gerald McNamara.
6
<PAGE>
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 hereunto duly authorized.
GROVE REAL ESTATE ASSET TRUST
Date: March 28, 1997 /s/ DAMON NAVARRO
---------------------
Damon Navarro
President
7
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
3.1 Third Amended and Restated Declaration of Trust of the
Registrant.
3.2 Amended and Restated By-laws of the Registrant.
10.1 Securities Purchase Agreement, dated March 14, 1997,
between the Registrant and Morgan Stanley Group Inc.
10.2 Securities Purchase Agreement, dated March 14, 1997, between the
Registrant and ABKB/LaSalle Securities Limited.
10.3 Form of Securities Purchase Agreement executed by other Investors in
thePrivate Placement.
10.4 Registration Rights Agreement executed by the Investors.
10.5 Multifamily Note, dated March 14, 1997, among Citicorp Real Estate,
Inc.,GR-Properties III Limited Partnership, Foxwoodburg, L.P.,
Grove-Westfield Associates Limited Partnership, Grove-West Springfield
Associates Limited Partnership and GR-Westwynd Associates Limited
Partnership.
10.6 Cash Management Agreement, dated as of March 14, 1997, among Citicorp Real
Estate, Inc., GR-Properties III Limited Partnership, Foxwoodburg, L.P.,
Grove-Westfield Associates Limited Partnership, Grove-West Springfield
Associates Limited Partnership and GR-Westwynd Associates Limited
Partnership.
10.7 Form of Multifamily Open-End Mortgage Deed, Assignment
of Rents and Security Agreement, executed by Citicorp Real
Estate, Inc. and each of GR-Properties III Limited
Partnership, Foxwoodburg, L.P., Grove-Westfield Associates
Limited Partnership, Grove-West Springfield Associates
Limited Partnership and GR-Westwynd Associates Limited
Partnership.
10.8 Pledge Agreement, dated as of March 14, 1997, between the Operating
Partnership and Citicorp Real Estate, Inc.
8
<PAGE>
10.9 Registration Rights Agreement, dated March 14, 1997, between the
Registrant and certain partners of the Operating Partnership.
10.10 1996 Share Incentive Plan, dated March 14, 1997.
10.11 Pledge Agreement, dated March 14, 1997, among Damon
Navarro, Brian Navarro, Edmund Navarro, Joseph LaBrosse,
Gerald McNamara, National Realty Services Limited
Partnership, GIG, Burgundy Associates Limited Partnership,
Grove Equity Partnership, Grove Holding Co. Inc. and the
Registrant.
10.12 Noncompetition Agreement among the Registrant, the
Operating Partnership, National Realty Services Limited
Partnership, GIG and Burgundy Associates Limited
Partnership.
10.13 Form of Noncompetition Agreement executed by each of Damon
Navarro, Brian Navarro, Joseph LaBrosse, Edmund Navarro
and Gerald McNamara.
10.14 Employment Agreement, dated March 14, 1997, between the Registrant and
Damon Navarro.
10.15 Employment Agreement, dated March 14, 1997, between the Registrant and
Brian Navarro.
10.16 Employment Agreement, dated March 14, 1997, between the Registrant and
Edmund Navarro.
10.17 Employment Agreement, dated March 14, 1997, between the Registrant and
Joseph LaBrosse.
10.18 Employment Agreement, dated March 14, 1997, between the Registrant and
Gerald McNamara.
- --------
Incorporated by reference from the Registrant's Current Report on Form 8-K,
dated February 13, 1997.
9
<TABLE>
<CAPTION>
PAGES
INDEX TO FINANCIAL STATEMENTS ---------
<S> <C>
GROVE REAL ESTATE ASSET TRUST
Pro Forma Financial Statements (Unaudited):
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1996............................ F-2
Notes to Pro Forma Condensed Consolidated Balance Sheet............................................ F-3
Pro Forma Condensed Consolidated Statements of Income for the Nine Months Ended September 30, 1996
and Year Ended December 31, 1995.................................................................. F-5
Notes to Pro Forma Condensed Consolidated Statements of Income..................................... F-7
Historical Financial Statements:
Unaudited Balance Sheet as of September 30, 1996................................................... F-9
Unaudited Statements of Income for the Nine Months Ended September 30, 1996 and 1995............... F-10
Unaudited Statement of Changes in Shareholders' Equity for the Nine Months Ended September 30,
1996.............................................................................................. F-11
Unaudited Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995........... F-12
Notes to the Unaudited Financial Statements........................................................ F-13
Report of Independent Auditors..................................................................... F-15
Balance Sheet as of December 31, 1995.............................................................. F-16
Statements of Income for the Year Ended December 31, 1995 and the period from
inception (June 24, 1994) to December 31, 1994................................................... F-17
Statement of Shareholders' Equity for the Year Ended December 31, 1995
and the period from inception (June 24, 1994) to December 31, 1994............................... F-18
Statements of Cash Flows for the Year Ended December 31, 1995 and the period
from inception (June 24, 1994) to December 31, 1994.............................................. F-19
Notes to the Financial Statements.................................................................. F-20
GROVE OPERATING, L.P.
Financial Statements:
Report of Independent Auditors..................................................................... F-26
Balance Sheet as of November 4, 1996............................................................... F-27
Notes to Balance Sheet............................................................................. F-28
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
Combined Financial Statements:
Report of Independent Auditors..................................................................... F-30
Combined Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995................. F-31
Combined Statements of Income for the Nine Months Ended September 30, 1996 and 1995 (unaudited) and
the Years Ended December 31, 1995 and 1994........................................................ F-32
Combined Statements of Changes in Owners' Equity for the Nine Months Ended September 30, 1996
(unaudited) and the Years Ended December 31, 1995 and 1994........................................ F-33
Combined Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 (unaudited)
and the Years Ended December 31, 1995 and 1994.................................................... F-34
Notes to the Combined Financial Statements......................................................... F-35
GROVE CAMBRIDGE ASSOCIATES LIMITED PARTNERSHIP
Financial Statements:
Reports of Independent Auditors.................................................................... F-40
Balance Sheet as of December 31, 1995.............................................................. F-42
Statements of Operations for the Years Ended December 31, 1995 and 1994............................ F-43
Statements of Changes in Partners' Equity (Deficit) for the Years Ended December 31, 1995 and
1994.............................................................................................. F-44
Statements of Cash Flows for the Years Ended December 31, 1995 and 1994............................ F-45
Notes to the Financial Statements.................................................................. F-46
</TABLE>
F-1
<PAGE>
GROVE REAL ESTATE ASSET TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
This unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as if
(i) the Consolidation Transactions as defined elsewhere in this Proxy Statement,
including the New Equity Investment with gross proceeds of $17.5 million, had
occurred on September 30, 1996, and (ii) the Company used a portion of the net
proceeds from the New Equity Investment together with borrowings under the new
Credit Facility ("Refinancings") to retire certain mortgage notes and to
purchase a portion of the interests of the Limited Partners in certain of the
Property Partnerships. The pro forma information assumes that all parties to the
Consolidation Transactions participate in full. The unaudited Pro Forma
Condensed Consolidated Balance Sheet should be read in conjunction with the
Combined Financial Statements of Grove Property Services Limited Partnership and
Property Partnerships, Grove Real Estate Asset Trust and Grove Cambridge
Associates Limited Partnership and Notes thereto included elsewhere in this
Proxy Statement. In management's opinion, all adjustments necessary to present
fairly the effects of the Consolidation Transactions have been made.
The pro forma information is not necessarily indicative of the results that
would have been reported had such events actually occurred on the dates
specified, nor is it indicative of the Company's future results.
SEPTEMBER 30,1996
-----------------------------------------------------
MANAGEMENT
HISTORICAL HISTORICAL PRO FORMA
COMPANY RO FORMA
GREAT (A) COMBINED (A) ADJUSTMENTS ADJUSTMENTS
CONSOLIDATED
--------- ----------- -------------- -------- ---------
(DOLLARS IN THOUSANDS)
ASSETS
Real estate, net .. $8,804 $ 54,944 $ 851 (B) $ 63,657
(942)(I)
Cash and cash
equivalents 442 1,290 (1,870)(C) $ (80)(H) 22
240 (F)
Restricted cash ... 157 655 (18)(I) 794
Due from partners . 884 (884)(G) --
Deferred costs, net 83 969 133 (D) 1,185
Other assets ...... 61 421 (4)(I) (153)(H) 325
------ -------- ------- -------- --------
Total assets ...... $9,547 $ 59,163 $(2,494) $ (233) $ 65,983
------ -------- ------- -------- --------
------ -------- ------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes
payable $ 5,675 $ 47,518 $(39,800)(E)
16,383 (F)
(525)(I) $ 29,251
Revolving credit
facility 15,940 (F) 15,940
Accounts payable and
other liabilities 61 1,183 (72)(H) 1,172
Due to affiliates 3 985 (476)(C)
(341)(G) 171
Resident security
deposits 157 655 (18)(I) 794
Dividends payable 121 0 0 0 121
--- ----- -------- -------- -----
Total liabilities 6,017 50,341 (8,837) (72) 47,449
Minority interest -- -- 7,763(J) -- 7,763
Shareholders' equity:
Common shares 5 21 (G) 26
Additional paid-in
captial 3,913 14,595 (G) 10,745
(7,763)(J)
Distributions in excess
of earnings (388) -- 388 (G) --
Partners'equity 8,822 (1,000)(F) (161)(H) --
(7,240)(G)
(421)(I)
-------- ------- -------- -------- -------
Shareholders' equity 3,530 8,822 (1,420) (161) 10,771
-------- ------- -------- -------- -------
-
Total liabilities and
shareholders' equity$ 9,547 $ 59,163 $(2,494) $ (233) $ 65,983
======= ======== ======= ======== ========
F-2
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(A) Balance sheet data was derived from the financial statements appearing
elsewhere in this Proxy Statement.
(B) Certain Limited Partners will receive cash for their Property
Partnership interests acquired by the Operating Partnership. Purchase accounting
will be applied to the acquisition of Property Partnership interests from such
partners. The pro forma adjustment of $851 reflects the excess of the purchase
price ($7,354) of these interests over the net book value of $6,503. The
acquisition of all other interests will be accounted for as a reorganization of
entities under common control and, accordingly, assets and liabilities related
to those interests will be reflected at historical cost in a manner similar to
that used in pooling of interests accounting.
(C) Reflects the following transactions:
<TABLE>
<S> <C>
Proceeds from New Equity Investment............................... $ 17,500
Expenses of New Equity Investment................................. (1,965)
Payment of mortgage notes and interest............................ (39,800)
Payments for Property Partnership interests....................... (7,354)
Payments to Grove Companies in exchange for certain general
partnership interests........................................... (178)
Payment of loans from affiliates.................................. (476)
Issuance of new debt.............................................. 31,083
Financing costs................................................... (680)
---------
$ (1,870)
---------
---------
</TABLE>
(D) Reflects the following transactions:
<TABLE>
<S> <C>
Financing costs............................................ $ 680
Write-off of deferred costs related to retired debt........ (547)
---------
$ 133
---------
---------
</TABLE>
(E) Reflects the $39,800 paydown of certain existing mortgage notes payable.
(F) Reflects the issuance of new long term mortgage financing of $15,143 and
drawdown of new revolving credit facility of $15,940, due in lump sum payments
after ten years and three years, respectively, assuming gross proceeds of $17.5
million are received by the Company in connection with the New Equity
Investment. Proceeds received in excess of such amount (up to a maximum of $30.0
million) will result in a dollar-for-dollar reduction in the draw-down under the
Revolving Credit Facility. Additional cash of $240 was derived from $1,240 of
new debt obtained in October, 1996 net of $1,000 which will be distributed to
certain Limited Partners of Grove Opportunity Fund II Limited Partnership prior
to the Consolidation Transactions.
F-3
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(G) Reflects the following transactions:
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN
SHARES CAPITAL
------ -------
<S> <C> <C> <C>
Proceeds from New Equity Investment.......... $ 17,500 $ 19 $ 17,481
Expenses of New Equity Investment............ (1,965) (1,965)
Conversion of remaining partnership interest. 7,240 7,240
Reduction to partners' capital accounts
for contributions receivable............... (884) (884)
Affiliated debt contributed to capital....... 341 341
Acquisition of Property Partnership interests
for cash.................................... (7,532) (7,532)
Allocation of purchase price................. 851 851
Reclassification of distributions in excess
of earnings.................................. (388) (388)
Par value of Stock dividends and stock split. 2 (2)
Write-off of deferred costs related
to retired debt............................ (547) (547)
--------- --- -----------
Total shareholders' equity................... $ 14,616 $ 21 $ 14,595
========= ========= =========
</TABLE>
(H) Represents adjustments to exclude the assets and liabilities of Grove
Property Services Limited Partnership used in connection with brokerage services
that will be transferred to National Realty Services, L.P., a newly formed
entity which will not be included in the Consolidation Transactions.
(I) Reflects adjustments to exclude the Company's investment in Talcott
Forest which is not included in the Consolidation Transactions.
(J) Based upon 1,848,683 Common Units issued to Limited Partners outstanding
of the 4,413,257 Common Shares (assuming the exchange of all Common Units for
Common Shares) assumed to be outstanding (41.89%).
F-4
<PAGE>
GROVE REAL ESTATE ASSET TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
These unaudited Pro Forma Condensed Consolidated Statements of Income are
presented as if (i) the Company had acquired Grove Cambridge Associates Limited
Partnership as of the beginning of the period and (ii) the Consolidation
Transactions, as defined elsewhere in this Proxy Statement, including the New
Equity Investment and Refinancings, had occurred as of the beginning of the
period. The pro forma information assumes that all parties to the Consolidating
Transactions participate in full. The unaudited Pro Forma Condensed Consolidated
Statements of Income should be read in conjunction with the Combined Financial
Statements of Grove Property Services Limited Partnership and Property
Partnerships, Grove Real Estate Asset Trust and Grove Cambridge Associates
Limited Partnership and Notes thereto included elsewhere in this Proxy
Statement. In management's opinion, all adjustments necessary to present fairly
the effects of the Consolidation Transactions have been made.
The pro forma information is not necessarily indicative of the results that
would have been reported had such events actually occurred on the dates
specified, nor is it indicative of the Company's future results.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------------------------------------------------
MANAGEMENT
HISTORICAL ACQUISITION HISTORICAL PRO FORMA COMPANY PRO FORMA
GREAT(A) ADJUSTMENTS(A) COMBINED(A) ADJUSTMENTS ADJUSTMENTS CONSOLIDATED
----------- --------------- ----------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income............ $ 1,521 $ 28 $ 9,644 $ (190)(D) $ (13)(H) $ 10,990
Property management...... 1,198 (525)(H) 593
(80)(I)
Interest and other....... 28 1 243 (26)(D) (100)(J) 146
----------- --- ----------- ----------- ----- -----------
Total revenue.......... 1,549 29 11,085 (216) (718) 11,729
Expenses:
Related party management
fees................... 80 (80)(I) --
Other property
operating.............. 485 14 4,349 (89)(D) (600)(H) 4,159
General and
administrative......... 55 12 194 (3)(D)
30 (G) 361 (H) 649
Real estate taxes........ 155 3 938 (17)(D) 1,079
----------- --- ----------- ----------- ----- -----------
Total expenses....... 775 29 5,481 (79) (319) 5,887
----------- --- ----------- ----------- ----- -----------
774 -- 5,604 (137) (399) 5,842
Interest................. 292 63 2,807 (519)(C)
(34)(D) 2,609
Depreciation and
amortization........... 293 27 2,346 (35)(D) 31 (H)
2(E)
26(F) 2,690
----------- --- ----------- ----------- ----- -----------
Income before minority
interest and
extraordinary items.... 189 (90) 451 423 (430) 543
Minority interest in
earnings............... (227)(K) (227)
----------- --- ----------- ----------- ----- -----------
Income before
extraordinary items.... $ 189 $ (90) $ 451 $ 196 $ (430) $ 316
----------- --- ----------- ----------- ----- -----------
----------- --- ----------- ----------- ----- -----------
</TABLE>
F-5
<PAGE>
GROVE REAL ESTATE ASSET TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------------------------------
MANAGEMENT
HISTORICAL ACQUISITION HISTORICAL PRO FORMA COMPANY PRO FORMA
GREAT(A) ADJUSTMENTS(A) COMBINED(A) ADJUSTMENTS ADJUSTMENTS CONSOLIDATED
----------- --------------- ----------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income............ $ 1,287 $ 746 $ 11,965 $ (247)(D) $ (18)(H) $ 13,773
Property management...... 1,473 (448)(H) 911
(114)(I)
Interest and other....... 30 16 445 (15)(D) 476
----------- --- ----------- ----------- ----- -----------
Total revenue.......... 1,317 762 13,883 (216) (580) 15,120
Expenses:
Related party management
fees....... ........... 67 47 (114)(I) --
Other property
operating.............. 406 222 5,276 (84)(D) (771)(H) 5,049
General and
administrative......... 56 0 261 (3)(D)
40 (G) 452 (H) 806
Real estate taxes........ 148 61 1,234 (26)(D) 1,417
----------- --- ----------- ----------- ----- -----------
Total expenses....... 677 330 6,771 (73) (433) 7,272
----------- --- ----------- ----------- ----- -----------
640 432 7,112 (189) (147) 7,848
Interest................. 85 409 3,829 (792)(C)
(52)(D) 3,479
Depreciation and
amortization........... 216 187 3,140 (42)(D) 37 (H)
(33)(E)
35 (F) 3,540
----------- --- ----------- ----------- ----- -----------
Income before minority
interest and
extraordinary items.... 339 (164) 143 695 (184) 829
Minority interest in
earnings............... (347)(K) (347)
----------- --- ----------- ----------- ----- -----------
Income before
extraordinary items.... $ 339 $ (164) $ 143 $ 348 $ (184) $ 482
----------- --- ----------- ----------- ----- -----------
----------- --- ----------- ----------- ----- -----------
</TABLE>
F-6
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(A) Results of operations data was derived from the financial statements
appearing elsewhere in this Proxy Statement.
(B) Results of operations of Grove Cambridge Associates Limited Partnership
prior to its acquisition on January 12, 1996.
(C) Represents the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
<S> <C> <C>
Pro forma interest expense on refinanced debt......... $ 1,796 $ 2,355
Historical interest expense on refinanced debt........ (2,315) (3,147)
------- -------
$ (519) $ (792)
------- -------
------- -------
</TABLE>
Interest expense on the new debt is based on a rate of approximately 7.9%
per annum. Assumes proceeds of $17.5 million are received by the Company in
connection with the New Equity Investment.
Gross proceeds received in excess of the assumed $17.5 million in connection
with the New Equity Investment will result in a dollar-for-dollar reduction in
the initial draw-down under the Revolving Credit Facility necessary to fund the
Consolidation Transactions, and a corresponding reduction in the outstanding
indebtedness of the Company following the consummation of the Consolidation
Transactions. Assuming receipt by the Company of the maximum gross proceeds of
$30.0 million in connection with the New Equity Investment, pro forma interest
expense for the year ended December 31, 1995 and the nine months ended September
30, 1996 will be $2,499 and $1,874, respectively; pro forma minority interest in
earnings will be $583 and $412, respectively; pro forma net income will be
$1,246 and $881, respectively; pro forma net income per share will be $.31 and
$.22, respectively; pro forma FFO will be $5,251 and $3,922, respectively; pro
forma total debt at September 30, 1996 will be $32,650 and pro forma
shareholders' equity will be $21,155.
(D) Reflects adjustments to exclude the results of operations of Talcott
Forest which is not included in the Consolidation Transactions.
(E) Represents the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------- -------------------
<S> <C> <C>
Pro forma deferred financing amortization costs....... $ 102 $ 136
Historical deferred financing amortization costs...... (100) (169)
----- -----
$ 2 $ (33)
----- -----
----- -----
</TABLE>
(F) Represents adjustment to record depreciation on the excess of the
purchase price relating to the purchase of certain partnership interests from
partners, over the net book value.
(G) Represents adjustment to record compensation expense associated with the
Deferred Stock Grants granted to Executive Officers in connection with the
consummation of the Consolidation Transactions, pursuant to the 1996 Plan.
(H) Represents adjustments to exclude the results of operations of Grove
Property Services Limited Partnership attributable to brokerage services and
reclassification of certain expenses historically classified
F-7
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
by Grove Property Services Limited Partnership as property management expenses
to general and administrative of the Company, as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------- -------------------
<S> <C> <C>
Other property operating--brokerage services.......... $ (239) $ (319)
Reclassification of other property operating to
general and administrative.......................... (424) (566)
----- -----
$ (663) $ (885)
----- -----
----- -----
</TABLE>
(I) Elimination of intercompany management fees.
(J) Elimination of commission received from an affiliate.
(K) Based upon 1,848,683 Common Units issued to Limited Partners
outstanding, of the 4,413,257 Common Shares (assuming the exchange of all Common
Units for Common Shares) assumed to be outstanding (41.89%).
F-8
<PAGE>
GROVE REAL ESTATE ASSET TRUST
BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Real estate assets:
Land ........................................................ $ 920,293
Buildings and improvements .................................. 8,494,112
Furniture, fixtures and equipment ........................... 347,336
-----------
9,761,741
Less--accumulated depreciation .............................. (958,017)
-----------
Net real estate assets .................................. 8,803,724
Cash and cash equivalents ..................................... 441,632
Cash--resident security deposits .............................. 156,592
Deferred charges, net of accumulated amortization of $4,247 ... 83,222
Other assets .................................................. 62,069
-----------
Total assets .................................................. $ 9,547,239
-----------
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable .................... 5,675,478
Accounts payable, accrued expense and other 61,189
Due to affiliates ......................... 2,532
Resident security deposits ................ 156,592
Dividends payable ......................... 120,750
---------
Total liabilities ........................... 6,016,541
---------
Commitments and subsequent event Shareholders' equity:
Preferred shares, $.01 par value per share, 4,000,000
shares authorized; no shares issued or outstanding ........... --
Common shares, $.01 par value per share, 10,000,000
shares authorized; 525,000 shares issued and outstanding 5,250
Additional paid-in capital ................................... 3,913,176
Distributions in excess of earnings .......................... (387,728)
-----------
Total equity ................................................... 3,530,698
-----------
Total liabilities and shareholders' equity ..................... $ 9,547,239
-----------
-----------
</TABLE>
See accompanying notes.
F-9
<PAGE>
GROVE REAL ESTATE ASSET TRUST
INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
----------------------------
<S> <C> <C>
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
Revenues:
Rental income............................. $ 1,521,188 $ 961,423
Interest and other income................. 28,015 22,395
------------- -------------
Total revenues.......................... 1,549,203 983,818
------------- -------------
Expenses:
Property operating and maintenance........ 485,361 296,532
Real estate taxes......................... 155,007 110,858
Related party management fees............. 79,883 49,874
General and administrative................ 55,337 46,329
------------- -------------
Total expenses.......................... 775,588 503,593
------------- -------------
773,615 480,225
Interest expense............................ 291,551 63,588
Depreciation and amortization............... 293,328 161,686
------------- -------------
Net income............................ $ 188,736 $ 254,951
------------- -------------
------------- -------------
Net income per share........................ $ 0.36 $ 0.49
------------- -------------
------------- -------------
Weighted average number of shares 525,000 525,000
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-10
<PAGE>
GROVE REAL ESTATE ASSET TRUST
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
DISTRIBUTIONS
COMMON PAIN-IN IN EXCESS
OF
SHARES CAPITAL NET
INCOME
----------- ------------ ------------
<S> <C> <C> <C>
Amounts at December 31, 1995.......... $ 5,250 $ 3,913,176 $(215,526)
Net income............................ 188,736
Declared dividends.................... (360,938)
----------- ------------ ------------
Amounts at September 30, 1996......... $ 5,250 $ 3,913,176 $(387,728)
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
See accompanying notes.
F-11
<PAGE>
GROVE REAL ESTATE ASSET TRUST
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 188,736 $ 254,951
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 293,328 161,686
Imputed interest--mortgage.................... 27,875 25,931
Increase in other assets...................... (59,357) (33,003)
Increase (decrease) in accounts payable,
accrued expenses and other............. 29,885 (2,372)
------------- -------------
Net cash provided by operating activities... 480,467 407,193
------------- -------------
Cash flows from investing activities:
Expenditures for building and improvements...... (67,635) (37,624)
Expenditures for furniture, fixtures and
equipment.. (21,604) (5,057)
------------- -------------
Net cash used in investing activities....... (89,239) (42,681)
------------- -------------
Cash flows from financing activities:
Proceeds from mortgage payable.................. 220,197 --
Financing costs................................. (56,469) --
Repayment of mortgage payable................... (42,428) --
Repayment of notes payable to affiliates........ (94,996) (50,000)
Dividends paid.................................. (359,625) (353,063)
------------- -------------
Net cash used in financing activities....... (333,321) (403,063)
------------- -------------
Net increase (decrease) in cash and cash equivalen 57,907 (38,551)
Cash and cash equivalents, beginning of period.... 383,725 416,012
------------- -------------
Cash and cash equivalents, end of period.......... $ 441,632 $ 377,461
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-12
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. FORMATION AND BUSINESS OF THE COMPANY
Grove Real Estate Asset Trust (the "Company") was organized in the State of
Maryland on April 4, 1994 as a Real Estate Investment Trust ("REIT"). The
Company currently operates four properties with a total of 257 residential
apartments. The Company purchased three properties on June 23, 1994 (the
"Original Properties"), and the fourth property ("Cambridge") was acquired for
$4,250,000 in January of 1996. Cambridge is a ninety-two unit multifamily
apartment complex located in Norwich, Connecticut
These statements do not contain all information required by generally
accepted accounting principles to be included in a full set of financial
statements. In the opinion of management, the accompanying unaudited financial
statements reflect all the adjustments necessary to present fairly the financial
position of the Company at September 30, 1996 and results of its operations and
its cash flows for the period then ended and the period ended September 30,
1995. These unaudited financial statements should be read in conjunction with
the audited financial statements and notes contained herein. Results of
operations for this period are not necessarily indicative of results to be
expected for the full year.
Earnings per share is based on the weighted average number of common shares
issued and outstanding from January 1, 1996 to September 30, 1996, and from
January 1, 1995 to September 30, 1995, which was equal to 525,000 shares. The
assumed exercise of outstanding stock options and warrants is not dilutive and,
therefore, is not included.
2. MORTGAGE NOTES PAYABLE
Mortgage notes payable at September 30, 1996 consist of the following:
<TABLE>
<S> <C>
Southington Apartments note..................................... $1,217,906
Cambridge Estates note.......................................... 4,457,572
---------
$5,675,478
---------
---------
</TABLE>
The mortgage note on the Southington Apartments property located in
Southington, Connecticut, one of the Original Properties, which has a face
amount of $1,250,000, has an imputed interest rate of 7.25% due in monthly
interest payments of $4,167 through June 1997 and monthly principal and interest
payments of $8,527 through July 2013. The note is collateralized by the
Southington Apartments property and 15% of the face amount is guaranteed by
certain executive officers and shareholders of the Company.
The Cambridge note payable had an original principal balance of $4,500,000.
Monthly principal and interest payments of $31,920 based on a 25-year
amortization table are due through January 2006. Interest is fixed at 7.04%. The
mortgage is secured by a blanket first mortgage lien on the Cambridge property,
and the two other Original Properties located in Hamden, Connecticut.
3. STOCK OPTIONS AND WARRANTS
The Company has adopted the 1994 Share Option Plan (the "Plan") and has
reserved 100,000 shares for issuance under the Plan. The Company has granted
options to purchase 50,000 shares to the executive officers with an exercise
price of $11.125 per share. The options will expire on the tenth anniversary of
the closing of the IPO. Additionally, the Company has granted each Trust Manager
of the Company who is not an employee upon their election as a Trust Manager a
non-qualified stock option to purchase 2,000 shares
F-13
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
(UNAUDITED)
3. STOCK OPTIONS AND WARRANTS (CONTINUED)
for a total of 6,000 shares with an exercise price of $11.125 per share. At the
time of each annual meeting of shareholders, each non-employee Trust Manager
receives an option to purchase 1,000 shares at the fair market value of the
shares on the date of grant. All options which have been granted under the Plan
become exercisable in increments of 33 1/3% per year on each of the first three
anniversaries of the date of grant. At September 30, 1996, no options had been
exercised. At September 30, 1996, 62,000 options are outstanding, of which
38,334 are exercisable.
At September 30, 1996, warrants to purchase an aggregate of 40,000 common
shares are exercisable at $13.35 per share and expire in June 1999.
4. RELATED PARTY TRANSACTIONS
DUE TO AFFILIATES
Amounts due to affiliates at September 30, 1996 consist of the following:
<TABLE>
<S> <C>
Grove Property Services Limited Partnership......................... $ 2,532
---------
Total due to affiliates......................................... $ 2,532
---------
---------
</TABLE>
MANAGEMENT FEE
Grove Property Services Limited Partnership, an affiliate of GREAT, provides
all of the operating and support functions requisite to the operation of
properties owned by GREAT, including building management and leasing, to the
Company. The management agreement provides for a management fee equal to 5% of
gross rental revenues, as defined. The agreement expires on June 30, 1997.
5. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest expense was $278,551 and $63,431 for the nine months
ended September 30, 1996 and 1995, respectively. On January 12, 1996 the Company
purchased Cambridge for $4,250,000, which was financed with a $4,500,000 first
mortgage from a bank.
F-14
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders and Board of Directors
of Grove Real Estate Asset Trust
Hartford, Connecticut
We have audited the accompanying balance sheet of Grove Real Estate Asset
Trust as of December 31, 1995, and the related statements of income,
shareholders' equity and cash flows for the year ended December 31, 1995 and for
the period of initial operations (June 24, 1994) through December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Grove Real Estate Asset
Trust as of December 31, 1995 and the results of its operations and its cash
flows for the year ended December 31, 1995 and for the period of initial
operations (June 24, 1994) through December 31, 1994 in conformity with
generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
January 30, 1996
New York, New York
F-15
<PAGE>
GROVE REAL ESTATE ASSET TRUST
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Real estate assets:
Land.............................................................. $ 493,823
Buildings and improvements........................................ 4,658,438
Furniture, fixtures and equipment................................. 240,438
---------
5,392,699
Less--accumulated depreciation.................................... (694,215)
---------
Net real estate assets........................................ 4,698,484
Cash and cash equivalents........................................... 383,725
Cash--resident security deposits.................................... 99,973
Deferred charges, net of accumulated amortization of $11,736........ 56,279
Other assets........................................................ 2,712
---------
Total assets.................................................. $5,241,173
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage note payable............................................. $1,190,031
Accounts payable, accrued expense and other....................... 31,304
Due to affiliates................................................. 97,528
Resident security deposits........................................ 99,973
Dividends payable................................................. 119,438
---------
Total liabilities............................................. 1,538,273
---------
Commitments and subsequent event (notes 6, 8, 9, and 11)............ --
Shareholders' equity:
Preferred shares, $.01 par value per share, 4,000,000 shares
authorized; shares issued or outstanding........................ --
Common shares, $.01 par value per share, 10,000,000 shares
authorized; 525,000 shares issued and outstanding............... 5,250
Additional paid-in capital........................................ 3,913,176
Distributions in excess of earnings............................... (215,526)
---------
Total equity.................................................. 3,702,900
---------
Total liabilities and shareholders' equity.................... $5,241,173
---------
---------
</TABLE>
See accompanying notes.
F-16
<PAGE>
GROVE REAL ESTATE ASSET TRUST
INCOME STATEMENTS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEAR ENDED (JUNE 24, 1994) TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ --------------------
<S> <C> <C>
Revenues:
Rental income..................... $1,287,013 $ 641,036
Interest and other income......... 29,902 12,952
------------ --------
Total revenues................ 1,316,915 653,988
------------ --------
Expenses:
Property operating and maintenance 406,227 207,625
Real estate taxes................. 147,770 76,391
Related party management fees..... 66,781 33,282
General and administrative........ 56,363 16,433
------------ --------
Total expenses................ 677,141 333,731
------------ --------
639,774 320,257
Interest expense.................... 85,103 44,478
Depreciation and amortization....... 216,413 116,876
------------ --------
Net income.................... $ 338,258 $ 158,903
------------ --------
------------ --------
Net income per share................ $ 0.64 $ 0.30
------------ --------
------------ --------
Weighted average number of shares... 525,000 525,000
------------ --------
------------ --------
</TABLE>
See accompanying notes.
F-17
<PAGE>
GROVE REAL ESTATE ASSET TRUST
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL DISTRIBUTIONS
COMMON PAID-IN IN EXCESS OF
SHARES CAPITAL NETINCOME
------- ---------- ----------
<S> <C> <C> <C>
Shareholders' equity, June 24, 1994 (Inception) $ -- $ -- $ --
Public offering of 500,000 shares ........... 5,000 5,181,958 --
Purchase price of property in excess of
carryover basis ............................ -- (1,524,507) --
Issuance of 25,000 shares ................... 250 255,625 --
Proceeds of underwriting warrants ........... -- 100 --
Net income .................................. -- -- 158,903
Declared dividends .......................... -- -- (237,562)
----------- ---------
---------
Shareholders' equity, December 31, 1994 ....... 5,250 3,913,176 (78,659)
Net income .................................. -- -- 338,258
Declared dividends .......................... -- -- (475,125)
----------- ---------
Shareholders' equity, December 31, 1995 ....... $5,250 $ 3,913,176 $(215,526)
----------- ---------
</TABLE>
See accompanying notes.
F-18
<PAGE>
GROVE REAL ESTATE ASSET TRUST
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEAR ENDED (JUNE 24, 1994) TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ --------------------
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................... $ 338,258 $ 158,903
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................. 216,413 116,876
Imputed interest--mortgage ..................... 34,892 18,516
Decrease in other assets ....................... 4,472 --
Increase in accounts payable, accrued expenses
and other ...................................... (8,891) 153,467
--------- -----------
Net cash provided by operating activities .... 585,144 447,762
--------- -----------
Cash flows from investing activities:
Acquisition of real estate assets ................ -- (4,956,961)
Expenditures for building and improvements ....... (81,410) (63,931)
Expenditures for furniture, fixtures and equipment (17,592) (24,184)
--------- -----------
Net cash used in investing activities ........ (99,002) (5,045,076)
--------- -----------
Cash flows from financing activities:
Proceeds of stock issuance, net of issuance costs -- 5,181,958
Financing costs .................................. (23,000) (47,882)
Repayment of notes payable to affiliates ......... (22,929) --
Dividends paid ................................... (472,500) (120,750)
--------- -----------
Net cash provided by (used in) financing activities (518,429 5,013,326
--------- -----------
Net increase (decrease) in cash and cash equivalents (32,287) 416,012
Cash and cash equivalents, beginning of period ..... 416,012 --
--------- -----------
Cash and cash equivalents, end of period ........... $ 383,725 $ 416,012
--------- -----------
--------- -----------
</TABLE>
See accompanying notes.
F-19
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD
FROM INCEPTION (JUNE 24, 1994) TO DECEMBER 31, 1994
1. FORMATION AND BUSINESS OF THE COMPANY
Grove Real Estate Asset Trust ("GREAT" or the "Company") was organized in
the State of Maryland on April 4, 1994 as a Real Estate Investment Trust
("REIT"). The Company commenced operations effective with the completion of an
initial public offering (the "IPO") of 500,000 common shares for $5,562,500 at a
price of $11.125 per share on June 23, 1994. Concurrently with the equity
offering the Company purchased three properties (the "Properties") with a total
of 165 residential apartments for gross amount of $6,064,490, assumed a mortgage
on one of the properties with a principal balance of $1,139,490, the executive
officers purchased 25,000 restricted shares for $255,875, and a $3,000,000 line
of credit agreement (the "Credit Facility") was entered into with a bank.
Prior to the IPO, the predecessor entities operations consisted of the
combined operations of 3 individual limited partnerships, all of which were
affiliated with the Company. The accompanying financial statements reflect the
operations of the Company for the year ended December 31, 1995. See Note 3, "Pro
Forma Statement of Operations", for operating results of the combined operations
of the predecessor entities from January 1, through December 31, 1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with an original
maturity of three months or less at the time of the purchase to be cash
equivalents for financial statement purposes.
REAL ESTATE ASSETS AND DEPRECIATION
The Properties were recorded in the accounts of GREAT at their historical
cost due to the controlling relationship between the principals of the entities
previously operating the Properties (the "Grove Affiliates") and GREAT. The
proportion of the purchase price attributable to the net assets acquired from
Grove Affiliates exceeds their amortized historical cost. Accordingly, the
excess amount is reflected as a decrease in equity for accounting purposes. All
real estate assets purchased subsequent to the IPO have been recorded at cost.
Depreciation is recorded using the straight-line method over the estimated life
of the assets (7 to 27.5 years).
EARNINGS PER SHARE
Earnings per share is based on the weighted average number of common shares
issued and outstanding during the period from June 23, 1994 to December 31, 1994
and for the year ended December 31, 1995,
F-20
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD
FROM INCEPTION (JUNE 24, 1994) TO DECEMBER 31, 1994
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) which was equal to
525,000 shares for both periods. The assumed exercise of outstanding stock
options and warrants is not dilutive and, therefore, is not included.
INCOME TAXES AND DIVIDENDS
The Company has made the election to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). A
REIT will generally not be subject to federal income tax to the extent it
distributes at least 95% of its taxable income to its shareholders and complies
with other requirements. Accordingly, no provision has been made for federal
income taxes for the Company in the accompanying financial statements. Even
though the Company qualifies for taxation as a REIT, the Company may be subject
to certain state and local taxes on its income and property and to federal
income and excise taxes on its undistributed income, if any. Shareholders are
taxed on dividends declared and must report such dividends as either ordinary
income, short term gains, long term gains, or as a return of capital.
As the Company intends to continue to qualify as a REIT, it will not be
subject to corporate income taxes. Therefore, the difference between the tax
bases and reported amounts of assets and liabilities has not been recognized for
financial reporting purposes. The only significant unrecognized temporary
difference, approximately $1,180,701 at the statutory tax rate, relates to basis
differential in the carrying amount of real estate assets for financial
reporting and income tax purposes.
The federal income tax characteristics of dividends paid by the Company
consisted of:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Ordinary income.................................. 83.22% 56.53%
Return of capital................................ 16.78% 43.47%
</TABLE>
DEFERRED CHARGES
Deferred charges, consisting principally of loan costs, are amortized on a
straight line basis over the term of the related obligation.
RENTAL INCOME
The Company leases space to tenants pursuant to lease agreements accounted
for as operating leases. Revenues, consisting primarily of rentals for
apartments, are recognized as earned. The leases are generally for one year.
FINANCIAL STATEMENT RECLASSIFICATIONS
Certain amounts reflected in the financial statements for the period ended
December 31, 1994 have been reclassified to conform to the presentation for the
year ended December 31, 1995.
F-21
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD
FROM INCEPTION (JUNE 24, 1994) TO DECEMBER 31, 1994
3. PRO FORMA STATEMENT OF OPERATIONS
The following unaudited pro forma statement of operations for the year ended
December 31, 1994 is presented as if (i) GREAT had owned all of its 3 original
properties at the beginning of the year, and (ii) GREAT had qualified as a REIT,
distributed all of its taxable income and, therefore, incurred no federal income
tax expense during the year. The unaudited statement of operations does not
purport to represent what GREAT's results of operations would actually have been
if such transactions, in fact, had occurred on January 1, 1994, nor does it
purport to represent the results of operations for future periods.
<TABLE>
<CAPTION>
GROVE GROVE REAL
AFFILIATES ESTATE
JANUARY 1, ASSET
1994 TRUST
TO JUNE 23, JUNE 24,
1994
TO HISTORICAL PRO FORMA
1994 DECEMBER
31, 1994 COMBINED ADJUSTMENTS PRO FORMA
---------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Total Revenues ................. $ 583,274 653,988 1,237,262 0 1,237,262
--------- ------- --------- -------- ---------
EXPENSES
Property Operating & Maintenance 220,086 207,625 427,711 0 427,711
Related Party Management Fee ... 33,367 33,282 66,649 0 66,649
General & Administrative ....... 14,316 16,433 30,749 12,091 42,840
Real Estate Taxes .............. 71,402 76,391 147,793 0 147,793
Interest Expense ............... 173,416 44,478 217,894 (134,081) 83,813
Depreciation & Amortization .... 101,536 116,876 218,412 (2,477) 215,935
--------- ------- --------- -------- ---------
Total Expenses ................. 614,123 495,085 1,109,208 (124,467) 984,741
--------- ------- --------- -------- ---------
Net Income ..................... $ (30,849) 158,903 128,054 124,467 252,521
--------- ------- --------- -------- ---------
--------- ------- --------- -------- ---------
</TABLE>
The unaudited pro forma adjustments gives effect to (i) actual operating
revenues and expenses of the properties acquired on June 24, 1994 for the period
January 1, 1994 through the date of purchase; (ii) the elimination of the
interest expense on certain notes payable which were satisfied from the proceeds
from the IPO; (iii) a net increase in general and administrative expenses in the
operation of GREAT, including administrative services (pursuant to the
Administrative Services Agreement) and rental of GREAT's principal executive
offices; and (iv) the elimination of amortization of intangible assets of the
Grove Affiliates and the addition of the amortization of financing costs
associated with the Credit Facility.
4. MORTGAGE NOTE PAYABLE
The Company's mortgage note payable is due to an unrelated party and had a
balance of $1,190,031 at December 31, 1995. This mortgage note was assumed by
the Company concurrently with the IPO with an imputed balance of $1,139,490 and
a face amount of $1,250,000. The note has an imputed interest rate of 7.25% due
in monthly interest payments of $4,167 through June 1997 and monthly principal
and interest payments of $8,527 through July 2013. The note is collateralized by
one of the Company's operating properties and 15% of the face amount is
guaranteed by certain executive officers and shareholders of the Company.
F-22
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD
FROM INCEPTION (JUNE 24, 1994) TO DECEMBER 31, 1994
4. MORTGAGE NOTE PAYABLE (CONTINUED)
Aggregate maturities of the mortgage note for the next five years and
thereafter are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- - -----------------------------------------------------------------------------
<S> <C>
1996....................................... $ 0
1997....................................... 6,038
1998....................................... 12,751
1999....................................... 13,706
2000....................................... 14,734
Thereafter................................. 1,202,771
------------
Total.................................. $ 1,250,000
------------
------------
</TABLE>
The carrying amount of the mortgage note at December 31, 1995 approximates
its fair value.
5. CREDIT FACILITY
The Company entered into the Credit Facility concurrently with the IPO. The
Credit Facility, which provided for up to $3.0 million in borrowings, was
expected to be used to finance acquisitions of properties, re-development and
renovation costs and expenses, and for working capital purposes related to
future acquisitions. The Credit Facility was not drawn upon, and was terminated
in January 1996.
6. 1994 STOCK OPTION PLAN
The Company has adopted a stock option plan (the "Plan") and has reserved
100,000 shares for issuance under the Plan. The Company has granted options to
purchase 50,000 shares to the executive officers with an exercise price of
$11.125 per share. The options will expire June 23, 2004. Additionally, each
Trust Manager of the Company who is not an employee has received a non-qualified
stock option to purchase 2,000 shares for a total of 6,000 shares with an
exercise price of $11.125 per share. On each anniversary of his or her election
to the Board of Trust Managers, each non-employee Trust Manager shall receive an
option to purchase 1,000 shares at the fair market value of the shares on the
date of grant. All options which have been granted under the Plan become
exercisable in increments of 33 1/3% per year on each of the first three
anniversaries of the date of grant. At December 31, 1995 no options had been
exercised. At December 31, 1995 57,000 options are outstanding, of which 18,667
are exercisable.
7. UNDERWRITER WARRANTS
In conjunction with the IPO, the managing underwriter, Barclay Investments,
Inc., was granted Underwriter Warrants to purchase 40,000 Common Shares. The
Underwriter Warrants are exercisable at $13.35 per share and expire in June
1999. No warrants had been exercised.
8. PENSION PLAN
The Company has a 401(k) savings plan (the "Plan") which is a voluntary
defined contribution plan. Under the Plan, eligible employees may contribute a
percentage of their salaries to the Plan, subject to
F-23
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD
FROM INCEPTION (JUNE 24, 1994) TO DECEMBER 31, 1994
8. PENSION PLAN (CONTINUED)
certain dollar limitations and the Company may make matching contributions on
the participant's behalf equal to 25% of the participants contribution. Expenses
under this Plan are not material.
9. RELATED PARTY TRANSACTIONS
MANAGEMENT FEE
Grove Property Services ("GPS"), an affiliate of GREAT, provides to the
Company all of the operating and support functions requisite to the operation of
the Properties, including building management and leasing. The management
agreement provides for a management fee equal to 5% of gross rental revenues, as
defined. The agreement expires on June 30, 1997.
CONSTRUCTION SERVICES
Grove Development Corporation ("GDC"), an affiliate of GREAT, provides
construction services to the Company. These services are generally provided at
the cost of materials and labor plus a project management and supervision fee
equal to 20% of the aforementioned direct project costs. Services related to the
redevelopment of the Properties and tenant improvements have been capitalized as
real estate assets in the accompanying balance sheet. Total costs of $26,788 and
$49,688 were paid or payable to GDC during 1995 and 1994, respectively.
OPERATING EXPENSES AND NON-OPERATING EXPENSES
Certain operating and non-operating expenses include amounts paid or payable
to affiliates of GREAT for administrative expenses and for reimbursement of
expenditures funded by them in connection with the conduct of the business of
the Company. Included in these amounts are general and administrative expenses
allocated to the Company by GPS. This charge reflects an allocation of the cost
of accounting and related support staff expenses incurred by GPS for services
required by the Company, which are outside the scope of services customarily
rendered by a property management company for its basic fee.
DUE TO AFFILIATES
Amounts due to affiliates at December 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
1995 1994
--------- ----------
<S> <C> <C>
Grove Investment Group................ $ 70,457 120,457
GPS................................... 14,890 --
GDC................................... 12,181 --
--------- ----------
Total due to affiliates........... $ 97,528 120,457
--------- ----------
--------- ----------
</TABLE>
The amount due to the Grove Investment Group ("GIG") relates to advances
made by GIG to GREAT to fund expenses incurred by the Company related to the IPO
and to fund initial organization costs. The Company repaid $50,000 of note
payable balance during the second quarter of 1995 and repaid
F-24
<PAGE>
GROVE REAL ESTATE ASSET TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD
FROM INCEPTION (JUNE 24, 1994) TO DECEMBER 31, 1994
9. RELATED PARTY TRANSACTIONS (CONTINUED)
the remaining balance in January 1996. No interest is being charged on the
outstanding balance, and there are no repayment terms.
RENT TO RELATED PARTY
GREAT's executive offices are leased from an affiliate for $500 per month
under a three year lease. Rent expense incurred by the Company under this
agreement was $3,000 for the period ended December 31, 1994, and $6,000 for the
year ended December 31, 1995. Minimum annual future base rental expenditures are
not significant.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest expense was $84,892 and $37,499 for the year ended
December 31, 1995 and for the period from June 23, 1994 to December 31, 1994,
respectively.
11. SUBSEQUENT EVENT
On January 12, 1996, GREAT purchased the assets and operations of Grove
Cambridge Associates Limited Partnership ("Cambridge") GREAT paid $4,250,000 in
cash for Cambridge. The acquisition was 100% financed by a loan of $4,500,000
from a bank. The loan is secured by a blanket first mortgage lien on the
Cambridge property, and the Hamden I and Hamden II properties. Monthly payments
of principal and interest based on a 25-year amortization are due through
January, 2006. Interest is fixed at 7.04%.
Grove Cambridge Associates Limited Partnership is owned 99% by Grove Norwich
Associates Limited Partnership, and 0.5% each by Grove Investment Group, Inc.
and Springfield Development Corporation. Grove Norwich Associates Limited
Partnership is owned 50% by Messrs. Damon, Brian and Edmund Navarro and 50% by
individuals who are not affiliates of GREAT. Grove Investment Group, Inc. is
owned 100% by Messrs. Damon, Brian and Edmund Navarro. Springfield Development
Corporation is owned 100% by individuals who are not affiliates of GREAT.
The following unaudited pro forma information for the year ended December
31, 1995 and 1994 is presented as if (i) GREAT had owned all of its 4 properties
at the beginning of the 1994, and (ii) GREAT had qualified as a REIT,
distributed all of its taxable income and, therefore, incurred no federal income
tax expense during the year. The unaudited information does not purport to
represent what GREAT's results of operations would actually have been if such
transactions, in fact, had occurred on January 1, 1994, nor does it purport to
represent the results of operations for future periods
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Revenues................................ $ 2,078,292 $ 1,988,299
Net Income.............................. $ 281,759 $ 162,453
Earnings per share...................... $ 0.54 $ 0.31
</TABLE>
F-25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Grove Operating, L.P.
We have audited the accompanying balance sheet of Grove Operating, L.P. as
of November 4, 1996. This balance sheet is the responsibility of the
Partnership's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Grove Operating, L.P. at November
4, 1996, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Hartford, Connecticut
November 4, 1996
F-26
<PAGE>
GROVE OPERATING, L.P.
BALANCE SHEET
NOVEMBER 4, 1996
<TABLE>
<S> <C>
Cash............................................ $ 100
---------
Total assets.................................... $ 100
---------
---------
OWNERS' EQUITY
Contributed capital............................. $ 100
---------
Total owners' equity............................ $ 100
---------
---------
</TABLE>
See accompanying notes.
F-27
<PAGE>
GROVE OPERATING, L.P.
NOTES TO BALANCE SHEET
NOVEMBER 4, 1996
1. ORGANIZATION
Grove Operating, L.P. ("Operating Partnership") is a newly formed limited
partnership organized to act as the vehicle for the consolidation of ownership
and/or control of the operations and assets and liabilities of Grove Real Estate
Asset Trust ("GREAT") and Grove Property Services Limited Partnership and
Property Partnerships ("the Grove Companies"). These entities are expected to be
the subject of a business combination in connection with the formation of an
umbrella REIT (the "Company). GREAT is the sole general partner of the Operating
Partnership.
2. CONSOLIDATION TRANSACTIONS
The Consolidation Transactions constitute a series of transactions pursuant
to which GREAT will become a self-administered and self-managed REIT with
control over 23 multi-family residential projects and one neighborhood shopping
center in the Northeastern United States. The following transactions have
occurred or will occur prior to the consummation of the Consolidation
Transactions.
- The Operating Partnership was formed as a Delaware limited partnership in
November 1996.
- Pursuant to an Exchange Offer, the Operating Partnership will offer to
purchase from the Limited Partners of the Property Partnerships, any and
all outstanding partnership units of each of the Property Partnerships in
exchange for Common Units of the Operating Partnership, or, in certain
circumstances, cash. The number of Common Units to be received by a
Limited Partner will be calculated based upon such partners' interest in
the applicable partnership as applied to the value of the property
partnership associated therewith.
In connection with the Exchange Offer, Limited Partners who tender their
partnership units will also be consenting to certain amendments of the
limited partnership agreements including provisions which might otherwise
restrict the Company's ability to effect the Consolidation Transactions.
- Immediately prior to the consummation of the Consolidation Transactions,
GREAT will declare and issue a stock dividend aggregating 26,250 Common
Shares and concurrently effect a Stock Split of 1.125 to 1, thereby
issuing on a pro rata basis a total of 95,130 Common Shares to the holders
of the currently issued and outstanding 525,000 Common Shares.
- GREAT will issue up to 3,333,333 Common Shares to new equity investors in
exchange for up to $30 million of New Equity Investment.
- Pursuant to a Contribution Agreement among GREAT, the Grove Companies and
the Operating Partnership, substantially all of the assets and operations
of GREAT, the management services division of Grove Property Services
Limited Partnership and the Grove Companies' interests in the Property
Partnerships (or the holdings thereof) will be transferred to the Company.
In exchange for the above, the Grove Companies will receive an aggregate
of 904,867 Common Units in the Operating Partnership and a cash payment
equal to $177,669 from GREAT, and GREAT will receive 620,130 Common Units
in the Operating Partnership. Additionally, GREAT will contribute to the
Operating Partnership the gross proceeds received from the New Equity
Investment in exchange for a number of additional Common Units equal to
the number of Common Shares issued by GREAT to the new equity investors.
F-28
<PAGE>
GROVE OPERATING, L.P.
NOTES TO BALANCE SHEET
NOVEMBER 4, 1996
2. CONSOLIDATION TRANSACTIONS (CONTINUED)
- In connection with the Consolidation Transactions, the Operating
Partnership will enter into a three-year secured revolving acquisition and
working capital facility of approximately $25 million and an approximately
$15.1 million ten-year term mortgage loan.
The Company will use a portion of the proceeds from the New Equity
Investment, together with borrowings under the new credit facilities, to
paydown or refinance approximately $39.8 million of mortgage indebtedness
of the Property Partnerships and to acquire certain minority interests in
certain of the Property Partnerships.
F-29
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partners and Owners
Grove Property Services Limited Partnership and Property Partnerships
We have audited the accompanying combined balance sheets of Grove Property
Services Limited Partnership and Property Partnerships as of December 31, 1995,
and the related combined statements of income, owners' equity and cash flows for
each of the two years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Grove Property
Services Limited Partnership and Property Partnerships at December 31, 1995, and
the combined results of their operations and their cash flows for each of the
two years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Hartford, Connecticut
October 12, 1996
F-30
<PAGE>
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 1996 31, 1995
----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Real estate assets, at cost:
Land..................................... $ 7,735 $ 7,741
Buildings and improvements............... 66,632 65,242
Furniture, fixtures and equipment........ 4,144 3,852
----------- -----------
78,511 76,835
Less accumulated depreciation.............. 23,567 21,256
----------- -----------
Net real estate assets................... 54,944 55,579
Cash and cash equivalents.................. 1,290 2,168
Restricted cash-resident security deposits. 655 619
Due from related parties, net.............. 1,434
Due from partners.......................... 884 324
Deferred costs, net of accumulated
amortization of $1,570 and $1,349 at
September 30, 1996 and December 31, 1995,
respectively............................. 969 1,369
Other assets............................... 421 185
----------- -----------
Total assets............................... $ 59,163 $ 61,678
----------- -----------
----------- -----------
LIABILITIES AND OWNERS' EQUITY
Mortgage notes payable..................... $ 47,518 $ 46,786
Accounts payable and other liabilities..... 1,183 1,077
Due to NAVAB............................... 508 937
Due to related parties, net................ 477
Resident security deposits................. 655 619
----------- -----------
Total liabilities.......................... 50,341 49,419
Owners' equity:
General partners......................... (3,328) (3,316)
Limited partners......................... 12,150 15,575
----------- -----------
8,822 12,259
----------- -----------
Total liabilities and owners' equity....... $ 59,163 $ 61,678
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
F-31
<PAGE>
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE-MONTHS ENDED
YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------- --------------------
1996 1995 1995 1994
--------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Rental income .................... $ 9,644 $ 8,864 $11,965 $ 11,462
Property management .............. 1,198 914 1,473 1,103
Interest and other ............... 243 449 445 563
------- ------- ------- --------
Total revenues ..................... 11,085 10,227 13,883 13,128
------- ------- ------- --------
Expenses:
Payroll related .................. 1,678 1,503 2,358 2,285
Other property operating ......... 2,671 2,271 2,918 2,953
General and administrative ....... 194 255 261 271
Real estate taxes ................ 938 895 1,234 1,253
------- ------- ------- --------
Total expenses ..................... 5,481 4,924 6,771 6,762
------- ------- ------- --------
5,604 5,303 7,112 6,366
Interest expense ................... 2,807 2,861 3,829 3,817
Depreciation and amortization ...... 2,346 2,348 3,140 3,165
------- ------- ------- --------
Income (loss) before
extraordinary items ................ 451 94 143 (616)
Extraordinary items-gain on
restructuring of debt 2,186 2,186 1,771
------- ------- ------- --------
Net income ......................... $ 451 $ 2,280 $ 2,329 $ 1,155
------- ------- ------- --------
------- ------- ------- --------
</TABLE>
See accompanying notes.
F-32
<PAGE>
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY
NINE-MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
YEARS ENDED DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED OWNERS'
PARTNERS PARTNERS EQUITY
--------- --------- ---------
<S> <C> <C> <C>
Owners' equity, December 31, 1993............ $ (2,940) $ 11,123 $ 8,183
Capital contributions........................ 2,667 2,667
Distributions................................ (12) (1,047)
(1,059)
Net income................................... (591) 1,746 1,155
--------- --------- ---------
Owners' equity, December 31, 1994............ (3,543) 14,489 10,946
Capital contributions........................ 1 1 2
Distributions................................ (10) (1,008)
(1,018)
Net income................................... 236 2,093 2,329
--------- --------- ---------
Owners' equity, December 31, 1995............ (3,316) 15,575 12,259
Capital contributions (unaudited)............ 855 855
Distributions (unaudited).................... (23) (4,720)
(4,743)
Net income (unaudited)....................... 11 440 451
--------- --------- ---------
Owners' equity, September 30, 1996 (unaudited) $ (3,328) $ 12,150 $ 8,822
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-33
<PAGE>
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE-MONTHS ENDED YEAR ENDED DECEMBER
SEPTEMBER 30 31
-------------------- ------------------
1996 1995 1995 1994
--------- ------- ------ ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................ $ 451 $ 2,280 $ 2,329 $ 1,155
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization ........... 2,346 2,348 3,140 3,165
Gain on restructuring of debt ........... (2,186) (2,186) (1,771)
Decrease (increase) in assets:
Other assets .......................... (236) (313) (25) 111
(Decrease) increase in liabilities:
Accounts payable and other liabilities 107 152 59 (312)
Due to related parties, net ........... 1,911 (285) (502) (1)
------- ------- ------- -------
Net cash provided by operating activities . 4,579 1,996 2,815 2,347
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate assets ............ (1,312) (910) (3,004) (6,015)
Payment for deferred costs ................ (389) (415) (391)
------- ------- ------- -------
Net cash used in investing activities ..... (1,312) (1,299) (3,419) (6,406)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage notes ............... (558) (7,110) (7,655) (5,791)
Proceeds from mortgage notes .............. 1,290 5,800 7,800 8,725
Payment for financing costs ............... (131) (256) (104)
Due from partners ......................... (560) 116 750 (13)
Due to NAVAB .............................. (429) 753 1,171 (461)
Distributions to owners ................... (4,743) (759) (1,018) (1,059)
Capital contributions ..................... 855 2 2,667
------- ------- ------- -------
Net cash provided by (used in) financing
activities (4,145) (1,331) 794 3,964
------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents (878) (634) 190 (95)
Cash and cash equivalents, beginning of yea 2,168 1,978 1,978 2,073
------- ------- ------- -------
Cash and cash equivalents, end of year .... $ 1,290 $ 1,344 $ 2,168 $ 1,978
------- ------- ------- -------
------- ------- ------- -------
SUPPLEMENTAL INFORMATION
Cash paid during the year for interest .... $ 2,599 $ 2,729 $ 3,883 $ 3,817
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See accompanying notes.
F-34
<PAGE>
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. BASIS OF PRESENTATION
Grove Property Services Limited Partnership and Property Partnerships (the
"Group") combined financial statements include the accounts of various
partnerships; it is not a separate legal entity. "Property Partnerships" is a
combination of affiliated entities that have ownership interests principally in
multifamily communities in the Connecticut, Massachusetts and Rhode Island
areas. The accounts are presented on a combined basis because all of the
communities are managed by Grove Property Services Limited Partnership (GPS)
whose general partners have a controlling interest in each of the communities
and because these communities are expected to be the subject of a business
combination in connection with the formation of an umbrella REIT (the
"Company"). Each of the communities are expected to be substantially owned by a
newly formed Operating Partnership, which will be owned, in part, by the
Company. The Company intends to qualify as a real estate investment trust under
the Internal Revenue Code of 1986, as amended.
The business combination is structured so that the partners will receive
cash, limited partnership interests in Grove Operating, L.P. (the "Operating
Partnership" which will hold substantially all of the operating assets of the
Company), or a combination thereof. The Company will be the sole general partner
of the Operating Partnership.
In addition to GPS, and Grove Longmeadow Associates, a neighborhood shopping
center, the following limited partnerships have been included in the combined
financial statements:
<TABLE>
<CAPTION>
NUMBER OF
LIMITED PARTNERSHIP NAME EXISTING COMMUNITY NAME APARTMENTS
- - --------------------------------- ------------------------------------------
<S> <C> <C>
Avonplace Associates.............. Avonplace 146
Burgundy Associates............... Burgundy Studios 102
Grove-Ellington Associates........ Arbor Commons 28
Grove-Enfield Associates.......... Fox Hill Apartments 168
Grove-Manchester Associates....... 208-210 Main Street Apartments 28
Grove-Newington Associates........ Woodbridge Apartments 73
Grove Opportunity Fund II......... Dean Estates II 58
Royale Apartments 76
Talcott Forest 19
Grove-Plainville Associates....... Colonial Village Apartments 104
Grove Properties III.............. Bradford Commons 64
Loomis Manor 43
Grove Taunton Associates.......... Dean Estates 48
Grove-Vernon Associates........... Fox Hill Commons 74
Grove-West Hartford Associates.... Park Place West 63
Grove-West Springfield Associates. Van Deene Manor 109
Grove-Westfield Associates........ Security Manor 63
Grove-Westwynd Associates......... Westwynd Apartments 46
Shoreline London Associates....... Ocean Reef 163
Nautilus Properties............... Sandalwood* 39
</TABLE>
- - ------------------------
* Available for lease August 1996.
All significant intercompany accounts and transactions have been eliminated
in combination.
F-35
<PAGE>
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEPRECIATION OF REAL ESTATE ASSETS
Ordinary repairs and maintenance are expensed as incurred; major
replacements and betterments are capitalized and depreciated over their
estimated useful lives. Depreciation of real estate is computed principally on a
straight-line basis over the expected useful lives of depreciable property,
which ranges from 15 to 39 years for buildings, improvements and land
improvements and 5 to 7 years for furnishings and equipment.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of 1996. The effect of
adoption on the financial statements was not material.
REVENUE RECOGNITION
Rental income attributable to leases is recognized on a straight-line basis
over the terms of the leases. Residential leases are for periods of up to one
year. Commercial leases are generally for periods of 5 to 10 years.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid debt investments with
original maturities of three months or less from the date of purchase.
DEFERRED COSTS
Deferred costs consist of organization costs and costs incurred in obtaining
long-term financing. Deferred financing costs are amortized over the term of the
related mortgage loan obligation. Organization costs are amortized over 5 years.
INCOME TAXES
The Group is owned by various partnerships whose partners are required to
include their respective share of profits and losses in their individual income
tax returns. Accordingly, no federal or state income taxes have been provided in
the accompanying combined financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-36
<PAGE>
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PARTNERSHIP AGREEMENTS
The net income or loss for each partnership is allocated in accordance with
the provisions of the partnership agreements. Such amounts are allocated to the
general and limited partners based on distribution percentages ranging from 1%
to 15% for general partners and 85% to 99% for limited partners.
3. DUE TO AND FROM RELATED PARTIES AND NAVAB
Certain properties managed by GPS are not included in the Group. Due to/from
related parties represent costs paid by the Group on behalf of these properties,
property expense and other advances from the Group to those properties, and
management fees owed to the Group by those properties.
An affiliate of the Group, NAVAB, periodically loans funds to the
partnerships under their line of credit. These loans generally bear interest at
2.5% above the prime rate. Interest paid to NAVAB was $115,600 and $156,500 for
the years ended December 31, 1995 and 1994, respectively and $74,700 and $29,500
for the nine months ended September 30, 1996 and 1995 (unaudited), respectively.
4. MORTGAGE NOTES PAYABLE
The Group's mortgage notes at December 31, 1995 and September 30, 1996
(unaudited) consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 31,
1996 1995
----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Mortgage notes payable at fixed interest rates
ranging from 7.09% to 7.5%, payable in varying
amounts through December 2003..................... $ 6,061 $ 6,068
Mortgage notes payable with floating interest rates
(7.22% to 9.27% at December 31, 1995), payable in
varying amounts through November 2005............. 41,457 40,718
----------- -----------
$ 47,518 $ 46,786
----------- -----------
----------- -----------
</TABLE>
Each of the mortgage notes is collateralized by a first mortgage on separate
communities. Certain loans are guaranteed in whole or part by individuals
affiliated with the Group. Such guarantees aggregate approximately $29.5 and
29.8 million at September 30, 1996 and December 31, 1995, respectively.
F-37
<PAGE>
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
4. MORTGAGE NOTES PAYABLE (CONTINUED)
Principal maturities as of December 31, 1995 are as follows (IN THOUSANDS):
<TABLE>
<S> <C>
1996............................................................... $ 662
1997............................................................... 721
1998............................................................... 778
1999............................................................... 4,844
2000............................................................... 923
Thereafter......................................................... 38,858
---------
$ 46,786
---------
---------
</TABLE>
5. RELATED PARTY TRANSACTIONS
GPS performs management services for certain communities not included in the
Group. Management fees received from these communities were $891,300 and
$747,200 for the years ended December 31, 1995 and 1994, respectively, and
$754,600 and $708,400 for the nine-months ended September 30, 1996 and 1995
(unaudited), respectively.
The Group leases office space from an affiliate at $4,000 per month.
6. EXTRAORDINARY GAIN
The Group recognized gains during 1995 and 1994 relating to restructuring of
debt on various mortgage notes due to banks. The total amount due to banks
consisted of $11,112,000 of principal and interest in 1995 and $6,257,000 of
principal and interest in 1994. The Group paid $8,926,000 and $4,486,000, in
1995 and 1994, respectively, in satisfaction of the notes, resulting in
extraordinary gains of $2,186,000 and $1,771,000, respectively.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by
management using available market information and appropriate valuation
methodologies. Judgment is necessary to interpret market data and develop
estimated fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Group could realize on disposition of
the financial instruments. The use of different market assumptions and/or
estimation methodolgies may have a material effect on the estimated fair value
amounts.
Cash equivalents, accounts receivable, accounts payable and other accruals,
and mortgage notes are carried at amounts that approximate their fair values.
Fair values were estimated using discounted cash flow analyses, based on
interest rates currently available to the Group for issuance of debt with
similar terms and remaining maturities.
8. SUBSEQUENT EVENTS
In October 1996, the Group obtained additional mortgage loans for two of its
properties aggregating $1.24 million. The loans bear interest at a LIBOR based
rate and are due in 2005.
F-38
<PAGE>
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
9. LEASES
Future minimum lease payments to be received on noncancelable commercial
leases with terms greater than one year consist of the following at December 31,
1995:
<TABLE>
<S> <C>
1996............................................................ $1,030,300
1997............................................................ 910,800
1998............................................................ 787,800
1999............................................................ 779,300
2000............................................................ 670,200
Thereafter...................................................... 2,487,900
---------
$6,666,300
---------
---------
</TABLE>
F-39
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders and Board of Directors
of Grove Real Estate Asset Trust
Hartford, Connecticut
We have audited the accompanying statements of income, partners' equity and
cash flows of Grove Cambridge Associates Limited Partnership for the year ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and csh flows of Grove
Cambridge Associates Limited Partnership for the year ended December 31, 1994 in
conformity with generally accepted accounting principals.
/s/ BDO SEIDMAN, LLP
December 8, 1995
New York, New York
F-40
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partners
Grove Cambridge Associates Limited Partnership
We have audited the accompanying balance sheet of Grove Cambridge Associates
Limited Partnership as of December 31, 1995, and the related statements of
operations, partners' equity (deficit), and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Grove Cambridge Associates
Limited Partnership at December 31, 1995, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Hartford, Connecticut
October 12, 1996
F-41
<PAGE>
GROVE CAMBRIDGE ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Real estate assets, at cost:
Land ........................................................... $ 504,301
Buildings and improvements ..................................... 4,700,870
Furniture, fixtures and equipment .............................. 78,880
-----------
5,284,051
Less: accumulated depreciation ................................. 1,120,190
-----------
Net real estate assets ..................................... 4,163,861
Cash and cash equivalents ........................................ 14,033
Deferred charges, net of accumulated
amortization of $17,082 .......................................... 27,454
Other assets ..................................................... 200
-----------
Total assets ............................................... $ 4,205,548
-----------
-----------
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Mortgage payable ............................................... $ 2,968,307
Accounts payable, and other liabilities ........................ 89,647
Loans payable--affiliates ...................................... 1,170,942
Other liabilities .............................................. 53,813
-----------
Total liabilities .......................................... 4,282,709
-----------
Partners' equity (deficit):
General partner ............................................... (773)
Limited partners .............................................. (76,388)
-----------
Total partners' equity (deficit) ........................... (77,161)
-----------
Total liabilities and partners' equity (deficit) ......... $ 4,205,548
-----------
---------
</TABLE>
See accompanying notes
F-42
<PAGE>
GROVE CAMBRIDGE ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Revenues:
Rental income................................ $ 745,655 $ 719,720
Interest and other income.................... 15,722 31,317
----------- ------------
Total revenues............................. 761,377 751,037
----------- ------------
Expenses:
Property operating and maintenance........... 223,143 245,642
Real estate taxes............................ 60,839 58,740
Related party management fees................ 46,556 42,469
----------- ------------
Total expenses............................. 330,538 346,851
----------- ------------
430,839 404,186
Interest expense............................... 408,941 322,285
Depreciation and amortization.................. 186,628 186,625
----------- ------------
Loss before extraordinary item................. (164,730)
(104,724)
Extraordinary item:
Gain on restructuring of debt................ 1,033,566
----------- ------------
Net income (loss).............................. $ (164,730) $ 928,842
----------- ------------
----------- ------------
</TABLE>
See accompanying notes.
F-43
<PAGE>
GROVE CAMBRIDGE ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
--------- ----------- -----------
<S> <C> <C> <C>
Balance, December 31, 1993......... $ (8,414) $ (832,859) $
(841,273)
Net income..................... 9,288 919,554 928,842
--------- ----------- -----------
Balance, December 31, 1994......... 874 86,695 87,569
Net loss....................... (1,647) (163,083)
(164,730)
--------- ----------- -----------
Balance, December 31, 1995......... $ (773) $ (76,388) $
(77,161)
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
See accompanying notes.
F-44
<PAGE>
GROVE CAMBRIDGE ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ (164,730) $ 928,842
Adjustments to reconcile net income (loss) to
net cash provided by operating
activities:
Depreciation and amortization.................... 186,628 186,625
Gain on restructuring of debt.................... -- (1,033,566)
Decrease in other assets....................... 8,929 10,713
Increase (decrease) in accounts payable
and other liabilities.................... 11,625 (9,537)
----------- -----------
Net cash provided by operating activities.... 42,452 83,077
----------- -----------
Cash flows from investing activities:
Expenditures for building and other improvements... (36,884) (27,693)
Payment for deferred costs......................... (3,083) (32,653)
----------- -----------
Net cash used in investing activities........ (39,967) (60,346)
----------- -----------
Cash flows from financing activities:
Repayment of mortgages and notes payable........... (28,364) (82,165)
Increase in loans from affiliates.................. 20,627 56,806
----------- -----------
Net cash used in financing activities........ (7,737) (25,359)
----------- -----------
Net decrease in cash and cash equivalents............ (5,252) (2,628)
Cash and cash equivalents, beginning of year......... 19,285 21,913
----------- -----------
Cash and cash equivalents, end of year............... $ 14,033 $ 19,285
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
F-45
<PAGE>
GROVE CAMBRIDGE ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION AND NATURE OF BUSINESS
Grove Cambridge Associates Limited Partnership ("CAMBRIDGE" or the
"partnership") owns and operates an apartment complex in Norwich, CT (the
"property").
ALLOCATIONS AND DISTRIBUTIONS
The net income or loss of the partnership is allocated in accordance with
the provisions of the partnership agreement. In general, these amounts are
allocated on a pro-rata basis in proportion to the equity interest held by each
general or limited partner.
DEPRECIATION OF REAL ESTATE ASSETS
Expenditures for additions, renewals and betterment's are capitalized;
expenditures for maintenance and repairs are charged to expense as incurred.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets as follows:
<TABLE>
<CAPTION>
YEARS
---------
<S> <C>
Buildings and improvements................................ 20-30
Land improvements......................................... 15
Furnishings and equipment................................. 5-7
</TABLE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of 1996. The effect of
adoption on the financial statements was not material.
REVENUE RECOGNITION
Revenues, consisting primarily of rentals for apartments, are recognized on
a straight-line basis over the term of lease, generally for one year.
INCOME TAXES
The activities of the partnership are included in the respective tax returns
of the partners and no Federal income taxes are provided or imposed at the
partnership level.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the partnership considers all
highly liquid debt instruments with an original maturity of three months or less
from the date of purchase to be cash equivalents.
F-46
<PAGE>
GROVE CAMBRIDGE ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. MORTGAGE PAYABLE
The outstanding mortgage payable of $2,968,307 is secured by a first
mortgage lien on the Property and is personally guaranteed by certain officers
and stockholders of one of the general partners. Monthly payments, based on a
25-year amortization table, are due through November 1999, at which time the
remaining principal balance becomes due and payable. The loan bears interest at
a fixed interest rate of 9.27% through November 1996, after which, at the option
of the Partnership, is adjusted annually at a rate equal to 2.4% over the one
year U.S. Treasury Securities rate or 2% over the bank's costs of funds rate.
Principal payments are as follows:
<TABLE>
<S> <C>
1996............................................................ $ 35,099
1997............................................................ 38,495
1998............................................................ 42,219
1999............................................................ 2,852,494
---------
$2,968,307
---------
---------
</TABLE>
In September 1994, the partnership completed a bank debt restructuring
through an affiliate. The partnership paid $3,000,000 in full satisfaction of
the principal and interest obligations to the bank, which totaled $4,033,566,
resulting in an extraordinary gain of $1,033,566.
In November 1994, the affiliate transferred its loan to an unaffiliated
lending institution. During 1994, the partnership made payments aggregating
approximately $85,000 to the affiliate, including $68,820 of interest.
3. RELATED PARTY TRANSACTIONS
The partnership agreement provides for a management fee and bookkeeping fee
based on the gross monthly revenues (as defined) to be paid to a related party.
An affiliate of Cambridge periodically loans funds to the partnership under
its $1.5 million line of credit. These loans generally bear interest at 2.5%
above the prime rate, however, the affiliate has waived the interest during
certain periods. Borrowings under this line of credit were $570,228 at December
31, 1995.
The partnership has notes payable to other affiliates totaling $600,714.
Those notes are principally due on demand and are no-interest bearing.
4. SUBSEQUENT EVENT
On January 12, 1996, the partnership sold its assets and operations to Grove
Real Estate Asset Trust ("GREAT"). The principals of GREAT are also principals
of Cambridge. The selling price was $4,250,000 in cash.
F-47
GROVE REAL ESTATE ASSET TRUST
THIRD AMENDED AND RESTATED
DECLARATION OF TRUST
Dated , 1997
THIS THIRD AMENDED AND RESTATED DECLARATION OF TRUST is made in conformity
with the provisions of Section 12.5 hereof, as of the date set forth above by
the undersigned Trust Managers.
ARTICLE I
THE TRUST; CERTAIN DEFINITIONS
SECTION 1.1 Name. The name of the trust (the "TRUST") is:
GROVE PROPERTY TRUST
SECTION 1.2 Resident Agent. The name and address of the resident agent of
the Trust in the State of Maryland is the CT Corporation System, Maryland, 32
South Street, Baltimore, Maryland 21202. The Trust may have such offices or
places of business within or without the State of Maryland as the Trustees may
from time to time determine.
SECTION 1.3 Nature of Trust. The Trust is a real estate investment trust
within the meaning of "Title 8", defined below.
SECTION 1.4 Powers. The Trust shall have all of the powers granted to real
estate investment trusts generally by Title 8 and shall have any other and
further powers as are not inconsistent with Title 8 or other applicable law.
SECTION 1.5 Definitions. As used in this Declaration of Trust, the following
terms shall have the following meanings unless the context otherwise requires:
"AFFILIATE" or "AFFILIATED" means, as to any corporation, partnership, trust
or other association (other than the Trust), any Person (i) that holds
beneficially, directly or indirectly, 5% or more of the outstanding stock or
equity interests thereof or (ii) who is an officer, director, partner or trustee
thereof or of any Person which controls, is controlled by, or is under common
control with, such corporation, partnership, trust or other association or (iii)
which controls, is controlled by, or is under common control with, such
corporation, partnership, trust or other association.
"BOARD OF TRUST MANAGERS" means the Board of Trust Managers of the Trust.
"BYLAWS" means the Bylaws of the Trust, as amended.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DECLARATION" or "DECLARATION OF TRUST" means this Declaration Trust,
including any amendments or supplements hereto.
"EXECUTIVE OFFICERS" means Damon D. Navarro, Brian Navarro, Edmund Navarro,
Joseph LaBrosse and Gerald McNamara.
"INDEPENDENT TRUST MANAGER" means a member of the Board of Trust Managers of
the Trust which is not employed by or affiliated with the Trust or an Affiliate
of the Trust.
"PERSON" means an individual, corporation, partnership, 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
I-1
<PAGE>
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 508(a) of the
Code, joint stock company or other entity, or any government and agency or
political subdivision thereof.
"REIT PROVISIONS OF THE CODE" means Section 856 through 860 of the Code and
any other successor provisions of the Code relating to real estate investment
trust (including provisions as to the attribution of ownership of beneficial
interests therein) and the regulations promulgated thereunder.
"SECURITIES" means Shares (defined below), any stock, shares or other
evidences of equity, beneficial or other interests, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in, temporary or interim certificates for, receipts for,
guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing.
"SECURITIES OF THE TRUST" means any securities issued by the Trust.
"SHAREHOLDERS" means holders of record of Shares.
"SHARES" means transferable shares of beneficial interest of the Trust of
any class or series.
"TITLE 8" means Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland, or any successor statute.
"TRUST MANAGER" means, individually, an individual, and "TRUST MANAGERS"
means, collectively, the individuals, in each case, as named in Section 2.2 of
this Declaration so long as they continue in office and any and all other
individuals who have been duly elected and qualify as Trust Managers of the
Trust hereunder.
"TRUST PROPERTY" means any and all property, real, personal or otherwise,
tangible or intangible, which is transferred or conveyed to the Trust or the
Trust Managers (including all rents, income, profits and gains therefrom), which
is owned or held by, or for the account of, the Trust or the Trust Managers.
ARTICLE II
TRUST MANAGERS
SECTION 2.1 Number, Composition. The number of Trust Managers initially
shall be five, which number may thereafter be increased or decreased by the
Trust Managers then in office from time to time; however, the total number of
Trust Managers shall be not less than two and not more than 15. No reduction in
the number of Trust Managers shall cause the removal of any Trust Managers from
office prior to the expiration of his term.
At all times after the date of closing of the Initial Public Offering (as
defined herein), the composition of the Board of Trust Managers shall consist of
a majority of Independent Trust Managers.
SECTION 2.2 Term. At each Annual Meeting of Shareholders, the successors to
the class of Trust Managers whose term expires at such Meeting shall be elected
to hold office for a term expiring at the annual Meeting of Shareholders held in
the third year following the year of their election and the other Trust Managers
shall continue in office.
SECTION 2.3 Resignation, Removal or Death. Any Trust Manager may resign by
written notice to the remaining Trust Managers, effective upon execution and
delivery to the Trust of such written notice or upon any future date specified
in the notice. A Trust Manager may be removed, only with Cause (as hereinafter
defined), at a Meeting of the Shareholders called for that purpose, by the
affirmative vote of the holders of not less than two-thirds of the Shares then
outstanding and entitled to vote in the election of Trustees. As used herein,
"CAUSE" shall mean (a) material theft, fraud or embezzlement or active and
deliberate dishonesty by a Trust Manager; (b) habitual neglect of duty by a
Trust Manager having a material and adverse significance to the Trust; or (c)
the conviction of a Trust Manager of a felony or of
I-2
<PAGE>
any crime involving moral turpitude. Upon the incapacity, death, resignation or
removal of any Trust Manager, or his otherwise ceasing to be a Trust Manager, he
shall automatically cease to have any right, title or interest in and to the
Trust Property and shall execute and deliver such documents as the remaining
Trust Managers require for the conveyance of any Trust Property held in his
name, and shall account to the remaining Trust Managers as they require for all
property which he holds as Trust Manager.
SECTION 2.4 Legal Title. Legal title to all Trust Property shall be vested
in the Trust, but the Trust may cause legal title to any Trust Property to be
held by or in the name of any or all of the Trust Managers or any other Person
as nominee. Any right, title or interest of the Trust Managers in and to the
Trust Property shall automatically vest in successor and additional Trust
Managers upon their qualification and acceptance of election or appointment as
Trust Managers, and they shall thereupon have all the right and obligations of
Trust Managers, whether or not conveyancing documents have been executed and
delivered pursuant to Section 2.3 or otherwise. Written evidence of the
qualification and acceptance of election or appointment of successor and
additional Trust Managers may be filed with the records of the Trust and in such
other offices, agencies or places as the Trust or Trust Managers may deem
necessary or desirable.
ARTICLE III
POWERS OF TRUST MANAGERS
Subject to the express limitations herein or in the Bylaws, (1) the business
and affairs of the Trust shall be managed under the direction of the Board of
Trust Managers and (2) the Trust Managers shall have full, exclusive and
absolute power, control and authority over the Trust Property and over the
business of the Trust as if they, in their own right, were the sole owners
thereof. The Trustees may take any actions as in their sole judgment and
discretion are necessary or desirable to conduct the business of the Trust. This
Declaration of Trust shall be construed with a presumption in favor of the grant
of power and authority to the Trust Managers. Any construction of this
Declaration or determination made in good faith by the Trust Managers concerning
their powers and authority hereunder shall be conclusive. The powers of the
Trust Managers shall in no way be limited or restricted by reference to or
inference from the terms of this or any other provision of this Declaration or
construed or deemed by inference or otherwise in any manner to exclude or limit
the powers conferred upon the Trust Managers under the general laws of the State
of Maryland as now or hereafter in force.
ARTICLE IV
INVESTMENT POLICY
The fundamental investment policy of the Trust is to make investments in
such a manner as to comply with the REIT Provisions of the Code and with the
requirements of Title 8 with respect to the composition of the Trust's
investments and the derivation of its income. Subject to Section 6.7, the Trust
Managers shall use their best efforts to carry out this fundamental investment
policy and to conduct the affairs of the Trust in such a manner as to continue
to qualify the Trust for the tax treatment provided in the REIT Provisions of
the Code; PROVIDED, HOWEVER, that no Trust Manager, officer, employee or agent
of the Trust shall be liable for any action or omission resulting in the loss of
tax benefits under the Code, except to the extent provided in Section 11.2. The
Trust Managers may change from time to time, either by resolution or by
amendment to the Bylaws of the Trust, such investment policies as they determine
to be in the best interest of the Trust, including prohibitions or restrictions
upon certain types of investments.
ARTICLE V
SHARES
SECTION 5.1 Authorized Shares. The total number of Shares which the Trust
has authority to issue is 14,000,000 shares, of which 10,000,000 are Common
Shares, $.01 par value per share (each, a "COMMON SHARE" or collectively,
"COMMON SHARES"), and 4,000,000 are Preferred Shares, $.01 par value per share
(each a "PREFERRED SHARE" or collectively, "PREFERRED SHARES").
I-3
<PAGE>
SECTION 5.2 Common Shares. Subject to the provisions of Article VII
regarding Excess Shares (as such term is defined therein), each Common Share
shall entitle the holder thereof to one vote. Holders of Common Shares shall not
be entitled to cumulative voting.
SECTION 5.3 Preferred Shares. Preferred Shares may be issued, from time to
time, in one or more series, as authorized by the Board of Trust Managers. Prior
to issuance of Preferred Shares of each series, the Board of Trust Managers, by
resolution, shall designate that series of Preferred Shares to distinguish it
from all other series and classes of Preferred Shares, shall specify the number
of Preferred Shares to be included in the series and, subject to the provisions
of Article VII regarding Excess Shares, shall set the terms, preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption.
SECTION 5.4 Classification or Reclassification of Unissued Shares. Subject
to the express terms of any series of Preferred Shares or any class of Common
Shares outstanding at the time and notwithstanding any other provision of the
Declaration of Trust, the Board of Trust Managers may increase or decrease the
number of, alter the designation of or classify or reclassify any unissued
Shares by setting or changing, in any one or more respects, from time to time
before issuing the Shares, and subject to the provisions of Article VII
regarding Excess Shares, the terms, preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications or terms or conditions of redemption of any series or class of
Shares.
SECTION 5.5 Declaration of Trust and Bylaws. All persons who acquire Shares
shall acquire the same subject to the provisions of this Declaration of Trust
and the Bylaws.
SECTION 5.6 Exchange of OP Units. So long as the Trust remains the general
partner of Grove Operating, L.P., the board of trust managers is hereby
expressly vested with authority (subject to the restrictions on ownership,
transfer and redemption of Equity Shares set forth in Article VII hereof) to
issue, and shall issue to the extent provided in the Partnership Agreement,
Common Shares in exchange for the units into which partnership interests in
Grove Operating, L.P. ("OP Units") are divided, as the same may be adjusted, as
provided in the Partnership Agreement.
SECTION 5.7 Reservation of Shares. Pursuant to the obligations of the Trust
under the Partnership Agreement to issue Common Shares in exchange for OP Units,
the board of trust managers is hereby required to reserve and authorize for
issuance a sufficient number of authorized but unissued Common Shares to permit
the Trust to issue Common Shares in exchange for OP Units that may be exchanged
for or converted into Common Shares as provided in the Partnership Agreement.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
TRUST AND OF THE SHAREHOLDERS AND TRUST MANAGERS
SECTION 6.1 Authorization by Board of Share Issuance. The Board of Trust
Managers may authorize the issuance from time to time of Shares of any class,
whether now or hereafter authorized, or securities convertible into Shares of
any class, whether now or hereafter authorized, for such consideration as the
Board of Trust Managers may deem advisable, subject to such restrictions or
limitations, if any, as may be set forth in this Declaration of Trust or in the
Bylaws or in the general corporation laws or other laws of the State of Maryland
affecting or having application to real estate investment trusts.
SECTION 6.2 Preemptive and Appraisal Rights. Except as may be provided by
the Board of Trust Managers in authorizing the issuance of Preferred Shares
pursuant to Section 5.3, no holder of Shares shall, as such holder, (a) have any
preemptive right to purchase or subscribe for any additional Shares or any other
security of the Trust which the Trust may issue or sell or (b), except as
expressly required by Title 8, have any right to require the Trust to pay him
the fair value of his Shares in an appraisal or similar proceeding.
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SECTION 6.3 Advisor or Property Management Agreements. Subject to such
approval of the Shareholders and other conditions, if any, as may be required by
any applicable statute, rule or regulation, the Board of Trust Managers may
authorize the execution and performance by the Trust of one or more agreements
with any person, corporation, association, company, trust, partnership (limited
or general) or other organization, whether or not an Affiliate of the Trust
(each, an "ADVISOR"), whereby, subject to the supervision and control of the
Board of Trust Managers, any such Advisor shall render or make available to the
Trust managerial, investment, advisory and/or related services, office space,
and property management services, and other services and facilities (including,
if deemed advisable by the Board of Trust Managers, the management or
supervision of the investments of the Trust) upon such terms and conditions as
may be provided in such agreement or agreements (including, if deemed fair and
equitable by the Board of Trust Managers, the compensation payable thereunder by
the Trust), subject to the provisions of Section 11.6.
SECTION 6.4 Related Party Transactions.
(a) Without limiting any other procedures available by law or otherwise to
the Trust, the Board of Trust Managers may authorize any agreement of the
character described in Section 6.3 or any other transaction with any Advisor,
although one or more of the Trust Managers or officers of the Trust may be a
party to such agreement or may be an officer, director, stockholder or member of
such Advisor, and no such agreement or transaction shall be invalidated or
rendered void or voidable solely by reason of the existence of any such
relationship if the existence is disclosed or known to the Board of Trust
Managers, and the contract or transaction is approved by the Board of Trust
Managers (including the affirmative vote of a majority of the Independent Trust
Managers, even if they constitute less than a quorum of the Board). Any Trust
Manager who is also a director, officer, stockholder or member of an Advisor or
other entity with whom the Trust proposes to engage in business may be counted
in determining the existence of a quorum at any meeting of the Board of Trust
Managers considering such matter.
(b) Subsequent to the Closing Date (as defined herein), the affirmative vote
of a majority of the Independent Trust Managers (even if they constitute less
than a quorum of the Board) shall be required to approve the purchase by the
Trust or its subsidiaries of any multifamily residential or mixed-use
properties, the ownership of which is under the control, whether directly or
indirectly, of Messrs. Damon D. Navarro and Joseph R. LaBrosse or any of the
Executive Officers of the Trust, or their respective Affiliates.
SECTION 6.5 Determinations by Board. The determination as to any of the
following matters, made in good faith by, or pursuant to the direction of, the
Board of Trust Managers consistent with this Declaration of Trust and in the
absence of actual receipt of an improper benefit in money, property or services
or active and deliberate dishonesty established by a court, shall be final and
conclusive and shall be binding upon the Trust and every holder of Shares: (a)
the amount of the net income of the Trust for any period and the amount of
assets at any time legally available for the payment of dividends, redemption of
Shares or the payment of other distributions with respect to Shares; (b) the
amount of paid-in surplus, net assets, other surplus, annual or other net
profit, net assets in excess of capital, undivided profits or excess of profits
over losses on sales of assets; (c) the amount, purpose, time of creation,
increase or decrease, alteration or cancellation of any reserves or charges and
the propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged);
(d) the fair value, or any sale, bid or asked price to be applied in determining
the fair value, of any asset owned or held by the Trust; and (e) any matters
relating to the acquisition, holding and disposition of any assets by the Trust.
The affirmative vote of a majority of the Independent Trust Managers, even
if they constitute less than a quorum, shall be required to approve any and all
matters for which approval by the Board of Trust Managers is required by this
Declaration of Trust.
SECTION 6.6 Reserved Powers of Board. The enumeration and definition of
powers of the Board of Trust Managers included in this Article VI shall in no
way be limited or restricted by reference to or inference from the terms of any
other clause of this or any other provision of the Declaration of Trust, or
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construed or deemed by inference or otherwise in any manner to exclude or limit
the powers conferred upon the Board of Trust Managers under the general laws of
the State of Maryland as now or hereafter in force.
SECTION 6.7 REIT Qualification. The Board of Trust Managers shall use its
reasonable best efforts to cause the Trust and the Shareholders to qualify for
federal income tax treatment in accordance with the REIT Provisions of the Code.
In furtherance of the foregoing, the Board of Trust Managers shall use its
reasonable best efforts to take such actions as are necessary, and may take such
actions as in its sole judgment and discretion are desirable, to preserve the
status of the Trust as a REIT, including amending the provisions of this
Declaration of Trust as provided in Article IX; provided, however, that if the
Board of Trust Managers determines that it is no longer in the best interests of
the Trust for it to continue to qualify as a REIT, the Board of Trust Managers
may revoke or otherwise terminate the Trust's REIT election.
ARTICLE VII
RESTRICTIONS ON OWNERSHIP AND TRANSFER
TO PRESERVE TAX BENEFIT
SECTION 7.1 Definitions. For the purposes of this Article VII, the following
terms shall have the following meanings:
"BENEFICIAL OWNERSHIP" shall mean ownership of Equity Shares by a Person who
is or would be treated as an owner of such Equity Shares either actually or
constructively through the application of Section 544 of the Code, as modified
by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially
Own," "Beneficially Owns" and "Beneficially Owned" shall have the correlative
meanings.
"CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of a Special
Trust as determined pursuant to Section 7.3(f) of this Article VII.
"CLOSING DATE" shall mean the time and date of the payment for and delivery
of Common Shares issued pursuant to the Initial Public Offering.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute.
"CONSTRUCTIVE OWNERSHIP" shall mean ownership of Equity Shares by a Person
who is or would be treated as an owner of such Equity Shares either actually or
constructively through the application of Section 318 of the Code, as modified
by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Own," "Constructively Owns" and "Constructively Owned" shall
have the correlative meanings.
"DEFERRED STOCK GRANT" means a grant, pursuant to the Trust's 1996 Share
Incentive Plan of Common Shares.
"EQUITY SHARES" shall mean Common Shares and/or Preferred Shares.
"EXECUTIVE OFFICERS" shall mean Damon Navarro, Brian Navarro, Edmund
Navarro, Joseph LaBrosse and Gerald McNamara.
"EXECUTIVE OFFICER OWNERSHIP LIMIT" means 20% (by value or by number of
Shares, whichever is more restrictive) of the outstanding Equity Shares of the
Trust.
"INITIAL PUBLIC OFFERING" shall mean the sale of Common Shares pursuant to
the Trust's first effective registration statement for such Common Shares filed
under the Securities Act of 1933, as amended, on Form SB-2 in June 1994.
"IRS" means the United States Internal Revenue Service.
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"MARKET PRICE" shall mean the last reported sales price reported on the
Emerging Company Marketplace of the American Stock Exchange, Inc. (the "AMEX"),
or otherwise on the AMEX, of the Common Shares, or Preferred Shares, as the case
may be, on the trading day immediately preceding the relevant date, or if not
then traded on the AMEX, the last reported sales price of the Common Shares, or
Preferred Shares, as the case may be, on the trading day immediately preceding
the relevant date as reported on any exchange or quotation system over which the
Common Shares, or Preferred Shares, as the case may be, may be traded, or if not
then traded over any exchange or quotation system, then the market price of the
Common Shares, or Preferred Shares, as the case may be, on the relevant date as
determined in good faith by the Board of Trust Managers.
"OPTION" means an option, granted pursuant to the Trust's 1994 Share Option
Plan or 1996 Share Incentive Plan, to acquire Common Shares.
"OWNERSHIP LIMIT" shall mean 5.0% (by value or by number of shares,
whichever is more restrictive) of the outstanding Equity Shares of the Trust.
"PARTNERSHIP AGREEMENT" shall mean the Agreement of Limited Partnership of
Grove Operating, L.P., of which the Trust is the sole general partner, dated as
of , 1996, as such agreement may be amended from time to time.
"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; but does not include an
underwriter acting in a capacity as such in a public offering of the Common
Shares, or Preferred Shares, as the case may be, provided that the ownership of
Common Shares, or Preferred Shares, as the case may be, by such underwriter
would not result in the Trust being "closely held" within the meaning of Section
856(h) of the Code, or otherwise result in the Trust failing to qualify as a
REIT.
"PURPORTED BENEFICIAL TRANSFEREE" shall mean, with respect to any purported
Transfer which results in a transfer to a Special Trust, as provided in Section
7.2(b) of this Article VII, the purported beneficial transferee or owner for
whom the Purported Record Transferee would have acquired or owned Equity Shares,
if such Transfer had been valid under Section 7.2(a) of this Article VII.
"PURPORTED RECORD TRANSFEREE" shall mean, with respect to any purported
Transfer which results in a transfer to a Special Trust, as provided in Section
7.2(b) of this Article VII, the record holder of the Equity Shares if such
Transfer had been valid under Section 7.2(a) of this Article VII.
"REIT" shall mean a real estate investment trust under Sections 856 through
860 of the Code.
"RESTRICTION TERMINATION DATE" shall mean the first day after the Closing
Date on which the Board of Trust Managers determines that it is no longer in the
best interests of the Trust to attempt to, or continue to, qualify as a REIT.
"SPECIAL TRUST" shall mean each of the trusts provided for in Section 7.3 of
this Article VII.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other
disposition of Equity Shares, including (i) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Equity Shares or (ii) the sale, transfer, assignment or other disposition of any
securities (or rights convertible into or exchangeable for Equity Shares),
whether voluntary or involuntary, whether of record or beneficially or
Beneficially or Constructively (including but not limited to transfers of
interests in other entities which result in changes in Beneficial or
Constructive Ownership of Equity Shares), and whether by operation of law or
otherwise.
"TRUSTEE" shall mean any Person unaffiliated with the Trust, the Purported
Beneficial Transferee, and the Purported Record Transferee, that is appointed by
the Trust to serve as trustee of a Special Trust.
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Section 7.2 Restrictions on Ownership and Transfers.
(a) From the Closing Date and prior to the Restriction Termination Date:
(i) except as provided in Section 7.9 of this Article VII, (i) no Person
(other than an Executive Officer) shall Beneficially Own Equity Shares in
excess of the Ownership Limit and (ii) no Executive Officer shall, nor shall
all of the Executive Officers, in the aggregate, Beneficially Own Equity
Shares in excess of the Executive Officer Ownership Limit;
(ii) except as provided in Section 7.9 of this Article VII, no Person
shall Constructively Own in excess of 9.8% (by value or by number of shares,
whichever is more restrictive) of the outstanding Equity Shares of the
Trust; and
(iii) no Person shall Beneficially or Constructively Own Equity Shares
to the extent that such Beneficial or Constructive Ownership would result in
the Trust being "closely held" within the meaning of Section 856(h) of the
Code, or otherwise failing to qualify as a REIT (including, but not limited
to, ownership that would result in the Trust owning (actually or
Constructively) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Trust (either directly
or indirectly through one or more partnerships) from such tenant would cause
the Trust to fail to satisfy any of the gross income requirements of Section
856(c) of the Code).
(b) If, during the period commencing on the Closing Date and prior to the
Restriction Termination Date, any Transfer (whether or not such Transfer is the
result of a transaction entered into through the facilities of the AMEX) or
other event occurs that, if effective, would result in any Person Beneficially
or Constructively Owning Equity Shares in violation of Section 7.2(a) of this
Article VII, (i) then that number of Equity Shares that otherwise would cause
such Person to violate Section 7.2(a) of this Article VII (rounded up to the
nearest whole share) shall be automatically transferred to a Special Trust for
the benefit of a Charitable Beneficiary, as described in Section 7.3, effective
as of the close of business on the business day prior to the date of such
Transfer or other event, and such Purported Beneficial Transferee shall
thereafter have no rights in such Equity Shares or (ii) if, for any reason, the
transfer to a Special Trust described in clause (i) of this sentence is not
automatically effective as provided therein to prevent any Person from
Beneficially or Constructively Owning Equity Shares in violation of Section
7.2(a) of this Article VII, then the Transfer of that number of Equity Shares
that otherwise would cause any Person to violate Section 7.2(a) shall be void AB
INITIO, and the Purported Beneficial Transferee shall have no rights in such
Equity Shares.
(c) Subject to Section 7.12 of this Article and notwithstanding any other
provisions contained herein, during the period commencing on the Closing Date
and prior to the Restriction Termination Date, any Transfer of Equity Shares
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the AMEX) that, if effective, would result in the
capital stock of the Trust being beneficially owned by less than 100 Persons
(determined without reference to any rules of attribution) shall be void AB
INITIO, and the intended transferee shall acquire no rights in such Equity
Shares.
(d) It is expressly intended that the restrictions on ownership and Transfer
described in this Section 7.2 of Article VII shall apply to the
redemption/exchange rights provided in Section of the Partnership Agreement.
Notwithstanding any of the provisions of the Partnership Agreement or any other
agreement between Grove Operating, L.P. and any of its partners to the contrary,
a partner of Grove Operating, L.P. shall not be entitled to effect an exchange
of an interest in Grove Operating, L.P. for Equity Shares to the extent the
actual or beneficial or Beneficial or Constructive ownership of such Equity
Shares would be prohibited under the provisions of this Article VII.
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SECTION 7.3 Transfers of Equity Shares in Trust
(a) Upon any purported Transfer or other event described in Section 7.2(b)
of this Article VII, such Equity Shares shall be deemed to have been transferred
to the Trustee in his capacity as trustee of a Special Trust for the exclusive
benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee
shall be deemed to be effective as of the close of business on the business day
prior to the purported Transfer or other event that results in a transfer to a
Special Trust pursuant to Section 7.2(b). The Trustee shall be appointed by the
Trust and shall be a Person unaffiliated with the Trust, any Purported
Beneficial Transferee, and any Purported Record Transferee. Each Charitable
Beneficiary shall be designated by the Trust as provided in Section 7.3(f) of
this Article VII.
(b) Equity Shares held by the Trustee shall be issued and outstanding Common
Shares or Preferred Shares of the Trust, as the case may be. The Purported
Beneficial Transferee or Purported Record Transferee shall have no rights in the
Equity Shares held by the Trustee. The Purported Beneficial Transferee or
Purported Record Transferee shall not benefit economically from ownership of any
Equity Shares held in trust by the Trustee, shall have no rights to dividends
and shall not possess any rights to vote or other rights attributable to the
Equity Shares held in a Special Trust.
(c) The Trustee shall have all voting rights and rights to dividends with
respect to Equity Shares held in a Special Trust, which rights shall be
exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend
or distribution paid prior to the discovery by the Trust that the Equity Shares
have been transferred to the Trustee shall be paid to the Trustee upon demand,
and any dividend or distribution declared but unpaid shall be paid when due to
the Trustee with respect to such Equity Shares. Any dividends or distributions
so paid over to the Trustee shall be held in trust for the Charitable
Beneficiary. The Purported Record Transferee and Purported Beneficial Transferee
shall have no voting rights with respect to the Equity Shares held in a Special
Trust and, subject to Maryland law, effective as of the date the Equity Shares
have been transferred to the Trustee, the Trustee shall have the authority (at
the Trustee's sole discretion) (i) to rescind as void any vote cast by a
Purported Record Transferee with respect to such Equity Shares prior to the
discovery by the Trust that the Equity Shares have been transferred to the
Trustee and (ii) to recast such vote in accordance with the desires of the
Trustee acting for the benefit of the Charitable Beneficiary; PROVIDED, however,
that if the Trust has already taken irreversible action, then the Trustees shall
not have the authority to rescind and recast such vote. Notwithstanding the
provisions of this Article VII, until the Trust has received notification that
the Equity Shares have been transferred into a Special Trust, the Trust shall be
entitled to rely on its share transfer and other stockholder records for
purposes of preparing lists of stockholders entitled to vote at meetings,
determining the validity and authority of proxies and otherwise conducting votes
of stockholders.
(d) Within 20 days of receiving notice from the Trust that Equity Shares
have been transferred to a Special Trust, the Trustee of a Special Trust shall
sell the Equity Shares held in a Special Trust to a person, designated by the
Trustee, whose ownership of the Equity Shares will not violate the ownership
limitations set forth in Section 7.2(a). Upon such sale, the interest of the
Charitable Beneficiary in the Equity Shares sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and to the Charitable Beneficiary as provided in this Section 7.3(d). The
Purported Record Transferee shall receive the lesser of (i) the price paid by
the Purported Record Transferee for the Equity Shares in the transaction that
resulted in such transfer to the Special Trust (or, if the event which resulted
in the transfer to the Special Trust did not involve a purchase of such Equity
Shares at Market Price, the Market Price of such Equity Shares on the day of the
event which resulted in the transfer of the Equity Shares to the Special Trust)
and (ii) the price per share received by the Trustee (net of any commissions and
other expenses of sale) from the sale or other disposition of the Equity Shares
held in the Special Trust. Any net sales proceeds in excess of the amount
payable to the Purported Record Transferee shall be immediately paid to the
Charitable Beneficiary together with any dividends or other distributions
thereon. If, prior to the discovery by the Trust that such Equity Shares have
been transferred to the Trustee, such Equity Shares are sold by a Purported
Record Transferee then (i) such Equity Shares shall be deemed to
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have been sold on behalf of the Special Trust and (ii) to the extent that the
Purported Record Transferee received an amount for such Equity Shares that
exceeds the amount that such Purported Record Transferee was entitled to receive
pursuant to this subparagraph (3)(d), such excess shall be paid to the Trustee
upon demand.
(e) Equity Shares transferred to the Trustee shall be deemed to have been
offered for sale to the Trust, or its designee, at a price per share equal to
the lesser of (i) the price paid by the Purported Record Transferee for the
Equity Shares in the transaction that resulted in such transfer to a Special
Trust (or, if the event which resulted in the transfer to a Special Trust did
not involve a purchase of such Equity Shares at Market Price, the Market Price
of such Equity Shares on the day of the event which resulted in the transfer of
the Equity Shares to a Special Trust) and (ii) the Market Price on the date the
Trust, or its designee, accepts such offer. The Trust shall have the right to
accept such offer until the Trustee has sold the Equity Shares held in a Special
Trust pursuant to Section 7.3(d). Upon such a sale to the Trust, the interest of
the Charitable Beneficiary in the Equity Shares sold shall terminate and the
Trustee shall distribute the net proceeds of the sale to the Purported Record
Transferee and any dividends or other distributions held by the Trustee with
respect to such Equity Shares shall thereupon be paid to the Charitable
Beneficiary.
(f) By written notice to the Trustee, the Trust shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in a
Special Trust such that (i) the Equity Shares held in a Special Trust would not
violate the restrictions set forth in Section 7.2(a) in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
SECTION 7.4 Remedies for Breach. If the Board of Trust Managers, or a
committee thereof (or other designees if permitted by Maryland law) shall at any
time determine in good faith that a Transfer or other event has taken place in
violation of Section 7.2 of this Article VII or that a Person intends to
acquire, has attempted to acquire or may acquire beneficial ownership
(determined without reference to any rules of attribution), Beneficial Ownership
or Constructive Ownership of any Equity Shares of the Trust in violation of
Section 7.2 of this Article VII, the Board of Trust Managers, or a committee
thereof (or other designees if permitted by Maryland law) shall take such action
as it deems advisable to refuse to give effect to or to prevent such Transfer,
including, but not limited to, causing the Trust to redeem Equity Shares,
refusing to give effect to such Transfer on the books of the Trust or
instituting proceedings to enjoin such Transfer; PROVIDED, however, that any
Transfers (or, in the case of events other than a Transfer, ownership or
Constructive Ownership or Beneficial Ownership) in violation of Section 7.2(a)
of this Article VII, shall automatically result in the transfer to a Special
Trust as described in Section 7.2(b) and any Transfer in violation of Section
7.2(c) shall automatically be void AB INITIO, irrespective of any action (or
non-action) by the Board of Trust Managers.
SECTION 7.5 Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire Equity Shares in violation of Section 7.2 of this Article
VII or any Person who is a Purported Transferee such that an automatic transfer
to a Special Trust results under Section 7.2(b) of this Article VII, shall
immediately give written notice to the Trust of such event and shall provide to
the Trust such other information as the Trust may request in order to determine
the effect, if any, of such Transfer or attempted Transfer on the Trust's status
as a REIT.
SECTION 7.6 Owners Required to Provide Information. From the Closing Date
and prior to the Restriction Termination Date:
(a) Each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Equity Shares and each Person (including the shareholder
of record) who is holding Equity Shares for a beneficial owner or Beneficial
Owner or Constructive Owner shall, on demand, be required to disclose to the
Trust in writing such information as the Trust may request in order to determine
the effect, if any, of such shareholder's actual and constructive ownership of
Equity Shares on the the Trust's status as a REIT and
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to ensure compliance with the Ownership Limit, the Executive Officer Ownership
Limit, or such other limit as provided from time to time in this Third Amended
and Restated Declaration of Trust or as otherwise permitted by the Board of
Trust Managers.
(b) Each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Equity Shares and each Person (including the Shareholder
of record) who is holding Equity Shares for a beneficial owner or Beneficial
Owner or Constructive Owner shall, on demand, provide to the Trust a completed
questionnaire containing the information regarding their ownership of such
Equity Shares, as set forth in the regulations (as in effect from time to time)
of the U.S. Department of Treasury under the Code.
SECTION 7.7 Remedies Not Limited. Nothing contained in this Article VII (but
subject to Sections 6.7 and 7.12 of the Charter) shall limit the authority of
the Board of Trust Managers to take such other action as it deems necessary or
advisable to protect the Trust and the interests of its shareholders by
preservation of the Trust's status as a REIT.
SECTION 7.8 Ambiguity. In the case of an ambiguity in the application of any
of the provisions of Sections 7.2 through 7.9, 7.13 and 7.14 of this Article
VII, including any definition contained in Section 7.1, the Board of Trust
Managers shall have the power to determine the application of the provisions of
Sections 7.2 through 7.9, 7.13 and 7.14 with respect to any situation based on
the facts known to it (subject, however, to the provisions of Section 7.12 of
this Article). In the event any of Sections 7.2 through 7.9, 7.13 or 7.14
requires an action by the Board of Trust Managers and this Third Amended and
Restated Declaration of Trust fails to provide specific guidance with respect to
such action, the Board of Trust Managers shall have the power to determine the
action to be taken so long as such action is not contrary to the provisions of
such Sections 7.2 through 7.9 of this Article VII. Absent a decision to the
contrary by the Board of Trust Managers (which the Board of Trust Managers may
make in its sole and absolute discretion), if a Person would have (but for the
remedies set forth in Section 7.2(b)) acquired Beneficial or Constructive
Ownership of Equity Shares in violation of Section 7.2(a), such remedies (as
applicable) shall apply first to the Equity Shares which but for such remedies,
would have been actually owned by such Person, and second to Equity Shares
which, but for such remedies, would have been Beneficially Owned or
Constructively Owned (but not actually owned) by such Person, PRO RATA among the
Persons who actually own such Equity Shares based upon the relative number of
the Equity Shares held by each such Person.
SECTION 7.9 Exceptions.
(a) Subject to Section 7.2(a)(iii), the Board of Trust Managers, in its sole
discretion, may exempt a Person from the limitation on a Person Beneficially
Owning Equity Shares in excess of the Ownership Limit or the Executive Officers
Beneficially Owning Equity Shares, in the aggregate, in excess of the Executive
Officer Ownership Limit, as the case may be, if the Board of Trust Managers
obtains such representations and undertakings from such Person or from such
Executive Officer or Executive Officers as are reasonably necessary to ascertain
that no individual's Beneficial Ownership or the Executive Officers' Beneficial
Ownership, in the aggregate, as the case may be, of such Equity Shares will
violate the Ownership Limit or the Executive Officer Ownership, as the case may
be, or that any such violation will not cause the Trust to fail to qualify as a
REIT under the Code, and agrees that any violation of such representations or
undertaking (or other action which is contrary to the restrictions contained in
Section 7.2 of this Article VII) or attempted violation will result in such
Equity Shares being transferred to a Special Trust in accordance with Section
7.2(b) of this Article VII.
(b) Subject to Section 7.2(a)(iii), the Board of Trust Managers, in its sole
discretion, may exempt a Person from the limitation on a Person Constructively
Owning Equity Shares in excess of 9.8% (by value or by number of Equity Shares,
whichever is more restrictive) of the outstanding Equity Shares of the Trust, if
such Person does not, and represents that it will not own, actually or
Constructively, an interest in a tenant of the Trust (or a tenant of any entity
owned in whole or in part by the Trust) that would cause the Trust to own,
actually or Constructively, more than a 9.8% interest (as set forth in Section
856(d)(2)(B) of the Code) in such tenant and the Trust obtains such
representations and undertakings from such Person as are
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reasonably necessary to ascertain this fact and agrees that any violation or
attempted violation will result in such Equity Shares being transferred to the
Trust in accordance with Section 7.2(b) of this Article VII. Notwithstanding the
foregoing, the inability of a Person to make the certification described in this
Section 7.9(b) shall not prevent the Board of Trust Managers, in its sole
discretion, from exempting such Person from the limitation on a Person
Constructively Owning Equity Shares in excess of 9.8% of the outstanding Equity
Shares if the Board of Trust Managers determines that the resulting application
of Section 856(d)(2)(B) of the Code would affect the characterization of less
than 0.5% of the gross income (as such term is used in Section 856(c)(2) of the
Code) of the Trust in any taxable year, after taking into account the effect of
this sentence with respect to all other Equity Shares to which this sentence
applies.
(c) Prior to granting any exception pursuant to Section 7.9(a) or (b) of
this Article VII, the Board of Trust Managers may require a ruling from the
Internal Revenue Service, or an opinion of counsel, in either case in form and
substance satisfactory to the Board of Trust Managers in its sole discretion, as
it may deem necessary or advisable in order to determine or ensure the Trust's
status as a REIT.
SECTION 7.10 Legends. Each certificate for Equity Shares shall bear
substantially the following legends:
CLASS OF STOCK
"THE TRUST IS AUTHORIZED TO ISSUE CAPITAL STOCK OF MORE THAN ONE CLASS,
CONSISTING OF COMMON STOCK AND ONE OR MORE CLASSES OF PREFERRED STOCK.
THE BOARD OF TRUST MANAGERS IS AUTHORIZED TO DETERMINE THE PREFERENCES,
LIMITATIONS AND RELATIVE RIGHTS OF ANY CLASS OF THE PREFERRED STOCK
BEFORE THE ISSUANCE OF SHARES OF SUCH CLASS OF PREFERRED STOCK. THE TRUST
WILL FURNISH, WITHOUT CHARGE, TO ANY STOCKHOLDER MAKING A WRITTEN REQUEST
THEREFOR, A COPY OF THE TRUST'S CHARTER AND A WRITTEN STATEMENT OF THE
DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES, CONVERSION OR OTHER RIGHTS,
VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER
DISTRIBUTIONS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF
THE STOCK OF EACH CLASS WHICH THE CORPORATION HAS THE AUTHORITY TO ISSUE
AND, IF THE CORPORATION IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL
CLASS AND SERIES, (i) THE DIFFERENCES IN THE RELATIVE RIGHTS AND
PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT SET, AND (ii)
THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET SUCH RIGHTS AND
PREFERENCES OF SUBSEQUENT SERIES. REQUESTS FOR SUCH WRITTEN STATEMENT MAY
BE DIRECTED TO THE SECRETARY OF THE TRUST AT ITS PRINCIPAL OFFICE."
RESTRICTION ON OWNERSHIP AND TRANSFER
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE
TRUST'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUBJECT TO
CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE
TRUST'S CHARTER, (I)(A) NO PERSON (EXCEPT FOR AN EXECUTIVE OFFICER) MAY
BENEFICIALLY OWN IN EXCESS OF 5.0% OF THE
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OUTSTANDING EQUITY SHARES OF THE TRUST (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) AND (B) NO EXECUTIVE OFFICER MAY, NOR MAY
THE EXECUTIVE OFFICERS, IN THE AGGREGATE, BENEFICIALLY OWN IN EXCESS OF
20% OF THE OUTSTANDING EQUITY SHARES OF THE TRUST (BY VALUE OR BY NUMBER
OF SHARES, WHICHEVER IS MORE RESTRICTIVE); (II) NO PERSON MAY
CONSTRUCTIVELY OWN IN EXCESS OF 9.8% OF THE OUTSTANDING EQUITY SHARES OF
THE TRUST (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE
RESTRICTIVE); (III) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
EQUITY SHARES THAT WOULD RESULT IN THE TRUST BEING "CLOSELY HELD" UNDER
SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE TRUST TO FAIL TO
QUALIFY AS A REIT; AND (IV) NO PERSON MAY TRANSFER EQUITY SHARES IF SUCH
TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE TRUST BEING OWNED BY
FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY
OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN EQUITY SHARES
WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN
EQUITY SHARES IN EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY
THE TRUST. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE EQUITY SHARES REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A SPECIAL TRUST FOR THE BENEFIT OF ONE OR
MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE TRUST MAY REDEEM SHARES
UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF TRUST MANAGERS IN
ITS SOLE DISCRETION IF THE BOARD OF TRUST MANAGERS DETERMINES THAT
OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS
DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS,
ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY
BE VOID AB INITIO. ALL TERMS IN THIS LEGEND THAT ARE DEFINED IN THE
DECLARATION OF TRUST HAVE THE MEANINGS ASCRIBED TO THEM IN THE
DECLARATION OF TRUST OF THE TRUST, AS THE SAME MAY BE AMENDED FROM TIME
TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND
OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF EQUITY SHARES ON REQUEST
AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE
SECRETARY OF THE TRUST, AT THE TRUST'S PRINCIPAL OFFICE."
SECTION 7.11 Severability. If any provision of this Article VII or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
SECTION 7.12 AMEX. Nothing in this Article VII shall preclude the settlement
of any transaction entered into through the facilities of the AMEX or any other
national securities exchange. The fact that the settlement of any transaction is
so permitted shall not negate the effect of any other provision of this Article
VII and any transferee in such a transaction shall be subject to all the
provisions and limitations of this Article VII.
SECTION 7.13 Changes In Ownership Limit and Executive Officer Ownership
Limit. Subject to the limitations provided in Section 7.14, the Board of Trust
Managers may from time to time increase (or
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decrease) the Ownership Limit and/or the Executive Officer Ownership Limit
(including, but not limited to, in connection with the grant of Options and/or
Deferred Stock Grants to the Executive Officers).
SECTION 7.14 Limitations on Changes In the Ownership Limit and the Executive
Officer Ownership Limit.
(a) Neither the Ownership Limit nor the Executive Officer Ownership Limit
may be increased if, as a result of such increase, five Beneficial Owners of
Equity Shares (including all of the Executive Officers) could Beneficially Own,
in the aggregate, more than 50.0% (in number or value, whichever is more
restrictive) of the then outstanding Equity Shares.
(b) Prior to the modification of the Ownership Limit or the Executive
Officer Ownership Limit pursuant to Section 7.13, the Board of Trust Managers
may require such opinions of counsel, affidavits, undertakings or agreements as
it may deem necessary or advisable in order to determine or ensure the Trust's
status as a REIT.
(c) The Executive Officer Ownership Limit shall not be reduced to a
percentage which is less than the Ownership Limit.
ARTICLE VIII
SHAREHOLDERS
SECTION 8.1 Meetings of Shareholders. There shall be an Annual Meeting of
the Shareholders, to be held at such time and place as shall be determined by or
in the manner prescribed in Article II of the Bylaws, at which Trust Managers
shall be elected and any other proper business may be conducted. Except as
otherwise provided in this Declaration of Trust, special meetings of
Shareholders may be called in the manner provided in Article II of the Bylaws.
If there are no Trust Managers, the President or any other officer of the Trust
shall promptly call a special meeting of the Shareholders entitled to vote for
the election of successor Trust Managers. Any meeting may be adjourned and
reconvened as the Trust Managers determine or as provided in Article II of the
Bylaws.
SECTION 8.2 Voting Rights of Shareholders. Subject to the provisions of any
class or series of Shares then outstanding, the Shareholders shall be entitled
to vote only on the following matters: (a) the election or removal of Trust
Managers; (b) the amendment of this Declaration of Trust; (c) the voluntary
dissolution or termination of the Trust; (d) the reorganization of the Trust;
and (e) the merger or consolidation of the Trust or the sale or other
disposition of all or substantially all of the Trust Property. Except with
respect to the foregoing matters, no action taken by the Shareholders at any
meeting shall in any way bind the Trust Managers.
ARTICLE IX
AMENDMENT
SECTION 9.1 By Shareholders. Except as provided in Section 9.2 hereof, this
Declaration of Trust may be amended only by the affirmative vote of the holders
of not less than two-thirds of all the Shares then outstanding and entitled to
vote on the matter.
SECTION 9.2 By Trust Managers. The Trust Managers, by a two-thirds vote, may
amend provisions of this Declaration of Trust from time to time to enable the
Trust to qualify as a real estate investment trust under the Code or under Title
8.
SECTION 9.3 No Other Amendment. This Declaration of Trust may not be amended
except as provided in this Article IX.
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ARTICLE X
DURATION OF TRUST
The Trust shall continue perpetually unless terminated pursuant to any
applicable provision of Title 8. The Trust may be voluntarily dissolved or
reorganized or its existence terminated only by the affirmative vote of the
holders of not less than two-thirds of all the Shares then outstanding and
entitled to vote on the matter. The Trust may sell or otherwise dispose of all
or substantially all of the Trust Property only by the affirmative vote of the
holders entitled to vote on the matter.
ARTICLE XI
LIABILITY OF SHAREHOLDERS, TRUST MANAGERS, OFFICERS,
EMPLOYEES AND AGENTS
AND TRANSACTIONS BETWEEN THEM AND THE TRUST
SECTION 11.1 Limitation of Shareholder Liability. No Shareholder shall be
liable for any debt, claim, demand, judgment or obligation of any kind of,
against or with respect to the Trust by reason of his being a Shareholder, nor
shall any Shareholder be subject to any personal liability whatsoever, in tort,
contract or otherwise, to any Person in connection with the Trust Property or
the affairs of the Trust.
SECTION 11.2 Limitation of Trust Manager and Executive Officer Liability. To
the maximum extent that Maryland law in effect from time to time permits
limitations of the liability of trustees and officers of a real estate
investment trust, no Trust Manager or officer of the Trust shall be liable to
the Trust or to any Shareholder for money damages. Neither the amendment nor
repeal of this Section, nor the adoption or amendment of any other provision of
this Declaration of Trust inconsistent with this section, shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption. In the absence of any Maryland statute limiting the liability of
trustees and officers of a Maryland real estate investment trust for money
damages in a suit by or on behalf of the Trust or by any Shareholder, no Trust
Manager or Executive Officer of the Trust shall be liable to the Trust or to any
Shareholder unless (a) that Trust Manager or Executive Officer actually received
an improper benefit or profit in money, property or services, and then, for the
amount of the benefit of profit in money or services actually received or (b) a
judgment or other final adjudication adverse to the Trust Manager or Executive
Officer is entered in a proceeding based on a finding in the proceeding that the
Trust Manager's or Executive Officer's action or failure to act was the result
of active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding or (c) otherwise, in accordance with the
provisions of an indemnification agreement between any of them and the Trust.
SECTION 11.3 Express Exculpatory Clauses in Instruments. Neither the
Shareholders nor the Trust Managers, Executive Officers, employees or agents of
the Trust shall be liable under any written instrument creating an obligation of
the Trust, and all Persons shall look solely to the Trust Property for the
payment of any claim under or for the performance of the instrument. The
omission of the foregoing exculpatory clause in such instrument shall not render
any Shareholder, Trust Manager, Executive Officer, employee or agent liable
thereunder to any third party, nor shall the Trust Manager or any officers,
employees or agents of the Trust be liable to anyone for such omission. In the
event of a conflict between the terms of this Declaration and any
indemnification agreement, the terms of the indemnification agreement shall
control.
SECTION 11.4 Indemnification and Advance for Expenses. The Trust shall have
the power, to the maximum extent permitted by Maryland law in effect from time
to time, to obligate itself to indemnify, and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to, (a) any individual
who is a present or former Shareholder, Trust Manager or officer of the Trust or
(b) any individual who, while a Shareholder, Trust Manager or officer of the
Trust and at the express request of the Trust, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or
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any other enterprise as a director, officer, Shareholder, partner or trustee of
such corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, from and against all claims and liabilities to which such
person may become subject and against all claims and liabilities to which such
person may become subject by reason of his being or having been a Shareholder,
Trust Manager or Executive Officer. The Trust shall have the power, with the
approval of its Board of Trust Managers, to provide such indemnification and
advancement of expenses to a person who served a predecessor of the Trust in any
of the capacities described in (a) or (b) above and to any employee or agent of
the Trust or a predecessor of the Trust.
SECTION 11.5 Transactions Between the Trust and its Trust Managers,
Executive Officers, Employees and Agents. Subject to any express restriction in
this Declaration of Trust, including, but not limited to, Section 6.4, any
restriction adopted by the Trust Managers in the Bylaws or by resolution, and in
accordance with the terms and provisions of any employment agreement and/or
non-competition agreement with any Trust Manager or Executive Officer and the
Trust, as applicable, the Trust may enter into any contract or transaction of
any kind (including, without limitation, for the purchase or sale of property or
for any type of services, including those in connection with the underwriting or
the offer or sale of Securities of the Trust) with any Person, including any
Trust Manager, Executive Officer, employee or agent of the Trust, whether or not
any of them has a financial interest in such transaction.
SECTION 11.6 Limitation on Total Operating Expenses. The Total Operating
Expenses of the Trust shall not exceed the greater of 2% of its average invested
assets or 25% of its net income in any fiscal year as defined below. The Trust
Managers will limit operating expenses to these levels unless a majority of the
Independent Trust Managers make a finding that, based on unusual or
non-recurring factors, a higher level of expenses is justified for that year.
Written records and supporting data shall be maintained by the Trust Managers in
this regard.
Within 60 days after the end of any fiscal quarter in which Total Operating
Expenses for the preceding twelve (12) months exceeded this limitation, the
Trust will disclose this fact to the Shareholders, together with an explanation
of the factors upon which the Independent Trust Managers relied in approving
higher operating expenses.
For purposes of this Section 11.6, "TOTAL OPERATING EXPENSES" shall include
all cash operating expenses, including additional expenses paid directly or
indirectly by the Trust to its Affiliates or third parties based upon their
relationship with the Trust, including loan administration, servicing,
engineering, inspection and all other expenses paid by the Trust, except the
expenses related to raising capital, for interest, taxes and direct property
acquisition, operation, maintenance and management costs.
"AVERAGE INVESTED ASSETS", for purposes of this Section 11.6, for any
period, shall mean the average of the aggregate book value of the assets of the
Trust, invested, directly or indirectly, in equity interests and in loans
secured by real estate, before reserves for depreciation or bad debts or other
similar non-cash reserves computed by taking the average of such values at the
end of each month during such period.
"NET INCOME", for purposes of the calculation contained in this Section
11.6, shall mean total revenues applicable to such period, other than additions
to reserves for depreciation or bad debts or other similar non-cash reserves.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Governing Law. This Third Amended and Restated Declaration of
Trust is executed by the Trust Managers and delivered in the State of Maryland
with reference to the laws thereof, and the rights of all parties and the
validity, construction and effect of every provision hereof shall be subject to
and construed according to the laws of the State of Maryland without regard to
conflict of law provisions thereof.
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<PAGE>
SECTION 12.2 Reliance by Third Parties. Any certificate shall be final and
conclusive as to any Person dealing with the Trust if executed by an individual
who, according to the records of the Trust or of any recording office in which
this Third Amended and Restated Declaration of Trust may be recorded, appears to
be the Secretary or an Assistant Secretary of the Trust or a Trust Manager, and
if certifying to: (a) the number or identity of Trust Managers, officers of the
Trust or Shareholders; (b) the due authorization of the execution of any
document; (c) any action or vote taken, and the existence of a quorum at a
meeting of Trust Managers or Shareholders; (d) a copy of this Declaration or of
the Bylaws as a true and complete copy as then in force; (e) an amendment to
this Declaration; (f) the termination of the Trust; or (g) the existence of any
fact or facts which relate to the affairs of the Trust. No purchaser, lender,
transfer agent or other Person shall be bound to make any inquiry concerning the
validity of any transaction purported to be made on behalf of the Trust by the
Trust Managers or by any officer, employee or agent of the Trust.
SECTION 12.3 Provisions in Conflict With Law or Regulations.
(a) The provisions of this Third Amended and Restated Declaration of Trust
are severable, and if the Trust Managers shall determine, with the advice of
counsel, that any one or more of such provisions are in conflict with the REIT
Provisions of the Code, Title 8 or any other applicable federal or state law,
the conflicting provisions shall be deemed never to have constituted a part of
this Declaration of Trust, even without any amendment of this Declaration of
Trust pursuant to Article IX; PROVIDED, HOWEVER, that such determination by the
Trust Managers shall not affect or impair any of the remaining provisions of
this Declaration of Trust or render invalid or improper any action taken or
omitted prior to such determination. No Trust Manager shall be liable for making
or failing to make such a determination.
(b) If any provision of this Third Amended and Restated Declaration of Trust
shall be held invalid or unenforceable in any jurisdiction, such holding shall
not in any manner affect or render invalid or unenforceable such provision in
any other jurisdiction or any other provision of this Declaration of Trust in
any jurisdiction.
Section 12.4 Construction. In this Third Amended and Restated Declaration of
Trust, unless the context requires otherwise, words used in the singular or in
the plural include both the plural and singular and words denoting any gender
include all genders. Title and headings of different parts of this Declaration
are inserted for convenience and shall not affect the meaning, construction or
effect hereof. In defining or interpreting the powers and duties of the Trust
and its Trust Managers and officers, reference may be made, to the extent
appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3
of the Corporations and Associations Article of the Annotated Code of Maryland
(the "MARYLAND CODE"). In furtherance and not in limitation of the foregoing, in
accordance with the provisions of Title 3, Subtitles 6 and 7, of the Maryland
Code, the Trust shall be included within the definition of "corporation" for
purposes of such provisions.
SECTION 12.5 Recordation. This Third Amended and Restated Declaration of
Trust and any amendment or supplement hereto shall be filed for record with the
State Department of Assessments and Taxation of Maryland and may also be filed
or recorded in such other places as the Trust Managers deem appropriate, but
failure to file for record this Third Amended and Restated Declaration or any
amendment or supplement hereto in any office other than in the State of Maryland
shall not affect or impair the validity or effectiveness of this Third Amended
and Restated Declaration or any amendment hereto. This Third Amended and
Restated Declaration, and any subsequently amended and restated Declaration,
shall, upon filing, be conclusive evidence of all amendments or supplements
contained therein and may thereafter be referred to in lieu of the original
Declaration and the various amendments or supplements thereto.
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IN WITNESS WHEREOF, this Third Amended and Restated Declaration of Trust has
been signed on this day of , 1997, by the undersigned Trust Managers, each of
whom acknowledge that this document is his free act and deed, that, to the best
of his knowledge, information and belief, the matters and facts set forth herein
are true in all material respects and that this statement is made under the
penalties for perjury.
<TABLE>
<S> <C> <C>
- - --------------------- --------------------- ---------------------
Harold Gorman Damon D. Navarro James F. Twaddell
- - --------------------- ---------------------
J. Joseph Garrahy Joseph R. LaBrosse
</TABLE>
I-18
GROVE REAL ESTATE ASSET TRUST
BYLAWS
OFFICES
0. PRINCIPAL OFFICE. The principal office of the Trust shall be located at
such place or places as the Trust Managers may designate.
1. ADDITIONAL OFFICES. The Trust may have additional offices at such places
as the Trust Managers may from time to time determine or the business of the
Trust may require.
MEETINGS OF SHAREHOLDERS
0. PLACE. All meetings of shareholders shall be held at the principal office of
the Trust or at such other place within the United States as shall be stated
in the notice of the meeting.
1. ANNUAL MEETING. An annual meeting of the shareholders for the election of
Trust Managers and the transaction of any business within the powers of the
Trust shall be held during the month of May of each year, after the delivery of
the annual report, referred to in Section 11 of this Article II, at a convenient
location and on proper notice, on a date and at the time set by the Trust
Managers, beginning with the year 1995.
2. SPECIAL MEETINGS. The Chairman of the Board of Trust
Managers or the President or one-third of the Trust Managers may call special
meetings of the shareholders. Special meetings of shareholders shall also be
called by the Secretary upon the written request of the holders of shares
entitled to cast not less than 25% of all the votes entitled to the cast at such
meeting. Such request shall state the purpose of such meeting. The secretary
shall inform such shareholders of the reasonably estimated cost of preparing and
mailing notice of the meeting and, upon payment by such shareholders to the
Trust of such costs, the Secretary shall give notice to each shareholder
entitled to notice of the meeting. Unless requested by shareholders entitled to
cast a majority of all the votes entitled to be cast at such meeting, a special
meeting need not be called to consider any matter which is substantially the
same as a matter voted on at any meeting of the shareholders held during the
preceding twelve months.
3. NOTICE. Not less than ten nor more than 90 days before such meeting of
shareholders, the Secretary shall give to each shareholder entitled to vote at
such meeting and to each shareholder not entitled to vote who is entitled to
notice of the meeting, written or printed notice stating the time and place of
the meeting and, in the case of a special meeting or as otherwise may be
required by any statute, the purpose for which the meeting is called, either by
mail or by presenting it to such shareholder personally or by leaving it at his
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail addressed to the shareholder
at his/her post office address as it appears on the records of the Trust, with
postage thereon prepaid.
4. SCOPE OF NOTICE. Any business of the Trust may be
transacted at an annual meeting of shareholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of shareholders except as specifically designated in the notice.
5. QUORUM. At any meeting of shareholders, the presence in
person or by proxy of shareholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the Declaration of Trust,
as amended, for the vote necessary for the adoption of any measure. If, however,
such quorum shall not be present at any meeting, the shareholders entitled to
vote at the meeting, present in person or by proxy, shall have power to adjourn
the meeting from time to time to a date not more than 120 days after the
original record date without notice other than announcement at the meeting. At
such adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
6. VOTING. A plurality of all the votes cast at a meeting of shareholders duly
called and at which a quorum is present shall be sufficient to elect a Trust
Manager. Each share may be voted for as many individuals as there are Trust
Managers to be elected and for whose election the share is entitled to be voted.
A majority of the votes cast at a meeting of shareholders duly called and at
which a quorum is present shall be sufficient to approve any other matter which
may properly come before the meeting, unless more than a majority of the votes
cast is required herein or by statute or by the Declaration of Trust Managers,
as amended. Unless otherwise provided in the Declaration, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders.
7. PROXIES. A shareholder may vote the shares owned of record by him, either in
person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
Trust before or at the time of the meeting. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in the proxy.
8. VOTING OF SHARES BY CERTAIN HOLDERS. Shares registered in the name of a
corporation, partnership, trust or other entity, if entitled to be voted, may be
voted by the President or a Vice President, a general partner or trustee,
thereof, as the case may be, or a proxy appointed by any of the foregoing
individuals, unless some other person who has been appointed to vote such shares
pursuant to a bylaw or a resolution of the board of directors of such
corporation or other entity, and if such person presents a certified copy of
such bylaw or resolution, in which case such person may vote such shares. Any
trustee or other fiduciary may vote shares registered in his name as such
fiduciary, either in person or by proxy.
Shares of the Trust directly or indirectly owned by it shall not be voted at any
meeting and shall not be counted in determining the total number of outstanding
shares entitled to be voted at any given time, unless they are held by it in a
fiduciary capacity, in which case they may be voted and shall be counted in
determining the total number of outstanding shares at any given time.
( ) The Board of Trust Managers may adopt by resolution a procedure by which a
shareholder may certify in writing to the Trust that any shares registered in
the name of the shareholder are held for the account of a specified person other
than the shareholder. The resolution shall set forth the class of shareholder
who may make the certification; the purpose for which the certification may be
made; the form of certification and the information to be contained in it; if
the certification is with respect to a record date or closing of the share
transfer books, the time after the record date or closing of the share transfer
books within which the certification must be received by the Trust; and any
other provisions with respect to the procedure which the Trust Managers consider
necessary or desirable. On receipt of such certification, the person specified
in the certification shall be regarded as, for the purposes set forth in the
certification, the shareholder of record of the specified shares in place of the
shareholder who makes the certification.
(a) Notwithstanding any other provision contained in the
Declaration of Trust, as amended, or these Bylaws, Title 3, Subtitle 7 of the
Corporations and Associations Article of the Annotated Code of Maryland (, as
amended from time to time, or any successor statute) shall not be applicable to
the voting rights of any shares of stock of the Trust currently issued or issued
in the future and held by either a currently existing or future shareholder of
the Trust.
9. INSPECTORS. At any meeting of shareholders, the Chairman of the meeting may,
or upon the request of any shareholder shall, appoint one or more persons as
inspectors for such meeting. Such inspectors shall ascertain and report the
number of shares represented at the meeting based upon their determination of
the validity and effect of proxies, count all votes, report the results and
perform such other acts as are proper to conduct the election and voting with
impartiality and fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him/her or by a
majority of them, if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector(s) on the number of shares
represented at the meeting and the results of the voting shall be prima facie
evidence thereof.
10. REPORTS TO SHAREHOLDERS. Not later than 90 days after the close of each
fiscal year of the Trust, the Trust Managers shall deliver or cause to be
delivered a report of the business and operations of the Trust during such
fiscal year to the shareholders containing a balance sheet and a statement of
income and surplus of the Trust, accompanied by the certification of an
independent certified public accountant, and such further information as the
Trust Managers may determine is required pursuant to any law or regulation to
which the Trust is subject. A signed copy of the annual report and the
accountant's certificate shall be filed by the Trust Managers with the State
Department of Assessments and Taxation of Maryland, pursuant to Subtitle 4,
Title 8 of the Annotated Code of Maryland (or any successor statute), (the
"Maryland REIT Act") and with such other governmental agencies as may be
required by law and as the Trust Managers may deem appropriate.
11. NOMINATIONS AND SHAREHOLDER BUSINESS.
( ) Annual Meetings of Shareholders.
(0) Nominations of persons for election to the Board of Trust Managers and the
proposal of business to be considered by the shareholders may be made at an
annual meeting of shareholders (i) pursuant to the Trust's notice of meeting,
(ii) by or at the direction of the Trust Managers or (iii) by any shareholder of
the Trust who was a shareholder of record at the time of giving of notice
provided for in this Section 12(a), who is entitled to vote at the meeting and
who complied with the notice procedures set forth in this Section 12(a)(2) and
(3).
(1) For nominations or other business to be properly brought before an annual
meeting by a shareholder pursuant to clause (iii) of paragraph (a)(1) of this
Section 12, the shareholder must have given timely notice thereof in writing to
the Secretary of the Trust. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive offices of the Trust not
less than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or delayed by more
than 60 days from such anniversary date, notice by the shareholder to be timely
must be so delivered not earlier than the 90th day prior to such annual meeting
and not later than the close of business on the later of the 60th day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such shareholder's
notice shall set forth (i) as to each person whom the shareholder proposes to
nominate for election or reelection as a Trust Manager all information relating
to such person that is required to be disclosed in solicitations of proxies for
election of Trust Managers, or is otherwise required in each case pursuant to
Regulations 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a Trust Manager if elected); (ii)
as to any other business that the shareholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business of such shareholder and of the
beneficial owner, if any, on whose behalf the proposal is made, and (iii) as to
the shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, (x) the name and address of such
shareholder, as they appear on the Trust's books, and of such beneficial owner
and (y) the number of each class of shares of the Trust which are owned
beneficially and of record by such shareholder and such beneficial owner.
(2) Notwithstanding anything in the second sentence of paragraph (a)(2) of this
Section 12 to the contrary, in the event that the number of Trust Managers to be
elected to the Board of Trust Managers is increased and there is no public
announcement naming all of the nominees for Trust Manager or specifying the size
of the increased Board of Trust Managers made by the Trust at least 70 days
prior to the first anniversary of the preceding year's annual meeting, a
shareholder's notice required by this Section 12(a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Trust not later than the close of business on the tenth day
following the day on which such public announcement is first made by the Trust.
(a) Special Meetings of Shareholders. Only such business shall be conducted at a
special meeting of shareholders as shall have been brought before the meeting
pursuant to the Trust's notice of meeting. Nominations of persons for election
to the Board of Trust Managers may be made at a special meeting of shareholders
at which Trust Managers are to be elected pursuant to the Trust's notice of
meeting (i) by or at the direction of the Board of Trust Managers or (ii)
provided that the Board of Trust Managers has determined that Trust Managers
shall be elected at such special meeting, by any shareholder of the Trust who is
a shareholder of record at the time of giving of notice provided for in this
Section 12(b), who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 12(b). In the event the Trust calls
a special meeting of shareholders for the purpose of electing one or more Trust
Managers to the Board of Trust Managers, any such shareholder may nominate a
person or persons (as the case may be) for election to such position as
specified in the Trust's notice of meeting, if the shareholder's notice required
by paragraph (a)(2) of this Section 12 shall be delivered to the Secretary at
the principal executive offices of the Trust not earlier than the 90th day prior
to such special meeting and not later than the close of business on the later of
the 60th day prior to such special meeting or the tenth day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Trust Manager to the elected at such meeting.
(b) General.
(0) Only such persons who are nominated in accordance with the procedures set
forth in this Section 12 shall be eligible to serve as Trust Managers and only
such business shall be conducted at a meeting of shareholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section 12. The presiding officer of the meeting shall have the power and duty
to determine whether a nomination or any business proposed to be brought before
the meeting was made in accordance with the procedures set forth in this Section
12 and, if any proposed nomination or business is not in compliance with this
Section 12, to declare that such defective nomination or proposal be
disregarded.
(1) For purposes of this Section 12, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable news service or in a document publicly filed by the Trust with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(b) of the
Exchange Act.
(2) Notwithstanding the foregoing provisions of this Section 12, a shareholder
shall also comply with all applicable requirements of state law and of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 12. Nothing in this Section 12 shall be deemed
to affect any rights of shareholders to request inclusion of proposals in the
Trust's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
12. INFORMAL ACTION BY SHAREHOLDERS. Any action required or permitted to be
taken at a meeting of shareholders may be taken without a meeting if a consent
in writing, setting forth such action, is signed by each shareholder entitled to
vote on the matter and any other shareholder entitled to notice of a meeting of
shareholders (but not to vote thereat) has waived in writing any right to
dissent from such action, and such consent and waiver are filed with the minutes
of proceedings of the shareholders.
13. VOTING BY BALLOT. Voting on any question or in any election may be viva
voce unless the presiding officer shall order or any shareholder shall demand
that voting be by ballot.
TRUST MANAGERS
0. GENERAL POWERS; QUALIFICATIONS. The business and affairs of the Trust
shall be managed under the direction of its Board of Trust Managers. A Trust
Manager shall be an individual at least 21 years of age who is not under legal
disability.
1. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Trust Managers shall be
held immediately after and at the same place as the annual meeting of
shareholders, no notice other than this Bylaw being necessary. The Trust
Managers may provide, by resolution, the time and place, either within or
without the State of Maryland, for the holding of regular meetings of the Trust
Managers without other notice than such resolution.
2. SPECIAL MEETINGS. Special meetings of the Trust Managers may be called by or
at the request of the Chairman of the Board, the Chief Executive Officer or a
majority of the Trust Managers then in office. The person or persons authorized
to call special meetings of the Trust Managers may fix any place, either within
or without the State of Maryland, as the place for holding any special meeting
of the Trust Managers called by them.
3. NOTICE. Notice of any special meetings shall be given by
written notice delivered personally, telegraphed or mailed to each Trust Manager
at his business or residence address. Personally delivered or telegraphed
notices shall be given at least two days prior to the meeting. Notice by mail
shall be given at least five days prior to the meeting. If mailed, such notice
shall be deemed to be given when deposited in the United States mail properly
addressed, with postage thereon prepaid. If given by telegram, such notice shall
be deemed to be given when the telegram is delivered to the telegraph company.
Neither the business to be transacted at, nor the purpose of, any annual,
regular or special meeting of the Trust Managers need be stated in the notice,
unless specifically required by statute or these Bylaws.
4. QUORUM. A majority of the Trust Managers shall constitute a quorum for
transaction of business at any meeting of the Trust Managers, provided that, if
less than a majority of such Trust Managers are present at said meeting, a
majority of the Trust Managers present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to the
Declaration of Trust, as amended, or these Bylaws, the vote of a majority of a
particular group of Trust Managers is required for action, a quorum must also
include a majority of such group.
The Trust Managers present at a meeting which has been duly called and convened
may continue to transfer business until adjournment, notwithstanding the
withdrawal of enough Trust Managers to leave less than a quorum.
5. VOTING. The action of the majority of the Trust Managers present at a
meeting at which a quorum is present shall be the action of the Trust Managers,
unless the concurrence of a greater proportion is required for such action by
applicable statute.
6. TELEPHONE MEETINGS. Trust Managers may participate in a meeting by means
of a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means shall constitute presence in person at the meeting.
7. INFORMAL ACTION BY TRUST MANAGERS. Any action required or permitted to be
taken at any meeting of the Trust Managers may be taken without a meeting, if a
consent in writing to such action is signed by each Trust Manager and such
written consent is filed with the minutes of proceeding of the Trust Managers.
8. VACANCIES. If for any reason any or all the Trust Managers cease to be Trust
Managers, such event shall not terminate the Trust or affect these Bylaws or the
powers of the remaining Trust Managers hereunder (even if fewer than two Trust
Managers remain). Any vacancy (including a vacancy created by an increase in the
number of Trust Managers) shall be filled, at any regular meeting or at any
special meeting called for that purpose, by a majority of the Trust Managers.
Any individual so elected as Trust Manager shall hold office for the unexpired
term of the Trust Manager he is replacing.
9. COMPENSATION. Trust Managers shall not receive any stated salary for their
services as Trust Manager, but, by resolution of the Trust Managers, may receive
fixed sums per year and/or per meeting. Expenses of attendance, if any, may be
allowed to Trust Managers for attendance at each annual, regular or special
meeting of the Trust Managers or of any committee thereof; but nothing herein
contained shall be construed to preclude any Trust Manager from serving the
Trust in any other capacity and receiving compensation therefor.
10. REMOVAL OF TRUST MANAGERS. The shareholders may, at any time, remove any
Trust Manager in the manner provided in the Declaration of Trust, as amended.
11. LOSS OF DEPOSITS. No Trust Manager shall be liable for any loss which
may occur by reason of the failure of the bank, trust company, savings and loan
association, or other institution with whom moneys or shares have been
deposited.
12. SURETY BONDS. Unless required by law, no Trust Manager shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
13. RELIANCE. Each Trust Manager, officer, employee and agent of the Trust
shall, in the performance of his duties with respect to the Trust, be fully
justified and protected with regard to any act or failure to act in reliance in
good faith upon the books of account or other records of the Trust, upon an
opinion of counsel or upon reports made to the Trust by any of its officers or
employees or by the advisor, accountants, appraisers or other experts or
consultants selected by the Trust Managers or officers of the Trust, regardless
of whether such counsel or expert may also be a Trust Manager.
14. CERTAIN RIGHTS OF TRUST MANAGERS, OFFICERS, EMPLOYEES AND AGENTS. The Trust
Managers shall have no responsibility to devote their full time to the affairs
of the Trust. Any Trust Manager or officer, employee or agent of the Trust, in
his personal capacity or in a capacity as an affiliate, employee, or agent of
any other person, or otherwise, may have business interests and engage in
business activities similar to or in addition to those of or relating to the
Trust subject to the provisions of any Non-Competition Agreement or Employment
Agreement between any of them and the Trust and exclusively on the terms set
forth in either of those Agreements.
COMMITTEES
0. NUMBER, TENURE AND QUALIFICATIONS. The Trust Managers may appoint from
among its members an Executive Committee, an Audit Committee and other
committees, composed of two or more independent Trust Managers, to serve at the
pleasure of the Trust Managers.
1. POWERS. The Trust Managers may delegate to committees appointed under
Section 1 of this Article any of the powers of the Trust Managers, except as
prohibited by law.
2. MEETINGS. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint another Trust Manager to act in the place of such absent member.
3. TELEPHONE MEETINGS. Members of a committee of the Trust Managers may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
4. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Trust Managers may be
taken without a meeting, if a consent in writing to such action is signed by
each member of the committee and such written consent is filed with the minutes
of proceedings of such committee.
OFFICERS
0. GENERAL PROVISIONS. The officers of the Trust may consist of a Chairman of
the Board, a Vice Chairman of the Board, a Chief Executive Officer, a President,
one or more Vice Presidents, a Treasurer, one or more Assistant Treasurers, a
Secretary, and one or more Assistant Secretaries. In addition, the Trust
Managers may from time to time appoint such other officers with such powers and
duties as they shall deem necessary or desirable. The officers of the Trust
shall be elected annually by the Trust Managers at the first meeting of the
Trust Managers held after each annual meeting of shareholders. If the election
of officers shall not be held at such meeting, such election shall be held as
soon thereafter as may be convenient. Each officer shall hold office until his
successor is elected and qualifies or until his death, resignation or removal in
the manner hereinafter provided. Any two or more offices except President and
Vice President may be held by the same person. In their discretion, the Trust
Managers may leave unfilled any office except that of President and Secretary.
Election of an officer or agent shall not of itself create contract rights
between the Trust and such officer or agent.
1. REMOVAL AND RESIGNATION. Any officer or agent of the Trust may be removed by
the Trust Managers if in their judgment the best interests of the Trust would be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Any officer of the Trust may resign at
any time by giving written notice of his resignation to the Trust Managers, the
Chairman of the Board, the President or the Secretary. Any resignation shall
take effect at any time subsequent to the time specified therein or, if the time
when it shall become effective is not specified therein, immediately upon its
receipt. The acceptance of a resignation shall not be necessary to make it
effective unless otherwise stated in the resignation.
2. VACANCIES. A vacancy in any office may be filled by the Trust Manager for the
balance of the term.
3. CHIEF EXECUTIVE OFFICER. The Trust Manager may designate a Chief Executive
Officer from among the elected officers. The Chief Executive Officer shall have
responsibility for implementation of the policies of the Trust, as determined by
the Trust Managers, and for the administration of the business affairs of the
Trust. In the absence of both the Chairman and the Vice Chairman of the Board,
the Chief Executive Officer shall preside over the meetings of the Trust
Managers and of the shareholders at which he shall be present.
4. CHIEF OPERATING OFFICER. The Trust Managers may designate a Chief
Operating Officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trust Managers or the Chief
Executive Officer.
5. CHIEF FINANCIAL OFFICER. The Trust Managers may designate
a Chief Financial Officer from among the elected officers. Said officer will
have the responsibilities and duties as set forth by the Trust Managers or the
Chief Executive Officer.
6. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside over the meetings of the Trust Managers and of the shareholders at which
he shall be present and shall in general oversee all of the business and affairs
of the Trust. In the absence of the Chairman of the Board, the Vice Chairman of
the Board shall preside at such meetings at which he shall be present. The
Chairman and the Vice Chairman of the Board may execute any deed, mortgage,
bond, contract or other instrument, except in cases where the execution thereof
shall be expressly delegated by the Trust Managers or by those Bylaws to some
other officer or agent of the Trust or shall be required by law to be otherwise
executed. The Chairman of the Board and the Vice Chairman of the Board shall
perform such other duties as may be assigned to him or them by the Trust
Managers.
7. PRESIDENT. In the absence of the Chairman, the Vice Chairman of the Board and
the Chief Executive Officer, the President shall preside over the meetings of
the Trust Managers and the shareholders at which he shall be present. In the
absence of a designation of a Chief Executive Officer by the Trust Managers, the
President shall be the Chief Executive Officer and shall be ex officio a member
of all committees that may, from time to time, be constituted by the Trust
Managers. The President may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Trust Managers or by these Bylaws to some other officer or
agent of the Trust or shall be required by law to be otherwise executed; and in
general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Trust Managers from time to time.
8. VICE PRESIDENTS. In the absence of the President or in the event of a vacancy
in such office, the Vice President (or in the event there be more than one Vice
President, election or, in the absence of any designation, then in the order of
their election) shall perform the duties of the President and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President; and shall perform such other duties as from time to time may be
assigned to him by the President or by the Trust Managers. The Trust Managers
may designate one or more Vice Presidents as executive Vice President or as Vice
President for particular areas of responsibility.
9. SECRETARY. The Secretary shall (a) keep the minutes of the proceedings of the
shareholders, the Trust Managers and committees of the Trust Managers in one or
more books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the trust records and of the seal of the Trust; (d) keep a register
of the post office address of each shareholder which shall be furnished to the
Secretary by such shareholder; (e) have general charge of the share transfer
books of the Trust; and (f) in general perform such other duties as from time to
time may be assigned to him by the Chief Executive Officer, the President or the
Trust Managers.
10. TREASURER. The Treasurer shall have the custody of the funds and securities
of the Trust and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Trust and shall deposit all moneys and
other valuable effects in the name and to the credit of the Trust in such
depositories as may be designated by the Trust Managers.
He shall disburse the funds of the Trust as may be ordered by the Trust
Managers, taking proper vouchers for such disbursements, and shall render to the
President and Trust Managers, at the regular meetings of the Trust Managers or
whenever they may require it, an account of all his transactions as Treasurer
and of the financial condition of the Trust.
If required by the Trust Managers, he shall give the Trust a bond in such sum
and with such surety or sureties as shall be satisfactory to the Trust Managers
for the faithful performance of the duties of his office and for the restoration
to the Trust, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, moneys and other property of whatever
kind in his possession or under his control belonging to the Trust.
11. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or Treasurer, respectively,
or by the President or the Trust Managers. The Assistant Treasurers shall, if
required by the Trust Managers, give bonds for the faithful performance of their
duties in such sums and with such surety or sureties as shall be satisfactory to
the Trust Managers.
12. SALARIES. The salaries of the officers shall be fixed from time to time
by the Trust Managers and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a Trust Manager.
CONTRACTS, LOANS CHECKS AND DEPOSITS
0. CONTRACTS. The Trust Manager may authorize any officer or agent to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the Trust and such authority may be general or confined to specific
instances. Any agreement, deed, mortgage, lease or other document executed by
one or more of the Trust Managers or by an authorized person shall be valid and
binding upon the Trust Managers and upon the Trust when authorized or ratified
by action of the Trust Managers.
1. CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of
money, notes or other evidence of indebtedness issued in the name of the Trust
shall be signed by such officer or officers, agent or agents of the Trust in
such manner as shall from time to time be determined by the Trust Managers.
2. DEPOSITS. All funds of the Trust not otherwise employed shall be
deposited from time to time to the credit of the Trust in such banks, trust
companies or other depositories as the Trust Managers may designate.
SHARES
0. CERTIFICATES. Each shareholder shall be entitled to a certificate or
certificates which shall represent and certify the number of shares of each
class of beneficial interests held by him in the Trust. Each certificate shall
be signed by the Chief Executive Officer, the President or a Vice President and
countersigned by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer and may be sealed with the seal, if any, of the Trust. The
signatures may be either manual or facsimile. Certificates shall be
consecutively numbered; and if the Trust shall, from time to time, issue several
classes of shares, each class may have its own number series. A certificate is
valid and may be issued whether or not an officer who signed it is still an
officer when it is issued. Each certificate representing shares which are
restricted as to their transferability or voting powers, which are preferred or
limited as to their dividends or as to their allocable portion of the assets
upon liquidation or which are redeemable at the option of the Trust, shall have
a statement of such restriction, limitation, preference or redemption provision,
or a summary thereof, plainly stated on the certificate. In lieu of such
statement or summary, the Trust may set forth upon the face or back of the
certificate a statement that the Trust will furnish to any shareholder, upon
request and without charge, a full statement of such information.
1. TRANSFERS. Certificates shall be treated as negotiable and title thereto and
to the shares they represent shall be transferred by delivery thereof to the
same extent as those of a Maryland stock corporation. Upon surrender to the
Trust or the transfer agent of the Trust of a share certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Trust shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
2. LOST CERTIFICATE. The Trust Managers (or any officer or
officers designated by them) may direct a new certificate to be issued in place
of any certificate previously issued by the Trust alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, the Trust Managers (or any officer or officers
designated by them) may, in his or their discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or his legal representative to advertise the same in such manner as
he or they shall require and/or to give bond, with sufficient surety, to the
Trust to indemnify it against any loss or claim which may arise as a result of
the issuance of a new certificate.
3. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Trust Managers may set, in advance, a record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
determining shareholder entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
shareholders for any other proper purposes. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days and, in the case of a meeting of shareholders not less
than ten days, before the date on which the meeting or particular action
requiring such determination of shareholders is to be held or taken.
In lieu of fixing a record date, the Trust Managers may
provide that the share transfer books shall be closed for a stated period but
not longer than 20 days. If the share transfer books are closed for the purpose
of determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the share transfer books are not closed for the
determination of shareholders, (a) the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day on which the notice of meeting is mailed
or the 30th day before the meeting, whichever is the closer date to the meeting;
and (b) the record date for the determination of shareholders entitled to
receive payment of a dividend or an allotment of any other rights shall be the
close of business on the day on which the resolution of the Trust Managers,
declaring the dividend or allotment for rights, is adopted.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except where the determination has been made
through the closing of the transfer books and the stated period of closing has
expired.
4. STOCK LEDGER. The Trust shall maintain at its principal office or at the
office of its counsel, accountants or transfer agent, an original or duplicate
share ledger containing the name and address of each shareholder and the number
of shares of each class held by such shareholder. 5. FRACTIONAL SHARES; ISSUANCE
OF UNITS. The Trust Managers may issue fractional shares or provide for the
issuance of scrip, all on such terms and under such conditions as they may
determine. Notwithstanding any other provision of the Declaration of Trust, as
amended, or these Bylaws, the Trust Managers may issue units consisting of
different securities of the Trust. Any security issued in a unit shall have the
same characteristics as any identical securities issued by the Trust, except
that the Trust Managers may provide that for a specified period securities of
the Trust issued in such unit may be transferred on the books of the Trust only
in such unit.
ACCOUNTING YEAR
The Trust Managers shall have the power, from time to time,
to fix the fiscal year of the trust by a duly adopted resolution.
DIVIDENDS
0. DECLARATION. Dividends upon the shares of the Trust may be declared by
the Trust Managers, subject to the provisions of law and the Declaration of
Trust, as amended. Dividends may be paid in cash, property of shares of the
Trust, subject to the provisions of law and the Declaration of Trust, as
amended.
1. CONTINGENCIES. Before payment of any dividends there may be set aside out of
any funds of the Trust available for dividends such sum or sums as the Trust
Managers may from time to time, in their absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends, for repairing or
maintaining any property of the Trust or for such other purpose as the Trust
Managers shall determine to be in the best interest of the Trust, and the Trust
Managers may modify or abolish any such reserve in the manner in which it was
created.
PROHIBITED INVESTMENTS AND ACTIVITIES
Notwithstanding anything to the contrary in the Declaration
of Trust, as amended, the Trust shall not make any interests of the Trust, and
will not, without the approval of a majority of the disinterested Trust
Managers, (i) acquire from or sell to any Trust Manager, officer or employee of
the Trust, any corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise in which a Trust Manager, officer or employee of the
Trust owns more than a one percent interest or any affiliate of any of the
foregoing, any of the assets or other property of the Trust, except for the
acquisition, directly or indirectly of certain properties and partnership
interests in connection with the initial public offering of shares by the Trust,
which properties and partnership interests shall be described in the prospectus
relating to such initial public offering, (ii) make any loan to or borrow from
any of the foregoing persons or (iii) engage in any other transaction with any
of the foregoing persons. Each such transaction will be in all respects on such
terms as are, as the time of the transaction and under the circumstances then
prevailing, fair and reasonable to the Trust.
SEAL
0. SEAL. The Trust Managers may authorize the adoption of a seal by the
Trust. The seal shall have inscribed thereon the name of the Trust and the year
of its organization. The Trust Managers may authorize one or more duplicate
seals and provide for the custody thereof.
1. AFFIXING SEAL. Whenever the Trust is required to place its seal to a
document, it shall be sufficient to meet the requirements of any law, rule or
regulation relating to a seal to place the word "(SEAL)" adjacent to the
signature of the person authorized to execute the document on behalf of the
Trust.
INDEMNIFICATION AND ADVANCES FOR EXPENSES
To the maximum extent permitted by Maryland law in effect
from time to time, the Trust, without requiring a preliminary determination of
the ultimate entitlement to indemnification, shall indemnify (a) any Trust
Managers, officer or shareholder or any former Trust Managers, officer or
shareholder (including among the foregoing, for all purposes of this Article XII
and without limitation, any individual who, while a Trust Manager, officer or
shareholder at the express request of the Trust, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a director, officer, shareholder, partner or trust manager
of such corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise) who has been successful, on the merits or otherwise, in the
defense of a proceeding to which he was made a party by reason of service in
proceeding to which he was made a party by reason of service in connection with
the proceeding, (b) any Trust Manager or officer or any former Trust Manager or
officer against any claim or liability to which he may become subject by reason
of such status unless it is established that (i) his act or omission was
material to the matter giving rise to the proceeding and was committed in bad
faith or was the result of active and deliberate dishonesty, (ii) he actually
received an improper personal benefit in money, property or services or (iii) in
the case of a criminal proceeding, he had reasonable cause to believe that his
act or omission was unlawful and (c) each shareholder or former shareholder
against any claim or liability to which he may become subject by reason of such
status. In addition, the Trust shall pay or reimburse, in advance of final
disposition of a proceeding, reasonable expenses incurred by a Trust Manager,
officer or shareholder or former Trust Manager, officer or shareholder made a
party to a proceeding by reason of such status, provided that, in the case of a
Trust Manager or officer, the Trust shall have received (i) a written
affirmation by the Trust Manager or officer of his good faith belief that he has
met the applicable standard of conduct necessary for indemnification by the
Trust as authorized by these Bylaws and (ii) a written undertaking by or on his
behalf to repay the amount paid or reimbursed by the Trust if it shall
ultimately be determined that the applicable standard of conduct was not met.
The Trust may, with the approval of its Trust Managers, provide such
indemnification and payment or reimbursement of expenses to any Trust Manager,
officer or shareholder or any former Trust Manager, officer or shareholder who
served a predecessor of the Trust. Neither the amendment nor repeal of this
Article, nor the adoption or amendment of any other provision of the Declaration
of Trust, as amended, or these Bylaws inconsistent with this Article, shall
apply to or affect in any respect the applicability of this Article with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption.
Any indemnification or payment or reimbursement of the
expenses permitted by these Bylaws shall be furnished in accordance with the
procedures provided for indemnification or payment or reimbursement of expenses,
as the case may be, under Section 2-418 of the Maryland General Corporation Law
(the "MGCL") for directors of Maryland corporations. The Trust may provide the
Trust extent permitted by the MGCL, as in effect from time to time, for
directors of Maryland corporations. In the event of a conflict between these
Bylaws and the terms of any Indemnification Agreement between the Trust and any
Trust Manager of Executive Officer of the Trust, the terms of the
Indemnification Agreement shall prevail.
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the
Declaration of Trust, as amended, or Bylaws or pursuant to or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at nor the purpose of any meeting need be set forth in the waiver of notice,
unless specifically required by statute. The attendance of any person at any
meeting shall constitute a waiver of notice of such meeting, except where such
person attends a meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting is not lawfully called or
convened.
AMENDMENT OF BYLAWS
The Trust Manager shall have the exclusive power to adopt,
alter or repeal any provision of these Bylaws and to make new Bylaws.
Notwithstanding the preceding sentence, Article II, Section 9(c) of these Bylaws
may be amended or repealed only upon the affirmative vote of a majority of all
votes entitled to be voted by the shareholders of the Trust.
*********
Adopted by the Board of Trust Managers
of Grove Real Estate Asset Trust on March
10, 1997.
SECURITIES PURCHASE AGREEMENT
dated as of February 20, 1997
between
GROVE REAL ESTATE ASSET TRUST
and
MORGAN STANLEY GROUP INC.
<PAGE>
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement"), dated as of
February 20, 1997, between Grove Real Estate Asset Trust, a Maryland real estate
investment trust ("GREAT") and Morgan Stanley Group Inc., a corporation
organized and existing under the laws of the State of Delaware ("Purchaser").
WHEREAS, GREAT has distributed to certain prospective investors
(including Purchaser) who are Accredited Investors (as defined), a Private
Placement Memorandum, dated December 5, 1996 (together with all appendices
thereto, the "PPM"), in connection with the offering by GREAT to such investors
of up to 3,333,333 of GREAT's common shares of beneficial interest, par value
$0.01 per share (each a "Common Share"), at a price of $9.00 per Common Share
(the "Purchase Price Per Share");
WHEREAS, following a complete and thorough review of the PPM, Purchaser
desires to purchase from GREAT, and GREAT desires to sell to Purchaser, 777,778
Common Shares (the "Purchased Common Shares"), upon the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
Article I
Definitions
1.1 Definitions. As used in this Agreement, the following terms
have the meaning set forth below:
"Accredited Investor" means, as defined under Regulation D promulgated
under the Act, any Person who (i) is able to bear the economic risk of the
acquisition of a security and can afford to sustain a total loss with respect to
such investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment,
and therefore has the capacity to protect its own interest in connection with
the acquisition of a security and/or (ii) comes within any of the following
categories: (1) any bank as defined in Section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity;
any broker or dealer registered pursuant to Section 15 of the Exchange Act; any
insurance company as defined in Section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that act; any Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its subdivisions for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; any employee
benefit plan within the meaning of ERISA, if the investment decision is made by
a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank,
savings and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are Accredited Investors; (2) any private business development
company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940;
(3) any organization described in Section 501(c)(3) of the Code, corporation,
Massachusetts or similar business trust or partnership, not formed for the
specific purpose of acquiring the securities offered, with total assets in
excess of $5,000,000; (4) any trust manager or executive officer of GREAT; (5)
any natural person whose individual net worth, or joint net worth with that
person's spouse, at the time of that person's purchase exceeds $1,000,000; (6)
any natural person who had an individual income in excess of $200,000 in each of
the two most recent years or joint income with that person's spouse in excess of
$300,000 in each of those years, and who has a reasonable expectation of
reaching the same income level in the current year; (7) any trust with total
assets in excess of $5,000,000 not formed for the specific purpose of acquiring
the securities offered, whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of Regulation D; and (8) any entity in which all
of the equity owners are Accredited Investors.
As used in this definition, the term "net worth" means the excess of
the total assets over total liabilities. In calculating "net worth," the value
of a principal residence must be valued at cost or at a written appraised value
used by an institutional lender to make a loan secured by the property. In
determining income, an investor should add to such investor's adjusted gross
income any amounts attributable to tax exempt income received, losses claimed as
a limited partner in any limited partnership, deductions claimed for depletion
contributions to an "IRA" or "KEOGH" retirement plan, alimony payments and any
amount by which income from long-term capital gains has been reduced in arriving
at adjusted gross income.
"Act" means the Securities Act of 1933, as amended, or any successor
statute.
"Affiliate" of any Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"AMEX" means the American Stock Exchange, Inc. (Emerging Company
Marketplace).
"best efforts" , as used in this Agreement, shall mean commercially
reasonable efforts; provided, that in no event shall "best efforts" mean efforts
which require the performing party (i) to do any act that is unreasonable under
the circumstances, to make any capital contribution or to expend any funds other
than reasonable out-of-pocket expenses incurred in satisfying its obligations
under this Agreement, including, but not limited to, the fees, expenses and
disbursements of its accountants, counsel and other professionals, or (ii) in
the case of GREAT, to modify the terms of the Consolidation Transactions.
"Charter" means the Second Amended and Restated Declaration of Trust
of GREAT.
"Charter Amendments" means the amendments proposed to be effected to
the Charter, as set forth in the Proxy Statement.
"Charter Documents" means the Charter and the Bylaws of GREAT, as each
may be amended from time to time.
"Closing" has the meaning ascribed to such term in Section 2.2 of this
Agreement.
"Closing Date" has the meaning ascribed to such term in Section 2.2 of
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder, or any successor statute.
"Common Shares" means the common shares of beneficial interest, $0.01
par value per share, of GREAT.
"Common Units" means common units representing ownership interests in
the Operating Partnership.
"Consolidation Transactions" means the consolidation transactions,
including the Private Placement, proposed to be entered into by GREAT, as
described in the Proxy Statement.
"Current Proposals" has the meaning ascribed to such term in Section
5.1(b) of this Agreement.
"Damages" of any Person means any loss, liability (however defined or
characterized), diminution in value, damage or expense (including reasonable
costs of investigation and prosecution of litigation and attorneys' fees)
incurred by such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Certification" has the meaning ascribed to such term in Section
5.3(a) of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute.
"Exchange Offer" means the Offer to Exchange, dated December 2, 1996,
by the Operating Partnership to the limited partners of certain limited
partnerships, pursuant to which certain such limited partners can exchange the
interests held by them in such limited partnerships for Common Units or, under
certain circumstances, cash, as such Offer to Exchange may be supplemented,
amended or modified from time to time.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States.
"GREAT" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"Knowledge" of GREAT means the actual knowledge of any of its officers
(other than assistant officers whose duties are principally ministerial) after
due inquiry to satisfy themselves that there is a reasonable basis for belief in
the accuracy of any of the representations and warranties made by GREAT, but
shall not be construed to require independent review or verification by them of
underlying facts.
"Material Adverse Effect" means any change in or effect on the business
of GREAT or its Subsidiaries that is materially adverse to the business, assets,
liabilities, results of operations, financial condition or prospects of GREAT
and its Subsidiaries taken as a whole, or materially impairs the ability of
GREAT to consummate the transactions contemplated by this Agreement.
"Operating Partnership" means Grove Operating, L.P., a Delaware limited
partnership and the operating partnership of GREAT.
"Permitted Transferee" means (i) any Affiliate of Purchaser and (ii)
any investor party to the Morgan Stanley Real Estate Special Situations Fund
Separate Accounts Agreement that has granted Purchaser discretionary authority
(with respect to voting and investment) over the funds invested pursuant
thereto; provided that such transferee executes a counterpart of this Agreement
under which it agrees to be bound by all the terms and conditions hereof,
including, without limitation, making the representations and warranties set
forth in Article IV.
"Person" means any individual, a partnership, a joint venture, a
corporation, a trust, limited liability company, an unincorporated organization
or a government or any department or agency thereof.
"PPM" has the meaning ascribed to such term in the first Whereas clause
of this Agreement.
"Private Placement" means the private placement of up to 3,333,333
Common Shares by GREAT pursuant to and as more fully set forth in the PPM.
"Proxy Statement" has the meaning ascribed to such term in Section
5.1(b) of this Agreement.
"Purchase Price" means $7,000,000, which is equal to the product of
$9.00 (the Purchase Price Per Share) and 777,778 (the number of Common Shares
which constitutes the Purchased Common Shares).
"Purchase Price Per Share" has the meaning ascribed to such term in the
first Whereas clause of this Agreement.
"Purchased Common Shares" has the meaning ascribed to such term in the
second Whereas clause of this Agreement.
"Qualified Public Offering" means an underwritten public offering of
Common Shares yielding gross proceeds (including upon exercise of any
over-allotment option) of at least $40 million and the listing for trading of
such Common Shares on the AMEX or similar or successor national stock exchange.
"Receipt" means the receipt to be executed and delivered by each of
Purchaser and GREAT at Closing, in the form attached as Exhibit D hereto.
"Redemption Rights" means the right, beginning one year after the
issuance of Common Units to limited partners of the limited partnerships
participating in the Exchange Offer, of certain limited partners to require the
Operating Partnership to redeem their Common Units for cash equal to the fair
market value of an equivalent number of Common Shares at the time of redemption
or, at the Operating Partnership's option, it can exchange such Common Units for
Common Shares on a one-for-one basis (subject to adjustment).
"Registration Rights Agreement" means the Registration Rights
Agreement, to be entered into on or prior to the Closing, among GREAT, Purchaser
and certain other purchasers of the Common Shares offered in the Private
Placement, substantially in the form attached hereto as Exhibit E.
"SEC" means the United States Securities and Exchange Commission.
"SEC Filings" has the meaning ascribed to such term in Section 3.4 of
this Agreement.
"Special Meeting" shall have the meaning ascribed to such term in
Section 5.1(b) of this Agreement.
"Subsidiaries" means, collectively, GREAT's direct or indirect
majority-owned subsidiaries, including, without limitation, the Operating
Partnership.
Article II.
Purchase of Common Shares
2.1 Purchase of Common Shares. At the Closing, GREAT shall issue and
sell to Purchaser, and Purchaser shall purchase from GREAT, the Purchased Common
Shares. At the Closing, Purchaser shall pay the Purchase Price for the Purchased
Common Shares by wire transfer of immediately available funds or by certified or
official bank check payable in same day funds to the order of GREAT. Upon
receipt of the Purchase Price, GREAT shall deliver to Purchaser certificates
representing the number of Common Shares constituting the Purchased Common
Shares, registered in such name or names and such denominations and delivered at
such address or addresses as Purchaser shall request.
2.2 Closing. The closing of the issuance and sale of the Purchased
Common Shares hereunder (the "Closing") shall take place at the offices of Kaye,
Scholer, Fierman, Hays & Handler, LLP located at 425 Park Avenue, New York, New
York 10022, and will occur substantially simultaneously with the closing of the
other purchases and sales of Common Shares in the Private Placement. GREAT will
notify Purchaser of the date of the Closing (the "Closing Date") not less than
three business days prior to the Closing Date.
2.3 Deliveries.
(a) Purchaser's Deliveries. At the Closing, in consideration of Purchaser's
receipt from GREAT of the Purchased Common Shares, Purchaser shall deliver to
GREAT the following:
(i) the Purchase Price in accordance with Section 2.1 hereof;
(ii) the certificate referred to in Section 7.3 hereof duly executed on behalf
ofPurchaser;
(iii) the Registration Rights Agreement, duly executed on behalf of
Purchaser; and
(iv) the Receipt, duly executed on behalf of Purchaser.
(b) GREAT's Deliveries. At the Closing, in consideration of GREAT's receipt
of the Purchase Price from Purchaser, GREAT shall deliver to Purchaser the
following:
(i) certificates representing the Purchased Shares in accordance with
Section 2.1 hereof.
(ii) the certificate referred to in Section 6.3 hereof, duly executed by an
authorized officer on behalf of GREAT;
(iii) the Registration Rights Agreement, duly executed by an authorized
officer on behalf of GREAT;
(iv) the Receipt, duly executed by an authorized officer on behalf of GREAT;
(v) A comfort letter of Ernst & Young, LLP in the form attached as Exhibit F
hereto;
(vi) a Secretary's certificate of GREAT certifying as to the Charter
Documents and the resolutions of the Board of Trust Managers approving the
transactions contemplated hereby and by the Proxy Statement; and
(vii) A Certificate of Good Standing of GREAT issued by the Maryland State
Department of Assessments and Taxation.
2.4 Legends. In addition to the legend concerning inter alia, Excess
Shares, set forth in the Charter, the certificates evidencing the Purchased
Common Shares shall bear the following legends:
(a) "The transfer of the securities represented by this
certificate is subject to conditions specified in section 5.3(d) of a Securities
Purchase Agreement dated February __, 1997, as such agreement may be amended
from time to time, and no transfer of such securities shall be valid or
effective until such conditions have been fulfilled with respect to such
transfer. A copy of such Securities Purchase Agreement will be furnished by the
company to the holder of this certificate upon written request and without
charge."
(b) "These securities have not been registered under the
Securities Act of 1933, as amended (the "Act") and may not be offered sold or
otherwise transferred except pursuant to an effective registration statement
under the Act or an exemption from the registration requirements thereof. These
securities have not been registered under the securities laws of any state."
Article III
Representations and Warranties of GREAT
GREAT hereby represents and warrants to Purchaser that, as of the date
of this Agreement and as of the Closing Date:
3.1 Organization, Good Standing and Qualification. GREAT has been duly
organized and is a validly existing trust in good standing under the laws of
Maryland with all requisite power and authority to carry on its business as
presently conducted. GREAT is duly qualified to transact business and is in good
standing in each jurisdiction in which it is required to be qualified except
where the failure to be so qualified or in good standing would not, in the
aggregate, have a Material Adverse Effect.
3.2 Capitalization. (a) As of the date hereof, the authorized capital
stock of GREAT consists of 10,000,000 Common Shares, 525,000 of which are issued
and outstanding as of the date hereof, and 4,000,000 preferred shares of
beneficial interest, $0.01 par value per share, none of which are issued and
outstanding as of the date hereof. No other shares of capital stock of GREAT are
outstanding or held as treasury shares. There are no outstanding options,
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from GREAT of any shares of its capital stock or
securities or obligations of any kind convertible into any shares of its capital
stock except for (i) options to purchase an aggregate of 100,000 Common Shares
held by certain executive officers and trust managers of GREAT and issued under
GREAT's 1994 Share Option Plan, (ii) as contemplated by the Private Placement
(including pursuant to this Agreement and pursuant to other Securities Purchase
Agreements between GREAT on the one hand, and other purchasers of Common Shares
therein on the other hand), (iii) the Common Shares issuable to certain Persons
participating in the Exchange Offer at the option of the Operating Partnership
upon the exercise by such Persons of Redemption Rights in all material respects
on the terms described in the Proxy Statement and (iv) warrants to purchase
40,000 Common Shares granted to Barclay Investments, Inc. in connection with
GREAT's initial public offering.
(b) The Capitalization Table set forth in the section of
Appendix I to the PPM entitled "SUMMARY -- Capitalization" sets forth the
currently anticipated capitalization of GREAT at the Closing, giving effect to
the consummation of the Consolidation Transactions, including the Private
Placement. The capitalization set forth on such table has been calculated taking
into account various assumptions regarding the Consolidation Transactions, as
described in further detail in the above-referenced section of Appendix I to the
PPM, and accordingly, the actual capitalization of GREAT following the
consummation of the Consolidation Transactions may differ.
3.3 Authorization. GREAT has full power and corporate authority to
execute and deliver this Agreement and the Registration Rights Agreement
(subject to shareholder approval as contemplated by the Proxy Statement) and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Registration Rights Agreement and the other
agreements and instruments contemplated hereby and thereby, and the consummation
of the transactions contemplated by this Agreement and the Registration Rights
Agreement, have been authorized by the Board of Trust Managers of GREAT and no
other proceedings (except for a meeting of the shareholders of GREAT for the
purpose of obtaining shareholder approval as contemplated by the Proxy
Statement) on the part of GREAT are necessary to authorize this Agreement and
the Registration Rights Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed by GREAT and,
subject as aforesaid, constitutes, and upon execution and delivery thereof the
Registration Rights Agreement will constitute a valid and binding agreement of
GREAT enforceable in accordance with its terms except as limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
3.4 SEC Filings. Purchaser has been provided (or will, upon Purchaser's
written request, be provided) true and correct copies of GREAT's annual reports
on Form 10-KSB for the fiscal years ended December 31, 1995 and 1994, GREAT's
quarterly reports on Form 10-QSB for the fiscal quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996 and the Proxy Statement (collectively, the
"SEC Filings"). As of their respective dates, the SEC Filings (including all
exhibits and schedules thereto and documents incorporated by reference therein)
complied in all material respects with the laws, regulations and forms governing
the SEC Filings; and none of the SEC Filings contained, as of the date it was
filed with the SEC, any untrue statement of any material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
3.5 Valid Issuance of Shares. The Purchased Common Shares, when issued,
sold and delivered to Purchaser in accordance with the terms hereof for the
consideration expressed herein, will be duly authorized and validly issued,
fully paid and nonassessable and, based in part on the representations of
Purchaser in this Agreement, will be issued in compliance with all applicable
federal and state securities laws.
3.6 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement or the Registration Rights Agreement by GREAT, its
consummation of the transactions contemplated hereby or thereby nor its
compliance with any of the provisions hereof or thereof will (a) conflict with
or result in the breach of any provision of the Charter Documents; (b) require
any consent, approval, order or authorization of, or registration,
qualification, designation or filing with or notification to, any governmental
or regulatory authority, the failure of which to obtain would have a Material
Adverse Effect, except for (i) the filing with the SEC of a Form D and such
other documents as may be required in connection with this Agreement and the
other Common Shares being issued in the Private Placement, (ii) the filing of
such documents with, and the obtaining of orders from, the various state
securities authorities that are required in connection with the transactions
contemplated by this agreement and (iii) the filing of an additional listing
application and the listing of the Purchased Common Shares to be issued pursuant
to this Agreement and the other Common Shares to be issued in the Private
Placement, as contemplated by Section 5.1(c); or (c) conflict with or result in
any breach or default (with or without notice or lapse of time or both) or
violate any loan agreement, note, mortgage, indenture, lease or other
obligation, instrument, order, injunction, decree, statute, rule or regulation
applicable to GREAT or its Subsidiaries or any of their respective properties or
assets where such conflicts, breaches, defaults or violations would, in the
aggregate, have a Material Adverse Effect.
3.7 REIT Status. (a) To GREAT's Knowledge, no person or entity which
would be treated as an "individual" for purposes of Section 542(a)(2) of the
Code (as modified by the by Section 856(h) of the Code) owns or would be
considered to own (taking into account the ownership attribution rules under
Section 544 of the Code, as modified by Section 856(h) of the Code) in excess of
5.0% of the value of the outstanding equity interest in GREAT. The Board of
Trust Managers of GREAT has not exempted any Person from the Ownership Limit (as
defined in the Charter) or the Grove Affiliate Investor Limit (as defined in the
Charter) or otherwise waived any of the provisions of Section 7 of the Charter.
The Ownership Limit and the Grove Affiliate Investor Limit (each as defined in
the Charter) have not been modified pursuant to Section 7.9 or 7.10 of the
Charter or otherwise; provided, that such limits are expected to be modified
pursuant to the Charter Amendments, and, if the Charter Amendments are effected,
GREAT's Board of Trust Managers will be permitted to exempt from such limits one
or more Persons in connection with a purchase of Common Shares by such Persons
in the Private Placement.
(b) GREAT (i) has been in its federal income tax returns for
the tax years ended December 31, 1994 and 1995 taxed as a real estate investment
trust within the meaning of Section 856 of the Code (a "REIT"), and intends in
its federal income tax returns for the tax year ended December 31, 1996 to be so
taxed and has complied with all applicable provisions of the Code relating to a
REIT for 1994, 1995 and 1996, (ii) has operated and currently intends to
continue to operate in such a manner so as to qualify as a REIT, (iii) has not
taken or omitted to take any action which would reasonably be expected to result
in a challenge to its status as a REIT, and (iv) to GREAT's Knowledge, and
assuming the accuracy of Purchaser's representations in Article IV hereof, will
not be rendered unable to qualify as a REIT for federal income tax purposes as a
consequence of the transactions contemplated hereby.
3.8 No Brokers' or Other Fees. No broker, finder or investment banker
is entitled to any brokerage, finder or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by GREAT for which Purchaser shall be liable or obligated.
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11
Representations and Warranties of Purchaser
Purchaser hereby represents and warrants to GREAT that, as of
the date of this Agreement and as of the Closing Date:
.0 Organization and Authorization. Purchaser is an entity of
the type identified in the introductory paragraph of this Agreement, duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation. The execution and delivery of this Agreement and the
other agreements and instruments contemplated hereby have been, and the
consummation of the transactions contemplated hereby and thereby have been, duly
and validly authorized by all necessary action of Purchaser, and no other
proceedings on the part of Purchaser are or will be necessary to consummate the
transactions contemplated hereby. Purchaser has the right, power, legal capacity
and authority to enter into, deliver and perform this Agreement and any other
agreements and instruments contemplated hereby and to own the Purchased Common
Shares, and this Agreement and all such other agreements are, or upon the
execution thereof will be, valid and legally binding upon Purchaser and
enforceable in accordance with their respective terms except as limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
.1 Consents and Approvals; No Violation. None of the execution
and delivery of this Agreement by Purchaser, its consummation of the
transactions contemplated hereby or its compliance with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
statutes governing the organization and operation of Purchaser or the
organizational documents of Purchaser, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except for any filings referred to in Section 3.6,
filings by Purchaser under Section 13(d) or 16(a) of the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby, and except for such other consents as are obtained or waived prior to
the Closing Date, or (iii) conflict with or result in any breach or default
(with or without notice or lapse of time or both) or violate any loan agreement,
note, mortgage, indenture, lease or other obligation, instrument, order, writ,
injunction, decree, statute, rule or regulation applicable to Purchaser or any
of its properties or assets.
.2 ERISA Certification. Purchaser has read and comprehends the ERISA
Certification referred to in Section 5.3(a) and attached hereto as Exhibit A
(the "ERISA Certification"), has completed and executed the ERISA Certification
and has delivered the same to GREAT simultaneously with the execution of this
Agreement.
.3 Information Supplied. None of the written information
supplied by Purchaser in connection with the Proxy Statement will, at the date
mailed to shareholders and at the time of the Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
.4 No Brokers' or Other Fees. No broker, finder or investment
banker is entitled to any brokerage, finder or other fee or commission in
connection with the transaction contemplated by this Agreement based upon
arrangements made by or on behalf of Purchaser or its Affiliates for which GREAT
shall be liable or obligated.
.5 Investment Intent. Purchaser has read and comprehends the
definition of "Accredited Investor" set forth in Section 1.1 hereof, and is an
"Accredited Investor." Purchaser is acquiring the Purchased Common Shares for
the purpose of investment only and not with a view to or for sale in connection
with any distribution thereof (other than in a transaction which is either
registered under the Act or which is exempt from such registration). Purchaser
hereby acknowledges that (i) copies of the SEC Filings have been provided or
made available to Purchaser and (ii) Purchaser has been given an opportunity to
ask questions of, and receive written answers from, GREAT and its executive
officers concerning the terms and conditions of the Private Placement, and to
obtain any additional written information (to the extent GREAT possesses such
information or can acquire it without unreasonable expense or effort) necessary
to verify the accuracy of the information contained therein.
.6 Investment Company Matters. Purchaser is not, and after giving effect to
the purchase of the Purchased Common Shares hereunder, will not be, an
"investment company" subject to registration under the Investment Company Act of
1940, as amended.
Covenants of GREAT and Purchaser
.0 Covenants of GREAT. GREAT covenants and agrees with Purchaser as follows:
( ) Access. Between the date of this Agreement and the Closing Date, and
subject ------- to any limitations imposed by Section 5(c) of the Act, GREAT
shall (and shall cause its Subsidiaries to) give Purchaser and its counsel,
accountants and other representatives access to, and furnish Purchaser and its
representatives with, all documents, copies of documents, financial and
operating data and other information concerning the property and affairs of
GREAT as Purchaser may from time to time reasonably request.
(a) Shareholder Meeting. GREAT shall call a special meeting of its
shareholders (the "Special Meeting") to be held as promptly as practicable in
connection with the approval by shareholders of certain matters relating to the
Consolidation Transactions. GREAT filed on November 21, 1996 with the SEC under
the Exchange Act, a proxy statement with respect to the Special Meeting
(together with any amendments and supplements thereto, the "Proxy Statement"),
and the SEC took a "no review" position with respect to the Proxy Statement. At
the Special Meeting, GREAT will, through its Board of Trust Managers, recommend
to its shareholders approval of all proposals (the "Current Proposals") included
in the Proxy Statement.
(b) Stock Exchange Listing. Prior to the Closing Date, the Purchased Common
Shares to be issued pursuant to this Agreement shall be approved for listing on
the AMEX, subject to official notice of issuance.
(c) Ancillary Agreements. GREAT shall cause the Registration Rights
Agreement to be executed by a duly authorized officer on behalf of GREAT at or
prior to the Closing.
(d) Best Efforts. Subject to the terms and conditions of this Agreement,
GREAT shall use its best efforts to take, or cause to be taken, all reasonable
action, and to do, or cause to be done, all reasonable things necessary, proper
or advisable under the applicable laws and regulations to cause the conditions
specified in Article VI to be satisfied and otherwise to consummate and make
effective the transactions contemplated by this Agreement.
(e) Material Adverse Changes; SEC Filings; Financial Statements.
( ) GREAT will promptly notify Purchaser of any event of which GREAT
obtains knowledge which has had or might reasonably be expected to have a
Material Adverse Effect or which might reasonably be expected to result in the
non-satisfaction of any condition set forth in Article VI.
(i) Prior to the Closing, GREAT will timely file with the SEC all
disclosure documents, including each Quarterly Report on Form 10-Q, Current
Report on Form 8-K and Annual Report on Form 10-K, required to be filed by GREAT
under the Exchange Act and the rules and regulations promulgated thereunder. As
of their respective dates, none of such reports shall contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(ii) Each of the financial statements included in GREAT's Forms 10-Q and
Form 10-K referred to in clause (ii) shall be prepared in accordance with GAAP
consistently applied during the periods covered (except as disclosed therein),
except that the quarterly financial statements may omit (y) statements of
changes in financial position and footnote disclosures required by GAAP to the
extent the content thereof would not materially differ from those disclosures
reported in the most recent annual financial statement, and (z) year-end
adjustments to the extent not material.
(f) Director Liability Insurance. GREAT shall maintain directors', and
officers' liability insurance in an amount not less than $5 million for the
benefit of the Board of Trust Managers.
(g) Board of Trust Managers; Nominees; Observers.
( ) Purchaser shall be entitled to designate either Ted Bigman or Russell
Platt or such other individual acceptable to GREAT, in its reasonable
discretion, to be nominated as a member of the Board of Trust Managers and GREAT
shall recommend such nominee for election to the Board of Trust Managers. In
furtherance thereof, at or prior to the Closing, GREAT shall increase the size
of the Board of Trust Managers by at least one additional Trust Manager and
shall elect Purchaser's nominee to the class of Trust Managers whose term
expires at the 1997 annual meeting of GREAT shareholders. At such meeting, GREAT
shall nominate Purchaser's nominee for election to the Board of Trust Managers
for a three-year term. With respect to any annual meeting of GREAT shareholders
thereafter, at least 60 days prior to the date GREAT submits nominees for the
Board of Trust Managers to its shareholders, GREAT shall notify Purchaser and
thereafter Purchaser shall have 30 days from the date of such notice to submit
the name of Purchaser's nominee, together with such other information regarding
such nominee as reasonably requested by GREAT in order to prepare the related
proxy statement. In the event that at any time Purchaser is entitled to
designate a nominee to the Board of Trust Managers pursuant to this Section
5.1(h), such nominee resigns or is removed from the Board, Purchaser shall be
entitled to designate a replacement to fill the vacancy created thereby.
(i) If at any time Purchaser is entitled to designate a nominee to the
Board of Trust Managers pursuant to this Section 5.1(h) and Purchaser does not
have a representative on the Board of Trust Managers, GREAT shall permit one
representative of Purchaser (which representative shall be acceptable to GREAT,
in its reasonable discretion) to attend, but not vote, as an observer at each
meeting of the Board of Trust Managers or any committee of the Board of Trust
Managers empowered to act with the full authority of the Board of Trust
Managers, including telephonic meetings. GREAT shall cause notice of any meeting
of the Board of Trust Managers or any such committee of the Board of Trust
Managers to be delivered to any such representative at the same time and in the
same manner as notice is given to the members of the Board of Trust Managers.
Such representative will be entitled to receive all written materials given to
the members of the Board of Trust Managers in connection with such meetings at
the time such materials and information are given to the Board of Trust
Managers. GREAT shall reimburse such representative for his reasonable
out-of-pocket expenses incurred in connection with attending meetings of the
Board of Trust Managers.
(iii) In the event that the Board of Trust Managers forms a committee to
act in connection with a proposed Qualified Public Offering, GREAT shall name
Purchaser's nominee (if any) on the Board of Trust Managers to serve on such
committee.
(iv) Upon termination pursuant to Section 5.1(j) below of Purchaser's right
to designate a member of the Board of Trust Managers, Purchaser shall cause its
nominee to resign from the Board of Trust Managers, and the provisions of this
Section 5.1(h) shall have no further force or effect.
(h) Preemptive Rights. GREAT shall provide Purchaser with written notice
(the "Issuance Notice") of any proposed issuance for cash of any Common Shares
or any securities convertible into or exchangeable for, or any rights or
warrants to acquire, any Common Shares no later than 30 days prior to the
proposed issuance thereof, including the Qualified Public Offering. The Issuance
Notice shall specify the securities to be issued, a purchase price range or
formula under which the purchase price is to be determined, the proposed
issuance date and all other material terms of such issuance (to the extent then
known by GREAT). Upon delivery to GREAT by Purchaser no later than 10 days after
the Issuance Notice of a notice (the "Purchase Notice") stating that Purchaser
intends to acquire a portion of the securities to be issued, Purchaser shall be
entitled, on the terms offered by GREAT to other prospective purchasers of the
securities to be issued, to purchase (A) in the case of a proposed issuance of
Common Shares, up to a number of Common Shares such that, giving effect to the
proposed issuance (and the exercise in full by Purchaser of its rights under
this Section 5.1(i) with respect to such proposed issuance), Purchaser would
hold the Percentage Amount of all issued and outstanding Common Shares and
then-exercisable "in-the-money" options, in the aggregate, and (B) in the case
of a proposed issuance of any securities convertible into or exchangeable for,
or any rights or warrants to acquire, any Common Shares, up to the Percentage
Amount of such securities proposed for issuance. Any Purchase Notice shall state
the amount of securities Purchaser intends to purchase. Notwithstanding anything
herein to the contrary, GREAT shall be entitled not to proceed with the proposed
issuance or to alter the terms thereof; provided that, in the event that any
material terms of the proposed issuance are altered, (i) any Issuance Notice and
Purchase Notice shall be deemed to be revoked automatically and (ii) Purchaser
shall be entitled to participate in such proposed issuance on the terms set
forth in a revised Issuance Notice in accordance with this Section 5.1(i),
except that the revised Issuance Notice shall be given as soon as practicable
but in no event later than five business days prior to the proposed issuance and
the Purchase Notice with respect thereto shall be given no later than two
business days after the revised Issuance Notice. Notwithstanding the foregoing,
this Section 5.1(i) shall not apply to (i) the issuance of Common Shares at any
time pursuant to Redemption Rights, (ii) the issuance of any Common Shares
pursuant to warrants, options or other securities, convertible into,
exchangeable or exercisable for or otherwise carrying the right to receive
Common Shares, in each case outstanding as of Closing Date, (iii) the issuance
of Common Shares or options or other rights to acquire Common Shares (and the
issuance of Common Shares pursuant thereto) pursuant to GREAT's 1996 Share
Incentive Plan, and (iv) the issuance of Common Shares or options or other
rights to acquire Common Shares (and the issuance of Common Shares pursuant
thereto) pursuant to any stock incentive plan adopted after the date of this
Agreement. For purposes of this Section 5.1(i), the "Percentage Amount" shall
mean twenty percent (20%), except in the case of any proposed issuance of Common
Shares for less than $9.00 per share or any securities convertible into or
exchangeable for, or any rights or warrants to acquire, any Common Shares where
the initial conversion, exchange or exercise price, as the case may be, is less
than $9.00 per Common Share, in which case the "Percentage Amount" shall mean
twenty-five percent (25%).
(i) Expiration of Covenants. The covenants of GREAT contained in Sections
5.1(g) through (i) shall expire upon the earlier to occur of (i) consummation of
a Qualified Public Offering, and (ii) such time as the Purchaser and its
Permitted Transferees, in the aggregate, hold less than ten percent (10%) of the
outstanding Common Shares (excluding from the number of outstanding Common
Shares for purposes of such calculation, Common Shares issued after the Closing
Date to which Purchaser's preemptive rights set forth in Section 5.1(i) did not
apply).
(k) Registration Statements. Before the filing thereof with the SEC, the
Company will use reasonable efforts to furnish to Purchaser and the managing
underwriters, if any, copies of any shelf registration statement or prospectus,
or any amendments or supplements thereto, to be filed pursuant to the
Registration Rights Agreement if Purchaser has elected to include any
Registrable Securities (as defined in the Registration Rights Agreement) in such
registration statement.
.1 Covenants of Purchaser. Purchaser covenants and agrees with GREAT as
follows:
( ) Confidentiality. Subject to the requirements of applicable law,
Purchaser ---------------- shall, and shall use all reasonable efforts to cause
its officers, employees and agents who obtain such information to, hold in
confidence all non-public information obtained from GREAT until such time as
such information is otherwise available to Purchaser without breach of an
agreement with Purchaser or becomes publicly available.
(a) Proxy Statement. Purchaser shall cooperate with GREAT in the
preparation of the Proxy Statement and shall provide to GREAT any information
regarding Purchaser required or deemed advisable by GREAT or its advisors to be
included in the Proxy Statement. None of the information to be supplied by
Purchaser expressly for inclusion in the Proxy Statement, or in any amendments
or supplements thereto, will, at the time of (x) the first delivery or mailing
thereof or (y) the Special Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. At the Special Meeting called
pursuant to Section 5.1(b), Purchaser shall vote all Common Shares owned by it
(if any) in favor of approval and adoption of each of the Current Proposals.
(b) Ancillary Agreements. Purchaser shall cause the Registration Rights
Agreement to be executed on behalf of Purchaser and delivered to GREAT at or
prior to the Closing.
(c) Best Efforts. Subject to the terms and conditions of this Agreement,
Purchaser shall use its best efforts to take, or cause to be taken, all
reasonable actions, and to do, or cause to be done, all reasonable things
necessary, proper or advisable under the applicable laws and regulations to
cause the conditions specified in Article VII to be satisfied and otherwise to
consummate and make effective the transactions contemplated by this Agreement.
5.3 ERISA Covenants.
(a) ERISA Certification. Simultaneous with the execution of this Agreement,
Purchaser shall review, complete and deliver to GREAT an ERISA Certification,
substantially in the form of Exhibit A hereto (the "ERISA Certification").
(b)Restrictions on Transfer. In addition to any other restrictions on the
transferof the Purchased Common Shares, whether contained in the Charter,
GREAT's Bylaws or elsewhere, until such time as the Purchased Common Shares are
registered under the Act, in no event may a transfer of any interest in a
Purchased Common Share be made unless, prior to such transfer, (i) the proposed
transferee delivers to GREAT a completed and executed ERISA Certification, and
(ii) GREAT determines, in its sole discretion, that such transfer would not
cause any portion of its assets to be deemed to be "plan assets" for purposes of
the fiduciary requirements of ERISA and the prohibited transaction provisions of
ERISA and/or Internal Revenue Code Section 4975.
Conditions of Purchaser's Obligations at Closing
The obligations of Purchaser set forth in Article II are
subject to the fulfillment or waiver by Purchaser on or before the Closing Date
of each of the following conditions:
.0 Representations and Warranties. The representations and
warranties of GREAT contained in Article III shall be true in all material
respects on and as of the Closing Date with the effect as though such
representations and warranties had been made on and as of the Closing Date.
.1 Performance. GREAT shall have delivered to the Purchaser
the items set forth in Section 2.3(b) and performed and complied in all material
respects with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing Date.
.2 Compliance Certificate. GREAT shall deliver to Purchaser at the
Closing a certificate, in the form of Exhibit C hereto, duly executed by an
authorized officer on behalf of GREAT, certifying that the conditions specified
in Sections 6.1 and 6.2 have been satisfied and that no condition exists or
event has occurred requiring GREAT to notify Purchaser under Section 5.1(f)(i).
.3 No Litigation. There shall not be any action, suit,
proceeding, hearing or investigation or order, decree or injunction of any
nature or type threatened, pending or made by or before any governmental body
that questions or challenges the lawfulness of the transactions contemplated by
this Agreement or in connection with any of the Consolidation Transactions under
any law or regulation or seeks to delay, restrain or prevent or obtain damages
in respect of such transactions.
.4 Consents and Waivers. Any and all consents or waivers from
other parties to any agreements, or consents, waivers or permits from other
Persons, that are required in connection with the consummation by Purchaser or
GREAT of the transactions contemplated by this Agreement shall have been
obtained, including, without limitation, the approval of GREAT's shareholders of
the Current Proposals.
.5 Ancillary Agreements. The Registration Rights Agreement shall have been
duly and validly executed by GREAT and shall be in full force and effect.
.6 Minimum Private Placement. The aggregate gross proceeds received by
GREAT from the concurrent sale of Common Shares hereunder and to other
purchasers of Common Shares in the Private Placement shall be not less than
$17,500,000 (such minimum condition to be reduced to as low as $15.0 million, if
and to the extent that limited partners entitled to receive Common Units in lieu
of cash in the Exchange Offer elect to do so).
.7 Consolidation Transactions. The Consolidated Transactions
(including, without limitation, the closing under the Contribution Agreement (as
defined in the Proxy Statement), the Exchange Offer and the Refinancing (as
defined in the Proxy Statement)) shall have been consummated in all material
respects upon the terms and conditions set forth in the Proxy Statement, or all
conditions thereto shall have been satisfied so that the same shall occur
concurrent with the Closing of the Purchased Shares.
.8 Director Nominee. The designee of Purchaser, if any, shall have been
elected to the Board of Trust Managers of GREAT in accordance with Section
5.1(h).
.9 Ownership Limitations. GREAT's Board of Trust Managers will have waived
the application of the ownership limitations as applied to Purchaser and its
Permitted Transferees with respect to the Purchased Common Shares and any
securities purchased under Section 5.1(i).
Conditions of GREAT's Obligations at Closing
The obligations of GREAT set forth in Article II are subject
to the fulfillment or waiver by GREAT on or before the Closing of each of the
following conditions:
.0 Representations and Warranties. The representations and
warranties of Purchaser contained in Article IV shall be true on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
.1 Purchase Price. Purchaser shall have delivered the Purchase Price to
GREAT.
.2 Compliance Certificate. Purchaser shall deliver to GREAT at the Closing
a certificate, in the form of Exhibit B hereto, duly executed by or on behalf of
Purchaser, certifying that the conditions specified in Sections 7.1 and 7.4 have
been satisfied.
.3 Performance. Purchaser shall have delivered to GREAT the items set forth
in Section 2.3(a) and performed and complied in all material respects with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing Date.
.4 No Litigation. There shall not be any action, suit, proceeding, hearing
or investigation or order, decree or injunction of any nature or type
threatened, pending or made by or before any governmental body that questions or
challenges the lawfulness of the transactions contemplated by this Agreement or
in connection with any of the Consolidation Transactions under any law or
regulation or seeks to delay, restrain or prevent or obtain damages in respect
of such transactions.
.5 Consents and Waivers. Any and all consents or waivers from other parties
to any agreements or consents, waivers or permits from other Persons that are
required in connection with the consummation by Purchaser or GREAT of the
transactions contemplated in this Agreement shall have been obtained, including
without limitation approval of the Current Proposals by GREAT's shareholders.
.6 Ancillary Agreements. The Registration Rights Agreement shall have been
duly and validly executed by the parties thereto (other than GREAT) and shall be
in full force and effect.
.7 ERISA Certification. Purchaser shall have reviewed, completed and
delivered to GREAT the ERISA Certification.
7.9 Minimum Private Placement. The aggregate gross proceeds
received by GREAT from the concurrent sale of Common Shares hereunder and to
other purchasers of Common Shares in the Private Placement shall be not less
than $15,000,000.
7.10 "Consolidation Transactions". The closing under the
Contribution Agreement (as described in the Proxy Statement), the Exchange Offer
and the Refinancing (as described in the Proxy Statement) shall have occurred,
or all of the conditions thereto shall have been satisfied so that the closings
thereunder occur concurrently with the sale of the Purchased Shares.
ARTICLE VIII
MISCELLANEOUS
8.1 Successors and Assigns. Neither party may assign any of
its rights or delegate any of its duties under this Agreement without the prior
written consent of the other; provided, that Purchaser shall be entitled to
assign its rights (and delegate its duties, provided that, notwithstanding such
delegation, Purchaser shall continue to remain obligated therefor) under this
Agreement to any Permitted Transferee who acquires Purchased Common Shares from
the Purchaser, provided, further that Purchaser's rights under Section 5.1(g)
and (h) shall only be assignable to a Permitted Transferee which is an Affiliate
of Purchaser. Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York,
except that the internal corporate affairs of GREAT shall be governed by the
laws of Maryland applicable thereto.
8.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.4 Captions. The captions used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
8.5 Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto shall
be in writing, shall be deemed to have been duly given or delivered when
delivered personally or telecopied (receipt confirmed, with a copy sent by
certified or registered mail as set forth herein) or sent by certified or
registered mail, postage prepaid, return receipt requested, or by Federal
Express or other overnight delivery service, to the address of the party set
forth below or to such address as the party to whom notice is to be given may
provide in a written notice to GREAT, a copy of which written notice shall be on
file with the Secretary of GREAT:
( ) To GREAT:
Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Telecopier No.: (860) 947-6960
Telephone No.: (860) 246-1126
Attention: Mr. Joseph LaBrosse, Chief Financial Officer
and Secretary
With copies to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telecopier No.: (212) 836-8689
Telephone No.: (212) 836-8685
Attention: Lynn Toby Fisher, Esq.
(a) To Purchaser:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
22nd Floor
New York, NY 10020
Telecopier No.: 212-762-7536
Telephone No.: 212-762-4000
Attention: General Counsel
Any Notice given to Purchaser shall be deemed to have been given to
any Permitted Transferee.
8.6 Expenses. Whether or not the Closing occurs, GREAT shall
pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement and shall reimburse
Purchaser for all such costs incurred by it (including the reasonable fees and
expenses of counsel to Purchaser) provided such costs shall not exceed $50,000
without GREAT's written consent.
8.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing executed by each of (i) GREAT and (ii)
Purchaser and/or Permitted Transferees holding a majority of the Purchased
Common Shares.
8.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms to the fullest extent permitted by law.
8.9 Publicity. GREAT and Purchaser shall continue to consult
with each other before issuing any press releases or otherwise making any public
statement with respect to this Agreement and the transactions contemplated
hereby, and they shall not issue any such press release or make any such public
statement prior to such consultation, except as may, in the judgment of counsel,
be required by law or by obligations pursuant to any securities laws or listing
agreement with any national securities exchange, in which case GREAT shall use
reasonable efforts to provide a copy of any such press release or public
statement to Purchaser prior to the filing or release thereof.
8.10 Further Assurances. Each of the parties shall, without
further consideration, use reasonable efforts to execute and deliver to the
other such additional documents and take such other action as the other may
reasonably request to carry out the intent of this Agreement and the
transactions contemplated hereby.
8.11 Entire Agreement. This Agreement, including the exhibits
hereto, the documents, schedules, certificates and referred to herein, together
with the Registration Rights Agreement, embodies the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by such agreements. There are no restrictions, promises, inducements,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
written or oral agreements and understandings between the parties with respect
to such transactions.
8.12 Survival. All representations and warranties and covenants of the
parties contained in
this Agreement shall survive the Closing.
ARTICLE IX
Termination
9.1 Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time before the Closing
Date:
(a) by mutual written agreement of Purchaser and GREAT;
(b) by either GREAT or Purchaser at any time after April 30, 1997 if, at
the time notice of such termination is given, the Closing has not occurred,
unless the failure of such occurrence shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe any material covenant
or agreement set forth herein required to be performed or observed by such party
on or before the Closing Date;
(c) by Purchaser (if it is not in breach of any of its material obligations
hereunder) in the event of a breach or failure by GREAT that is material in the
context of the transactions contemplated hereby of any representation, warranty,
covenant or agreement by GREAT contained herein which has not been, or cannot
be, cured within 30 days after written notice of such breach is given to GREAT;
or
(d) by GREAT (if it is not in breach of any of its material obligations
hereunder) in the event of a breach or failure by Purchaser that is material in
the context of the transactions contemplated hereby of any representation,
warranty, covenant or agreement by Purchaser contained herein which has not
been, or cannot be, cured within 30 days after written notice of such breach is
given to Purchaser.
The power of termination provided for by this Section 9.1 shall be
effective only after notice thereof, duly executed on behalf of the party for
which it is given, shall have been given to the other.
9.2 Procedure Upon Termination; Liabilities. In the event of
a termination of this Agreement by either or both of GREAT and Purchaser
pursuant to Section 9.1, notice thereof shall forthwith be given by the
terminating party to the other party, and this Agreement shall thereupon
terminate and become void and have no further effect, and the transactions
contemplated hereby shall be abandoned without further action by the parties
hereto, except that the provisions of Section 5.2(a) (Confidentiality), 8.6
(Expenses), 8.2 (Governing Law), and 8.5 (Notices), and any related
definitional, interpretive or other provisions necessary for the logical
interpretation of such provisions, shall survive the termination of this
Agreement; provided, however, that such termination shall not relieve any party
hereto of any liability for any breach of this Agreement.
<PAGE>
IN WITNESS WHEREOF, Purchaser and GREAT have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
MORGAN STANLEY GROUP INC.
By: /s/ BARTON M. BIGGS
Name: Barton M. Biggs
Title: Managing Director
GROVE REAL ESTATE ASSET TRUST
By:
Damon Navarro
Chief Executive Officer
<PAGE>
Exhibit A
ERISA CERTIFICATION
Reference is made to that certain Securities Purchase
Agreement (the "Agreement"), dated as of February 21, 1997, between Grove Real
Estate Asset Trust ("GREAT") and Morgan Stanley Group Inc. ("Purchaser").
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Agreement.
This is the ERISA Certification referred to in, and contemplated by,
Section 5.3(a) of the Agreement.
The United States Department of Labor (the "DOL") has
promulgated 29 CFR 2510.101 (the "DOL Regulation") defining the term "plan
assets" for purposes of the fiduciary requirements of Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the prohibited transaction
provisions of ERISA and Internal Revenue Code Section 4975. Under the DOL
Regulation, when an employee benefit plan or an entity that holds the assets of
an employee benefit plan ("Benefit Plan Investors") makes an equity investment
in another entity, the underlying assets of that entity generally will be
considered plan assets unless one of the exceptions contained in the DOL
Regulation is met. In order to avoid having its assets deemed to be plan assets
of any Benefit Plan Investor that purchases Common Shares in the Private
Placement, GREAT has determined to restrict the number of Common Shares
purchased by Benefit Plan Investors in the Private Placement. In order to permit
GREAT to comply with this restriction, Purchaser hereby certifies the following
under penalties of perjury [check one]:
|_| It is not a Benefit Plan Investor.
[_| It is a Benefit Plan Investor because it is [Check Applicable Category]:
|_| an employee welfare benefit plan or employee pension benefit plan, as
those terms are defined in ERISA Section 3, subject to ERISA (including, without
limitation: a pension, profit sharing, stock bonus or employee stock ownership
plan that is qualified under Internal Revenue Code Section 401(a), and is
established for the benefit of the employees of any employer or is a "Keogh"
plan established for the benefit of a self-employed individual (or the partners
of a partnership);
|_| a governmental plan (as defined in ERISA) which is not subject to
ERISA;
|_| an individual retirement account or annuity described in Internal
Revenue Code Section 408; or
|_| any other entity or account the underlying assets of which are deemed
to be "plan assets," within the meaning of 29 CFR Section 2510.3-101 (including,
without limitation, a bank collective investment vehicle or group trust or an
insurance company separate account) as follows [describe]:
IN WITNESS WHEREOF, Purchaser has executed this ERISA
Certification as of this 20th day of February, 1997.
MORGAN STANLEY GROUP INC.
By
Name:
Title:
<PAGE>
Exhibit B
PURCHASER'S COMPLIANCE CERTIFICATE
Pursuant to Section 7.3 of the Securities Purchase Agreement
(the "Agreement"), dated February __, 1997, between ____________________,
("Purchaser") and Grove Real Estate Asset Trust ("GREAT"), the undersigned is
duly authorized to certify on behalf of Purchaser, and hereby certifies on
behalf of Purchaser that:
1. The representations and warranties of Purchaser contained in the
Agreement are true as of the date hereof, as though such representations and
warranties had been made on the date hereof.
2. Purchaser has delivered to GREAT all items set forth in Section 2.3(a)
and performed and complied in all material respects with all agreements,
obligations and conditions contained in the Agreement that were required to be
performed or complied with by Purchaser on or before the date hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this __
day of ___________________, 199_.
Insert Name of Purchaser
By Name: Title:
<PAGE>
Exhibit C
GREAT's COMPLIANCE CERTIFICATE
Pursuant to Section 6.3 of the Securities Purchase Agreement
(the "Agreement"), dated February __, 1997, between ____________________,
("Purchaser") and Grove Real Estate Asset Trust ("GREAT"), the undersigned, the
Secretary of GREAT, hereby duly certifies on behalf of GREAT that:
1. The representations and warranties of GREAT contained in the Agreement
are true in all material respects as of the date hereof, as though such
representations and warranties had been made on the date hereof.
2. GREAT has delivered to Purchaser all items set forth in Section 2.3(b)
and performed and complied in all material respects with all agreements,
obligations and conditions contained in the Agreement that were required to be
performed or complied with by GREAT on or before the date hereof.
3. No condition exists or event has occurred requiring GREAT to notify
Purchaser under Section 5.1(f)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned has set his hand this __ day of
___________________, 199_.
GROVE REAL ESTATE ASSET TRUST
By:
Joseph R. LaBrosse
Secretary
<PAGE>
Exhibit D
RECEIPT
Reference is made to the Securities Purchase Agreement (the
"Agreement"), dated February __, 1997, between ____________________
("Purchaser") and Grove Real Estate Asset Trust ("GREAT"). Capitalized terms
used but not defined herein shall have the meanings ascribed to such terms in
the Agreement.
GREAT hereby acknowledges receipt, on the date hereof, of $_____________ in
respect of the Purchase Price.
Purchaser hereby acknowledges receipt, on the date hereof,
the certificate(s) listed on Schedule A hereto representing an aggregate of ____
Common Shares, which Common Shares constitute the Purchased Common Shares, as
such number of Common Shares may have been adjusted from time to time prior to
the date hereof in accordance with Section 5.3(b) of the Agreement.
GROVE REAL ESTATE ASSET TRUST
By:
Joseph R. LaBrosse
Chief Financial Officer
MORGAN STANLEY GROUP INC.
By: Morgan Stanley Asset Management Inc.
By
Name:
Title:
<PAGE>
Schedule A
Certificate(s) Representing Purchased Shares
<PAGE>
Exhibit E
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
Exhibit F
FORM OF COMFORT LETTER
<PAGE>
SECURITIES PURCHASE AGREEMENT
dated as of February 21, 1997
between
GROVE REAL ESTATE ASSET TRUST
and
OREGON INVESTMENT COUNCIL ACTING ON BEHALF OF OREGON PUBLIC
EMPLOYEES' RETIREMENT FUND UNDER AUTHORITY OF
OREGON REVISED STATUTES SECTION 293.741
BY ITS AGENTABKB/LASALLE SECURITIES
LIMITED
<PAGE>
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement"), dated as of
February 21, 1997, between Grove Real Estate Asset Trust, a Maryland real estate
investment trust ("GREAT") and Oregon Investment Council acting on behalf of
Oregon Public Employees' Retirement Fund under authority of Oregon revised
statutes Section 293.741 by its Agent ABKB/LaSalle Securities Limited
("Purchaser").
WHEREAS, GREAT has distributed to certain prospective investors
(including Purchaser) who are Accredited Investors (as defined), a Private
Placement Memorandum, dated December 5, 1996 (together with all appendices
thereto, the "PPM"), in connection with the offering by GREAT to such investors
of up to 3,333,333 of GREAT's common shares of beneficial interest, par value
$0.01 per share (each a "Common Share"), at a price of $9.00 per Common Share
(the "Purchase Price Per Share");
WHEREAS, following a complete and thorough review of the PPM, Purchaser
desires to purchase from GREAT, and GREAT desires to sell to Purchaser, 391,392
Common Shares (as such number of Common Shares may be reduced from time to time
in accordance with Section 5.3(b), the "Purchased Common Shares"), upon the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
Article I
Definitions
1.1 Definitions. As used in this Agreement, the following terms have the
meaning set forth below:
"Accredited Investor" means, as defined under Regulation D promulgated
under the Act, any Person who (i) is able to bear the economic risk of the
acquisition of a security and can afford to sustain a total loss with respect to
such investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment,
and therefore has the capacity to protect its own interest in connection with
the acquisition of a security and/or (ii) comes within any of the following
categories: (1) any bank as defined in Section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity;
any broker or dealer registered pursuant to Section 15 of the Exchange Act; any
insurance company as defined in Section 2(13) of the Act; any investment company
registered under the
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<PAGE>
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
subdivisions for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; any employee benefit plan within the meaning of ERISA, if
the investment decision is made by a plan fiduciary, as defined in Section 3(21)
of ERISA, which is either a bank, savings and loan association, insurance
company, or registered investment advisor, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are Accredited Investors; (2)
any private business development company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940; (3) any organization described in Section
501(c)(3) of the Code, corporation, Massachusetts or similar business trust or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000; (4) any trust manager or
executive officer of GREAT; (5) any natural person whose individual net worth,
or joint net worth with that person's spouse, at the time of that person's
purchase exceeds $1,000,000; (6) any natural person who had an individual income
in excess of $200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years, and who has a
reasonable expectation of reaching the same income level in the current year;
(7) any trust with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D;
and (8) any entity in which all of the equity owners are Accredited Investors.
As used in this definition, the term "net worth" means the excess of
the total assets over total liabilities. In calculating "net worth," the value
of a principal residence must be valued at cost or at a written appraised value
used by an institutional lender to make a loan secured by the property. In
determining income, an investor should add to such investor's adjusted gross
income any amounts attributable to tax exempt income received, losses claimed as
a limited partner in any limited partnership, deductions claimed for depletion
contributions to an "IRA" or "KEOGH" retirement plan, alimony payments and any
amount by which income from long-term capital gains has been reduced in arriving
at adjusted gross income.
"Act" means the Securities Act of 1933, as amended, or any successor statute.
"Affiliate" of any Person means any Person which, directly or indirectly,
controls, is controlled by, or is under common control with, such Person. The
term "control" (including, with correlative meaning, the terms "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management
3
<PAGE>
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
"Agreement" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"AMEX" means the American Stock Exchange, Inc. (Emerging Company
Marketplace).
"best efforts" , as used in this Agreement, shall mean commercially
reasonable efforts; provided, that in no event shall "best efforts" mean efforts
which require the performing party (i) to do any act that is unreasonable under
the circumstances, to make any capital contribution or to expend any funds other
than reasonable out-of-pocket expenses incurred in satisfying its obligations
under this Agreement, including, but not limited to, the fees, expenses and
disbursements of its accountants, counsel and other professionals, or (ii) in
the case of GREAT, to modify the terms of the Consolidation Transactions.
"Charter" means the Second Amended and Restated Declaration of Trust of
GREAT.
"Charter Amendments" means the amendments proposed to be effected to
the Charter, as set forth in the Proxy Statement.
"Charter Documents" means the Charter and the Bylaws of GREAT, as each
may be amended from time to time.
"Closing" has the meaning ascribed to such term in Section 2.2 of this
Agreement.
"Closing Date" has the meaning ascribed to such term in Section 2.2 of
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder, or any successor statute.
"Common Shares" means the common shares of beneficial interest, $0.01
par value per share, of GREAT.
"Common Units" means common units representing ownership interests in
the Operating Partnership.
4
<PAGE>
"Consolidation Transactions" means the consolidation transactions,
including the Private Placement, proposed to be entered into by GREAT, as
described in the Proxy Statement.
"Current Proposals" has the meaning ascribed to such term in Section
5.1(b) of this Agreement.
"Damages" of any Person means any loss, liability (however defined or
characterized), diminution in value, damage or expense (including reasonable
costs of investigation and prosecution of litigation and attorneys' fees)
incurred by such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Certification" has the meaning ascribed to such term in Section
5.3(a) of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute.
"Exchange Offer" means the Offer to Exchange, dated December 2, 1996,
by the Operating Partnership to the limited partners of certain limited
partnerships, pursuant to which certain such limited partners can exchange the
interests held by them in such limited partnerships for Common Units or, under
certain circumstances, cash, as such Offer to Exchange may be supplemented,
amended or modified from time to time.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States.
"GREAT" has the meaning ascribed to such term in the introductory paragraph
of this Agreement.
"Knowledge" of GREAT means the actual knowledge of any of its officers
(other than assistant officers whose duties are principally ministerial) after
due inquiry to satisfy themselves that there is a reasonable basis for belief in
the accuracy of any of the representations and warranties made by GREAT, but
shall not be construed to require independent review or verification by them of
underlying facts.
"Material Adverse Effect" means any change in or effect on the business
of GREAT or its Subsidiaries that is materially adverse to the business, assets,
results of operations or financial condition of GREAT and its Subsidiaries taken
as a whole, or
5
<PAGE>
materially impairs the ability of GREAT to consummate the transactions
contemplated by this Agreement.
"Operating Partnership" means Grove Operating, L.P., a Delaware limited
partnership and the operating partnership of GREAT.
"Person" means any individual, a partnership, a joint venture, a
corporation, a trust, limited liability company, an unincorporated organization
or a government or any department or agency thereof.
"PPM" has the meaning ascribed to such term in the first Whereas clause
of this Agreement.
"Private Placement" means the private placement of up to 3,333,333
Common Shares by GREAT pursuant to and as more fully set forth in the PPM.
"Proxy Statement" has the meaning ascribed to such term in Section
5.1(b) of this Agreement.
"Purchase Price" means $3,522,528, which is equal to the product of
$9.00 (the Purchase Price Per Share) and 391,392 (the number of Common Shares
which constitutes the Purchased Common Shares), subject to adjustment in
accordance with Section 5.3(c).
"Purchase Price Per Share" has the meaning ascribed to such term in the
first Whereas clause of this Agreement.
"Purchased Common Shares" has the meaning ascribed to such term in the
second Whereas clause of this Agreement.
"Qualified Public Offering" means an underwritten public offering of
Common Shares yielding gross proceeds (including upon exercise of any
over-allotment option) of at least $40 million and the listing for trading of
such Common Shares on the AMEX or similar or successor national stock exchange.
"Receipt" means the receipt to be executed and delivered by each of
Purchaser and GREAT at Closing, in the form attached as Exhibit D hereto.
"Redemption Rights" means the right, beginning one year after the
issuance of Common Units to limited partners of the limited partnerships
participating in the Exchange Offer, of certain limited partners to require the
Operating Partnership to redeem their Common Units for cash equal to the fair
market value of an equivalent number of Common Shares at the time of redemption
or, at the Operating Partnership's
6
<PAGE>
option, it can exchange such Common Units for Common Shares on a one-for-one
basis (subject to adjustment).
"Registration Rights Agreement" means the Registration Rights
Agreement, to be entered into on or prior to the Closing, among GREAT,
Purchaser, certain other purchasers of the Common Shares offered in the Private
Placement and others, which will grant to Purchaser certain "piggyback"
registration rights (provided, that in any event, no registration statement in
connection with such registration rights shall be filed with the SEC or with any
state securities commission at any time prior to the six-month anniversary of
the Closing) and subject the sale by Purchaser of its Common Shares to certain
"black out" provisions.
"SEC" means the United States Securities and Exchange Commission.
"SEC Filings" has the meaning ascribed to such term in Section 3.4 of
this Agreement.
"Special Meeting" shall have the meaning ascribed to such term in
Section 5.1(b) of this Agreement.
"Subsidiaries" means, collectively, GREAT's direct or indirect
majority-owned subsidiaries, including, without limitation, the Operating
Partnership.
Article II.
Purchase of Common Shares
2.1 Purchase of Common Shares. At the Closing, GREAT shall issue and
sell to Purchaser, and Purchaser shall purchase from GREAT, the Purchased Common
Shares. At the Closing, Purchaser shall pay the Purchase Price for the Purchased
Common Shares by wire transfer of immediately available funds or by certified or
official bank check payable in same day funds to the order of GREAT. Upon
receipt of the Purchase Price, GREAT shall deliver to Purchaser a certificate
representing the number of Common Shares constituting the Purchased Common
Shares, registered in the name of Purchaser.
2.2 Closing. The closing of the issuance and sale of the Purchased
Common Shares hereunder (the "Closing") shall take place at the offices of Kaye,
Scholer, Fierman, Hays & Handler, LLP located at 425 Park Avenue, New York, New
York 10022, and will occur substantially simultaneously with the closing of the
other purchases and sales of Common Shares in the Private Placement. GREAT will
notify
7
<PAGE>
Purchaser of the date of the Closing (the "Closing Date") not less than three
business days prior to the Closing Date.
2.3 Deliveries.
(a) Purchaser's Deliveries. At the Closing, in consideration of
Purchaser's receipt from GREAT of the Purchased Common Shares, Purchaser shall
deliver to GREAT the following:
(i) the Purchase Price in accordance with Section 2.1 hereof;
(ii) the certificate referred to in Section 7.3 hereof duly executed on
behalf of Purchaser;
(iii) the Registration Rights Agreement, duly executed on behalf of
Purchaser; and
(iv) the Receipt, duly executed on behalf of Purchaser.
(b) GREAT's Deliveries. At the Closing, in consideration of GREAT's receipt of
the Purchase Price from Purchaser, GREAT shall deliver to Purchaser the
following:
(i) certificates representing the Purchased Shares, duly issued in the
name of Purchaser;
(ii) the certificate referred to in Section 6.3 hereof, duly executed by an
authorized officer on behalf of GREAT;
(iii) the Registration Rights Agreement, duly executed by an authorized
officer on behalf of GREAT; and
(iv) the Receipt, duly executed by an authorized officer on behalf of
GREAT.
2.4 Legends. In addition to the legend concerning inter alia, Excess
Shares, set forth in the Charter, the certificates evidencing the Purchased
Common Shares shall bear the following legends:
(a) "The transfer of the securities represented by this
certificate is subject to conditions specified in section 5.3(d) of a Securities
Purchase Agreement dated February 21, 1997, as such agreement may be amended
from time to time, and no transfer of such securities shall be valid or
effective until such conditions have been fulfilled with respect to such
transfer. A copy of such Securities Purchase Agreement
8
<PAGE>
will be furnished by the company to the holder of this certificate upon written
request and without charge."
(b) "These securities have not been registered under the
Securities Act of 1933, as amended (the "Act") and may not be offered sold or
otherwise transferred except pursuant to an effective registration statement
under the Act or an exemption from the registration requirements thereof. These
securities have not been registered under the securities laws of any state."
Article III
Representations and Warranties of GREAT
GREAT hereby represents and warrants to Purchaser that, as of the date
of this Agreement and as of the Closing Date:
3.1 Organization, Good Standing and Qualification. GREAT has been duly
organized and is a validly existing trust in good standing under the laws of
Maryland with all requisite power and authority to carry on its business as
presently conducted. GREAT is duly qualified to transact business and is in good
standing in each jurisdiction in which it is required to be qualified except
where the failure to be so qualified or in good standing would not, in the
aggregate, have a Material Adverse Effect.
3.2 Capitalization. (a) As of the date hereof, the authorized capital
stock of GREAT consists of 10,000,000 Common Shares, 525,000 of which are issued
and outstanding as of the date hereof, and 4,000,000 preferred shares of
beneficial interest, $0.01 par value per share, none of which are issued and
outstanding as of the date hereof. No other shares of capital stock of GREAT are
outstanding or held as treasury shares. There are no outstanding options,
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from GREAT of any shares of its capital stock or
securities or obligations of any kind convertible into any shares of its capital
stock except for (i) options to purchase an aggregate of 100,000 Common Shares
held by certain executive officers and trust managers of GREAT and issued under
GREAT's 1994 Share Option Plan, (ii) as contemplated by the Private Placement
(including pursuant to this Agreement and pursuant to other Securities Purchase
Agreements between GREAT on the one hand, and other purchasers of Common Shares
therein on the other hand), (iii) the Common Shares issuable to certain Persons
participating in the Exchange Offer at the option of the Operating Partnership
upon the exercise by such Persons of Redemption Rights and (iv) warrants to
purchase 40,000 Common Shares granted to Barclay Investments, Inc. in connection
with GREAT's initial public offering.
9
<PAGE>
(b) The Capitalization Table set forth in the section of
Appendix I to the PPM entitled "SUMMARY -- Capitalization" sets forth the
currently anticipated capitalization of GREAT at the Closing, giving effect to
the consummation of the Consolidation Transactions, including the Private
Placement. The capitalization set forth on such table has been calculated taking
into account various assumptions regarding the Consolidation Transactions, as
described in further detail in the above-referenced section of Appendix I to the
PPM, and accordingly, the actual capitalization of GREAT following the
consummation of the Consolidation Transactions may differ.
3.3 Authorization. GREAT has full power and corporate authority to
execute and deliver this Agreement and (subject to shareholder approval as
contemplated by the Proxy Statement) to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the other agreements
and instruments contemplated hereby, and the consummation of the transactions
contemplated by this Agreement, have been authorized by the Board of Trust
Managers of GREAT and no other proceedings (except for a meeting of the
shareholders of GREAT for the purpose of obtaining shareholder approval as
contemplated by the Proxy Statement) on the part of GREAT are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed by GREAT and, subject as aforesaid,
constitutes a valid and binding agreement of GREAT enforceable in accordance
with its terms except as limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
3.4 SEC Filings. Purchaser has been provided (or will, upon Purchaser's
written request, be provided) true and correct copies of GREAT's annual reports
on Form 10-KSB for the fiscal years ended December 31, 1995 and 1994, and
GREAT's quarterly reports on Form 10-QSB for the fiscal quarters ended March 31,
1996, June 30, 1996 and September 30, 1996 (collectively, the "SEC Filings"). As
of their respective dates, the SEC Filings (including all exhibits and schedules
thereto and documents incorporated by reference therein) complied in all
material respects with the laws, regulations and forms governing the SEC
Filings; and none of the SEC Filings contained, as of the date it was filed with
the SEC, any untrue statement of any material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.5 Valid Issuance of Shares. The Purchased Common Shares, when issued,
sold and delivered to Purchaser in accordance with the terms hereof for the
consideration expressed herein, will be duly authorized and validly issued,
fully paid and nonassessable and, based in part on the representations of
Purchaser in this Agreement, will be issued in compliance with all applicable
federal and state securities laws.
10
<PAGE>
3.6 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by GREAT, its consummation of the transactions
contemplated hereby nor its compliance with any of the provisions hereof will
(a) conflict with or result in the breach of any provision of the Charter
Documents; (b) require any consent, approval, order or authorization of, or
registration, qualification, designation or filing with or notification to, any
governmental or regulatory authority, the failure of which to obtain would have
a Material Adverse Effect, except for (i) the filing with the SEC of a Form D
and such other documents as may be required in connection with this Agreement
and the other Common Shares being issued in the Private Placement and the
obtaining from the SEC of such orders as may be so required, (ii) the filing of
such documents with, and the obtaining of orders from, the various state
securities authorities that are required in connection with the transactions
contemplated by this agreement and (iii) the filing of an additional listing
application and the listing of the Purchased Common Shares to be issued pursuant
to this Agreement and the other Common Shares to be issued in the Private
Placement, as contemplated by Section 5.1(c); or (c) conflict with or result in
any breach or default (with or without notice or lapse of time or both) or
violate any loan agreement, note, mortgage, indenture, lease or other
obligation, instrument, order, injunction, decree, statute, rule or regulation
applicable to GREAT or its Subsidiaries or any of their respective properties or
assets where such conflicts, breaches, defaults or violations would, in the
aggregate, have a Material Adverse Effect.
3.7 REIT Status. (a) To GREAT's Knowledge, no person or entity which
would be treated as an "individual" for purposes of Section 542(a)(2) of the
Code (as modified by the by Section 856(h) of the Code) owns or would be
considered to own (taking into account the ownership attribution rules under
Section 544 of the Code, as modified by Section 856(h) of the Code) in excess of
5.0% of the value of the outstanding equity interest in GREAT. The Board of
Trust Managers of GREAT has not exempted any Person from the Ownership Limit (as
defined in the Charter) or the Grove Affiliate Investor Limit (as defined in the
Charter) or otherwise waived any of the provisions of Section 7 of the Charter.
The Ownership Limit and the Grove Affiliate Investor Limit (each as defined in
the Charter) have not been modified pursuant to Section 7.9 or 7.10 of the
Charter or otherwise; provided, that such limits are expected to be modified
pursuant to the Charter Amendments, and, if the Charter Amendments are effected,
GREAT's Board of Trust Managers will be permitted to exempt from such limits one
or more Persons in connection with a purchase of Common Shares by such Persons
in the Private Placement.
(b) GREAT (i) has been or intends in its federal income tax returns for
the tax years ended December 31, 1994, 1995 and 1996 to be taxed as a real
estate investment trust within the meaning of Section 856 of the Code (a "REIT")
and has complied (or will comply) with all applicable provisions of the Code
relating to a REIT for 1995 and 1996, (ii) has operated and currently intends to
continue to operate in such a manner so as to qualify as a REIT, (iii) has not
taken or omitted to take any action
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<PAGE>
which would reasonably be expected to result in a challenge to its status as a
REIT, and (iv) to GREAT's Knowledge, and assuming the accuracy of Purchaser's
representations in Article IV hereof, will not be rendered unable to qualify as
a REIT for federal income tax purposes as a consequence of the transactions
contemplated hereby.
3.8 No Brokers' or Other Fees. No broker, finder or investment banker
is entitled to any brokerage, finder or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by GREAT for which Purchaser shall be liable or obligated.
ARTICLE
Representations and Warranties of Purchaser
Purchaser hereby represents and warrants to GREAT that, as of
the date of this Agreement and as of the Closing Date:
.0 Organization and Authorization. Purchaser is an entity of the
type identified in the introductory paragraph of this Agreement, duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation. The execution and delivery of this Agreement and the other agreements
and instruments contemplated hereby have been, and the consummation of the
transactions contemplated hereby and thereby have been, duly and validly
authorized by all necessary action of Purchaser, and no other proceedings on the
part of Purchaser are or will be necessary to consummate the transactions
contemplated hereby. Purchaser has the right, power, legal capacity and
authority to enter into, deliver and perform this Agreement and any other
agreements and instruments contemplated hereby and to own the Purchased Common
Shares, and this Agreement and all such other agreements are, or upon the
execution thereof will be, valid and legally binding upon Purchaser and
enforceable in accordance with their respective terms except as limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
.1 Consents and Approvals; No Violation. None of the execution
and delivery of this Agreement by Purchaser, its consummation of the
transactions contemplated hereby or its compliance with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
statutes governing the organization and operation of Purchaser or the
organizational documents of Purchaser, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except for any filings referred to in Section 3.6,
filings by Purchaser under Section 13(d) or 16(a) of the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby, and except for such other consents as are obtained or waived prior to
the Closing Date,
<PAGE>
or (iii) conflict with or result in any breach or default (with or without
notice or lapse of time or both) or violate any loan agreement, note, mortgage,
indenture, lease or other obligation, instrument, order, writ, injunction,
decree, statute, rule or regulation applicable to Purchaser or any of its
properties or assets.
.2 ERISA Certification. Purchaser has read and comprehends the ERISA
Certification referred to in Section 5.3(a) and attached hereto as Exhibit A
(the "ERISA Certification"), has completed and executed the ERISA Certification
and has delivered the same to GREAT simultaneously with the execution of this
Agreement.
.3 Information Supplied. None of the information to be supplied by
Purchaser in connection with the Proxy Statement will, at the date mailed to
shareholders and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
4. No Brokers' or Other Fees. No broker, finder or investment banker is
entitled to any brokerage, finder or other fee or commission in connection with
the transaction contemplated by this Agreement based upon arrangements made by
or on behalf of Purchaser or its Affiliates for which GREAT shall be liable or
obligated.
5. Investment Intent. Purchaser has read and comprehends the definition of
"Accredited Investor" set forth in Section 1.1 hereof, and is an "Accredited
Investor." Purchaser is acquiring the Purchased Common Shares for the purpose of
investment only and not with a view to or for sale in connection with any
distribution thereof (other than in a transaction which is either registered
under the Act or which is exempt from such registration). Purchaser hereby
acknowledges that (i) copies of the SEC Filings have been provided or made
available to Purchaser and (ii) Purchaser has been given an opportunity to ask
questions of, and receive written answers from, GREAT and its executive officers
concerning the terms and conditions of the Private Placement, and to obtain any
additional written information (to the extent GREAT possesses such information
or can acquire it without unreasonable expense or effort) necessary to verify
the accuracy of the information contained therein.
6. REIT Qualification Matters. To Purchaser's knowledge, no Person which
would be treated as an "individual" for purposes of Section 542(a)(2) of the
Code (as modified by Section 856(h) of the Code) owns or would be considered to
own (taking into account the ownership attribution rules under Section 544 of
the Code as modified by Section 856(h) of the Code) in excess of 5.0% of the
value of the outstanding equity interest in Purchaser.
7.Investment Company Matters. Purchaser is not, and after giving
effect to the purchase of the Purchased Common Shares hereunder, will not be, an
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<PAGE>
"investment company" or an entity "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.
ARTICLE
Covenants of Great and Purchaser
0. Covenants of GREAT. GREAT covenants and agrees with Purchaser
as follows:
( ) Access. Between the date of this Agreement and the Closing Date, and
subject to any limitations imposed by Section 5(c) of the Act, GREAT shall (and
shall cause its Subsidiaries to) give Purchaser and its counsel, accountants and
other representatives access to, and furnish Purchaser and its representatives
with, all documents, copies of documents, financial and operating data and other
information concerning the property and affairs of GREAT as Purchaser may from
time to time reasonably request.
(a) Shareholder Meeting. GREAT shall call a special meeting of its
shareholders (the "Special Meeting") to be held as promptly as practicable for
the purpose of voting upon the issuance and sale of Common Shares pursuant to
the Private Placement (including the Purchased Shares) and certain other
matters. GREAT filed on November 21, 1996 with the SEC under the Exchange Act,
and shall use its best efforts to clear with the SEC, a proxy statement with
respect to the Special Meeting (together with any amendments and supplements
thereto, the "Proxy Statement"). At the Special Meeting, GREAT will, through its
Board of Trust Managers, recommend to its shareholders approval of all proposals
(the "Current Proposals") included in the Proxy Statement as filed with the SEC
on November 21, 1996.
(b) Stock Exchange Listing. Prior to the Closing Date, the Purchased Common
Shares to be issued pursuant to this Agreement shall be approved for listing on
the AMEX, subject to official notice of issuance.
(c) Ancillary Agreements. GREAT shall cause the Registration Rights
Agreement to be executed by a duly authorized officer on behalf of GREAT at or
prior to the Closing and shall use all reasonable efforts to obtain the
execution of the Registration Rights Agreement by the other parties thereto
(other than Purchaser) effective on the Closing.
(d) Best Efforts. Subject to the terms and conditions of this Agreement,
GREAT shall use its best efforts to take, or cause to be taken, all reasonable
action, and to do, or cause to be done, all reasonable things necessary,
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<PAGE>
proper or advisable under the applicable laws and regulations to cause the
conditions specified in Article VI to be satisfied and otherwise to consummate
and make effective the transactions contemplated by this Agreement.
(e) Material Adverse Changes; SEC Filings; Financial
Statements.
( ) GREAT will promptly notify Purchaser of any event of which GREAT
obtains knowledge which has had or might reasonably be expected to have a
Material Adverse Effect or which might reasonably be expected to result in the
non-satisfaction of any condition set forth in Article VI.
(i) Prior to the Closing, GREAT will timely file with the SEC all
disclosure documents, including each Quarterly Report on Form 10-Q, Current
Report on Form 8-K and Annual Report on Form 10-K, required to be filed by GREAT
under the Exchange Act and the rules and regulations promulgated thereunder. As
of their respective dates, none of such reports shall contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(ii) Each of the financial statements included in GREAT's Forms 10-Q and
Form 10-K referred to in clause (ii) shall be prepared in accordance with GAAP
consistently applied during the periods covered (except as disclosed therein),
except that the quarterly financial statements may omit (y) statements of
changes in financial position and footnote disclosures required by GAAP to the
extent the content thereof would not materially differ from those disclosures
reported in the most recent annual financial statement, and (z) year-end
adjustments to the extent not material.
(f) Preemptive Rights. GREAT shall provide Purchaser with written notice
(the "Issuance Notice") of any proposed issuance for cash of any Common Shares
or any securities convertible into or exchangeable for, or any rights or
warrants to acquire, any Common Shares no later than 30 days prior to the
proposed issuance thereof, including any Qualified Public Offering. The Issuance
Notice shall specify the securities to be issued, a purchase price range or
formula under which the purchase price is to be determined, the proposed
issuance date and all other material terms of such issuance (to the extent then
known by GREAT). Upon delivery to GREAT by Purchaser no later than 10 days after
the Issuance Notice of a notice (the "Purchase Notice") stating that Purchaser
intends to acquire a portion of the securities to be issued, Purchaser shall be
entitled, on the terms offered by GREAT to other prospective purchasers of the
securities to be issued, to purchase (A) in the case of a proposed issuance of
Common Shares, up to a number of Common Shares such that, giving effect to the
proposed issuance (and the exercise in full by Purchaser of its rights
15
<PAGE>
under this Section 5.1(g) with respect to such proposed issuance), Purchaser
would hold 11.2% of the issued and outstanding Common Shares, and (B) in the
case of a proposed issuance of any securities convertible into or exchangeable
for, or any rights or warrants to acquire, any Common Shares, up to 11.2% of
such securities proposed for issuance. Any Purchase Notice shall state the
amount of securities Purchaser intends to purchase. Notwithstanding anything
herein to the contrary, GREAT shall be entitled not to proceed with the proposed
issuance or to alter the terms thereof; provided that, in the event that any
material terms of the proposed issuance are altered, (i) any Issuance Notice and
Purchase Notice shall be deemed to be revoked automatically and (ii) Purchaser
shall be entitled to participate in such proposed issuance on the terms set
forth in a revised Issuance Notice in accordance with this Section 5.1(g),
except that the revised Issuance Notice shall be given as soon as practicable
but in no event later than five business days prior to the proposed issuance and
the Purchase Notice with respect thereto shall be given no later than two
business days after the revised Issuance Notice. Notwithstanding the foregoing,
this Section 5.1(g) shall not apply to (i) the issuance of Common Shares at any
time pursuant to Redemption Rights, (ii) the issuance of any Common Shares
pursuant to warrants, options or other securities, convertible into,
exchangeable or exercisable for or otherwise carrying the right to receive
Common Shares, in each case outstanding as of Closing Date, (iii) the issuance
of Common Shares or options or other rights to acquire Common Shares (and the
issuance of Common Shares pursuant thereto) pursuant to GREAT's 1996 Share
Incentive Plan, and (iv) the issuance of Common Shares or options or other
rights to acquire Common Shares (and the issuance of Common Shares pursuant
thereto) pursuant to any stock incentive plan adopted after the date of this
Agreement.
(g) Expiration of Covenants. The covenants of GREAT contained in Section
5.1(g) shall expire upon the earlier to occur of (i) consummation of a Qualified
Public Offering, and (ii) such time as the Purchaser holds less than 5.6% of the
outstanding Common Shares (excluding from the number of outstanding Common
Shares for purposes of such calculation, Common Shares issued after the Closing
Date to which Purchaser's preemptive rights set forth in Section 5.1(g) did not
apply).
.1 Covenants of Purchaser. Purchaser covenants and agrees with GREAT as
follows:
( ) Confidentiality. Subject to the requirements of applicable law,
Purchaser shall, and shall use all reasonable efforts to cause its officers,
employees and agents who obtain such information to, hold in confidence all
non-public information obtained from GREAT until such time as such information
is otherwise available to Purchaser without breach of an agreement with
Purchaser or becomes publicly available.
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<PAGE>
(a) Proxy Statement. Purchaser shall cooperate with GREAT in the
preparation of the Proxy Statement and shall provide to GREAT any information
regarding Purchaser required or deemed advisable by GREAT or its advisors to be
included in the Proxy Statement. None of the information to be supplied by
Purchaser expressly for inclusion in the Proxy Statement, or in any amendments
or supplements thereto, will, at the time of (x) the first delivery or mailing
thereof or (y) the Special Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. At the Special Meeting called
pursuant to Section 5.1(b), Purchaser shall vote all Common Shares owned by it
(if any) in favor of approval and adoption of each of the Current Proposals.
(b) Ancillary Agreements. Purchaser shall cause the Registration Rights
Agreement to be executed on behalf of Purchaser and delivered to GREAT at or
prior to the Closing.
(c) Best Efforts. Subject to the terms and conditions of this Agreement,
Purchaser shall use its best efforts to take, or cause to be taken, all
reasonable actions, and to do, or cause to be done, all reasonable things
necessary, proper or advisable under the applicable laws and regulations to
cause the conditions specified in Article VII to be satisfied and otherwise to
consummate and make effective the transactions contemplated by this Agreement.
5.3 ERISA Covenants.
(a) ERISA Certification. Simultaneous with the execution of
this Agreement, Purchaser shall review, complete and deliver to GREAT an ERISA
Certification, substantially in the form of Exhibit A hereto (the "ERISA
Certification").
(b) Adjustment to Purchased Common Shares. The parties hereby
acknowledge and agree that, notwithstanding any prior agreement between the
parties or anything to the contrary contained herein, in the event that
Purchaser is a "benefit plan investor" (as defined in the ERISA Certification),
GREAT may, in its sole discretion, by delivery of a notice to Purchaser at any
time prior to the Closing, reduce the number of Common Shares that constitute
the Purchased Common Shares hereunder, and such reduction shall not affect
Purchaser's obligations hereunder except as specifically contemplated by Section
5.3(c). GREAT's notice shall set forth (i) the number of Common Shares which
shall thereafter constitute the Purchased Shares hereunder and (ii) the Purchase
Price for the Purchased Shares, as reduced in accordance with Section 5.3(c).
(c) Adjustment to Purchase Price. In the event that the number of
Common Shares which constitutes the Purchased Common Shares is reduced
17
<PAGE>
pursuant to Section 5.3(b) hereof, the Purchase Price to be paid by Purchaser
hereunder shall be reduced accordingly, and shall thereafter be equal to the
product of (i) the Purchase Price Per Common Share and (ii) the number of Common
Shares constituting the Purchased Common Shares, after giving effect to the
reduction pursuant to Section 5.3(b).
(d) Restrictions on Transfer. In addition to any other restrictions on
the transfer of the Purchased Common Shares, whether contained in the Charter,
GREAT's Bylaws or elsewhere, in no event may a transfer of any interest in a
Purchased Common Share be made unless, prior to such transfer, (i) the proposed
transferee delivers to GREAT a completed and executed ERISA Certification, and
(ii) GREAT determines, in its sole discretion, that such transfer would not
cause any portion of its assets to be deemed to be "plan assets" for purposes of
the fiduciary requirements of ERISA and the prohibited transaction provisions of
ERISA and/or Internal Revenue Code Section 4975.
ARTICLE
Conditions of Purchaser's Obligations at Closing
The obligations of Purchaser set forth in Article II are
subject to the fulfillment or waiver by Purchaser on or before the Closing Date
of each of the following conditions:
.0 Representations and Warranties. The representations and warranties of
GREAT contained in Article III shall be true in all material respects on and as
of the Closing Date with the effect as though such representations and
warranties had been made on and as of the Closing Date.
.1 Performance. GREAT shall have performed and complied in all material
respects with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing Date.
.2 Compliance Certificate. GREAT shall deliver to Purchaser at the Closing
a certificate, in the form of Exhibit C hereto, duly executed by an authorized
officer on behalf of GREAT, certifying that the conditions specified in Sections
6.1 and 6.2 have been satisfied.
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<PAGE>
.3 No Litigation. There shall be no order, decree or injunction of a court
of competent jurisdiction which, as of the Closing Date, stays or prohibits the
transactions contemplated by this Agreement.
.4 Consents and Waivers. Any and all consents or waivers from other parties
to any agreements, or consents, waivers or permits from other Persons, that are
required in connection with the consummation by Purchaser or GREAT of the
transactions contemplated by this Agreement shall have been obtained, including,
without limitation, the approval of GREAT's shareholders of the Current
Proposals.
.5 Ancillary Agreements. The Registration Rights Agreement shall have been
duly and validly executed by the parties thereto (other than Purchaser) and
shall be in full force and effect.
.6 Minimum Private Placement. The aggregate gross proceeds received by
GREAT from the concurrent sale of Common Shares hereunder and to other
purchasers of Common Shares in the Private Placement shall be not less than
$15,000,000.
ARTICLE
Conditions of GREAT's Obligations at Closing
The obligations of GREAT set forth in Article II are subject
to the fulfillment or waiver by GREAT on or before the Closing of each of the
following conditions:
.0 Representations and Warranties. The representations and warranties of
Purchaser contained in Article IV shall be true on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the Closing Date.
.1 Purchase Price. Purchaser shall have delivered the Purchase Price to
GREAT.
.2 Compliance Certificate. Purchaser shall deliver to GREAT at the Closing
a certificate, in the form of Exhibit B hereto, duly executed by or on behalf of
Purchaser, certifying that the conditions specified in Sections 7.1 and 7.4 have
been satisfied.
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<PAGE>
.3 Performance. Purchaser shall have performed and complied in all material
respects with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing Date.
.4 No Litigation. There shall not be any action, suit, proceeding, hearing
or investigation or order, decree or injunction of any nature or type
threatened, pending or made by or before any governmental body that questions or
challenges the lawfulness of the transactions contemplated by this Agreement or
in connection with any of the Consolidation Transactions under any law or
regulation or seeks to delay, restrain or prevent or obtain damages in respect
of such transactions.
.5 Consents and Waivers. Any and all consents or waivers from other parties
to any agreements or consents, waivers or permits from other Persons that are
required in connection with the consummation by Purchaser or GREAT of the
transactions contemplated in this Agreement shall have been obtained, including
without limitation approval of the Current Proposals by GREAT's shareholders.
.6 Ancillary Agreements. The Registration Rights Agreement shall have been
duly and validly executed by the parties thereto (other than GREAT) and shall be
in full force and effect.
.7 ERISA Certification. Purchaser shall have reviewed, completed and
delivered to GREAT the ERISA Certification.
7.9 Minimum Private Placement. The aggregate gross proceeds
received by GREAT from the concurrent sale of Common Shares hereunder and to
other purchasers of Common Shares in the Private Placement shall be not less
than $15,000,000.
7.10 "Consolidation Transactions". The closing under the
Contribution Agreement (as described in the Proxy Statement), the Exchange Offer
and the Refinancing (as described in the Proxy Statement) shall have occurred,
or all of the conditions thereto shall have been satisfied so that the closings
thereunder occur concurrently with the sale of the Purchased Shares.
ARTICLE VIII
MISCELLANEOUS
8.1 Successors and Assigns. Neither party may assign
any of its rights or delegate any of its duties under this Agreement with out
the prior written consent of the other party hereto. Except as otherwise
provided herein, the terms and
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<PAGE>
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
8.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York,
except that the internal corporate affairs of GREAT shall be governed by the
laws of Maryland applicable thereto.
8.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.4 Captions. The captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
8.5 Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto shall
be in writing, shall be deemed to have been duly given or delivered when
delivered personally or telecopied (receipt confirmed, with a copy sent by
certified or registered mail as set forth herein) or sent by certified or
registered mail, postage prepaid, return receipt requested, or by Federal
Express or other overnight delivery service, to the address of the party set
forth below or to such address as the party to whom notice is to be given may
provide in a written notice to GREAT, a copy of which written notice shall be on
file with the Secretary of GREAT:
To GREAT:
Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Telecopier No.: (860) 947-6960
Telephone No.: (860) 246-1126
Attention: Mr. Joseph LaBrosse, Chief Financial Officer
and Secretary
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With copies to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telecopier No.: (212) 836-8689
Telephone No.: (212) 836-8685
Attention: Lynn Toby Fisher, Esq.
To Purchaser:
ABKB/LaSalle Securities Limited
100 East Pratt Street
Baltimore, Maryland 21202
Telecopier No.: (410) 528-8129
Telephone No.: (410) 347-0600
Attention: George Noon
8.6 Expenses. Whether or not the Closing occurs, GREAT and
Purchaser shall each pay all costs and expenses that it incurs with respect to
the negotiation, execution, delivery and performance of this Agreement.
8.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing executed by each of GREAT and Purchaser.
8.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms to the fullest extent permitted by law.
8.9 Publicity. GREAT and Purchaser shall continue to consult
with each other before issuing any press releases or otherwise making any public
statement with respect to this Agreement and the transactions contemplated
hereby, and they shall not issue any such press release or make any such public
statement prior to such consultation, except as may, in the judgment of counsel,
be required by law or by obligations pursuant to any securities laws or listing
agreement with any national securities exchange.
8.10 Further Assurances. Each of the parties shall,
without furtherconsideration, use reasonable efforts to execute and deliver
to the other such additional
22
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documents and take such other action as the other may reasonably request to
carry out the intent of this Agreement and the transactions contemplated hereby.
8.11 Entire Agreement. This Agreement, including the exhibits
hereto, the documents, schedules, certificates and referred to herein, together
with the Registration Rights Agreement, embodies the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by such agreements. There are no restrictions promises, inducements,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
written or oral agreements and understandings between the parties with respect
to such transactions.
8.12 Survival. All representations and warranties and
covenants of the parties contained in this Agreement shall survive the Closing.
ARTICLE IX
Termination
9.1 Termination Events. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time before
the Closing Date:
(a) by mutual written agreement of Purchaser and GREAT;
(b) by either GREAT or Purchaser at any time after April 30,
1997 if, at the time notice of such termination is given, the Closing has not
occurred, unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe any material
covenant or agreement set forth herein required to be performed or observed by
such party on or before the Closing Date;
(c) by Purchaser (if it is not in breach of any of its
material obligations hereunder) in the event of a breach or failure by GREAT
that is material in the context of the transactions contemplated hereby of any
representation, warranty, covenant or agreement by GREAT contained herein which
has not been, or cannot be, cured within 30 days after written notice of such
breach is given to GREAT; or
(d) Purchaser (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by GREAT that is
material in the context of the transactions contemplated hereby of any
representation, warranty, covenant or agreement by GREAT contained herein which
has not been, or cannot be, cured within 30 days after written notice of such
breach is given to GREAT.
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The power of termination provided for by this Section 9.1 shall be effective
only after notice thereof, duly executed on behalf of the party for which it is
given, shall have been given to the other.
9.2 Procedure Upon Termination; Liabilities. In the event of a
termination of this Agreement by either or both of GREAT and Purchaser pursuant
to Section 9.1, notice thereof shall forthwith be given by the terminating party
to the other party, and this Agreement shall thereupon terminate and become void
and have no further effect, and the transactions contemplated hereby shall be
abandoned without further action by the parties hereto, except that the
provisions of Section 5.2(a) (Confidentiality), 8.6 (Expenses), 8.2 (Governing
Law), and 8.5 (Notices), and any related definitional, interpretive or other
provisions necessary for the logical interpretation of such provisions, shall
survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any breach
of this Agreement.
IN WITNESS WHEREOF, Purchaser and GREAT have caused this
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
OREGON INVESTMENT COUNCIL ACTING ON
BEHALF OF OREGON PUBLIC EMPLOYEES'
RETIREMENT FUND UNDER AUTHORITY OF
OREGON REVISED STATUTES SECTION 293.741
BY ITS AGENT ABKB/LASALLE SECURITIES
LIMITED
By: /s/ KEITH R. PAULEY
Keith R. Pauley
Managing Director of ABKA/LaSalle
Securities Limited
GROVE REAL ESTATE ASSET TRUST
By: /s/ DAMON NAVARRO
Damon Navarro
Chief Executive Officer
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Exhibit A
ERISA CERTIFICATION
Reference is made to that certain Securities Purchase Agreement (the
"Agreement"), dated as of February 21, 1997, between Grove Real Estate Asset
Trust ("GREAT") and Oregon Investment Council acting on behalf of Oregon Public
Employees' Retirement Fund under authority of Oregon revised statutes Section
293.741 by its Agent ABKB/LaSalle Securities Limited ("Purchaser"). Capitalized
terms used but not defined herein shall have the meanings ascribed to such terms
in the Agreement.
This is the ERISA Certification referred to in, and contemplated by,
Section 5.3(a) of the Agreement.
The United States Department of Labor (the "DOL") has promulgated 29
CFR 2510.101 (the "DOL Regulation") defining the term "plan assets" for purposes
of the fiduciary requirements of Employee Retirement Income Security Act of
1974, as amended ("ERISA") and the prohibited transaction provisions of ERISA
and Internal Revenue Code Section 4975. Under the DOL Regulation, when an
employee benefit plan or an entity that holds the assets of an employee benefit
plan ("Benefit Plan Investors") makes an equity investment in another entity,
the underlying assets of that entity generally will be considered plan assets
unless one of the exceptions contained in the DOL Regulation is met. In order to
avoid having its assets deemed to be plan assets of any Benefit Plan Investor
that purchases Common Shares in the Private Placement, GREAT has determined to
restrict the number of Common Shares purchased by Benefit Plan Investors in the
Private Placement. In order to permit GREAT to comply with this restriction,
Purchaser hereby certifies the following under penalties of perjury [check one]:
[X| It is not a Benefit Plan Investor.
[_| It is a Benefit Plan Investor because it is [Check Applicable Category]:
|_| an employee welfare benefit plan or employee pension benefit
plan, as those terms are defined in ERISA Section 3, whether
or not such plan is subject to ERISA (including, without
limitation: (i) a pension, profit sharing, stock bonus or
employee stock ownership plan that is qualified under Internal
Revenue Code Section 401(a), and is established for the
benefit of the employees of any employer or is a "Keogh" plan
established for the benefit of a self-employed individual (or the
partners of a partnership), or (ii) a governmental plan (as
defined in ERISA);
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|_| an individual retirement account or annuity described in
Internal Revenue Code Section 408; or
|_| any other entity or account the underlying assets of which are
deemed to be "plan assets," within the meaning of 29 CFR Section
2510.3-101 (including, without limitation, a bank collective
investment vehicle or group trust or an insurance company separate
account) as follows [describe]:
==========================================
==========================================
==========================================
Purchaser acknowledges that, notwithstanding anything set forth in the
Agreement to the contrary, in the event that Purchaser is a "Benefit Plan
Investor," as defined in the DOL Regulation, and GREAT determines, in its sole
discretion, that the ownership by Benefit Plan Investors of Common Shares issued
in the Private Placement should be restricted to avoid having the assets of the
Purchaser deemed to be "plan assets" for purpose of the fiduciary requirements
of ERISA and the prohibited transaction provisions of ERISA and/or Internal
Revenue Code Section 4975, (a) the number of Common Shares which constitute the
Purchased Common Shares to be purchased by Purchaser under the Agreement will be
reduced in accordance with Section 5.3(b) thereof to the extent that GREAT, in
its sole discretion, deems necessary or appropriate and (b) the Purchase Price
to be paid by Purchaser for the Purchased Common Shares thereunder will be
reduced accordingly in accordance with Section 5.3(c) thereof.
IN WITNESS WHEREOF, Purchaser has executed this ERISA Certification as
of this 21st day of February, 1997.
OREGON INVESTMENT COUNCIL ACTING ON
BEHALF OF OREGON PUBLIC EMPLOYES'
RETIREMENT FUND UNDER AUTHORITY OF
OREGON REVISED STATUTES SECTION 293.741
BY ITS AGENT ABKB/LASALLE SECURITIES
LIMITED
By: /s/ KEITH R. PAULEY
Keith R. Pauley
Managing Director of ABKB/LaSalle
Securities Limited
26
<PAGE>
Exhibit B
PURCHASER'S COMPLIANCE CERTIFICATE
Pursuant to Section 7.3 of the Securities Purchase Agreement (the
"Agreement"), dated February 21, 1997, between Oregon Investment Council acting
on behalf of Oregon Public Employees' Retirement Fund under authority of Oregon
revised statutes Section 293.741 by its Agent ABKB/LaSalle Securities Limited,
("Purchaser") and Grove Real Estate Asset Trust ("GREAT"), the undersigned is
duly authorized to certify on behalf of Purchaser, and hereby certifies on
behalf of Purchaser that:
1. The representations and warranties of Purchaser contained
in the Agreement are true as of the date hereof, as though such
representations and warranties had been made on the date hereof.
2. Purchaser has performed and complied in all material respects
with all agreements, obligations and conditions contained in the
Agreement that were required to be performed or complied with by
Purchaser on or before the date hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this __ day of
___________________, 199_.
OREGON INVESTMENT COUNCIL ACTING
ON BEHALF OF OREGON PUBLIC
EMPLOYES' RETIREMENT FUND UNDER
AUTHORITY OF OREGON REVISED
STATUTES SECTION 293.741 BY ITS AGENT
ABKB/LASALLE SECURITIES LIMITED
By:_____________________________
Name:
Title:
27
<PAGE>
Exhibit C
GREAT's COMPLIANCE CERTIFICATE
(ABKB/LaSalle)
Pursuant to Section 6.3 of the Securities Purchase Agreement (the
"Agreement"), dated February 21, 1997, between Oregon Investment Council acting
on behalf of Oregon Public Employees' Retirement Fund under authority of Oregon
revised statutes Section 293.741 by its agent ABKB/LaSalle Securities Limited
("Purchaser"), and Grove Real Estate Asset Trust ("GREAT"), the undersigned, the
Secretary of GREAT, hereby duly certifies on behalf of GREAT that:
1. The representations and warranties of GREAT contained in
the Agreement are true in all material respects as of the date hereof,
as though such representations and warranties had been made on the date
hereof.
2. GREAT has performed and complied in all material respects
with all agreements, obligations and conditions contained in the
Agreement that were required to be performed or complied with by GREAT
on or before the date hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this __ day of
March, 1997.
GROVE REAL ESTATE ASSET TRUST
By:_____________________________
Joseph R. LaBrosse
Secretary
28
<PAGE>
Exhibit D
RECEIPT
Reference is made to the Securities Purchase Agreement (the
"Agreement"), dated February 21, 1997, between Oregon Investment Council acting
on behalf of Oregon Public Employees' Retirement Fund under authority of Oregon
revised statutes Section 293.741 by its Agent ABKB/LaSalle Securities Limited
("Purchaser") and Grove Real Estate Asset Trust ("GREAT"). Capitalized terms
used but not defined herein shall have the meanings ascribed to such terms in
the Agreement.
GREAT hereby acknowledges receipt, on the date hereof, of
$_____________ in respect of the Purchase Price, as such amount may have been
adjusted from time to time prior to the date hereof in accordance with Section
5.3(c) of the Agreement.
Purchaser hereby acknowledges receipt, on the date hereof, the
certificate(s) listed on Schedule A hereto representing an aggregate of ____
Common Shares, which Common Shares constitute the Purchased Common Shares, as
such number of Common Shares may have been adjusted from time to time prior to
the date hereof in accordance with Section 5.3(b) of the Agreement.
GROVE REAL ESTATE ASSET TRUST
By:_______________________________
Joseph R. LaBrosse
Chief Financial Officer
OREGON INVESTMENT COUNCIL ACTING
ON BEHALF OF OREGON PUBLIC
EMPLOYES' RETIREMENT FUND UNDER
AUTHORITY OF OREGON REVISED
STATUTES SECTION 293.741 BY ITS AGENT
ABKB/LASALLE SECURITIES LIMITED
By:___________________________________
Name:
Title:
29
<PAGE>
Schedule A
Certificate(s) Representing Purchased Shares
30
<PAGE>
31
<PAGE>
SECURITIES PURCHASE AGREEMENT
dated as of February __, 1997
between
GROVE REAL ESTATE ASSET TRUST
and
------------------------------
Insert Purchaser's Name
<PAGE>
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement"), dated as of
January __, 1997, between Grove Real Estate Asset Trust, a Maryland real estate
investment trust ("GREAT") and
- ------------------------------------------------------------------------------
_____________________("Purchaser").
WHEREAS, GREAT has distributed to certain prospective investors
(including Purchaser) who are Accredited Investors (as defined), a Private
Placement Memorandum, dated December 5, 1996 (together with all appendices
thereto, the "PPM"), in connection with the offering by GREAT to such investors
of up to 3,333,333 of GREAT's common shares of beneficial interest, par value
$0.01 per share (each a "Common Share"), at a price of $9.00 per Common Share
(the "Purchase Price Per Share");
WHEREAS, following a complete and thorough review of the PPM, Purchaser
desires to purchase from GREAT, and GREAT desires to sell to Purchaser,
_________ Common Shares (as such number of Common Shares may be reduced from
time to time in accordance with Section 5.3(b), the "Purchased Common Shares"),
upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
Article I
Definitions
1.1 Definitions. As used in this Agreement, the following terms
have the meaning set forth below:
"Accredited Investor" means, as defined under Regulation D promulgated
under the Act, any Person who (i) is able to bear the economic risk of the
acquisition of a security and can afford to sustain a total loss with respect to
such investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment,
and therefore has the capacity to protect its own interest in connection with
the acquisition of a security and/or (ii) comes within any of the following
categories: (1) any bank as defined in Section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity;
any broker or dealer registered pursuant to Section 15 of the Exchange Act; any
insurance company as defined in Section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that act; any Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its subdivisions for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; any employee
benefit plan within the meaning of ERISA, if the investment decision is made by
a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank,
savings and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are Accredited Investors; (2) any private business development
company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940;
(3) any organization described in Section 501(c)(3) of the Code, corporation,
Massachusetts or similar business trust or partnership, not formed for the
specific purpose of acquiring the securities offered, with total assets in
excess of $5,000,000; (4) any trust manager or executive officer of GREAT; (5)
any natural person whose individual net worth, or joint net worth with that
person's spouse, at the time of that person's purchase exceeds $1,000,000; (6)
any natural person who had an individual income in excess of $200,000 in each of
the two most recent years or joint income with that person's spouse in excess of
$300,000 in each of those years, and who has a reasonable expectation of
reaching the same income level in the current year; (7) any trust with total
assets in excess of $5,000,000 not formed for the specific purpose of acquiring
the securities offered, whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of Regulation D; and (8) any entity in which all
of the equity owners are Accredited Investors.
As used in this definition, the term "net worth" means the excess of
the total assets over total liabilities. In calculating "net worth," the value
of a principal residence must be valued at cost or at a written appraised value
used by an institutional lender to make a loan secured by the property. In
determining income, an investor should add to such investor's adjusted gross
income any amounts attributable to tax exempt income received, losses claimed as
a limited partner in any limited partnership, deductions claimed for depletion
contributions to an "IRA" or "KEOGH" retirement plan, alimony payments and any
amount by which income from long-term capital gains has been reduced in arriving
at adjusted gross income.
"Act" means the Securities Act of 1933, as amended, or any successor statute.
"Affiliate" of any Person means any Person which, directly or indirectly,
controls, is controlled by, or is under common control with, such Person. The
term "control" (including, with correlative meaning, the terms "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" has the meaning ascribed to such term in the introductory paragraph
of this Agreement.
"AMEX" means the American Stock Exchange, Inc.
"best efforts" , as used in this Agreement, shall mean commercially reasonable
efforts; provided, that in no event shall "best efforts" mean efforts which
require the performing party (i) to do any act that is unreasonable under the
circumstances, to make any capital contribution or to expend any funds other
than reasonable out-of-pocket expenses incurred in satisfying its obligations
under this Agreement, including, but not limited to, the fees, expenses and
disbursements of its accountants, counsel and other professionals, or (ii) in
the case of GREAT, to modify the terms of the Consolidation Transactions.
"Charter" means the Second Amended and Restated Declaration of Trust of GREAT.
"Charter Amendments" means the amendments proposed to be effected to the
Charter, as set forth in the Proxy Statement.
"Charter Documents" means the Charter and the Bylaws of GREAT, as each may be
amended from time to time.
"Closing" has the meaning ascribed to such term in Section 2.2 of this
Agreement.
"Closing Date" has the meaning ascribed to such term in Section 2.2 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, together with the
rules and regulations promulgated thereunder, or any successor statute.
"Common Shares" means the common shares of beneficial interest, $0.01 par value
per share, of GREAT.
"Common Units" means common units representing ownership interests in the
Operating Partnership.
"Consolidation Transactions" means the consolidation transactions, including the
Private Placement, proposed to be entered into by GREAT, as described in the
Proxy Statement.
"Current Proposals" has the meaning ascribed to such term in Section 5.1(b) of
this Agreement.
"Damages" of any Person means any loss, liability (however defined or
characterized), diminution in value, damage or expense (including reasonable
costs of investigation and prosecution of litigation and attorneys' fees)
incurred by such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
or any successor statute.
"ERISA Certification" has the meaning ascribed to such term in Section 5.3(a) of
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute.
"Exchange Offer" means the Offer to Exchange, dated December 2, 1996, by the
Operating Partnership to the limited partners of certain limited partnerships,
pursuant to which certain such limited partners can exchange the interests held
by them in such limited partnerships for Common Units or, under certain
circumstances, cash, as such Offer to Exchange may be supplemented, amended or
modified from time to time.
"GAAP" means generally accepted accounting principles in effect from time to
time in the United States.
"GREAT" has the meaning ascribed to such term in the introductory paragraph of
this Agreement.
"Knowledge" of GREAT means the actual knowledge of any of its officers (other
than assistant officers whose duties are principally ministerial) after due
inquiry to satisfy themselves that there is a reasonable basis for belief in the
accuracy of any of the representations and warranties made by GREAT, but shall
not be construed to require independent review or verification by them of
underlying facts.
"Material Adverse Effect" means any change in or effect on the business of GREAT
or its Subsidiaries that is materially adverse to the business, assets, results
of operations or financial condition of GREAT and its Subsidiaries taken as a
whole, or materially impairs the ability of GREAT to consummate the transactions
contemplated by this Agreement.
"Operating Partnership" means Grove Operating, L.P., a Delaware limited
partnership and the operating partnership of GREAT.
"Person" means any individual, a partnership, a joint venture, a corporation, a
trust, limited liability company, an unincorporated organization or a government
or any department or agency thereof.
"PPM" has the meaning ascribed to such term in the first Whereas clause of this
Agreement.
"Private Placement" means the private placement of up to 3,333,333 Common Shares
by GREAT pursuant to and as more fully set forth in the PPM.
"Proxy Statement" has the meaning ascribed to such term in Section 5.1(b) of
this Agreement.
"Purchase Price" means $____________, which is equal to the product of $9.00
(the Purchase Price Per Share) and _________ (the number of Common Shares which
constitutes the Purchased Common Shares), subject to adjustment in accordance
with Section 5.3(c).
"Purchase Price Per Share" has the meaning ascribed to such term in the first
Whereas clause of this Agreement.
"Purchased Common Shares" has the meaning ascribed to such term in the second
Whereas clause of this Agreement.
"Receipt" means the receipt to be executed and delivered by each of Purchaser
and GREAT at Closing, in the form attached as Exhibit D hereto.
"Redemption Rights" means the right, beginning one year after the issuance of
Common Units to limited partners of the limited partnerships participating in
the Exchange Offer, of certain limited partners to require the Operating
Partnership to redeem their Common Units for cash equal to the fair market value
of an equivalent number of Common Shares at the time of redemption or, at the
Operating Partnership's option, it can exchange such Common Units for Common
Shares on a one-for-one basis (subject to adjustment).
"Registration Rights Agreement" means the Registration Rights Agreement, to be
entered into on or prior to the Closing, among GREAT, Purchaser, certain other
purchasers of the Common Shares offered in the Private Placement and others,
which will grant to Purchaser certain "piggyback" registration rights (provided,
that in any event, no registration statement in connection with such
registration rights shall be filed with the SEC or with any state securities
commission at any time prior to the six-month anniversary of the Closing) and
subject the sale by Purchaser of its Common Shares to certain "black out"
provisions.
"SEC" means the United States Securities and Exchange Commission.
"SEC Filings" has the meaning ascribed to such term in Section 3.4 of this
Agreement.
"Special Meeting" shall have the meaning ascribed to such term in Section 5.1(b)
of this Agreement.
"Subsidiaries" means, collectively, GREAT's direct or indirect majority-owned
subsidiaries, including, without limitation, the Operating Partnership.
Article II.
Purchase of Common Shares
2.1 Purchase of Common Shares. At the Closing, GREAT shall issue and sell to
Purchaser, and Purchaser shall purchase from GREAT, the Purchased Common Shares.
At the Closing, Purchaser shall pay the Purchase Price for the Purchased Common
Shares by wire transfer of immediately available funds or by certified or
official bank check payable in same day funds to the order of GREAT. Upon
receipt of the Purchase Price, GREAT shall deliver to Purchaser a certificate
representing the number of Common Shares constituting the Purchased Common
Shares, registered in the name of Purchaser.
2.2 Closing. The closing of the issuance and sale of the Purchased Common Shares
hereunder (the "Closing") shall take place at the offices of Kaye, Scholer,
Fierman, Hays & Handler, LLP located at 425 Park Avenue, New York, New York
10022, and will occur substantially simultaneously with the closing of the other
purchases and sales of Common Shares in the Private Placement. GREAT will notify
Purchaser of the date of the Closing (the "Closing Date") not less than three
business days prior to the Closing Date.
2.3 Deliveries.
(a) Purchaser's Deliveries. At the Closing, in consideration of Purchaser's
receipt from GREAT of the Purchased Common Shares, Purchaser shall deliver to
GREAT the following:
(i) the Purchase Price in accordance with Section 2.1 hereof;
(ii) the certificate referred to in Section 7.3 hereof duly executed on behalf
of Purchaser;
(iii) the Registration Rights Agreement, duly executed on behalf of Purchaser;
and
(iv) the Receipt, duly executed on behalf of Purchaser.
(b) GREAT's Deliveries. At the Closing, in consideration of GREAT's receipt of
the Purchase Price from Purchaser, GREAT shall deliver to Purchaser the
following:
(i) certificates representing the Purchased Shares, duly issued in the name of
Purchaser;
(ii) the certificate referred to in Section 6.3 hereof, duly executed by an
authorized officer on behalf of GREAT;
(iii) the Registration Rights Agreement, duly executed by an authorized officer
on behalf of GREAT; and
(iv) the Receipt, duly executed by an authorized officer on behalf of GREAT.
2.4 Legends. In addition to the legend concerning inter alia, Excess Shares, set
forth in the Charter, the certificates evidencing the Purchased Common Shares
shall bear the following legends:
(a) "The transfer of the securities represented by this
certificate is subject to conditions specified in section 5.3(d) of a Securities
Purchase Agreement dated January, __, 1997, as such agreement may be amended
from time to time, and no transfer of such securities shall be valid or
effective until such conditions have been fulfilled with respect to such
transfer. A copy of such Securities Purchase Agreement will be furnished by the
company to the holder of this certificate upon written request and without
charge."
(b) "These securities have not been registered under the
Securities Act of 1933, as amended (the "Act") and may not be offered sold or
otherwise transferred except pursuant to an effective registration statement
under the Act or an exemption from the registration requirements thereof. These
securities have not been registered under the securities laws of any state."
Article III
Representations and Warranties of GREAT
GREAT hereby represents and warrants to Purchaser that, as of the date
of this Agreement and as of the Closing Date:
3.1 Organization, Good Standing and Qualification. GREAT has been duly
organized and is a validly existing trust in good standing under the laws of
Maryland with all requisite power and authority to carry on its business as
presently conducted. GREAT is duly qualified to transact business and is in good
standing in each jurisdiction in which it is required to be qualified except
where the failure to be so qualified or in good standing would not, in the
aggregate, have a Material Adverse Effect.
3.2 Capitalization. (a) As of the date hereof, the authorized capital
stock of GREAT consists of 10,000,000 Common Shares, 525,000 of which are issued
and outstanding as of the date hereof, and 4,000,000 preferred shares of
beneficial interest, $0.01 par value per share, none of which are issued and
outstanding as of the date hereof. No other shares of capital stock of GREAT are
outstanding or held as treasury shares. There are no outstanding options,
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from GREAT of any shares of its capital stock or
securities or obligations of any kind convertible into any shares of its capital
stock except for (i) options to purchase an aggregate of 100,000 Common Shares
held by certain executive officers and trust managers of GREAT and issued under
GREAT's 1994 Share Option Plan, (ii) as contemplated by the Private Placement
(including pursuant to this Agreement and pursuant to other Securities Purchase
Agreements between GREAT on the one hand, and other purchasers of Common Shares
therein on the other hand) and (iii) the Common Shares issuable to certain
Persons participating in the Exchange Offer at the option of the Operating
Partnership upon the exercise by such Persons of Redemption Rights.
(b) The Capitalization Table set forth in the section of
Appendix I to the PPM entitled "SUMMARY -- Capitalization" sets forth the
currently anticipated capitalization of GREAT at the Closing, giving effect to
the consummation of the Consolidation Transactions, including the Private
Placement. The capitalization set forth on such table has been calculated taking
into account various assumptions regarding the Consolidation Transactions, as
described in further detail in the above-referenced section of Appendix I to the
PPM, and accordingly, the actual capitalization of GREAT following the
consummation of the Consolidation Transactions may differ.
3.3 Authorization. GREAT has full power and corporate authority to
execute and deliver this Agreement and (subject to shareholder approval as
contemplated by the Proxy Statement) to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the other agreements
and instruments contemplated hereby, and the consummation of the transactions
contemplated by this Agreement, have been authorized by the Board of Trust
Managers of GREAT and no other proceedings (except for a meeting of the
shareholders of GREAT for the purpose of obtaining shareholder approval as
contemplated by the Proxy Statement) on the part of GREAT are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed by GREAT and, subject as aforesaid,
constitutes a valid and binding agreement of GREAT enforceable in accordance
with its terms except as limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
3.4 SEC Filings. Purchaser has been provided (or will, upon Purchaser's
written request, be provided) true and correct copies of GREAT's annual reports
on Form 10-KSB for the fiscal years ended December 31, 1995 and 1994, and
GREAT's quarterly reports on Form 10-QSB for the fiscal quarters ended March 31,
1996, June 30, 1996 and September 30, 1996 (collectively, the "SEC Filings"). As
of their respective dates, the SEC Filings (including all exhibits and schedules
thereto and documents incorporated by reference therein) complied in all
material respects with the laws, regulations and forms governing the SEC
Filings; and none of the SEC Filings contained, as of the date it was filed with
the SEC, any untrue statement of any material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.5 Valid Issuance of Shares. The Purchased Common Shares, when issued,
sold and delivered to Purchaser in accordance with the terms hereof for the
consideration expressed herein, will be duly authorized and validly issued,
fully paid and nonassessable and, based in part on the representations of
Purchaser in this Agreement, will be issued in compliance with all applicable
federal and state securities laws.
3.6 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by GREAT, its consummation of the transactions
contemplated hereby nor its compliance with any of the provisions hereof will
(a) conflict with or result in the breach of any provision of the Charter
Documents; (b) require any consent, approval, order or authorization of, or
registration, qualification, designation or filing with or notification to, any
governmental or regulatory authority, the failure of which to obtain would have
a Material Adverse Effect, except for (i) the filing with the SEC of a Form D
and such other documents as may be required in connection with this Agreement
and the other Common Shares being issued in the Private Placement and the
obtaining from the SEC of such orders as may be so required, (ii) the filing of
such documents with, and the obtaining of orders from, the various state
securities authorities that are required in connection with the transactions
contemplated by this agreement and (iii) the filing of an additional listing
application and the listing of the Purchased Common Shares to be issued pursuant
to this Agreement and the other Common Shares to be issued in the Private
Placement, as contemplated by Section 5.1(c); or (c) conflict with or result in
any breach or default (with or without notice or lapse of time or both) or
violate any loan agreement, note, mortgage, indenture, lease or other
obligation, instrument, order, injunction, decree, statute, rule or regulation
applicable to GREAT or its Subsidiaries or any of their respective properties or
assets where such conflicts, breaches, defaults or violations would, in the
aggregate, have a Material Adverse Effect.
3.7 REIT Status. (a) To GREAT's Knowledge, no person or entity which
would be treated as an "individual" for purposes of Section 542(a)(2) of the
Code (as modified by the by Section 856(h) of the Code) owns or would be
considered to own (taking into account the ownership attribution rules under
Section 544 of the Code, as modified by Section 856(h) of the Code) in excess of
5.0% of the value of the outstanding equity interest in GREAT. The Board of
Trust Managers of GREAT has not exempted any Person from the Ownership Limit (as
defined in the Charter) or the Grove Affiliate Investor Limit (as defined in the
Charter) or otherwise waived any of the provisions of Section 7 of the Charter.
The Ownership Limit and the Grove Affiliate Investor Limit (each as defined in
the Charter) have not been modified pursuant to Section 7.9 or 7.10 of the
Charter or otherwise; provided, that such limits are expected to be modified
pursuant to the Charter Amendments, and, if the Charter Amendments are effected,
GREAT's Board of Trust Managers will be permitted to exempt from such limits one
or more Persons in connection with a purchase of Common Shares by such Persons
in the Private Placement.
(b) GREAT (i) has been or intends in its federal income tax returns for
the tax years ended December 31, 1994, 1995 and 1996 to be taxed as a real
estate investment trust within the meaning of Section 856 of the Code (a "REIT")
and has complied (or will comply) with all applicable provisions of the Code
relating to a REIT for 1995 and 1996, (ii) has operated and currently intends to
continue to operate in such a manner so as to qualify as a REIT, (iii) has not
taken or omitted to take any action which would reasonably be expected to result
in a challenge to its status as a REIT, and (iv) to GREAT's Knowledge, and
assuming the accuracy of Purchaser's representations in Article IV hereof, will
not be rendered unable to qualify as a REIT for federal income tax purposes as a
consequence of the transactions contemplated hereby.
3.8 No Brokers' or Other Fees. No broker, finder or investment banker
is entitled to any brokerage, finder or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by GREAT for which Purchaser shall be liable or obligated.
<PAGE>
ARTICLE IV
Representations and Warranties of Purchaser
Purchaser hereby represents and warrants to GREAT that, as of
the date of this Agreement and as of the Closing Date:
4.1 Organization and Authorization. Purchaser is an entity of the type
identified in the introductory paragraph of this Agreement, duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation. The execution and delivery of this Agreement and the other agreements
and instruments contemplated hereby have been, and the consummation of the
transactions contemplated hereby and thereby have been, duly and validly
authorized by all necessary action of Purchaser, and no other proceedings on the
part of Purchaser are or will be necessary to consummate the transactions
contemplated hereby. Purchaser has the right, power, legal capacity and
authority to enter into, deliver and perform this Agreement and any other
agreements and instruments contemplated hereby and to own the Purchased Common
Shares, and this Agreement and all such other agreements are, or upon the
execution thereof will be, valid and legally binding upon Purchaser and
enforceable in accordance with their respective terms except as limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
4.2 Consents and Approvals; No Violation. None of the execution and
delivery of this Agreement by Purchaser, its consummation of the transactions
contemplated hereby or its compliance with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the statutes governing
the organization and operation of Purchaser or the organizational documents of
Purchaser, (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, except
for any filings referred to in Section 3.6, filings by Purchaser under Section
13(d) or 16(a) of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, and except for such other
consents as are obtained or waived prior to the Closing Date, or (iii) conflict
with or result in any breach or default (with or without notice or lapse of time
or both) or violate any loan agreement, note, mortgage, indenture, lease or
other obligation, instrument, order, writ, injunction, decree, statute, rule or
regulation applicable to Purchaser or any of its properties or assets.
4.3 ERISA Certification. Purchaser has read and comprehends the ERISA
Certification referred to in Section 5.3(a) and attached hereto as Exhibit A
(the "ERISA Certification"), has completed and executed the ERISA Certification
and has delivered the same to GREAT simultaneously with the execution of this
Agreement.
4.4 Information Supplied. None of the information to be supplied by
Purchaser in connection with the Proxy Statement will, at the date mailed to
shareholders and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
4.5 No Brokers' or Other Fees. No broker, finder or investment banker
is entitled to any brokerage, finder or other fee or commission in connection
with the transaction contemplated by this Agreement based upon arrangements made
by or on behalf of Purchaser or its Affiliates for which GREAT shall be liable
or obligated.
4.6 Investment Intent. Purchaser has read and comprehends the
definition of "Accredited Investor" set forth in Section 1.1 hereof, and is an
"Accredited Investor." Purchaser is acquiring the Purchased Common Shares for
the purpose of investment only and not with a view to or for sale in connection
with any distribution thereof (other than in a transaction which is either
registered under the Act or which is exempt from such registration). Purchaser
hereby acknowledges that (i) copies of the SEC Filings have been provided or
made available to Purchaser and (ii) Purchaser has been given an opportunity to
ask questions of, and receive written answers from, GREAT and its executive
officers concerning the terms and conditions of the Private Placement, and to
obtain any additional written information (to the extent GREAT possesses such
information or can acquire it without unreasonable expense or effort) necessary
to verify the accuracy of the information contained therein.
4.7 REIT Qualification Matters. To Purchaser's knowledge, no Person
which would be treated as an "individual" for purposes of Section 542(a)(2) of
the Code (as modified by Section 856(h) of the Code) owns or would be considered
to own (taking into account the ownership attribution rules under Section 544 of
the Code as modified by Section 856(h) of the Code) in excess of 5.0% of the
value of the outstanding equity interest in Purchaser.
4.8 Investment Company Matters. Purchaser is not, and after giving
effect to the purchase of the Purchased Common Shares hereunder, will not be, an
"investment company" or an entity "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.
4.9 Ownership of Tenants. Purchaser does not own, directly or
indirectly, an interest in a tenant of GREAT listed on Schedule 4.9, which
interest is equal to or greater than (i) 10% of the combined voting power of all
classes of stock of such tenant, (ii) 10% of the total number of shares in all
classes of stock of such tenant, or (iii) if such tenant is not a corporation,
10% of the assets or net profits of such tenant. For purposes of this Section,
the ruled prescribed by Section 318(a) of the Code, for determining the
ownership of stock, as modified by Section 856(d)(5) of the Code, shall apply in
determining direct and indirect ownership of stock, assets, or net profits.
GREAT shall advise Purchaser within a reasonable period of time prior to the
Closing of any material changes to Schedule 4.9.
ARTICLE V
Covenants of Great and Purchaser
5.1 Covenants of GREAT. GREAT covenants and agrees with Purchaser as
follows:
(a) Access. Between the date of this Agreement and the Closing Date, and subject
to any limitations imposed by Section 5(c) of the Act, GREAT shall (and shall
cause its Subsidiaries to) give Purchaser and its counsel, accountants and other
representatives access to, and furnish Purchaser and its representatives with,
all documents, copies of documents, financial and operating data and other
information concerning the property and affairs of GREAT as Purchaser may from
time to time reasonably request.
(b) Shareholder Meeting. GREAT shall call a
special meeting of its shareholders(the "Special Meeting") to be held as
promptly as practicable for the purpose of voting upon the issuance and sale of
Common Shares pursuant to the Private Placement (including the Purchased Shares)
and certain other matters. GREAT filed on November 21, 1996 with the SEC under
the Exchange Act, and shall use its best efforts to clear with the SEC, a proxy
statement with respect to the Special Meeting (together with any amendments and
supplements thereto, the "Proxy Statement"). At the Special Meeting, GREAT will,
through its Board of Trust Managers, recommend to its shareholders approval of
all proposals (the "Current Proposals") included in the Proxy Statement as filed
with the SEC on November 21, 1996.
(c) Stock Exchange Listing. Prior to the Closing Date, the Purchased Common
Shares to be issued pursuant to this Agreement shall be approved for listing on
the AMEX, subject to official notice of issuance.
(d) Ancillary Agreements. GREAT shall cause the Registration Rights Agreement to
be executed by a duly authorized officer on behalf of GREAT at or prior to the
Closing and shall use all reasonable efforts to obtain the execution of the
Registration Rights Agreement by the other parties thereto (other than
Purchaser) effective on the Closing.
(e) Best Efforts. Subject to the terms and conditions of this Agreement, GREAT
shall use its best efforts to take, or cause to be taken, all reasonable action,
and to do, or cause to be done, all reasonable things necessary, proper or
advisable under the applicable laws and regulations to cause the conditions
specified in Article VI to be satisfied and otherwise to consummate and make
effective the transactions contemplated by this Agreement.
(f) Material Adverse Changes; SEC Filings; Financial Statements.
(i) GREAT will promptly notify Purchaser of any event of which GREAT obtains
knowledge which has had or might reasonably be expected to have a Material
Adverse Effect or which might reasonably be expected to result in the
non-satisfaction of any condition set forth in Article VI.
(ii) Prior to the Closing, GREAT will timely file with the SEC all disclosure
documents, including each Quarterly Report on Form 10-Q, Current Report on
Form 8-K and Annual Report on Form 10-K, required to be filed by GREAT
under the Exchange Act and the rules and regulations promulgated
thereunder. As of their respective dates, none of such reports shall
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(iii)Each of the financial statements included in GREAT's Forms 10-Q and Form
10-K referred to in clause (ii) shall be prepared in accordance with GAAP
consistently applied during the periods covered (except as disclosed
therein), except that the quarterly financial statements may omit (y)
statements of changes in financial position and footnote disclosures
required by GAAP to the extent the content thereof would not materially
differ from those disclosures reported in the most recent annual financial
statement, and (z) year-end adjustments to the extent not material.
5.2 Covenants of Purchaser. Purchaser covenants and agrees with GREAT as
follows:
(a) Confidentiality. Subject to the requirements of applicable law, Purchaser
shall, and shall use all reasonable efforts to cause its officers, employees and
agents who obtain such information to, hold in confidence all non-public
information obtained from GREAT until such time as such information is otherwise
available to Purchaser without breach of an agreement with Purchaser or becomes
publicly available.
(b) Proxy Statement. Purchaser shall cooperate with GREAT in the preparation of
the Proxy Statement and shall provide to GREAT any information regarding
Purchaser required or deemed advisable by GREAT or its advisors to be included
in the Proxy Statement. None of the information to be supplied by Purchaser
expressly for inclusion in the Proxy Statement, or in any amendments or
supplements thereto, will, at the time of (x) the first delivery or mailing
thereof or (y) the Special Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. At the Special Meeting called
pursuant to Section 5.1(b), Purchaser shall vote all Common Shares owned by it
(if any) in favor of approval and adoption of each of the Current Proposals.
(c) Ancillary Agreements. Purchaser shall cause the Registration Rights
Agreementto be executed on behalf of Purchaser and delivered to GREAT at or
prior to the Closing.
(d) Best Efforts. Subject to the terms and conditions of this Agreement,
Purchaser shall use its best efforts to take, or cause to be taken, all
reasonable actions, and to do, or cause to be done, all reasonable things
necessary, proper or advisable under the applicable laws and regulations to
cause the conditions specified in Article VII to be satisfied and otherwise to
consummate and make effective the transactions contemplated by this Agreement.
5.3 ERISA Covenants.
(a) ERISA Certification. Simultaneous with the execution of
this Agreement, Purchaser shall review, complete and deliver to GREAT an ERISA
Certification, substantially in the form of Exhibit A hereto (the "ERISA
Certification").
(b) Adjustment to Purchased Common Shares. The parties hereby
acknowledge and agree that, notwithstanding any prior agreement between the
parties or anything to the contrary contained herein, in the event that
Purchaser is a "benefit plan investor" (as defined in the ERISA Certification),
GREAT may, in its sole discretion, by delivery of a notice to Purchaser at any
time prior to the Closing, reduce the number of Common Shares that constitute
the Purchased Common Shares hereunder, and such reduction shall not affect
Purchaser's obligations hereunder except as specifically contemplated by Section
5.3(c). GREAT's notice shall set forth (i) the number of Common Shares which
shall thereafter constitute the Purchased Shares hereunder and (ii) the Purchase
Price for the Purchased Shares, as reduced in accordance with Section 5.3(c).
(c) Adjustment to Purchase Price. In the event that the number
of Common Shares which constitutes the Purchased Common Shares is reduced
pursuant to Section 5.3(b) hereof, the Purchase Price to be paid by Purchaser
hereunder shall be reduced accordingly, and shall thereafter be equal to the
product of (i) the Purchase Price Per Common Share and (ii) the number of Common
Shares constituting the Purchased Common Shares, after giving effect to the
reduction pursuant to Section 5.3(b).
(d) Restrictions on Transfer. In addition to any other restrictions on
the transfer of the Purchased Common Shares, whether contained in the Charter,
GREAT's Bylaws or elsewhere, in no event may a transfer of any interest in a
Purchased Common Share be made unless, prior to such transfer, (i) the proposed
transferee delivers to GREAT a completed and executed ERISA Certification, and
(ii) GREAT determines, in its sole discretion, that such transfer would not
cause any portion of its assets to be deemed to be "plan assets" for purposes of
the fiduciary requirements of ERISA and the prohibited transaction provisions of
ERISA and/or Internal Revenue Code Section 4975.
ARTICLE VI
Conditions of Purchaser's Obligations at Closing
The obligations of Purchaser set forth in Article II are
subject to the fulfillment or waiver by Purchaser on or before the Closing Date
of each of the following conditions:
6.1 Representations and Warranties. The representations and
warranties of GREAT contained in Article III shall be true in all material
respects on and as of the Closing Date with the effect as though such
representations and warranties had been made on and as of the Closing Date.
6.2 Performance. GREAT shall have performed and complied in
all material respects with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or
before the Closing Date.
6.3 Compliance Certificate. GREAT shall deliver to Purchaser
at the Closing a certificate, in the form of Exhibit C hereto, duly executed by
an authorized officer on behalf of GREAT, certifying that the conditions
specified in Sections 6.1 and 6.2 have been satisfied.
6.4 No Litigation. There shall be no order, decree or
injunction of a court of competent jurisdiction which, as of the Closing Date,
stays or prohibits the transactions contemplated by this Agreement.
6.5 Consents and Waivers. Any and all consents or waivers from
other parties to any agreements, or consents, waivers or permits from other
Persons, that are required in connection with the consummation by Purchaser or
GREAT of the transactions contemplated by this Agreement shall have been
obtained, including, without limitation, the approval of GREAT's shareholders of
the Current Proposals.
6.6 Ancillary Agreements. The Registration Rights
Agreement shall have been duly and validly executed by the parties thereto
(other than Purchaser) and shall be in full force and effect.
6.7 Minimum Private Placement. The aggregate gross proceeds
received by GREAT from the concurrent sale of Common Shares hereunder and to
other purchasers of Common Shares in the Private Placement shall be not less
than $15,000,000.
ARTICLE VII
Conditions of GREAT's Obligations at Closing
The obligations of GREAT set forth in Article II are subject
to the fulfillment or waiver by GREAT on or before the Closing of each of the
following conditions:
7.1 Representations and Warranties. The representations and
warranties of Purchaser contained in Article IV shall be true on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
7.2 Purchase Price. Purchaser shall have delivered the
Purchase Price to GREAT.
7.3 Compliance Certificate. Purchaser shall deliver to GREAT
at the Closing a certificate, in the form of Exhibit B hereto, duly executed by
or on behalf of Purchaser, certifying that the conditions specified in Sections
7.1 and 7.4 have been satisfied.
7.4 Performance. Purchaser shall have performed and complied
in all material respects with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Closing Date.
7.5 No Litigation. There shall not be any action, suit,
proceeding, hearing or investigation or order, decree or injunction of any
nature or type threatened, pending or made by or before any governmental body
that questions or challenges the lawfulness of the transactions contemplated by
this Agreement or in connection with any of the Consolidation Transactions under
any law or regulation or seeks to delay, restrain or prevent or obtain damages
in respect of such transactions.
7.6 Consents and Waivers. Any and all consents or waivers from
other parties to any agreements or consents, waivers or permits from other
Persons that are required in connection with the consummation by Purchaser or
GREAT of the transactions contemplated in this Agreement shall have been
obtained, including without limitation approval of the Current Proposals by
GREAT's shareholders.
7.7 Ancillary Agreements. The Registration Rights
Agreement shall have been duly and validly executed by the parties thereto
(other than GREAT) and shall be in full force and effect.
7.8 ERISA Certification. Purchaser shall have reviewed,
completed and delivered to GREAT the ERISA Certification.
7.9 Minimum Private Placement. The aggregate gross proceeds
received by GREAT from the concurrent sale of Common Shares hereunder and to
other purchasers of Common Shares in the Private Placement shall be not less
than $15,000,000.
7.10 "Consolidation Transactions". The closing under the
Contribution Agreement (as described in the Proxy Statement), the Exchange Offer
and the Refinancing (as described in the Proxy Statement) shall have occurred,
or all of the conditions thereto shall have been satisfied so that the closings
thereunder occur concurrently with the sale of the Purchased Shares.
ARTICLE VIII
MISCELLANEOUS
8.1 Successors and Assigns. Neither party may assign any of
its rights or delegate any of its duties under this Agreement with out the prior
written consent of the other party hereto. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
8.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York,
except that the internal corporate affairs of GREAT shall be governed by the
laws of Maryland applicable thereto.
8.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.4 Captions. The captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
8.5 Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto shall
be in writing, shall be deemed to have been duly given or delivered when
delivered personally or telecopied (receipt confirmed, with a copy sent by
certified or registered mail as set forth herein) or sent by certified or
registered mail, postage prepaid, return receipt requested, or by Federal
Express or other overnight delivery service, to the address of the party set
forth below or to such address as the party to whom notice is to be given may
provide in a written notice to GREAT, a copy of which written notice shall be on
file with the Secretary of GREAT:
(a) To GREAT:
Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Telecopier No.: (860) 947-6960
Telephone No.: (860) 246-1126
Attention: Mr. Joseph LaBrosse, Chief Financial Officer
and Secretary
With copies to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telecopier No.: (212) 836-8689
Telephone No.: (212) 836-8618
Attention: Steve Gliatta, Esq.
(b) To Purchaser:
=============================
=============================
Telecopier No.:_________________
Telephone No.:_________________
Attention:______________________
8.6 Expenses. Whether or not the Closing occurs, GREAT and
Purchaser shall each pay all costs and expenses that it incurs with respect to
the negotiation, execution, delivery and performance of this Agreement.
8.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing executed by each of GREAT and Purchaser.
8.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms to the fullest extent permitted by law.
8.9 Publicity. GREAT and Purchaser shall continue to consult
with each other before issuing any press releases or otherwise making any public
statement with respect to this Agreement and the transactions contemplated
hereby, and they shall not issue any such press release or make any such public
statement prior to such consultation, except as may, in the judgment of counsel,
be required by law or by obligations pursuant to any securities laws or listing
agreement with any national securities exchange.
8.10 Further Assurances. Each of the parties shall, without
further consideration, use reasonable efforts to execute and deliver to the
other such additional documents and take such other action as the other may
reasonably request to carry out the intent of this Agreement and the
transactions contemplated hereby.
8.11 Entire Agreement. This Agreement, including the exhibits
hereto, the documents, schedules, certificates and referred to herein, together
with the Registration Rights Agreement, embodies the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by such agreements. There are no restrictions promises, inducements,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
written or oral agreements and understandings between the parties with respect
to such transactions.
8.12 Survival. All representations and warranties and
covenants of the parties contained in this Agreement shall survive the Closing.
ARTICLE IX
Termination
9.1 Termination Events. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any
time before the Closing Date:
(a) by mutual written agreement of Purchaser and GREAT;
(b) by either GREAT or Purchaser at any time after April 30,
1997 if, at the time notice of such termination is given, the Closing has not
occurred, unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe any material
covenant or agreement set forth herein required to be performed or observed by
such party on or before the Closing Date;
(c) by Purchaser (if it is not in breach of any of its
material obligations hereunder) in the event of a breach or failure by GREAT
that is material in the context of the transactions contemplated hereby of any
representation, warranty, covenant or agreement by GREAT contained herein which
has not been, or cannot be, cured within 30 days after written notice of such
breach is given to GREAT; or
(d) Purchaser (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by GREAT that is
material in the context of the transactions contemplated hereby of any
representation, warranty, covenant or agreement by GREAT contained herein which
has not been, or cannot be, cured within 30 days after written notice of such
breach is given to GREAT.
The power of termination provided for by this Section 9.1 shall be effective
only after notice thereof, duly executed on behalf of the party for which it is
given, shall have been given to the other.
9.2 Procedure Upon Termination; Liabilities. In the event of a
termination of this Agreement by either or both of GREAT and Purchaser pursuant
to Section 9.1, notice thereof shall forthwith be given by the terminating party
to the other party, and this Agreement shall thereupon terminate and become void
and have no further effect, and the transactions contemplated hereby shall be
abandoned without further action by the parties hereto, except that the
provisions of Section 5.2(a) (Confidentiality), 8.6 (Expenses), 8.2 (Governing
Law), and 8.5 (Notices), and any related definitional, interpretive or other
provisions necessary for the logical interpretation of such provisions, shall
survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any breach
of this Agreement.
IN WITNESS WHEREOF, Purchaser and GREAT have caused this
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
----------------------------
Insert Purchaser's Name
By:______________________________
Name:
Title:
GROVE REAL ESTATE ASSET TRUST
By:______________________________
Damon Navarro
Chief Executive Officer
<PAGE>
Exhibit A
ERISA CERTIFICATION
Reference is made to that certain Securities Purchase Agreement (the
"Agreement"), dated as of January __, 1997, between Grove Real Estate Asset
Trust ("GREAT") and _____________ ("Purchaser"). Capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the Agreement.
This is the ERISA Certification referred to in, and contemplated by,
Section 5.3(a) of the Agreement.
The United States Department of Labor (the "DOL") has promulgated 29
CFR 2510.101 (the "DOL Regulation") defining the term "plan assets" for purposes
of the fiduciary requirements of Employee Retirement Income Security Act of
1974, as amended ("ERISA") and the prohibited transaction provisions of ERISA
and Internal Revenue Code Section 4975. Under the DOL Regulation, when an
employee benefit plan or an entity that holds the assets of an employee benefit
plan ("Benefit Plan Investors") makes an equity investment in another entity,
the underlying assets of that entity generally will be considered plan assets
unless one of the exceptions contained in the DOL Regulation is met. In order to
avoid having its assets deemed to be plan assets of any Benefit Plan Investor
that purchases Common Shares in the Private Placement, GREAT has determined to
restrict the number of Common Shares purchased by Benefit Plan Investors in the
Private Placement. In order to permit GREAT to comply with this restriction,
Purchaser hereby certifies the following under penalties of perjury [check one]:
It is not a Benefit Plan Investor.
It is a Benefit Plan Investor because it is [Check Applicable Category]:
an employee welfare benefit plan or employee pension benefit
plan, as those terms are defined in ERISA Section 3, whether or
not such plan is subject to ERISA (including, without
limitation: (i) a pension, profit sharing, stock bonus or
employee stock ownership plan that is qualified under Internal
Revenue Code Section 401(a), and is established for the benefit
of the employees of any employer or is a "Keogh" plan
established for the benefit of a self-employed individual (or
the partners of a partnership), or (ii) a governmental plan (as
defined in ERISA);
an individual retirement account or annuity described in
Internal Revenue Code Section 408; or
any other entity or account the underlying assets of which are
deemed to be "plan assets," within the meaning of 29 CFR
Section 2510.3-101 (including, without limitation, a bank
collective investment vehicle or group trust or an insurance
company separate account) as follows [describe]:
==========================================
==========================================
==========================================
Purchaser acknowledges that, notwithstanding anything set forth in the
Agreement to the contrary, in the event that Purchaser is a "Benefit Plan
Investor," as defined in the DOL Regulation, and GREAT determines, in its sole
discretion, that the ownership by Benefit Plan Investors of Common Shares issued
in the Private Placement should be restricted to avoid having the assets of the
Purchaser deemed to be "plan assets" for purpose of the fiduciary requirements
of ERISA and the prohibited transaction provisions of ERISA and/or Internal
Revenue Code Section 4975, (a) the number of Common Shares which constitute the
Purchased Common Shares to be purchased by Purchaser under the Agreement will be
reduced in accordance with Section 5.3(b) thereof to the extent that GREAT, in
its sole discretion, deems necessary or appropriate and (b) the Purchase Price
to be paid by Purchaser for the Purchased Common Shares thereunder will be
reduced accordingly in accordance with Section 5.3(c) thereof.
IN WITNESS WHEREOF, Purchaser has executed this ERISA Certification as
of this ___ day of ______________, 1997.
----------------------------
Insert Purchaser's Name
By:___________________________
Name:
Title:
<PAGE>
Exhibit B
PURCHASER'S COMPLIANCE CERTIFICATE
Pursuant to Section 7.3 of the Securities Purchase Agreement (the
"Agreement"), dated January __, 1997, between ____________________,
("Purchaser") and Grove Real Estate Asset Trust ("GREAT"), the undersigned is
duly authorized to certify on behalf of Purchaser, and hereby certifies on
behalf of Purchaser that:
1. The representations and warranties of Purchaser contained
in the Agreement are true as of the date hereof, as though such
representations and warranties had been made on the date hereof.
2. Purchaser has performed and complied in all material
respects with all agreements, obligations and conditions contained in
the Agreement that were required to be performed or complied with by
Purchaser on or before the date hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this __ day of
___________________, 1997.
--------------------------------
Insert Name of Purchaser
By:_____________________________
Name:
Title:
<PAGE>
Exhibit C
GREAT's COMPLIANCE CERTIFICATE
Pursuant to Section 6.3 of the Securities Purchase Agreement (the
"Agreement"), dated January __, 1997, between ____________________,
("Purchaser") and Grove Real Estate Asset Trust ("GREAT"), the undersigned, the
Secretary of GREAT, hereby duly certifies on behalf of GREAT that:
1. The representations and warranties of GREAT contained in
the Agreement are true in all material respects as of the date hereof,
as though such representations and warranties had been made on the date
hereof.
2. GREAT has performed and complied in all material respects
with all agreements, obligations and conditions contained in the
Agreement that were required to be performed or complied with by GREAT
on or before the date hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this __ day of
___________________, 1997.
GROVE REAL ESTATE ASSET TRUST
By:_____________________________
Joseph R. LaBrosse
Secretary
<PAGE>
Exhibit D
RECEIPT
Reference is made to the Securities Purchase Agreement (the
"Agreement"), dated January __, 1997, between ____________________ ("Purchaser")
and Grove Real Estate Asset Trust ("GREAT"). Capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the Agreement.
GREAT hereby acknowledges receipt, on the date hereof, of
$_____________ in respect of the Purchase Price, as such amount may have been
adjusted from time to time prior to the date hereof in accordance with Section
5.3(c) of the Agreement.
Purchaser hereby acknowledges receipt, on the date hereof, the
certificate(s) listed on Schedule A hereto representing an aggregate of _______
Common Shares, which Common Shares constitute the Purchased Common Shares, as
such number of Common Shares may have been adjusted from time to time prior to
the date hereof in accordance with Section 5.3(b) of the Agreement.
GROVE REAL ESTATE ASSET TRUST
By:_______________________________
Joseph R. LaBrosse
Chief Financial Officer
--------------------------------------
Insert Name of Purchaser
By:___________________________________
Name:
Title:
<PAGE>
Schedule A
Certificate(s) Representing Purchased Shares
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
March 14, 1997, by and between Grove Real Estate Asset Trust, a Maryland real
estate investment trust (the "Company"), and each of the parties listed on
Schedule 1 hereto (each, a "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company has entered into a Securities Purchase
Agreement (each, a "Securities Purchase Agreement") with each Purchaser
providing for the purchase by such Purchaser and sale by the Company of Common
Shares; and
WHEREAS, in order to induce each Purchaser to enter into the
Securities Purchase Agreement, the Company has agreed to provide the
registration rights set forth herein;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
0. Definitions. As used herein, the following terms shall have the meanings set
forth below:
( ) "Agreement" shall have the meaning set forth in the preamble to this
- ---------
Agreement.
(a)"Business Day" shall mean any day on which the American Stock Exchange,
Inc. is open for trading.
(b)"Commencement Date" shall mean the six (6) month anniversary of the date of
this Agreement.
(c)"Company" shall have the meaning set forth in the preamble to this
Agreement.
(d)"Commission" shall mean the Securities and Exchange Commission, and any
successor thereto.
(e) "Common Shares" shall mean the common shares of beneficial interest, $0.01
par value per share, of the Company.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any successor thereto, and the rules and regulations thereunder.
(g) "Effectiveness Period" shall have the meaning set forth in Section 2(a).
(h) "Fair Market Value" shall mean, as of any date, (i) if the Common Shares are
listed or admitted for trading on any national securities exchange, the Fair
Market Value of each Common Share shall be the average closing price per share
on such exchange (or if so listed on more than one exchange, the principal
exchange) on the ten (10) Business Days preceding the relevant date; (ii) if the
Common Shares are not traded on any national securities exchange, but are quoted
on the NASD Automated Quotation System (NASDAQ System) or any similar system of
automated dissemination of quotations of prices in common use, the Fair Market
Value of each Common Share shall be the average price per share equal to the
mean between the closing high asked and the low bid on such system on the ten
(10) Business Days preceding the relevant date; or (iii) if neither clause (i)
nor clause (ii) is applicable, the Fair Market Value of each Common Share shall
be the fair market value as of the close of trading on the relevant date as
determined by the Board of Trust Managers of the Company, in good faith in
accordance with uniform principles consistently applied.
(i) "NASD" shall mean the National Association of Securities Dealers, Inc.
(j) "Permitted Transferee" of any Purchaser shall mean any Person to whom
Registrable Securities are permitted to be transferred pursuant to the
Securities Purchase Agreement.
(k) "Person" shall mean an individual, a partnership (general or limited),
corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
(l) "Purchaser" shall have the meaning set forth in the preamble to this
Agreement.
(m) "Registrable Securities" shall mean (i) the Common Shares acquired by a
Purchaser pursuant to the Securities Purchase Agreement and listed on Schedule 1
hereto, (ii) the Common Shares, if any, acquired by a Purchaser pursuant to any
preemptive rights granted in a Securities Purchase Agreement (subject to any
restrictions on transfer relating to compliance with securities laws specified
in the applicable securities purchase agreement), and (iii) any securities
issued or issuable with respect to any Common Shares or other securities
referred to in clause (i) or clause (ii) by way of conversion, exchange, stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular Registrable Securities, once issued, such securities shall
cease to be Registrable Securities when (A) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (B) such securities are permitted to be
disposed of pursuant to Rule 144(k) (or any successor provision to such Rule)
under the Securities Act as confirmed in a written opinion of counsel to the
Company addressed to the Purchaser holding such securities or (C) such
securities shall have been otherwise transferred pursuant to an applicable
exemption under the Securities Act, new certificates for such securities not
bearing a legend restricting further transfer shall have been delivered by the
Company and such securities shall be freely transferable to the public without
registration under the Securities Act.
(n) "Registration Expenses" shall mean all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (a) the fees,
disbursements and expenses of the Company's counsel, accountants and experts in
connection with the registration of Registrable Securities to be disposed of
under the Securities Act; (b) all expenses in connection with the preparation,
printing and filing of any registration statement, preliminary prospectus or
final prospectus, any other offering document and amendments and supplements
thereto and the mailing and delivery of copies thereof to any underwriters and
dealers; (c) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of Registrable Securities to be disposed of; (d) all
expenses in connection with the qualification of Registrable Securities to be
disposed of for offering and sale under state securities laws, including the
fees and disbursements of counsel for any underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(e) the Commission or blue sky registration fees and any filing fees incident to
securing any required review by the NASD of the terms of the sale of Registrable
Securities to be disposed of; and (f) fees and expenses incurred in connection
with the listing of Registrable Securities on each securities exchange or
quotation system on which the Common Shares are then listed; provided, that
Registration Expenses with respect to any registration pursuant to this
Agreement shall not include underwriting discounts or commissions attributable
to Registrable Securities, transfer taxes applicable to Registrable Securities
or fees of counsel, if any, or other expenses of any Purchaser.
(o) "Registration Suspension Period" shall have the meaning set forth in
Section 2(b).
(p) "Securities Act" shall mean the Securities Act of 1933, as amended, and any
successor thereto, and the rules and regulations thereunder.
(q) "Securities Purchase Agreement" shall have the meaning set forth in the
recitals to this Agreement.
(r) "Shelf Registration" shall have the meaning set forth in Section 2(a).
(s) "Suspension Notice" shall have the meaning set forth in Section 2(b).
1. Shelf Registration. Obligation to File and Maintain. Promptly following the
Commencement Date, the Company will use commercially reasonable efforts to file
with the Commission a registration statement under the Securities Act for the
offering on a continuous or delayed basis in the future of all of the
Registrable Securities and will use commercially reasonable efforts to have it
declared effective as promptly as practicable following the Commencement Date
(the "Shelf Registration"). The Shelf Registration shall be on an appropriate
form and the Shelf Registration and any form of prospectus included therein or
prospectus supplement relating thereto shall reflect such plan of distribution
or method of sale as a Purchaser may from time to time notify the Company,
including, without limitation, the sale of some or all of the Registrable
Securities in a public offering or, if requested by a Purchaser, subject to
receipt by the Company of such information (including information relating to
Purchasers) as the Company reasonably may require, (i) in a transaction
constituting an offering outside the United States which is exempt from
registration requirements of the Securities Act in which the seller undertakes
to effect registration after the completion of such offering in order to permit
such shares to be freely tradeable in the United States, (ii) in a transaction
constituting a private placement under Section 4(2) of the Securities Act in
connection with which the seller undertakes to effect a registration after the
conclusion of such placement to permit such shares to be freely tradeable by the
purchasers thereof or (iii) in a transaction under Rule 144A of the Securities
Act in connection with which the seller undertakes to effect a registration
after the conclusion of such transaction to permit such shares to be freely
tradeable by the purchasers thereof. The Company shall use commercially
reasonable efforts to keep the Shelf Registration continuously effective for the
period beginning on the date on which the Shelf Registration is declared
effective and ending three years thereafter, or, with respect to any Purchaser
entitled to preemptive rights under the Securities Purchase Agreement, if
longer, three years after the last acquisition by such Purchaser of securities
of the Company pursuant to such preemptive rights (not including periods during
such period of effectiveness which are Registration Suspension Periods and any
periods during which such registration cannot be used by Purchasers as a result
of any stop order, injunction or other order of the Commission or other
government authority for any reason other than an act or omission of a
Purchaser), or, if shorter, the holding period under Rule 144(k) promulgated
under the Securities Act for Persons who are not affiliates of the Company (the
"Effectiveness Period")). During the period during which the Shelf Registration
is effective, the Company shall supplement or make amendments to the Shelf
Registration, if required by the Securities Act or if reasonably requested by a
Purchaser or an underwriter of Registrable Securities, including to reflect any
specific plan of distribution or method of sale, and shall use commercially
reasonable efforts to have such supplements and amendments declared effective,
if required, as soon as practicable after filing.
( ) Black-Out Periods. Notwithstanding anything herein to the contrary, (i)
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the Company shall have the right from time to time to require Purchasers not to
sell under the Shelf Registration or to suspend the effectiveness thereof during
the period starting with the date 15 days prior to the Company's good faith
estimate of the proposed date of closing of an underwritten public offering of
equity securities of the Company for the account of the Company (or such longer
period, not to exceed 30 days, as the Company may be engaged in a "road show" in
connection with such offering), and ending on the date 90 days following such
closing, and (ii) the Company shall be entitled to require Purchasers not to
sell under the Shelf Registration or to suspend the effectiveness thereof (but
not for a period exceeding 60 days) if the Company determines, in its good faith
judgment, that (A) such offering or continued effectiveness would interfere with
any material financing, acquisition, disposition, corporate reorganization or
other material transaction involving the Company or any of its subsidiaries, (B)
public disclosure of any such transaction would be required prior to the time
such disclosure might otherwise be required, or (C) when the Company is in
possession of material information that it deems advisable not to disclose in a
registration statement. The Company may not exercise its rights under this
Section 2(b) more than two times during any 12-month period; provided, that the
period during which the Company requires Purchaser not to sell under the Shelf
Registration or suspends effectiveness thereof under this Section 2(b) shall not
exceed 150 days during such 12-month period.
Once any Shelf Registration has been declared effective, any period during which
the Company causes Purchaser to not sell under the Shelf Registration or fails
to keep such Shelf Registration effective and usable for resale of Registrable
Securities for the period required hereunder shall be referred to as a
"Registration Suspension Period". Following the date a Shelf Registration
becomes effective, a Purchaser shall be required to advise the Company in
writing of its intent to sell Registrable Securities under the Shelf
Registration two Business Days prior to the date of the intended sale, at which
time the Company shall advise such Purchaser whether a Registration Suspension
Period is then currently in effect by giving written notice pursuant to this
Section 2(b) to such Purchaser of its determination that such registration
statement is no longer in effect or usable for resale of Registrable Securities
(a "Suspension Notice"). If the Company does not respond to a Purchaser's notice
of its intent to sell Registrable Securities within two Business Days of the
Company's receipt of that notice, the Company will be deemed to have confirmed
that the Shelf Registration is currently in effect and no Registration
Suspension Period exists. Any Registration Suspension Period shall continue
until the date when the Company notifies Purchasers that the use of the
prospectus included in a registration statement filed pursuant to this Section 2
may be resumed for the disposition of Registrable Securities. Any Suspension
Notice is not required to state the reason therefor, but shall be sufficient if
it contains a certification by an executive officer of the Company that such
suspension is permitted by this Section 2(b). The Effectiveness Period will be
extended by the same number of days that comprise a Registration Suspension
Period.
(a) Number of Shelf Registrations. The Company shall be obligated to effect,
under this Section 2, only one Shelf Registration. A Shelf Registration shall
not be deemed to have been effected unless such registration becomes effective
pursuant to the Securities Act and is kept continuously in effect for the
Effectiveness Period.
(b) Expenses. All Registration Expenses incurred in connection with any Shelf
Registration shall be borne by the Company; provided, that the Company shall not
be required to bear the Registration Expenses of more than one underwritten
offering; provided, further, that the Company shall not be obligated to bear the
expenses for any underwritten offering, and such expenses shall be borne pro
rata by the Purchasers whose Registrable Securities are included in such
offering if the offering yields gross proceeds to the sellers of the Registrable
Securities thereunder of less than $10 million.
(c) Selection of Underwriters. Purchasers holding in the aggregate at least 50%
of the Registrable Securities shall be entitled to select the lead underwriter
for any underwritten sale of Registrable Securities pursuant to a registration
statement contemplated by this Section 2, subject to the approval of the
Company, which approval shall not be unreasonably withheld or delayed.
2. Incidental Registrations. Notification and Inclusion. If the Company proposes
to register for its own account any equity securities of the Company or any
securities convertible into equity securities of the Company under the
Securities Act on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act (other
than a registration relating solely to the sale of securities to participants in
a dividend reinvestment plan, a registration on Form S-4 relating to a business
combination or similar transaction permitted to be registered on such Form S-4,
a registration on Form S-8 relating solely to the sale of securities to
participants in a stock or employee benefit plan, a registration permitted under
Rule 462 under the Securities Act registering additional securities of the same
class as were included in an earlier registration statement for the same
offering, and declared effective), the Company shall, at each such time after
the Commencement Date, promptly give written notice of such registration to the
Purchasers. Upon the written request of a Purchaser given within 10 Business
Days after the giving of such notice by the Company (which request shall specify
the number of Registrable Securities intended to be disposed of by such
Purchaser and the intended method of disposition thereof, but which shall not
include an underwritten offering unless the registration by the Company
contemplates an underwritten offering), the Company shall seek to include in
such proposed registration such Registrable Securities as a Purchaser shall
request to be so included and shall use commercially reasonable efforts to cause
a registration statement covering all of the Registrable Securities that such
Purchaser has requested to be registered to become effective under the
Securities Act. The Company shall be under no obligation to complete any
offering of securities it proposes to make under this Section 3 and shall incur
no liability to the Purchasers for its failure to do so. If, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to the Purchasers and, thereupon, (i) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
incurred in connection therewith) and (ii) in the case of a determination to
delay registering, the Company shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities.
( ) Cut-back Provisions. The Company will not be required to effect any
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registration pursuant to this Section 3 if the Company shall have been advised
in writing (with a copy to the Purchasers) by a nationally recognized
independent investment banking firm selected by the Company to act as lead
underwriter in connection with the public offering of securities by the Company
that, in such firm's written opinion, a registration of Registrable Securities
requested to be registered at that time could adversely affect the Company's own
scheduled offering of securities; provided, that if an offering of some but not
all of the Registrable Securities requested to be registered by the Purchasers
would not adversely affect the Company's own offering of securities, the
aggregate number of Registrable Securities requested to be included in such
offering by the Purchasers shall be reduced pro rata according to the total
number of Registrable Securities requested to be registered by the Purchasers
(and any other holders of securities of the Company requesting registration)
until the aggregate number of Registrable Securities requested to be included in
the Company's own offering of securities (as such number is reduced in
accordance with the foregoing) would not adversely affect the Company's own
offering of securities. The number of Registrable Securities that each Purchaser
could then include in such registration would be reduced pro rata according to
the number of Registrable Securities requested to be included as compared to the
total number of Registrable Securities requested to be registered by all
Purchasers (and any other holders of securities of the Company requesting
registration). In no event shall the Company be required to reduce its own
offering of securities.
(a) Expenses. All Registration Expenses incurred in connection with any
registration of Registrable Securities pursuant to this Section 3 shall be borne
by the Company.
(b) Withdrawal by Purchaser. Notwithstanding any request under Section 3(a), a
Purchaser may elect in writing prior to the effective date of a registration
under this Section 3, not to register its Registrable Securities in connection
with such registration of securities by the Company.
(c) Obligations Unaffected. No registration of Registrable Securities effected
under this Section 3 shall relieve the Company of its obligation to effect
registrations of Registrable Securities pursuant to Section 2.
3. Registration Procedures. In connection with the filing of any registration
statement as provided in Section 2 or 3, the Company shall use commercially
reasonable efforts, as expeditiously as reasonably practicable, to:
() prepare and file with the Commission the requisite registration statement
(including a prospectus therein) to effect such registration and use
commercially reasonable efforts to cause such registration statement to become
effective;
(a) prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to maintain the continued effectiveness of such registration and to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement until, in the case of
Section 2, the termination of the period during which the Shelf Registration is
required to be kept effective, or, in the case of Section 3, the earlier of such
time as all of such securities have been disposed of and the date which is 90
days after the date of initial effectiveness of such registration statement;
(b) furnish to each Purchaser such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statements (including each complete prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, including documents incorporated by reference, as a
Purchaser may reasonable request;
(c) use commercially reasonable efforts to register or qualify all Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
a Purchaser shall reasonably request, keep such registration or qualification in
effect for so long as such registration statement remains in effect, and take
any other action which may be reasonably necessary or advisable to enable the
Purchasers to consummate the disposition in such jurisdictions of the securities
owned by the Purchasers, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this paragraph be
obligated to be so qualified, or to consent to general service of process in any
such jurisdiction, or to subject the Company to any material tax in any such
jurisdiction where it is not then so subject;
(d) use commercially reasonable efforts in connection with an underwritten
offering of Registrable Securities to furnish to the Purchasers a signed
counterpart, addressed to each Purchaser (and the underwriters) of:
() an opinion of counsel for the Company, dated the effective date of such
registration statement (and dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to the Purchasers, and
(i) to the extent permitted by then applicable rules of professional
conduct, a "comfort" letter, dated the effective date of such registration
statement (and dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified the Company's
financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, all as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
(e) immediately notify the Purchasers at any time when the Company becomes aware
that a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect or any
document incorporated or deemed to be incorporated therein by reference,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made, and
at the request of a Purchaser promptly prepare and furnish to such Purchaser a
reasonable number of copies of a supplement to or an amendment of such
prospectus or registration statement as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
(f) use commercially reasonable efforts to provide a transfer agent and
registrar for all Registrable Securities covered by such registration statement
not later than the effective date of such registration statement; and
(g) use commercially reasonable efforts to list all Common Shares covered by
such registration statement on any securities exchange on which any of the
Common Shares are then listed.
(h) Notify each Purchaser and the managing underwriters, if any, promptly, and
(if requested by any of those Persons) confirm such notice in writing, (i) when
a prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a registration statement or any post-effective
amendment, when the registration statement or amendment has become effective,
(ii) of any request by the Commission or any other federal or state governmental
authority for amendments or supplements to a registration statement or related
prospectus or for additional information, (iii) of the issuance by the
Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of a registration statement or the initiation
of any proceedings for that purpose, (iv) if at any time the representations and
warranties of the Company contained in any agreement contemplated by Section 5
(including any underwriting agreement) cease to be true and correct, (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, and (vi) of the Company's reasonable determination
that a post-effective amendment to a registration statement would be
appropriate.
(i) Use every reasonable effort to obtain the withdrawal of any order suspending
the effectiveness of a registration statement, or the lifting of any suspension
of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest possible moment.
(j) If requested by the managing underwriters, if any, or a Purchaser, (i)
promptly incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and the Purchaser agree should
be included therein as may be required by applicable law and (ii) make all
required filings of the prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in the prospectus supplement or post-effective
amendment; provided, however, that the Company will not be required to take any
actions under this Section 4(k) that are not, in the reasonable opinion of
counsel for the Company, in compliance with applicable law.
(k) Cooperate with each Purchaser and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates will not bear any
restrictive legends (other than any legends contemplated by the Company's
articles of incorporation); and enable the Registrable Securities to be in such
denominations and registered in such names as the managing underwriters, if any,
shall request at least two business days prior to any sale of Registrable
Securities to the underwriters.
(l) Make available for inspection by a representative of each Purchaser, any
underwriter participating in any disposition of Registrable Securities, and any
attorney or accountant retained by a Purchaser or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company and
its subsidiaries, and cause the officers, directors and employees of the Company
and its subsidiaries to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
registration statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential at the
time of delivery of such records, information or documents will be kept
confidential by those Persons unless (i) those records, information or documents
are in the public domain or otherwise publicly available, (ii) disclosure of
those records, information or documents is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities, or
(iii) disclosure of those records, information or documents, in the opinion of
counsel to such Person, is otherwise required by law (including, without
limitation, pursuant to the requirements of the Securities Act).
(m) Comply with all applicable rules and regulations of the Commission and make
generally available to its security holders earning statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 45 calendar
days after the end of any 12-month period (or 90 calendar days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at the end
of any fiscal quarter in which Registrable Securities are sold to underwriters
in a firm commitment or best efforts underwritten offering, and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company, after the effective date of a registration
statement, which statements shall cover that 12-month period.
(n) Cause its officers and other appropriate employees to participate in any
presentations regarding any underwritten offering reasonably requested by a
Purchaser or the managing underwriter or underwriters participating in the
disposition of the Registrable Securities.
Each Purchaser shall furnish in writing to the Company such information
regarding such Purchaser (and any of its affiliates), the Registrable Securities
to be sold, the intended method of distribution of such Registrable Securities,
and such other information requested by Company as is necessary for inclusion in
the registration statement relating to such offering pursuant to the Securities
Act and the rules of the Commission thereunder. The Company may also impose such
restrictions and limitations on the distribution of such Registrable Securities
as the Company reasonably believes are necessary or advisable to comply with
applicable law or to effect an orderly distribution, including those
restrictions set forth in Section 2(b).
Each Purchaser agrees by acquisition of the Registrable Securities that upon
receipt of any notice from the Company of the happening of any event of the kind
described in paragraph (f) of this Section 4, such Purchaser will forthwith
discontinue its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such
Purchaser's receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (f) of this Section 4.
4. Underwriting. If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a registration described in this
Agreement, the Company will enter into and perform its obligations under an
underwriting agreement with such underwriters for such offering, such agreement
to contain such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect and to the extent provided in Section
7. The holders of Registrable Securities on whose behalf Registrable Securities
are to be distributed by such underwriters shall be parties to any such
underwriting agreement, and the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities.
() In the event that any registration pursuant to Section 3 shall involve, in
whole or in part, an underwritten offering, the Company may require Registrable
Securities requested to be registered pursuant to Section 3 to be included in
such underwriting on the same terms and conditions as shall be applicable to the
Registrable Securities or other of the Company's securities being sold through
underwriters under such registration. In such case, the holders of Registrable
Securities on whose behalf Registrable Securities are to be distributed by such
underwriters shall be parties to any such underwriting agreement. Such agreement
shall contain such representations and warranties by the Company and the
Purchasers and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities and contribution to the effect and to the extent
provided in Section 7. The representations and warranties in such underwriting
agreement by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities.
5. Preparation; Reasonable Investigation. In connection with the preparation and
filing of the registration statement under the Securities Act, the Company will
give the Purchasers, their underwriters, if any, and their respective counsel,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers, its counsel and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of the Purchasers' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
6. Indemnification. The Company will, and hereby does, indemnify and hold
harmless each Purchaser, its respective directors, officers, partners, agents,
employees and affiliates and each other person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls each such Purchaser or any such underwriter within the meaning
of the Securities Act, against any and all losses, claims, damages, expenses or
reasonable costs, or liabilities, joint or several, actions or proceedings
(whether commenced or threatened) in respect thereof, to which each such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, expenses or reasonable costs, or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in which
they were made not misleading, and the Company will reimburse each such
Purchaser and each such director, officer, partner, agent, employee or
affiliate, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, expense or reasonable costs, liability,
action or proceeding; provided, that (i) the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, expense or liability
(or action or proceeding, whether commenced or threatened, in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Purchaser or underwriter expressly for
use in the preparation thereof, (ii) the Company shall not be liable to any
Person who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls or is controlled by such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, expense or reasonable costs, or
liability (or action or proceeding, whether commenced or threatened, in respect
thereof) arises out of such underwriter's failure to send or give a copy of the
final prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus and (iii) the Company shall only reimburse the Purchasers for
legal expenses incurred due to the representation of all Purchasers by not more
than one legal counsel. The Company shall not be liable under this Section 7(a)
for any settlement of any claim or action effected without its consent, which
consent will not be unreasonably withheld or delayed.
() Each Purchaser severally shall indemnify, and hereby does, indemnify and hold
harmless the Company, its directors, its officers who sign the registration
statement, each Person who participates as an underwriter in the offering or
sale of securities, and each Person, if any, who controls the Company or any
such underwriter within the meaning of the Securities Act against any and all
losses, claims, damages, expenses or reasonable costs, or liabilities, joint or
several, actions or proceedings (whether commenced or threatened) in respect
thereof, to which each such indemnified party may become subject under the
Securities Act or otherwise insofar as such losses, claims, damages, expenses or
reasonable costs, or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon an untrue
statement of a material fact in or omission to state a material fact required to
be stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading in such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, but only to the
extent that such statement or omission was made in reliance upon and in
conformity with written information furnished by such Purchaser to the Company
by or on behalf of such Purchaser for use in preparation thereof.
(a) Promptly after receipt by any indemnified party hereunder of notice of the
commencement of any action or proceeding involving a claim referred to in
paragraphs (a) or (b) of this Section 7, the indemnified party will notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party under paragraphs (a) or
(b) of this Section 7, except to the extent that the indemnifying party is
adversely affected by any delay caused thereby. In case any such action shall be
brought against any indemnified party, the indemnifying party shall be entitled
to participate therein and, to the extent that the indemnifying party shall
elect (jointly with any other indemnifying party similarly so electing) to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (which approval shall not be unreasonably withheld or delayed)
(who shall not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under paragraph
(a) or (b) of this Section 7 for any legal expenses of other counsel or any
other expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof. In addition, the indemnifying party shall
not be required to indemnify, reimburse or otherwise make any contribution to
the amount paid or payable by the indemnified party for any losses, claims,
damages, expenses or reasonable costs, or liabilities (or actions or
proceedings, actual or threatened, in respect thereof) incurred by the
indemnified party in settlement of any such losses, claims, damages, expenses or
reasonable costs, liabilities, actions or proceedings otherwise covered
hereunder unless such settlement has been previously approved by the
indemnifying party, which approval shall not be unreasonably withheld or
delayed.
(b) If for any reason the indemnity under this Section 7 is unavailable or is
insufficient to hold harmless any indemnified party under paragraph (a) or (b)
of this Section 7, then the indemnifying parties shall contribute to the amount
paid or payable to the indemnified party as a result of any loss, claim,
expense, damage or liability (or actions or proceedings, whether commenced or
threatened, in respect thereof), and legal or other expenses reasonably incurred
by the indemnified party in connection with investigating or defending any such
loss, claim, expense, damage, liability, action or proceeding, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or a
Purchaser and each party's relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. If,
however, the allocation provided in the second preceding sentence is not
permitted by applicable law, or if the allocation provided in the second
preceding sentence provides a lesser sum to the indemnified party than the
amount hereinafter calculated, then the indemnifying party shall contribute to
the amount paid or payable by the indemnified party in such proportion as is
appropriate to reflect not only such relative fault but also the relative
benefits of the indemnifying party and the indemnified party as well as any
other relevant equitable considerations. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this paragraph (d) of
Section 7 were to be determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the preceding sentences of this paragraph (d) of Section 7.
Notwithstanding the provisions of this Section 7(d), an indemnifying party that
is a Purchaser will not be required to contribute any amount in excess of the
dollar amount of the gross proceeds received by that Purchaser upon the sale of
the Registrable Securities giving rise to the contribution obligation over the
amount of any damages which that Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(c) Indemnification and contribution similar to that specified in this Section 7
(with appropriate modifications) shall be given by the Company and the
Purchasers with respect to any required registration or other qualification of
securities under any federal, state or blue sky law or regulation of any
governmental authority other than the Securities Act.
(d) Notwithstanding any other provision of this Section 7, to the extent that
any director, officer, partner, agent, employee, affiliate or other
representative (current or former) of any indemnified party is a witness in any
action or proceeding, the indemnifying party agrees to pay to the indemnified
party all expenses reasonably incurred by, or on the behalf of, the indemnified
party and such witness in connection therewith.
(e) The termination of any proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, adversely affect the rights of any indemnified party to indemnification
hereunder or create a presumption that any indemnified party violated any
federal or state securities laws.
(f) In the event that advances are not made pursuant to this Section 7 or
payment has not otherwise been timely made, each indemnified party shall be
entitled to seek a final adjudication in an appropriate court of competent
jurisdiction of the entitlement of the indemnified party to indemnification or
advances hereunder.
( ) The Company and the Purchasers agree that they shall be precluded from
asserting that the procedures and presumptions of this Section 7 are not valid,
binding and enforceable. The Company and the Purchasers further agree to
stipulate in any such court that the Company and the Purchasers are bound by all
the provisions of this Section 7 and are precluded from making any assertion to
the contrary.
(i) To the extent deemed appropriate by the court, interest shall be paid by the
indemnifying party to the indemnified party at a reasonable interest rate for
amounts which the indemnifying party has not timely paid as the result of its
indemnification and contribution obligations hereunder.
(g) In the event that any indemnified party is a party to or intervenes in any
proceeding in which the validity or enforceability of this Section 7 is at issue
or seeks an adjudication to enforce the rights of any indemnified party under,
or to recover damages for breach of, this Section 7, the indemnified party, if
the indemnified party prevails in such action, shall be entitled to recover from
the indemnifying party and shall be indemnified by the indemnifying party
against, any expenses incurred by the indemnified party.
(h) The indemnity and contribution obligations of the Company contained in this
Section 7 shall be in addition to any other liability which it may have pursuant
to law or contract and shall remain operative and in full force and effect
regardless of any investigation made or omitted by or on behalf of any
indemnified party and shall survive the transfer of any Registrable Securities
by any Purchaser.
(k) In no event will the liability of any Purchaser under this Section 7 be
greater in amount than the dollar amount of the gross proceeds received by that
Purchaser upon the sale of the Registrable Securities giving rise to the
indemnification obligation.
7. Benefits of Registration Rights. Each Purchaser shall give notice to the
Company of any transfer by it of Registrable Securities to any Permitted
Transferee, identifying the name and address of the Permitted Transferee and the
Registerable Securities so transferred, and accompanied by a signature page to
this Agreement pursuant to which such Permitted Transferee agrees to be bound by
the terms and conditions of this Agreement. No consent of any Purchaser shall be
required for its Permitted Transferees to exercise registration rights under
this Agreement or otherwise to be entitled to the benefits of this Agreement
provided to all Purchasers.
8. Qualification for Rule 144 Sales. The Company will take all actions
reasonably necessary to comply with the filing requirements described in Rule
144(c)(1) of the Securities Act so as to enable the Purchasers to sell
Registrable Securities without registration under the Securities Act and, upon
the written request of any Purchaser, the Company will deliver to such Purchaser
a written statement as to whether it has complied with such filing requirements.
9. Miscellaneous. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of this Section 9,
provided receipt of copies of such counterparts is confirmed.
( ) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF.
(a) Entire Agreement. This Agreement and the Securities Purchase Agreement
together contain the entire agreement between the parties with respect to the
subject matter hereof and there are no agreements or understandings between
parties other than those set forth or referred to herein. This Agreement is not
intended to confer upon any Person not a party hereto (and their successors and
assigns) any rights or remedies hereunder.
(b) Notices. All notices and other communications hereunder shall be
sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax or other electronic transmission service
to the appropriate address or number as set forth below. Notices to the Company
shall be addressed to:
Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Attention: Mr. Joseph LaBrosse
Telecopy Number: (860) 527-0401
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Stephen Gliatta, Esq.
Telecopy Number: (212) 836-8689
or at such other address and to the attention of such other person as
the Company may designate by written notice to the Purchasers. Notices to the
Purchasers shall be addressed to the address on the stock transfer records of
the Company.
(c) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
Permitted Transferees.
(d) Headings. The Section and other headings contained in this Agreement
are inserted for convenience of reference only and will not affect the meaning
or interpretation of this Agreement. All references to Sections or other
headings contained herein mean Sections or other headings of this Agreement
unless otherwise stated.
(e) Amendments and Waivers. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the party against
whom enforcement of any such modification or amendment is sought. Either party
hereto may, only by an instrument in writing, waive compliance by the other
party hereto with any term or provision hereof on the part of such other party
hereto to be performed or complied with. The waiver by any party hereto of a
breach of any term or provision hereof shall not be construed as a waiver of any
subsequent breach.
(f) Interpretation; Absence of Presumption. For the purposes hereof, (i)
words in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other gender as the context
requires, (ii) the terms "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement, and Section,
paragraph or other references are to the Sections, paragraphs, or other
references to this Agreement unless otherwise specified, (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires or unless
otherwise specified, (iv) the word "or" shall not be exclusive and (v)
provisions shall apply, when appropriate, to successive events and transactions.
This Agreement shall be construed without regard to any presumption or
rule requiringconstruction or interpretation against the party drafting or
causing any instrument to be drafted.
(g) Severability. Any provision hereof which is invalid or unenforceable
shall beineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof.
(h)Jurisdiction; Venue. The parties to this Agreement hereby irrevocably
submit to the jurisdiction of any New York State or Federal court and any
appellate court from any district thereof over any action arising out of or
relating to this Agreement, and hereby irrevocably agree that all claims in
respect of such action or proceeding may be heard and determined in such New
York State court or in such Federal court. The parties to this Agreement hereby
irrevocably waive, to the fullest extent permitted under law, the defense of an
inconvenient forum or improper venue to the maintenance of such action or
proceeding.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of
the parties hereto as of the day first above written.
GROVE REAL ESTATE ASSET TRUST
By: /s/ DAMON NAVARRO
Damon Navarro
President
MORGAN STANLEY GROUP INC.
By: /s/ BARTON M. BIGGS
Name: Barton M. Biggs
Title: Managing Director
OREGON INVESTMENT COUNCIL ACTING ON
BEHALF OF OREGON PUBLIC EMPLOYEES'
RETIREMENT FUND UNDER AUTHORITY OF
OREGON REVISED STATUTES SECTION 293.741
BY ITS AGENT ABKB/LASALLE SECURITIES
LIMITED
By: /s/ KEITH R. PAULEY
Name: Keith R. Pauley
Title: Managing Director of ABKB/LaSalle
Securities Limited
PURCHASERS
By: /s/ DAMON NAVARRO
Damon Navarro
Attorney-In-Fact
<PAGE>
Schedule 1
Purchasers Common Shares
1. Dr. C.V. Alexander, Jr. 60,732
2. Bruce and Deborah Seltzer 3,813
3. Dr. Edward Benjamin 2,942
4. Robert D. Carl, III 20,809
5. Jody and Edith Chapnick 37,475
6. Mr. Keith Cich 7,626
7. Dr. Steven Cohen 16,288
8. Worsdale Trust FBO David S. Collins 11,242
9. Rossett Trust FBO Holiday Collins 11,242
10. Philip B. Crosby Revocable Trust 7,626
John Dale 3,813
The Gerald Entine 1988 Family Trust 15,253
Mark Epstein 2,235
Dr. Alan S. Friedman 7,626
Holiday Trust FBO Holiday Collins, David Collins
Trustee 7,495
Dr. John S. Jaffe 22,222
Dr. Terry A. Johnston 3,490
Lion Castle Trust FBO Jennifer Collins, David Collins
Trustee 7,495
Andrew L. Nichols 7,626
Dr. Marc R. Peck 3,468
Donald E. Procknow 2,777
Larry and Nancy Roth 7,626
Judith K. Seltzer 10,404
Dr. Alan Simpson 3,468
Mr. Charles Smith 7,626
Robert and Mary Soleau 3,813
Dr. Charles S. Walkoff 15,253
Ronald Altman 16,666
Henry W. Berinstein 5,555
Ronney A. Berinstein 13,900
<PAGE>
Bendor Management LTD 8,335
Ann N. Berinstein 5,000
Estate of Benjamin M. Berinstein - Trust "A", William
P. Berinstein, Trustee 1,115
ANB Enterprises Corporation 2,800
Martin Bernstein 20,000
Rory A. Brown 188,888
William J. Connors 20,000
Dr. Karen Cooper 5,555
Arthur S. DeMoss Foundation 188,888
Millenco, LP 188,888
Englander Specialist Corp. 111,111
Terry Feeney 1,111
Norman M. Feinberg 22,222
N. Scott and Cathy M. Fine JT/WROS 27,777
William A. and Susan Stafford Jolly JT/WROS 27,777
Richard S. Frary 11,111
GT Special Situations, L.P. 166,666
Brett Hildebrand 22,222
Richard B. Jennings 22,222
LKCM Investment Partnership 111,111
James D. Lackie 11,111
Taylor M. and Margaret C. Lackie Trust, William M.
Vaughan, Jr., Trustee 11,111
Carol Lamberg 11,111
Arthur W. Langel 22,222
Jodie E. Langel 2,777
David M. McGrath 11,111
Benjamin W. and Kelly K. Navarro 35,555
Ralph B. Paterline 5,555
Dennis B. Poster 15,698
Joan Poster 11,111
Meredith Poster 5,555
Cynthia Poster 5,555
The Trust U/W/O Dora Aronson FBO Audrey Aronson,
Dennis B. Poster Trustee 5,555
<PAGE>
Aronson Family Trust 11,111
D.J. Nordquist 5,555
Matthew W. Quigley 15,000
Victor P. Serodino 11,111
Elizabeth Shuldiner Revocable Trust UA 3/20/90 5,600
Kenneth W. Slutsky 22,000
Mary Kim McMillan 16,000
National Fire and Casualty 22,000
Ashmont Insurance Co., LTD 44,000
Frank L. Flautt, Jr. Equity 22,000
Flautt Family Foundation, Inc. 11,000
Kylher Investments L.P. 1994 11,000
Kylher Investments 85-I 16,000
Cliffwood Equity Fund, L.P. 75,000
Cliffwood Real Estate Equity Fund LTD 91,800
Frank Varallo 8,333
Babette B. Weksler 11,111
Stuzin Family Partnership, Ltd. 50,000
Charles B. Stuzin 33,335
Stuzin Associates, Ltd. 16,665
L.A. & C. Limited Partnership 11,110
Oregon Investment Council Acting On Behalf Of
Oregon Public Employees' Retirement Fund Under
Authority of Oregon Revised Statutes Section 293.741
By Its Agent ABKB/LaSalle Securities Limited 391,392
Morgan Stanley Group, Inc. 777,778
<PAGE>
MULTIFAMILY NOTE
US $15,084,000.00 New York, New York
March 14, 1997
FOR VALUE RECEIVED, GR-Properties III Limited Partnership, Foxwoodburg,
L.P., Grove-Westfield Associates Limited Partnership, Grove-West Springfield
Associates Limited Partnership, and GR-Westwynd Associates Limited Partnership
(collectively, "Makers"), jointly and severally, promise to pay Citicorp Real
Estate, Inc. ("Lender"), or order, the principal sum of Fifteen Million Eighty
Four Thousand and 00/100 Dollars ($15,084,000.00), with interest ("Interest") on
the unpaid principal balance from March 14, 1997, until paid, at the Effective
Interest Rate (hereinafter defined). The principal and Interest shall be payable
at c/o Citibank, N.A., One Court Square, 45th Floor, Zone 5, Long Island City,
NY 11120, Attn: John Fierst, or such other place as Lender may designate in
writing in accordance with the provisions set forth below, until the entire
indebtedness evidenced hereby is fully paid, except that any remaining
indebtedness, together with any accrued and unpaid Interest, if not sooner paid,
shall be due and payable on April 1, 2007 (the "Maturity Date").
For purposes of calculating the interest rate and the payment of
Interest hereunder, the following terms shall have the meanings set forth below,
with such definitions to be applicable equally to the singular and the plural
forms:
"Base LIBOR Rate" shall mean, with respect to each Interest Accrual
Period (other than the First Interest Accrual Period), the rate of interest per
annum (rounded upwards, if necessary, to the nearest 1/10,000 of 1%) determined
as follows (such determination to be conclusive, absent manifest error):
(i) On the LIBOR Determination Date immediately
preceding an Interest Accrual Period, Lender will determine the
offered rate for one month U.S. dollar deposits as of10:00 a.m.
(London time) that appears on Telerate Page 3750. Such offered rate
shall be the Base LIBOR Rate; or
(ii) If for any reason such offered rate does not so appear,
or if the relevant page and the replacement page is unavailable, on the
LIBOR Determination Date immediately preceding an Interest Accrual
Period, the Base LIBOR Rate for such Interest Accrual Period shall be
the rate of interest per annum (determined on a 360 day, actual days
elapse basis) offered by the principal office of Citibank, N.A. in
London to prime banks in the London interbank market at 10:00 a.m.
(London time) two (2) LIBOR Business Days immediately preceding the
LIBOR Determination Date which commences such Interest Accrual Period
as the rate per annum at which such principal office of Citibank, N.A.
in London would be willing to accept a deposit from such prime banks in
an amount equal to $1,000,000.
If no amount can be established for the Base LIBOR Rate pursuant to
clause (i) or (ii) above on a LIBOR Determination Date, the Base LIBOR Rate for
the Interest Accrual Period shall be the Base LIBOR Rate in effect for the last
preceding Interest Accrual Period.
"Closing Date" shall mean as of March 13, 1997.
"Effective Interest Rate" shall mean the rate of interest on this Note
which is equal to (a) 6.58% per annum for the First Interest Accrual Period and
(b) thereafter, the Base LIBOR Rate in effect for each Interest Accrual Period
plus 1.14% per annum.
"First Interest Accrual Period" shall mean the period commencing on
(and including) March 14, 1997 and ending on (but not including) April 1, 1997.
"Interest Accrual Period" shall mean the period commencing on (and
including) the first day of each calendar month and ending on (but not
including) the first day of the next calendar month.
"LIBOR Business Day" shall mean a day upon which U.S. dollar deposits
may be dealt in on the London interbank market and commercial banks and foreign
exchange markets are open in London, but excluding a Saturday, a Sunday or other
day on which Lender is not open for business.
"LIBOR Determination Date" shall mean February 27, 1997 and the
twenty-seventh (27th) day of each successive calendar month thereafter;
provided, however, that such day is a LIBOR Business Day. If such day is not a
LIBOR Business Day, LIBOR Determination Date shall be the first day preceding
such day that is a LIBOR Business Day.
"Payment Date" shall mean May 1, 1997, and the first day of each
calendar month thereafter, unless such day is not a LIBOR Business Day, in which
event it shall be the following LIBOR Business Day.
"Telerate Page 3750" shall mean the display designated as "Page 3750"
on the Associated Press-Dow Jones Telerate Service (or such other page as may
replace Page 3750 on the Associated Press-Dow Jones Telerate Service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Banker's Association
interest settlement rates for U.S. Dollar deposits). Any Base LIBOR Rate
determined on the basis of the rate displayed on Telerate Page 3750 in
accordance with the provisions of this Note shall be subject to corrections, if
any, made in such rate and displayed by the Associated Press-Dow Jones Telerate
Service within one (1) hour of the time when such rate is displayed by such
service.
This Note shall bear Interest during each Interest Accrual Period at
the Effective Interest Rate in effect for such Interest Accrual Period.
Throughout the term of this Note, Interest shall be calculated based on
a 360-day year consisting of twelve (12) thirty (30) day Interest Accrual
Periods. If any payment of Interest to be made by Makers shall become due on a
day other than a LIBOR Business Day, such payment shall be made on the next
succeeding LIBOR Business Day.
Makers shall pay Lender, in advance, on the date hereof, interest only
on the outstanding principal balance of this Note, at the Effective Interest
Rate for the First Interest Accrual Period, from the date hereof to and
excluding April 1, 1997.
Makers shall make payments of Interest to Lender monthly in arrears on
each Payment Date, commencing on May 1, 1997, in an amount equal to Interest
accrued during the Interest Accrual Period which expired on such Payment Date at
the Effective Interest Rate in effect for such Interest Accrual Period.
Lender shall furnish to Makers, two (2) days after each LIBOR
Determination Date, a statement showing Interest to accrue during the Interest
Accrual Period immediately succeeding the Interest Accrual Period in which such
LIBOR Determination Date occurs, and the Effective Interest Rate in effect for
such succeeding Interest Accrual Period and the payment of Interest to be due
for such Interest Accrual Period (the "Lender's Statement"). Failure of Lender
to timely furnish the Lender's Statement shall not waive Lender's right to
subsequently furnish such statement.
<PAGE>
If the Lender's Statement shall be furnished to Makers after the
expiration of the Interest Accrual Period to which it relates, then until the
Lender's Statement is delivered for such Interest Accrual Period, Makers shall
make the monthly payment of Interest based upon Interest as set forth in the
Lender's Statement then in effect and Makers, shall, within five (5) days after
the Lender's Statement is furnished to Makers, pay to Lender an amount equal to
any underpayment theretofore paid by Makers for such Interest Accrual Period,
and in the event of an overpayment by Makers, Lender shall permit Makers to
credit against subsequent payments of Interest the amount of such overpayment.
If any payment of Interest under this Note is not paid when due, at the
option of Lender, the entire principal amount outstanding hereunder and all
accrued and unpaid Interest thereon and all other sums due hereunder shall at
once become due and payable. Lender may exercise this option to accelerate
during any default by any of Makers regardless of any prior forbearance. In the
event of any default by any of Makers in the payment of this Note or any other
payment due under the Instrument or any other Loan Document (as such terms are
hereinafter defined), and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto,
Makers, shall pay Lender all expenses and costs, including, but not limited to,
reasonable attorney's fees and applicable statutory costs.
If any payment of Interest under this Note is not received by Lender
within ten (10) calendar days after such payment is due, Makers shall pay to
Lender a late charge of the greater of (a) US$250.00 or (b) five (5%) percent of
such payment, such late charge to be immediately due and payable without demand
by Lender. If any payment of Interest under this Note or any other monetary
payment due under this Note, the Instrument or any other Loan Document remains
past due for ten (10) calendar days or more, the outstanding principal balance
of this Note shall bear interest during the period such default exists at the
Effective Interest Rate plus five percent (5%) per annum, or if there shall
exist any non-monetary default by any of Makers under this Note, the Instrument
or any other Loan Document which remains uncured for the later of (i) ten (10)
calendar days or (ii) the expiration of any applicable grace or cure period
specifically provided in the Instrument, the outstanding principal balance of
this Note shall bear interest during the period any of Makers is in default at
the Effective Interest Rate plus two percent (2%) per annum, or, if such
increased rate of interest may not be collected from any of Makers under
applicable law, then at the maximum increased rate of interest, if any, which
may be collected from any of Makers under applicable law.
From time to time, without affecting the joint and several obligations
of Makers or the successors or assigns of Makers to pay the outstanding
principal balance of this Note and observe the covenants of Makers contained
herein in the Instrument or in any other Loan Document, without affecting the
guaranty of any person, corporation, partnership or other entity for payment of
the outstanding principal balance of this Note, without giving notice to or
obtaining the consent of any of Makers, the successors or assigns of Makers or
guarantors, and without liability on the part of Lender, Lender may, at the
option of Lender, extend the time for payment of said outstanding principal
balance or any part thereof, reduce the payments thereon, release anyone liable
on any of said outstanding principal balance, accept a renewal of this Note,
agree in writing with Makers to modify the terms and time of payment of said
outstanding principal balance, join in any extension or subordination agreement,
release any security given herefor, take or release other or additional
security, and agree in writing with Makers to modify the rate of Interest or
period of amortization of this Note or change the amount of the monthly payments
of Interest payable hereunder.
Presentment, notice of dishonor, and protest are hereby waived by
Makers, sureties, guarantors and endorsers hereof. This Note shall be the joint
and several obligation of Makers, sureties, guarantors and endorsers, and shall
be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by among other
things, those certain eight (8) Multifamily Mortgages, Assignment of Rents and
Security Agreements, dated of even date herewith, each of which is executed by
one of the Makers (collectively, the "Instrument"), encumbering the real
properties more particularly described therein and set forth on Schedule 1
attached hereto (collectively, the "Property"), and reference is made thereto
for rights as to acceleration of the indebtedness evidenced by this Note. This
Note shall be governed by the law of the State of New York.
Prior to and through March 31, 2000, this Note may not be prepaid in
whole or (except as hereinafter provided) in part. Commencing April 1, 2000 and
continuing through and including the day immediately prior to the Maturity Date,
this Note may only be prepaid (whether voluntarily or involuntarily, except as
hereinafter provided, and including any acceleration by Lender) in whole, upon
not less than five (5) days written notice by Makers to Lender prior to the next
applicable LIBOR Determination Date and the simultaneous payment by Makers to
Lender of the then unpaid principal balance of this Note together with (i) all
accrued and unpaid Interest through and including the last day of the calendar
month in which such prepayment is made and (ii) any other sums then due under
this Note, the Instrument or any other Loan Document.
Notwithstanding anything to the contrary contained herein, commencing
April 1, 2000 and continuing through and including the day immediately prior to
the Maturity Date, a permitted partial prepayment of this Note may only be made
in connection with a release of any of the Property (the "Released Property") by
Lender pursuant to Article 37 of the Instrument by prepayment of a portion of
the outstanding principal balance of this Note equal to one hundred twenty-five
percent (125%) of that portion of the then unpaid principal balance of this Note
allocated to the Released Property in accordance with the allocation percentage
set forth in Schedule 2 attached hereto (the "Allocated Principal") together
with one hundred percent (100%) of any other sums then due and unpaid under this
Note, the Instrument or any other Loan Document, including, but not limited to,
accrued and unpaid Interest. In the event of such partial prepayment of this
Note, the total unpaid principal balance of this Note shall be reduced by the
principal portion of such partial prepayment, provided, however, that the
Maturity Date under this Note shall remain unchanged.
Subject to the qualifications below in this paragraph, Makers, shall,
jointly and severally, be liable for payment and performance of all of the
obligations, covenants and agreements of Makers under this Note, the Instrument,
the Assignment of Leases and Rents (herein so called), dated of even date
herewith, and executed by Makers to Lender, the Environmental Indemnity
Agreement (herein so called), dated of even date herewith, and executed by
Makers and Lender, and all other instruments and documents evidencing, securing
or governing the terms of the loan (the "Loan") evidenced by this Note
(collectively, the "Loan Documents"), to the full extent (but only to the
extent) of all of the Property and any other items, property or amounts which
are collateral or security for the Loan pursuant to any Loan Document. If a
default occurs in the timely and proper payment of any portion of such
indebtedness or in the timely performance of any obligations, agreements or
covenants under any of the Loan Documents, except as set forth below in this
paragraph, neither Makers, nor any partner of Makers, nor any partner,
stockholder, director or officer of any partner of Makers, shall be personally
liable for the repayment of any of the principal of, interest on, or prepayment
fees or late charges, or other charges or fees, due in connection with, the
Loan, the performance of any covenants of Makers under this Note, the Instrument
or any of the other Loan Documents or for any deficiency judgment which Lender
may obtain after default by any of Makers. Notwithstanding the foregoing
provisions of this paragraph or any other agreement, Makers shall, jointly and
severally, be fully and personally liable for any and all: (1) liabilities,
costs, losses, damages, expenses or claims (including, without limitation, any
reduction in the value of the Property or any other items, property or amounts
which are collateral or security for the Loan) suffered or incurred by Lender by
reason of or in connection with (a) any fraud or misrepresentation by any of
Makers in connection with the Loan, including but not limited to any
misrepresentation of any of Makers contained in any Loan Document, (b) any
failure to pay taxes, insurance premiums (except to the extent that such taxes
and insurance premiums are then held by Lender), assessments (but only to the
extent such failure results from the misapplication of the rentals or other
income derived from the Property), charges for labor or materials or other
charges that can create liens on any portion of the Property, (c) any
misapplication of (i) proceeds of insurance covering any portion of the
Property, or (ii) proceeds of the sale or condemnation of any portion of the
Property, (d) any rentals, income, profits, issues and products received by or
on behalf of any of Makers subsequent to the date on which Lender gives written
notice that a default has occurred under the Loan and not applied to the payment
of principal or Interest due under this Note or the payment of operating
expenses (excluding any operator's, manager's, or developer's fee payable to any
of Makers or any affiliate of any of Makers) of the
2
<PAGE>
Property, (e) any failure to maintain, repair or restore the Property in
accordance with any Loan Document, to the extent not covered by insurance
proceeds made available to Lender, (f) any failure by any of Makers to deliver
to Lender all unearned advance rentals and security deposits paid by tenants of
the Property received by or on behalf of any of Makers, and not refunded to or
forfeited by such tenants, (g) any failure by any of Makers to return to, or
reimburse Lender for, all personalty taken from the Property by or on behalf of
any of Makers, except in accordance with the provisions of the Instrument, and
(h) any and all indemnities given by any of Makers to Lender set forth in the
Environmental Indemnity Agreement or any other Loan Document in connection with
any environmental matter relating to the Property; and (2) court costs and all
attorneys' fees provided for in any Loan Document. Furthermore, no limitation of
liability or recourse provided above in this paragraph shall (x) apply to the
extent that Lender's rights of recourse to the Property are suspended, reduced
or impaired by or as a result of any act, omission or misrepresentation of any
of Makers or any other party now or hereafter liable for any part of the Loan
and accrued interest thereon, or by or as a result of any case, action, suit or
proceeding to which any of Makers or any such other party, voluntarily becomes a
party; or (y) constitute a waiver, forfeiture, abrogation or limitation of or on
any right accorded by any law establishing a debtor relief proceeding,
including, but not limited to, Title 11, U.S. Code, which right provides for the
assertion in such debtor relief proceeding of a deficiency arising by reason of
the insufficiency of collateral notwithstanding an agreement of Lender not to
assert such deficiency.
This Note shall be governed by and construed in accordance with the law
of the State of New York and applicable federal law. The parties hereto intend
to conform strictly to the applicable usury laws. In no event, whether by reason
of demand for payment, prepayment, acceleration of the maturity hereof or
otherwise, shall the Interest contracted for, charged or received by Lender
hereunder or otherwise exceed the maximum amount permissible under applicable
law. If from any circumstance whatsoever Interest would otherwise be payable to
Lender in excess of the maximum lawful amount, the Interest payable to Lender
shall be reduced automatically to the maximum amount permitted by applicable
law. If Lender shall ever receive anything of value deemed Interest under
applicable law which would apart from this provision be in excess of the maximum
lawful amount, an amount equal to any amount which would have been excessive
Interest shall be applied to the reduction of the principal amount owing
hereunder in the inverse order of its maturity and not to the payment of
interest, or if such amount which would have been excessive Interest exceeds the
unpaid balance of principal hereof, such excess shall be refunded to Makers. All
Interest paid or agreed to be paid to Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term (including any renewal or extension) of such indebtedness so
that the amount of Interest on account of such indebtedness does not exceed the
maximum permitted by applicable law. The provisions of this paragraph shall
control all existing and future agreements between Makers and Lender.
MAKERS, HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT
MAKERS MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE INSTRUMENT, ANY
OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.
Lender shall have the right to assign, in whole or in part, this Note,
the Instrument and any other Loan Document andall of its rights hereunder and
thereunder, and all of the provisions herein and therein shall continue to apply
to the Loan. Lendershall have the right to participate the Loan with other
parties.
Makers warrant and represent to Lender that the proceeds of the Loan
evidenced by this Note will not be used for personal, family or household
purposes.
Executed under seal on the day and year first above written.
Signed and sealed in the presence of:
GR-PROPERTIES III LIMITED PARTNERSHIP
/s/ Louis Hait
Name: Louis Hait By: Grove Investment Group, Inc.,
Its General Partner
By: /s/ Joseph R. LaBrosse
/s/ Victor Morganthaler Joseph R. LaBrosse
Name: Victor Morganthaler Its Treasurer
Signed and sealed in the presence of:
FOXWOODBURG, L.P.
/s/ Louis Hait
Name: Louis Hait By: FWB, Inc.,
Its General Partner
By: /s/ Joseph R. LaBrosse
/s/ Victor Morganthaler Joseph R. LaBrosse
Name: Victor Morganthaler Its Treasurer
Signed and sealed in the presence of:
GROVE-WESTFIELD ASSOCIATES
/s Louis Hait LIMITED PARTNERSHIP
Name: Louis Hait
By: Grove Investment Group, Inc.,
Its General Partner
By: /s/ Joseph R. LaBrosse
/s/ Victor Morganthaler Joseph R. LaBrosse
Name: Victor Morganthaler Its Treasurer
Signed and sealed in the presence of:
NF34138.9
3
<PAGE>
GROVE-WEST SPRINGFIELD ASSOCIATES
/s/ Louis Hait LIMITED PARTNERSHIP
Name:Louis Hait
By: Grove Investment Group, Inc.,
Its General Partner
By: /s/ Joseph R. LaBrosse
/s/ Victor Morganthaler Joseph R. LaBrosse
Name: Victor Morganthaler Its Treasurer
Signed and sealed in the presence of:
GR-WESTWYND ASSOCIATES
/s/ Louis Hait LIMITED PARTNERSHIP
Name: Louis Hait
By: Grove Caya Corporation,
Its General Partner
By: /s/ Joseph R. LaBrosse
/s/ Victor Morganthaler Joseph R. LaBrosse
Name: Victor Morganthaler Its Treasurer
4
<PAGE>
Schedule 1
Property Location
1. Westwynd West Hartford, CT
2. Loomis Manor West Hartford, CT
3. Woodbridge Apartments Newington, CT
4. Burgundy Studios Middletown, CT
5. Fox Hill Commons Vernon, CT
6. Bradford Commons Newington, CT
7. Van Deene West Springfield, MA
8. Security Manor Westfield, MA
<PAGE>
Schedule 2
Property Allocated Debt
1. Westwynd Apartments $1,215,000
Caya Avenue (or 8% of outstanding
West Hartford, CT principal balance)
2. Loomis Manor Apartments $1,650,000
71 Loomis Drive (or 11% of outstanding
West Hartford, CT principal balance)
3. Woodbridge Apartments $2,220,000
83 Main Street (or 15% of outstanding
Newington, CT principal balance)
4. Burgundy Studios $1,650,000
104 Meeting House Lane (or 11% of outstanding
Middletown, CT principal balance)
5. Fox Hill Commons $2,100,000
99-101 South Street (or 14% of outstanding
Vernon, CT principal balance)
6. Bradford Commons $1,860,000
1582 Willard Avenue (or 12% of outstanding
Newington, CT principal balance)
7. Van Deene Manor $3,000,000
39 Van Deen Avenue (or 20% of outstanding
West Springfield, MA principal balance)
8. Security Manor Apartments $1,389,000
47 Broad Street (or 9% of outstanding
Westfield, MA principal balance)
$15,084,000
<PAGE>
CASH MANAGEMENT AGREEMENT
CASH MANAGEMENT AGREEMENT, dated as of March 14, 1997 between
GR-PROPERTIES III LIMITED PARTNERSHIP, FOXWOODBURG, L.P., GROVE-WESTFIELD
ASSOCIATES LIMITED PARTNERSHIP, GROVE-WEST SPRINGFIELD ASSOCIATES LIMITED
PARTNERSHIP and GR-WESTWYND ASSOCIATES LIMITED PARTNERSHIP having its principal
office at c/o Property Trust, 598 Asylum Avenue, Hartford, Connecticut 06105
(hereinafter collectively referred to as "Borrowers") and CITICORP REAL ESTATE,
INC., a Delaware corporation, having its principal place of business at 599
Lexington Avenue, New York, New York (together with its successors and/or
assigns, the "Lender".
W I T N E S S E T H:
WHEREAS, each of the Borrowers is the owner of one or more
real properties as shown on Exhibit A hereto (collectively, the "Properties");
and
WHEREAS, Lender is about to make a loan in the amount of
$15,084,000.00 to Borrowers evidenced by a note in the amount of $15,084,000.00
made by Borrowers to Lender (the "Note") and secured by, among other things, one
or more mortgages from each Borrower to Lender (collectively, the "Mortgage")
encumbering the Properties owned by such Borrower (the "Loan"); and
WHEREAS, Borrowers and Lender desire to establish, pursuant to
the terms of this Cash Management Agreement, bank accounts for the deposit (in
accordance with the terms hereof) of all revenues arising from the Properties to
facilitate Borrower's payment of debt service and other payments payable by
Borrowers to Lender pursuant to the Note, Mortgage and any other document
executed in connection with the Loan (collectively, the "Loan Documents").
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Borrower and Lender
agree as follows:
0. From and after the date hereof, Borrowers shall deposit or cause to be
deposited into the deposit accounts described in Exhibit B hereto (collectively,
the "Cash Management Account") within one (1) business day after Borrower's
receipt thereof (whether through an agent or otherwise) all rents, rent,
additional rents and all other revenue received in connection with the ownership
and operation of the Properties (collectively, the "Rents"). The Cash Management
Account must be established in such manner as to permit Lender to make daily
withdrawals therefrom.
1. Notwithstanding anything contained herein or in the Loan Documents to
the contrary, in the event that, at any time during the term of the Loan, (i)
the debt service coverage ratio for the Properties falls below 1.5 to 1.0 based
upon an assumed constant annual interest rate of 9.66% for the most recent
"Measuring Period" (as defined below) during the term of the Loan,
<PAGE>
or (ii) a default on the part of Grove Property Trust shall occur under any
interest rate swap agreements pledged to Lender to secure the Loan (each, a
"Sweep Event"), Lender shall, without notice to Borrower, be permitted to
withdraw, and Borrower hereby authorizes Lender to make such withdrawals,
amounts on deposit in the Cash Management Account equal to the amounts that
Borrower will be obligated to pay Lender pursuant to the Loan Documents on the
next occurring Payment Date (as defined in the Note) in respect of debt service
due under the Note and all escrows and reserves required under the Mortgage (the
"Debt Service Amounts"). For the purpose of this Cash Management Agreement, the
term "Measuring Period" shall mean (i) each consecutive 12-month period measured
on a rolling basis for which the Borrowers are required to deliver quarterly
financial statements under the terms of the Loan Documents or (ii) with respect
to the quarterly periods ending June 30, 1997, September 30, 1997 and December
31, 1997, the preceding 3-month, 6-month, and 9-month periods, respectively.
2. All Debt Service Amounts drawn by Lender from the Cash Management
Account shall be deposited into the Other Impositions Account (as defined in the
Mortgage). To the extent available, the Debt Service Amounts on deposit in the
Other Imposition Account shall, on the first day of each calendar month after
the Sweep Event be applied by Lender to the debt service payments due under the
Loan Documents (including, but not limited to and to the extent provided for in
the Loan Document, amounts due for principal, interest, late fees, default
interest, tax, insurance, repair and similar reserves) (collectively, the
"Monthly Payment"). It shall constitute an event of default hereunder, under the
Note and under the Mortgage if there are not Debt Service Amounts on deposit in
the Other Impositions Account on the first day of each month during the
continuance of a Sweep Event sufficient to pay the Monthly Payment and Borrower
has not delivered an amount equal to the deficiency thereof to Lender on or
prior to such date.
3. In the event that, after the occurrence of a Sweep Event, either (i) the
debt service coverage ratio equals or exceeds 1.5 to 1.0 based upon an assumed
annual interest rate of 9.66% for the most recent Measuring Period, or (ii) the
applicable default under the Interest Rate Agreement has been cured, and (iii)
no default shall have occurred or be continuing beyond the expiration of any
applicable grace period under the Note, the Mortgage or any other Loan Document,
Lender shall not make any further withdrawals from the Cash Management Account
unless and until a subsequent Sweep Event shall thereafter occur.
4. All funds in the Other Imposition Account shall be treated as "Funds" as
provided in the second paragraph of Section 3 of the Mortgage. Notwithstanding
anything to the contrary contained in any of the Loan Documents, (x) so long as
a Sweep Event is continuing and Lender has the right to withdraw funds from the
Cash Management Account pursuant to this Agreement, Borrowers shall have no
obligation to make any payments under the Loan Documents for the Monthly Payment
(and no late charge or default rate interest shall accrue, and no default shall
result, from Borrowers' failure to make any such payment) if and to the extent
that, as of 2 p.m. on the date immediately preceding the date on which any such
payment is due, there is an aggregate amount on deposit in the Cash Management
Account equal to or greater than the amount of such Monthly Payment. Borrowers
shall have the right to change the destination of the Cash Management Accounts
from time to time upon not less than 60-days prior written notice to Lender to
new accounts where all Rents will be deposited, subject to the terms of this
Cash Management
2
<PAGE>
Agreement provided the financial institution which shall maintain such
accounts shall be reasonably satisfactory to Lender.
5. This Agreement is to become effective as of the date hereof, and the
Cash Management Account shall be in a position to process remittances on that
date. This Agreement shall terminate and be of no further force and effect upon
the payment in full of all sums due and owing to Lender under the Loan Documents
and the satisfaction of all obligations of Borrower thereunder.
6. Lender shall not incur any liability or responsibility of any nature for
any act or omission on its part provided the same is in good faith and without
gross negligence and in accordance with this Agreement, and Borrower hereby
fully indemnifies Lender against any claims, and any expenses incident thereto,
which may be asserted against the Lender arising out of or with respect to, any
such act or omission provided the same is in good faith and without negligence.
7. All instructions, notices, statements and other communications provided
for herein shall be given or made in writing and shall be deemed delivered (i)
if delivered by hand delivery or by nationally-recognized overnight courier
service, when received, or (ii) if sent by certified mail, postage prepaid,
return receipt requested, on the date set forth on the return receipt, in each
case to the intended recipient as follows:
To Borrower: c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Attention: Mr. Joseph R. LaBrosse
To Lender: Citicorp Real Estate, Inc.
599 Lexington Avenue
New York, New York 10043
Attention: CitiMae Conduit (MC-2)
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party.
8. This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut. Each of the parties hereto submits to personal
jurisdiction in the State of Connecticut and the federal courts of the United
States of America located in said state (and any Appellate Courts taking appeals
therefrom) for the enforcement of such party's rights and obligations hereunder,
and waives (a) any and all personal rights under the law of any state to object
to jurisdiction within the State of Connecticut for the purpose of any action,
suit, proceeding or litigation (collectively, an "Action") to enforce such
obligations of such party and (b) all personal rights to bring any action in any
state other than Connecticut to enforce the rights of such party hereunder. Each
party hereby waives and agrees not to assert, as a defense in any Action brought
in the courts of or within the State of Connecticut and arising out of or
relating
3
<PAGE>
to this Agreement, (x) that it is not subject to the jurisdiction of such courts
or that such Action may not be brought or is not maintainable in such courts or
that this Agreement may not be enforced in or by such courts or that it is
exempt or immune from execution, (y) that the action is brought in an
inconvenient forum or (z) that the venue of the Action is improper.
9. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS AGREEMENT, THE NOTE, THE
MORTGAGE, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.
10. A default by any of the Borrowers hereunder shall constitute default
under the Note and Mortgage.
11. This Agreement may not be terminated, amended or modified except by a
written instrument signed by all of the parties hereto. None of the parties
hereto may assign or transfer their respective rights or obligations under this
Agreement without the prior written consent of the non-assisting parties.
12. This Agreement may be executed in any number of counterparts. Each
executed counterpart shall be deemed to be an original, whether delivered via
facsimile or otherwise. All executed counterparts taken together shall
constitute one Agreement.
13. This Agreement shall bind and inure to the benefit of the parties and
their respective heirs, executives successors and assigns. Lender and any
successor to Lender's interest in the Loan may assign all or any part of its
rights or remedies under this Agreement to any party or parties (without
limitation) who acquires an interest in the Loan; provided, however, the
indemnification granted to Lender and each successive assignee shall continue to
exist for the benefit of such party notwithstanding any such assignment of this
Agreement by such party. Borrower may not assign any of its rights or
obligations under this Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
BORROWERS:
GR-PROPERTIES III LIMITED
PARTNERSHIP
By: Grove Investment Group, Inc.,
Its General Partner
By: /s/ JOSEPH LABROSSE
Joseph R. LaBrosse
Its Treasurer
FOXWOODBURG, L.P.
By: FWB, Inc.,
Its General Partner
By: /s/ JOSEPH LABROSSE
Joseph R. LaBrosse
Its Treasurer
GROVE-WESTFIELD ASSOCIATES
LIMITED PARTNERSHIP
By: Grove Investment Group, Inc.,
Its General Partner
By: /s/ JOSEPH LABROSSE
Joseph R. LaBrosse
Its Treasurer
5
<PAGE>
GROVE-WEST SPRINGFIELD ASSOCIATES
LIMITED PARTNERSHIP
By: Grove Investment Group, Inc.,
Its General Partner
By: /s/ JOSEPH LABROSSE
Joseph R. LaBrosse
Its Treasurer
GR-WESTWYND ASSOCIATES
LIMITED PARTNERSHIP
By: Grove Caya Corporation,
Its General Partner
By: /s/ JOSEPH LABROSSE
Joseph R. LaBrosse
Its Treasurer
LENDER:
CITICORP REAL ESTATE, INC.,
a Delaware corporation
By: /s/ HOWARD KAPLOW
Name: Howard Kaplow
6
<PAGE>
NF37113.1
8
WHEN RECORDED MAIL TO
Joanne Feil, Esq.
Rogers & Wells
200 Park Avenue
New York, New York 10166-0153
Attn: Mary J. Conway, Esq.
(3198/189) PACE ABOVE THIS LINE FOR RECORDER'S USE
- -------------------------------------------------------------------------------
MULTIFAMILY OPEN-END MORTGAGE DEED,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
THIS MORTGAGE (herein "Instrument") is made this 14th day of March,
1997, between the Mortgagor/Grantor, GR-PROPERTIES III LIMITED PARTNERSHIP,
whose address is c/o Grove Property Trust, 598 Asylum Avenue, Hartford,
Connecticut 06105 (herein "Borrower"), and the Mortgagee, CITICORP REAL ESTATE,
INC., a corporation organized and existing under the laws of Delaware, whose
address is 599 Lexington Avenue, 24th Floor, New York, New York 10043, together
with its successors, assigns and transferees (herein "Lender").
BORROWER, in consideration of the indebtedness herein recited grants,
conveys and assigns to Lender and Lender's successors, assigns and transferees
with mortgage covenants and upon statutory condition the following described
property located in the Town of Newington, County of Hartford, State of
Connecticut:
See Exhibit "A" attached hereto and incorporated herein by reference
for all purposes.
TO HAVE AND TO HOLD such property unto Lender and Lender's successors
and assigns, forever, together with all buildings, improvements, and tenements
now or hereafter erected on the property, and all heretofore or hereafter
vacated alleys and streets abutting the property, and all easements, rights,
appurtenances, rents, royalties, mineral, oil and gas rights and profits, water,
water rights, and water stock appurtenant to the property, and all fixtures,
machinery, equipment, engines, boilers, incinerators, building materials,
appliances and goods of every nature whatsoever now or hereafter located in, or
on, or used, or intended to be used in connection with the property, including,
but not limited to, those for the purposes of supplying or distributing heating,
cooling, electricity, gas, water, air and light; and all elevators, and related
machinery and equipment, fire prevention and extinguishing apparatus, security
and access control apparatus, plumbing, bath tubs, water heaters, water closets,
sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers,
awnings, storm windows, storm doors, screens, blinds, shades, curtains and
curtain rods, mirrors, cabinets, panelling, rugs, attached floor coverings,
furniture, pictures, antennas, trees and plants, tax refunds, trade names (to
the extent applicable to property encumbered by this Instrument), licenses,
permits, insurance proceeds, unearned insurance premiums and choses in action;
all of which, including replacements and additions thereto, shall be deemed to
be and remain a part of the real property covered by this Instrument; and all of
the foregoing, together with said property (or the leasehold estate in the event
this Instrument is on a leasehold) are herein referred to as the "Property";
TOGETHER with all right, title and interest in, to and under any and
all leases now or hereinafter in existence (as amended or supplemented from time
to time) and covering space in or applicable to the Property (hereinafter
referred to collectively as the "Leases" and singularly as a "Lease"), together
with all rents, earnings, income, profits, benefits and advantages arising from
the Property and from said Leases and all other sums due or to become due under
and pursuant thereto, and together with any and all guarantees of or under any
of said Leases, and together with all rights, powers, privileges, options and
other benefits of Borrower as lessor under the Leases, including, without
limitation, the immediate and continuing right, upon the occurrence of a default
and the continuation thereof beyond any applicable grace period, to receive and
collect all rents, income, revenues, issues, profits, condemnation awards,
insurance proceeds, moneys and security payable or receivable under the Leases
or pursuant to any of the provisions thereof, whether as rent or otherwise, the
right to accept or reject any offer made by any tenant pursuant to its Lease to
purchase the Property and any other property subject to the Lease as therein
provided and to perform all other necessary or appropriate acts with respect to
such Leases, and the right, upon the occurrence of a default and the
continuation thereof beyond any applicable grace period, to make all waivers and
agreements, to give and receive all notices, consents and releases, to take such
action upon the happening of a default under any Lease, including the
commencement, conduct and consummation of proceedings at law or in equity as
shall be permitted under any provision of any Lease or by any law, and to do any
and all other things whatsoever which the Borrower is or may become entitled to
do under any such Lease together with all accounts receivable, contract rights,
franchises, interests, estates or other claims, both at law and in equity,
relating to the Property, to the extent not included in rent earnings and income
under any of the Leases;
TOGETHER with all right, title and interest in, to and under any and
all reserve, deposit or escrow accounts (the "Accounts") made pursuant to any
loan document made between Borrower and Lender with respect to the Property,
together with all income, profits, benefits and advantages arising therefrom,
and together with all rights, powers, privileges, options and other benefits of
Borrower under the Accounts, and together with the right to do any and all other
things whatsoever which the Borrower is or may become entitled to do under the
Accounts;
TOGETHER with all agreements, contracts, certificates, guaranties,
warranties, instruments, franchises, permits, licenses, plans, specifications
and other documents, now or hereafter entered into, and all rights therein and
thereto, pertaining to the use, occupancy, construction, management or operation
of the Property and any part thereof and any improvements or respecting any
business or activity conducted on the Property and any part thereof and all
right, title and interest of Borrower therein, including the right to receive
and collect any sums payable to Borrower thereunder and all deposits or other
security or advance payments made by Borrower with respect to any of the
services related to the Property or the operation thereof;
TOGETHER with all tradenames, trademarks, servicemarks, logos,
copyrights, goodwill, books and records and all other general intangibles
relating to or used in connection with the operation of the Property and owned
by Borrower; and
TOGETHER with any and all proceeds resulting or arising from the
foregoing (collectively, the "Collateral").
TO SECURE TO LENDER on condition of (a) the repayment of the
indebtedness evidenced by the note dated of even date herewith (herein "Note"),
a copy of which Note is attached hereto and made a part hereof as Exhibit B
executed by Borrower and those other entities listed on Schedule 1 attached
hereto in the principal sum of Fifteen Million Eighty Four Thousand Dollars
($15,084,000.00), with interest thereon (the "Loan"), providing for monthly
installments of interest, with the balance of the indebtedness, if not sooner
paid, due and payable on April 1, 2007 (the "Maturity Date") and all renewals,
extensions and modifications thereof (the "Loan"); (b) the repayment of any
future advances with interest thereon, made by Lender to Borrower pursuant to
paragraph 30 hereof (herein "Future Advances"); (c) the performance of the
covenants and agreements of Borrower contained in an Environmental Indemnity
Agreement (herein so-called) between Lender and Borrower dated of even date
herewith; (d) the payment of all other sums, with interest thereon, advanced in
accordance herewith to protect the security of this Instrument; (e) the
performance of the covenants and agreements of Borrower herein contained; and
(d) the performance of the covenants and agreements in the Loan Documents (as
hereinafter defined).
This Instrument, each of the documents listed on Schedule 1 attached
hereto (the "Additional Security Documents"), and any other documents and
instruments evidencing, securing or governing the terms of the Loan (this
Instrument, the Additional Security Documents and such other documents and
instruments being collectively, (the "Loan Documents") are given as security for
the payment of the Note.
Borrower covenants that Borrower is lawfully seised of the estate
hereby conveyed and has the right to mortgage, grant, convey and assign the
Property (and, if this Instrument is on a leasehold, that the ground lease is in
full force and effect without modification except as noted above and without
default on the part of either lessor or lessee thereunder), that the Property is
unencumbered (except as disclosed in the title policies delivered to Lender as a
condition to the funding of the Loan), and that Borrower will warrant and defend
generally the title to the Property against all claims and demands, subject to
any easements, restrictions, liens and encumbrances listed in a schedule of
exceptions to coverage in any title insurance policy insuring Lender's interest
in the Property.
UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows:
<PAGE>
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0. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when due
the principal of and interest on the indebtedness evidenced by the Note, any
prepayment and late charges provided in the Note and all other sums secured by
this Instrument.
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1. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Contemporaneously with
the execution hereof, Borrower shall deliver to Lender an amount equal to three
(3) monthly premium installments for fire and other hazard insurance, rent loss
insurance and such other insurance covering the Property as Lender may require
pursuant to paragraph 5 hereof. In addition to such payment, Borrower shall pay
to Lender on the day monthly installments of interest are payable under the Note
(or on another day designated in writing by Lender), until the Note is paid in
full, a sum (herein "Funds") equal to one-twelfth of (a) the yearly taxes and
assessments which may be levied on the Property, (b) the yearly ground rents, if
any, (c) if this Instrument is on a leasehold, the yearly fixed rents, if any,
under the ground lease, all as reasonably estimated initially and from time to
time by Lender on the basis of assessments and bills and reasonable estimates
thereof. In the event Borrower fails to make any payments when due for fire and
hazard insurance premiums Lender reserves the right to require Borrower to make
monthly deposits for such premiums which should be included with the Funds. Any
waiver by Lender of a requirement that Borrower pay such Funds may be revoked by
Lender, in Lender's sole discretion, at any time upon notice in writing to
Borrower. Lender may require Borrower to pay to Lender, in advance, such other
Funds for other similar taxes, charges, premiums, assessments and impositions in
connection with Borrower or the Property which Lender shall reasonably deem
necessary to protect Lender's interests (herein "Other Impositions"). Unless
otherwise provided by applicable law, Lender may require Funds for Other
Impositions to be paid by Borrower in a lump sum (but not more than thirty (30)
days before the due date) or in periodic installments, at Lender's option.
The Funds shall be held in an institution(s) the deposits or
accounts of which are insured or guaranteed by a Federal or state agency
(including Lender if Lender is such an institution). Lender shall apply the
Funds to pay said rents, taxes, assessments, insurance premiums and Other
Impositions so long as Borrower is not in breach, beyond any applicable grace
period, of any covenant or agreement of Borrower in this Instrument. Lender
shall make no charge for so holding and applying the Funds, analyzing said
account or for verifying and compiling said assessments and bills, unless Lender
or Lender's servicer shall incur outside third party costs in connection
therewith. Interest on the Funds shall accrue at the then prevailing annual
money market rate offered by the depository and accrue for the benefit of
Borrower. Lender shall give to Borrower, without charge, an annual accounting of
the Funds in Lender's normal format showing credits and debits to the Funds and
the purpose for which each debit to the Funds was made. The Funds are pledged as
additional security for the sums secured by this Instrument.
If the amount of the Funds held by Lender at the time of the
annual accounting thereof shall exceed the amount deemed necessary by Lender to
provide for the payment of taxes, assessments, insurance premiums, rents and
Other Impositions, as they fall due, such excess shall be credited to Borrower
on the next monthly installment or installments of Funds due. If at any time the
amount of the Funds held by Lender shall be less than the amount deemed
necessary by Lender to pay taxes, assessments, insurance premiums, rents and
Other Impositions, as they fall due, Borrower shall pay to Lender any amount
necessary to make up the deficiency within thirty days after notice from Lender
to Borrower requesting payment thereof.
Upon Borrower's breach of any covenant or agreement of
Borrower in this Instrument beyond any applicable grace period, Lender may
apply, in any amount and in any order as Lender shall determine in Lender's sole
discretion, any Funds held by Lender at the time of application (i) to pay
rents, taxes, assessments, insurance premiums and Other Impositions which are
then or will thereafter become due, or (ii) as a credit against sums secured by
this Instrument. Upon payment in full of all sums secured by this Instrument,
Lender shall promptly refund to Borrower any Funds held by Lender.
2. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise,
all payments received by Lender from Borrower under the Note or this Instrument
shall be applied by Lender in the following order of priority: (i) amounts
payable to Lender by Borrower under paragraph 2 hereof; (ii) interest payable on
the Note; (iii) principal of the Note; (iv) interest payable on advances made
pursuant to paragraph 8 hereof; (v) principal of advances made pursuant to
paragraph 8 hereof; (vi) interest payable on any Future Advance, provided that
if more than one Future Advance is outstanding, Lender may apply payments
received among the amounts of interest payable on the Future Advances in such
order as Lender, in Lender's sole discretion, may determine; (vii) principal of
any Future Advance, provided that if more than one Future Advance is
outstanding, Lender may apply payments received among the principal balances of
the Future Advances in such order as Lender, in Lender's sole discretion, may
determine; and (viii) any other sums secured by this Instrument in such order as
Lender, at Lender's option, may determine: provided, however, that Lender may,
at Lender's option, apply any sums payable pursuant to paragraph 8 hereof prior
to interest on and principal of the Note, but such application shall not
otherwise affect the order of priority of application specified in this
paragraph 3.
3. CHARGES; LIENS. Borrower shall pay all rents, taxes, assessments,
premiums, and Other Impositions attributable to the Property in the manner
provided under paragraph 2 hereof or, if not paid in such manner, by Borrower
making payment, when due, directly to the payee thereof, or in such other manner
as Lender may reasonably designate in writing. Borrower shall promptly furnish
to Lender all notices of amounts due under this paragraph 4, and in the event
Borrower shall make payment directly, Borrower shall promptly furnish to Lender
receipts evidencing such payments. Borrower shall promptly discharge any lien,
which has, or may have, priority over or equality with, the lien of this
Instrument, and Borrower shall pay, when due, the claims of all persons
supplying labor or materials to or in connection with the Property. Without
Lender's prior written permission, Borrower shall not allow any lien inferior to
this Instrument to be perfected against the Property.
4. HAZARD INSURANCE. Borrower shall keep the improvements now existing
or hereafter erected on the Property insured by carriers at all times
satisfactory to Lender against loss by fire, hazards included within the term
"extended coverage", rent loss and such other hazards, casualties, liabilities
and contingencies as Lender (and, if this Instrument is on a leasehold, the
ground lease) shall reasonably require pursuant to existing commercial standards
at the time in question and in such amounts and for such periods as Lender shall
require. All premiums on insurance policies shall be paid, at Lender's option,
in the manner provided under paragraph 2 hereof, or in such other manner as
Lender may reasonably designate in writing. Borrower acknowledges that Lender
shall, in its sole discretion, determine whether future insurance carriers are
acceptable.
All insurance policies and renewals thereof shall be in a
form acceptable to Lender and shall include a standard mortgagee clause in favor
of and in form acceptable to Lender. Lender shall have the right to hold the
policies, and Borrower shall promptly furnish to Lender all renewal notices and
all receipts of paid premiums. At least thirty (30) days prior to the expiration
date of a policy, Borrower shall deliver to Lender a renewal policy in form
satisfactory to Lender. If this Instrument is on a leasehold, Borrower shall
furnish Lender a duplicate of all policies, renewal notices, renewal policies
and receipts of paid premiums if, by virtue of the ground lease, the originals
thereof may not be supplied by Borrower to Lender.
In the event of loss, Borrower shall give immediate written
notice to the insurance carrier and to Lender. Borrower hereby authorizes and
empowers Lender as attorney-in-fact for Borrower to make proof of loss, to
adjust and compromise any claim under insurance policies, to appear in and
prosecute any action arising from such insurance policies, to collect and
receive insurance proceeds, and to deduct therefrom Lender's expenses incurred
in the collection of such proceeds; provided however, that nothing contained in
this paragraph 5 shall require Lender to incur any expense or take any action
hereunder. Borrower further authorizes Lender, at Lender's option, (a) to hold
the balance of such proceeds to be used to reimburse Borrower for the cost of
reconstruction or repair of the Property or (b) subject to the immediately
following paragraph to apply all of such proceeds to the payment of the sums
secured by this Instrument, whether or not then due, in the order of application
set forth in paragraph 3 hereof (subject, however, to the rights of the lessor
under the ground lease if this Instrument is on a leasehold). The insurance
required in this section can be insured through a blanket policy or policies
provided that such blanket policy designates the amount of insurance allocable
to the Property.
Lender shall not exercise Lender's option to apply insurance
proceeds to the payment of the sums secured by this Instrument if all of the
following conditions are met: (i) Borrower is not in breach or default of any
covenant or agreement of this Instrument, the Note or any other Loan Document;
(ii) Lender determines that there will be sufficient funds to restore and repair
the Property to the Pre-existing Condition (as hereinafter defined) or Borrower
has posted any shortfall with Lender; (iii) Lender agrees in writing that the
rental income of the Property, after restoration and repair of the Property to
the Pre-existing Condition, will be sufficient to meet all operating costs and
other expenses, payments for reserves and loan repayment obligations (including
any obligations under any permitted subordinate financing) relating to the
Property and maintain a debt service coverage ratio of at least 1.35 to 1.0 at
an assumed annual interest rate of 9.66% for the portion of the Loan allocable
to the Property; (iv) Lender determines that restoration and repair of the
Property to the Pre-existing Condition will be completed within one year of the
date of the loss or casualty to the Property, but in no event later than six
months prior to the Maturity Date; (v) Lender is reasonably satisfied that the
Property can be restored and repaired as nearly as possible to the condition it
was in immediately prior to such casualty and in compliance with all applicable
zoning, building and other laws and codes (the "Pre-existing Condition")
(provided that if Borrower does not have the legal right to restore the original
number of units, the Loan shall only be repaid to the extent required by Section
33 hereof). If Lender elects to make the insurance proceeds available for the
restoration and repair of the Property, Borrower agrees that, if at any time
during the restoration and repair, the cost of completing such restoration and
repair, as determined by Lender, exceeds the undisbursed insurance proceeds,
Borrower shall, immediately upon demand by Lender, deposit the amount of such
excess with Lender, and Lender shall first disburse such deposit to pay for the
costs of such restoration and repair on the same terms and conditions as the
insurance proceeds are disbursed.
If the insurance proceeds are held by Lender to reimburse
Borrower for the cost of restoration and repair of the Property, the Property
shall be restored to at least the equivalent of its condition as existing on the
date hereof or such other condition as Lender may approve in writing. Lender
may, at Lender's option, condition disbursement of said proceeds on Lender's
approval of such plans and specifications of an architect reasonably
satisfactory to Lender, contractor's cost estimates, architect's certificates,
waivers of liens, sworn statements of mechanics and materialmen and such other
evidence of costs, percentage completion of construction, application of
payments; and satisfaction of liens as Lender may reasonably require.
Notwithstanding anything to the contrary set forth above, if the insurance
proceeds are to be used for the rest of restoration and repair, Borrower shall
be entitled to collect and receive such proceeds if such proceeds do not exceed
$350,000. If the Property is sold pursuant to paragraph 27 hereof or if Lender
acquires title to the Property, Lender shall have all of the right, title and
interest of Borrower in and to any insurance policies and unearned premiums
thereon and in and to the proceeds resulting from any damage to the Property
prior to such sale or acquisition.
5. PRESERVATION AND MAINTENANCE OF PROPERTY; LEASEHOLDS. Borrower (a)
shall not commit waste or permit impairment or deterioration of the Property,
(b) shall not abandon the Property, (c) shall restore or repair promptly and in
a good and workmanlike manner all or any part of the Property to the equivalent
of its original condition, or such other condition as Lender may approve in
writing, in the event of any damage, injury or loss thereto, whether or not
insurance proceeds are available to cover in whole or in part the costs of such
restoration or repair, (d) shall keep the Property, including improvements,
fixtures, equipment, machinery and appliances thereon in good repair and shall
replace fixtures, equipment, machinery and appliances on the Property when
necessary to keep such items in good repair, (e) shall comply with all laws,
ordinances, regulations and requirements of any governmental body applicable to
the Property, (f) shall provide for professional management of the Property by
Grove Operating LP or a residential rental property manager satisfactory to
Lender pursuant to a contract approved by Lender in writing, unless such
requirement shall be waived by Lender in writing, (g) shall generally operate
and maintain the Property in a manner to ensure maximum rentals that are
equivalent to similar properties in the area of the Property, (h) shall, in the
event a Property's debt service coverage ratio falls below 1.10 to 1.00, either
terminate the management agreement and select a new property manager
satisfactory to the Lender, or provide evidence reasonably satisfactory to
Lender in its sole judgment that the property manager is performing to market
standards and (i) shall give notice in writing to Lender of and, unless
otherwise directed in writing by Lender, appear in and defend any action or
proceeding purporting to affect the Property, the security of this Instrument or
the rights or powers of Lender. Neither Borrower nor any tenant or other person
shall remove, demolish or alter any improvement now existing or hereafter
erected on the Property or any fixture, equipment, machinery or appliance in or
on the Property except when incident to alterations in the normal course of
business and the replacement of fixtures, equipment, machinery and appliances
with items of like kind.
If this Instrument is on a leasehold, Borrower (i) shall
comply with the provisions of the ground lease, (ii) shall give immediate
written notice to Lender of any default by lessor under the ground lease or of
any notice received by Borrower from such lessor of any default under the ground
lease by Borrower, (iii) shall exercise any option to renew or extend the ground
lease and give written confirmation thereof to Lender within thirty days after
such option becomes exercisable, (iv) shall give immediate written notice to
Lender of the commencement of any remedial proceedings under the ground lease by
any party thereto and, if required by Lender, shall permit Lender as Borrower's
attorney-in-fact to control and act for Borrower in any such remedial
proceedings and (v) shall within thirty days after request by Lender obtain from
the lessor under the ground lease and deliver to Lender the lessor's estoppel
certificate required thereunder, if any. Borrower hereby expressly transfers and
assigns to Lender the benefit of all covenants contained in the ground lease,
whether or not such covenants run with the land, but Lender shall have no
liability with respect to such covenants nor any other covenants contained in
the ground lease.
Borrower shall not surrender the leasehold estate and
interests herein conveyed nor terminate or cancel the ground lease creating said
estate and interests, and Borrower shall not, without the express written
consent of Lender, alter or amend said ground lease. Borrower covenants and
agrees that there shall not be a merger of the ground lease, or of the leasehold
estate created thereby, with the fee estate covered by the ground lease by
reason of said leasehold estate or said fee estate, or any part of either,
coming into common ownership, unless Lender shall consent in writing to such
merger, if Borrower shall acquire such fee estate, then this Instrument shall
simultaneously and without further action be spread so as to become a lien on
such fee estate.
6. USE OF PROPERTY. Unless required by applicable law or unless Lender
has otherwise agreed in writing, Borrower shall not allow changes in the use for
which all or any part of the Property was intended at the time this Instrument
was executed. Borrower shall not subdivide the Property or initiate or acquiesce
in a change in the zoning classification of the Property without Lender's prior
written consent.
7. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the
covenants and agreements contained in this Instrument, or if any action or
proceeding is commenced which affects the Property or title thereto or the
interest of Lender therein, including, but not limited to, eminent domain,
insolvency, code enforcement, or arrangements or proceedings involving a
bankrupt or decedent, then Lender at Lender's option may make such appearances,
disburse such sums and take such action as Lender deems necessary, in its sole
discretion, to protect Lender's interest, including, but not limited to, (i)
disbursement of attorney's fees, (ii) entry upon the Property to make repairs,
(iii) procurement of satisfactory insurance as provided in paragraph 5 hereof,
(iv) if this Instrument is on a leasehold, exercise of any option to renew or
extend the ground lease on behalf of Borrower and the curing of any default of
Borrower in the terms and conditions of the ground lease, and (v) the payment of
any taxes and/or assessments levied against the Property and then due and
payable. Lender will endeavor to give Borrower prior notice thereof, but
Lender's failure to give notice will not be deemed a default by Lender hereunder
or otherwise create any liability against Lender.
Any amounts disbursed by Lender pursuant to this paragraph 8,
with interest thereon, shall become additional indebtedness of Borrower secured
by this Instrument. Unless Borrower and Lender agree to other terms of payment,
such amounts shall be immediately due and payable and shall bear interest from
the date of disbursement at the rate stated in the Note unless collection from
Borrower of interest at such rate would be contrary to applicable law, in which
event such amounts shall bear interest at the highest rate which may be
collected from Borrower under applicable law. Borrower hereby covenants and
agrees that Lender shall be subrogated to the lien of any mortgage or other lien
discharged, in whole or in part, by the indebtedness secured hereby. Nothing
contained in this paragraph 8 shall require Lender to incur any expense or take
any action hereunder.
8. INSPECTION. Lender may make or cause to be made reasonable entries
upon and inspections of the Property including, but not limited to, phase I
and/or phase II environmental audits and inspections which phase II inspections
will not unreasonably disturb Borrower's or any tenant's use of the Property.
9. BOOKS AND RECORDS. Borrower shall keep and maintain at all times at
Borrower's address stated below, or such other place as Lender may approve in
writing, complete and accurate books of accounts and records adequate to reflect
correctly the results of the operation of the Property and copies of all written
contracts, leases and other instruments which affect the Property. Such books,
records, contracts, leases and other instruments shall be subject to examination
and inspection at any reasonable time by Lender. Borrower shall furnish to
Lender, within sixty (60) days after the end of each three month quarter of each
fiscal year of Borrower, a balance sheet, a statement of income and expenses of
the Property and a statement of changes in financial position, each in such
reasonable detail as Lender shall reasonably require and certified by Borrower
and, if Lender shall require, by an independent certified public accountant.
Borrower shall furnish to Lender, within sixty (60) days after the end of each
fiscal year of Borrower, a balance sheet, a statement of income and expenses of
the Property and a statement of changes in financial position, each in
reasonable detail and certified by Borrower and, if Lender shall require, by an
independent certified public accountant. Borrower shall furnish, within ninety
(90) days after each fiscal year of Borrower, commencing with 1997, annual
audited statements for the Grove Operating L.P. and Grove Property Trust with a
supplemental schedule for each Property. Borrower shall furnish within thirty
(30) days after the start of each fiscal year of Borrower, an annual operating
and capital expenditure budget for each Property. Borrower shall furnish,
together with the foregoing financial statements and at any other time upon
Lender's request, a rent schedule for the Property, certified by Borrower,
showing the name of each tenant, and for each tenant, the space occupied, the
lease expiration date, the rent payable and the rent paid. In addition to the
above delivery of financial statements and rent schedule, Borrower shall deliver
to Lender updated versions of such financial statements at any other time upon
Lender's request, including monthly balance sheets and monthly statements of
income and expenses of the Property.
As a condition to closing the Loan, Borrower delivered
financial statements to Lender. Borrower hereby authorizes the use of these
financial statements for the marketing to potential investors in the Loan or in
mortgage securities derived from the Loan. Borrower acknowledges such investors
will rely on the financial statements and representations made by Borrower and
hereby agrees to indemnify and hold Lender and its affiliates harmless from and
against all liabilities, costs, obligations, demands, suits, damages,
assessments, and/or penalties, arising out of or in connection with any
misstatement in financial statements and information.
10. CONDEMNATION. Borrower shall promptly notify Lender of any action
or proceeding relating to any condemnation or other taking, whether direct or
indirect, of the Property, or part thereof, and Borrower shall appear in and
prosecute any such action or proceeding unless otherwise directed by Lender in
writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for
Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name,
any action or proceeding relating to any condemnation or other taking of the
Property, whether direct or indirect, and to settle or compromise any claim in
connection with such condemnation or other taking. The proceeds of any award,
payment or claim for damages, direct or consequential, in connection with any
condemnation or other taking, whether direct or indirect, of the Property, or
part thereof, or for conveyances in lieu of condemnation, are hereby assigned to
and shall be paid to Lender subject, if this Instrument is on a leasehold, to
the rights of lessor under the ground lease.
Borrower authorizes Lender to apply such awards, payments,
proceeds or damages, after the deduction of Lender's expenses incurred in the
collection of such amounts, at Lender's option, to restoration or repair of the
Property or to payment of the sums secured by this Instrument, whether or not
then due, in the order of application set forth in paragraph 3 hereof, with the
balance, if any, to Borrower, provided that Lender's right to apply such amounts
to repay the Loan shall be subject to the same conditions as are set forth in
paragraphs 5 and 33 in respect of restoration following a casualty. Borrower
agrees to execute such further evidence of assignment of any awards, proceeds,
damages or claims arising in connection with such condemnation or taking as
Lender may require.
11. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at
Lender's option, without giving notice to or obtaining the consent of Borrower,
Borrower's successors or assigns or of any junior lienholder or guarantors,
without liability on Lender's part and notwithstanding Borrower's breach of any
covenant or agreement of Borrower in this Instrument, extend the time for
payment of said indebtedness or any part thereof, reduce the payments thereon,
release anyone liable on any of said indebtedness, accept a renewal note or
notes therefor, modify the terms and time of payment of said indebtedness,
release from the lien of this Instrument any part of the Property, take or
release other or additional security, reconvey any part of the Property, consent
to any map or plan of the Property, consent to the granting of any easement,
join in any extension or subordination agreement, and agree in writing with
Borrower to modify the rate of interest or period of amortization of the Note or
change the amount of the monthly installments payable thereunder. Any actions
taken by Lender pursuant to the terms of this paragraph 12 shall not affect the
obligation of Borrower or Borrower's successors or assigns to pay the sums
secured by this Instrument and to observe the covenants of Borrower contained
herein, shall not affect the guaranty of any person, corporation, partnership or
other entity for payment of the indebtedness secured hereby, and shall not
affect the lien or priority of lien hereof on the Property. Borrower shall pay
Lender a reasonable service charge, together with such title insurance premiums
and attorney's fees as may be incurred at Lender's option, for any such action
if taken at Borrower's request.
12. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in
exercising any right or remedy hereunder, or otherwise afforded by applicable
law, shall not be a waiver of or preclude the exercise of any right or remedy.
The acceptance by Lender of payment of any sum secured by this Instrument after
the due date of such payment shall not be a waiver of Lender's right to either
require prompt payment when due of all other sums so secured or to declare a
default for failure to make prompt payment. The procurement of insurance or the
payment of taxes or other liens or charges by Lender shall not be a waiver of
Lender's right to accelerate the maturity of the indebtedness secured by this
Instrument, nor shall Lender's receipt of any awards, proceeds or damages under
paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in
payment of sums secured by this Instrument.
13. ESTOPPEL CERTIFICATE. Borrower shall within ten (10) days of a
written request from Lender furnish Lender with a written statement, duly
acknowledged, setting forth the sums secured by this Instrument and any right of
set-off, counterclaim or other defense which exists against such sums and the
obligations of this Instrument and attaching true, correct and complete copies
of the Note, this Instrument and any other Loan Documents (as herein defined)
and any and all modifications, amendments and substitutions thereof.
14. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is
intended to be a security agreement pursuant to the Uniform Commercial Code for
any of the items specified above as part of the Property which, under applicable
law, may be subject to a security interest pursuant to the Uniform Commercial
Code, and Borrower hereby grants Lender a security interest in said items.
Borrower agrees that Lender may file this Instrument, or a reproduction thereof,
in the real estate records or other appropriate index, as a financing statement
for any of the items specified above as part of the Property. Any reproduction
of this Instrument or of any other security agreement or financing statement
shall be sufficient as a financing statement. In addition, Borrower agrees to
execute and deliver to Lender, upon Lender's request, any financing statements,
as well as extensions, renewals and amendments thereof, and reproductions of
this Instrument in such form as Lender may require to perfect a security
interest with respect to said items. Borrower shall pay all costs of filing such
financing statements and any extensions, renewals, amendments and releases
thereof, and shall pay all reasonable costs and expenses of any record searches
for financing statements Lender may reasonably require. Without the prior
written consent of Lender, Borrower shall not create or suffer to be created
pursuant to the Uniform Commercial Code any other security interest in said
items, including replacements and additions thereto. Upon Borrower's breach of
any covenant or agreement of Borrower contained in this Instrument, including
the covenants to pay when due all sums secured by this Instrument, Lender shall
have the remedies of a secured party under the Uniform Commercial Code and, at
Lender's option, may also invoke the remedies provided in paragraph 27 of this
Instrument as to such items. In exercising any of said remedies, Lender may
proceed against the items of real property and any items of personal property
specified above as part of the Property separately or together and in any order
whatsoever, without in any way affecting the availability of Lender's remedies
under the Uniform Commercial Code or of the remedies provided in paragraph 27 of
this Instrument.
15. LEASES OF THE PROPERTY. As used in this paragraph 16, the word
"lease" shall mean "sublease" if this Instrument is on a leasehold. Borrower
shall, in all material respects, comply with and observe Borrower's obligations
as landlord under all leases of the Property or any part thereof. Borrower will
not lease any portion of the Property for non-residential use except with the
prior written approval of Lender. Borrower shall be required to obtain Lender's
consent, which shall not be unreasonably withheld, for any non-residential lease
and non-residential subleases at the Property. The request for approval of each
such proposed lease shall be made to Lender in writing and Borrower shall
furnish to Lender (and any loan servicer specified from time to time by Lender):
(i) such biographical and financial information about the proposed tenant as
Lender may require in conjunction with its review, (ii) a copy of the proposed
form of lease, and (iii) a summary of the material terms of such proposed lease
(including, without limitation, rental terms and the term of the proposed lease
and any options). Borrower, at Lender's request, shall furnish Lender with
executed copies of all leases hereafter made of all or any part of the Property,
and all leases hereafter entered into will be in form and substance subject to
the approval of Lender. All leases of the Property shall, to the extent entered
into from the date hereof, specifically provide that such leases are subordinate
to this Instrument; that the tenant attorns to Lender, such attornment to be
effective upon Lender's acquisition of title to the Property; that the tenant
agrees to execute such further evidences of attornment as Lender may from time
to time request; that the attornment of the tenant shall not be terminated by
foreclosure; that in no event shall Lender, as holder of this Instrument or as
successor landlord, be liable to the tenant for any act or omission of any prior
landlord or for any liability or obligation of any prior landlord occurring
prior to the date that Lender or any subsequent owner acquire title to the
Property; and that Lender may, at Lender's option, accept or reject such
attornments. Except as otherwise provided in this paragraph 16, Borrower shall
not, without Lender's written consent, execute, modify, surrender or terminate,
either orally or in writing, any lease now existing or hereafter made of all or
any part of the Property having an unexpired term of three (3) years or more,
permit an assignment or sublease of a non-residential lease without Lender's
written consent, or request or consent to the subordination of any lease of all
or any part of the Property to any lien subordinate to this Instrument. If
Borrower becomes aware that any tenant proposes to do, or is doing, any act or
thing which may give rise to any right of set-off against rent, Borrower shall
(i) take such steps as shall be reasonably calculated to prevent the accrual of
any right to a set-off against rent, (ii) notify Lender thereof and of the
amount of said set-offs, and (iii) within ten (10) days after such accrual,
reimburse the tenant who shall have acquired such right to set-off or take such
other steps as shall effectively discharge such set-off and as shall assure that
rents thereafter due shall continue to be payable without set-off or deduction.
Borrower shall absolutely assign to Lender, by written
instrument satisfactory to Lender, all leases now existing or hereafter made of
all or any part of the Property and all security deposits made by tenants in
connection with such leases of the Property as security for the Loan. Upon
assignment by Borrower to Lender of any leases of the Property and during the
continuance of a default, beyond the applicable grace period, under this
Instrument, Lender shall have all of the rights and powers possessed by Borrower
prior to such assignment and Lender shall have the right to modify, extend or
terminate such existing leases and to execute new leases, in Lender's sole
discretion.
16. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is
distinct and cumulative to all other rights or remedies under this Instrument or
afforded by law or equity, and may be exercised concurrently, independently, or
successively, in any order whatsoever.
17. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. If Borrower shall
voluntarily file a petition under Title 11 of the U.S. Code (the "Act"), as such
Act may from time to time be amended, or under any similar or successor Federal
statute relating to bankruptcy, insolvency, arrangements or reorganizations, or
under any state bankruptcy or insolvency act, or file an answer in any
involuntary proceeding admitting insolvency or inability to pay debts, or if
Borrower shall fail to obtain a vacation or stay of involuntary proceedings
brought for the reorganization, dissolution or liquidation of Borrower, within
one hundred and twenty (120) days of the filing of such involuntary proceeding,
or if Borrower shall be adjudged a bankrupt, or if a trustee or receiver shall
be appointed for Borrower or Borrower's property, or if the Property shall
become subject to the jurisdiction of a Federal bankruptcy court or similar
state court, or if Borrower shall make an assignment for the benefit of
Borrower's creditors, or if there is an attachment, execution or other judicial
seizure of any portion of Borrower's assets and such seizure is not discharged
within ten (10) days, then Lender may, at Lender's option, declare all of the
sums secured by this Instrument to be immediately due and payable without prior
notice to Borrower, and Lender may invoke any remedies permitted by paragraph 27
of this Instrument. Any attorney's fees and other expenses incurred by Lender in
connection with Borrower's bankruptcy or any of the other aforesaid events shall
be additional indebtedness of Borrower secured by this Instrument pursuant to
paragraph 8 hereof
8. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTERESTS IN BORROWER.
( ) Except as provided in subparagraph (c) and subparagraph
(d) of this paragraph 19, upon the sale or transfer of (i) all or any part of
the Property, or any interest therein, or (ii) beneficial interests in Borrower
(if Borrower is not a natural person or persons but is a corporation,
partnership, trust or other legal entity), Lender may, at Lender's option,
declare all of the sums secured by this Instrument to be immediately due and
payable, and Lender may invoke any remedies permitted by paragraph 27 of this
Instrument.
(a) For purposes of this paragraph 19, a sale or transfer of a
beneficial interest in Borrower shall be deemed to include, but is not limited
to:
( ) if Borrower or any general partner of Borrower is a corporation or
limited liability company, the voluntary or involuntary sale, conveyance,
transfer or pledge of a majority of such corporation's or limited liability
company's stock (or the stock of any corporation directly or indirectly
controlling such corporation or limited liability company by operation of law or
otherwise) or the creation or issuance of new stock by which an aggregate of
more than 49% of such corporation's or limited liability company's stock shall
be vested in a party or parties who are not now stockholders;
(i) if Borrower is a limited liability company, the change, removal or
resignation of a managing member;
(ii) if Borrower, or any general partner of Borrower, is a limited or
general partnership, the change, removal or resignation of a general partner or
managing partner or the transfer or pledge of the partnership interest of any
general partner or managing partner or any profits or proceeds relating to such
partnership interest;
(iii) if Borrower is a limited partnership, the transfer or pledge of a
majority of the limited partnership interests which in the aggregate constitute
more than a 49% interest in Borrower, or any profits or proceeds relating to
such limited partnership interests.
(b) Notwithstanding the foregoing, the following shall not be
deemed a sale or transfer of a beneficial interest in Borrower for purposes of
this paragraph 19:
( ) a transfer of less than a 49% interest in Borrower, or any partner,
shareholder or member of Borrower, by devise, descent or by operation of law
upon the death of a partner, member or stockholder of Borrower;
(i) a transfer of a limited partner, shareholder or non-managing member
interest in Borrower for estate planning purposes to an immediate family member
of such limited partner, shareholder or member, or a trust for the benefit of an
immediate family member; or
(ii) a transfer of a general partner or managing member interest in
Borrower for estate planning purposes to an immediate family member of such
partner or member, or a trust for the benefit of an immediate family member,
subject to obtaining Lender's prior written consent, which consent shall not be
unreasonably withheld subject to the criteria set forth in subparagraph (b) of
paragraph 36 of this Instrument.
(c) In addition to the provisions of subparagraph 19(c) above,
the following shall not be deemed a sale or transfer of a beneficial interest in
Borrower for purposes of this paragraph 19:
( ) the sale, conveyance, transfer or pledge of stock of Grove Property
Trust, a publicly traded real estate investment trust (the "REIT"), the owner of
all outstanding shares of stock of the general partner of Borrower named herein;
(i) the sale, conveyance, transfer or pledge of partnership interests of
Grove Operating, L.P. (the "Operating Partnership"), the holder of a limited
partnership interest in Borrower named herein;
(ii) the one time Transfer and Assumption (as defined in Paragraph 36)
subject to the consent of Lender, not to be unreasonably withheld and subject
further to the provisions of paragraph 36 below, to a newly-formed
single-purpose bankruptcy remote limited partnership, the general partner of
which is a single-purpose bankruptcy-remote entity wholly-owned (directly or
indirectly) by the REIT, and the limited partners interests in which are
directly or indirectly owned at least 49% by the Operating Partnership. Lender
waives the right to collect any assumption fee in connection with a consent to
the foregoing Transfer and Assumption; and
(iii) the sale, conveyance, transfer or pledge of limited partnership
interests in Borrower by any person other than the Operating Partnership and the
sale, conveyance, transfer or pledge of any interest in any such person,
provided suchperson owns not more than 30% limited partnership interest in
Borrower.
See paragraph 36 of this Instrument.
19. NOTICE. Except for any notice required under applicable law to be
given in another manner, (a) any notice to Borrower provided for in this
Instrument or in the Note shall be given by mailing such notice by certified
mail addressed to Borrower at Borrower's address stated above or at such other
address as Borrower may designate by notice to Lender as provided herein, and
(b) any notice to Lender shall be given (i) by certified mail, return receipt
requested, or (ii) by a nationally recognized overnight courier service to
Lender's address stated herein or to such other address as Lender may designate
by notice to Borrower as provided herein. Any notice provided for in this
Instrument or in the Note shall be deemed to have been given to Borrower or
Lender when received by Borrower or Lender in the manner designated herein.
20. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS;
CAPTIONS. The covenants and agreements herein contained shall bind, and the
rights hereunder shall inure to, the respective successors and assigns of Lender
and Borrower, subject to the provisions of paragraph 19 hereof. All covenants
and agreements of Borrower shall be joint and several. In exercising any rights
hereunder or taking any actions provided for herein, Lender may act through its
employees, agents or independent contractors as authorized by Lender. The
captions and headings of the paragraphs of this Instrument are for convenience
only and are not to be used to interpret or define the provisions hereof.
21. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This
form of multifamily instrument combines uniform covenants for national use and
non-uniform covenants with limited variations by jurisdiction to constitute a
uniform security instrument covering real property and related fixtures and
personal property. This Instrument shall be governed by the law of the
jurisdiction in which the Property is located. In the event that any provision
of this Instrument or the Note conflicts with applicable law, such conflict
shall not affect other provisions of this Instrument or the Note which can be
given effect without the conflicting provisions, and to this end the provisions
of this Instrument and the Note are declared to be severable. In the event that
any applicable law limiting the amount of interest or other charges permitted to
be collected from Borrower is interpreted so that any charge provided for in
this Instrument or in the Note, whether considered separately or together with
other charges levied in connection with this Instrument and the Note, violates
such law, and Borrower is entitled to the benefit of such law, such charge is
hereby reduced to the extent necessary to eliminate such violation. The amounts,
if any, previously paid to Lender in excess of the amounts payable to Lender
pursuant to such charges as reduced shall be applied by Lender to reduce the
principal of the indebtedness evidenced by the Note. For the purposes of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
indebtedness which is secured by this Instrument or evidenced by the Note and
which constitutes interest, as well as all other charges levied in connection
with such indebtedness which constitute interest, shall be deemed to be
allocated and spread over the stated term of the Note. Unless otherwise required
by applicable law, such allocation and spreading shall be effected in such a
manner that the rate of interest computed thereby is uniform throughout the
stated term of the Note.
22. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to
assert any statute of limitations as a bar to the enforcement of the lien of
this Instrument or to any action brought to enforce the Note or any other
obligation secured by this Instrument.
23. WAIVER OF MARSHALLING. Notwithstanding the existence of any other
security interest in the Property held by Lender or by any other party, Lender
shall have the right to determine the order in which any or all of the Property
shall be subjected to the remedies provided herein. Lender shall have the right
to determine the order in which any or all portions of the indebtedness secured
hereby are satisfied from the proceeds realized upon the exercise of the
remedies provided herein. Borrower, any party who consents to this Instrument
and any party who now or hereafter acquires a security interest in the Property
and who has actual or constructive notice hereof hereby waives any and all right
to require the marshalling of assets in connection with the exercise of any of
the remedies permitted by applicable law or provided herein.
24. INTENTIONALLY OMITTED.
25. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.
As part of the consideration for the indebtedness evidenced by the Note,
Borrower hereby absolutely and unconditionally assigns and transfers to Lender
all the rents and revenues of the Property, including those now due, past due,
or to become due by virtue of any lease or other agreement for the occupancy or
use of all or any part of the Property, regardless of to whom the rents and
revenues of the Property are payable. Borrower hereby authorizes Lender or
Lender's agents to collect the aforesaid rents and revenues and hereby directs
each tenant of the Property to pay such rents to Lender or Lender's agents;
provided, however, that, notwithstanding anything to the contrary contained
elsewhere in this Instrument or in any Loan Document, prior to written notice
given by Lender to Borrower of the breach by Borrower of any covenant or
agreement of Borrower in this Instrument or any other Loan Document, Borrower
shall collect and receive all rents and revenues of the Property as trustee for
the benefit of Lender and Borrower, to apply the rents and revenues so collected
to the sums secured by this Instrument in the order provided in paragraph 3
hereof with the balance, so long as no such breach has occurred, to the account
of Borrower, it being intended by Borrower and Lender that this assignment of
rents constitutes an absolute assignment and not an assignment for additional
security only. Upon delivery of written notice by Lender to Borrower of the
breach by Borrower of any covenant or agreement of Borrower in this Instrument,
and without the necessity of Lender entering upon and taking and maintaining
full control of the Property in person, by agent or by a court-appointed
receiver, Lender shall immediately be entitled to possession of all rents and
revenues of the Property as specified in this paragraph 26 as the same become
due and payable, including, but not limited to, rents then due and unpaid, and
all such rents shall immediately upon delivery of such notice be held by
Borrower as trustee for the benefit of Lender only; provided, however, that the
written notice by Lender to Borrower of the breach by Borrower shall contain a
statement that Lender exercises its rights to such rents. Borrower agrees that
commencing upon delivery of such written notice of Borrower's breach by Lender
to Borrower, each tenant of the Property shall make such rents payable to and
pay such rents to Lender or Lender's agents on Lender's written demand to each
tenant therefor, delivered to each tenant personally, by mail or by delivering
such demand to each rental unit, without any liability on the part of said
tenant to inquire further as to the existence of a default by Borrower.
Borrower hereby covenants that Borrower has not executed any
prior assignment of said rents, that Borrower has not performed, and will not
perform, any acts or has not executed, and will not execute, any instrument
which would prevent Lender from exercising its rights under this paragraph 26,
and that at the time of execution of this Instrument there has been no
anticipation or prepayment of any of the rents of the Property for more than one
month prior to the due dates of such rents. Borrower covenants that Borrower
will not hereafter collect or accept payment of any rents of the Property more
than one month prior to the due dates of such rents. Borrower further covenants
that Borrower will execute and deliver to Lender such further assignments of
rents and revenues of the Property as Lender may from time to time reasonably
request.
Upon Borrower's breach of any covenant or agreement of
Borrower in this Instrument beyond any applicable grace period, Lender shall be
entitled to the appointment of a receiver for the Property, without notice to
Borrower or any other person or entity and Lender may in person, by agent or by
a court appointed receiver, regardless of the adequacy of Lender's security,
enter upon and take and maintain full control of the Property in order to
perform all acts necessary and appropriate for the operation and maintenance
thereof including, but not limited to, the execution, cancellation or
modification of leases, the collection of all rents and revenues of the
Property, the enforcement or fulfillment of any terms, condition or provision of
any lease, the making of repairs to the Property and the execution or
termination of contracts providing for the management or maintenance of the
Property, all on such terms as are deemed best to protect the security of this
Instrument. In the event Lender elects to seek the appointment of a receiver for
the Property upon Borrower's breach of any covenant or agreement of Borrower in
this Instrument beyond any applicable grace period, Borrower hereby expressly
consents to the appointment of such receiver. Lender or the receiver shall be
entitled to receive a reasonable fee for so managing the Property.
All rents and revenues collected subsequent to delivery of
written notice by Lender to Borrower of the breach by Borrower of any covenant
or agreement of Borrower in this Instrument or a breach of any covenant or
agreement contained in the other Loan Documents shall be applied first to the
costs, if any, of taking control of and managing the Property and collecting the
rents, including, but not limited to, attorney's fees, receiver's fees, premiums
on receiver's bonds, costs of repairs to the Property, premiums on insurance
policies, taxes, assessments and other charges on the Property, and the costs of
discharging any obligation or liability of Borrower as lessor or landlord of the
Property and then to the sums secured by this Instrument. Lender or the receiver
shall have access to the books and records used in the operation and maintenance
of the Property and shall be liable to account only for those rents actually
received. Lender shall not be liable to Borrower, anyone claiming under or
through Borrower or anyone having an interest in the Property by reason of
anything done or left undone by Lender under this paragraph 26 except for gross
negligence or willful misconduct of Lender which occurs after the consummation
of a foreclosure or the delivery of the deed in lieu of foreclosure.
If the rents of the Property are not sufficient to meet the
costs, if any, of taking control of and managing the Property and collecting the
rents, any funds expended by Lender for such purposes shall become indebtedness
of Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof.
Unless Lender and Borrower agree in writing to other terms of payment, such
amounts shall be payable upon notice from Lender to Borrower requesting payment
thereof and shall bear interest from the date of disbursement at the rate stated
in the Note unless payment of interest at such rate would be contrary to
applicable law, in which event such amounts shall bear interest at the highest
rate which may be collected from Borrower under applicable law.
Any entering upon and taking and maintaining of control of
the Property by Lender or the receiver and any application of rents as provided
herein shall not cure or waive any default hereunder or invalidate any other
right or remedy of Lender under applicable law or provided herein. This
assignment of rents of the Property shall terminate at such time as this
Instrument ceases to secure indebtedness held by Lender. Lender will execute
such documents as are reasonably required to evidence such termination and
Borrower shall pay Lender's reasonable costs associated therewith.
NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree
as follows:
26. ACCELERATION UPON DEFAULT; ADDITIONAL REMEDIES. Upon Borrower's
breach, beyond any applicable grace period, of any representation, covenant or
agreement of Borrower in this Instrument, the Note, the Environmental Indemnity
Agreement, or any other Loan Document, including, but not limited to, the
covenants to pay when due any sums secured by this Instrument, Lender, at
Lender's option, may declare all of the sums secured by this Instrument to be
immediately due and payable without further demand, and may invoke the power of
sale and any other remedies permitted by applicable law or provided herein.
Borrower acknowledges that the power of sale herein granted may be exercised by
Lender without prior judicial hearing. Borrower has the right to bring an action
to assert the non-existence of a breach or any other defense of Borrower to
acceleration and sale. Lender shall be entitled to collect all costs and
expenses incurred in pursuing such remedies, including, but not limited to,
attorney's fees and costs of documentary evidence, abstracts and title reports.
Notwithstanding the foregoing, Lender shall not invoke any
remedy provided hereunder, under the Loan Documents, at law or in equity upon
Borrower's breach of a non-monetary representation, covenant, or agreement of
Borrower in this Instrument, the Note, the Environmental Indemnity Agreement or
any other Loan Document, other than a breach of paragraphs 5, 19, 32(e), 32(f)
or 32(h) of this Instrument, or paragraph 2 of the Environmental Indemnity
Agreement, provided Borrower shall have, on or before the date that is twenty
(20) days after Borrower's receipt of notice thereof, cured such default or, if
such default cannot be cured within such twenty (20) day period, Borrower shall
have commenced to cure within such twenty (20) day period and is taking all
actions required to diligently cure such default and such default is cured on or
before the date that is forty-five (45) days after Borrower's receipt of a
notice to cure such default.
In the event that one or more of the events of default as
above provided shall occur and continue beyond the applicable grace period, the
remedies available to Lender shall include, but not necessarily be limited to,
any one or more of the following:
( ) Lender may declare the entire unpaid balance of the Note,
together with all accrued interest thereon, immediately due and payable without
notice.
(a) Lender may take immediate possession of the Property or
any part thereof (which Borrower agrees to surrender to Lender) and manage,
control or lease the same to such person or persons and at such rental as it may
deem proper; and collect, with or without taking possession of the Property, all
the rents, issues and profits therefrom, including those past due as well as
those thereafter accruing, with the right in Lender to cancel any lease,
sublease or tenancy for any cause which would entitle Borrower to cancel the
same; to make such expenditures for maintenance, repairs and costs of operation
as it may deem advisable; and after deducting the cost thereof, to apply the
residue to the payment of any sums which are unpaid hereunder or under the Note.
The taking of possession and/or the collection of rents under this paragraph
shall not prevent concurrent or later proceedings for the foreclosure of the
Property as provided elsewhere herein.
(b) Lender may apply to any court of competent jurisdiction
for the appointment of a receiver or similar official to manage and operate the
Property, or any part thereof, and to apply the net rents, issues, and profits
therefrom to the payment of the interest and principal of the Note and any other
obligations of Borrower to Lender hereunder. In the event of such application,
Borrower consents to the appointment of such receiver or similar official and
agrees that such receiver or similar official may be appointed without notice to
Borrower, without regard to the adequacy of any security for the debt and
without regard to the solvency of Borrower or any other person, firm or
corporation who or which may be liable for the payment of the Note or any other
obligation of Borrower hereunder.
(c) Lender may exercise any or all of the remedies available
to a secured party under the Connecticut Uniform Commercial Code, including, but
not limited to:
( ) Either personally or by means of a court appointed receiver, to take
possession of all or any of the Collateral and exclude therefrom Borrower and
all others claiming under Borrower, and thereafter to hold, store, use, operate,
manage, maintain and control, make repairs, replacements, alterations, additions
and improvements to and exercise all rights and powers of Borrower in respect to
the Collateral or any part thereof. In the event Lender demands or attempts to
take possession of the Collateral in the exercise of any rights under any of the
instruments which secure the Note, Borrower promises and agrees to promptly turn
over and deliver complete possession thereof to Lender;
(i) Without notice to or demand upon Borrower, to make such payments and do
such acts as Lender may deem necessary to protect its security interest in the
Collateral, including without limitation, paying, purchasing, contesting or
compromising any encumbrance, charge or lien which is prior to or superior to
the security interest granted hereunder, and in exercising any such powers or
authority to pay all expenses incurred in connection therewith;
(ii) To require Borrower to assemble the Collateral or any portion thereof
at a place designated by Lender and reasonably convenient to both parties, and
promptly to deliver such Collateral to Lender, or an agent or representative
designated by it. Lender, and its agents and representatives shall have the
right to enter upon any or all of Borrower's premises and property to exercise
Lender's rights hereunder;
(iii) To sell, lease or otherwise dispose of the Collateral at public sale,
with or without having the Collateral at the place of sale, and upon such terms
and in such manner as Lender may determine. Lender may be a purchaser at any
such sale, and unless the collateral are perishable or threaten to decline
speedily in value or are of a type customarily sold on a recognized market,
Lender shall give Borrower at least ten (10) days' prior written notice of the
time and place of any public sale of the collateral or other intended
disposition thereof. Such notice may be mailed to Borrower at the address
hereinafter set forth for notice.
(d) Lender shall the right to foreclose the Instrument and in
an action or proceeding to foreclosure the Instrument, the Property may be
foreclosed in parts or as an entirety.
Additional Provisions. Borrower expressly agrees as follows:
(e) All remedies available to Lender with respect to the
Instrument shall be cumulative and may be pursued concurrently or successively.
No delay by Lender in exercising any such remedy shall operate as a waiver
thereof or preclude the exercise thereof during the continuance of that or any
subsequent default.
(f) The obtaining of a judgment or decree on the Note, shall
not in any manner affect the lien of the Instrument upon the Property, and the
debt represented by said judgment or decree shall be secured hereby to the same
extent as the Note is now secured.
(g) The only limitation upon the foregoing agreements as to
the exercise of Lender's remedies is that there shall be but one full and
complete satisfaction of the indebtedness secured hereby.
Remedies Not Exclusive. Lender shall be entitled to enforce
payment of any indebtedness secured hereby and performance of all obligations
contained herein and to exercise all rights and powers under the Instrument or
the Note or under any other agreement of Borrower or any laws now or hereafter
in force, notwithstanding that some or all of the said indebtedness and
obligations secured hereby may now or hereafter be otherwise secured, whether by
mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the
acceptance of the Instrument nor its enforcement shall prejudice or in any
manner affect Lender's right to realize upon or enforce any other security now
or hereafter held by Lender, it being agreed that Lender shall be entitled to
enforce the Instrument and any other security now or hereafter held by Lender in
such order and manner as Lender may in its absolute discretion determine. No
remedy herein conferred upon or reserved to Lender is intended to be exclusive
of any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute. Every power or remedy
given to Lender or to which it otherwise may be entitled may be exercised,
concurrently or independently, from time to time and as often as may be deemed
expedient by Lender and it may pursue inconsistent remedies.
See Paragraph 35 of this Instrument.
27. RELEASE. Upon payment and discharge of all sums secured by this
Instrument, this Instrument shall become null and void and Lender shall execute
a release of this Instrument in recordable form. Borrower shall pay Lender's
reasonable costs incurred in releasing this Instrument.
28. INTENTIONALLY OMITTED.
29. FUTURE ADVANCES. Upon request of Borrower, Lender, at Lender's
option so long as this Instrument secures indebtedness held by Lender, may make
Future Advances to Borrower. Such Future Advances, with interest thereon, shall
be secured by this Instrument when evidenced by promissory notes stating that
said notes are secured hereby. At no time shall the principal amount of the
indebtedness secured by this Instrument exceed the original amount of the Note
(US $15,084,000.00) nor shall the maturity of Future Advances secured hereby
extend beyond the time of repayment of the Note.
30. NONRECOURSE LOAN. Subject to the qualifications below in this
paragraph, the Borrower shall be liable for payment and performance of all of
the obligations, covenants and agreements of the Borrower under the Note, this
Instrument, the Assignment of Leases and Rents (herein so-called), dated of even
date herewith, executed by Borrower to Lender, the Environmental Indemnity
Agreement dated of even date herewith, executed by Borrower and Lender, and all
other Loan Documents, to the full extent (but only to the extent) of all of the
Property and any other items, property or amounts which are collateral or
security for the Loan pursuant to any Loan Document. If a default occurs in the
timely and proper payment of any portion of such indebtedness or in the timely
performance of any obligations, agreements or covenants, except as set forth
below in this paragraph, neither Borrower, nor any partner of Borrower, nor any
partner, stockholder, director or officer of any partner of Borrower, shall be
personally liable for the repayment of any of the principal of, interest on, or
prepayment fees or late charges, or other charges or fees due in connection with
the Loan, the performance of any covenants of Borrower under the Note, this
Instrument or any of the other Loan Documents or for any deficiency judgment
which Lender may obtain after default by Borrower. Notwithstanding the foregoing
provisions of this paragraph or any other agreement, the Borrower shall be fully
and personally liable for any and all: (1) liabilities, costs, losses, damages,
expenses or claims (including, without limitation, any reduction in the value of
the Property or any other items, property or amounts which are collateral or
security for the Loan) suffered or incurred by Lender by reason of or in
connection with (a) any fraud or misrepresentation by the Borrower in connection
with the Loan, including but not limited to any misrepresentation of the
Borrower contained in any Loan Document, (b) any failure to pay taxes, insurance
premiums (except to the extent that such taxes and insurance premiums are then
held by the Lender), assessments (but only to the extent such failure results
from the misapplication of rentals or other income derived from the Property),
charges for labor or materials or other charges that can create liens on any
portion of the Property, (c) any misapplication of (i) proceeds of insurance
covering any portion of the Property, or (ii) proceeds of the sale or
condemnation of any portion of the Property, (d) any rentals, income, profits,
issues and products received by or on behalf of the Borrower subsequent to the
date on which the Lender gives written notice that a default has occurred under
the Loan and not applied to the payment of principal or interest due under the
Note or the payment of operating expenses (excluding any operator's, manager's
or developer's fee paid to the Borrower or any affiliate of the Borrower) of the
Property, (e) any failure to maintain, repair or restore the Property in
accordance with any Loan Document to the extent not covered by insurance
proceeds made available to the Lender, (f) any failure by the Borrower to
deliver to the Lender all unearned advance rentals and security deposits paid by
tenants of the Property received by or on behalf of the Borrower, and not
refunded to or forfeited by such tenants, (g) any failure by the Borrower to
return to, or reimburse the Lender for, all personalty taken from the Property
by or on behalf of the Borrower, except in accordance with the provisions of
this Instrument, and (h) any and all indemnities given by the Borrower to the
Lender set forth in the Environmental Indemnity Agreement or any other Loan
Document in connection with any environmental matter relating to the Property;
and (2) court costs and all attorneys' fees provided for in any Loan Document.
Furthermore, no limitation of liability or recourse provided above in this
paragraph shall (x) apply to the extent that the Lender's rights of recourse to
the Property are suspended, reduced or impaired by or as a result of any act,
omission or misrepresentation of the Borrower or any other party now or
hereafter liable for any part of the Loan and accrued interest thereon, or by or
as a result of any case, action, suit or proceeding to which the Borrower or any
such other party, voluntarily becomes a party; or (y) constitute a waiver,
forfeiture, abrogation or limitation of or on any right accorded by any law
establishing a debtor relief proceeding, including, but not limited to, Title
11, U.S. Code, which right provides for the assertion in such debtor relief
proceeding of a deficiency arising by reason of the insufficiency of collateral
notwithstanding an agreement of the Lender not to assert such deficiency.
31. REPRESENTATIONS OF BORROWER. The Borrower hereby represents and
warrants to Lender the following:
( ) Borrower is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Connecticut. There
are no proceedings or actions pending, threatened or contemplated for the
liquidation, termination or dissolution of Borrower.
(a) Except for a lease for laundry facilities, no person or
entity has any leasehold estate in, or any lease or other agreement granting the
right to use or occupy any portion of, the Property except the lessees under the
leases (the "Leases") listed in the rent roll (the "Rent Roll") provided by
Borrower to Lender in connection with the closing of the Loan; the Leases expire
on the respective dates shown in the Rent Roll; no rental in excess of one
month's rent has been prepaid under any of the Leases; the amount of the
security deposit, if any, held by Borrower under each of the Leases is as shown
in the Rent Roll; each of the Leases is valid and binding on the parties thereto
in accordance with its terms; the execution of this Instrument will not
constitute an event of default under any of the Leases; Borrower has received no
written notice that any of the tenants under any of the Leases has any present
rights of offset or counterclaim against the landlord; all of the obligations of
the landlord pursuant to the Leases have been performed; and as of the date of
the Rent Roll, all tenants are current in the payment of rent except as shown on
the Rent Roll.
(b) Except as specifically listed in the schedule of
exceptions to coverage in the title policy insuring Lender's interest in the
Property, Borrower is now in possession of the Property (subject to the
occupancy of portions thereof pursuant to the Leases); Borrower's possession of
the Property is peaceable and undisturbed; Borrower does not know any facts by
reason of which any claim to the Property, or any part thereof, might arise or
be set up adverse to Borrower; and to Borrower's knowledge the Property is free
and clear of (i) any lien for taxes (except real property taxes not yet due and
payable for the calendar year in which this Instrument is being executed), and
(ii) any easements, rights-of-way, restrictions, encumbrances, liens or other
exceptions to title by mortgage, decree, judgment, agreement, instrument, or, to
the knowledge of Borrower, proceeding in any court.
(c) All charges for labor, materials or other work of any kind
furnished in connection with the construction, improvement, renovation or
rehabilitation of the Property or any portion thereof have been paid in full,
and to Borrower's knowledge no unreleased affidavit claiming a lien against the
Property, or any portion thereof, for the supplying of labor, materials or
services for the construction of improvements on the Property has been executed
or recorded in the mechanic's lien or other appropriate records in the county in
which the Property is located.
(d) To the knowledge of Borrower: the current and contemplated
uses of the Property are in compliance in all material respect with all
applicable federal, state and municipal laws, rules, regulations and ordinances,
applicable restrictions, zoning ordinances, building codes and regulations,
building lines and easements, including, without limitation, federal and state
environmental protection law and the Americans with Disabilities Act of 1990,
the Fair Housing Amendments Act of 1988, all state and local laws or ordinances
related to handicapped access, and any statute, rule, regulation, ordinance, or
order of governmental bodies or regulatory agencies, or any order or decree of
any court adopted or enacted with respect thereto (collectively, "Applicable
Laws"); no governmental authority having jurisdiction over any aspect of the
Property has made a claim or determination that there is any such violation; the
Property is not included in any area identified by the Secretary of Housing and
Urban Development pursuant to the Flood Disaster Protection Act of 1973, as
amended, as an area having special flood hazards except as shown on the survey
described in the title policy insuring this Instrument; and all permits,
licenses and the like which are necessary for the operation of the Property have
been issued and are in full force and effect.
(e) There have been no material adverse changes, financial or
otherwise, in the condition of Borrower from that disclosed to Lender in the
loan application submitted to Lender by Borrower, or in any supporting data
submitted in connection with the Loan, and all of the information contained
therein was true and correct when submitted and is now substantially and
materially true and correct on the date hereof.
(f) There is no claim, litigation or condemnation proceeding
pending, or, to the knowledge of the Borrower, threatened in writing, against
the Property or Borrower, which would affect the Property or Borrower's ability
to perform its obligations in the connection with the Loan.
(g) Borrower does not own any real property or assets other
than the Properties and does not operate any business other than the management
and operation of the Properties.
(h) No proceedings in bankruptcy or insolvency has ever been
instituted by or against Borrower or any affiliate thereof, and no such
proceeding is now pending or contemplated.
(i) Borrower is, and if there are any general partners or
members of Borrower, such partners or members are, solvent pursuant to the laws
of the United States, as reflected by the entries in Borrower's books and
records and as reflected by the actual facts.
(j) The Loan Documents have been duly authorized, executed and
delivered by Borrower and constitute valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms. No
approval, consent, order or authorization of any governmental authority and no
designation, registration, declaration or filing with any governmental authority
which has not been obtained or made, as applicable, is required in connection
with the execution and delivery of the Note, this Instrument or any other Loan
Document.
(k) The execution and delivery of the Loan Documents will not
violate or contravene in any way the articles of incorporation or bylaws or
partnership agreement, articles of organization or operating agreement as the
case may be, of Borrower or any indenture, agreement or instrument to which
Borrower is a party or by which it or its property may be bound, or be in
conflict with, result in a breach of or constitute a default under any such
indenture, agreement or other instrument, result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
property or assets of Borrower, except as contemplated by the provisions of such
Loan Documents, and no action or approval with respect thereto by any third
person is required that has not been obtained.
(l) No part of the Property is all or a part of Borrower's homestead.
(m) maintain or cause to be maintained in full force and
effect for the benefit of the Borrower and Lender those certain interest rate
swap agreements with the First National Bank of Boston entered into prior to or
concurrently herewith in the aggregate notional amount of $15,200,000, which
provide for a swap of a fixed rate of interest payable by an affiliate of
Borrower in exchange for the receipt of a floating rate of interest based upon
one month Libor payable by First National Bank of Boston, it being acknowledged
that the interest rate protection provided under the swap agreements are a
material inducement to Lender's willingness to make the loan evidenced by the
Note. The failure to maintain foregoing interest rate swap agreements or any
termination thereunder shall be deemed a default under this Instrument.
32. BORROWER'S ADDITIONAL COVENANTS. Borrower hereby covenants, agrees and
undertakes to:
( ) pursuant and in addition to paragraph 5 of this
Instrument, purchase policies of insurance with respect to the Property with
such insurers, in such amounts and covering such risks as shall be satisfactory
to Lender, including, but not limited to, (i) personal injury and death; (ii)
loss or damage by fire, lightning, hail, windstorm, explosion, hurricane (to the
extent available), and such other hazards, casualties and contingencies
(including at least twelve (12) months rental insurance in an amount equal to
the gross rentals for such period and broad form boiler and machinery insurance)
as are normally and usually covered by extended coverage policies in effect
where the Property is located and comprehensive general public liability
insurance in an amount not less than $1,000,000; provided, that each policy
shall provide by way of endorsement, rider or otherwise that no such insurance
policy shall be cancelled, endorsed, altered, or reissued to effect a change in
coverage unless such insurer shall have first given Lender thirty (30) days
prior written notice thereof, such policy shall be on a replacement cost basis
in an amount not less than that necessary to comply with any coinsurance
percentage stipulated in the policy, but not less than one hundred percent
(100%) of the insurable value (based upon replacement cost) of the Property and
the deductible clause, if any, of the fire and extended coverage policy may not
exceed the lesser of one percent (1%) of the face amount of the policy or
$10,000.00; (iii) loss or damage by flood, if the Property is in an area
designated by the Secretary of Housing and Urban Development as an area having
special flood hazards, in an amount equal to the principal amount of the Note or
the maximum amount available under the Flood Disaster Protection Act of 1973,
and regulations issued pursuant thereof, as amended from time to time, whichever
is less, in form complying with the "insurance purchase requirement" of that
Act; and (iv) such other insurance and endorsements, if any, as Lender may
reasonably require from time to time pursuant to commercial standards existing
at the time in question, or which is required by the Loan Documents. Borrower
shall cause all insurance (except general public liability insurance) carried in
accordance with paragraph 5 of this Instrument and this paragraph to be payable
to Lender as a mortgagee and not as a coinsured, and, in the case of all
policies of insurance carried by each lessee for the benefit of Borrower, if
any, to cause all such policies to be payable to Lender as Lender's interest may
appear. Notwithstanding anything to the contrary set forth in Paragraph 5, in
the event the Property cannot be restored to the equivalent of its original
condition, as concerns height, floor area, use and number of apartment units,
Lender may, in its sole discretion, (i) require that, in the event that Borrower
is in default under this Instrument or there is a default under any other Loan
Document, the insurance proceeds be applied to the payment of the sums secured
by this Instrument, whether or not then due (the "Loan Balance"), in the order
of application set forth in paragraph 3 hereof, or (ii) require that (a) only a
portion of the Property be restored and repaired, (b) that the insurance
proceeds be applied to reduce the Loan Balance such that the ratio of the Loan
Balance to the number of apartment units that existed immediately prior to the
event of loss shall equal the ratio of the reduced Loan Balance to the reduced
number of apartment units that will exist after the partial restoration and
repair of the Property but in no event shall Lender require that the Loan
Balance be reduced more than is necessary to achieve after restoration a ratio
for the Loan Balance to the aggregate value of all of the Properties securing
the Loan of 60%, and (c) any insurance proceeds not used to reduce the Loan
Balance shall be held by Lender in accordance with paragraph 5 hereof to
reimburse Borrower for the cost of such partial restoration and repair. Any
insurance proceeds not applied to the repair or restoration of the Property
shall be paid to Borrower so long as no default shall exist under this
Instrument, the Note, or any other Loan Document;
(a) from time to time, at the request of Lender, (i) promptly
correct any defect, error or an obvious omission which may be discovered in the
contents of this Instrument or in any other Loan Document or in the execution or
acknowledgement thereof; (ii) execute, acknowledge, deliver and record and/or
file such further documents or instruments (including, without limitation,
further mortgages, security agreements, financing statements, continuation
statements, assignments of rents or leases and environmental indemnity
agreements) and perform such further acts and provide such further assurances as
may be necessary, desirable or proper, in Lender's reasonable opinion, to carry
out more effectively the purposes of this Instrument and such other instruments
and to subject to the liens and security interests hereof and thereof any
property intended by the terms hereof or thereof to be covered hereby or
thereby, including specifically, but without limitation, any renewals,
additions, substitutions, replacements, or appurtenances to the Property;
provided that such documents or instruments do not materially increase
Borrower's liability under the Loan Documents; and (iii) execute, acknowledge,
deliver, procure, and file and/or record any document or instrument (including
specifically, but without limitation, any financing statement) deemed advisable
by Lender to protect the liens and the security interests herein granted against
the rights or interests of third persons; provided that such documents or
instruments do not increase Borrower's liability under the Loan Documents.
Borrower will pay all reasonable costs connected with any of the foregoing in
this subparagraph (b);
(b) continuously maintain Borrower's existence and right to do business in
the State of
Connecticut;
(c) at any time any law shall be enacted imposing or
authorizing the imposition of any tax upon this Instrument, or upon any rights,
titles, liens or security interests created hereby, or upon the obligations
secured hereby or any part thereof, immediately pay all such taxes; provided
that, if such law as enacted makes it unlawful for Borrower to pay such tax,
Borrower shall not pay nor be obligated to pay such tax, and in the alternative,
Borrower may, in the event of the enactment of such a law, and must, if it is
unlawful for Borrower to pay such taxes, prepay the obligations secured hereby
in full within sixty (60) days after demand therefor by Lender;
(d) not execute or deliver any deed of trust, mortgage or pledge of any
type covering all or any portion of the Property;
(e) not acquire any real property or assets (other than the
Properties) or operate any business other than the management and operation of
the Properties during the term of the Loan;
(f) not permit any drilling or exploration for or extraction,
removal or production of any mineral, natural element, compound or substance
from the surface or subsurface of the Property regardless of the depth thereof
or the method of mining or extraction thereof;
(g) not change its name, structure, or employer identification number
during the term of the Loan except as specifically permitted herein; and
(h) pay on demand all reasonable and bona fide out-of-pocket
costs, fees and expenses and other expenditures, including, but not limited to,
reasonable attorneys' fees and expenses, paid or incurred by Lender to third
parties incident to this Instrument or any other Loan Document (including, but
not limited to, reasonable attorneys' fees and expenses in connection with the
negotiation, preparation and execution hereof and of any other Loan Document and
any amendment hereto or thereto, any release hereof, any consent, approval or
waiver hereunder or under any other Loan Document, the making of any advance
under the Note, and any suit to which Lender is a party involving this
Instrument or the Property) or incident to the enforcement of the obligations
secured hereby or the exercise of any right or remedy of Lender under any Loan
Document.
33. RESERVES.
( ) CAPITAL IMPROVEMENTS RESERVE.
( ) Commencing on the first day a monthly installment of interest is due
and payable under the Note and continuing on the first calendar day of each
calendar month thereafter, Borrower shall deliver to Lender, together with the
regular installments of interest an amount (a "CIR Payment") equal to $1,381.
Each CIR Payment shall be deemed "Other Impositions" and "Funds" as defined in
paragraph 2 of this Instrument. The CIR Payments will be placed in interest
bearing deposits or accounts in the name of Lender or Lender's loan servicer at
the same financial institution(s) as the other Funds (the "Other Impositions
Account"), shall be held in accordance with the terms of paragraph 2 of this
Instrument, and may be drawn on by Borrower for deferred maintenance and/or
ongoing capital improvement expenditures in connection with the Property,
pursuant to the terms set forth below in subparagraph 34(a)(ii). At Lender's
discretion, the CIR Payments may be increased to reflect any increase in the
"Consumer Price Index" published by the Bureau of Labor Statistics of the U.S.
Department of Labor, All Items, U.S. city average, all urban consumers
(presently denominated "CPI-U"), or a successor or substitute index
appropriately adjusted (the "CPI"). In the event Lender shall elect not to
increase the CIR Payment for any given year by the CPI, Lender, at its sole
discretion, may during any subsequent year elect to increase the CIR Payment by
the aggregate amount of CPI increases which Lender otherwise was entitled to
make during the previous years in which it did not elect to make such increases.
(i) So long as Borrower is not in default, beyond any applicable grace
period, under any of the terms of the Note, this Instrument and no default
exists under any of the other Loan Documents, Borrower, subject to the following
provisions of this subparagraph (ii) and upon ten (10) days' prior written
notice to Lender and Lender's loan servicer (which notice shall include a brief
statement of the purpose for which the advance is to be used), shall be entitled
to draw on the CIR Payments on deposit in the Other Impositions Account solely
for the payment of deferred maintenance and/or ongoing capital improvement
expenditures for the Property. Borrower may not make any drawing on the Other
Impositions Account for less than $500. Lender may request, in connection with a
request by Borrower for a drawing on the Other Impositions Account, that
Borrower furnish written evidence reasonably satisfactory to Lender that the
amount requested by Borrower is for work performed, services or materials
furnished, and bills paid or payable with respect to the deferred maintenance
and/or ongoing capital improvement expenditures (including, but not limited to,
contracts and invoices for work performed or materials supplied and, to the
extent obtainable, mechanics' and materialmen' lien releases and waivers from
such parties performing such work or supplying such materials). Lender also
reserves the right to make any disbursement or portion thereof from the Other
Impositions Account directly to the party performing such work or supplying such
materials. Lender or Lender's servicing agent, as the case may be, shall be
entitled to charge Borrower for third party costs. Any such third party costs
shall be deducted by Lender from the Funds on deposit or account or, at Lender's
option, shall be paid to Lender by Borrower within ten (10) days of Lender's
written demand.
(ii) Each CIR Payment is pledged as additional security for the sums
secured by this Instrument and any of the other Loan Documents. Borrower hereby
grants to Lender a lien and security interest in each CIR Payment and the
deposit or other accounts in which such payments are placed.
(a) ENVIRONMENTAL RESERVE.
(i) Upon execution of this Instrument, Borrower shall deliver to Lender an
amount equal to $2,000.00 (the "Environmental Reserve"). The Environmental
Reserve shall be deemed "Other Impositions" and "Funds" as defined in paragraph
2 of this Instrument. The Environmental Reserve will be placed in the Other
Impositions Account, shall be held in accordance with the terms of paragraph 2
of this Instrument, and may be drawn on by Borrower for the following
expenditures in connection with the Property:
A. The procurement of an Operations and Maintenance Plan for asbestos (the
"Asbestos O&M Plan") acceptable to Lender, in Lender's sole discretion, within
thirty (30) days of the date hereof. An amount equal to $1,000.00 (the "Asbestos
O&M Reserve") shall be allocated to the expenses incurred in obtaining the
Asbestos O&M Plan. The Asbestos O&M Reserve shall be released to Borrower upon
Lender's approval of the Asbestos O&M Plan.
B. The procurement of an Operations and Maintenance Plan for lead-based
paint (the "Lead Paint O&M Plan") acceptable to Lender, in Lender's sole
discretion, within thirty (30) days of the date hereof. An amount equal to
$1,000.00 (the "Lead Paint O&M Reserve") shall be allocated to the expenses
incurred in obtaining the Lead Paint O&M Plan. The Lead Paint O&M Reserve shall
be released to Borrower upon Lender's approval of the Lead Paint O&M Plan.
(ii) Borrower's failure to obtain the Asbestos O&M Plan and the Lead Paint
O&M Plan shall be deemed a default under this Instrument, the Note, and the
other Loan Documents. The Environmental Reserve is pledged as additional
security for the sums secured by this Instrument and any of the other Loan
Documents. Borrower hereby grants to Lender a lien and security interest in the
Environmental Reserve and the deposit or other accounts in which such payments
are placed.
(iii) In addition, Borrower shall deliver within 120 days from the date
hereof, in a form acceptable to Lender, "no further action" letters from the
Connecticut Department of Environmental Protection (the "CDEP") or a Connecticut
Licensed Site Professional (the "Site Professional"), with respect to the
removal of all underground storage tanks in, on, or about the Property and
resulting soil contamination. If, after utilizing all reasonable diligence
during such 120 day period, Borrower is unable to obtain "no further action"
letters from the CDEP or the Site Professional Lender may grant Borrower, at
Lender's option, up to two (2) additional sixty (60) day period extensions in
which to obtain such "no further action" letter. Borrower's failure to deliver
"no further action" letters within the time period provided in this subparagraph
or any applicable extension shall be deemed a default under this Instrument, the
Note, and the other Loan Documents.
(d) DEFERRED MAINTENANCE RESERVE.
(i) Contemporaneously with the execution hereof, Borrower shall deliver the
sum of $12,500.00 to Lender (the "Deferred Maintenance Reserve") to be held in
accordance with the provisions of this paragraph 33(d) for the purpose of
ensuring Borrower's performance of certain deferred maintenance described in
that certain Building Condition Survey dated January 24, 1997, prepared by
Kenneth O. Wille & Associates, covering the Property (the "Deferred
Maintenance"). Borrower shall complete the Deferred Maintenance within ninety
(90) calendar days after the date hereof, and failure to do so shall, in
Lender's sole and absolute discretion, be deemed a default under this
Instrument, the Note and the other Loan Documents.
(ii) The Deferred Maintenance Reserve shall be deemed "Other Impositions"
and "Funds" as defined in paragraph 2 of this Instrument. The Deferred
Maintenance Reserve will be placed in an account in the name of Lender or
Lender's loan servicer at the same financial institution(s) as the other Funds
(the "Deferred Maintenance Account") and shall be held in accordance with the
terms of paragraph 2 of this Instrument. So long as Borrower is not in default,
beyond any applicable grace period, under any of the terms of the Note, this
Instrument and no default exists under any of the other Loan Documents,
Borrower, subject to the following provisions of this subparagraph (ii) and upon
ten (10) days' prior written notice to Lender and, if applicable, Lender's loan
servicer (the "Deferred Maintenance Request") and satisfaction of the other
requirements set forth in this paragraph 33(d), shall be entitled to withdraw
the entire amount then held in the Deferred Maintenance Account. The Deferred
Maintenance Request shall include copies of invoices for all items or materials
purchased and all labor or services provided in connection with the Deferred
Maintenance, and Borrower shall certify and provide evidence satisfactory to
Lender, in Lender's reasonable discretion, including, without limitation, final
lien releases executed by all mechanics and materialmen, that the Deferred
Maintenance has been completed in a good and workmanlike manner, free and clear
of any mechanics' or materialmen's liens and encumbrances and is in compliance
with all applicable laws, ordinances, rules and regulations of any governmental
authority, agency or instrumentality having jurisdiction over the Property.
Notwithstanding the receipt by Lender of the aforesaid certification and
evidence, Lender reserves the right to inspect, or have Lender's agent inspect,
the Property to verify that the Deferred Maintenance has been satisfactorily
completed on a lien free basis. Borrower shall pay all costs necessary for
completion of the Deferred Maintenance without regard to the sufficiency of the
funds in the Deferred Maintenance Account. Lender or Lender's servicing agent,
as the case may be, shall be entitled to charge Borrower for third party costs.
Any such third party costs shall be deducted by Lender from the Deferred
Maintenance Account or, at Lender's option, shall be paid to Lender by Borrower
within ten (10) days of Lender's written demand. Notwithstanding anything to the
contrary, Borrower shall not be obligated to perform any Deferred Maintenance in
connection with ADA compliance until ninety (90) days after Borrower's receipt
of notification of violation of or noncompliance with ADA. Borrower shall be
obligated to continue to reserve in the Deferred Maintenance Reserve 125% of the
amounts scheduled in the above-described Building Condition Survey with respect
thereof until the later of the repayment in full of the Loan, or the completion
of such ADA work. Borrower's failure to perform the ADA compliance work within
the required time period, if applicable, shall, at Lender's option, be deemed a
default under this Instrument.
(iii) The Deferred Maintenance Reserve is pledged as additional security
for the sums secured by this Instrument and any of the other Loan Documents.
Borrower hereby grants to Lender a lien and security interest in the Deferred
Maintenance Reserve and the Deferred Maintenance Account.
34. FORECLOSURE. Connecticut law requires judicial foreclosure.
35. ASSUMABILITY.
( ) So long as (i) Borrower is not in default under any of the
terms of the Note, this Instrument or and no default exists under any other Loan
Document, and (ii) no situation exists which with the passage of time or the
giving of notice or both would constitute a default under the Note, this
Instrument or any other Loan Document, in the event Borrower desires to transfer
all of the Property together with all property securing the Additional Security
Documents to another party (the "Transferee") and have the Transferee assume all
of Borrower's obligations under the Note, this Instrument and all of the other
Loan Documents (collectively, the "Transfer and Assumption"), Borrower, subject
to the terms of this paragraph, may make a written application to Lender for
Lender's consent to the Transfer and Assumption, subject to the conditions set
forth in subparagraph (b) of this paragraph 36. Together with such written
application (and afterwards if requested by Lender), Borrower will submit to
Lender true, correct and complete copies of any and all information and
documents of any kind requested by Lender concerning the Property, Transferee
and/or Borrower, together with any review fee required by Lender, in Lender's
sole discretion.
(a) Lender shall not unreasonably withhold its consent to a Transfer and
Assumption provided and upon the condition that:
( ) Lender receives an opinion from counsel acceptable to Lender that (x)
such Transfer and Assumption shall not affect, in any way, the enforceability of
the Loan Documents or the lien status, and (y) that the Transferee complies in
all respects with the provisions of paragraph 32(h) and paragraph 33(f) of this
Instrument and such other conditions concerning the organizational structure of
the Transferee as were required by Lender at the time of the making of the Loan;
(i) Borrower has submitted to Lender true, correct and complete copies of
any and all information and documents of any kind requested by Lender concerning
the Property, Transferee and/or Borrower;
(ii) the Transferee, in Lender's sole judgment, has sufficient experience
in managing assets similar in size and type to the Property;
(iii) in Lender's sole judgment, the Transferee and the partners, members
or shareholders of the Transferee are financially sound or have sufficient
financial resources to manage the Property for the term of the Loan;
(iv) the Loan has been placed, or Lender plans to place the Loan, in an offering
of Securities (as defined in paragraph 39) and Lender receives written
confirmation from the rating agencies that the Transfer and Assumption will not
result in any downgrade, qualification or withdrawal of the ratings assigned to
the pool and assets in which the Loan has been placed; and
(v) Borrower has paid any review fee required by Lender.
(b) If Lender consents to the Transfer and Assumption, the
Transferee and/or Borrower as the case may be, shall deliver the following to
Lender:
( ) Borrower shall deliver to Lender an assumption fee in the amount of one
percent (1%) of the then unpaid principal balance of the Loan;
(i) Borrower and Transferee shall execute and deliver to Lender any and all
documents required by Lender, in form and substance required by Lender, in
Lender's sole discretion (the "Assumption Documents");
(ii) Borrower shall cause to be delivered to Lender, an endorsement to the
mortgagee policy of title insurance then insuring the lien created by this
Instrument in form and substance acceptable to Lender, in Lender's sole
discretion (the "Endorsement"); and
(iii) Borrower shall deliver to Lender a payment in the amount of all costs
incurred by Lender in connection with the Transfer and Assumption, including but
not limited to, Lender's attorneys fees and expenses, all recording fees for the
Assumption Documents, and all fees payable to the title company for the delivery
to Lender of the Endorsement.
(c) Notwithstanding anything contained in this paragraph to
the contrary, (x) under no circumstances may the Property and Loan be
transferred and assumed by any party under the terms of this paragraph more than
once during the entire term of the Loan and (y) except based on Lender's written
agreement to the Transfer and Assumption and Borrower's and Transferee's
compliance with all of the terms and provisions of this paragraph, the terms and
provisions of this paragraph shall in no way amend or modify the terms and
provisions contained in paragraph 19 of this Instrument.
36. RELEASE OF COLLATERAL.
(a) So long as no default exists under any of the terms of
the Note, this Instrument or any other Loan Document, (ii) no situation exists
which with the passage of time or the giving of notice or both would constitute
a default under the Note, this Instrument or any other Loan Document, and (iii)
and Borrower complies with the provisions of this paragraph 37, Borrower may
make written application for Lender's consent to release the Property from the
lien of this Instrument and to release Borrower from its obligations under the
Note and the other Loan Documents (other than the Environmental Indemnity
Agreement) except to the extent Borrower shall continue to own other properties
secured by the Loan (subject to the provisions set forth below) in connection
with a partial paydown of the Note (the "Release of Collateral").
(b) Lender shall consent to the Release of Collateral and
shall release Borrower from its obligations under the Note and the other Loan
Documents (other than the Environmental Indemnity Agreement) except to the
extent Borrower shall continue to own other properties secured by the Loan
provided and upon the condition that:
i) The cash flow generated from the remaining properties which shall
continue to be encumbered by the Loan Documents results in a debt service
coverage ratio of 1.35 to 1 based upon an assumed annual interest rate of 9.66%
for the six (6) month period following such release as reasonably determined by
Lender;
ii) If the Loan has been placed, or if Lender plans to place the Loan, in
an offering of Securities (as defined in paragraph 39), Lender receives written
confirmation from the rating agencies that the Release of Collateral will not
result in any downgrade, qualification or withdrawal of the ratings assigned to
the pool and assets in which the Loan has been placed;
iii) The purchase and sale agreement, if any, for the acquisition of the
Property contains a provision pursuant to which the purchaser agrees not to
commence an involuntary bankruptcy proceeding against Borrower in connection
with any claim under the purchase and sale agreement;
(iv) Borrower shall prepay the principal balance of the Note by an amount
equal to 125% of the principal portion of the Loan allocated to the Property as
set forth in the Note;
v) If Borrower shall continue to own any other properties that will
continue to be collateral for the Loan, Borrower shall not violate any
single-purpose bankruptcy-remoteness criteria imposed by the rating agencies;
vi) Borrower shall deliver to Lender a payment in the amount of all costs
incurred by Lender in connection with the Release of Collateral, including but
not limited to, Lender's reasonable attorneys' fees and expenses, all recording
fees for the release documents; and
vii) If Borrower shall continue to own any other properties encumbered by
the Loan, Borrower shall execute such documents reasonably required by Lender
confirming Borrower's continuing obligations under the Loan and documents
executed in connection therewith.
(c) Lender shall execute and deliver such documents as are
reasonably necessary and appropriate to effect the release of the Property and
Borrower, simultaneously with the payments by Borrower required under this
paragraph 37, provided that all of the other conditions to such release set
forth above have been satisfied.
37. WAIVER OF JURY TRIAL. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT THE BORROWER MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONJUNCTION WITH THE NOTE, THIS INSTRUMENT, ANY OTHER LOAN DOCUMENT, ANY OTHER
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
EITHER PARTY.
BORROWER HEREBY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH
THIS INSTRUMENT IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY WAIVES ITS
RIGHT TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL
STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO
ANY PREJUDGMENT REMEDY WHICH THE LENDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE
TO USE.
38. TRANSFER OF LOAN. Lender may, at any time, sell, transfer or assign
the Note, this Instrument and the Loan Documents, or any part thereof, and any
or all servicing rights with respect thereto, or grant participations therein or
issue mortgage pass-through certificates or other securities evidencing a
beneficial interest in a rated or unrated public offering or private placement
(the "Securities"). Lender may forward to each purchaser, transferee, assignee,
servicer, participant, investor in such Securities or any rating agency rating
such Securities (singularly, an "Investor," and collectively, the "Investors")
and each prospective Investor, all documents and information which Lender now
has or may hereafter acquire relating to the Loan and to Borrower, any
guarantor, any indemnitors and/or the Property, whether furnished by Borrower,
any guarantor, any indemnitors or otherwise, as Lender determines necessary or
desirable. Borrower shall furnish and Borrower consents to Lender furnishing to
such Investors or such prospective Investors or rating agency any and all
information concerning the Property, the leases, the financial condition of
Borrower, any guarantor and any indemnitor as may be requested by Lender, any
Investor or any prospective Investor or rating agency in connection with any
sale, transfer or participation interest.
This Instrument may be executed in any number of duplicate
originals and each duplicate original shall be deemed to be an original.
Lender is specifically permitted, at its option and in its
discretion, to make additional advances under this Instrument as contemplated by
Section 49-2(c) of the Connecticut General Statutes.
NOW THEREFORE, if the Note secured hereby, and any
modifications, extensions or renewals thereof, shall be well and truly paid
according to its tenor, and if all agreements and provisions contained in such
Note and herein and in the other Loan Documents are fully kept and performed,
and all obligations are fully satisfied then this Instrument shall become null
and void; otherwise to remain in full force and effect.
IN WITNESS WHEREOF, Borrower has executed this Instrument or
has caused the same to be executed by its representatives thereunto duly
authorized.
WITNESS: BORROWER:
Signed and sealed in the presence of:
GR-PROPERTIES III LIMITED PARTNERSHIP
/s/ Victor Morganthaler
Name: Victor Morganthaler By: Grove Investment Group, Inc.,
Its General Partner
/s/ Joseph R. LaBrosse
/s/ Louis Hait Joseph R. LaBrosse
Name: Louis Hait Its Treasurer
Borrower's Address:
c/o Grove Property Trust
598 Asylum Avenue
Hartford, Connecticut 06105
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
I certify that I know or have satisfactory evidence that
Joseph R. LaBrosse is the person who appeared before me, and said person
acknowledged that he signed the foregoing instrument, on oath stated that he was
authorized to execute the instrument and acknowledged it as the Treasurer of
GR-Properties III Limited Partnership to be the free and voluntary act of such
party for the uses and purposes mentioned in the instrument.
Dated this 13th day of March, 1997.
/s/ Christopher A. Foley
Christopher A. Foley
(printed name)
Notary Public for the State of New York
My appointment expires February 20, 1998
<PAGE>
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16
Exhibit A
Property Description
<PAGE>
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17
Exhibit B
Copy of Promissory Note
<PAGE>
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Schedule 1
Additional Security Documents
<PAGE>
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<PAGE>
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0 Van Deene Manor Apartments (West Springfield, Massachusetts)
- -------------------------------------------------------------------------------
( ) Multifamily Mortgage, Assignment of Rents and Security
Agreement dated of even date with this Instrument, executed by Grove-West
Springfield Associates Limited Partnership for the benefit of Lender.
(a) Assignment of Leases and Rents dated of even date with
this Instrument, executed by Grove-West Springfield Associates Limited
Partnership to Lender.
(b) Environmental Indemnity Agreement dated of even date with this
Instrument, executed by Grove-West Springfield Associates Limited Partnership,
Grove Investment Group, Inc. and Lender.
(c) UCC-1 Financing Statements executed by Grove-West
Springfield Associates Limited Partnership, as debtor, and Lender as secured
party filed with the Secretary of State of Massachusetts and the county in which
the secured property is located.
1 Security Manor Apartments (Westfield, Massachusetts)
( ) Multifamily Mortgage, Assignment of Rents and Security
Agreement dated of even date with this Instrument, executed by Grove-Westfield
Associates Limited Partnership for the benefit Lender of Lender.
(a) Assignment of Leases and Rents dated of even date with
this Instrument, executed by Grove-Westfield Associates Limited Partnership to
Lender.
(b) Environmental Indemnity Agreement dated of even date with this
Instrument, executed by Grove-Westfield Associates Limited Partnership, Grove
Investment Group, Inc. and Lender.
(c) UCC-1 Financing Statements executed by Grove-Westfield
Associates Limited Partnership, as debtor, and Lender as secured party filed
with the Secretary of State of Massachusetts and the county in which the secured
property is located.
2 Woodbridge Apartments (Newington, Connecticut)
( ) Multifamily Open-End Mortgage Deed, Assignment of Rents
and Security Agreement dated of even date with this Instrument, executed by
Foxwoodburg, L.P. for the benefit of Lender.
(a) Assignment of Leases and Rents dated of even date with this Instrument,
executed by Foxwoodburg, L.P. to Lender.
(b) Environmental Indemnity Agreement dated of even date with this
Instrument, executed by Foxwoodburg, L.P., FWB, Inc. and Lender.
(c) UCC-1 Financing Statements executed by Foxwoodburg, L.P.,
as debtor, and Lender as secured party filed with the Secretary of State of
Connecticut and the town in which the secured property is located.
3 Fox Hill Apartments (Vernon, Connecticut)
( ) Multifamily Open-End Mortgage Deed, Assignment of Rents and Security
Agreement dated of even date with this Instrument, executed by Foxwoodburg, L.P.
for the benefit of Lender.
(a) Assignment of Leases and Rents dated of even date with this Instrument,
executed by Foxwoodburg, L.P. to Lender.
(b) Environmental Indemnity Agreement dated of even date with this
Instrument, executed by Foxwoodburg, L.P., FWB, Inc. and Lender.
(c) UCC-1 Financing Statements executed by Foxwoodburg, L.P., as debtor,
and Lender as secured party filed with the Secretary of State of Connecticut and
the town in which the secured property is located.
4 Burgundy Studio (Middletown, Connecticut)
( ) Multifamily Open-End Mortgage Deed, Assignment of Rents and Security
Agreement dated of even date with this Instrument, executed by Foxwoodburg, L.P.
for the benefit of Lender.
(a) Assignment of Leases and Rents dated of even date with this Instrument,
executed by Foxwoodburg, L.P. to Lender.
(b) Environmental Indemnity Agreement dated of even date with this
Instrument, executed by Foxwoodburg, L.P., FWB, Inc. and Lender.
(c) UCC-1 Financing Statements executed by Foxwoodburg, L.P.,
as debtor, and Lender as secured party filed with the Secretary of State of
Connecticut and the town in which the secured property is located.
5 Loomis Manor (West Hartford, Connecticut)
( ) Multifamily Open-End Mortgage Deed, Assignment of Rents
and Security Agreement dated of even date with this Instrument, executed from
GR-Properties III Limited Partnership for the benefit of Lender.
(a) Assignment of Leases and Rents dated of even date with
this Instrument, executed from GR-Properties III Limited Partnership to Lender.
(b) Environmental Indemnity Agreement dated of even date with this
Instrument, executed by GR-Properties III Limited Partnership, Grove Investment
Group, Inc. and Lender.
(c) UCC-1 Financing Statements executed by GR-Properties III
Limited Partnership, as debtor, and Lender as secured party filed with the
Secretary of State of Connecticut and the town in which the secured property is
located.
Schedule 1
(continued)
6 Westwynd Apartments (West Hartford, Connecticut)
( ) Multifamily Open-End Mortgage Deed, Assignment of Rents
and Security Agreement dated of even date with this Instrument, executed by
GR-Westwynd Associates Limited Partnership for the benefit of Lender.
(a) Assignment of Leases and Rents dated of even date with
this Instrument, executed by GR-Westwynd Associates Limited Partnership to
Lender.
(b) Environmental Indemnity Agreement dated of even date with
this Instrument, executed by GR-Westwynd Associates Limited Partnership, Grove
Caya Corporation and Lender.
(c) UCC-1 Financing Statements executed by GR-Westwynd
Associates Limited Partnership, as debtor, and Lender as secured party filed
with the Secretary of State of Connecticut and the town in which the secured
property is located.
EXECUTION
PLEDGE AGREEMENT
PLEDGE AGREEMENT (the "Pledge Agreement"), dated as of March 13, 1997,
between GROVE OPERATING, L.P., a Delaware limited partnership (the "Pledgor")
and CITICORP REAL ESTATE, INC., a Delaware corporation (the "Lender").
WHEREAS, the Lender has made a mortgage loan in the amount of
$15,084,000 (the "Loan") to various affiliates of Pledgor listed on Schedule 1
annexed hereto (collectively, the "Borrowers") as evidenced by a Multi-Family
Note of the Borrowers of even date herewith (the "Note"), which Note provides
for the payment of interest at an interest rate calculated with reference to
monthly LIBOR;
WHEREAS, the Note is secured, inter alia, by a series of mortgages,
assignments of leases, environmental indemnity agreements, UCC-1 financing
statements and other documents and instruments executed in connection therewith,
collectively, the "Security Documents", the Note and the Security Documents are
collectively, the "Loan Documents");
WHEREAS, Pledgor as of the date hereof has entered into two (2)
interest rate swap agreements in the aggregate notional amount of $15,200,000
with First National Bank of Boston, copies of which are attached hereto as
Exhibit A (collectively, the "Swap Agreement") whereby Pledgor has agreed to pay
a fixed rate of interest on the notional amount, in exchange for the receipt of
payments calculated at one-month's LIBOR rate;
WHEREAS, Pledgor has agreed to pledge its rights under the Swap
Agreement to Lender to secure the Borrowers obligations under the Note and the
Loan Documents (collectively, the "Obligations");
WHEREAS, it is a condition precedent to the Lender's entering into the
Loan that the Pledgor pledge to the Lender the Collateral (as defined herein);
<PAGE>
WHEREAS, considerable benefit will insure to the Pledgor in
connection with the making of the Loan to the Borrowers;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto mutually agree as follows:
SECTION Definitions. Except as otherwise defined herein, all
capitalized terms shall have the respective meanings given to such terms in the
Loan Documents.
SECTION Security Interest. As security for the payment and performance
of all of the Obligations, the Pledgor hereby pledges, grants and assigns to the
Lender and its successors and assigns, and creates in the Lender and its
successors and assigns, a security interest in and lien on all of its right,
title and interest in, to and under the following (hereafter, the "Collateral"):
All payments of money or other payments of other property due
and payable to the Pledgor under the Swap Agreement and
general intangibles for money due or to become due (as
described in Section 9-318(4) of the Uniform Commercial Code
as adopted in the State of New York) under the Swap Agreement,
and
Any and all proceeds of any of the foregoing.
SECTION Delivery of Certificates. The Pledgor shall promptly deliver to
the Lender, all certificates, instruments or other property representing or
constituting any Collateral received or receivable by the Pledgor after the date
of this Pledge Agreement. Any certificates or other instruments so delivered
shall be duly endorsed and subscribed by Pledgor or accompanied by appropriate
instruments of transfer or assignment duly executed in blank by the Pledgor. Any
such certificates, instruments or other property representing or constituting
any Collateral received by the Pledgor after the date of this Pledge Agreement
shall be held by the Pledgor in trust for the Lender and shall forthwith be
delivered by the Pledgor to the Lender as aforesaid. If at any time the Lender
notifies the Pledgor that additional endorsements
2
<PAGE>
or other instruments of transfer or assignment with respect to any of the
Collateral held by the Lender are required, the Pledgor shall promptly execute
all of the same reasonably requested by Lender in blank and deliver such
endorsements or other instruments of transfer or assignment as the Lender may
reasonably request.
SECTION Power of Attorney. The Pledgor hereby constitutes and
irrevocably appoints the Lender, with full power of substitution and revocation
by the Lender, as the Pledgor's true and lawful attorney-in-fact, for the
purpose from time to time of carrying out the provisions of this Pledge
Agreement and taking any action and executing any instrument that the Lender
deems necessary or advisable to accomplish the purposes of this Pledge
Agreement. The power of attorney granted pursuant to this Pledge Agreement and
all authority hereby conferred are granted and conferred solely to protect the
Lender's interest in the Collateral and shall not impose any duty upon the
Lender to exercise any power. This power of attorney shall be irrevocable as one
coupled with an interest.
SECTION Representations and Warranties of Pledgor. Pledgor represents
and warrants that:
It has the power and authority under the laws of its jurisdiction
of organization to execute, deliver and perform this Pledge Agreement and to
grant the lien on the Collateral contemplated hereby in favor of the Lender.
Its execution, delivery and performance of this
Pledge Agreement and granting of the lien on the Collateral contemplated hereby
has been duly authorized by all necessary corporate or other action and does not
and will not (i) violate any applicable law, rule or regulation or any provision
of its organizational documents, (ii) conflict with, result in a breach of, or
constitute a default under any provision of any indenture, mortgage or other
material agreement or instrument to which it is a party, by which it or its
properties or assets is bound or subject or any license, judgment order or
decree of any governmental authority having jurisdiction over it or its
activities, properties or assets or (iii) result in or require the creation or
imposition of any lien upon or with respect to any properties or assets now or
hereafter owned by it (other than the Collateral).
3
<PAGE>
This Pledge Agreement has been duly executed and
delivered by Pledgor and constitutes its legal, valid and binding obligation,
enforceable against such Pledgor in accordance with its terms.
No consent or authorization of, filing with, or
other act by or in respect of any governmental authority and no consent of any
other person is required that has not been obtained (i) for the execution,
delivery and performance of this Pledge Agreement by Pledgor, (ii) for the
pledge by such Pledgor of the Collateral to the Lender pursuant to this Pledge
Agreement, or (iii) for the exercise by the Lender of the rights provided for in
this Pledge Agreement or the remedies in respect of the Collateral pursuant to
this Pledge Agreement.
Such Pledgor is the sole legal and beneficial owner
of, and has valid and transferrable title to, the Collateral, free and clear of
all liens, other than the lien in favor of the Lender created by this Pledge
Agreement.
The principal place of business of Pledgor and the
books and records of such Pledgor are located at the address indicated for such
Pledgor set forth in Section 12 of this Pledge Agreement.
SECTION Obligations of Pledgor. Pledgor covenants to
the Lender that:
It shall not sell, transfer or convey any interest
in, or suffer or permit any lien to exist on or with respect to, any of the
Collateral except the lien created under this Pledge Agreement;
It shall defend the Lender's right, title and
interest in, to and under the Collateral against the claims and
demands of all persons whomsoever;
It hereby authorizes the Lender to file one or more
financing or continuation statements and amendments thereto relating to all or
part of the Collateral without the Pledgor's signatures. A photocopy or other
reproduction of this Pledge Agreement shall be sufficient as a financing
statement;
4
<PAGE>
It shall not change its name or principal place of
business or the location of its records without providing at least
30 days' prior written notice thereof to the Lender;
It shall remain liable for all of its obligations
and liabilities under the Swap Agreement and agrees that the Lender shall not be
deemed to undertake any obligations or liabilities of any nature whatsoever
arising under or in connection with the Swap Agreement.
SECTION Distributions. Notwithstanding anything to the contrary
contained elsewhere in this Pledge Agreement, so long as no default has occurred
and is continuing beyond the expiration of any applicable grace period under the
Loan Documents, the Pledgor shall be entitled to collect all payments due
Pledgor under the Swap Agreement. Upon the occurrence and during the continuance
of any default beyond the expiration of any applicable grace period under the
Loan Documents, the Lender shall have the exclusive right to receive all
payments due Pledgor under the Swap Agreement.
SECTION Rights of the Lender. (a) If the Pledgor shall fail to perform
in any material respect any agreement contained herein and such failure
continues for 10 days after notice from Lender, the Lender may (but shall not be
obligated or required to) perform, or cause the performance, of such agreement.
(b) At any time upon and during the continuance of a default
beyond any applicable grace period under the Loan Documents, the Lender may (but
shall not be obligated or required to):
Cause the Collateral to be transferred to its name or to the
name of its nominee or nominees and thereafter exercise as to such
Collateral all of the rights, powers and remedies of an owner;
Ask for, demand, collect, sue for, recover, compromise,
receive and give acquittances and receipts for monies due or to become
due under or in respect of any of the Collateral and hold the same as
part of the Collateral, or apply the same to any of the Obligations in
such manner as the Lender may direct in its sole discretion; and
5
<PAGE>
File any claims or take any actions or institute any
proceedings that the Lender may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce compliance
with the rights of the Lender with respect to any of the Collateral;
SECTION Default; Remedies. Upon and during the continuance of any
default beyond the expiration of any applicable grace period under the Loan
Documents or upon the occurrence of any default under this Pledge Agreement that
continues for 10 days after notice from Lender:
The Lender shall have all the rights and remedies of a secured
party under the Uniform Commercial Code, as in effect in any applicable
jurisdiction or otherwise available at law or equity. All rights to
distributions of any kind to which the Pledgor is entitled under the Collateral
shall automatically vest in the Lender, and if any such payments are received by
the Pledgor, they shall be held in trust by the Pledgor for the Lender,
segregated from all other funds of the Pledgor and promptly paid over to the
Lender. In addition, the Lender shall have the right, without demand of
performance or other demand, advertisement or notice of any kind, except as
specified below, to or upon the Pledgor or any other person (all and each of
which demands, advertisements and/or notices are hereby expressly waived), to
proceed forthwith to collect, receive, appropriate and realize upon the
Collateral, or any part thereof and to proceed forthwith to sell, assign, or
otherwise dispose of and deliver the Collateral or any part thereof at public or
private sale at such prices and on such terms and restrictions as the Lender may
deem appropriate without any liability for any loss due to decrease in the
market value of the Collateral during the period held. If any notification to
the Pledgor of the intended disposition of the Collateral is required by law,
such notification shall be deemed reasonable and properly given if hand
delivered or sent by recognized overnight courier at least ten business days'
prior to such disposition to the address of the Pledgor indicated below. Any
disposition of the Collateral or any part thereof may be for cash or on credit
or for future delivery without assumption of any credit risk, with the right to
the Lender to purchase all or any part of the Collateral so sold at any such
sale or sales, public or
6
<PAGE>
private, free of any equity or right of redemption, which right or equity is
hereby expressly waived and released by the Pledgor.
All of the Lender's rights and remedies under this
Pledge Agreement and under applicable law, including but not limited to the
foregoing, shall be cumulative and not exclusive and shall be enforceable
alternatively, successively or concurrently as the Lender may deem expedient.
The Pledgor specifically waives all rights of stay
or appraisal which the Pledgor had or may have under any rule of law or statute
now existing or hereafter adopted.
The Lender shall not be obligated to make any sale
or other disposition unless the terms thereof shall be satisfactory to it. The
Lender may, without notice or publication, adjourn any private or public sale,
and, upon ten business days' prior notice to the Pledgor, hold such sale at any
time or place to which the same may be so adjourned. In case of any sale of all
or any part of the Collateral, on credit or future delivery, the Collateral so
sold may be retained by the Lender until the selling price is paid by the
purchaser thereof, but the Lender shall incur no liability in case of the
failure of such purchaser to take up and pay for the property so sold and, in
case of any such failure, such property may again be sold as herein provided.
SECTION Disposition of Proceeds. The proceeds of any sale or
disposition of all or any part of the Collateral shall be applied by the Lender
to the payment of the Obligations in such order as the Lender may elect. Any
surplus thereafter remaining shall be paid to the Pledgor, or as otherwise may
be required by applicable law.
SECTION Termination. This Pledge Agreement shall:
create a continuing security interest in the
Collateral;
remain in full force and effect for so long as any
of the Obligations are outstanding;
7
<PAGE>
be binding upon the Pledgor and its permitted
successors and assigns; and
inure to the benefit of the Lender and its
successors, transferees and assigns including any transferee or
assignee of the Loan.
Without limiting the foregoing, the Lender may assign or otherwise transfer the
Loan held by it to any other person, and such other person shall thereupon
become vested with all the benefits in respect thereof granted herein or
otherwise. The Pledgor may not assign its rights or obligations under this
Pledge Agreement without the prior written consent of the Lender.
SECTION General Provisions. No failure on the part of the Lender to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by the
Lender of any right, power or remedy hereunder preclude any other or future
exercise thereof, or the exercise of any other right, power or remedy. The
representations, covenants and agreements of the Pledgor herein contained shall
survive the date hereof.
No amendment or waiver of any provision of this
Pledge Agreement nor consent to any departure by the Pledgor herefrom nor
release of all or any part of the Collateral shall in any event be effective
unless the same shall be in writing, signed by the party against whom
enforcement of such amendment, waiver, consent, departure or release is sought.
Any such waiver or consent or release shall be effective only in the specific
instance and for the specific purpose for which it is given.
Except as expressly otherwise provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing, and shall be deemed to have been duly given or
made when delivered by hand, or one business day after being sent by overnight
mail, or when received if sent by certified mail, postage prepaid, return
receipt requested addressed as follows, or to such other address as may be
hereafter notified by the respective parties hereto:
8
<PAGE>
The Lender: Citicorp Real Estate, Inc.
599 Lexington Avenue, 24th Floor
New York, New York 10043
Attn: CitiMae Conduit (MC-2)
The Pledgor: c/o Grove Property Trust
598 Asylum Avenue
Hartford, Connecticut 16105
Attn: Mr. Joseph R. LaBrosse
provided that any notice, request or demand to or upon the Lender shall not be
effective until actually received.
Pledgor hereby consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York for New York County
and the United States District Court for the Southern District of New York with
respect to any suit, claim, action or proceeding arising out of or related to
this Pledge Agreement or the transactions contemplated hereby and hereby waives
any objection which it may have now or hereafter to the venue of any suit,
claim, action or proceeding arising out of or related to this Pledge Agreement
or the transactions contemplated hereby and brought in the courts specified
above and also hereby waives any claim that any such suit, claim, action or
proceeding has been brought in an inconvenient forum.
If any provision of this Pledge Agreement is
determined by a court of competent jurisdiction to be unenforceable, such
provision shall be automatically reformed and construed so as to be valid,
operative and enforceable to the maximum extent permitted by the law while most
nearly preserving its original intent. The invalidity of any part of this Pledge
Agreement shall not render invalid the remainder of this Pledge Agreement.
This Pledge Agreement may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts taken together shall constitute but one and
the same instrument.
9
<PAGE>
The section headings in this Pledge Agreement are
for convenience of reference only and shall not affect the
interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
GROVE OPERATING, L.P.,
as Pledgor
By:Grove Property Trust, General Partner
By: /s/ Joseph LaBrosse
Name: Joseph LaBrosse
Title: Chief Financial Officer
CITICORP REAL ESTATE, INC.,
as Lender
By: /s/ Howard Kaplow
Name: Howard Kaplow
10
<PAGE>
Schedule 1
List of Borrowers
1. GR-Properties III Limited Partnership
2. Foxwoodburg, L.P.
3. Grove-Westfield Associates Limited Partnership
4. GR-Westwynd Associates Limited Partnership
5. Grove-West Springfield Associates Limited Partnership
<PAGE>
Exhibit A
Swap Agreements
MASTER AGREEMENT
dated as of December 6, 1996
THE FIRST NATIONAL BANK OF BOSTON and GROVE OPERATING, L.P. have entered and/or
anticipate entering into one or more transactions (each a "Transaction") that
are or will be governed by this Master Agreement, which includes the schedule
(the "Schedule"), and the documents and other confirming evidence (each a
"Confirmation") exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows: --
1. Interpretation
1. Definitions. The terms defined in Section 14 and in the Schedule will
have the
meaning therein specified for the purpose of this Master
Agreement.
2. Inconsistency. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
3. Single Agreement. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. Obligations
1. General Conditions.
1. Each Party will make each payment or
delivery specified in each Confirmation to be made by
it, subject to the other provisions of this
Agreement.
2. Payments under this Agreement will be
made on the due date for value on that date in the
place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement,
in freely transferable funds and in the manner
customary for payments in the required currency.
Where settlement is by delivery (that is, other than
by payment), such delivery will be made for receipt
on the due date in the manner customary for the
relevant obligation unless otherwise specified in the
relevant Confirmation or elsewhere in this Agreement.
3. Each obligation of each party under
Section 2(a)(i) is subject to (1) the condition
precedent that no Event of Default or Potential Event
of Default with respect to the other party has
occurred and is continuing, (2) the condition
precedent that no Early Termination Date in respect
of the relevant Transaction has occurred or been
effectively designated and (3) each other applicable
condition precedent specified in this Agreement.
2. Change of Account. Either party may change its account for
receiving a payment or delivery by giving notice to the other
party at least five Local Business Days prior to the scheduled
date for the payment or delivery to which such change applies
unless such other party gives timely notice of a reasonable
objection to such change.
3.Netting. If on any date amounts would otherwise be payable:--
1. in the same currency; and
2. in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation
to make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount would otherwise have been
payable by one party exceeds the aggregate amount that would otherwise
have been payable by the other party, replaced by an obligation upon
the party by whom the larger aggregate amount would have been payable
to pay to the other party the excess of the larger aggregate amount
over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net
amount will be determined in respect of all amounts payable on the same
date in the same currency in respect of such Transactions, regardless
of whether such amounts are payable in respect of the same Transaction.
The election may be made in the Schedule or a Confirmation by
specifying that subparagraph (ii) above will not apply to the
Transactions identified as being subject to the election, together with
the starting date (in which case subparagraph (ii) above will not, or
will cease to, apply to such Transactions from such date). This
election may be made separately for different groups of Transactions
and will apply separately to each pairing of Offices through which the
parties make and receive payments or deliveries.
4. Deduction or Withholding for Tax.
1. Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such deduction or
withholding is required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, then in effect. If a party is so
required to deduct or withhold, then that party ("X") will:--
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full
amount required to be deducted or withheld
(including the full amount required to be
deducted or withheld from any additional
amount paid by X to Y under this Section
2(d)) promptly upon the earlier of
determining that such deduction or
withholding is required or receiving notice
that such amount has been assessed against
Y;
(3) promptly forward to Y an official receipt
(or a certified copy), or other
documentation reasonable acceptable to Y,
evidencing such payment to such authorities;
and
(4) if such Tax is an Indemnifiable Tax, pay to
Y, in addition to the payment to which Y is
otherwise entitled under this Agreement,
such additional amount as is necessary to
ensure that the net amount actually received
by Y (free and clear of Indemnifiable Taxes,
whether assessed against X or Y) will equal
the full amount Y would have received had no
such deduction or withholding been required.
However, X will not be required to pay any
additional amount to Y to the extent that it
would not be required to be paid but for:--
(A) the failure by Y to comply with or perform any agreement contained in
Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made
by Y pursuant to Section 3(f) to be
accurate and true unless such
failure would not have occurred but
for (I) any action taken by a taxing
authority, or brought in a court of
competent jurisdiction, on or after
the date on which a Transaction is
entered into (regardless of whether
such action is taken or brought with
respect to a party to this
Agreement) or (II) a Change in Tax
Law.
2. Liability. If:--
(1) X is required by any applicable law, as
modified by the practice of any relevant
governmental revenue authority, to make any
deduction or withholding in respect of which
X would not be required to pay an additional
amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is
assessed directly against X,
then, except to the extent Y has satisfied or then satisfies
the liability resulting from such Tax, Y will promptly pay to
X the amount of such liability (including any related
liability for interest, but including any related liability
for penalties only if Y has failed to comply with or perform
any agreement contained in Section (4)(i), 4(a)(iii) or 4(d)).
5. Default Interest; Other Amounts. Prior to the occurrence
or effective designation of an Early Termination Date in
respect of the relevant Transaction, a party that defaults in
the performance of any payment obligation will, to the extent
permitted by law and subject to Section 6(c), be required to
pay interest (before as well as after judgment) on the overdue
amount to the other party on demand in the same currency as
such overdue amount, for the period from (and including) the
original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be
calculated on the basis of daily compounding and the actual
number of days elapsed. If, prior to the occurrence or
effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the
performance of any obligation required to be settled by
delivery, it will compensate the other party on demand if and
to the extent provided for in the relevant Confirmation or
elsewhere in this Agreement.
3. Representations.
1. Basic Representations.
1. Status. It is duly organized and
validly existing under the laws of
the jurisdiction of its organization or
incorporation and, if relevant under such
laws, in good standing;
2. Powers. It has the power to execute this
Agreement and any other documentation relating to
this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating
to this Agreement that it is required by this
Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under
any Credit Support Document to which it is a party
and has taken all necessary action to authorize such
execution, delivery and performance;
3. No Violation or Conflict. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other agency of
government applicable to it or any of its assets or any contractual restriction
binding on or affecting it or any of its assets;
5. Consents. All governmental and other consents that are required to have
been obtained by it with respect to this Agreement or any Credit Support
Document to which it is a party have been obtained and are in full force and
effect and all conditions of any such consents have been complied with; and
6. Obligations Binding. Its obligations
under this Agreement and any Credit Support Document
to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance
with their respective terms (subject to applicable
bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally
and subject, as to enforceability, to equitable
principles of general application (regardless of
whether enforcement is sought in a proceeding in
equity or at law)).
2. Absence of Certain Events. No Event of Default or
Potential Event of Default or, to its knowledge, Termination
Event with respect to it has occurred and is continuing and no
such event or circumstance would occur as a result of its
entering into or performing its obligations under this
Agreement or any Credit Support Document to which it is a
party.
3. Absence of Litigation. There is not pending or, to its
knowledge, threatened against it or any of its Affiliates any
action, suit or proceeding at law or in equity or before any
court, tribunal, governmental body, agency or official or any
arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit
Support Document to which it is a party or its ability to
perform its obligations under this Agreement or such Credit
Support Document.
4. Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
5. Payer Tax Representation. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate and true.
6. Payee Tax Representations. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or
may have any obligation under this Agreement or under any Credit
Support Document to which it is a party:--
1. Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
1. any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
2. any other documents specified in the Schedule or any Confirmation; and
3. upon reasonable demand by such other party, any form or document that
may be required or reasonably requested in writing in order to allow such other
party or its Credit Support Provider to make a payment under this Agreement or
any applicable Credit Support Document without any deduction or withholding for
or on account of any Tax or with such deduction or withholding at a reduced rate
(so long as the completion, execution or submission of such form or document
would not materially prejudice the legal or commercial position of the party in
receipt of such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and to be
executed and to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
2. Maintain Authorizations. It will use all reasonable
efforts to maintain in full force and effect all consents of
any governmental or other authority that are required to be
obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all
reasonable efforts to obtain any that may become necessary in
the future.
3. Comply with Laws. It will comply in all material respects
with all applicable laws and orders to which it may be subject
if failure so to comply would materially impair its ability to
perform its obligations under this Agreement or any Credit
Support Document to which it is a party.
4. Tax Agreement. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
5. Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organized, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. Events of Default and Termination Event
1. Events of Default. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
1. Failure to Pay or Deliver. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before
the third Local Business Day after notice of such failure is given to
the party;
2. Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied
with or performed by the party in accordance with this Agreement if
such failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
3. Credit Support Default.
(1) Failure by the party or any Credit Support
Provider of such party to comply with or
perform any agreement or obligation to be
complied with or performed by it in
accordance with any Credit Support Document
if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit
Support Document or the failing or ceasing
of such Credit Support Document to be in
full force and effect for the purpose of
this Agreement (in either case other than in
accordance with its terms) prior to the
satisfaction of all obligations of such
party under each Transaction to which such
Credit Support Document relates without the
written consent of the other party; or
(3) the party or such Credit Support Provider
disaffirms, disclaims, repudiates or
rejects, in whole or in part, or challenges
the validity of, such Credit Support
Document;
4. Misrepresentation. A representation
(other than a representation under Section 3(e) or
(f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider
of such party in this Agreement or any Credit Support
Document proves to have been incorrect or misleading
in any material respect when made or repeated or
deemed to have been made or repeated;
5. Default under Specified Transaction. The
party, any Credit Support Provider of such party or
any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after
giving effect to any applicable notice requirement or
grace period, there occurs a liquidation of, an
acceleration of obligations under, or an early
termination of, that Specified Transaction, (2)
defaults, after giving effect to any applicable
notice requirement or grace period, in making any
payment or delivery due on the last payment, delivery
or exchange date of, or any payment on early
termination of, a Specified Transaction (or such
default continues for at least three Local Business
Days if there is no applicable notice requirement or
grace period) or (3) disaffirms, disclaims,
repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it
or act on its behalf);
6. Cross Default. If "Cross Default" is
specified in the Schedule as applying to the party,
the occurrence or existence of (1) a default, event
of default or other similar condition or event
(however described) in respect of such party, any
Credit Support Provider of such party or any
applicable Specified Entity of such party under one
or more agreements or instruments relating to
Specified Indebtedness of any of them (individually
or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in
the Schedule) which has resulted in such Specified
Indebtedness becoming, or becoming capable at such
time of being declared, due and payable under such
agreements or instruments, before it would otherwise
have been due and payable or (2) a default by such
party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one
or more payments on the due date thereof in an
aggregate amount of not less than the applicable
Threshold Amount under such agreements or instruments
(after giving effect to any applicable notice
requirement or grace period);
7. Bankruptcy. The party, any Credit
Support Provider of such party or
any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a
consolidation, amalgamation or merger); (2)
becomes insolvent or is unable to pay its
debts or fails or admits in writing its
inability generally to pay its debts as they
become due; (3) makes a general assignment,
arrangement or composition with or for the
benefit of its creditors; (4) institutes or
has instituted against it a proceeding
seeking a judgment of solvency or bankruptcy
or any other relief under any bankruptcy or
insolvency law or other similar law
affecting creditors' rights, or a petition
is presented for its winding-up or
liquidation, and, in the case of any such
proceeding or petition instituted or
presented against it, such proceeding or
petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an
order for relief or the making of an order
for its winding-up or liquidation or (B) is
not dismissed, discharged, stayed or
restrained in each case within 30 days of
the institution or presentation thereof; (5)
has a resolution passed for its winding-up,
official management or liquidation (other
than pursuant to a consolidation,
amalgamation or merger); (6) seeks or
becomes subject to the appointment of an
administrator, provisional liquidator,
conservator, receiver, trustee, custodian or
other similar official for it or for all or
substantially all its assets; (7) has a
secured party take possession of all or
substantially all its assets or has a
distress, execution, attachment,
sequestration or other legal process levied,
enforced or sued on or against all or
substantially all its assets and such
secured party maintains possession, or any
such process is not dismissed, discharged,
stayed or restrained, in each case within 30
days thereafter; (8) causes or is subject to
any event with respect to it which, under
the applicable laws of any jurisdiction, has
an analogous effect to any of the events
specified in clauses (1) to (7) (inclusive);
or (9) takes any action in furtherance of,
or indicating its consent to, approval of,
of acquiescence in, any of the foregoing
acts; or
8. Merger Without Assumption. The party or any Credit Support Provider or
such party consolidates or amalgamates with, or merges with or into,
or transfers all or substantially all its assets to, another entity
and, at the time of such consolidation, amalgamation, merger or
transfer:--
(1) the resulting, surviving or transferee
entity fails to assume all the obligations
of such party of such Credit Support
Provider under this Agreement or any Credit
Support Document to which it or its
predecessor was a party by operation of law
or pursuant to an agreement reasonably
satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document
fail to extend (without the consent of the
other party) to the performance by such
resulting, surviving or transferee entity of
its obligations under this Agreement.
2. Termination Events. The occurrence at any time with
respect to a party or, if applicable, any Credit Support
Provider of such party or any Specific Entity of such party of
any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is
specified in (ii) below or a Tax Event Upon Merger if the
event is specified in (iii) below, and, if specified to be
applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination
Event if the event is specified pursuant to (v) below:--
1. Illegality. Due to the adoption of, or
any change in, any applicable law after the date on
which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation
by any court, tribunal or regulatory authority with
competent jurisdiction of any applicable law after
such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for
such party (which will be the Affected Party):--
(1) to perform any absolute or contingent
obligation to make a payment or delivery or
to receive a payment or delivery in respect
of such Transaction or to comply with any
other material provision of this Agreement
relating to such Transaction; or
(2) to perform, or for any Credit Support
Provider of such party to perform, any
contingent or other obligation which the
party (or such Credit Support Provider) has
under any Credit Support Document relating
to such Transaction;
2. Tax Event. Due to (x) any action taken
by a taxing authority, or brought in a court of
competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether
such action is taken or brought with respect to a
party to this Agreement) or (y) a Change in Tax Law,
the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on
the next succeeding Scheduled Payment Date (1) be
required to pay to the other party an additional
amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest
under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive
a payment from which an amount is required to be
deducted or withheld for or on account of a Tax
(except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is
required to be paid in respect of such Tax under
Section 2(d)(i)(4) (other than by reason of Section
2(d)(i)(4)(A) or (B));
3. Tax Event Upon Merger. The party (the
"Burdened Party") on the next succeeding Scheduled
Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax
under Section 2(d)(i)(4) (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) or (2)
receive a payment from which an amount has been
deducted or withheld for or on account of any
Indemnifiable Tax in respect of which the other party
is not required to pay an additional amount (other
than by reason of Section 2(d)(i)(4)(A) or (B)), in
either case as a result of a party consolidating or
amalgamating with, or merging with or into, or
transferring all or substantially all its assets to,
another entity (which will be the Affected Party)
where such action does not constitute an event
described in Section 5(a)(viii);
4. Credit Event Upon Merger. If "Credit
Event Upon Merger" is specified in the Schedule as
applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified
Entity of X consolidates or amalgamates with, or
merges with or into, or transfers all or
substantially all its assets to, another entity and
such action does not constitute an event described in
Section 5(a)(viii) but the creditworthiness of the
resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support
Provider or such Specified Entity, as the case may
be, immediately prior to such action (and, in such
event, X or its successor or transferee, as
appropriate, will be the Affected Party); or
5. Additional Termination Event. If any
"Additional Termination Event" is specified in the
Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the
Affected Party or Affected Parties shall be as
specified for such Additional Termination Event in
the Schedule or such Confirmation).
3. Event of Default and Illegality. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and
will not constitute an Event of Default.
6. Early Termination
1. Right to Terminate Following Event of Default. If at any
time an Event of Default with respect to a party (the
"Defaulting Party") has occurred and is then continuing, the
other party (the "Non-defaulting Party") may, by not more than
20 days notice to the Default Party specifying the relevant
Event of Default, designate a day not earlier than the day
such notice is effective as an Early Termination Date in
respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as
applying to a party, then an Early Termination Date in respect
of all outstanding Transactions will occur immediately upon
the occurrence with respect to such party of an Event of
Default specified in Section 5(a)(vii)(1), (3), (5), (6) or,
to the extent analogous thereto, (8), and as of the time
immediately preceding the institution of the relevant
proceeding or the presentation of the relevant petition upon
the occurrence with respect to such party of an Event of
Default specified in Section 5(a)(vii)(4) or, to the extent
analogous thereto, (8).
2. Right to Terminate Following Termination Event.
59. Notice. If a Termination Event occurs,
an Affected Party will, promptly upon becoming aware
of it, notify the other party, specifying the nature
of that Termination Event and each Affected
Transaction and will also give such other information
about that Termination Event as the other party may
reasonably require.
60. Transfer to Avoid Termination Event. If
either an Illegality under Section 5(b)(i)(1) or a
Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the
Burdened Party is the Affected Party, the Affected
Party will, as a condition to its right to designate
an Early Termination Date under Section 6(b)(iv), use
all reasonable efforts (which will not require such
party to incur a loss, excluding immaterial,
incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights
and obligations under this Agreement in respect of
the Affected Transactions to another of its Officers
or Affiliates so that such Termination Event ceases
to exist.
If the Affected Party is not able to make such a
transfer it will give notice to the other party to
that effect within such 20 day period, whereupon the
other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section
6(b)(ii) will be subject to and conditional upon the
prior written consent of the other party, which
consent will not be withheld if such other party's
policies in effect at such time would permit it to
enter into transactions with the transferee on the
terms proposed.
3. Two Affected Parties. If an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and
there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30
days after notice thereof is given under Section
6(b)(i) on action to avoid that Termination Event.
4. Right to Terminate. If:--
(1) a transfer under Section 6(b)(ii) or an
agreement under Section 6(b)(iii), as the
case may be, has not been effected with
respect to all Affected Transactions within
30 days after an Affected Party gives notice
under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2),
a Credit Event Upon Merger or an
Additional Termination Event occurs, or a
Tax Event Upon Merger occurs and the
Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party
in the case of a Tax Event Upon Merger, any Affected Party in
the case of a Tax Event or an Additional Termination Event if
there is more than one Affected Party, or the party which is
not the Affected Party in the case of a Credit Event Upon
Merger or an Additional Termination Event if there is only one
Affected Party may, by not more than 20 days notice to the
other party and provided that the relevant Termination Event
is then continuing, designate a day not earlier than the day
such notice is effective as an Early Termination Date in
respect of all Affected Transactions.
<PAGE>
3. Effect of Designation.
1. If notice designating an Early
Termination Date is given under Section 6(a) or (b),
the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of
Default or Termination Event is then continuing.
2. Upon the occurrence or effective
designation of an Early Termination Date, no further
payments or deliveries under Section 2(a)(i) or 2(e)
in respect of the Terminated Transactions will be
required to be made, but without prejudice to the
other provisions of this Agreement. The amount, if
any, payable in respect of an Early Termination Date
shall be determined pursuant to Section 6(e).
4. Calculations.
1. Statement. On or as soon as reasonably
practicable following the occurrence of an Early
Termination Date, each party will make the
calculations on its part, if any, contemplated by
Section 6(e) and will provide to the other party a
statement (1) showing, in reasonable detail, such
calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and
(2) giving details of the relevant account to which
any amount payable to it is to be paid. In the
absence of written confirmation from the source of a
quotation obtained in determining a Market Quotation,
the records of the party obtaining such quotation
will be conclusive evidence of the existence and
accuracy of such quotation.
2. Payment Date. An amount calculated as
being due in respect of any Early Termination Date
under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the
case of an Early Termination Date which is designated
or occurs as a result of an Event of Default) and on
the day which is two Local Business Days after the
day on which notice of the amount payable is
effective (in the case of an Early Termination Date
which is designated as a result of a Termination
Event). Such amount will be paid together with (to
the extent permitted under applicable law) interest
thereon (before as well as after judgment) in the
Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding)
the date such amount is paid, at the Applicable Rate.
Such interest will be calculated on the basis of
daily compounding and the actual number of days
elapsed.
5. Payments on Early Termination. If an Early Termination
Date occurs, the following provisions shall apply based on the
parties' election in the Schedule of a payment measure, either
"Market Quotation" or the "Second Method", as the case may be,
shall apply. The amount, if any, payable in respect of an
Early Termination Date and determined pursuant to this Section
will be subject to any Set-off.
1. Events of Default. If the Early
Termination Date results from an
Event of Default:--
(1) First Method and Market Quotation. If the
First Method and Market Quotation apply, the
Defaulting Party will pay to the
Non-defaulting Party the excess, if a
positive number, of (A) the sum of the
Settlement Amount (determined by the
Non-defaulting Party) in respect of the
Terminated Transactions and the Termination
Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party over (B)
the Termination Currency Equivalent of the
Unpaid Amounts owing to the Defaulting
Party.
(2) First Method and Loss. If the First
Method and Loss apply, the Defaulting
Party will pay to the Non-defaulting
Party, if a positive number, the
Non-defaulting Party's Loss in respect of
this Agreement.
(3) Second Method and Market Quotation. If the
Second Method and Market Quotation apply, an
amount will be payable equal to (A) the sum
of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the
Terminated Transactions and the Termination
Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B)
the Termination Currency Equivalent of the
Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number,
the Defaulting Party will pay it to the
Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay
the absolute value of that amount to the
Defaulting Party.
(4) Second Method and Loss. If the Second Method
and Loss apply, an amount will be payable
equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is
a positive number, the Defaulting Party will
pay it to the Non-defaulting Party; if it is
a negative number, the Non-defaulting Party
will pay the absolute value of that amount
to the Defaulting Party.
2. Termination Events. If the Early
Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected
Party, the amount payable will be determined
in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section
6(e)(i)(4), if Loss applies, except that, in
either case, references to the Defaulting
Party and to the Non-defaulting Party will
be deemed to be references to the Affected
Party and the party which is not the
Affected Party, respectively, and, if Loss
applies and fewer than all the Transactions
are being terminated, Loss shall be
calculated in respect of all Terminated
Transactions.
(2) Two Affected Parties. If there are two
Affected Parties:--
1. if Market Quotation applies, each party will determine a Settlement
Amount in respect of the Terminated Transactions, and an amount will be
payable equal to (I) the sum of (a) one-half of the difference between
the Settlement Amount of the party will the higher Settlement Amount
("X") and the Settlement Amount of the party with the lower Settlement
Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid
Amounts owing to X less (II) the Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and
2. if Loss applies, each party will determine its Loss in respect of this
Agreement (or, if fewer than all the Transactions are being terminated,
in respect of all Terminated Transactions) and an amount will be
payable equal to one-half of the difference between the Loss of the
party with the higher Loss ("X") and the Loss of the party with the
lower Loss ("Y").
If the amount payable is a positive number, Y will
pay it to X; if it is a negative number, X will pay
the absolute value of that amount to Y.
3. Adjustment for Bankruptcy. In
circumstances where an Early Termination Date occurs
because "Automatic Early Termination" applies in
respect of a party, the amount determined under this
Section 6(e) will be subject to such adjustments as
are appropriate and permitted by law to reflect any
payments or deliveries made by one party to the other
under this Agreement (and retained by such other
party) during the period from the relevant Early
Termination Date to the date for payment determined
under Section 6(d)(ii).
4. Pre-Estimate. The parties agree that if
Market Quotation applies an amount recoverable under
this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for
the loss of bargain and the loss of protection
against future risks and except as otherwise provided
in this Agreement neither party will be entitled to
recover any additional damages as a consequence of
such losses.
7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by
way of security or otherwise) by either party without the prior written
consent of the other party, except that:--
6. a party may make such a transfer of this Agreement pursuant
to a consolidation or amalgamation with, or merger with or
into, or transfer of all or substantially all its assets to,
another entity (but without prejudice to any other right or
remedy under this Agreement); and
7. a party may make such a transfer of all or any
part of its interest in any amount
payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will
be void.
8. Contractual Currency
1. Payment in the Contractual Currency. Each payment under
this Agreement will be made in the relevant currency specified
in this Agreement for that payment (the "Contractual
Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the
Contractual Currency will not be discharged or satisfied by
any tender in any currency other than the Contractual
Currency, except to the extent such tender results in the
actual receipt by the party to which payment is owed, acting
in a reasonable manner and in good faith in converting the
currency so tendered into the Contractual Currency, of the
full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in
the Contractual Currency so received falls short of the amount
in the Contractual Currency payable in respect of this
Agreement, the party required to make the payment will, to the
extent permitted by applicable law, immediately pay such
additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason
the amount in the Contractual Currency so received exceeds the
amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund
promptly the amount of such excess.
2. Judgments. To the extent permitted by applicable law, if
any judgment or order expressed in a currency other than the
Contractual Currency is rendered (i) for the payment of any
amount owing in respect of this Agreement, (ii) for the
payment of any amount relating to any early termination in
respect of this Agreement or (iii) in respect of a judgment or
order of another court for the payment of any amount described
in (i) or (ii) above, the party seeking recovery, after
recovery in full of the aggregate amount to which such party
is entitled pursuant to the judgment or order, will be
entitled to receive immediately from the other party the
amount of any shortfall of the Contractual Currency received
by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any
excess of the Contractual Currency received by such party as a
consequence of sums paid in such other currency if such
shortfall or such excess arises or results from any variation
between the rate of exchange at which the Contractual Currency
is converted into the currency of the judgment or order for
the purposes of such judgment or order and the rate of
exchange at which such party is able, acting in a reasonable
manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual
Currency with the amount of the currency of the judgment or
order actually received by such party. The term "rate of
exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or
conversion into the Contractual Currency.
3. Separate Indemnities. To the extent permitted by
applicable law, these indemnities constitute separate and
independent obligations from the other obligations in this
Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence
granted by the party to which any payment is owed and will not
be affected by judgment being obtained or claim or proof being
made for any other sums payable in respect of this Agreement.
4. Evidence of Loss. For the purpose of this
Section 8, it will be sufficient for a
party to demonstrate that it would have suffered a loss had
an actual exchange or purchase been
made.
9. Miscellaneous
1. Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supersedes all oral communication and prior writings with respect
thereto.
2. Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing
evidenced by a facsimile transmission) and executed by each of the
parties or confirmed by an exchange of telexes or electronic messages
on an electronic messaging system.
3. Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will
survive the termination of any Transaction.
4. Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and
privileges provided by law.
5. Counterparts and Confirmations.
1. This Agreement (and each amendment,
modification and waiver in respect of it) may be
executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed
an original.
2. The parties intend that they are legally
bound by the terms of each Transaction from the
moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as
soon as practicable and may be executed and delivered
in counterparts (including by facsimile transmission)
or be created by an exchange of telexes or by an
exchange of electronic messages on an electronic
messaging system, which in each case will be
sufficient for all purposes to evidence a binding
supplement to this Agreement. The parties will
specify therein or through another effective means
that any such counterpart, telex or electronic
message constitutes a Confirmation.
6. No waiver of Rights. A failure or delay in exercising any
right, power or privilege in respect of this Agreement will
not be presumed to operate as a waiver, and a single or
partial exercise of any right, power or privilege will not be
presumed to preclude any subsequent or further exercise, of
that right, power or privilege or the exercise of any other
right, power or privilege.
7. Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be
taken into consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
1. If Section 10(a) is specified in the Schedule as applying,
each party that enters into a Transaction through an Office
other than its head or home office represents to the other
party that, notwithstanding the place of booking office or
jurisdiction of incorporation or organisation of such party,
the obligations of such party are the same as if it had
entered into the Transaction through its head or home office.
This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
2. Neither party may change the Office through which it makes
and receives payments or deliveries for the purpose of a
Transaction without the prior written consent of the other
party.
3. If a party is specified as a Multibranch Party in the
Schedule, such Multibranch Party may make and receive payments
or deliveries under any Transaction through any Office listed
in the Schedule, and the Office through which it makes and
receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the
other party for and against all reasonable out-of-pocket expenses,
including legal fees and Stamp Tax, incurred by such other party by
reason of the enforcement and protection of its rights under this
Agreement or any Credit Support Document to which the Defaulting Party
is a party or by reason of the early termination of any Transaction,
including, but not limited to, costs of collection.
12. Notices
1. Effectiveness. Any notice or other communication in
respect of this Agreement may be given in any manner set forth
below (except that a notice or other communication under
Section 5 or 6 may not be given by facsimile transmission or
electronic messaging system) to the address or number or in
accordance with the electronic messaging system details
provided (see the Schedule) and will be deemed effective as
indicated:--
1. if in writing and delivered in
person or by courier, on the date it
is delivered;
2. if sent by telex, on the date the
recipient's answerback is received;
3. if sent by facsimile transmission, on
the date that transmission is received by a
responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt
will be on the sender and will not be met by a
transmission report generated by the sender's
facsimile machine);
4. if sent by certified or registered mail
(airmail, if overseas) or the
equivalent (return receipt requested), on the
date that mail is
delivered or delivery is attempted; or
5. if sent by electronic messaging
system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or
that receipt, as applicable, is not a Local Business Day or
that communication is delivered (or attempted) or received, as
applicable, after the close of business on a Local Business
Day, in which case that communication shall be deemed given
and effective on the first following day that is a Local
Business Day.
2. Change of Addresses. Either party may by notice to the other change
the address, telex or facsimile number or electronic messaging system
details at which notices or other communications are to be given to
it.
13. Governing Law and Jurisdiction
1. Governing Law. This Agreement will be governed by
and construed in accordance with
the law specified in the Schedule.
2. Jurisdiction. With respect to any suit, action
or proceedings relating to this
Agreement ("Proceedings"), each party irrevocably:--
1. submits to the jurisdiction of the
English courts, if this Agreement is expressed to be
governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York
and the United States District Court located in the
Borough of Manhattan in New York City, if this
Agreement is expressed to be governed by the laws of
the State of New York; and
2. waives any objection which it may have
at any time to the laying of venue of any Proceedings
brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient
forum and further waives the right to object, with
respect to such Proceedings, that such court does not
have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing
Proceedings in any other jurisdiction (outside, if this Agreement is
expressed to be governed by English law, the Contracting States, as
defined in Section 1(3) of the Civil Jurisdiction and Judgments Act
1982 or any modification, extension or re-enactment thereof for the
time being in force) nor will the bringing of Proceedings in any one or
more jurisdictions preclude the bringing of Proceedings in any other
jurisdiction.
3. Service of Process. Each party irrevocably appoints the
Process Agent (if any) specified opposite its name in the
Schedule to receive, for it and on its behalf, service of
process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a
substitute process agent acceptable to the other party. The
parties irrevocably consent to service of process given in the
manner provided for notices in Section 12. Nothing in this
Agreement will affect the right of either party to serve
process in any other manner permitted by law.
4. Waiver of Immunities. Each party irrevocably waives, to
the fullest extent permitted by applicable law, with respect
to itself and its revenues and assets (irrespective of their
use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction,
order for specific performance or for recovery of property,
(iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to
which it or its revenues or assets might otherwise be entitled
in any Proceedings in the courts of any jurisdiction and
irrevocably agrees, to the extent permitted by applicable law,
that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section
5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and
(b) with respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person,
any entity controlled, directly or indirectly, by the person, any
entity that controls, directly or indirectly, the person or any entity
directly or indirectly under common control with the person. For this
purpose, "control" of any entity or person means ownership of a
majority of the voting power of the entity or person.
"Applicable Rate" means:--
1. in respect of obligations payable or deliverable
(or which would have been but for
Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
2. in respect of an obligation to pay an amount under
Section 6(e) of either party from
and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is
payable, the Default Rate;
3. in respect of all other obligations payable or
deliverable (or which would have been
but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
4. in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or
after the date on which the relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation,
exemption, notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is
specified as such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof
or evidence of any actual cost) to the relevant payee (as certified by
it) if it were to fund or of funding the relevant amount plus 1% per
annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with
Section 6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and,
if applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be
imposed in respect of a payment under this Agreement but for a present
or former connection between the jurisdiction of the government or
taxation authority imposing such Tax and the recipient of such payment
or a person related to such recipient (including, without limitation, a
connection arising from such recipient or related person being or
having been a citizen or resident of such jurisdiction, or being or
having been organised, present or engaged in a trade or business in
such jurisdiction, but excluding a connection arising solely from such
recipient or related person having executed, delivered, performed its
obligations or received a payment under, or enforced, this Agreement or
a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the
case of tax matters, by the practice of any relevant governmental
revenue authority) and "lawful" and "unlawful" will be construed
accordingly.
"Local Business Day" means, subject to the Schedule, a day on which
commercial banks are open for business (including dealings in foreign
exchange and foreign currency deposits) (a) in relation to any
obligation under Section 2(a)(i), in the place(s) specified in the
relevant Confirmation or, if not so specified, as otherwise agreed by
the parties in writing or determined pursuant to provisions contained,
or incorporated by reference, in this Agreement, (b) in relation to any
other payment, in the place where the relevant account is located and,
if different, in the principal financial centre, if any, of the
currency of such payment, (c) in relation to any notice or other
communication, including notice contemplated under Section 5(a)(i), in
the city specified in the address for notice provided by the recipient
and, in the case of a notice contemplated by Section 2(b), in the place
where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with
respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith
to be its total losses and costs (or gain, in which case expressed as a
negative number) in connection with this Agreement or that Terminated
Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of
such party but without duplication, loss or cost incurred as a result
of its terminating, liquidating, obtaining or reestablishing any hedge
or related trading position (or any gain resulting from any of them).
Loss includes losses and costs (or gains) in respect of any payment or
delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early
Termination Date and not made, except, so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not
include a party's legal fees and out-of-pocket expenses referred to
under Section 11. A party will determine its Loss as of the relevant
Early Termination Date, or, if that is not reasonably practicable, as
of the earliest date thereafter as is reasonably practicable. A party
may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the
relevant markets.
"Market Quotation" means, with respect to one or more Terminated
Transactions and a party making the determination, an amount determined
on the basis of quotations from Reference Market-makers. Each quotation
will be for an amount, if any, that would be paid to such party
(expressed as a negative number) or by such party (expressed as a
positive number) in consideration of an agreement between such party
(taking into account any existing Credit Support Document with respect
to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement
Transaction") that would have the effect of preserving for such party
the economic equivalent of any payment or delivery (whether the
underlying obligation was absolute or contingent and assuming the
satisfaction of each applicable condition precedent) by the parties
under Section 2(a)(i) in respect of such Terminated Transaction or
group of Terminated Transactions that would, but for the occurrence of
the relevant Early Termination Date, have been required after that
date. For this purpose, Unpaid Amounts in respect of the Terminated
Transaction or group of Terminated Transactions are to be excluded but,
without limitation, any payment or delivery that would, but for the
relevant Early Termination Date, have been required (assuming
satisfaction of each applicable condition precedent) after that Early
Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference
Market-maker may, in good faith, agree. The party making the
determination (or its agent) will request each Reference Market-maker
to provide its quotation to the extent reasonably practicable as of the
same day and time (without regard to different time zones) on or as
soon as reasonably practicable after the relevant Early Termination
Date. The day and time as of which those quotations are to be obtained
will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged,
after consultation with the other. If more than three quotations are
provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and
lowest values. If exactly three such quotations are provided, the
Market Quotation will be the quotation remaining after disregarding the
highest and lowest quotations. For this purpose, if more than one
quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are
provided, it will be deemed that the Market Quotation in respect of
such Terminated Transaction or group of Terminated Transactions cannot
be determined.
"Non-default Rate" means a rate per annum equal to the cost (without
proof or evidence of any actual cost) to the Non-defaulting Party (as
certified by it) if it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's
head or home office.
"Potential Event of Default" means any event which, with the giving of
notice or the lapse of time or both, would constitute an Event of
Default.
"Reference Market-makers" means four leading dealers in the relevant
market selected by the party determining a Market Quotation in good
faith (a) from among dealers of the highest credit standing which
satisfy all the criteria that such party applies generally at the time
in deciding whether to offer or to make an extension of credit and (b)
to the extent practicable, from among such dealers having an office in
the same city.
"Relevant Jurisdiction" means, with respect to a party, the
jurisdictions (a) in which the party is incorporated, organised,
managed and controlled or considered to have its seat, (b) where an
Office through which the party is acting for purposes of this Agreement
is located, (c) in which the party executes this Agreement and (d) in
relation to any payment, from or through which such payment is made.
"Scheduled Payment Date" means a date on which a payment or delivery is
to be made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of
retention or withholding or similar right or requirement to which the
payer of an amount under Section 6 is entitled or subject (whether
arising under this Agreement, another contract, applicable law or
otherwise) that is exercised by, or imposed on, such payer.
"Settlement Amount" means, with respect to a party and any Early
Termination Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations
(whether positive or negative) for each Terminated Transaction
or group of Terminated Transactions for which a Market
Quotation is determined; and
(b) such party's Loss (whether positive or negative and without
reference to any Unpaid Amounts) for each Terminated
Transaction or group of Terminated Transactions for which a
Market Quotation cannot be determined or would not (in the
reasonable belief of the party making the determination)
produce a commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation
(whether present or future, contingent or otherwise, as principal or
surety or otherwise) in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any
transaction (including an agreement with respect thereto) now existing
or hereafter entered into between one party to this Agreement (or any
Credit Support Provider of such party or any applicable Specified
Entity of such party) and the other party to this Agreement (or any
Credit Support Provider of such other party or any applicable Specified
Entity of such other party) which is a rate swap transaction, basis
swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap, equity or equity index option, bond
option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or
any other similar transaction (including any option with respect to any
of these transactions), (b) any combination of these transactions and
(c) any other transaction identified as a Specified Transaction in this
Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar
tax.
"Tax" means any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and
additions thereto) that is imposed by any government or other taxing
authority in respect of any payment under this Agreement other than a
stamp, registration, documentation or similar tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transaction" means with respect to any Early Termination
Date (a) if resulting from a Termination Event, all Affected
Transactions and (b) if resulting from an Event of Default, all
Transactions (in either case) in effect immediately before the
effectiveness of the notice designating that Early Termination Date
(or, if "Automatic Early Termination" applies, immediately before that
Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount
denominated in the Termination Currency, such Termination Currency
amount and, in respect of any amount denominated in a currency other
than the Termination Currency (the "Other Currency"), the amount in the
Termination Currency determined by the party making the relevant
determination as being required to purchase such amount of such Other
Currency as at the relevant Early Termination Date, or, if the relevant
Market Quotation or Loss (as the case may be), is determined as of a
later date, that later date, with the Termination Currency at the rate
equal to the spot exchange rate of the foreign exchange agent (selected
as provided below) for the purchase of such Other Currency with the
Termination Currency at or about 11:00 a.m. (in the city in which such
foreign exchange agent is located) on such date as would be customary
for the determination of such a rate for the purchase of such Other
Currency for value on the relevant Early Termination Date or that later
date. The foreign exchange agent will, if only one party is obliged to
make a determination under Section 6(e), be selected in good faith by
that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event
Upon Merger or, if specified to be applicable, a Credit Event Upon
Merger or an Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean
of the cost (without proof or evidence of any actual cost) to each
party (as certified by such party) if it were to fund or of funding
such amounts. "Unpaid Amounts" owing to any party means, with respect
to an Early Termination Date, the aggregate of (a) in respect of all
Terminated Transactions, the amounts that became payable (or that would
have become payable but for Section 2(a)(iii)) to such party under
Section 2(a)(i) on or prior to such Early Termination Date and which
remain unpaid as at such Early Termination Date and (b) in respect of
each Terminated Transaction, for each obligation under Section 2(a)(i)
which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination
Date and which has not been so settled as at such Early Termination
Date, an amount equal to the fair market value of that which was (or
would have been) required to be delivered as of the originally
scheduled date for delivery, in each case together with (to the extent
permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were
or would have been required to have been paid or performed to (but
excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily
compounding and the actual number of days elapsed. The fair market
value of any obligation referred to in clause (b) above shall be
reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the
average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
THE FIRST NATIONAL BANK OF BOSTON GROVE OPERATING, L.P.
(Name of Party)
By: /s/ William K. LePard By: /s/ Joseph R. LaBrosse
Name: William K. LePard Name:
Title: Managing Director Title:
By: /s/ Kenneth C. Foster
Name: Kenneth C. Foster
Title: Vice President/Team Executive
<PAGE>
(Multicurrency - Cross Border) Execution Copy
ISDA(R)
International Swaps and Derivatives Association, Inc.
SCHEDULE
to the
Master Agreement
dated as of December 6, 1996
between
THE FIRST NATIONAL BANK OF BOSTON
("Party A")
and
GROVE OPERATING, L.P.
("Party B")
Part 1. Termination Provisions.
1. "Specified Entity" means in relation to Party A for the purpose of:-
Section 5(a)(v): Not Applicable
Section 5(a)(vi): Not Applicable
Section 5(a)(vii): Not Applicable
Section 5(b)(iv): Not Applicable
and in relation to Party B for the purpose of:-
Section 5(a)(v): Not Applicable
Section 5(a)(vi): Not Applicable
Section 5(a)(vii): Not Applicable
Section 5(b)(iv): Not Applicable
2. "Specified Transaction" will have the meaning specified in Section 14.
3. The "Cross Default" provisions of Section 5(a)(vi)
will not apply to Party A
will apply to Party B
If such provisions apply:-
"Specified Indebtedness" will have the meaning specified in Section 14.
"Threshold Amount" means an amount equal to US$1,000,000.
4. The "Credit Event Upon Merger" provisions of Section 5(b)(iv)
will apply to Party A
will apply to Party B
5. The "Automatic Early Termination provision of Section 6(a)
will not apply to Party A
will not apply to Party B
6. Payments on Early Termination. For the purpose of Section 6(e) of
this Agreement:-
1. Market Quotation will apply.
2. The Second Method will apply.
7. "Termination Currency" means United States Dollars.
8. Additional Event of Default.
Breach of the following covenants, terms and provisions by Party B
shall constitute an additional Event of Default with respect to Party
B:-
Party B hereby agrees, during the period commencing with the date of
this Agreement through and including the date on which all of Party B's
obligations under this Agreement are fully performed, Party B shall
observe, perform and fulfill each and every covenant, term and
provision applicable to Party B and contained in the Revolving Loan
Agreement, Term Note, Mortgage and Guaranty dated as of March [ ], 1997
as amended and/or restated from time to time (the "Credit Agreement")
by and among Party A and Party B, provided that in the event the Credit
Agreement terminates prior to the termination of this Agreement, these
sections will continue to apply: 7(b), (c), (g), 8(d), 9(c), and
12.1(e), (f), (h), (i) and (j). The aforementioned covenants, terms,
and provisions of the Credit Agreement are hereby incorporated into
this Agreement by reference.
Part 2. Tax Representations
1. Payor Representations. For the purpose of Section 3(e), Party A
and Party B will make the following
representation:-
It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any tax from any payment (other than interest under Sections 2(e),
6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party
under this Agreement. In making this representation, it may rely on:-
1. the accuracy of any representation made by the other party pursuant
to Section 3(f); 2. the satisfaction of the agreement of the other
party contained in Section 4(a)(i) or 4(a)(iii) and the accuracy and
effectiveness of any document provided by the other party pursuant to
Section 4(a)(i) or 4(a)(iii); and 3. the satisfaction of the agreement
of the other party contained in Section 4(D), provided that it shall
not be a breach of this representation where reliance is placed on
clause (ii) and the other party does not deliver a form or document
under Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
2. Payee Representations. For the purpose of Section 3(f) of this
Agreement, Party A and Party B make the representations specified
below, if any:
Party A represents that it is a national banking association organized
under the laws of the United States of America.
Party B represents that it is a Delaware limited partnership.
Part 3. Agreement to Deliver Documents
1. Party B shall have delivered to Party A, prior to the execution of this
Agreement (unless otherwise provided herein): A certified copy of the
Partnership Agreement and Certificate of limited partnership of Party
B.
2. Party B shall deliver to Party A on an ongoing basis for as long as
there are outstandings hereunder:
1. the audited balance sheet of Party B and as at and for each fiscal
year end beginning 12/31/97, and the related statements of income and
cash flows of Party B for such year, certified by independent public
accountants satisfactory to Party A; 2. the balance sheet of Party B as
at and for each fiscal quarter end beginning 6/30/97, and the related
statements of income and cash flows of Party B for the portion of the
fiscal year then ending, together with a certificate of the principal
financial or accounting officer of Party B certifying that the
information contained in such financial statements is true and accurate
(subject to audit and year-end adjustments); 3. a Certificate of the
principal financial or accounting officer of Party B certifying as of
the end of each quarter or year, as the case may be, the Absence of
Certain Events with respect to Party B and the full performance and
compliance of Party B with all of its agreements under Section 4(a)
(or, if an event has occurred or exists, the nature and period of
existence thereof), and setting forth in reasonable detail the
calculations required to determine compliance by Party B with all of
its agreements under Section 4(a).
3. Party B shall deliver to Party A concurrent with execution of this
Agreement:- 1. a certified copy (substantially in the form of Exhibit B
attached hereto) of the resolution of the partnership authorizing the
execution by an officer of Party B and the performance by Party B of the
transactions contemplated hereby, and specifying the names and specimen
signatures of each person authorized to execute this Agreement on behalf of
Party B; and 2. an opinion of legal counsel to Party B substantially in the
form of Exhibit A attached hereto.
Part 4. Miscellaneous.
1. Address for Notices. For the purpose of Section 12(a) of this
Agreement:-
Address for notices or communications to Party A:-
Address: 100 Federal Street
Boston, Massachusetts 02106
Attention: Arbitrage Operations, Swap Desk, 01-12-02
Facsimile No: (617) 434-3085
Address for notices or communications to Party B:-
Address: 598 Asylum Avenue
Hartford, CT 06105
Attention: Joe LaBrosse
Chief Financial Officer
Facsimile No.: 860-527-0401
Telephone No.: 860-246-1126, Ext. 137
2. Process Agent. For the purpose of Section 13(c) of this Agreement:-
Party A appoints as its Process Agent: Not Applicable.
Party B appoints as its Process Agent: Not Applicable.
3. Offices. The provisions of Section 10(a) will apply to this Agreement.
4. Multibranch Party. For the purpose of Section 10(c) of this
Agreement:-
Party A is not a Multibranch Party. Party B is not a Multibranch Party.
5. Calculation Agent. The Calculation Agent is Party A, unless
otherwise specified in a Confirmation in
relation to the relevant Transaction.
6. Credit Support Document. Details of any Credit Support Document:-
Guaranty.
7. Credit Support Provider. Credit Support Provider means in relation
to Party B:- Grove Property Trust, a Maryland corporation and sole
General Partner.
8. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the
State of New York (without reference to choice of law doctrine).
9. Netting of Payments. Subparagraph (ii) of Section 2(c) of this
Agreement will not apply to any
Transactions under this Agreement.
10. "Affiliate" will have the meaning specified in Section 14.
Part 5. Other Provisions
1. Definitions.
This Agreement, each Confirmation and each Transaction are subject to
the 1991 ISDA Definitions (as published by the International Swaps and
Derivatives Association, Inc.) (the "Definitions"), and will be governed in all
respects by the provisions set forth in the Definitions. The provisions of the
Definitions are incorporated by reference in, and shall be deemed to be part of,
this Agreement and each Confirmation, as if set forth in full in this Agreement
or in that Confirmation. In the event of any inconsistency between the
provisions of this Agreement and the Definitions, this Agreement will prevail.
In the event of any inconsistency between the provisions of any Confirmation and
this Agreement, such Confirmation will prevail for the purpose of the relevant
Transaction.
2. Procedures for Entering Into Transactions.
(i) With respect to each Transaction entered into pursuant hereto,
Party A shall, on or promptly after the Trade Date thereof, send Party B a
Confirmation substantially in the form of Exhibit C confirming such Transaction,
and Party B shall promptly thereafter confirm the accuracy of or request the
correction of such Confirmation.
(ii) Notwithstanding the terms of Sections 5 and 6 of this Agreement,
if at any time and so long as one of the parties to this Agreement ("X") shall
have satisfied in full all its payment obligations under Sections 2(a)(i) of
this Agreement and shall at the time have no future payment obligations, whether
absolute or contingent, under such Section, then unless the other party ("Y") is
required pursuant to appropriate proceedings to return to X or otherwise returns
to X upon demand of X any portion of any such payment, (a) the occurrence of an
event described in Section 5(A) of this Agreement with respect to X, any Credit
Support Provider of X, or any Specified entity of X shall not constitute an
Event of Default or a Potential Event of Default with respect to X as the
Defaulting Party and (b) Y shall be entitled to designate an Early Termination
Date pursuant to Section 6 of this Agreement as a result of the occurrence of a
Termination Event set forth in (i) either Section 5(b)(i) or 5(b)(ii) of this
Agreement with respect to Y as the Affected Party or (ii) Section 5(b)(iii) of
this Agreement with respect to Y as the Burdened Party.
3. Additional Representations.
For purposes of Section 3 of this Agreement, the following shall be
added, immediately following paragraph (f) thereof:
"(g) This Agreement and each Transaction constitutes a "swap
agreement" within the meaning of Commodity Futures Trading
Commission ("CFTC") regulations Section 35.1(b)(1).
(h) It is an "eligible swap participant" within
the meaning of CFTC Regulations
Section 35.1(b)(2).
(i) Neither this Agreement nor any Transaction is one of a
fungible class of agreements that are standardized as to their
material economic terms, within the meaning of CFTC
Regulations Section 35.2(b).
(j) The creditworthiness of the other party was or will be a
material consideration in entering into or determining the
terms of this Agreement and each Transaction, including
pricing, cost or credit enhancement terms of the Agreement or
Transaction, within the meaning of CFTC Regulations 35.2(c).
(k) It has entered into this Agreement (including each
Transaction evidenced hereby) in conjunction with its line of
business (including financial intermediation services) or the
financing of its business.
(l) Relationship Between Parties. Each party will be deemed to
represent to the other party on the date on which it enters
into a Transaction that (absent a written agreement between
the parties that expressly imposes affirmative obligations to
the contrary for the Transaction):
(i) Non-Reliance. It is acting for its own account,
and it has made its own independent decisions to enter into
that Transaction and as to whether that Transaction is
appropriate or proper for it based upon its own judgment and
upon advice from such advisors as it has deemed necessary. It
is not relying on any communication (written or oral) of the
other party as investment advice or as a recommendation to
enter into that Transaction; it being understood that
information and explanations related to the terms and
conditions of a Transaction shall not be considered investment
advice or a recommendation to enter into that Transaction. It
has not received from the other party any assurance or
guarantee as to the expected results of that Transaction.
(ii) Assessment and Understanding. It is capable of
assessing the merits of and understanding (on its own behalf
or through independent professional advice), and understands
and accepts, the terms, conditions and risks of that
Transaction. It is also capable of assuming, and assumes, the
risks of that Transaction.
(iii) Status of Parties. The other party is not
acting as a fiduciary for or as an
advisor to it in respect of that Transaction.
4. Recording.
Each party hereto consents to the monitoring or recording, at any time
and from time to time, by the other party of any and all communications between
officers or employees of the parties, waives any further notice of such
monitoring or recording, and agrees to notify its officers and employees of such
monitoring or recording.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this document as of the
date specified on the first page hereof.
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ William K. LePard By: /s/ Kenneth C. Foster
Name: William K. LePard Name: Kenneth C. Foster
Title: Managing Director Title: Vice President/Team Executive
GROVE OPERATING, L.P.
By: GROVE PROPERTY TRUST
f.k.a. GROVE REAL ESTATE ASSET TRUST
By: /s/ Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Treasurer
<PAGE>
EXHIBIT A
[LETTERHEAD OF COUNSEL TO PARTY B]
[Date]
The First National Bank of Boston
Global Financial Markets, 12th Floor
100 Federal Street
Boston, Massachusetts 02106
Dear Sirs:
Re: [Counterparty Name]
This opinion is furnished to you pursuant to Part 3 of the
Schedule to the Master Agreement dated as of the _________ day of
_________________, 199__ and the Transactions entered into pursuant thereto (the
"Agreement") made between ______________________ (the "Counterparty") and The
First National Bank of Boston.
We have acted as counsel to the Counterparty in connection
with the preparation, execution and delivery of the Agreement. In that
connection we have examined such documents and considered such questions of law
as we have deemed necessary or appropriate for the opinion expressed herein.
Based on the foregoing we are of the opinion that:
1. The Counterparty is a duly organized limited partnership,
validly existing under the laws of its jurisdiction of
incorporation and has full partnership power and authority to
execute and deliver the Agreement and to perform its
obligations thereunder. The general partner of the
Counterparty is duly incorporated and organized and validly
existing under the laws of its jurisdiction of incorporation
and has full corporate power and authority to execute and
deliver the Agreement on behalf of the Counterparty.
2. The execution, delivery and performance of the Agreement by
the general partner of the Counterparty has been duly
authorized by all necessary corporate action of the general
partner of the Counterparty and all partnership action of the
Counterparty and will not conflict with or result in a breach
of the articles or by-laws of the general partner of the
Counterparty or the certificate of limited partnership or the
partnership agreement of the Counterparty.
Yours truly,
<PAGE>
EXHIBIT B
[NAME OF LIMITED PARTNERSHIP]
CERTIFICATE
I, _______________________, the duly appointed, qualified and acting
General Partner of ........[Name of Limited Partnership]........(the "Limited
Partnership"), a Limited Partnership duly organized and existing under the laws
of _____________________, hereby certify that:
I. The Limited Partnership is hereby authorized to enter into with The First
National Bank of Boston (the "Bank") any and all interest rate and currency swap
transactions, interest rate cap, collar and floor transactions, interest rate
and currency option transactions, and any and all similar derivative products
("Swap Transactions") and any borrowing or lending transactions related to any
of the foregoing (such borrowing and lending transactions together with the Swap
Transactions being hereafter collectively referred to as the "Transactions");
and
II. That the execution, delivery and performance of the Interest Rate Agreement,
and any and all documents executed in connection therewith, entered into by the
Limited Partnership in connection with the Transactions contemplated by
Paragraph I above are within the authority of the Limited Partnership, have been
authorized by proper partnership proceedings and do not and will not contravene
any provision of law, applicable governmental rule or regulation or its limited
partnership agreement; and
III. Each of the following persons whose names appear below is
authorized to execute and deliver for and on
behalf of the Limited Partnership confirmations, agreements, contracts,
instruments and other documentation evidencing the Transactions described in
Paragraph I above; and
IV. The signature set forth opposite each of the following persons is the
genuine signature of the person sonamed with which I am familiar.
Name Position Signature
IN WITNESS WHEREOF, I have hereunto set my hand this ________ day of
__________, 19__.
------------------------------
General Partner
<PAGE>
EXHIBIT C
DATE:
TO:
ATT:
FAX:
FROM: The First National Bank of Boston ("FNBB")
FAX: (617) 434-0505 (Treasury Operations)
RE: INTEREST RATE SWAP TRANSACTION
[Our Ref:SW / ]
The purpose of this letter is to set forth the terms and conditions of the
interest rate swap transaction entered into between us on the Trade Date
specified below (the "Swap Transaction"). This letter constitutes a
"Confirmation" as referred to in the Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions in this Confirmation, this Confirmation will
govern.
1. This Confirmation evidences a complete binding agreement between you
and us as to the terms of the Swap Transaction to which this Confirmation
relates. This Confirmation supplements, forms a part of, and is subject to the
Master Agreement, dated as of , as amended and supplemented from time to time
(the "Agreement"). All provisions contained or incorporated by reference in such
Agreement upon its execution shall govern this Confirmation except as expressly
modified below.
2. The terms of the particular Swap Transaction to which this
Confirmation relates are as follows:
Notional Amount:
Trade Date:
Effective Date:
Termination Date:
FIXED PAYMENTS:
Fixed Rate Payer:
Fixed Rate:
Fixed Rate
Payment Date(s): The of in
each year
beginning and
ending the
Termination Date, subject to
adjustment in accordance with
the Modified Following Business Day convention.
Fixed Rate Day
Court Fraction:
FLOATING PAYMENTS:
Floating Rate Payer:
Floating Rate
Payment Dates: The of in
each year
beginning and
ending the
Termination Date, subject to
adjustment in accordance with
the Modified Following Business Day convention.
Floating Rate for
Initial Calculation
Period:
Floating Rate Day
Count Fraction:
Floating Rate Option:
Designated Maturity:
Method of Averaging: Weighted/Unweighted Average.
Spread: N/A
Floating Rate
Reset Dates: The first day of each Calculation Period.
Compounding: Inapplicable/Applicable
Calculation Agent: FNBB
Business Day Convention: New York and London
Governing Law: New York law.
Documentation: ISDA's Master Agreement to be provided by FNBB.
3. ACCOUNT DETAILS:
PAYMENT TO FNBB: The First National Bank of Boston,
Routing No. ABA 011000390, for Arbitrage
Settlement Account #295032,
Attn: Swap Desk, 01-12-02.
PAYMENTS TO [COUNTERPARTY]
4. CONTACT INSTRUCTIONS:
FNBB: Swap Desk (Resets/Payments): Tel: (617) 434-5896
FAX: (617) 434-0505
Documentation (Confirms): Tel: (617) 434-7510
FAX: (617) 434-0505
[COUNTERPARTY]: PLEASE ADVISE
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
Traded by: Approved by:
By: By:
Name: Name:
Title: Title:
PLEASE COUNTERSIGN BELOW AND FAX TO (617) 434-0505 ATTN.: TRACY CHAN, OR
REQUEST CORRECTION BY TELEPHONING (617)434-7510.
Agreed and accepted as of the date first above written:
[COUNTERPARTY NAME]
By:
Name:
Title:
<PAGE>
As of December 6, 1996
First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02106
Re: SWAP Transaction [SW2839/66139]
SWAP Transaction [SW2842/66155]
Gentlemen:
We refer to (i) the two referenced swap transactions, each in
the notional amount of U.S. $7,600,000 between The First National Bank of Boston
("FNBB") and Grove Real Estate Asset Trust ("GREAT"), dated December 5, 1996 and
December 6, 1996, respectively (copies of the Confirmations of which are
attached hereto) and (ii) that certain ISDA Master Agreement dated as of
December 6, 1996 between FNBB and Grove Operating L.P., a Delaware limited
partnership ("OP") and the Schedule thereto (the "Master Agreement").
This will confirm the agreement of FNBB, GREAT and OP as
follows:
1. Great has transferred all its rights and
obligations under such swap transactions toOP. FNBB has consented to such
transfer.
2. Great, OP and FNBB agree that such swap transactions shall
be deemed to be Transactions (as defined in the Master Agreement) directly
between FNBB and OP for all purposes, and shall be governed by the Master
Agreement.
Please execute this letter in the place provided below to
evidence your agreement with the foregoing.
Very truly yours,
GROVE REAL ESTATE ASSET TRUST
By: /s/Joseph R. LaBrosse
Joseph R. LaBrosse
Treasurer
<PAGE>
GROVE OPERATING, L.P.
By: Grove Real Estate Asset Trust
General Partner
By: /s/Joseph R. LaBrosse
Joseph R. LaBrosse
Treasurer
AGREED TO:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/Kenneth C. Foster
Name: Kenneth C. Foster
Title: Team Executive
<PAGE>
DATE: December 5, 1996
TO: Grove Real Estate Asset Trust
ATT: Joe Labrosse
FAX: 860-527-0401
FROM: The First National Bank of Boston ("FNBB")
FAX: (617) 434-0505 (Confirmation)
RE: SWAP TRANSACTION
[Our Ref: SW2839/66139]
The purpose of this letter agreement is to confirm the terms and conditions of
the Swap Transaction entered into between us on the Trade Date specified below
(the "Swap Transaction"). This letter constitutes a "Confirmation" as referred
to in the Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions in this Confirmation, this Confirmation will
govern.
1. This Confirmation evidences a complete binding agreement between you
and us as to the terms of the Swap Transaction to which this Confirmation
relates. In addition, you and we agree to use our best efforts promptly to
negotiate, execute and deliver a Master Agreement in the form published by the
International Swaps and Derivatives Association, Inc. ("ISDA"), with such
modifications as you and we shall in good faith agree. Upon the execution by you
and us of such a Master Agreement (the "Agreement"), this Confirmation will
supplement, form a part of, and be subject to the Agreement. All provisions
contained or incorporated by reference in such Agreement upon its execution
shall govern this Confirmation except as expressly modified below. Prior to
execution of the Agreement the provisions of Section 3 and Section 5 of the
Agreement are deemed to be incorporated by reference herein and form a part of
this Confirmation. In the event of any inconsistency between those provisions
and this Confirmation, this Confirmation will govern.
2. The terms of the particular Swap Transaction to which this
Confirmation relates are as follows:
NOTIONAL AMOUNT: USD 7,600,000.
TRADE DATE: December 5, 1996
EFFECTIVE DATE: October 1, 1997
TERMINATION DATE: October 1, 2007
FIXED AMOUNTS:
FIXED RATE PAYER: Grove Real Estate Asset Trust
FIXED RATE: 6.53%
FIXED RATE
PAYMENT DATES: The 1st of each
month in each year
beginning November 1, 1997
and ending on the
Termination Date, subject
to adjustment in accordance
with the Modified Following
Business Day convention.
FIXED RATE DAY
COUNT FRACTION: Actual/360
FLOATING AMOUNTS:
FLOATING PAYOR: FNBB
FLOATING RATE
PAYMENT DATES: The 1st of each
month beginning November 1,
1997 and ending on the
Termination Date, subject
to adjustment in accordance
with the Modified Following
Business Day convention.
FLOATING RATE FOR
INITIAL CALCULATION
PERIOD: To be determined two Business Days prior to Effective Date.
FLOATING RATE DAY
COUNT FRACTION: Actual/360
FLOATING RATE OPTION: USD-LIBOR-BBA
DESIGNATED MATURITY: One month
SPREAD: None
RESET DATES: The first day of each Calculation Period.
COMPOUNDING: Inapplicable
BUSINESS DAYS: New York and London
<PAGE>
BUSINESS DAY CONVENTION: Modified Following.
CALCULATION AGENT: FNBB
GOVERNING LAW: New York law.
DOCUMENTATION: ISDA's Master Agreement to be provided by FNBB.
3. ACCOUNT DETAILS:
PAYMENT TO FNBB: Through the Federal Reserve Bank, Boston, Routing No.
ABA 011000390, for A/C FNB, Boston, for credit to Arbitrage
Settlement Account #295032, Attn: Swap
Desk, 01-12-02.
PAYMENTS TO
Grove Real Estate Asset Trust PLEASE ADVISE
4. CONTACT INSTRUCTIONS:
FNBB: Swap Desk (Resets/Payments): Tel: (617) 434-5896
FAX: (617) 434-0505
Confirmations: Tel: (617) 434-7510
FAX: (617) 434-0505
Grove Real Estate Asset Trust: PLEASE ADVISE
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
Traded by: Approved by:
By: /s/ T. Corcoran By: J. Mather
Name: Thomas P. Corcoran Name: James Mather
Title: Director Title: Director
PLEASE COUNTERSIGN BELOW AND FAX TO (617) 434-0505 ATTN.: TRACY CHAN, OR
REQUEST CORRECTION BY TELEPHONING (617)434-7510.
Agreed and accepted as of the date first above written:
GROVE REAL ESTATE ASSET TRUST
By:/s/Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Chief Financial Officer
<PAGE>
DATE: December 6, 1996
TO: Grove Real Estate Asset Trust
ATT: Joe Labrosse
FAX: 860-527-0401
FROM: The First National Bank of Boston ("FNBB")
FAX: (617) 434-0505 (Confirmation)
RE: SWAP TRANSACTION
[Our Ref: SW2839/66139]
The purpose of this letter agreement is to confirm the terms and conditions of
the Swap Transaction entered into between us on the Trade Date specified below
(the "Swap Transaction"). This letter constitutes a "Confirmation" as referred
to in the Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions in this Confirmation, this Confirmation will
govern.
1. This Confirmation evidences a complete binding agreement between you
and us as to the terms of the Swap Transaction to which this Confirmation
relates. In addition, you and we agree to use our best efforts promptly to
negotiate, execute and deliver a Master Agreement in the form published by the
International Swaps and Derivatives Association, Inc. ("ISDA"), with such
modifications as you and we shall in good faith agree. Upon the execution by you
and us of such a Master Agreement (the "Agreement"), this Confirmation will
supplement, form a part of, and be subject to the Agreement. All provisions
contained or incorporated by reference in such Agreement upon its execution
shall govern this Confirmation except as expressly modified below. Prior to
execution of the Agreement the provisions of Section 3 and Section 5 of the
Agreement are deemed to be incorporated by reference herein and form a part of
this Confirmation. In the event of any inconsistency between those provisions
and this Confirmation, this Confirmation will govern.
2. The terms of the particular Swap Transaction to which this
Confirmation relates are as follows:
NOTIONAL AMOUNT: USD 7,600,000.
TRADE DATE: December 6, 1996
EFFECTIVE DATE: October 1, 1997
TERMINATION DATE: January 4, 2005
FIXED AMOUNTS:
FIXED RATE PAYER: Grove Real Estate Asset
Trust
FIXED RATE: 6.54%
FIXED RATE
PAYMENT DATES: The 1st of each
month in each year
beginning November 1, 1997
and ending on the
Termination Date, subject
to adjustment in accordance
with the Modified Following
Business Day convention.
FIXED RATE DAY
COUNT FRACTION: Actual/360
FLOATING AMOUNTS:
FLOATING PAYOR: FNBB
FLOATING RATE
PAYMENT DATES: The 1st of each
month beginning November 1,
1997 and ending on the
Termination Date, subject
to adjustment in accordance
with the Modified Following
Business Day convention.
FLOATING RATE FOR
INITIAL CALCULATION
PERIOD: To be determined two Business Days prior to Effective Date.
FLOATING RATE DAY
COUNT FRACTION: Actual/360
FLOATING RATE OPTION: USD-LIBOR-BBA
DESIGNATED MATURITY: One month
SPREAD: None
RESET DATES: The first day of each
Calculation Period.
COMPOUNDING: Inapplicable
BUSINESS DAYS: New York and London
<PAGE>
BUSINESS DAY CONVENTION: Modified Following.
CALCULATION AGENT: FNBB
GOVERNING LAW: New York law.
DOCUMENTATION: ISDA's Master Agreement to be provided by FNBB.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
March 14, 1997, by and between Grove Real Estate Asset Trust, a Maryland real
estate investment trust (the "Company"), Grove Operating, L.P., a Delaware
limited partnership (the "Operating Partnership") and each of the parties listed
on Schedule 1 hereto (each, a "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company has agreed to provide the Purchasers with
certain registration rights as set forth in this Agreement with respect to the
Common Shares (as defined below) issuable upon exchange by the Company of units
(the "Common Units") held by each Purchaser representing a limited partnership
interest in the Operating Partnership.
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
0. Definitions. As used herein, the following terms shall have the meanings
set forth below:
() "Agreement" shall have the meaning set forth in the preamble to this
Agreement.
(a) "Business Day" shall mean any day on which the American Stock Exchange,
Inc. is open for trading.
(b) "Commencement Date" shall mean the one (1) year anniversary of the date
of this Agreement.
(c) "Company" shall have the meaning set forth in the preamble to this
Agreement.
(d) "Commission" shall mean the Securities and Exchange Commission, and any
successor thereto.
(e) "Common Shares" shall mean the common shares of beneficial interest,
$0.01 par value per share, of the Company.
(f) "Common Units" shall have the meaning set forth in the recitals to this
Agreement.
(g) "Contribution Agreement" shall mean the Contribution Agreement, dated
as of March __, 1997, among the Company, the Operating Partnership and the
Contributors identified therein.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor thereto, and the rules and regulations thereunder.
(i) "Effectiveness Pe
riod" shall have the meaning set forth in Section2(a).
(j) "Fair Market Value" shall mean, as of any date, (i) if the Common
Shares are listed or admitted for trading on any national securities exchange,
the Fair Market Value of each Common Share shall be the average closing price
per share on such exchange (or if so listed on more than one exchange, the
principal exchange) on the ten (10) Business Days preceding the relevant date;
(ii) if the Common Shares are not traded on any national securities exchange,
but are quoted on the NASD Automated Quotation System (NASDAQ System) or any
similar system of automated dissemination of quotations of prices in common use,
the Fair Market Value of each Common Share shall be the average price per share
equal to the mean between the closing high asked and the low bid on such system
on the ten (10) Business Days preceding the relevant date; or (iii) if neither
clause (i) nor clause (ii) is applicable, the Fair Market Value of each Common
Share shall be the fair market value as of the close of trading on the relevant
date as determined by the Board of Trust Managers of the Company, in good faith
in accordance with uniform principles consistently applied.
(k) "NASD" shall mean the National Association of Securities Dealers, Inc.
(l) "Operating Partnership" shall have the meaning set forth in the
preamble to this Agreement.
(m) "Permitted Transferee" of any Purchaser shall mean any Person to whom
Registrable Securities are permitted to be transferred pursuant to the Agreement
of Limited Partnership of the Operating Partnership, as in effect from time to
time.
(n) "Person" shall mean an individual, a partnership (general or limited),
corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
(o) "Purchaser" shall have the meaning set forth in the preamble to this
Agreement.
(p) "Registrable Securities" shall mean (i) all or any portion of the
Common Shares acquired by the Purchasers upon exchange of the Common Units
acquired on the date hereof and (ii) any securities issued or issuable with
respect to such Common Shares by way of conversion, exchange, stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued, such securities shall cease to be
Registrable Securities when (A) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (B) such securities are permitted to be disposed of pursuant to Rule
144(k) (or any successor provision to such Rule) under the Securities Act as
confirmed in a written opinion of counsel to the Company addressed to the
Purchaser holding such securities or (C) such securities shall have been
otherwise transferred pursuant to an applicable exemption under the Securities
Act, new certificates for such securities not bearing a legend restricting
further transfer shall have been delivered by the Company and such securities
shall be freely transferable to the public without registration under the
Securities Act.
(q) "Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following: (a) the
fees, disbursements and expenses of the Company's counsel, accountants and
experts in connection with the registration of Registrable Securities to be
disposed of under the Securities Act; (b) all expenses in connection with the
preparation, printing and filing of any registration statement, preliminary
prospectus or final prospectus, any other offering document and amendments and
supplements thereto and the mailing and delivery of copies thereof to any
underwriters and dealers; (c) the cost of printing or producing any agreement(s)
among underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of Registrable Securities to be disposed of; (d) all
expenses in connection with the qualification of Registrable Securities to be
disposed of for offering and sale under state securities laws, including the
fees and disbursements of counsel for any underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(e) the Commission or blue sky registration fees and any filing fees incident to
securing any required review by the NASD of the terms of the sale of Registrable
Securities to be disposed of; and (f) fees and expenses incurred in connection
with the listing of Registrable Securities on each securities exchange or
quotation system on which the Common Shares are then listed; provided, that
Registration Expenses with respect to any registration pursuant to this
Agreement shall not include underwriting discounts or commissions attributable
to Registrable Securities, transfer taxes applicable to Registrable Securities
or fees of counsel, if any, or other expenses of any Purchaser.
(r) "Registration Suspension Period" shall have the meaning set forth in
Section 2(b).
(s) "Securities Act" shall mean the Securities Act of 1933, as amended, and
any successor thereto, and the rules and regulations thereunder.
(t) "Shelf Registration" shall have the meaning set forth in Section 2(a).
(u) "Suspension Notice" shall have the meaning set forth in Section 2(b).
1. Shelf Registration. Obligation to File and Maintain. Promptly following the
Commencement Date, the Company will use commercially reasonable efforts to file
with the Commission a registration statement under the Securities Act for the
offering on a continuous or delayed basis in the future of all of the
Registrable Securities and will use commercially reasonable efforts to have it
declared effective as promptly as practicable following the Commencement Date
(the "Shelf Registration"). The Shelf Registration shall be on an appropriate
form and the Shelf Registration and any form of prospectus included therein or
prospectus supplement relating thereto shall reflect such plan of distribution
or method of sale as a Purchaser may from time to time notify the Company,
including, without limitation, the sale of some or all of the Registrable
Securities in a public offering or, if requested by a Purchaser, subject to
receipt by the Company of such information (including information relating to
Purchasers) as the Company reasonably may require, (i) in a transaction
constituting an offering outside the United States which is exempt from
registration requirements of the Securities Act in which the seller undertakes
to effect registration after the completion of such offering in order to permit
such shares to be freely tradeable in the United States, (ii) in a transaction
constituting a private placement under Section 4(2) of the Securities Act in
connection with which the seller undertakes to effect a registration after the
conclusion of such placement to permit such shares to be freely tradeable by the
purchasers thereof or (iii) in a transaction under Rule 144A of the Securities
Act in connection with which the seller undertakes to effect a registration
after the conclusion of such transaction to permit such shares to be freely
tradeable by the purchasers thereof. The Company shall use commercially
reasonable efforts to keep the Shelf Registration continuously effective for the
period beginning on the date on which the Shelf Registration is declared
effective and ending three years thereafter (not including periods during such
period of effectiveness which are Registration Suspension Periods and any
periods during which such registration cannot be used by Purchasers as a result
of any stop order, injunction or other order of the Commission or other
government authority for any reason other than an act or omission of a
Purchaser), or, if shorter, the holding period under Rule 144(k) promulgated
under the Securities Act for Persons who are not affiliates of the Company (the
"Effectiveness Period"). During the period during which the Shelf Registration
is effective, the Company shall supplement or make amendments to the Shelf
Registration, if required by the Securities Act or if reasonably requested by a
Purchaser or an underwriter of Registrable Securities, including to reflect any
specific plan of distribution or method of sale, and shall use commercially
reasonable efforts to have such supplements and amendments declared effective,
if required, as soon as practicable after filing.
() Black-Out Periods. Notwithstanding anything herein to the contrary, (i)
the Company shall have the right from time to time to require Purchasers not to
sell under the Shelf Registration or to suspend the effectiveness thereof during
the period starting with the date 15 days prior to the Company's good faith
estimate of the proposed date of closing of an underwritten public offering of
equity securities of the Company for the account of the Company (or such longer
period, not to exceed 30 days, as the Company may be engaged in a "road show" in
connection with such offering), and ending on the date 90 days following such
closing, and (ii) the Company shall be entitled to require Purchasers not to
sell under the Shelf Registration or to suspend the effectiveness thereof (but
not for a period exceeding 60 days) if the Company determines, in its good faith
judgment, that (A) such offering or continued effectiveness would interfere with
any material financing, acquisition, disposition, corporate reorganization or
other material transaction involving the Company or any of its subsidiaries, (B)
public disclosure of any such transaction would be required prior to the time
such disclosure might otherwise be required, or (C) when the Company is in
possession of material information that it deems advisable not to disclose in a
registration statement. The Company may not exercise its rights under this
Section 2(b) more than two times during any 12-month period; provided, that the
period during which the Company requires Purchaser not to sell under the Shelf
Registration or suspends effectiveness thereof under this Section 2(b) shall not
exceed 150 days during such 12-month period.
Once any Shelf Registration has been declared
effective, any period during which the Company causes Purchaser to not sell
under the Shelf Registration or fails to keep such Shelf Registration effective
and usable for resale of Registrable Securities for the period required
hereunder shall be referred to as a "Registration Suspension Period". Following
the date a Shelf Registration becomes effective, a Purchaser shall be required
to advise the Company in writing of its intent to sell Registrable Securities
under the Shelf Registration two Business Days prior to the date of the intended
sale, at which time the Company shall advise such Purchaser whether a
Registration Suspension Period is then currently in effect by giving written
notice pursuant to this Section 2(b) to such Purchaser of its determination that
such registration statement is no longer in effect or usable for resale of
Registrable Securities (a "Suspension Notice"). If the Company does not respond
to a Purchaser's notice of its intent to sell Registrable Securities within two
Business Days of the Company's receipt of that notice, the Company will be
deemed to have confirmed that the Shelf Registration is currently in effect and
no Registration Suspension Period exists. Any Registration Suspension Period
shall continue until the date when the Company notifies Purchasers that the use
of the prospectus included in a registration statement filed pursuant to this
Section 2 may be resumed for the disposition of Registrable Securities. Any
Suspension Notice is not required to state the reason therefor, but shall be
sufficient if it contains a certification by an executive officer of the Company
that such suspension is permitted by this Section 2(b). The Effectiveness Period
will be extended by the same number of days that comprise a Registration
Suspension Period.
(a) Number of Shelf Registrations. The Company shall be obligated to
effect, under this Section 2, only one Shelf Registration. A Shelf Registration
shall not be deemed to have been effected unless such registration becomes
effective pursuant to the Securities Act and is kept continuously in effect for
the Effectiveness Period.
(b) Expenses. All Registration Expenses incurred in connection with any
Shelf Registration shall be borne by the Company; provided, that the Company
shall not be required to bear the Registration Expenses of more than one
underwritten offering; provided, further, that the Company shall not be
obligated to bear the expenses for any underwritten offering, and such expenses
shall be borne pro rata by the Purchasers whose Registrable Securities are
included in such offering if the offering yields gross proceeds to the sellers
of the Registrable Securities thereunder of less than $10 million.
(c) Selection of Underwriters. Purchasers holding in the aggregate at least
50% of the Registrable Securities shall be entitled to select the lead
underwriter for any underwritten sale of Registrable Securities pursuant to a
registration statement contemplated by this Section 2, subject to the approval
of the Company, which approval shall not be unreasonably withheld or delayed.
2. Incidental Registrations. Notification and Inclusion. If the Company proposes
to register for its own account any equity securities of the Company or any
securities convertible into equity securities of the Company under the
Securities Act on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act (other
than a registration relating solely to the sale of securities to participants in
a dividend reinvestment plan, a registration on Form S-4 relating to a business
combination or similar transaction permitted to be registered on such Form S-4,
a registration on Form S-8 relating solely to the sale of securities to
participants in a stock or employee benefit plan, a registration permitted under
Rule 462 under the Securities Act registering additional securities of the same
class as were included in an earlier registration statement for the same
offering, and declared effective), the Company shall, at each such time after
the Commencement Date, promptly give written notice of such registration to the
Purchasers. Upon the written request of a Purchaser given within 10 Business
Days after the giving of such notice by the Company (which request shall specify
the number of Registrable Securities intended to be disposed of by such
Purchaser and the intended method of disposition thereof, but which shall not
include an underwritten offering unless the registration by the Company
contemplates an underwritten offering), the Company shall seek to include in
such proposed registration such Registrable Securities as a Purchaser shall
request to be so included and shall use commercially reasonable efforts to cause
a registration statement covering all of the Registrable Securities that such
Purchaser has requested to be registered to become effective under the
Securities Act. The Company shall be under no obligation to complete any
offering of securities it proposes to make under this Section 3 and shall incur
no liability to the Purchasers for its failure to do so. If, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to the Purchasers and, thereupon, (i) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
incurred in connection therewith) and (ii) in the case of a determination to
delay registering, the Company shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities.
() Cut-back Provisions. The Company will not be required to effect any
registration pursuant to this Section 3 if the Company shall have been advised
in writing (with a copy to the Purchasers) by a nationally recognized
independent investment banking firm selected by the Company to act as lead
underwriter in connection with the public offering of securities by the Company
that, in such firm's written opinion, a registration of Registrable Securities
requested to be registered at that time could adversely affect the Company's own
scheduled offering of securities; provided, that if an offering of some but not
all of the Registrable Securities requested to be registered by the Purchasers
would not adversely affect the Company's own offering of securities, the
aggregate number of Registrable Securities requested to be included in such
offering by the Purchasers shall be reduced pro rata according to the total
number of Registrable Securities requested to be registered by the Purchasers
(and any other holders of securities of the Company requesting registration)
until the aggregate number of Registrable Securities requested to be included in
the Company's own offering of securities (as such number is reduced in
accordance with the foregoing) would not adversely affect the Company's own
offering of securities. The number of Registrable Securities that each Purchaser
could then include in such registration would be reduced pro rata according to
the number of Registrable Securities requested to be included as compared to the
total number of Registrable Securities requested to be registered by all
Purchasers (and any other holders of securities of the Company requesting
registration). In no event shall the Company be required to reduce its own
offering of securities.
(a) Expenses. All Registration Expenses incurred in connection with any
registration of Registrable Securities pursuant to this Section 3 shall be borne
by the Company.
(b) Withdrawal by Purchaser. Notwithstanding any request under Section
3(a), a Purchaser may elect in writing prior to the effective date of a
registration under this Section 3, not to register its Registrable Securities in
connection with such registration of securities by the Company.
(c) Obligations Unaffected. No registration of Registrable Securities
effected under this Section 3 shall relieve the Company of its obligation to
effect registrations of Registrable Securities pursuant to Section 2.
3. Registration Procedures. In connection with the filing of any
registration statement as provided in Section 2 or 3, the Company shall use
commercially reasonable efforts, as expeditiously as reasonably practicable, to:
() prepare and file with the Commission the requisite registration
statement (including a prospectus therein) to effect such registration and use
commercially reasonable efforts to cause such registration statement to become
effective;
(a) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to maintain the continued effectiveness of such registration
and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until, in
the case of Section 2, the termination of the period during which the Shelf
Registration is required to be kept effective, or, in the case of Section 3, the
earlier of such time as all of such securities have been disposed of and the
date which is 90 days after the date of initial effectiveness of such
registration statement;
(b) furnish to each Purchaser such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statements (including each complete prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, including documents incorporated by reference, as a
Purchaser may reasonable request;
(c) use commercially reasonable efforts to register or qualify all
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as a Purchaser shall reasonably request, keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary or advisable
to enable the Purchasers to consummate the disposition in such jurisdictions of
the securities owned by the Purchasers, except that the Company shall not for
any such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the requirements of
this paragraph be obligated to be so qualified, or to consent to general service
of process in any such jurisdiction, or to subject the Company to any material
tax in any such jurisdiction where it is not then so subject;
(d) use commercially reasonable efforts in connection with an underwritten
offering of Registrable Securities to furnish to the Purchasers a signed
counterpart, addressed to each Purchaser (and the underwriters) of:
( ) an opinion of counsel for the Company, dated the effective date of such
registration statement (and dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to the Purchasers, and
(i) to the extent permitted by then applicable rules of professional
conduct, a "comfort" letter, dated the effective date of such registration
statement (and dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified the Company's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the accountants' letter,
with respect to events subsequent to the date of such financial statements, all
as are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to the underwriters in underwritten public offerings of
securities;
(e) immediately notify the Purchasers at any time when the Company becomes
aware that a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect or any
document incorporated or deemed to be incorporated therein by reference,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made, and
at the request of a Purchaser promptly prepare and furnish to such Purchaser a
reasonable number of copies of a supplement to or an amendment of such
prospectus or registration statement as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
(f) use commercially reasonable efforts to provide a transfer agent and
registrar for all Registrable Securities covered by such registration statement
not later than the effective date of such registration statement;
(g) use commercially reasonable efforts to list all Common Shares covered
by such registration statement on any securities exchange on which any of the
Common Shares are then listed.
(h) Notify each Purchaser and the managing underwriters, if any, promptly,
and (if requested by any of those Persons) confirm such notice in writing, (i)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and, with respect to a registration statement or any post-effective
amendment, when the registration statement or amendment has become effective,
(ii) of any request by the Commission or any other federal or state governmental
authority for amendments or supplements to a registration statement or related
prospectus or for additional information, (iii) of the issuance by the
Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of a registration statement or the initiation
of any proceedings for that purpose, (iv) if at any time the representations and
warranties of the Company contained in any agreement contemplated by Section 5
(including any underwriting agreement) cease to be true and correct, (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, and (vi) of the Company's reasonable determination
that a post-effective amendment to a registration statement would be
appropriate.
(i) Use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest possible
moment.
(j) If requested by the managing underwriters, if any, or a Purchaser, (i)
promptly incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and the Purchaser agree should
be included therein as may be required by applicable law and (ii) make all
required filings of the prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in the prospectus supplement or post-effective
amendment; provided, however, that the Company will not be required to take any
actions under this Section 4(k) that are not, in the reasonable opinion of
counsel for the Company, in compliance with applicable law.
(k) Cooperate with each Purchaser and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates will not bear any
restrictive legends (other than any legends contemplated by the Company's
declaration of trust); and enable the Registrable Securities to be in such
denominations and registered in such names as the managing underwriters, if any,
shall request at least two business days prior to any sale of Registrable
Securities to the underwriters.
(l) Make available for inspection by a representative of each Purchaser,
any underwriter participating in any disposition of Registrable Securities, and
any attorney or accountant retained by a Purchaser or underwriter, all financial
and other records, pertinent corporate documents and properties of the Company
and its subsidiaries, and cause the officers, directors and employees of the
Company and its subsidiaries to supply all information reasonably requested by
any such representative, underwriter, attorney or accountant in connection with
such registration statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential at the
time of delivery of such records, information or documents will be kept
confidential by those Persons unless (i) those records, information or documents
are in the public domain or otherwise publicly available, (ii) disclosure of
those records, information or documents is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities, or
(iii) disclosure of those records, information or documents, in the opinion of
counsel to such Person, is otherwise required by law (including, without
limitation, pursuant to the requirements of the Securities Act).
(m) Comply with all applicable rules and regulations of the Commission and
make generally available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45
calendar days after the end of any 12-month period (or 90 calendar days after
the end of any 12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten offering, and
(ii) if not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of the Company, after the effective date of a
registration statement, which statements shall cover that 12-month period.
(n) Cause its officers and other appropriate employees to participate in
any presentations regarding any underwritten offering reasonably requested by a
Purchaser or the managing underwriter or underwriters participating in the
disposition of the Registrable Securities.
Each Purchaser shall furnish in writing to the Company such
information regarding such Purchaser (and any of its affiliates), the
Registrable Securities to be sold, the intended method of distribution of such
Registrable Securities, and such other information requested by Company as is
necessary for inclusion in the registration statement relating to such offering
pursuant to the Securities Act and the rules of the Commission thereunder. The
Company may also impose such restrictions and limitations on the distribution of
such Registrable Securities as the Company reasonably believes are necessary or
advisable to comply with applicable law or to effect an orderly distribution,
including those restrictions set forth in Section 2(b).
Each Purchaser agrees by acquisition of the Registrable Securities that
upon receipt of any notice from the Company of the happening of any event of the
kind described in paragraph (f) of this Section 4, such Purchaser will forthwith
discontinue its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such
Purchaser's receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (f) of this Section 4.
4. Underwriting. If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a registration described in this
Agreement, the Company will enter into and perform its obligations under an
underwriting agreement with such underwriters for such offering, such agreement
to contain such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect and to the extent provided in Section
7. The holders of Registrable Securities on whose behalf Registrable Securities
are to be distributed by such underwriters shall be parties to any such
underwriting agreement, and the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities.
( ) In the event that any registration pursuant to Section 3 shall involve,
in whole or in part, an underwritten offering, the Company may require
Registrable Securities requested to be registered pursuant to Section 3 to be
included in such underwriting on the same terms and conditions as shall be
applicable to the Registrable Securities or other of the Company's securities
being sold through underwriters under such registration. In such case, the
holders of Registrable Securities on whose behalf Registrable Securities are to
be distributed by such underwriters shall be parties to any such underwriting
agreement. Such agreement shall contain such representations and warranties by
the Company and the Purchasers and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution to
the effect and to the extent provided in Section 7. The representations and
warranties in such underwriting agreement by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such holders of Registrable Securities.
5. Preparation; Reasonable Investigation. In connection with the preparation and
filing of the registration statement under the Securities Act, the Company will
give the Purchasers, their underwriters, if any, and their respective counsel,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers, its counsel and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of the Purchasers' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
6. Indemnification. The Company and the Operating Partnership jointly and
severally will, and hereby do, indemnify and hold harmless each Purchaser, its
respective directors, officers, partners, agents, employees and affiliates and
each other person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls each such Purchaser
or any such underwriter within the meaning of the Securities Act, against any
and all losses, claims, damages, expenses or reasonable costs, or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof, to which each such indemnified party may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages,
expenses or reasonable costs, or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company and the
Operating Partnership will, jointly and severally, reimburse each such Purchaser
and each such director, officer, partner, agent, employee or affiliate,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, expense or reasonable costs, liability, action or
proceeding; provided, that (i) the Company and the Operating Partnership shall
not be liable in any such case to the extent that any such loss, claim, damage,
expense or liability (or action or proceeding, whether commenced or threatened,
in respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company or the Operating Partnership
by or on behalf of such Purchaser or underwriter expressly for use in the
preparation thereof, (ii) the Company and the Operating Partnership shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls or is
controlled by such underwriter within the meaning of the Securities Act, in any
such case to the extent that any such loss, claim, damage, expense or reasonable
costs, or liability (or action or proceeding, whether commenced or threatened,
in respect thereof) arises out of such underwriter's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus and (iii) the Company and the Operating
Partnership shall only reimburse the Purchasers for legal expenses incurred due
to the representation of all Purchasers by not more than one legal counsel.
Neither the Company nor the Operating Partnership shall be liable under this
Section 7(a) for any settlement of any claim or action effected without its
consent, which consent will not be unreasonably withheld or delayed.
( ) Each Purchaser severally shall indemnify, and hereby does, indemnify
and hold harmless the Company, its directors, its officers who sign the
registration statement, the Operating Partnership, each Person who participates
as an underwriter in the offering or sale of securities, and each Person, if
any, who controls the Company or any such underwriter within the meaning of the
Securities Act against any and all losses, claims, damages, expenses or
reasonable costs, or liabilities, joint or several, actions or proceedings
(whether commenced or threatened) in respect thereof, to which each such
indemnified party may become subject under the Securities Act or otherwise
insofar as such losses, claims, damages, expenses or reasonable costs, or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon an untrue statement of a
material fact in or omission to state a material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading in such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, but only to the
extent that such statement or omission was made in reliance upon and in
conformity with written information furnished by such Purchaser to the Company
or the Operating Partnership by or on behalf of such Purchaser for use in
preparation thereof.
(a) Promptly after receipt by any indemnified party hereunder of notice of
the commencement of any action or proceeding involving a claim referred to in
paragraphs (a) or (b) of this Section 7, the indemnified party will notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party under paragraphs (a) or
(b) of this Section 7, except to the extent that the indemnifying party is
adversely affected by any delay caused thereby. In case any such action shall be
brought against any indemnified party, the indemnifying party shall be entitled
to participate therein and, to the extent that the indemnifying party shall
elect (jointly with any other indemnifying party similarly so electing) to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (which approval shall not be unreasonably withheld or delayed)
(who shall not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under paragraph
(a) or (b) of this Section 7 for any legal expenses of other counsel or any
other expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof. In addition, the indemnifying party shall
not be required to indemnify, reimburse or otherwise make any contribution to
the amount paid or payable by the indemnified party for any losses, claims,
damages, expenses or reasonable costs, or liabilities (or actions or
proceedings, actual or threatened, in respect thereof) incurred by the
indemnified party in settlement of any such losses, claims, damages, expenses or
reasonable costs, liabilities, actions or proceedings otherwise covered
hereunder unless such settlement has been previously approved by the
indemnifying party, which approval shall not be unreasonably withheld or
delayed.
(b) If for any reason the indemnity under this Section 7 is unavailable or
is insufficient to hold harmless any indemnified party under paragraph (a) or
(b) of this Section 7, then the indemnifying parties shall contribute to the
amount paid or payable to the indemnified party as a result of any loss, claim,
expense, damage or liability (or actions or proceedings, whether commenced or
threatened, in respect thereof), and legal or other expenses reasonably incurred
by the indemnified party in connection with investigating or defending any such
loss, claim, expense, damage, liability, action or proceeding, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or a
Purchaser and each party's relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. If,
however, the allocation provided in the second preceding sentence is not
permitted by applicable law, or if the allocation provided in the second
preceding sentence provides a lesser sum to the indemnified party than the
amount hereinafter calculated, then the indemnifying party shall contribute to
the amount paid or payable by the indemnified party in such proportion as is
appropriate to reflect not only such relative fault but also the relative
benefits of the indemnifying party and the indemnified party as well as any
other relevant equitable considerations. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this paragraph (d) of
Section 7 were to be determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the preceding sentences of this paragraph (d) of Section 7.
Notwithstanding the provisions of this Section 7(d), an indemnifying party that
is a Purchaser will not be required to contribute any amount in excess of the
dollar amount of the gross proceeds received by that Purchaser upon the sale of
the Registrable Securities giving rise to the contribution obligation over the
amount of any damages which that Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(c) Indemnification and contribution similar to that specified in this
Section 7 (with appropriate modifications) shall be given by the Company and the
Operating Partnership and the Purchasers with respect to any required
registration or other qualification of securities under any federal, state or
blue sky law or regulation of any governmental authority other than the
Securities Act.
(d) Notwithstanding any other provision of this Section 7, to the extent
that any director, officer, partner, agent, employee, affiliate or other
representative (current or former) of any indemnified party is a witness in any
action or proceeding, the indemnifying party agrees to pay to the indemnified
party all expenses reasonably incurred by, or on the behalf of, the indemnified
party and such witness in connection therewith.
(e) The termination of any proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, adversely affect the rights of any indemnified party to indemnification
hereunder or create a presumption that any indemnified party violated any
federal or state securities laws.
(f) In the event that advances are not made pursuant to this Section 7 or
payment has not otherwise been timely made, each indemnified party shall be
entitled to seek a final adjudication in an appropriate court of competent
jurisdiction of the entitlement of the indemnified party to indemnification or
advances hereunder.
( ) The Company, the Operating Partnership and the Purchasers agree that
they shall be precluded from asserting that the procedures and presumptions
of this Section 7 are not valid, binding and enforceable. The Company, the
Operating Partnership and the Purchasers further agree to stipulate in any
such court that the Company, the Operating Partnership and the Purchasers
are bound by all the provisions of this Section 7 and are precluded from
making any assertion to the contrary.
(i) To the extent deemed appropriate by the court, interest shall be
paid by the indemnifying party to the indemnified party at a
reasonable interest rate for amounts which the indemnifying party has
not timely paid as the result of its indemnification and contribution
obligations hereunder.
(g) In the event that any indemnified party is a party to or intervenes in
any proceeding in which the validity or enforceability of this Section 7 is at
issue or seeks an adjudication to enforce the rights of any indemnified party
under, or to recover damages for breach of, this Section 7, the indemnified
party, if the indemnified party prevails in such action, shall be entitled to
recover from the indemnifying party and shall be indemnified by the indemnifying
party against, any expenses incurred by the indemnified party.
(h) The indemnity and contribution obligations of the Company and the
Operating Partnership contained in this Section 7 shall be in addition to any
other liability which it may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of any Registrable Securities by any Purchaser.
(k) In no event will the liability of any Purchaser under this Section 7 be
greater in amount than the dollar amount of the gross proceeds received by that
Purchaser upon the sale of the Registrable Securities giving rise to the
indemnification obligation.
7. Benefits of Registration Rights. Each Purchaser shall give notice to the
Company of any transfer by it of Registrable Securities to any Permitted
Transferee, identifying the name and address of the Permitted Transferee and the
Registerable Securities so transferred, and accompanied by a signature page to
this Agreement pursuant to which such Permitted Transferee agrees to be bound by
the terms and conditions of this Agreement. No consent of any Purchaser shall be
required for its Permitted Transferees to exercise registration rights under
this Agreement or otherwise to be entitled to the benefits of this Agreement
provided to all Purchasers.
8. Qualification for Rule 144 Sales. The Company will take all actions
reasonably necessary to comply with the filing requirements described in Rule
144(c)(1) of the Securities Act so as to enable the Purchasers to sell
Registrable Securities without registration under the Securities Act and, upon
the written request of any Purchaser, the Company will deliver to such Purchaser
a written statement as to whether it has complied with such filing requirements.
9. Miscellaneous. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of this Section 9,
provided receipt of copies of such counterparts is confirmed.
( ) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF.
(a) Entire Agreement. This Agreement and the Contribution Agreement
together contain the entire agreement between the parties with respect to the
subject matter hereof and there are no agreements or understandings between
parties other than those set forth or referred to herein. This Agreement is not
intended to confer upon any Person not a party hereto (and their successors and
assigns) any rights or remedies hereunder.
(b) Notices. All notices and other communications hereunder shall be
sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax or other electronic transmission service
to the appropriate address or number as set forth below. Notices to the Company
or the Operating Partnership shall be addressed to:
Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Attention: Mr. Joseph LaBrosse
Telecopy Number: (860) 527-0401
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Stephen Gliatta, Esq.
Telecopy Number: (212) 836-8689
or at such other address and to the attention of such other person as
the Company may designate by written notice to the Purchasers. Notices to the
Purchasers shall be addressed to the address listed either on the records of the
Operating Partnership or on the stock transfer records of the Company.
(c) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
Permitted Transferees.
(d) Headings. The Section and other headings contained in this Agreement
are inserted for convenience of reference only and will not affect the meaning
or interpretation of this Agreement. All references to Sections or other
headings contained herein mean Sections or other headings of this Agreement
unless otherwise stated.
(e) Amendments and Waivers. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the party against
whom enforcement of any such modification or amendment is sought. Either party
hereto may, only by an instrument in writing, waive compliance by the other
party hereto with any term or provision hereof on the part of such other party
hereto to be performed or complied with. The waiver by any party hereto of a
breach of any term or provision hereof shall not be construed as a waiver of any
subsequent breach.
(f) Interpretation; Absence of Presumption. For the purposes hereof, (i)
words in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other gender as the context
requires, (ii) the terms "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement, and Section,
paragraph or other references are to the Sections, paragraphs, or other
references to this Agreement unless otherwise specified, (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires or unless
otherwise specified, (iv) the word "or" shall not be exclusive and (v)
provisions shall apply, when appropriate, to successive events and transactions.
This Agreement shall be construed without regard to any presumption or rule
requiring construction or interpretation against the party drafting or causing
any instrument to be drafted.
(g) Severability. Any provision hereof which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof.
(h) Jurisdiction; Venue. The parties to this Agreement hereby irrevocably
submit to the jurisdiction of any New York State or Federal court and any
appellate court from any district thereof over any action arising out of or
relating to this Agreement, and hereby irrevocably agree that all claims in
respect of such action or proceeding may be heard and determined in such New
York State court or in such Federal court. The parties to this Agreement hereby
irrevocably waive, to the fullest extent permitted under law, the defense of an
inconvenient forum or improper venue to the maintenance of such action or
proceeding.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the day first above written.
GROVE REAL ESTATE ASSET TRUST
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Chief Financial Officer
GROVE OPERATING, L.P.
BY: GROVE REAL ESTATE ASSET TRUST, its
general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Chief Financial Officer
PURCHASERS
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Attorney-in-Fact for all of the
Purchasers set forth on Schedule 1
hereto pursuant to powers of
attorney on file at the offices of
the Operating Partnership
20
<PAGE>
Schedule 1
Purchasers: Registrable Securities:
Damon Navarro 2,898.00
Brian Navarro 2,898.00
Edmund Navarro 963.00
Grove Property Services Limited Partnership 695,928.00
Grove Equity Partnership 168,442.00
JRC Management, Inc. 339.00
GMG-Avon, Inc. 226.00
Pelham Associates Partnership 20,930.00
Jody Chapnick 4,345.00
Springfield Development Corporation 3,376.62
Ronald Abdow 8,909.00
George Abdow 8,909.00
Springfield Retail Development, Inc. 3,376.00
Gerald McNamara 3,979.00
<PAGE>
1996 SHARE INCENTIVE PLAN
OF
GROVE REAL ESTATE ASSET TRUST
GROVE OPERATING, L.P.
AND
PROPERTY PARTNERSHIPS
<PAGE>
1996 SHARE INCENTIVE PLAN
OF
GROVE REAL ESTATE ASSET TRUST
GROVE OPERATING, L.P.
AND
PROPERTY PARTNERSHIPS
TABLE OF CONTENTS
Page
SECTION 1. PURPOSES..........................................1
SECTION 2. DEFINITIONS; RULES OF CONSTRUCTION................1
SECTION 3. ELIGIBILITY.......................................7
SECTION 4. AWARDS............................................7
SECTION 5. COMMON SHARES AVAILABLE UNDER PLAN...............12
SECTION 6. AWARD AGREEMENTS.................................16
SECTION 7. ADJUSTMENTS; CHANGE IN CONTROL; ACQUISITIONS.....18
SECTION 8. ADMINISTRATION...................................21
SECTION 9. NON-EMPLOYEE TRUST MANAGER OPTIONS...............23
SECTION 10. AMENDMENT AND TERMINATION OF PLAN.................25
SECTION 11. MISCELLANEOUS.....................................25
i
<PAGE>
1996 SHARE INCENTIVE PLAN
OF
GROVE REAL ESTATE ASSET TRUST
GROVE OPERATING, L.P.
AND
PROPERTY PARTNERSHIPS
Grove Real Estate Asset Trust, a Maryland real estate investment trust,
(the "Company"), Grove Operating, L.P., a Delaware limited partnership, (the
"Operating Partnership") and each of the Property Partnerships (defined below)
have adopted the 1996 Share Incentive Plan (the "Plan"), effective March __,
1997, for the benefit of their eligible employees and the Trust Managers
(defined below).
0. PURPOSES
The purposes of this Plan are as follows:
( ) To provide an additional incentive for Trust Managers and
key employees to further the growth, development and financial success of the
Company, the Operating Partnership and the Property Partnerships by personally
benefiting through the ownership of Company shares and/or rights which recognize
such growth, development and financial success.
(a) To enable the Company, the Operating Partnership and the Property
Partnerships to obtain and retain the services of Trust Managers and key
employees considered essential to the long-range success of the Company, the
Operating Partnership and the Property Partnerships by offering them an
opportunity to own shares of the Company and/or rights which will reflect such
growth, development and financial success.
1. DEFINITIONS; RULES OF CONSTRUCTION
( ) Defined Terms. The terms defined in this Section shall have the
following meanings for purposes of this --------------- Plan:
"Aquiror" shall have the meaning set forth in Section 7(c)(1).
"Award" shall mean an award granted pursuant to Section 4 or Section 9.
"Award Agreement" shall mean an agreement described in Section 6, setting forth
the terms and conditions of an Award granted to a Participant.
"Beneficiary" shall mean a person or persons (including a trust or trusts)
validly designated by a Participant or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution, to receive the
benefits specified in the Award Agreement and under this Plan in the event of a
Participant's death.
"Board of Trust Managers" or "Board" shall mean the Board of Trust Managers of
the Company.
"Change of Control" shall have the meaning set forth in Section 7(c).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Committee described in Section 8.
"Common Shares" shall mean the Company's common shares of beneficial interest,
$0.01 par value per share.
"Common Units" shall mean units representing ownership interests in the
Operating Partnership.
"Company" shall mean Grove Real Estate Asset Trust, a Maryland real estate
investment trust.
"Company Charter" shall mean the Third Amended and Restated Declaration of Trust
of the Company, as amended from time to time.
"Company Employee" shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company or of any entity
which is then a Company Subsidiary.
"Company Subsidiary" shall mean any corporation, partnership or other entity
(other than the Company) in an unbroken chain beginning with the Company if all
of them (including the Company) in the aggregate, other than the last one in the
unbroken chain, then own shares or other interests possessing 50 percent or more
of the total combined economic interests or the total combined voting power of
all classes of shares or other interests in each of the others (other than the
Company) in such chain; provided, however, that "Company Subsidiary" shall not
include the Operating Partnership, or any Operating Partnership Subsidiary, the
Property Partnership or any Property Partnership Subsidiary.
"Continuing Trust Manager" shall have the meaning set forth in Section 7(c)(2).
"Employee" shall mean any Company Employee, Operating Partnership Employee or
Property Partnership Employee.
"Employer" shall mean the Company, a Company Subsidiary, the Operating
Partnership, an Operating Partnership Subsidiary, a Property Partnership and/or
a Property Partnership Subsidiary, as appropriate to the context.
"EPS" shall mean earnings per Common Share on a fully diluted basis.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Executive Officer" shall mean an executive officer as defined in Rule 3b-7
under the Exchange Act, provided that, if the Board has designated the executive
officers of the Company for purposes of reporting under the Exchange Act, the
designation shall be conclusive for purposes of this Plan.
"Fair Market Value" shall mean the average of the closing prices of the Common
Shares for the five trading days immediately preceding the applicable date as
reported on the composite tape of American Stock Exchange issues (or, if the
security is not so listed, the principal national stock exchange on which the
security is then listed or, if the security is not listed on any national stock
exchange, such other reporting system as shall be selected by the Committee).
The Committee shall determine the Fair Market Value of any security that is not
publicly traded using criteria as it shall determine, in its sole discretion, to
be appropriate for the valuation.
"FFO" shall mean net income (loss) (computed in accordance with GAAP), excluding
gains (or losses) from debt restructuring and sales of property, plus real
estate related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures.
"For Cause" shall mean (i) (x) the continued failure by the Participant to
substantially perform his or her duties with an Employer (other than any such
failure resulting from his or her incapacity due to physical or mental illness),
or (y) the engaging by the Participant in conduct which is materially injurious
to an Employer, monetarily or otherwise, in either case as determined by the
Committee, or (ii) if the Participant has an employment agreement with any
Employer that defines "cause," such definition.
"Incentive Share Option" shall have the meaning set forth in Section 4(a)(2).
"Insider" shall mean any person who is subject to Section 16(b) of the Exchange
Act.
"Net Cash Flow" shall mean cash and cash equivalents derived from either
(i) net cash flow from operations or (ii) net cash flow from operations,
financings and investing activities, as determined by the Committee at the time
an Award is granted.
"Non-Employee Trust Manager" shall mean a member of the Board of Trust Managers
who is not also an Employee.
"Non-Qualified Share Option" shall have the meaning set forth in
Section 4(a)(1).
"Operating Partnership" shall mean Grove Operating, L.P., a Delaware limited
partnership.
<PAGE>
"Operating Partnership Agreement" shall mean the agreement of limited
partnership of the Operating Partnership, as the same may be amended, modified
or restated from time to time.
"Operating Partnership Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Operating
Partnership or any entity which is then an Operating Partnership Subsidiary.
"Operating Partnership Optionee Purchased Shares" shall have the meaning set
forth in Section 6(e)(1).
"Operating Partnership Purchase Price" shall have the meaning set forth in
Section 6(e)(2).
"Operating Partnership Purchased Shares" shall have the meaning set forth in
Section 6(e)(2).
"Operating Partnership Subsidiary" shall mean any corporation, partnership or
other entity (other than the Operating Partnership, the Property Partnerships
and the Property Partnership Subsidiaries) in an unbroken chain beginning with
the Operating Partnership if all of them (including the Operating Partnership)
in the aggregate, other than the last one in the unbroken chain, then own more
than 50 percent of the total combined economic interests or the total combined
voting power of all classes of shares or other interests in each of the others
(other than the Operating Partnership).
"Option" shall mean a share option granted under Section 4(a)(1) or (2). An
Option granted under this Plan shall, as determined by the Committee, be either
a Non-Qualified Share Option or an Incentive Share Option; provided, however,
that Options granted to anyone other than Company Employees shall be
Non-Qualified Share Options.
"Participant" shall mean any Employee, any Officer or any Non-Employee Trust
Manager who is granted an Award pursuant to this Plan that remains outstanding.
"Performance-Based Awards" shall have the meaning set forth in Section 4(b).
( ) , and "Performance Goals" shall mean any combination thereof.
- -----------------
"Plan" shall mean this 1996 Share Incentive Plan of Grove Real Estate Asset
Trust, Grove Operating Partnership and Property Partnerships, as amended from
time to time.
"Property Partnership" shall mean any entity formed or owned by the Operating
Partnership for the purpose of holding or managing real property, and which has
been designated by the Board, in its sole discretion, as a participating
employer under the Plan.
"Property Partnership Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of a Property
Partnership or any entity which is then a Property Partnership Subsidiary.
"Property Partnership Optionee Purchased Shares" shall have the meaning set
forth in Section 6(f)(1).
"Property Partnership Purchase Price" shall have the meaning set forth in
Section 6(f)(2).
"Property Partnership Purchased Shares" shall have the meaning set forth in
Section 6(f)(2).
"Property Partnership Subsidiary" shall mean any corporation, partnership, or
other entity (other than a Property Partnership) in an unbroken chain beginning
with a Property Partnership if all of them (including such Property Partnership)
in the aggregate, other than the last one in the unbroken chain, then own more
than 50 percent of the total combined economic interests or total combined
voting power of all classes of stock or other interests in each of the others
(other than such Property Partnership).
"QDRO" shall mean a qualified domestic relations order as defined in Section
414(p) of the Code or Title I, Section 206(d)(3) of the Employee Retirement
Income Security Act of 1974, as amended (to the same extent as if this Plan was
subject thereto), or the applicable rules thereunder.
"Qualifying Option" shall have the meaning set forth in Section 4(b).
"Qualifying Share Appreciation Right" shall have the meaning set forth in
Section 4(b).
"Restricted Shares" shall have the meaning set forth in Section 4(c).
"ROE" shall mean consolidated net income of the Company (less preferred
dividends) divided by the average consolidated common shareholders' equity.
"Rule 16b-3" shall mean Rule 16b-3 under Section 16 of the Exchange Act, as
amended from time to time.
"Share Appreciation Right" shall have the meaning set forth in Section 4(a)(3).
"Share-Based Awards" shall mean Awards, as described in Sections 4(a)(1) through
(4) and Section 4(c), that are payable or denominated in or have a value derived
from the value of, or an exercise or conversion privilege at a price related to,
Common Shares.
"Share Ownership Limit" shall mean (i) the restrictions on ownership and
transfer of Common Shares provided in Article VII of the Company Charter, and
(ii) any other restrictions on ownership and transfer set forth in the Company
Charter.
"Share Units" shall mean the number of units under a Share-Based Award payable
solely in cash or actually paid in cash, determined by reference to the number
of Common Shares by which the Share-Based Award is measured.
"Subsidiary" shall mean any Company Subsidiary, Operating Partnership
Subsidiary or Property Partnership Subsidiary.
"Total Shareholder Return" shall mean, with respect to the Company or other
entities (if measured on a relative basis), the (i) change in the market price
of its common shares (as quoted in the principal market on which it is traded as
of the beginning and ending of the period) plus dividends and other
distributions paid, divided by (ii) the beginning quoted market price, all of
which is adjusted for any changes in equity structure including, but not limited
to, stock splits and stock dividends.
"Trust Manager" shall mean a member of the Board.
(b) Financial and Accounting Terms. Except as otherwise
expressly provided or the context otherwise requires, financial and accounting
terms, including terms defined herein as Performance Goals, are used as defined
for purposes of, and shall be determined in accordance with, generally accepted
accounting principles and as derived from the audited consolidated financial
statements of the Company, prepared in the ordinary course of business.
(c) Rules of Construction. For purposes of this Plan and the
Award Agreements, unless otherwise expressly provided or the context otherwise
requires, the terms defined in this Plan include the plural and the singular,
and pronouns of either gender or neutral shall include, as appropriate, the
other pronoun forms.
2. ELIGIBILITY
Any one or more Awards may be granted to any Employee who is
designated by the Committee to receive an Award. Non-Employee Trust Managers
shall not be eligible to receive any Awards except for the Non-Qualified Share
Options granted automatically without action of the Committee under the
provisions of Section 9.
3. AWARDS
( ) Type of Awards. The Committee may grant any of the following types of
Awards, either singly, in tandem or in combination with other Awards:
(0) Non-Qualified Share Options. A Non-Qualified Share Option is an Award
in the form of an option to purchase Common Shares that is not intended to
comply with the requirements of Code Section 422. Unless the Committee provides
otherwise, and such provision is reflected in the Award Agreement, the exercise
price of each Non-Qualified Share Option granted under this Plan shall be not
less than the Fair Market Value of the Common Shares on the date that the Option
is granted. All Non-Qualified Share Options granted at an exercise price not
less than Fair Market Value on the date of grant shall be treated as
Performance-Based Awards subject to the applicable restrictions of Section 4(b).
(1) Incentive Share Options. An Incentive Share Option is an Award in the
form of an option to purchase Common Shares that is intended to comply with the
requirements of Code Section 422 or any successor section of the Code. The
exercise price of each Incentive Share Option granted under this Plan shall be
not less than the Fair Market Value of the Common Shares on the date that the
Option is granted; provided, however, that the exercise price of any Incentive
Share Option granted to a Participant who owns more than 10% of the total
combined voting power of all classes of shares of the Company (including for
this purpose Common Units redeemable for Common Shares) shall not be less than
110% of such Fair Market Value. In addition, the Committee shall include such
other terms of any Incentive Share Option as it deems necessary or desirable to
qualify the Option as an incentive stock option under the provisions of Section
422 of the Code. To the extent that the aggregate "fair market value" of Common
Shares with respect to which one or more Incentive Share Options first become
exercisable by a Participant in any calendar year exceeds $100,000, taking into
account both Common Shares subject to Incentive Share Options under this Plan
and shares subject to incentive share options under all other plans of the
Company or of other entities referenced in Code Section 422(d)(1), the Share
Options shall be treated as Non-Qualified Share Options. All Incentive Share
Options granted at an exercise price not less than Fair Market Value on the date
of grant shall be treated as Performance-Based Awards subject to the applicable
restrictions of Section 4(b). No Incentive Share Option shall be granted to any
person who is not an employee (as defined in Section 3401(c) of the Code) of the
Company or a Company Subsidiary.
(2) Share Appreciation Rights. A Share Appreciation Right is an Award in
the form of a right to receive, upon surrender of the right, but without other
payment, an amount based on appreciation in the value of Common Shares as of the
date the Share Appreciation Right is exercised, over a base price established in
the Award, payable in cash, Common Shares or such other form or combination of
forms of payout, at times and upon conditions (which may include a Change of
Control), as may be approved by the Committee. Unless the Committee provides
otherwise, and such provision is reflected in the Award Agreement, the minimum
base price of a Share Appreciation Right granted under this Plan shall be not
less than the lowest of the Fair Market Value of the underlying Common Shares on
the date the Share Appreciation Right is granted or, in the case of a Share
Appreciation Right related to an Option (whether already outstanding or
concurrently granted), the exercise price of the related Option. All Share
Appreciation Rights granted at a base price not less than Fair Market Value on
the date of grant shall be treated as Performance-Based Awards subject to the
applicable restrictions of Section 4(b).
(3) Other Share-Based Awards. The Committee may from time to time grant
Awards under this Plan that provide Participants with Common Shares or the right
to purchase Common Shares, or provide other incentive Awards (including, but not
limited to, phantom shares or units, performance shares or units, bonus shares
or units, dividend equivalent units, or similar securities or rights and other
awards) payable in or with a value derived from or related to the Fair Market
Value of Common Shares. The Awards shall be in a form determined by the
Committee, provided that the Awards shall not be inconsistent with the other
express terms of this Plan. The Committee shall have the discretion to determine
whether Awards under this Section 4(a)(4) to Executive Officers that are either
granted or become vested, exercisable or payable based on attainment of one or
more Performance Goals shall only be granted as Performance-Based Awards under
Section 4(b) and the Committee may, in its sole discretion, make Restricted
Share Awards under Section 4(c), rather than as Performance-Based Awards under
Section 4(b).
(a) Special Performance-Based Awards. Without limiting the
generality of the foregoing, any of the types of Awards listed in Section 4(a)
may be granted as awards that satisfy the requirements for "performance-based
compensation" within the meaning of Code Section 162(m) ("Performance-Based
Awards"), the grant, vesting, exercisability or payment of which depends on the
degree of achievement of the Performance Goals relative to preestablished
targeted levels for the Company on a consolidated basis, provided that such
Awards satisfy the requirements of this Section 4(b). Notwithstanding anything
contained in this Section 4(b) to the contrary, any Option or Share Appreciation
Right with an exercise price or a base price not less than Fair Market Value on
the date of grant shall be subject only to the requirements of clauses (1) and
(3)(A) below in order for such Awards to satisfy the requirements for
Performance-Based Awards under this Section 4(b) (with such Awards hereinafter
referred to as a "Qualifying Option" or a "Qualifying Share Appreciation Right",
respectively). With the exception of any Qualifying Option or Qualifying Share
Appreciation Right, an Award that is intended to satisfy the requirements of
this Section 4(b) shall be designated as a Performance-Based Award at the time
of grant.
(0) Eligible Class. The eligible class of persons for Awards under this
Section 4(b) shall be all Employees.
(1) Performance Goals. The performance goals for any Awards under this
Section 4(b) (other than Qualifying Options and Qualifying Share Appreciation
Rights) shall be, on an absolute or relative basis, one or more of the
Performance Goals. The specific performance target(s) with respect to
Performance Goal(s) must be established by the Committee in advance of the
deadlines applicable under Code Section 162(m) and while the performance
relating to the Performance Goal(s) remains substantially uncertain.
(2) Individual Limits. The maximum number of Common Shares or Share Units
that are issuable under Options, Share Appreciation Rights or other Share-Based
Awards (described under Section 4(a)(4)) that are granted as Performance-Based
Awards during any calendar year to any Participant under this Plan shall not
exceed 500,000 (or, in the case of awards of Restricted Shares, 250,000 Common
Shares), either individually or in the aggregate, subject to adjustment as
provided in Section 7. Awards that are canceled during the year shall be counted
against this limit to the extent required by Code Section 162(m).
(3) Committee Certification. Before any Performance-Based Award under this
Section 4(b) (other than Qualifying Options and Qualifying Share Appreciation
Rights) is paid, the Committee must certify in writing (by resolution or
otherwise) that the applicable Performance Goal(s) and any other material terms
of the Performance-Based Award were satisfied; provided, however, that a
Performance-Based Award may be paid without regard to the satisfaction of the
applicable Performance Goal in the event of a Change of Control as provided in
Section 7(b).
(4) Terms and Conditions of Awards; Committee Discretion to Reduce
Performance Awards. The Committee shall have discretion to determine the
conditions, restrictions or other limitations, in accordance with the terms of
this Plan and Code Section 162(m), on the payment of individual
Performance-Based Awards under this Section 4(b). To the extent set forth in an
Award Agreement, the Committee may reserve the right to reduce the amount
payable in accordance with any standards or on any other basis (including the
Committee's discretion) as the Committee may impose.
(5) Adjustments for Material Changes. In the event of (i) a significant
acquisition or disposition by the Company, (ii) a change in capitalization, a
transaction or a complete or partial liquidation, or (iii) any extraordinary
gain or loss or other event that is treated for accounting purposes as an
extraordinary item under generally accepted accounting principles, (iv) any
material change in accounting policies or practices affecting the Company and/or
the Performance Goals or targets or (v) any other event that was not anticipated
(or the effects of which were not anticipated) at the time the Performance Goals
were established, then, to the extent any of the foregoing events (or a material
effect thereof) was not anticipated at the time the targets were set, the
Committee may make adjustments to the Performance Goals and/or targets, applied
as of the date of the event, and based solely on objective criteria, so as to
neutralize, in the Committee's judgment, the effect of the event on the
applicable Performance-Based Award.
(6) Interpretation. Except as specifically provided in this Section
4(b),the provisions of this Section 4(b) shall be interpreted and administered
by the Committee in a manner consistent with the requirements for exemption of
Performance-Based Awards granted to Executive Officers as "performance-based
compensation" under Code Section 162(m) and regulations and other
interpretations issued by the Internal Revenue Service thereunder.
<PAGE>
(b) Award of Restricted Shares.
(0) Restricted Share Awards.
( ) The Committee may, from time to time, in its absolute discretion:
( ) Select from among the Employees (including Employees who have
previously received other awards under this Plan) such of them as in its opinion
should be awarded Restricted Shares; and
(i) Determine the purchase price, if any, and other terms and conditions
(including, without limitation, in the case of awards to Operating Partnership
Employees and Property Partnership Employees, the mechanism for the transfer of
the Restricted Shares and payment therefor) applicable to such Restricted Shares
consistent with this Plan.
(A) The Committee shall establish the purchase price, if any, and form of
payment for Restricted Shares; provided, however, that such purchase price shall
be no less than the par value of the Common Shares to be purchased unless
otherwise permitted by applicable state law, and, in all cases, legal
consideration shall be required for each issuance of Restricted Shares.
(B) Upon the selection of an Employee to be awarded Restricted Shares, the
Committee shall instruct the Secretary of the Company to issue such Restricted
Shares and may impose such conditions on the issuance of such Restricted Shares
as it deems appropriate and consistent with this Plan.
(1) Consideration. As consideration for the issuance of Restricted Shares,
in addition to payment of any purchase price, the Participant shall agree, in a
written Award Agreement, to remain in the employ of his Employer for a period of
at least one year after the Restricted Shares are issued (or such shorter period
as may be fixed in the Award Agreement or by action of the Committee following
grant of the Restricted Shares). Nothing in this Plan or in any Award Agreement
hereunder shall (A) confer on any Participant any right to (i) continue in the
employ of any Employer, or (ii) receive severance pay from any Employer, or (B)
interfere with or restrict in any way the rights of any Employer, which are
hereby expressly reserved, to discharge such Participant at any time for any
reason whatsoever, whether or not For Cause.
(2) Rights as Shareholders. Upon delivery of the Restricted Shares to a
Participant or, if applicable, to the escrow holder pursuant to Section 4(c)(6),
such Participant shall have, unless otherwise provided by the Committee, all the
rights of a shareholder with respect to said shares, subject to the restrictions
in his Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that
in the discretion of the Committee, any extraordinary distributions with respect
to the Common Shares shall be subject to the restrictions set forth in Section
4(c)(4) and subject to any resolution of the Board or the Committee.
(3) Restriction. All Restricted Shares issued under this Plan (including
any shares received by Participants with respect to Restricted Shares as a
result of stock dividends, stock splits or any other form of recapitalization)
shall, in the terms of each individual Award Agreement, be subject to such
restrictions as the Committee shall provide, which restrictions may include,
without limitation, restrictions concerning voting rights and transferability
and restrictions based on duration of employment with any Employer, Company
performance and individual performance; provided however, that by action taken
after the Restricted Shares are issued, the Committee may, on such terms and
conditions as it may determine to be appropriate, remove any or all of the
restrictions imposed by the terms of the Award Agreement. Restricted Shares may
not be sold or encumbered until all restrictions are terminated or expire.
Unless provided otherwise by the Committee, if no consideration was paid by the
Participant upon issuance, his rights in unvested Restricted Shares shall lapse
upon the termination of his employment.
(4) Repurchase of Restricted Shares. The Committee shall provide in the
terms of each individual Award Agreement relating to Restricted Shares that the
Company shall have the right to repurchase from a Participant the unvested
Restricted Shares then subject to restrictions under the Award Agreement
immediately upon a termination of his employment, at a cash price per share
equal to the price paid by such Participant for such Restricted Shares, or, if
acquired at no cost, to require forfeiture of such Restricted Shares; provided,
however, that provision may be made that no such right of repurchase shall exist
in the event of a termination of employment not For Cause, or following a Change
of Control of an Employer, or because of the holder's retirement, death or
disability, or otherwise.
(5) Escrow. In its sole discretion, the Committee may appoint the Secretary
of the Company or such other escrow holder as the Committee may designate to
retain physical custody of each certificate representing Restricted Shares until
all of the restrictions imposed under the Award Agreement with respect to the
shares evidenced by such certificate expire or shall have been removed.
(6) Legend. In order to enforce the restrictions imposed upon Restricted
Shares hereunder, the Committee may, in its discretion, cause a legend or
legends to be placed on certificates representing all Restricted Shares that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.
(c) Maximum Term of Awards. No Award that contemplates exercise or
conversion may be exercised or converted to any extent, and no other Award that
defers vesting, shall remain outstanding and unexercised, unconverted or
unvested more than ten years after the date the Award was initially granted.
<PAGE>
4. COMMON SHARES AVAILABLE UNDER PLAN
( ) Aggregate Share Limit. The maximum number of Common Shares that may be
issued under the Plan pursuant to all Share-Based Awards (including Incentive
Share Options) is 900,000, subject to adjustment as provided in this Section 5
or Section 7.
(a) Reissue of Shares and Share Units. Any unexercised,
unconverted or undistributed portion of any expired, cancelled, terminated or
forfeited Award, or any alternative form of consideration under an Award that is
not paid in connection with the settlement of an Award or any portion of an
Award, shall again be available for Award under Section 5(a), whether or not the
Participant has received benefits of ownership (such as dividends or dividend
equivalents or voting rights) during the period in which the Participant's
ownership was restricted or otherwise not vested. Common Shares that are issued
pursuant to Awards and subsequently reacquired by the Company pursuant to the
terms and conditions of the Awards shall be available for reissuance under the
Plan. If the Company withholds Common Shares pursuant to Section 5(f), the
number of Common Shares that would have been deliverable with respect to an
Award but that are withheld may in effect not be issued, but the aggregate
number of Common Shares issuable with respect to the applicable Award shall be
reduced by the number of Common Shares withheld and such Common Shares shall be
available for additional Awards under this Plan.
(b) Interpretive Issues. Additional rules for determining the number of
Common Shares authorized under this Plan may be adopted by the Committee, as it
deems necessary or appropriate.
(c) Treasury Shares; No Fractional Shares. The Common Shares
which may be issued (which term includes Common Shares reissued or otherwise
delivered) pursuant to an Award under this Plan may be treasury or authorized
but unissued Common Shares or Common Shares acquired, subsequently or in
anticipation of a transaction under this Plan, in the open market or in
privately negotiated transactions to satisfy the requirements of this Plan. No
fractional shares shall be issued but fractional interests may be accumulated.
The Committee, however, may determine that cash, other securities, or other
property will be paid or transferred in lieu of any fractional share interests.
(d) Consideration. The Common Shares issued under this Plan
may be issued (subject to Section 11(d)) for any lawful form of consideration,
the value of which equals the par value of the Common Shares or such greater or
lesser value as the Committee, consistent with Sections 11(d), 4(a) and 4(c),
may require.
(e) Purchase or Exercise Price; Withholding. The exercise or
purchase price (if any) of the Common Shares issuable pursuant to any Award and
any withholding obligation under applicable tax laws shall be paid in cash or,
subject to the Committee's express authorization and the restrictions,
conditions and procedures the Committee may impose, any one or combination of
(i) cash, (ii) a check payable to the order of the Company, (iii) the delivery
of Common Shares having a Fair Market Value equivalent to the applicable
exercise price and withholding obligation, provided that any such shares used in
payment shall have been owned by the Participant at least six months prior to
the date of exercise, (iv) a reduction in the amount of Common Shares or other
amounts otherwise issuable or payable pursuant to such Award, (v) by notice and
third party payment in such manner as may be authorized by the Committee or (vi)
the delivery of a promissory note, or other obligation for the future payment of
money, the terms and conditions of which shall be determined (subject to Section
11(d)) by the Committee. In the case of a payment by the means described in
clause (iii) or (iv) above, the Common Shares to be so delivered or offset shall
be determined by reference to the Fair Market Value of the Common Shares on the
date as of which the payment or offset is made.
(f) Cashless Exercise. The Committee may permit the exercise
of the Award and payment of any applicable withholding tax in respect of an
Award by delivery of written notice, subject to the Company's receipt of a third
party payment in full in cash for the exercise price and the applicable
withholding prior to issuance of Common Shares, in the manner and subject to the
procedures as may be established by the Committee.
(g) Transfer of Common Shares to a Company Employee,
Non-Employee Trust Manager or Other Board Member. As soon as practicable after
receipt by the Company or a Company Subsidiary, pursuant to Section 5(f), of
payment for the Common Shares with respect to which an Option (which, in the
case of a Company Employee, was issued to and is held by such Company Employee
in his capacity as a Company Employee), or portion thereof, is exercised by a
Participant who is a Company Employee or a Non-Employee Trust Manager, with
respect to each such exercise, the Company shall transfer to the Participant the
number of Common Shares equal to:
(0) the amount of the payment made by the Participant to the
Company
pursuant to Section 5(f), divided by
(1) the exercise price per share of the Common Shares
subject to the Option.
(h) Transfer of Shares to an Operating Partnership Employee.
As soon as practicable after receipt by the Company, pursuant to Section 5(f),
of payment for the Common Shares with respect to which an Option (which was
issued to and is held by an Operating Partnership Employee in his capacity as an
Operating Partnership Employee), or portion thereof, is exercised by a
Participant who is an Operating Partnership Employee, with respect to each such
exercise:
(0) the Company shall transfer to the Participant the number of Common
Shares equal to (A) the amount of the payment made by the Participant to the
Company pursuant to Section 5(f) divided by (B) the Fair Market Value of a
Common Share at the time of exercise (the "Operating Partnership Optionee
Purchased Shares");
(1) the Company shall sell to the Operating Partnership the number of
Common Shares (the "Operating Partnership Purchased Shares") equal to the excess
of (A) the amount obtained by dividing (i) the amount of the payment made by the
Participant to the Company pursuant to Section 5(f) by (ii) the exercise price
per share of the Common Shares subject to the Option, over (B) the Operating
Partnership Optionee Purchased Shares.
The price to be paid by the Operating Partnership to the
Company for the Operating Partnership Purchased Shares (the "Operating
Partnership Purchase Price") shall be an amount equal to the product of (A) the
number of Operating Partnership Purchased Shares multiplied by (B) the Fair
Market Value of a Common Share at the time of the exercise; and
(2) as soon as practicable after receipt of the Operating Partnership
Purchased shares by the Operating Partnership, the Operating Partnership shall
transfer such shares to the Participant at no additional cost, as additional
compensation.
(i) Transfer of Shares to a Property Partnership Employee. As
soon as practicable after receipt by the Company, pursuant to Section 5(f), of
payment for the Common Shares with respect to which an Option (which, in the
case of a Property Partnership Employee, was issued to and is held by such
Property Partnership Employee in his capacity as a Property Partnership
Employee), or portion thereof, is exercised by a Participant who is a Property
Partnership Employee, with respect to each such exercise:
(0) the Company shall transfer to the Participant the number of Common
Shares equal to (A) the amount of the payment made by the Participant to the
Company pursuant to Section 5(f) divided by (B) the Fair Market Value of a
Common Share at the time of exercise (the "Property Partnership Optionee
Purchased Shares");
(1) the Company shall sell to the Property Partnership the number of Common
Shares (the "Property Partnership Purchased Shares") equal to the excess of (A)
the amount obtained by dividing (i) the amount of the payment made by the
Participant to the Company pursuant to Section 5(f) by (ii) the exercise price
per share of the Common Shares subject to the Option, over (B) the Property
Partnership Optionee Purchased Shares. The price to be paid by the Property
Partnership to the Company for the Property Partnership Purchased Shares (the
"Property Partnership Purchase Price") shall be an amount equal to the product
of (A) the number of Property Partnership Purchased Shares multiplied by (B) the
Fair Market Value of a Common Share at the time of the exercise;
(2) as soon as practicable after receipt of the Property Partnership
Purchased Shares by a Property Partnership, such Property Partnership shall
transfer such shares to the Participant at no additional cost, as additional
compensation.
(j) Transfer of Payment to the Operating Partnership or a
Property Partnership. As soon as practicable after receipt by the Company (i) of
the amount described in Section 5(f) and, where applicable, (ii) a related
Operating Partnership Purchase Price or Property Partnership Purchase Price
described in Section 5(i) or 5(f), the Company shall contribute to the Operating
Partnership or the applicable Property Partnership, as the case may be, an
amount of cash equal to such payment and the Operating Partnership or the
applicable Property Partnership, as the case may be, shall issue an additional
interest in the Operating Partnership or the applicable Property Partnership, as
the case may be, on the terms set forth in the Operating Partnership Agreement
or in the agreement of limited partnership of the applicable Property
Partnership.
5. AWARD AGREEMENTS
Each Award under this Plan shall be evidenced by an Award
Agreement in a form approved by the Committee setting forth, the number of
Common Shares or Share Units, as applicable, subject to the Award, and the price
(if any) and term of the Award and, in the case of Performance-Based Awards, the
applicable Performance Goals. The Award Agreement shall also set forth (or
incorporate by reference) (i) other material terms and conditions applicable to
the Award as determined by the Committee consistent with the limitations of this
Plan, and (ii) in the case of Share-Based Awards to Operating Partnership
Employees and Property Partnership Employees, the mechanisms for the transfer of
such Common Shares and payment therefor, including but not limited to the
mechanisms in Section 5(h), 5(i), 5(j) and 5(k).
( ) Incorporated Provisions. Award Agreements shall be subject to the terms
of this Plan and shall be deemed to include the following terms, unless the
Committee in the Award Agreement otherwise (consistent with applicable legal
considerations) provides:
(0) Non-assignability: The Award shall not be assignable nor transferable,
except (i) by will or by the laws of descent and distribution, (ii) pursuant to
a QDRO or any other exception to transfer restrictions expressly permitted by
the Committee and set forth in the Award Agreement (or an amendment thereto) or
(iii) in the case of Awards constituting Incentive Share Options, as permitted
by the Code. The restrictions on exercise and transfer shall not be deemed to
prohibit, to the extent permitted by the Committee, (a) transfers without
consideration for estate and financial planning purposes, transfers to such
other persons or in such other circumstances as the Committee may in the Award
Agreement expressly permit. During the lifetime of a Participant, the Award
shall be exercised only by such Participant or by his or her guardian or legal
representative, except as expressly otherwise provided consistent with the
foregoing transfer restrictions. The designation of a Beneficiary hereunder
shall not constitute a transfer prohibited by the foregoing provisions.
(1) Rights as Shareholder: Except as specifically set forth herein, a
Participant shall have no rights as a holder of Common Shares with respect to
any unissued securities covered by an Award until the date the Participant
becomes the holder of record of these securities. Except as provided in Section
7, no adjustment or other provision shall be made for dividends or other
shareholder rights, except to the extent that the Award Agreement provides for
dividend equivalents or similar economic benefits.
(2) Withholding: The Participant shall be responsible for payment of any
taxes or similar charges required by law to be withheld from an Award or an
amount paid in satisfaction of an Award, and these obligations shall be paid by
the Participant on or prior to the payment of the Award. In the case of an Award
payable in cash, the withholding obligation shall be satisfied by withholding
the applicable amount and paying the net amount in cash to the Participant. In
the case of an Award paid in Common Shares, a Participant shall satisfy the
withholding obligation as provided in Section 5(f).
(3) Section 83(b) Election: No Participant may make an election under Code
Section 83(b) with respect to any Award under this Plan, unless otherwise
expressly permitted by the Committee, in its sole discretion.
(a) Other Provisions. Award Agreements may include other terms and
conditions as the Committee shall approve including, but not limited to, the
following:
(0) Termination of Employment: A provision describing the treatment of an
Award in the event of the retirement, disability, death or other termination of
a Participant's employment with or services to an Employer, including any
provisions relating to the vesting, exercisability, forfeiture or cancellation
under Code Section 162(m).
(1) Vesting; Effect of Termination; Change of Control: Any other terms
consistent with the terms of this Plan as are necessary and appropriate to
effect the Award to the Participant including, but not limited to, the vesting
provisions, any requirements for continued employment, any other restrictions or
conditions (including performance requirements) of the Award, and the method by
which (consistent with Section 7) the restrictions or conditions lapse, and the
effect on the Award of a Change of Control.
(2) Replacement and Substitution: Any provisions permitting or requiring
the surrender of outstanding Awards or securities held by the Participant in
whole or in part in order to exercise or realize rights under or as a condition
precedent to other Awards, or in exchange for the grant of new or amended Awards
under similar or different terms.
(3) Reloading: Any provisions for successive or replenished Awards
including,
but not limited to, reload Options.
(4) Termination of Benefits: A provision that any and all unexercised
Awards and all rights under this Plan of a Participant who received such Award
(or his or her designated Beneficiary or legal representative) and the exercise
or vesting thereof, shall be forfeited if, prior to the time of such exercise,
the Participant shall (i) be employed by a competitor of, or shall be engaged in
any activity in competition with, any Employer without such Employer's consent,
(ii) divulge without any Employer's consent any secret or confidential
information belonging to such Employer, (iii) engage in any other activities
which would constitute grounds for termination For Cause or (iv) be terminated
For Cause.
(b) Contract Rights, Forms and Signatures. Any obligation of the Company or
an Employer to any Participant with respect to an Award shall be based solely
upon contractual obligations created by this Plan and an Award Agreement. No
Award shall be enforceable until the Award Agreement or a receipt has been
signed by the Participant and on behalf of the Company and, in the Committee's
discretion, the applicable Employer by an Executive Officer (other than the
recipient) or his or her delegate or, in the case of an Award to an Insider, by
the Participant and the Company, and the Committee's discretion, the applicable
Employer, whose signature shall be acknowledged by a member of the Committee. By
executing the Award Agreement or receipt, a Participant shall be deemed to have
accepted and consented to the terms of this Plan and any action taken in good
faith under this Plan by and within the discretion of the Committee, the Board
of Trust Managers or their delegates. Unless the Award Agreement otherwise
expressly provides, there shall be no third party beneficiaries of the
obligations of the Company or any Employer to the Participant under the Award
Agreement.
6. ADJUSTMENTS; CHANGE IN CONTROL; ACQUISITIONS.
( ) Adjustments. If there shall occur any recapitalization,
stock split (including a stock split in the form of a stock dividend), reverse
stock split, merger, combination, consolidation, or other reorganization or any
extraordinary dividend or other extraordinary distribution in respect of the
Common Shares (whether in the form of cash, Common Shares or other property), or
any split-up, spin-off, extraordinary redemption, combination or exchange of
outstanding Common Shares, or there shall occur any other similar transaction or
event in respect of the Common Shares, or a sale of substantially all the assets
of the Company as an entirety, then the Committee shall, in the manner and to
the extent, if any, as it deems appropriate and equitable to the Participants
and consistent with the terms of this Plan, and taking into consideration the
effect of the event on the holders of the Common Shares:
(0) proportionately adjust any or all of
( ) the number and type of Common Shares and Share Units which thereafter
may be made the subject of Awards (including the specific maximum numbers of
Common Shares or Share Units set forth elsewhere in this Plan),
(A) the number, amount and type of Common Shares, other property, Share
Units or cash subject to any or all outstanding Awards,
(B) the grant, purchase or exercise price, or conversion ratio of any or
all outstanding Awards, or of the Common Shares, other property or Share Units
underlying the Awards,
(C) the securities, cash or other property deliverable upon exercise or
conversion of any or all outstanding Awards,
(D) subject to Section 4(b), the performance targets or standards
appropriate to any outstanding Performance-Based Awards,
(E) any other terms as are affected by the event; or
(1) subject to any applicable limitations in the case of a transaction to
be accounted for as a pooling of interests under generally accepted accounting
principles, provide for
( ) an appropriate and proportionate cash settlement or distribution, or
(A) the substitution or exchange of any or all outstanding Awards, or the
cash, securities or property deliverable on exercise, conversion or vesting of
the Awards. Notwithstanding the foregoing, in the case of an Incentive Share
Option, no adjustment shall be made which would cause this Plan to violate Code
Section 424(a) or any successor provisions thereto, without the written consent
of the Participant adversely affected thereby. The Committee may act prior to an
event described in this paragraph (a) (including at the time of an Award by
means of more specific provisions in the Award Agreement) if deemed necessary or
appropriate to permit the Participant to realize the benefits intended to be
conveyed by an Award in respect of the Common Shares in the case of an event
described in paragraph (a).
(a) Change of Control. The Committee may, in the Award
Agreement, provide for the effect of a Change of Control on an Award. Such
provisions may include, but are not limited to, any one or more of the following
with respect to any or all Awards: (i) the specific consequences of a Change of
Control on the Awards; (ii) a reservation of the Committee's right to determine
in its discretion at any time that there shall be full acceleration or no
acceleration of benefits under the Awards; (iii) that only certain or limited
benefits under the Awards shall be accelerated; (iv) that the Awards shall be
accelerated for a limited time only; or (v) that acceleration of the Awards
shall be subject to additional conditions precedent (such as a termination of
employment following a Change of Control). In addition to any action required or
authorized by the terms of an Award, the Committee may take any other action it
deems appropriate to ensure the equitable treatment of Participants in the event
of or in anticipation of a Change of Control including, but not limited to, any
one or more of the following with respect to any or all Awards: (i) the
acceleration or extension of time periods for purposes of exercising, vesting
in, or realizing gain from, the Awards; (ii) the waiver of conditions on the
Awards that were imposed for the benefit of the Company or any Employer, (iii)
provision for the cash settlement of the Awards for their equivalent cash value,
as determined by the Committee, as of the date of the Change of Control; or (iv)
such other modification or adjustment to the Awards as the Committee deems
appropriate to maintain and protect the rights and interests of Participants
upon or following the Change of Control. The Committee also may accord any
Participant a right to refuse any acceleration of exercisability, vesting or
benefits, whether pursuant to the Award Agreement or otherwise, in such
circumstances as the Committee may approve. Notwithstanding the foregoing
provisions of this Section 7(b) or any provision in an Award Agreement to the
contrary, in no event shall the Committee be deemed to have discretion to
accelerate or not accelerate or make other changes in or to any or all Awards,
in respect of a transaction, if such action or inaction would be inconsistent
with or would otherwise frustrate the intended accounting for a proposed
transaction as a pooling of interests under generally accepted accounting
principles.
(b) Change of Control Definition. For purposes of this Plan, a "Change of
Control" of the Company shall be deemed to have occurred upon the happening of
any of the following events:
(0) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Trust Managers (as defined in paragraph
(c)(2) below) of the Company, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (an "Acquiror") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of the combined voting power of the then
outstanding Common Shares and other shares of the Company entitled to vote
generally in the election of trust managers, but excluding for this purpose:
( ) any such acquisition (or holding) by any Employer, or any employee
benefit plan (or related trust) of such Employer; or
(A) any such acquisition (or holding) by any corporation with respect to
which, following such acquisition, more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Common Shares and other voting
securities of the Company immediately prior to such acquisition in substantially
the same proportion as their ownership, immediately prior to such acquisition,
of the then outstanding Common Shares of the Company and of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of trust managers;
(1) individuals who, as of the date hereof, constitute the Board (the
"Continuing Trust Managers") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a trust manager
subsequent to the date hereof whose election, or nomination for election by the
shareholders of the Company, was approved by a vote of at least a majority of
the persons then comprising the Continuing Trust Managers shall be considered a
Continuing Trust Manager, but excluding, for this purpose, any such individual
whose initial election as a member of the Board is in connection with an actual
or threatened "election contest" relating to the election of the trust managers
of the Company (as such term is used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(2) approval by the shareholders of the Company of
( ) a reorganization, merger or consolidation of the Company, with respect
to which in each case all or substantially all of the individuals and entities
who were the respective beneficial owners of the Common Shares or voting
securities of the Company immediately prior to such reorganization, merger or
consolidation will not, immediately following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding Common Shares and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors of the entity resulting from such reorganization, merger
or consolidation, or
(A) a complete liquidation or dissolution of the Company, or
(B) the sale or other disposition of all or substantially all of the assets
of the Company.
(c) Business Acquisitions. Awards may be granted under this
Plan on the terms and conditions as the Committee considers appropriate, which
may differ from those otherwise required by this Plan, to the extent necessary
to reflect substitution for or assumption of share incentive awards held by
employees of other entities who become employees of any Employer as the result
of a merger of the employing entity with, or the acquisition of the property or
stock of the employing entity by, any Employer, directly or indirectly.
7. ADMINISTRATION.
( ) Committee Authority and Structure. This Plan and all
Awards granted under this Plan shall be administered by the Compensation
Committee of the Board or such other committee of the Board as may be designated
by the Board and made up solely of two or more Non-Employee Directors (as
defined in Rule 16b-3(b)(3) under the Exchange Act and the "outside director"
requirement of Code Section 162(m). The members of the Committee shall be
designated by the Board. A majority of the members of the Committee (but not
fewer than two) shall constitute a quorum. The vote of a majority of a quorum or
the unanimous written consent of the Committee shall constitute action by the
Committee.
(a) Selection and Grant. The Committee shall have the
authority to determine the Employees (if any) to whom Awards will be granted
under this Plan, the type of Award or Awards to be made, and the nature, amount,
pricing, timing and other terms of Awards to be made to any one or more of these
individuals, and to establish the installments (if any) in which such Awards
shall become exercisable or shall vest, or determine that no delayed
exercisability or vesting is required, and establish the events of termination
or reversion of such Awards, subject to the terms of this Plan.
(b) Construction and Interpretation. The Committee shall have
the power to interpret and administer this Plan and Award Agreements, and to
adopt, amend and rescind related rules and procedures. All questions of
interpretation and determinations with respect to this Plan, the number of
Common Shares, Share Appreciation Rights, or units or other Awards granted, and
the terms of any Award Agreements, the adjustments required or permitted by
Section 7, and other determinations hereunder shall be made by the Committee and
its determination shall be final and conclusive upon all parties in interest. In
the event of any conflict between an Award Agreement and any non-discretionary
provisions of this Plan, the terms of this Plan shall govern.
(c) Express Authority (And Limitations on Authority) to Change
Terms of Awards. Without limiting the Committee's authority under other
provisions of this Plan (including Sections 7 and 10), but subject to any
express limitations of this Plan (including under Sections 7 and 10), the
Committee shall have the authority to accelerate the exercisability or vesting
of an Award, to extend the term or waive early termination provisions of an
Award (subject to the maximum ten-year term under Section 4(b)), to cancel,
modify or waive any Employer's rights with respect to an Award or restrictive
conditions of an Award (including forfeiture conditions), to modify,
discontinue, suspend, or terminate any or all outstanding Awards held by
Employees, with or without adjusting any holding period or other terms of the
Award, in any case in such circumstances as the Committee deems appropriate. The
Committee may not, however, reduce by amendment the exercise or purchase price
of an outstanding Award.
(d) Rule 16b-3 Conditions; Bifurcation of Plan. It is the
intent of the Employers that this Plan and Share-Based Awards hereunder satisfy
and be interpreted in a manner, that, in the case of Participants who are or may
be Insiders, satisfies any applicable requirements of Rule 16b-3, so that these
persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 under the Exchange Act and will not be subjected to avoidable
liability thereunder as to Awards intended to be entitled to the benefits of
Rule 16b-3. Notwithstanding anything to the contrary in this Plan, the
provisions of this Plan may at any time be bifurcated by the Board or the
Committee in any manner so that certain provisions of this Plan or any Award
Agreement intended (or required in order) to satisfy the applicable requirements
of Rule 16b-3 are only applicable to Insiders and to those Awards to Insiders
intended to satisfy the requirements of Rule 16b-3.
(e) Delegation and Reliance. The Committee may delegate to the
officers or employees of any Employer the authority to execute and deliver those
instruments and documents, to do all acts and things, and to take all other
steps deemed necessary, advisable or convenient for the effective administration
of this Plan in accordance with its terms and purpose, except that the Committee
may not delegate any discretionary authority to grant or amend an Award or with
respect to substantive decisions or functions regarding this Plan or Awards as
these relate to the material terms of Performance-Based Awards to Executive
Officers or to the timing, eligibility, pricing, amount or other material terms
of Awards to Insiders. In making any determination or in taking or not taking
any action under this Plan, the Board and the Committee may obtain and may rely
upon the advice of experts, including professional advisors to the Company. No
trust manager, officer, employee or agent of any Employer shall be liable for
any such action or determination taken or made or omitted in good faith.
(f) Exculpation and Indemnity. Neither the Employers nor any
member of the Board of Trust Managers or of the Committee, nor any other person
participating in any determination of any question under this Plan, or in the
interpretation, administration or application of this Plan, shall have any
liability to any person for any action taken or not taken in good faith under
this Plan or for the failure of an Award (or action in respect of an Award) to
satisfy Code requirements as to incentive stock options or to realize other
intended tax consequences, to qualify for exemption or relief under Rule 16b-3
or to comply with any other law, compliance with which is not required on the
part of an Employer.
8. NON-EMPLOYEE TRUST MANAGER OPTIONS.
( ) Participation. Awards under this Section 9 shall be nondiscretionary,
shall be made only to Non-Employee Trust Managers and shall be evidenced by
Award Agreements setting forth the terms and conditions in this Section 9 and in
Sections 6(a) and 6(b)(5).
(a) Initial Award. Upon the consummation of the transactions
contemplated by the Company's Proxy Statement for a Special Meeting of
Shareholders to be held on March __, 1997, there shall be granted automatically
to each Non-Employee Trust Manager (without action by the Board or Committee) a
Non-Qualified Share Option (the date of grant of which shall be the closing date
of such transactions) to purchase 10,000 Common Shares.
(b) Annual Option Grants.
(0) Award Upon Election or Appointment. After approval of this Plan by the
shareholders of the Company, if any person who has not received an initial Award
pursuant to Section 9(b) and is not then an officer or employee of an Employer
shall become a Trust Manager of the Company, there shall be granted
automatically to such person (without any action by the Board or Committee) a
Non-Qualified Share Option (the date of grant of which shall be the date such
person takes office) to purchase 10,000 Common Shares.
(1) Subsequent Annual Awards. Immediately following the annual
shareholders' meeting in each year during the term of this Plan there shall be
granted automatically (without any action by the Committee or the Board) to each
Non-Employee Trust Manager elected by the shareholders of the Company at such
meeting a Non-Qualified Share Option (the date of grant of which shall be the
date of such meeting) to purchase 5,000 Common Shares.
(2) Maximum Number of Shares. A Non-Employee Trust Manager shall not
receive more than one grant of Non-Qualified Share Options under this Section 9
in any calendar year.
(c) Exercise Price. The exercise price per Common Share
covered by each Option granted under this Section 9 shall be 100% of the Fair
Market Value of the Common Shares on the date of grant. The exercise price of
the Common Shares issuable pursuant to any Option granted under this Section and
any withholding obligation under applicable tax laws shall be paid in cash or
any one or combination of (i) cash, (ii) a check payable to the order of the
Company, and (iii) the delivery of Common Shares, provided that any such shares
used in payment shall have been owned by the Participant at least six months
prior to the date of exercise and (iv) by notice and third party payment to the
Company prior to any issue of Common Shares and otherwise in accordance with all
applicable legal requirements in such manner as may be authorized by the
Committee for all Participants. In the case of a payment by the means described
in clause (iii) above, the Common Shares to be so delivered shall be determined
by reference to the Fair Market Value of the Common Shares on the date as of
which the payment is made.
(d) Option Period and Exercisability. Each Option granted
under this Section 9 and all rights or obligations thereunder shall expire ten
years after the date of grant and shall be subject to earlier termination as
provided below. Each Option granted under this Section 9 shall become
exercisable in increments of 50% per year on each of the first two anniversaries
of the date of grant.
(e) Termination of Trust Managers. If a Non-Employee Trust
Manager's services as a member of the Board of Trust Managers terminate by
reason of death, disability (the inability of the Non-Employee Trust Manager to
continue to perform his or her duties of employment as determined by the
Committee) or retirement, an Option granted pursuant to this Section held by
such Participant shall immediately become and shall remain fully exercisable for
one year after the date of such termination or until the expiration of the
stated term of such Option, whichever first occurs. If a Non-Employee Trust
Manager's services as a member of the Board of Trust Managers terminate for any
other reason, any portion of an Option granted pursuant to this Section 9 which
is not then exercisable shall terminate and any portion of such Option which is
then exercisable may be exercised for three months after the date of such
termination or until the expiration of the stated term, whichever first occurs.
(f) Adjustments. Options granted under this Section 9 shall be
subject to adjustment as provided in Section 7, but only to the extent that (i)
such adjustment and the Committee's actions in respect thereof satisfy
applicable criteria under Rule 16b-3, (ii) such adjustment in the case of a
Change of Control is effected pursuant to the terms of a reorganization
agreement approved by shareholders of the Company, and (iii) such adjustment is
consistent with adjustments to Options held by persons other than Executive
Officers or Trust Managers of the Company.
(g) Acceleration Upon a Change of Control. Upon the occurrence
of a Change of Control, each Option granted under this Section 9 shall become
immediately exercisable in full. To the extent that any Option granted under
this Section 9 is not exercised prior to (i) a dissolution of the Company or
(ii) a merger or other event that the Company does not survive, and no provision
is (or consistent with the provisions of this Section 9 can be) made for the
assumption, conversion, substitution or exchange of the Option, the Option shall
terminate upon the occurrence of such event.
(h) Limitations on Amendments. The provisions of this Section
9 with respect to the amount, purchase price and timing of Options and the
eligibility requirements shall not be amended more than once every six months
(other than as may be necessary to conform to any applicable changes in the Code
or the rules thereunder), unless such amendment would be consistent with the
provisions of Rule 16b-3.
9. AMENDMENT AND TERMINATION OF PLAN.
The Board of Trust Managers may at any time amend, suspend or
discontinue this Plan, without shareholder approval, except to the extent that
such shareholder approval is required under applicable law. The Committee may at
any time alter or amend any or all Award Agreements under this Plan in any
manner that would be authorized for a new Award under this Plan including, but
not limited to, any manner set forth in Section 8(d) (subject to any applicable
limitations thereunder). Notwithstanding the foregoing, no such action by the
Board or the Committee shall, in any manner adverse to a Participant other than
as expressly permitted by the terms of an Award Agreement, affect any Award then
outstanding and evidenced by an Award Agreement without the consent in writing
of the Participant or a Beneficiary who has become entitled to an Award.
10. MISCELLANEOUS
( ) Unfunded Plans. This Plan shall be unfunded. None of the
Company, the Employers, the Board of Trust Managers or the Committee shall be
required to segregate any assets that may at any time be represented by Awards
made pursuant to this Plan. None of the Company, Employers, the Board of Trust
Managers or the Committee shall be deemed to be a trustee of any amounts to be
paid or securities to be issued under this Plan. To the extent that a
Participant, Beneficiary or other person acquires a right to receive payment
pursuant to any Award hereunder, such right shall be no greater than the right
of any unsecured general creditor of any Employer.
(a) Rights of Employees.
(0) No Right to an Award. Status as an Employee shall not be construed as a
commitment that any one or more Awards will be made under this Plan to an
Employee or to Employees generally. Status as a Participant shall not entitle
the Participant to any additional Award.
(1) No Assurance of Employment. Nothing contained in this Plan (or in any
other documents related to this Plan or to any Award) shall confer upon any
Employee or Participant any right to continue in the employ or other service of
any Employer or constitute any contract (of employment or otherwise) or limit in
any way the right of any Employer to change a person's compensation or other
benefits or to terminate the employment of a person with or without cause, but,
nothing contained in this Plan or any document related hereto shall adversely
affect any independent contractual right of such person without his or her
consent thereto.
(b) Effective Date; Duration. This Plan has been adopted by
the Board of Trust Managers of the Company. This Plan shall become effective
upon and shall be subject to the approval of the shareholders of the Company.
Any Award granted prior to such shareholder approval of the Plan shall be
conditioned on such approval and, if such approval is not obtained on or before
the first anniversary of the date the Plan was adopted by the Board, such awards
shall be null and void. This Plan shall remain in effect until any and all
Awards under this Plan have been exercised, converted or terminated under the
terms of this Plan and applicable Award Agreements. Notwithstanding the
foregoing, no Award may be granted under this Plan after December 31, 2006. Any
Award granted prior to such date may be amended after such date in any manner
that would have been permitted prior to such date, except that no such amendment
shall increase the number of shares subject to, comprising or referenced in such
Award.
(c) Compliance with Laws. This Plan, Award Agreements, and the
grant, exercise, conversion, operation and vesting of Awards, and the issuance
and delivery of Common Shares and/or other securities or property or the payment
of cash under this Plan, Awards or Award Agreements, are subject to compliance
with all applicable federal and state laws, rules and regulations (including,
but not limited to, state and federal insider trading, registration, reporting
and other securities laws and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions (and
the person acquiring such securities shall, if requested by the Company, provide
such evidence, assurance and representations to the Company as to compliance
with any thereof) as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements.
(d) Applicable Law. This Plan, Award Agreements and any related documents
and matters shall be governed in accordance with the laws of the State of
Maryland, except as to matters of Federal law.
(e) Non-Exclusivity of Plan. Nothing in this Plan shall limit
or be deemed to limit the authority of any Employer, the Board or the Committee
to grant awards or authorize any other compensation, with or without reference
to the Common Shares, under any other plan or authority.
(f) Severability. In case any provision in this Plan shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions, or of such provision in any
other jurisdiction, shall not in any way be affected or impaired thereby.
(g) Ownership and Transfer Restrictions. Common Shares
acquired pursuant to an Award shall be subject to the restrictions on ownership
and transfer set forth in the Company Charter, and any additional restrictions
set forth in the Award Agreement. The Committee, in its sole discretion, may
impose such additional restrictions on the ownership and transferability of such
Common Shares as it deems appropriate in order to preserve the qualification of
the Company as a real estate investment trust, within the meaning of Code
Sections 856 through 860. The Committee may require a Participant to give the
Company prompt notices of any disposition of Common Shares acquired by exercise
of an Incentive Stock Option before the later to occur of (1) two years after
the date of grant of such Option or (2) one year after the transfer of such
Common Shares to the Participant. Any such restriction or notice requirement
shall be set forth in the Award Agreement and may be referred to on the Share
certificate.
(h) Restrictions on Awards.
Notwithstanding anything herein to the contrary, no Award shall be payable
in Common Shares and no Option shall be exercisable if, in the sole discretion
of the Committee, such would be likely to result in any of the following:
( ) The Participant's ownership of Common Shares being in violation of the
Share Ownership Limit or otherwise prohibited under the Company Charter; or
<PAGE>
(A) Income to the Company that could impair its status as a real estate
investment trust, within the meaning of Code Sections 856 through 860.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers duly authorized on this __ day of March, 1997.
March, 1997.
GROVE REAL ESTATE ASSET TRUST
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Chief Financial Officer
GROVE OPERATING, L.P.
By: GROVE REAL ESTATE ASSET TRUST,
its general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Chief Financial Officer
PROPERTY PARTNERSHIPS:
GROVE AVON ASSOCIATES LIMITED
PARTNERSHIP
By: GR-AVON, INC., its general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
<PAGE>
AVONPLACE ASSOCIATES LIMITED
PARTNERSHIP
By: AVON WATCH HILL, INC., its general
partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
GR-ENFIELD ASSOCIATES LIMITED
PARTNERSHIP
By: GEALP, INC., its general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
GROVE LONGMEADOW ASSOCIATES
LIMITED PARTNERSHIP
By: LONGMEADOW WATCH HILL, INC., its
general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
GR-PROPERTIES III LIMITED PARTNERSHIP
By: GROVE INVESTMENT GROUP, INC., its
general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
<PAGE>
GR-WESTWYND ASSOCIATES LIMITED
PARTNERSHIP
By: GROVE CAYA CORPORATION, its
general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
GROVE OPPORTUNITY FUND II LIMITED
PARTNERSHIP
By: GOF II, INC., its general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
SHORELINE LONDON ASSOCIATES LIMITED
PARTNERSHIP
By: OCEAN REEF LONDON, INC., its general
partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
NAUTILUS PROPERTIES LIMITED
PARTNERSHIP
By: NPLP, INC., its general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
<PAGE>
GROVE-WESTFIELD ASSOCIATES LIMITED
PARTNERSHIP
By: GROVE INVESTMENT GROUP, INC., its
general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
GROVE-WEST SPRINGFIELD ASSOCIATES
LIMITED PARTNERSHIP
By: GROVE INVESTMENT GROUP, INC., its
general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
FOXWOODBURG, L.P.
By: FWB, INC., its general partner
By: /s/ JOSEPH LABROSSE
Name: Joseph LaBrosse
Title: Treasurer
4
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated March 14, 1997,
between each of the individuals listed on Schedule 1 hereto (each such
individual is referred to herein individually as a "Pledgor" and collectively
such individuals are referred to as the "Pledgors"), Grove Real Estate Asset
Trust , a Maryland real estate investment trust (the "REIT"), and for Grove
Operating, L.P., a Delaware limited partnership (the "Operating Partnership";
the REIT and the Operating Partnership, collectively, the "Pledgee").
WHEREAS, the Pledgors are limited partners of the Operating
Partnership, pursuant to the Agreement of Limited Partnership of Grove
Operating, L.P. dated the date hereof, among the REIT, as sole general partner,
the Pledgors, as limited partners, and the other limited partners named therein
(as such agreement may be amended, modified or supplemented from time to time in
accordance with its terms, the "Operating Partnership Agreement") (the units of
limited partnership interests in the Operating Partnership owned by each Pledgor
are hereinafter referred to as "Units");
WHEREAS, the Pledgors, the REIT and the Operating Partnership are
parties to that certain Contribution Agreement, dated the date hereof, among the
REIT, the Operating Partnership, the Pledgors, and the other contributors named
therein (as such agreement may be amended, modified or supplemented from time to
time in accordance with its terms, the "Contribution Agreement"); capitalized
terms used herein but not otherwise defined herein shall have the meanings
assigned to such terms in the Contribution Agreement;
WHEREAS, the Pledgors have agreed to indemnify the REIT and the
Operating Partnership for certain Damages as set forth in Section 8.1.A of the
Contribution Agreement (the "Secured Obligations"); and
WHEREAS, in order to secure the full and timely performance of the
Secured Obligations, pursuant to the Contribution Agreement, each of the
Pledgors has agreed to pledge and grant to the Pledgee, for the benefit of the
Pledgee, a lien and security interest in, to and under its Units, as more fully
described on Schedule I attached hereto (the "Pledged Units").
NOW, THEREFORE, the parties agree as follows:
1. Grant of Security Interest. As collateral security for the payment,
performance and observance of the Secured Obligations, now existing or hereafter
arising, absolute or contingent, whether or not due and payable, each of the
Pledgors pledges to the Pledgee,, and grants to the Pledgee, a security interest
in the following property (collectively, the "Collateral"):
(a) the Pledged Units, as more particularly described in Schedule I
attached hereto;
(b) all rights of each Pledgor under the Operating Partnership
Agreement attributable to its ownership of the Pledged Units, including, without
limitation, all rights of such Pledgor in, to and under that portion of its
capital account and distributions represented by, or to which such Pledgor is
entitled as a result of its ownership of, the Pledged Units;
(c) all shares, securities, cash or property representing a
dividend or distribution on any of the Pledged Units resulting from a split,
recapitalization, reclassification or other blanket change of the Pledged Units
or otherwise received in exchange therefor;
(d) all distributions and moneys paid or distributed in respect of or in
exchange for any or all of the foregoing;
(e) all rights of Pledgor in and to all distributions declared in respect
of any or all of the foregoing;
(f) all books and records relating to the foregoing; and
(g) all proceeds and profits of any or all of the foregoing.
2. Delivery of Certificates and Instruments. The Pledgors shall
deliver to the Pledgee: (a) the original certificates or other instruments or
documents evidencing the Pledged Units concurrently with the execution and
delivery of this Agreement, and (b) the original certificates or other
instruments or documents evidencing all other Collateral (except for Collateral
which this Agreement specifically permits the Pledgors to retain) within ten
days after a Pledgor's receipt thereof. All Collateral (whether delivered to
Pledgee concurrently with the execution and delivery of this Agreement or
subsequent thereto) which consists of certificated securities shall be in bearer
form or, if in registered form, shall be issued in the name of the Pledgee or
endorsed to the Pledgee or in blank or accompanied by stock power or other
appropriate instruments of transfer in favor of Pledgee executed in blank.
3. Pledgors Remain Liable. Notwithstanding anything herein to the
contrary, (a) the applicable Pledgors shall remain liable under the agreements
(including, without limitation, the Operating Partnership Agreement) included in
the Collateral to the extent set forth therein to perform all of their duties
and obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Pledgee of any of its rights hereunder shall
not release any Pledgor from any of its duties or obligations under the
agreements (including, without limitation, the Operating Partnership Agreement)
included in the Collateral, except to the extent that such duties and
obligations may have been terminated by reason of a sale, transfer or other
disposition of the Collateral pursuant hereto, and (c) the Pledgee shall have no
obligation or liability under the agreements (including, without limitation, the
Operating Partnership Agreement) included in the Collateral by reason of this
Agreement, nor shall the Pledgee be obligated to perform any of the obligations
or duties of any Pledgor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
4. Representations, Warranties and Covenants. Each Pledgor represents,
warrants and covenants as follows:
(a) Set forth on Schedule I attached hereto is a complete and
accurate list and description of all Pledged Units delivered by such Pledgor and
such Pledgor is the sole holder of record and sole beneficial owner of the
Pledged Units set forth opposite its name, free and clear of all claims,
mortgages, pledges, liens, encumbrances and security interests of every nature
whatsoever, except in favor of the Pledgee. All other Collateral hereafter
delivered by such Pledgor to the Pledgee will be held of record and beneficially
owned by such Pledgor free and clear of all claims, mortgages, pledges, liens,
encumbrances and security interests of every nature whatsoever, except in favor
of the Pledgee.
(b) With respect to each Pledgor, the addresses of its principal places
of residence/business are set forth below its signature hereto. No Pledgor will
change said address or location, or change its name, without at least 15 days'
prior written notice to the Pledgee, and with respect to any such change in
address or name, each Pledgor shall execute and deliver to the Pledgee such
documents and take such actions as the Pledgee reasonably deems necessary to
perfect and protect the Pledgee's security interests in and to the Collateral.
(c) Such Pledgor will not create, incur, assume or permit to
exist any security interest in the Collateral other than the security interest
created hereby, or sell, transfer, assign, pledge or grant a security interest
in the Collateral to any person other than the Pledgee.
(d) Such Pledgor has the requisite power and authority and
full legal right and capacity, to execute and deliver, and to perform its
obligations under, this Agreement, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement. Such
Pledgor, if an individual living in a community property state, has obtained all
consents, approvals or authorizations required under applicable laws relating to
the transfer of community property to execute, deliver and perform its
obligations under this Agreement; a true, correct and complete copy of all such
consents, approvals or authorizations has been provided to Pledgee.
(e) This Agreement constitutes the legal, valid and binding
obligation of such Pledgor, enforceable in accordance with its terms.
(f) The execution, delivery and performance of this Agreement
will not violate any law or regulation, or any order or decree of any court or
governmental instrumentality, and will not conflict with, or result in the
breach of, or constitute a default under, any indenture, mortgage, deed of
trust, agreement or other instrument to which such Pledgor is a party or by
which it is bound, and will not result in the creation or imposition of any
lien, charge or encumbrance upon any of the property of such Pledgor (including
the Collateral) pursuant to the provisions of any of the foregoing.
(g) No consent of any other person (including, without
limitation creditors of such Pledgor) and no consent, license, permit, approval
or authorization of, exemption by, notice or report to, or registration, filing
or declaration with, any governmental instrumentality is required in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement, except for the filing of any financing statements required hereunder.
(h) The pledge of the Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in such
Collateral, subject to any filings or actions required pursuant to the New York
Uniform Commercial Code or otherwise.
(i) It will defend the Pledgee's security interest in the
Collateral against the claims and demands of all persons whomsoever.
(j) It will take any and all actions necessary to maintain
such Pledgor's status as a limited partner of the Operating Partnership and the
limited liability represented by the Pledged Units.
(k) Such Pledgor will not enter into or assume any other
agreement containing a negative pledge with respect to the Collateral.
5. Registration. At any time and from time to time the Pledgee may
cause all or any of theCollateral to be transferred to or registered in its
name or the name of its nominee or nominees.
6. Claims; Value of Collateral.
(a) On or prior to the date on which the survival period applicable to
the representation, warranty or covenant upon which a claim for indemnification
is based terminates as set forth in Sections 4.5 and 8.5.B of the Contribution
Agreement, the Pledgee may give notice (a "Claim Notice") to one or more of the
Pledgors of any such claim for indemnification it may have against the Pledgors,
or any claim against the Pledgee which it reasonably believes may result in such
a claim for indemnification against the Pledgors under Section 8.1.A of the
Contribution Agreement, specifying in reasonable detail the nature and dollar
amount of any such claim. Pledgor shall be deemed to have accepted a claim for
indemnification if it does not give a Response Notice (as hereinafter defined)
with respect thereto within 30 days following receipt of the Claim Notice. In
the event that the Pledgors object to any claim for indemnification and provide
a written response (a "Response Notice") to the Pledgee within 30 days following
receipt of the Claim Notice, which Response Notice describes in reasonable
detail the Pledgors' objection to the claim for indemnification (whether as to
the facts giving rise thereto, the amount thereof, or otherwise) and, if
applicable, providing a recalculation of the amount thereof, representatives of
the Pledgee and the Pledgors shall meet within ten days of the Pledgee's receipt
of the Response Notice to discuss and negotiate in good faith the claim for
indemnification and the Pledgors' objection thereto. In the event that such
meeting is not held or, if held, no resolution or compromise is reached within
30 days of such meeting, then at the election of either the Pledgee or the
Pledgors the dispute regarding the claim for indemnification shall be submitted
to and determined by a court of competent jurisdiction, as set forth in Section
21 hereof. A claim for indemnification is successful and is deemed to be a
Secured Obligation on the earliest to occur of: (i) the date on which the
Pledgors accept such claim pursuant to the second sentence of this paragraph (a)
or otherwise; (ii) on the date the Pledgors and the Pledgee agree on the amount
of such claim; or (iii) 30 days after a final adjudication of the Pledgors'
liability with respect to such claim (which shall mean that all applicable
appeals of any decision have been made or the time periods for filing such
appeals have lapsed) in accordance with the procedures set forth above in this
paragraph (a).
(b) The value of Collateral (the "Value") shall be determined as
follows: (i) with respect to Collateral consisting of the Pledged Units, an
amount equal to the fair market value of the number of common shares of
beneficial interest, par value $0.01 per share of the REIT ("Common Shares") for
which such Collateral is exchangeable pursuant to the Operating Partnership
Agreement; and (ii) for all other Collateral, the fair market value of such
Collateral as determined in good faith by the Independent Trust Managers of the
REIT. For purposes of clause (i) of this Section 6(b), "fair market value" of a
Common Share shall have the meaning assigned to such term in the Operating
Partnership Agreement. For the purposes of this Agreement, the term "Independent
Trust Managers" shall mean any member of the REIT's Board of Trust Managers who
is not an officer of the REIT or an affiliate of Grove Investment Group, Inc.
7. Voting Rights and Certain Payments Prior to Occurrence of
Secured Obligations and Other Events.
(a) Until Collateral may be applied to satisfy a Secured Obligation
hereunder, each Pledgor shall be entitled to exercise, as it shall think fit,
but in a manner in the judgment of the Pledgee not inconsistent with the terms
hereof, the voting power with respect to any such Collateral, and for that
purpose the Pledgee shall (if such Collateral shall be registered in the name of
the Pledgee or its nominee) execute or cause to be executed from time to time,
at the expense of such Pledgor, such proxies or other instruments in favor of
such Pledgor or its nominee, in such form and for such purposes as shall be
reasonably required by such Pledgor and, if such Pledgor is an entity, shall be
specified in a written request therefor of its President or a Vice-President, to
enable it to exercise such voting power with respect to such Collateral.
(b) Until the Independent Trust Managers of the REIT reasonably
determine that the outstanding claims for indemnification asserted by the
Pledgee in one or more Claim Notices may equal or exceed the value of the
Collateral then available to satisfy such claims for indemnification, each
Pledgor shall be entitled to receive and retain for its own account any and all
regular cash distributions (but not distributions in the form of partnership
interests in the Operating Partnership ("Partnership Interests") or other
securities or liquidating distributions) and interest at any time and from time
to time paid upon any of such Collateral.
(c) Notwithstanding anything contained in this Agreement to the
contrary, except with the prior consent of the Pledgee, until such time as this
Agreement is terminated, no Pledgor shall have the right to exercise any of its
redemption rights under Section 8.6 of the Operating Partnership Agreement.
8. Extraordinary Payments and Distributions. In case, upon the
dissolution or liquidation (in whole or in part) of the Operating Partnership,
any sum shall be paid as a liquidating distribution or otherwise upon or with
respect to any of the Collateral, such sum shall be paid over to the Pledgee
promptly, and in any event within ten days after receipt thereof, to be held by
the Pledgee as additional Collateral hereunder. In case any distribution of
Partnership Interests shall be made with respect to the Collateral, or
Partnership Interests or fractions thereof shall be issued pursuant to any split
involving any of the Collateral, or any distribution of capital shall be made on
any of the Collateral, or any partnership interests, shares, obligations or
other property shall be distributed upon or with respect to the Collateral
pursuant to a recapitalization or reclassification of the capital of the
Operating Partnership, or pursuant to the dissolution, liquidation (in whole or
in part), bankruptcy or reorganization of the Operating Partnership, or pursuant
to the merger or consolidation of the Operating Partnership with or into another
entity, the partnership interests, shares, obligations or other property so
distributed shall be delivered to the Pledgee promptly, and in any event within
ten days after receipt thereof, to be held by the Pledgee as additional
Collateral hereunder, and all of the same (other than cash) shall constitute
Collateral for all purposes hereof.
9. Voting Rights and Certain Payments After Occurrence of Secured
Obligation and Certain Other Events.
(a) At such time that Collateral may be applied to satisfy a Secured
Obligation hereunder, all rights of any Pledgor to exercise or refrain from
exercising all voting power with respect to such Collateral and to otherwise
exercise all ownership rights arising from such Collateral shall cease, and
thereupon the Pledgee shall be entitled to exercise all voting power with
respect to such Collateral and otherwise exercise such ownership rights as
though the Pledgee were the outright owner of such Collateral. In the event that
the Independent Trust Managers of the REIT acting on behalf of the Pledgee
hereunder, reasonably determine that the outstanding claims for indemnification
under the Contribution Agreement asserted by the Pledgee in one or more Claim
Notices may equal or exceed the value of the Collateral then available to
satisfy such claims for indemnification, all rights of any Pledgor to receive
and retain the distributions and interests which it would otherwise be
authorized to receive and retain pursuant to Section 7 hereof shall cease, and
thereupon the Pledgee shall be entitled to receive and retain, as additional
Collateral hereunder, any and all distributions and interest at any time and
from time to time paid upon any of such Collateral, provided that, concurrent
with making such determination, the Pledgee gives notice thereof to the
Pledgors. Upon receipt of any such notice, the Pledgors may submit the matter to
arbitration in accordance with the rules of the American Arbitration Association
before a tribunal in New York, New York, and the decision of the arbitrators as
to the retention of any such distributions and interest shall be final and
binding between the parties and shall be enforceable in any court of competent
jurisdiction.
(b) All payments, distributions or other property or assets which are
received by any Pledgor contrary to the provisions of paragraph (a) of this
Section 9 shall be received and held in trust for the benefit of the Pledgee,
shall be segregated from other funds of such Pledgor and shall be forthwith paid
over to the Pledgee.
10. Application of Cash Collateral. Any cash received and retained by
the Pledgee as additional Collateral hereunder pursuant to the foregoing
provisions may at any time and from time to time be applied (in whole or in
part) by the Pledgee, at its option, to the payment of the Secured Obligations
to which such Collateral is subject (in such order as the Pledgee shall in its
sole discretion determine).
11. Remedies With Respect to the Collateral.
(a) At such time that a claim for indemnification under the
Contribution Agreement becomes a Secured Obligation, the Pledgee, without
obligation to resort to other security, shall have the right at any time and
from time to time to redeem, sell, resell, assign and deliver, in its
discretion, all or any part of Collateral with a Value equal to the amount of
the Secured Obligation (the "Indemnification Amount"), in one or more parcels,
at the same or different times, and all right, title and interest, claim and
demand therein and right of redemption thereof, at any public or private sale,
for cash, upon credit or for future delivery, and in connection therewith the
Pledgee may grant options. Each such purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
Pledgor, and each Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which such Pledgor now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted. If any part of the Collateral is sold by the Pledgee upon
credit or for future delivery, the Pledgee shall not be liable for the failure
of the purchaser to purchase or pay for the same and, in the event of any such
failure, the Pledgee may resell the Collateral. In no event shall a Pledgor be
credited with any part of the proceeds of sale of any Collateral until cash
payment thereof has actually been received by the Pledgee.
(b) No demand, advertisement or notice, all of which are hereby
expressly waived, shall be required in connection with (i) any redemption by the
Operating Partnership of any Collateral in accordance with the Operating
Partnership Agreement or (ii) any sale or other disposition of any part of the
Collateral which threatens to decline speedily in value or which is of a type
customarily sold on a recognized market. Except as set forth in the preceding
sentence, the Pledgee shall give the Pledgors at least ten days' prior notice of
the time and place of any public sale and of the time after which any private
sale or other disposition is to be made, which notice the Pledgors agree is
reasonable, all other demands, advertisements and notices being hereby waived.
The Pledgee shall not be obligated to make any sale of Collateral if it shall
determine not to do so, regardless of the fact that notice of sale may have been
given. The Pledgee may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. Upon each
private sale of Collateral of a type customarily sold in a recognized market and
upon each public sale, the Pledgee may purchase all or any of the Collateral
being sold, free from any equity or right of redemption, which is hereby waived
and released, and may make payment therefor by release or discharge of the
Secured Obligations in lieu of cash payment, and may, upon compliance with the
terms of sale, hold, retain and dispose of such Collateral without further
accountability therefor. In the case of all sales of Collateral, public or
private, the Pledgee may deduct from the proceeds of sale all costs and expenses
of every kind for sale or delivery, including brokers' and attorneys' fees, and
the Pledgee shall apply any balance of the proceeds of sale to the payment of
the Secured Obligations. Recourse against the Pledgors is joint and several,
however, is limited to the rights of the Pledgors in the Collateral and the
Pledgors, collectively, shall not be liable for any deficiency in the proceeds
of sale of the Collateral to the payment of the Secured Obligations. If any
proceeds of sale remain after payment in full of such costs and expenses and all
of the Secured Obligations, they shall be held by the Pledgee as additional
Collateral hereunder, subject to any duty of the Pledgee imposed by law to the
holder of any subordinate security interest in the Collateral known to the
Pledgee.
(c) For purposes of this Section 11, an agreement to sell all or any
part of the Collateral shall be treated as a sale thereof and the Pledgee shall
be free to carry out such sale pursuant to such agreement, and no Pledgor shall
be entitled to the return of any of the same subject thereto, notwithstanding
that after the Pledgee shall have entered into such an agreement, all Secured
Obligations may have been paid and performed in full.
(d) Each Pledgor recognizes that the Pledgee may be unable to effect a
public sale of all or a part of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, as now or hereafter in
effect, or in applicable Blue Sky or other state securities laws, as now or
hereafter in effect, but may be compelled to resort to one or more private sales
to a restricted group of purchasers who will be obliged to agree, among other
things, to acquire such Collateral for their own account, for investment and not
with a view to the distribution or resale thereof. Each Pledgor agrees that
private sales so made may be at prices and other terms less favorable to the
seller than if such Collateral were sold at public sales, and that the Pledgee
has no obligation to delay sale of any such Collateral for the period of time
necessary to permit the issuer of such Collateral, even if such issuer would
agree, to register such Collateral for public sale under such applicable
securities laws. Each Pledgor agrees that private sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner.
(e) The remedies provided herein in favor of the Pledgee shall not be
deemed exclusive, but shall be cumulative, and shall be in addition to all other
remedies in favor of the Pledgee existing at law or in equity.
(f) The Pledgee shall not have any duty to exercise any of the rights,
privileges, options or powers or to sell or otherwise realize upon any of the
Collateral, as herein authorized, and the Pledgee shall not be responsible for
any failure to do so or delay in so doing.
12. Care of Collateral. The Pledgee shall have no duty as to the
collection or protection of the Collateral or any income thereon or as to the
preservation of any rights pertaining thereto, beyond the safe custody of any
thereof actually in its possession. With respect to any maturities, calls,
conversions, exchanges, redemptions, offers, tenders or similar matters relating
to any of the Collateral (herein called "events"), the Pledgee's duty shall be
fully satisfied if (i) the Pledgee exercises reasonable care to ascertain the
occurrence and to give reasonable notice to the Pledgors of any events
applicable to any Collateral which are registered and held in the name of the
Pledgee or its nominee, (ii) the Pledgee gives the Pledgors reasonable notice of
the occurrence of any events, of which the Pledgee has received actual
knowledge, as to any securities which are in bearer form or are not registered
and held in the name of the Pledgee or its nominee (the Pledgors hereby agreeing
to give the Pledgee reasonable notice of the occurrence of any events applicable
to any securities in the possession of the Pledgee of which the Pledgors have
received knowledge), and (iii) (a) the Pledgee endeavors to take such action
with respect to any of the events as the Pledgors may reasonably and
specifically request in writing in sufficient time for such action to be
evaluated and taken or (b) if the Pledgee determines that the action requested
might adversely affect the value of the Collateral, the collection of the
Secured Obligations, or otherwise prejudice the interests of the Pledgee, the
Pledgee gives reasonable notice to the Pledgors that any such requested action
will not be taken and if the Pledgee makes such determination or if any Pledgor
fails to make such timely request, the Pledgee takes such other action as it
deems advisable in the circumstances. Except as hereinabove specifically set
forth, the Pledgee shall have no further obligation to ascertain the occurrence
of, or to notify the Pledgors with respect to, any events and shall not be
deemed to assume any such further obligation as a result of the establishment by
the Pledgee of any internal procedures with respect to any securities in its
possession. Except for any claims, causes of action or demands arising out of
the Pledgee's failure to perform its agreements set forth in this Section, the
Pledgors release the Pledgee from any claims, causes of action and demands at
any time arising out of or with respect to this Agreement, the Collateral and/or
any actions taken or omitted to be taken by the Pledgee with respect thereto,
and the Pledgors hereby agree to hold the Pledgee harmless from and with respect
to any and all such claims, causes of action and demands.
13. Power of Attorney. Each Pledgor hereby appoints the Pledgee as
such Pledgor's attorney-in-fact for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instrument which the
Pledgee may deem necessary or advisable to accomplish the purposes hereof.
Without limiting the generality of the foregoing, the Pledgee shall have the
right and power to (a) receive, endorse and collect all checks and other orders
for the payment of money made payable to a Pledgor representing any interest or
other distribution payable in respect of the Collateral or any part thereof and
to give full discharge for the same, and (b) to execute endorsements,
assignments or other instruments of conveyance or transfer with respect to all
or any of the Collateral.
14. Further Assurances. The Pledgors shall, at their sole cost and
expense, upon request of the Pledgee, duly execute and deliver, or cause to be
duly executed and delivered, to the Pledgee such further instruments and
documents and take and cause to be taken such further actions as may be
necessary or proper in the reasonable opinion of the Pledgee to carry out more
effectually the provisions and purposes of this Agreement.
15. No Waiver. No failure on the part of the Pledgee to exercise, and
no delay on the part of the Pledgee in exercising, any of its options, powers,
rights or remedies hereunder, or partial or single exercise thereof, shall
constitute a waiver thereof or preclude any other or further exercise thereof or
the exercise of any other option, power, right or remedy.
16. Security Interest Absolute. All rights of the Pledgee hereunder,
grant of a security interest in the Collateral and all obligations of the
Pledgors hereunder, shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Contribution Agreement, any of the
Secured Obligations or any other agreement or instrument relating thereto, (b)
any change in any term of all or any of the Secured Obligations or any other
amendment or waiver of, or any consent to any departure from, the Contribution
Agreement, or any other agreement or instrument or (c) any other circumstance
which might otherwise constitute a defense available to, or a discharge of, any
Pledgor in respect of the Secured Obligations or in respect of this Agreement.
17. Return of Collateral. Upon the date that is two years from the
date hereof (i.e., the date of termination of the survival period for all
representations and warranties under the Contribution Agreement), the Pledgors
shall be entitled to the return of all of the Collateral and all other cash held
as additional Collateral hereunder which have not been used or applied toward
the payment of the Secured Obligations, unless claims for indemnification under
the Contribution Agreement asserted in one or more Claim Notices pursuant to
Section 6(a) hereof remain outstanding, in which case Collateral with a Value
equal to the aggregate dollar amount of such claims for indemnification (the
"Unresolved Claim Amount") shall be retained by the Pledgee pursuant to the
terms hereof pending final resolution of such claims for indemnification
pursuant to Section 6 hereof. Pledgee shall use its best efforts to cause the
Value of Collateral owned and pledged hereunder by each Pledgor that may be
retained towards the Unresolved Claim Amount by Pledgee under this Section 17 to
be equal to the Unresolved Claim Amount multiplied by such Pledgor's Collateral
Percentage, as set forth on Schedule I hereto. Notwithstanding the preceding
sentence, in the event that, the application of the calculation set forth in the
preceding sentence would result in (i) Pledgee returning any Collateral to any
Pledgor(s) and (ii) Pledgee retaining Collateral with a Value that is less than
the Unresolved Claim Amount, then Pledgee may retain additional Collateral from
the Pledgor(s) to whom Pledgee would otherwise be returning Collateral, pro rata
among such Pledgor(s) in accordance with their Collateral Percentage, until (x)
Pledgee has retained Collateral equal to the Unresolved Claim Amount or (y) no
Pledgor will have any Collateral returned hereunder, whichever should occur
first. Pledgee shall not be liable for any deficiency in the Value of Collateral
returned to any Pledgor under this Section 17. The assignment by the Pledgee to
the Pledgors of such Collateral shall be without representation or warranty of
any nature whatsoever and wholly without recourse. Notwithstanding the
foregoing, the Pledgors' release of the Pledgee and agreement to hold the
Pledgee harmless set forth in the last sentence of Section 12 hereof shall
survive any return of Collateral or termination of this Agreement.
18. Notices. All notices and other communications to any party
hereunder shall be in writing and shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, or by a reputable
courier delivery service or by prepaid telex or telecopy and shall be given to
the address or telex or telecopier number for such party set forth below such
party's signature to this Agreement, or to such other address or telex or
telecopier number as such party may hereafter specify by notice to the other
party. Each such notice or other communication shall be effective (a) if given
by telex or telecopier, when such telex or telecopy is transmitted to the telex
or telecopier number specified by this Section and the appropriate answerback or
confirmation is received or (b) if given by any other means (including, without
limitation, by courier), when delivered at the address specified by this
Section.
19. Amendments and Waivers. No amendment or waiver of any provision
of this Agreement shall in any event be effective unless the same shall be in
writing and signed by the Pledgee and each Pledgor.
20. Governing Law. This Agreement and the rights and obligations of
the Pledgee and the Pledgors hereunder shall be construed in accordance with
and governed by the law of the State of New York (without giving effect to the
conflict of law principles thereof).
21. Submission to Jurisdiction.
(a) Any legal action or proceeding with respect to this Agreement may
be brought in the courts of the State of New York or of the United States of
America located in New York, and, by execution and delivery of this Agreement,
each Pledgor hereby accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. Each Pledgor
hereby irrevocably waives, in connection with any such action or proceeding, (i)
trial by jury, (ii) any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such action or proceeding in
such respective jurisdictions and (iii) the right to interpose any setoff,
counterclaim or cross-claim.
(b) Each Pledgor irrevocably consents to the service of process of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to such Pledgor at its
address determined pursuant to Section 18 hereof.
(c) Nothing herein shall affect the right of the Pledgee to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Pledgor in any other jurisdiction.
22. Assignment. None of the Pledgors or Pledgee may assign any of
their respective rights under and interests in this Agreement without the prior
written consent of the Pledgors (if the assignor is the Pledgee) or of the
Pledgee (if the assignor is any Pledgor), which consent shall not be
unreasonably withheld or delayed; provided, however, that no consent of any of
the Pledgors is required hereunder for the assignment by the Operating
Partnership or the REIT of any of its rights under and interests in the
Contribution Agreement to any permitted assignee under the Contribution
Agreement. Upon receipt of such consent (if required under this Section 22), the
Pledgee may deliver the Collateral or any portion thereof to its assignee who
shall thereupon, to the extent provided in the instrument of assignment, have
all of the rights of the Pledgee hereunder with respect to the Collateral, and
the Pledgee shall thereafter be fully discharged from any responsibility with
respect to the Collateral so delivered to such assignee. However, no such
assignment shall relieve such assignee of those duties and obligations of the
Pledgee specified hereunder.
23. Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Pledgors and the Pledgee and their respective
heirs, successors and permitted assigns, and all subsequent holders of the
Secured Obligations.
24. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original and all of which
shall together constitute one and the same agreement.
25. Captions. The captions of the sections of this Agreement have been
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
26. Complete Agreement. This Agreement and the Contribution Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede all other understandings, oral or written, with
respect to the subject matter hereof.
27. Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired.
IN WITNESS WHEREOF, the Pledgors have duly executed this Agreement,
and the Pledgee has caused this Agreement to be duly executed by its officers
duly authorized, as of the day and year first above written.
(REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
/s/ Damon Navarro
Damon Navarro
Business Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
Residence Address
17 School Street
Glastonbury, CT 06033
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
/s/ Brian Navarro
Brian Navarro
Business Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
Residence Address
62D Nanel Drive
Glastonbury, CT 06033
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
/s/ Edmund Navarro
Edmund Navarro
Business Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
Residence Address
179 Robin Road
Glastonbury, CT 06033
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
/s/ Joseph R. LaBrosse
Joseph LaBrosse
Business Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
Residence Address
9 Coleman Road
Glastonbury, CT 06033
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
/s/ Gerald McNamara
Gerald McNamara
Business Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
Residence Address
15 Hatters Lane
Farmington, CT 06032
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
NATIONAL REALTY SERVICES,
LIMITED PARTNERSHIP
By: Grove Services Inc.
its General Partner
By: /s/ Edmund Navarro
Name: Edmund Navarro
Title: President
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
GROVE INVESTMENT GROUP, INC.
By: /s/ Brian Navarro
Name: Brian Navarro
Title: Secretary
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
BURGUNDY ASSOCIATES LIMITED
PARTNERSHIP
By: BALP, Inc.,
its General Partner
By: /s/ Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Treasurer
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
GROVE EQUITY PARTNERSHIP
By: /s/ Joseph R. LaBrosse
Joseph R. LaBrosse
Partner
By: /s/ Damon Navarro
Damon Navarro
Partner
By: /s/ Edmund Navarro
Edmund Navarro
Partner
By: /s/ Brian Navarro
Brian Navarro
Partner
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGOR:
GROVE HOLDING CO. INC.
By: /s/ Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Treasurer
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
PLEDGE AGREEMENT
PLEDGEES:
GROVE REAL ESTATE ASSET TRUST
By: /s/ Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Chief Financial Officer
Address:
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
GROVE OPERATING, L.P.
By: GROVE REAL ESTATE ASSET TRUST,
its General Partner
By: /s/ Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Chief Financial Officer
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SCHEDULE I
Pledged Units
Name of Pledgor Number of Units Collateral
Percentage
Damon Navarro ___ [ ]%
Brian Navarro ___ [ ]%
Edmund Navarro ___ [ ]%
Joseph LaBrosse ___ [ ]%
National Realty, L.P. ___ [ ]%
Grove Investment Group, Inc. ___ [ ]%
Burgundy Associates Limited
Partnership ___ [ ]%
Gerald McNamara [ ]%
Total ___ 100%
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is entered into as of
March 14, 1997 by and among GROVE REAL ESTATE ASSET TRUST, a real estate
investment trust organized under the laws of Maryland ("GREAT"), GROVE
OPERATING, L.P., a Delaware limited partnership (the "Operating Partnership"),
and each of the individuals and entities that execute a signature page to this
Agreement (each a "Grove Company" and, together, the "Grove Companies").
WHEREAS, on the date hereof, the Grove Companies, GREAT, the Operating
Partnership and certain other persons are entering into a series of related
transactions pursuant to which the Operating Partnership will acquire, among
other things, substantially all of the interests of the Grove Companies and
certain other individuals and entities in a portfolio of multi-family
residential properties (and one retail mixed-use property) located in the
Northeastern United states; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of each Grove Company, in an effort to eliminate
potential conflicts of interest that may arise in the future to protect the
Company's legitimate business interests, i.e., the value of its business and its
good will, and for other business purposes;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
0. Definitions. Capitalized terms used herein shall have the meanings set
forth below:
"Agreement" means this Noncompetition Agreement, including any amendments
hereto made in accordance with paragraph 6(d) hereof.
"Company" means, collectively, GREAT and its subsidiaries, including
without limitation the Operating Partnership.
"Excluded Properties" means those properties listed on Schedule A hereto,
each of which is owned by the limited partnership, and has the corporate general
partner, indicated on such Schedule A.
"Executive Officers" means each of Damon Navarro, Brian Navarro, Edmund
Navarro, Joseph LaBrosse and Gerald McNamara.
"Executive Officer Noncompetition Agreements" means each of the
Noncompetition Agreements, dated the date hereof, between GREAT and the
Operating Partnership, on the one hand, and an Executive Officer on the other
hand.
"Noncompetition Term" means the period during which any Executive Officer
remains bound by the terms of, and is prohibited from engaging in Competition
(as defined) pursuant to, the Executive Officer Noncompetition Agreement to
which such Executive Officer is a party.
1. Noncompetition. During the Noncompetition Term, each Grove Company shall
be prohibited from engaging in Competition (as defined below) with the Company.
( ) The term "Competition" for purposes of this Agreement shall mean
engaging directly or indirectly in developing, redeveloping, acquiring, managing
or operating multi-family or retail mixed-use properties in the Northeastern
United States or in any other market in which the Company owns, develops or
manages property, whether by a Grove Company individually or as principal,
partner, officer, director, consultant, employee, stockholder or manager of any
person, partnership, corporation, limited liability company or any other entity;
provided, however, that the term "Competition" shall be deemed to exclude (i) a
Grove Company's ownership, management or leasing of such Grove Company's
interests in any of the Excluded Properties and any passive ownership interest
in real property received in exchange therefor, and (ii) the provision of real
estate brokerage services. The term "Northeastern United States" for purposes of
this Agreement shall mean the following states: Maine, New Hampshire, Vermont,
Massachusetts, Connecticut, Rhode Island, New York, New Jersey and Pennsylvania.
2. Reasonable and Necessary Restrictions. Each Grove Company acknowledges
that the restrictions, prohibitions and other provisions hereof are reasonable,
fair and equitable in scope, terms and duration, are necessary to protect the
legitimate business interests of the Company, and are a material inducement to
the Company to enter into the transactions contemplated in the recitals hereto.
Each Grove Company covenants that it will not challenge the enforceability of
this Agreement nor will it raise any equitable defense to its enforcement.
3. Specific Performance. Each Grove Company acknowledges that the
obligations undertaken by it pursuant to this Agreement are unique and that the
Company likely will have no adequate remedy at law if such Grove Company shall
fail to perform any of its obligations hereunder, and each Grove Company
confirms that the Company's right to specific performance of the terms of this
Agreement is essential to protect the rights and interests of the Company.
Accordingly, in addition to any other remedies that the Company may have at law
or in equity, the Company shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by each Grove Company, and the Company shall have the right to obtain
preliminary and permanent injunctive relief to secure specific performance and
to prevent a breach or contemplated breach of this Agreement by a Grove Company,
and each Grove Company submits to the jurisdiction of the courts of the State of
New York for this purpose.
4. Termination of Existing Noncompetition Agreement. The existing
Noncompetition Agreement between the Grove Companies, GREAT and certain other
individuals and entities is hereby terminated, and shall be of no further legal
effect.
5. Miscellaneous Provisions.
( ) Binding Effect. Subject to any provisions hereof restricting
----------------
assignment, all covenants and agreements in this Agreement by or on behalf of
any of the parties hereto shall bind and inure to the benefit of the respective
successors, permitted assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder,
provided, that this Agreement may be assigned by GREAT and the Operating
Partnership to any successor to its business.
(a) Severability. If fulfillment of any provision of this Agreement, at the
time such fulfillment shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
(b) Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed by
and construed in accordance with the laws of the State of New York, not
including the choice-of-law rules thereof.
(c) Amendment; Waiver. Except as otherwise expressly provided in this
Agreement, no amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by each of the
parties hereto. Any waiver by any party or consent by any party to any variation
from any provision of this Agreement shall be valid only if in writing and only
in the specific instance in which it is given, and such waiver or consent shall
not be construed as a waiver of any other provision or as a consent with respect
to any similar instance or circumstance.
(d) Headings. Paragraph and subparagraph headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
(e) Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the person or entity may require.
(f) Notices. All notices and other communications to any party hereunder
shall be in writing and shall be personally delivered or sent by certified mail,
postage prepaid, return receipt requested, or by a reputable courier delivery
service or by prepaid telex or telecopy and shall be given to the address or
telex or telecopier number for such party set forth below such party's signature
to this Agreement, or to such other address or telex or telecopier number as
such party may hereafter specify by notice to the others. Each such notice or
other communication shall be effective (a) if given by telex or telecopier, when
such telex or telecopy is transmitted to the telex or telecopier number
specified by this Section and the appropriate answerback or confirmation is
received or (b) if given by any other means (including, without limitation, by
courier), when delivered at the address specified by this Section.
(g) Exclusive Agreement. This Agreement supersedes all prior agreements
(whether written or oral) among the parties with respect to the subject matter,
including, without limitation, any noncompetition agreement entered into by any
Grove Company in connection with the initial public offering of GREAT, and is
intended as a complete and exclusive statement of the terms of the agreement
among the parties with respect thereto.
(h) Execution in Counterparts. This Agreement may be executed in two or
more counterparts, none of which need contain the signatures of all parties
hereto and each of which shall be deemed an original.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
GROVE REAL ESTATE ASSET TRUST
By: /s/ Joseph R.
LaBrosse
Name: Joseph R. LaBrosse
Title: Chief Financial Officer
Address:
Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, CT 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
GROVE OPERATING, L.P., by its
General Partner
GROVE REAL ESTATE ASSET
TRUST
By: /s/ Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Chief Financial Officer
Address:
Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, CT 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
SIGNATURE PAGE
TO
NONCOMPETITION AGREEMENT
NATIONAL REALTY SERVICES, L.P.
By: Grove Services, Inc.,
its General Partner
By: /s/ Joseph R.LaBrosse
Name: Joseph R. LaBrosse
Title: Treasurer
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
NONCOMPETITION AGREEMENT
GROVE INVESTMENT GROUP, INC.
By: /s/ Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Treasurer
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
NONCOMPETITION AGREEMENT
BURGUNDY ASSOCIATES LIMITED
PARTNERSHIP
By: BALP, Inc.,
its General Partner
By:/s/ Joseph R.LaBrosse
Name: Joseph R. LaBrosse
Title: Treasurer
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
NONCOMPETITION AGREEMENT
GROVE HOLDING CO. INC.
By: /s/ Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Treasurer
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
NONCOMPETITION AGREEMENT
GROVE EQUITY PARTNERSHIP
By: /s/ Joseph R. LaBrosse
Joseph R. LaBrosse
Partner
By: /s/ Damon Navarro
Damon Navarro
Partner
By: /s/ Edmund Navarro
Edmund Navarro
Partner
By: /s/ Brian Navarro
Brian Navarro
Partner
Address:
c/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SIGNATURE PAGE
TO
NONCOMPETITION AGREEMENT
GROVE PROPERTY SERVICES LIMITED
PARTNERSHIP
By: Grove Services, Inc., its
General Partner
By: /s/ Joseph R. LaBrosse
Name: Joseph R. LaBrosse
Title: Treasurer
Address:
/o Grove Real Estate Asset Trust
598 Asylum Avenue
Hartford, Connecticut 06105
Tel: (860) 246-1126
Fax: (860) 527-0401
<PAGE>
SCHEDULE A
"Excluded Properties"
- -------------------------------------------------------------------------------
Corporate General
Limited Partnership Owning Partner of
Excluded Excluded Property Excluded
Property Property
Arbor on the Farmington Windsor Arbor LP Windsor Common Corp(a)
Birch Hill Apartments Farmington Summit Associates LP FSLP, Inc.(b)
Boulevard West Apartments Grove Boulevard Associates LP (1)
Capital View Apartments Grove Hartford Associates LP (1)
Coachlight Village ANE Associates LP (2)
Apartments
Farmington Forest Farmington Forest Associates LP Eastbrook Willow Corp.
Condominiums
Glastonbury Center Heritage Court Associates LP Glastonbury Realty L.P.
Apartments
Harbor View Apartments Grove Coastal Associates LP (3)
Bridge Building Grove Coastal Associates LP (3)
Holdridge Building Grove Coastal Associates LP (3)
2 Pearl Street Grove Coastal Associates LP (3)
Larkin Square Grove Coastal Associates LP (3)
Corner Block Building Grove Coastal Associates LP (3)
Wharf Building Grove Coastal Associates LP (3)
Park Place East Apartments Grove Coastal Associates LP (1)
Quequechan Apartments Northeast Apartment LP NEALP, Inc.
River Grove Apartments River Grove Associates LP (4)
Summit Apartments Farmington Summit Associates LP FSLP, Inc.
Brooksyde Apartments West Hartford Centre Associates LP WHCALP, Inc.
- -------------------------------------------------------------------------------
Talcott Condominiums Grove Talcott Associates LP GTALP, Inc.
- ------------------------------------------------------------------------------
Colonial Inn Edgartown Associates LP (4)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Damon Navarro, Brian Navarro, Ronald Abdow & George Abdow
(2) Stuart Grodd, Arthur Grodd, Grove ANE Corp.
(3) Grove Investment Group, Inc. and Springfield Development Corp.
(4) Damon Navarro, Brian Navarro, Gerald McNamara
(a) Grove Investment Group, Inc. is owned 100% by Damon Navarro, Brian
Navarro and Edmund Navarro (40%, 40% and 20% respectively). Springfield
Development Corp. is owned 100% by Ronald Abdow and George Abdow (50% each)
(b) Grove ANE Corp is owned 100% by Brian & Damon Navarro (50% each)
(c) Glastonbury Realty is owned by Damon Navarro (16.667%), Brian Navarro
(16.667%), George Abdow (16.667%), Ronald Abdow (16.667%), Timothy Jones
(19.166%) and Tucker Frederickson (14.166%)
DOC 1401554
1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of March 14, 1997 by
and among GROVE REAL ESTATE ASSET TRUST, a real estate investment trust
organized under the laws of Maryland ("GREAT"), GROVE OPERATING, L.P., a
Delaware limited partnership (the "Operating Partnership"), and _____________
(the "Executive").
WHEREAS, on the date hereof, the GREAT, the Operating Partnership and
certain other persons are entering into a series of related transactions
pursuant to which it will acquire, among other things, substantially all of the
interests of Executive and certain other individuals and entities in a portfolio
of multi-family residential properties (and one retail mixed-use property)
located in the Northeastern United states; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purposes;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Definitions. Capitalized terms used herein shall have the meanings set
forth below:
"Agreement" means this Noncompetition Agreement, including any
amendments hereto made in accordance with paragraph 7(d) hereof.
"Company" means, collectively, GREAT and its subsidiaries,
including without limitation the Operating Partnership.
"Employment Agreement" means that certain Employment Agreement
between GREAT and Executive, of even date herewith, as amended from time to
time.
"Excluded Properties" means those properties listed on
Schedule A hereto, each of which is owned by the limited partnership, and has
the corporate general partner, indicated on such Schedule A.
"Noncompetition Term" means the period beginning on the date
hereof through the date which is twenty-four (24) months after Executive is no
longer an executive officer, trust manager, Significant Shareholder, or employee
of or consultant to the Company; provided, that in the event that Executive's
employment with GREAT is terminated by GREAT without "Cause" or by the Executive
for "Good Reason" or in connection with a "Change of Control" (as such terms are
defined in the Employment Agreement), the Noncompetition Term shall terminate on
the effective date of such termination of employment.
"Significant Shareholder" means any individual or entity that
"beneficially owns" (as defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended) 5% of the then issued and outstanding common shares of
beneficial interest, par value $0.01 per share, of GREAT.
(a) Noncompetition. (a) During the Noncompetition Term, Executive shall be
prohibited from engaging in Competition (as defined below) with the Company.
(b) The term "Competition" for purposes of this Agreement shall mean
engaging directly or indirectly in developing, redeveloping, acquiring,
managing or operating multi-family or retail mixed-use properties in
the Northeastern United States or in any other market in which the
Company owns, develops or manages property, whether by the Executive
individually or as principal, partner, officer, director, consultant,
employee, stockholder or manager of any person, partnership,
corporation, limited liability company or any other entity; provided,
however, that the term "Competition" shall be deemed to exclude (i) the
Executive's ownership, management or leasing of the Executive's
interests in any of the Excluded Properties and any passive ownership
interest in real property received in exchange therefor, and (ii) the
provision of real estate brokerage services. The term "Northeastern
United States" for purposes of this Agreement shall mean the following
states: Maine, New Hampshire, Vermont, Massachusetts, Connecticut,
Rhode Island, New York, New Jersey and Pennsylvania.
2. Reasonable and Necessary Restrictions. Executive acknowledges that the
restrictions, prohibitions and other provisions hereof are reasonable, fair and
equitable in scope, terms and duration, are necessary to protect the legitimate
business interests of the Company, and are a material inducement to the Company
to enter into the transactions contemplated in the recitals hereto. Executive
covenants that he will not challenge the enforceability of this Agreement nor
will he raise any equitable defense to its enforcement.
3. Restrictions in Addition to Employment Agreement. Executive acknowledges
that the restrictions, prohibitions and other provisions hereof shall be in
addition to and not in substitution of the restrictions, prohibitions and other
provisions of the Employment Agreement.
4. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Company shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of New York for this purpose.
5. Termination of Existing Noncompetition Agreement. The existing
Noncompetition Agreement between Executive and GREAT is hereby terminated, and
shall be of no further legal effect.
6. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof restricting
assignment, all covenants and agreements in this Agreement by or on behalf of
any of the parties hereto shall bind and inure to the benefit of the respective
successors, permitted assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder,
provided, that this Agreement may be assigned by GREAT and the Operating
Partnership to any successor to its business.
(b) Severability. If fulfillment of any provision of this Agreement, at the
time such fulfillment shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed by
and construed in accordance with the laws of the State of New York, not
including the choice-of-law rules thereof.
(d) Amendment; Waiver. Except as otherwise expressly provided in this
Agreement, no amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by each of the
parties hereto. Any waiver by any party or consent by any party to any variation
from any provision of this Agreement shall be valid only if in writing and only
in the specific instance in which it is given, and such waiver or consent shall
not be construed as a waiver of any other provision or as a consent with respect
to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
(f) Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the person or entity may require.
(g) Notices. All notices and other communications to any party hereunder
shall be in writing and shall be personally delivered or sent by certified mail,
postage prepaid, return receipt requested, or by a reputable courier delivery
service or by prepaid telex or telecopy and shall be given to the address or
telex or telecopier number for such party set forth below such party's signature
to this Agreement, or to such other address or telex or telecopier number as
such party may hereafter specify by notice to the others. Each such notice or
other communication shall be effective (a) if given by telex or telecopier, when
such telex or telecopy is transmitted to the telex or telecopier number
specified by this Section and the appropriate answerback or confirmation is
received or (b) if given by any other means (including, without limitation, by
courier), when delivered at the address specified by this Section.
(h) Exclusive Agreement. This Agreement supersedes all prior agreements
(whether written or oral) among the parties with respect to the subject matter
(other than the Employment Agreement), including, without limitation, any
noncompetition agreement entered into by Executive in connection with the
initial public offering of GREAT, and is intended as a complete and exclusive
statement of the terms of the agreement among the parties with respect thereto.
(i) Execution in Counterparts. This Agreement may be executed in two or
more counterparts, none of which need contain the signatures of all parties
hereto and each of which shall be deemed an original.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
GROVE REAL ESTATE ASSET TRUST
_______________________________ By: ___________________________
[Executive] Name:
Title:
Address: Address:
Business
c/o Grove Real Estate Asset Trust Grove Real Estate Asset Trust
598 Asylum Avenue 598 Asylum Avenue
Hartford, CT 06105 Hartford, CT 06105
Tel: (860) 246-1126 Tel: (860) 246-1126
Fax: (860) 527-0401 Fax: (860) 527-0401
Residence
<PAGE>
SCHEDULE A
"Excluded Properties"
- -----------------------------------------------------------------------------
Corporate General
Limited Partnership Owning Partner of
Excluded Property Excluded Property Excluded Property
----------------- ----------------- -------------------
Arbor on the Farmington Windsor Arbor LP Windsor Common Corp(a)
Birch Hill Apartments Farmington Summit Associates LP FSLP, Inc.(b)
Boulevard West Apartments Grove Boulevard Associates LP (1)
Capital View Apartments Grove Hartford Associates LP (1)
Coachlight Village
Apartments ANE Associates LP (2)
Farmington Forest Farmington Forest Associates LP Eastbrook Willow
Condominiums Corp.
Glastonbury Center
Apartments Heritage Court Associates LP Glastonbury Realty L.P.
Harbor View Apartments Grove Coastal Associates LP (3)
Bridge Building Grove Coastal Associates LP (3)
Holdridge Building Grove Coastal Associates LP (3)
2 Pearl Street Grove Coastal Associates LP (3)
Larkin Square Grove Coastal Associates LP (3)
Corner Block Building Grove Coastal Associates LP (3)
Wharf Building Grove Coastal Associates LP (3)
Park Place East Apartments Grove Coastal Associates LP (1)
Quequechan Apartments Northeast Apartment LP NEALP, Inc.
River Grove Apartments River Grove Associates LP (4)
Summit Apartments Farmington Summit Associates LP FSLP, Inc.
Brooksyde Apartments West Hartford Centre Associates LP WHCALP, Inc.
- -------------------------------------------------------------------------------
Talcott Condominiums Grove Talcott Associates LP GTALP, Inc.
- ------------------------------------------------------------------------------
Colonial Inn Edgartown Associates LP (4)
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(1) Damon Navarro, Brian Navarro, Ronald Abdow & George Abdow
(2) Stuart Grodd, Arthur Grodd, Grove ANE Corp.
(3) Grove Investment Group, Inc. and Springfield Development Corp.
(4) Damon Navarro, Brian Navarro, Gerald McNamara
(a) Grove Investment Group, Inc. is owned 100% by Damon Navarro, Brian
Navarro and Edmund Navarro (40%, 40% and 20% respectively). Springfield
Development Corp. is owned 100% by Ronald Abdow and George Abdow (50% each)
(b) Grove ANE Corp is owned 100% by Brian & Damon Navarro (50% each)
(c) Glastonbury Realty is owned by Damon Navarro (16.667%), Brian Navarro
(16.667%), George Abdow (16.667%), Ronald Abdow (16.667%), Timothy Jones
(19.166%) and Tucker Frederickson (14.166%)
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of March 14,
1997, by and between Grove Real Estate Asset Trust, a real estate investment
trust organized under the laws of the State of Maryland ("GREAT"), and Damon
Navarro, an individual residing at 17 School Street, Glastonbury, Connecticut
06033 ("Executive").
WHEREAS, on the date hereof, GREAT is entering into a series of related
transactions pursuant to which it will acquire, among other things,
substantially all of the interests of Executive and certain other individuals
and entities in a portfolio of multi-family residential properties (and one
retail mixed-use property) located in the Northeastern United States;
WHEREAS, it is a condition to the consummation of the above-referenced
transactions, that Executive enter into this Agreement with GREAT; and
WHEREAS, Executive desires to be employed by and serve GREAT and GREAT
desires to employ Executive, all on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Certain Definitions. The following capitalized terms, as used in this
Agreement shall have the meanings ascribed to such terms below:
"Cause" means (a) failure of the Executive to perform his
duties under Section 3 of this Agreement or otherwise to perform or observe any
of the material terms or provisions of this Agreement or the Noncompetition
Agreement, in either case after receipt of notice from GREAT specifying such
failure and giving Executive fifteen (15) days to cure such failure; (b) willful
misconduct or other similar action on the part of Executive that is materially
damaging or detrimental to GREAT; (c) conviction of, the indictment for (or its
procedural equivalent), or the entering of a guilty plea or a plea of no contest
by Executive with respect to, a crime involving a felony, fraud, embezzlement or
the like; or (d) misappropriation (or attempted misappropriation) of GREAT's
funds or misuse of GREAT's assets by Executive.
"Change of Control" a "Change of Control" of GREAT shall be
deemed to have occurred upon the happening of any of the following events:
(a) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Trust Managers (as defined in paragraph
(b) below) of GREAT, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act)) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of the combined voting power of the then outstanding Common Shares and
other shares of GREAT entitled to vote generally in the election of trust
managers, but excluding for this purpose:
(i) any such acquisition (or holding) by any Employer (as such
term is defined in GREAT's 1996 Share Incentive Plan), or any employee benefit
plan (or related trust) of such Employer; or
(ii) any such acquisition (or holding) by any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Common Shares
and other voting securities of GREAT immediately prior to such acquisition in
substantially the same proportion as their ownership immediately prior to such
acquisition, of the then outstanding Common Shares of GREAT and of the combined
voting power of the then outstanding voting securities of GREAT entitled to vote
generally in the election of trust managers;
(b) individuals who, as of the date hereof, constitute the Board of
Trust Managers of GREAT (the "Continuing Trust Managers") cease for any reason
to constitute at least a majority of the Board of Trust Managers of GREAT,
provided that any individual becoming a trust manager subsequent to the date
hereof whose election, or nomination for election by the shareholders of the
Company, was approved by a vote of at least a majority of the persons then
comprising the Continuing Trust Managers shall be considered a Continuing Trust
Manager, but excluding, for this purpose, any such individual whose initial
election as a member of the Board of Trust Managers of GREAT is in connection
with an actual or threatened "election contest" relating to the election of the
trust managers of GREAT (as such term is used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(c) approval by the shareholders of GREAT of
(i) a reorganization, merger or consolidation of GREAT, with
respect to which in each case all or substantially all of the individuals and
entities who were the respective beneficial owners of the Common Shares or
voting securities of GREAT immediately prior to such reorganization, merger or
consolidation will not, immediately following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding Common Shares and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors of the entity resulting from such reorganization, merger
or consolidation, or
(ii) a complete liquidation or dissolution of GREAT, or
(iii) the sale or other disposition of all or substantially all of the
assets of GREAT.
"Common Shares" means the common shares of beneficial interest, par value
$0.01 per share of GREAT.
"Company" means, collectively, GREAT and its subsidiaries, including,
without limitation, Grove Operating, L.P.
"Confidential Information" means any and all proprietary
information of the Company of whatever kind or nature pertaining to any aspect
of the Company's business as disclosed as a consequence of or through employment
with GREAT or otherwise. Such proprietary information includes but is not
limited to information relating to the Company's inventions, processes, plans,
products, sources or supply of material, operating and other cost data, property
purchase prices, list of present, past, and prospective customers or tenants,
customer or seller proposals, price or rent lists and data relating to
determination of rental rates or pricing of the Company's products or services,
any of which information is not generally known to the public or to actual or
potential competitors of the Company.
"Disability" means that Executive shall have been unable to
perform in any material respect Executive's duties under this Agreement by
reason of illness, or physical or mental disability or other similar incapacity,
which inability shall continue for more than 120 consecutive days, or 180 days
during any twelve-month period, but only to the extent that such definition does
not violate the Americans With Disabilities Act, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Good Reason" means (a) the assignment of Executive without
his consent to a position, responsibilities or duties of a materially lesser
status or degree of responsibility than his position, responsibilities, or
duties as set forth in Section 3 hereof or (b) failure of GREAT to perform or
observe any of the material terms or provisions of this Agreement, and the
continued failure of GREAT to cure such default within thirty (30) days after
written notice of such default and demand for performance has been given to
GREAT by Executive, which notice and demand shall describe specifically the
nature of such alleged failure to perform or observe such material terms or
provisions; provided, however, that if cure is impossible within such thirty
(30) days, it shall be sufficient for GREAT to commence such cure within said
thirty (30) day period, and pursue such cure diligently to completion within the
shortest possible reasonable time.
"Noncompetition Agreement" means that certain Noncompetition
Agreement between Executive and GREAT, of even date herewith.
2. Term of Employment. GREAT will employ the Executive, and the
Executive hereby accepts employment by GREAT, on the terms and conditions
contained in this Agreement for the period commencing upon the date of this
Agreement and ending on the date that is three (3) years from the date hereof
(together with any extensions thereof, the "Term"). This Agreement will
automatically extend for successive one-year terms without any further action by
the parties hereto, unless GREAT or Executive gives written notice to the other,
at least 120 days prior to the end of the then current term, of such party's
desire to terminate this Agreement.
3. Position and Duties.
(a) Executive shall serve as Chief Executive Officer and
President of GREAT, with such duties and responsibilities as are assigned or
delegated to Executive by GREAT's Board of Trust Managers from time to time.
(b) Executive shall devote substantially all of his business
time, attention, skill and energy to the performance of Executive's duties and
the advancement of the business and affairs of GREAT. If Executive is elected as
a director or officer of GREAT or any of its affiliates, Executive will fulfill
his duties as such director or officer without additional compensation.
(c) Subject to the covenants of Executive set forth in the
Noncompetition Agreement, Executive may engage in other activities for
Executive's own account while employed by GREAT hereunder, including, without
limitation, charitable, community and other business activities, provided that
such other activities do not materially interfere with the performance of
Executive's duties hereunder and are not otherwise detrimental to the business
and operations of GREAT and its subsidiaries.
4. Current Compensation.
(a) Base Compensation. During the Term, GREAT shall pay the Executive
an initial annual base salary equal to $50,000, payable in equal installments in
accordance with GREAT's normal practices for payment of executives in existence
from time to time. Executive's salary shall be reviewed by GREAT's Board of
Trust Managers on the employment anniversary date each year, and nothing in this
Agreement shall be deemed to prohibit an increase at any time in the annual rate
of salary of Executive at the sole discretion of GREAT's Board of Trust Managers
.
(b) Bonus Compensation. Executive will be entitled to bonus compensation if
and as determined, and in the form and upon the terms determined, by GREAT's
Board of Trust Managers; including, without limitation pursuant to GREAT's 1996
Share Incentive Plan.
(c) Reimbursement for Expenses. During the Term, GREAT will reimburse
Executive for all documented expenses properly incurred by Executive in the
performance of Executive's duties under this Agreement. Reimbursement for such
expenses shall be made in accordance with the expense reimbursement policies of
GREAT in effect from time to time.
(d) Other Benefits. In addition to the benefits specified in Sections
4(a) through 4(c), during the Term, Executive will be entitled to participate in
any present and future life, disability or health insurance, pension,
retirement, profit sharing or employee stock ownership plan or other
compensation or incentive plan adopted by GREAT for the general and overall
benefit of all principal executives of GREAT.
5. Confidentiality; Nondisclosure. Executive hereby agrees to hold in
confidence and not directly or indirectly to use or disclose, either during or
after the Term, Confidential Information obtained or created by Executive during
the Term, whether or not during working hours, except to the extent authorized
by GREAT. Upon termination of this Agreement (for any reason), or upon an
earlier request by GREAT, Executive shall deliver to GREAT all tangible forms of
Confidential Information in Executive's possession or control, including, but
not limited to, drawings, specifications, records, devices, models,
correspondence, blueprints, manuals, letters, notes, notebooks, reports,
flow-charts, computer programs, proposals, or any other documents, whether in
hard copy or on magnetic or optical media, and any copies or reproductions
thereof.
6. Termination of Employment.
(a) Executive's employment with GREAT hereunder shall terminate upon
Executive's death.
(b) Upon notice to Executive, GREAT may terminate Executive's
employment with GREAT hereunder (i) upon the Disability of Executive, (ii) for
Cause, or (iii) for any other reason in its sole and absolute discretion.
(c) Upon not less than thirty (30) days prior written notice to GREAT,
Executive may terminate Executive's employment with GREAT hereunder (i) for Good
Reason, or (ii) at any time within one (1) year after a Change of Control of
GREAT.
7. Compensation Upon Termination of Employment.
(a) If Executive's employment with GREAT is terminated by Executive's
death, GREAT shall continue to pay to Executive's estate, or as may be directed
by the legal representatives of such estate, Executive's full base salary at the
rate in effect at the time of Executive's death through the end of the calendar
month during which his death occurs.
(b) If Executive's employment with GREAT is terminated by reason of
Executive's Disability, GREAT will continue to pay Executive's full base salary
at the rate in effect at the time notice of Executive's termination as a result
of Executive's Disability is given, through the end of the calendar month during
which such termination is effective and for the lesser of (i) three consecutive
months thereafter, and (ii) the period until disability insurance benefits
commence under the disability insurance coverage furnished by GREAT to
Executive.
(c) If (i) Executive shall terminate Executive's employment with GREAT
in breach of this Agreement or (ii) GREAT terminates Executive's employment with
GREAT for Cause; GREAT shall pay Executive's full salary, at the rate in effect
at the time notice of such termination is given through the date such
termination is effective, and GREAT shall have no further obligations to
Executive under this Agreement.
(d) If (i) GREAT terminates Executive's employment with GREAT pursuant
to clause (iii) of Section 6(b) or (ii) Executive terminates his employment with
GREAT for Good Reason or in the event of a Change of Control of GREAT, (x) GREAT
shall continue to pay the Executive's full base salary at the rate in effect at
the time that notice of such termination is given through the end of the
calendar month during which such termination is effective and (y) GREAT shall
pay to Executive a lump sum amount equal to 200% of (A) Executive's then current
base salary plus (B) an amount equal to the aggregate of all bonuses (whether
cash, stock, options, or otherwise (but specifically excluding Deferred Stock
Grants, if any, granted to Executive under GREAT's 1996 Share Incentive Plan)
granted to Executive for the previous year, and GREAT shall have no further
obligations to Executive under this Agreement.
(e) Notwithstanding anything to the contrary set forth in this Section
7, no termination of Executive's employment with GREAT shall affect the right of
Executive or his estate of beneficiaries to receive any salary or bonus accrued
and due and payable but unpaid at the time of such termination, or any vested
rights which Executive may have at the time of his death pursuant to any
insurance or other death benefit plans or any other plans, policies or
arrangements of GREAT, subject to the terms of such insurance or other plans,
policies or arrangements.
8. Injunctive Relief; Breach of Certain Provisions.
(a) Executive acknowledges that the injury that would be suffered by
GREAT as a result of a breach of the provisions of this Agreement (including,
without limitation, any provision of Section 5 (Confidentiality; Nondisclosure))
would be irreparable, and that an award of monetary damages to GREAT for such a
breach would be an inadequate remedy. Consequently, GREAT will have the right,
in addition to any other rights it may have, to obtain injunctive relief to
restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and GREAT will not be obligated to post bond or
other security in seeking such relief.
(b) Without limiting GREAT's rights under this Section 8 or any other
remedies available to GREAT, if Executive (i) breaches any of the provisions of
Section 5 (Confidentiality; Nondisclosure) of this Agreement or (ii) breaches
any of the provisions of Section 2 or Section 3 of the Noncompetition Agreement,
GREAT shall have the right to cease making payments of any amounts otherwise due
to Executive under this Agreement.
9. Termination of Existing Employment Agreement. The existing Employment
Agreement between Executive and GREAT is hereby terminated and shall be of no
further legal effect.
10. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11. Binding Effect. This Agreement shall inure to the benefit of, and shall
be binding upon, the parties hereto and their respective successors, heirs,
assigns and legal representatives. The duties of Executive under this Agreement
are personal and therefore, may not be delegated.
12. Survival. It is the express intention and agreement of the parties
hereto that the provisions of Section 5 (Confidentiality; Nondisclosure) of this
Agreement shall survive the termination of this Agreement and termination of the
employment of Executive with GREAT hereunder or otherwise.
13. Notices. All notices and other communications to any party
hereunder shall be in writing and shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, or by a reputable
courier delivery service or by prepaid telex or telecopy and shall be given to
the address or telex or telecopier number for such party set forth below such
party's signature to this Agreement, or to such other address or telex or
telecopier number as such party may hereafter specify by notice to the other
party. Each such notice or other communication shall be effective (a) if given
by telex or telecopier, when such telex or telecopy is transmitted to the telex
or telecopier number specified by this Section and the appropriate answerback or
confirmation is received or (b) if given by any other means (including, without
limitation, by courier), when delivered at the address specified by this
Section.
14. Headings. The Section headings contained in this Agreement are inserted
for convenience of reference only and shall not in any way define or affect the
meaning, construction or scope of the provisions hereof.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
principles conflict of laws.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
17. Entire Agreement; Amendment. This Agreement supersedes all prior
agreements (whether written or oral) among the parties with respect to the
subject matter, is intended as a complete and exclusive statement of the terms
of the agreement among the parties with respect thereto and cannot be amended or
terminated except by a written instrument by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GROVE REAL ESTATE ASSET TRUST
/s/ Damon Navarro By:/s/ Joseph R. LaBrosse
Damon Navarro Name: Joseph R. LaBrosse
Title: Chief Financial Officer
Address: Address:
Business
c/o Grove Real Estate Asset Trust Grove Real Estate Asset Trust
598 Asylum Avenue 598 Asylum Avenue
Hartford, CT 06105 Hartford, CT 06105
Tel: (860) 246-1126 Tel: (860) 246-1126
Fax: (860) 527-0401 Fax: (860) 527-0401
Residence
17 School Street
Glastonbury, Connecticut 06033
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of March 14,
1997, by and between Grove Real Estate Asset Trust, a real estate investment
trust organized under the laws of the State of Maryland ("GREAT"), and Brian
Navarro, an individual residing at 62D Nanel Drive, Glastonbury, Connecticut
06033 ("Executive").
WHEREAS, on the date hereof, GREAT is entering into a series of related
transactions pursuant to which it will acquire, among other things,
substantially all of the interests of Executive and certain other individuals
and entities in a portfolio of multi-family residential properties (and one
retail mixed-use property) located in the Northeastern United States;
WHEREAS, it is a condition to the consummation of the above-referenced
transactions, that Executive enter into this Agreement with GREAT; and
WHEREAS, Executive desires to be employed by and serve GREAT and GREAT
desires to employ Executive, all on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Certain Definitions. The following capitalized terms, as used in this
Agreement shall have the meanings ascribed to such terms below:
"Cause" means (a) failure of the Executive to perform his
duties under Section 3 of this Agreement or otherwise to perform or observe any
of the material terms or provisions of this Agreement or the Noncompetition
Agreement, in either case after receipt of notice from GREAT specifying such
failure and giving Executive fifteen (15) days to cure such failure; (b) willful
misconduct or other similar action on the part of Executive that is materially
damaging or detrimental to GREAT; (c) conviction of, the indictment for (or its
procedural equivalent), or the entering of a guilty plea or a plea of no contest
by Executive with respect to, a crime involving a felony, fraud, embezzlement or
the like; or (d) misappropriation (or attempted misappropriation) of GREAT's
funds or misuse of GREAT's assets by Executive.
"Change of Control" a "Change of Control" of GREAT shall be
deemed to have occurred upon the happening of any of the following events:
(a) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Trust Managers (as defined in paragraph
(b) below) of GREAT, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act)) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of the combined voting power of the then outstanding Common Shares and
other shares of GREAT entitled to vote generally in the election of trust
managers, but excluding for this purpose:
(i) any such acquisition (or holding) by any Employer (as such
term is defined in GREAT's 1996 Share Incentive Plan), or any employee benefit
plan (or related trust) of such Employer; or
(ii) any such acquisition (or holding) by any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Common Shares
and other voting securities of GREAT immediately prior to such acquisition in
substantially the same proportion as their ownership immediately prior to such
acquisition, of the then outstanding Common Shares of GREAT and of the combined
voting power of the then outstanding voting securities of GREAT entitled to vote
generally in the election of trust managers;
(b) individuals who, as of the date hereof, constitute the Board of
Trust Managers of GREAT (the "Continuing Trust Managers") cease for any reason
to constitute at least a majority of the Board of Trust Managers of GREAT,
provided that any individual becoming a trust manager subsequent to the date
hereof whose election, or nomination for election by the shareholders of the
Company, was approved by a vote of at least a majority of the persons then
comprising the Continuing Trust Managers shall be considered a Continuing Trust
Manager, but excluding, for this purpose, any such individual whose initial
election as a member of the Board of Trust Managers of GREAT is in connection
with an actual or threatened "election contest" relating to the election of the
trust managers of GREAT (as such term is used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(c) approval by the shareholders of GREAT of
(i) a reorganization, merger or consolidation of GREAT, with
respect to which in each case all or substantially all of the individuals and
entities who were the respective beneficial owners of the Common Shares or
voting securities of GREAT immediately prior to such reorganization, merger or
consolidation will not, immediately following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding Common Shares and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors of the entity resulting from such reorganization, merger
or consolidation, or
(ii) a complete liquidation or dissolution of GREAT, or
(iii) the sale or other disposition of all or substantially all of the
assets of GREAT.
"Common Shares" means the common shares of beneficial interest, par value
$0.01 per share of GREAT.
"Company" means, collectively, GREAT and its subsidiaries,
including, without limitation, Grove Operating, L.P.
"Confidential Information" means any and all proprietary
information of the Company of whatever kind or nature pertaining to any aspect
of the Company's business as disclosed as a consequence of or through employment
with GREAT or otherwise. Such proprietary information includes but is not
limited to information relating to the Company's inventions, processes, plans,
products, sources or supply of material, operating and other cost data, property
purchase prices, list of present, past, and prospective customers or tenants,
customer or seller proposals, price or rent lists and data relating to
determination of rental rates or pricing of the Company's products or services,
any of which information is not generally known to the public or to actual or
potential competitors of the Company.
"Disability" means that Executive shall have been unable to
perform in any material respect Executive's duties under this Agreement by
reason of illness, or physical or mental disability or other similar incapacity,
which inability shall continue for more than 120 consecutive days, or 180 days
during any twelve-month period, but only to the extent that such definition does
not violate the Americans With Disabilities Act, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Good Reason" means (a) the assignment of Executive without
his consent to a position, responsibilities or duties of a materially lesser
status or degree of responsibility than his position, responsibilities, or
duties as set forth in Section 3 hereof or (b) failure of GREAT to perform or
observe any of the material terms or provisions of this Agreement, and the
continued failure of GREAT to cure such default within thirty (30) days after
written notice of such default and demand for performance has been given to
GREAT by Executive, which notice and demand shall describe specifically the
nature of such alleged failure to perform or observe such material terms or
provisions; provided, however, that if cure is impossible within such thirty
(30) days, it shall be sufficient for GREAT to commence such cure within said
thirty (30) day period, and pursue such cure diligently to completion within the
shortest possible reasonable time.
"Noncompetition Agreement" means that certain Noncompetition
Agreement between Executive and GREAT, of even date herewith.
2. Term of Employment. GREAT will employ the Executive, and the
Executive hereby accepts employment by GREAT, on the terms and conditions
contained in this Agreement for the period commencing upon the date of this
Agreement and ending on the date that is three (3) years from the date hereof
(together with any extensions thereof, the "Term"). This Agreement will
automatically extend for successive one-year terms without any further action by
the parties hereto, unless GREAT or Executive gives written notice to the other,
at least 120 days prior to the end of the then current term, of such party's
desire to terminate this Agreement.
3. Position and Duties.
(a) Executive shall serve as Vice President of Acquisitions of
GREAT, with such duties and responsibilities as are assigned or delegated to
Executive by GREAT's Board of Trust Managers from time to time.
(b) Executive shall devote substantially all of his business
time, attention, skill and energy to the performance of Executive's duties and
the advancement of the business and affairs of GREAT. If Executive is elected as
a director or officer of GREAT or any of its affiliates, Executive will fulfill
his duties as such director or officer without additional compensation.
(c) Subject to the covenants of Executive set forth in the
Noncompetition Agreement, Executive may engage in other activities for
Executive's own account while employed by GREAT hereunder, including, without
limitation, charitable, community and other business activities, provided that
such other activities do not materially interfere with the performance of
Executive's duties hereunder and are not otherwise detrimental to the business
and operations of GREAT and its subsidiaries.
4. Current Compensation.
(a) Base Compensation. During the Term, GREAT shall pay the Executive
an initial annual base salary equal to $50,000, payable in equal installments in
accordance with GREAT's normal practices for payment of executives in existence
from time to time. Executive's salary shall be reviewed by GREAT's Board of
Trust Managers on the employment anniversary date each year, and nothing in this
Agreement shall be deemed to prohibit an increase at any time in the annual rate
of salary of Executive at the sole discretion of GREAT's Board of Trust Managers
.
(b) Bonus Compensation. Executive will be entitled to bonus compensation if
and as determined, and in the form and upon the terms determined, by GREAT's
Board of Trust Managers; including, without limitation pursuant to GREAT's 1996
Share Incentive Plan.
(c) Reimbursement for Expenses. During the Term, GREAT will reimburse
Executive for all documented expenses properly incurred by Executive in the
performance of Executive's duties under this Agreement. Reimbursement for such
expenses shall be made in accordance with the expense reimbursement policies of
GREAT in effect from time to time.
(d) Other Benefits. In addition to the benefits specified in Sections
4(a) through 4(c), during the Term, Executive will be entitled to participate in
any present and future life, disability or health insurance, pension,
retirement, profit sharing or employee stock ownership plan or other
compensation or incentive plan adopted by GREAT for the general and overall
benefit of all principal executives of GREAT.
5. Confidentiality; Nondisclosure. Executive hereby agrees to hold in
confidence and not directly or indirectly to use or disclose, either during or
after the Term, Confidential Information obtained or created by Executive during
the Term, whether or not during working hours, except to the extent authorized
by GREAT. Upon termination of this Agreement (for any reason), or upon an
earlier request by GREAT, Executive shall deliver to GREAT all tangible forms of
Confidential Information in Executive's possession or control, including, but
not limited to, drawings, specifications, records, devices, models,
correspondence, blueprints, manuals, letters, notes, notebooks, reports,
flow-charts, computer programs, proposals, or any other documents, whether in
hard copy or on magnetic or optical media, and any copies or reproductions
thereof.
6. Termination of Employment.
(a) Executive's employment with GREAT hereunder shall terminate upon
Executive's death.
(b) Upon notice to Executive, GREAT may terminate Executive's
employment with GREAT hereunder (i) upon the Disability of Executive, (ii) for
Cause, or (iii) for any other reason in its sole and absolute discretion.
(c) Upon not less than thirty (30) days prior written notice to GREAT,
Executive may terminate Executive's employment with GREAT hereunder (i) for Good
Reason, or (ii) at any time within one (1) year after a Change of Control of
GREAT.
7. Compensation Upon Termination of Employment.
(a) If Executive's employment with GREAT is terminated by Executive's
death, GREAT shall continue to pay to Executive's estate, or as may be directed
by the legal representatives of such estate, Executive's full base salary at the
rate in effect at the time of Executive's death through the end of the calendar
month during which his death occurs.
(b) If Executive's employment with GREAT is terminated by reason of
Executive's Disability, GREAT will continue to pay Executive's full base salary
at the rate in effect at the time notice of Executive's termination as a result
of Executive's Disability is given, through the end of the calendar month during
which such termination is effective and for the lesser of (i) three consecutive
months thereafter, and (ii) the period until disability insurance benefits
commence under the disability insurance coverage furnished by GREAT to
Executive.
(c) If (i) Executive shall terminate Executive's employment with GREAT
in breach of this Agreement or (ii) GREAT terminates Executive's employment with
GREAT for Cause; GREAT shall pay Executive's full salary, at the rate in effect
at the time notice of such termination is given through the date such
termination is effective, and GREAT shall have no further obligations to
Executive under this Agreement.
(d) If (i) GREAT terminates Executive's employment with GREAT pursuant
to clause (iii) of Section 6(b) or (ii) Executive terminates his employment with
GREAT for Good Reason or in the event of a Change of Control of GREAT, (x) GREAT
shall continue to pay the Executive's full base salary at the rate in effect at
the time that notice of such termination is given through the end of the
calendar month during which such termination is effective and (y) GREAT shall
pay to Executive a lump sum amount equal to 200% of (A) Executive's then current
base salary plus (B) an amount equal to the aggregate of all bonuses (whether
cash, stock, options, or otherwise (but specifically excluding Deferred Stock
Grants, if any, granted to Executive under GREAT's 1996 Share Incentive Plan)
granted to Executive for the previous year, and GREAT shall have no further
obligations to Executive under this Agreement.
(e) Notwithstanding anything to the contrary set forth in this Section
7, no termination of Executive's employment with GREAT shall affect the right of
Executive or his estate of beneficiaries to receive any salary or bonus accrued
and due and payable but unpaid at the time of such termination, or any vested
rights which Executive may have at the time of his death pursuant to any
insurance or other death benefit plans or any other plans, policies or
arrangements of GREAT, subject to the terms of such insurance or other plans,
policies or arrangements.
8. Injunctive Relief; Breach of Certain Provisions.
(a) Executive acknowledges that the injury that would be suffered by
GREAT as a result of a breach of the provisions of this Agreement (including,
without limitation, any provision of Section 5 (Confidentiality; Nondisclosure))
would be irreparable, and that an award of monetary damages to GREAT for such a
breach would be an inadequate remedy. Consequently, GREAT will have the right,
in addition to any other rights it may have, to obtain injunctive relief to
restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and GREAT will not be obligated to post bond or
other security in seeking such relief.
(b) Without limiting GREAT's rights under this Section 8 or any other
remedies available to GREAT, if Executive (i) breaches any of the provisions of
Section 5 (Confidentiality; Nondisclosure) of this Agreement or (ii) breaches
any of the provisions of Section 2 or Section 3 of the Noncompetition Agreement,
GREAT shall have the right to cease making payments of any amounts otherwise due
to Executive under this Agreement.
9. Termination of Existing Employment Agreement. The existing Employment
Agreement between Executive and GREAT is hereby terminated and shall be of no
further legal effect.
10. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11. Binding Effect. This Agreement shall inure to the benefit of, and shall
be binding upon, the parties hereto and their respective successors, heirs,
assigns and legal representatives. The duties of Executive under this Agreement
are personal and therefore, may not be delegated.
12. Survival. It is the express intention and agreement of the parties
hereto that the provisions of Section 5 (Confidentiality; Nondisclosure) of this
Agreement shall survive the termination of this Agreement and termination of the
employment of Executive with GREAT hereunder or otherwise.
13. Notices. All notices and other communications to any party
hereunder shall be in writing and shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, or by a reputable
courier delivery service or by prepaid telex or telecopy and shall be given to
the address or telex or telecopier number for such party set forth below such
party's signature to this Agreement, or to such other address or telex or
telecopier number as such party may hereafter specify by notice to the other
party. Each such notice or other communication shall be effective (a) if given
by telex or telecopier, when such telex or telecopy is transmitted to the telex
or telecopier number specified by this Section and the appropriate answerback or
confirmation is received or (b) if given by any other means (including, without
limitation, by courier), when delivered at the address specified by this
Section.
14. Headings. The Section headings contained in this Agreement are inserted
for convenience of reference only and shall not in any way define or affect the
meaning, construction or scope of the provisions hereof.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
principles conflict of laws.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
17. Entire Agreement; Amendment. This Agreement supersedes all prior
agreements (whether written or oral) among the parties with respect to the
subject matter, is intended as a complete and exclusive statement of the terms
of the agreement among the parties with respect thereto and cannot be amended or
terminated except by a written instrument by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GROVE REAL ESTATE ASSET TRUST
/s/ Brian Navarro By:/s/ Joseph R. LaBrosse
Brian Navarro Name: Joseph R. LaBrosse
Title: Chief Financial Offier
Address: Address:
Business
c/o Grove Real Estate Asset Trust Grove Real Estate Asset Trust
598 Asylum Avenue 598 Asylum Avenue
Hartford, CT 06105 Hartford, CT 06105
Tel: (860) 246-1126 Tel: (860) 246-1126
Fax: (860) 527-0401 Fax: (860) 527-0401
Residence
62D Nanel Drive
Glastonbury, CT 06033
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of March 14,
1997, by and between Grove Real Estate Asset Trust, a real estate investment
trust organized under the laws of the State of Maryland ("GREAT"), and Edmund
Navarro, an individual residing at 62D Nanel Drive, Glastonbury,
Connecticut 06033 ("Executive").
WHEREAS, on the date hereof, GREAT is entering into a series of related
transactions pursuant to which it will acquire, among other things,
substantially all of the interests of Executive and certain other individuals
and entities in a portfolio of multi-family residential properties (and one
retail mixed-use property) located in the Northeastern United States;
WHEREAS, it is a condition to the consummation of the above-referenced
transactions, that Executive enter into this Agreement with GREAT; and
WHEREAS, Executive desires to be employed by and serve GREAT and GREAT
desires to employ Executive, all on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Certain Definitions. The following capitalized terms, as used in this
Agreement shall have the meanings ascribed to such terms below:
"Cause" means (a) failure of the Executive to perform his
duties under Section 3 of this Agreement or otherwise to perform or observe any
of the material terms or provisions of this Agreement or the Noncompetition
Agreement, in either case after receipt of notice from GREAT specifying such
failure and giving Executive fifteen (15) days to cure such failure; (b) willful
misconduct or other similar action on the part of Executive that is materially
damaging or detrimental to GREAT; (c) conviction of, the indictment for (or its
procedural equivalent), or the entering of a guilty plea or a plea of no contest
by Executive with respect to, a crime involving a felony, fraud, embezzlement or
the like; or (d) misappropriation (or attempted misappropriation) of GREAT's
funds or misuse of GREAT's assets by Executive.
"Change of Control" a "Change of Control" of GREAT shall be
deemed to have occurred upon the happening of any of the following events:
(a) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Trust Managers (as defined in paragraph
(b) below) of GREAT, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act)) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of the combined voting power of the then outstanding Common Shares and
other shares of GREAT entitled to vote generally in the election of trust
managers, but excluding for this purpose:
(i) any such acquisition (or holding) by any Employer (as such
term is defined in GREAT's 1996 Share Incentive Plan), or any employee benefit
plan (or related trust) of such Employer; or
(ii) any such acquisition (or holding) by any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Common Shares
and other voting securities of GREAT immediately prior to such acquisition in
substantially the same proportion as their ownership immediately prior to such
acquisition, of the then outstanding Common Shares of GREAT and of the combined
voting power of the then outstanding voting securities of GREAT entitled to vote
generally in the election of trust managers;
(b) individuals who, as of the date hereof, constitute the Board of
Trust Managers of GREAT (the "Continuing Trust Managers") cease for any reason
to constitute at least a majority of the Board of Trust Managers of GREAT,
provided that any individual becoming a trust manager subsequent to the date
hereof whose election, or nomination for election by the shareholders of the
Company, was approved by a vote of at least a majority of the persons then
comprising the Continuing Trust Managers shall be considered a Continuing Trust
Manager, but excluding, for this purpose, any such individual whose initial
election as a member of the Board of Trust Managers of GREAT is in connection
with an actual or threatened "election contest" relating to the election of the
trust managers of GREAT (as such term is used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(c) approval by the shareholders of GREAT of
(i) a reorganization, merger or consolidation of GREAT, with
respect to which in each case all or substantially all of the individuals and
entities who were the respective beneficial owners of the Common Shares or
voting securities of GREAT immediately prior to such reorganization, merger or
consolidation will not, immediately following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding Common Shares and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors of the entity resulting from such reorganization, merger
or consolidation, or
(ii) a complete liquidation or dissolution of GREAT, or
(iii) the sale or other disposition of all or substantially all of the
assets of GREAT.
"Common Shares" means the common shares of beneficial interest, par value
$0.01 per share of GREAT.
"Company" means, collectively, GREAT and its subsidiaries,
including, without limitation, Grove Operating, L.P.
"Confidential Information" means any and all proprietary
information of the Company of whatever kind or nature pertaining to any aspect
of the Company's business as disclosed as a consequence of or through employment
with GREAT or otherwise. Such proprietary information includes but is not
limited to information relating to the Company's inventions, processes, plans,
products, sources or supply of material, operating and other cost data, property
purchase prices, list of present, past, and prospective customers or tenants,
customer or seller proposals, price or rent lists and data relating to
determination of rental rates or pricing of the Company's products or services,
any of which information is not generally known to the public or to actual or
potential competitors of the Company.
"Disability" means that Executive shall have been unable to
perform in any material respect Executive's duties under this Agreement by
reason of illness, or physical or mental disability or other similar incapacity,
which inability shall continue for more than 120 consecutive days, or 180 days
during any twelve-month period, but only to the extent that such definition does
not violate the Americans With Disabilities Act, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Good Reason" means (a) the assignment of Executive without
his consent to a position, responsibilities or duties of a materially lesser
status or degree of responsibility than his position, responsibilities, or
duties as set forth in Section 3 hereof or (b) failure of GREAT to perform or
observe any of the material terms or provisions of this Agreement, and the
continued failure of GREAT to cure such default within thirty (30) days after
written notice of such default and demand for performance has been given to
GREAT by Executive, which notice and demand shall describe specifically the
nature of such alleged failure to perform or observe such material terms or
provisions; provided, however, that if cure is impossible within such thirty
(30) days, it shall be sufficient for GREAT to commence such cure within said
thirty (30) day period, and pursue such cure diligently to completion within the
shortest possible reasonable time.
"Noncompetition Agreement" means that certain Noncompetition
Agreement between Executive and GREAT, of even date herewith.
2. Term of Employment. GREAT will employ the Executive, and the
Executive hereby accepts employment by GREAT, on the terms and conditions
contained in this Agreement for the period commencing upon the date of this
Agreement and ending on the date that is three (3) years from the date hereof
(together with any extensions thereof, the "Term"). This Agreement will
automatically extend for successive one-year terms without any further action by
the parties hereto, unless GREAT or Executive gives written notice to the other,
at least 120 days prior to the end of the then current term, of such party's
desire to terminate this Agreement.
3. Position and Duties.
(a) Executive shall serve as Vice President of Acquisitions of
GREAT, with such duties and responsibilities as are assigned or delegated to
Executive by GREAT's Board of Trust Managers from time to time.
(b) Executive shall devote substantially all of his business
time, attention, skill and energy to the performance of Executive's duties and
the advancement of the business and affairs of GREAT. If Executive is elected as
a director or officer of GREAT or any of its affiliates, Executive will fulfill
his duties as such director or officer without additional compensation.
(c) Subject to the covenants of Executive set forth in the
Noncompetition Agreement, Executive may engage in other activities for
Executive's own account while employed by GREAT hereunder, including, without
limitation, charitable, community and other business activities, provided that
such other activities do not materially interfere with the performance of
Executive's duties hereunder and are not otherwise detrimental to the business
and operations of GREAT and its subsidiaries.
4. Current Compensation.
(a) Base Compensation. During the Term, GREAT shall pay the Executive
an initial annual base salary equal to $50,000, payable in equal installments in
accordance with GREAT's normal practices for payment of executives in existence
from time to time. Executive's salary shall be reviewed by GREAT's Board of
Trust Managers on the employment anniversary date each year, and nothing in this
Agreement shall be deemed to prohibit an increase at any time in the annual rate
of salary of Executive at the sole discretion of GREAT's Board of Trust Managers
.
(b) Bonus Compensation. Executive will be entitled to bonus compensation if
and as determined, and in the form and upon the terms determined, by GREAT's
Board of Trust Managers; including, without limitation pursuant to GREAT's 1996
Share Incentive Plan.
(c) Reimbursement for Expenses. During the Term, GREAT will reimburse
Executive for all documented expenses properly incurred by Executive in the
performance of Executive's duties under this Agreement. Reimbursement for such
expenses shall be made in accordance with the expense reimbursement policies of
GREAT in effect from time to time.
(d) Other Benefits. In addition to the benefits specified in Sections
4(a) through 4(c), during the Term, Executive will be entitled to participate in
any present and future life, disability or health insurance, pension,
retirement, profit sharing or employee stock ownership plan or other
compensation or incentive plan adopted by GREAT for the general and overall
benefit of all principal executives of GREAT.
5. Confidentiality; Nondisclosure. Executive hereby agrees to hold in
confidence and not directly or indirectly to use or disclose, either during or
after the Term, Confidential Information obtained or created by Executive during
the Term, whether or not during working hours, except to the extent authorized
by GREAT. Upon termination of this Agreement (for any reason), or upon an
earlier request by GREAT, Executive shall deliver to GREAT all tangible forms of
Confidential Information in Executive's possession or control, including, but
not limited to, drawings, specifications, records, devices, models,
correspondence, blueprints, manuals, letters, notes, notebooks, reports,
flow-charts, computer programs, proposals, or any other documents, whether in
hard copy or on magnetic or optical media, and any copies or reproductions
thereof.
6. Termination of Employment.
(a) Executive's employment with GREAT hereunder shall terminate upon
Executive's death.
(b) Upon notice to Executive, GREAT may terminate Executive's
employment with GREAT hereunder (i) upon the Disability of Executive, (ii) for
Cause, or (iii) for any other reason in its sole and absolute discretion.
(c) Upon not less than thirty (30) days prior written notice to GREAT,
Executive may terminate Executive's employment with GREAT hereunder (i) for Good
Reason, or (ii) at any time within one (1) year after a Change of Control of
GREAT.
7. Compensation Upon Termination of Employment.
(a) If Executive's employment with GREAT is terminated by Executive's
death, GREAT shall continue to pay to Executive's estate, or as may be directed
by the legal representatives of such estate, Executive's full base salary at the
rate in effect at the time of Executive's death through the end of the calendar
month during which his death occurs.
(b) If Executive's employment with GREAT is terminated by reason of
Executive's Disability, GREAT will continue to pay Executive's full base salary
at the rate in effect at the time notice of Executive's termination as a result
of Executive's Disability is given, through the end of the calendar month during
which such termination is effective and for the lesser of (i) three consecutive
months thereafter, and (ii) the period until disability insurance benefits
commence under the disability insurance coverage furnished by GREAT to
Executive.
(c) If (i) Executive shall terminate Executive's employment with GREAT
in breach of this Agreement or (ii) GREAT terminates Executive's employment with
GREAT for Cause; GREAT shall pay Executive's full salary, at the rate in effect
at the time notice of such termination is given through the date such
termination is effective, and GREAT shall have no further obligations to
Executive under this Agreement.
(d) If (i) GREAT terminates Executive's employment with GREAT pursuant
to clause (iii) of Section 6(b) or (ii) Executive terminates his employment with
GREAT for Good Reason or in the event of a Change of Control of GREAT, (x) GREAT
shall continue to pay the Executive's full base salary at the rate in effect at
the time that notice of such termination is given through the end of the
calendar month during which such termination is effective and (y) GREAT shall
pay to Executive a lump sum amount equal to 200% of (A) Executive's then current
base salary plus (B) an amount equal to the aggregate of all bonuses (whether
cash, stock, options, or otherwise (but specifically excluding Deferred Stock
Grants, if any, granted to Executive under GREAT's 1996 Share Incentive Plan)
granted to Executive for the previous year, and GREAT shall have no further
obligations to Executive under this Agreement.
(e) Notwithstanding anything to the contrary set forth in this Section
7, no termination of Executive's employment with GREAT shall affect the right of
Executive or his estate of beneficiaries to receive any salary or bonus accrued
and due and payable but unpaid at the time of such termination, or any vested
rights which Executive may have at the time of his death pursuant to any
insurance or other death benefit plans or any other plans, policies or
arrangements of GREAT, subject to the terms of such insurance or other plans,
policies or arrangements.
8. Injunctive Relief; Breach of Certain Provisions.
(a) Executive acknowledges that the injury that would be suffered by
GREAT as a result of a breach of the provisions of this Agreement (including,
without limitation, any provision of Section 5 (Confidentiality; Nondisclosure))
would be irreparable, and that an award of monetary damages to GREAT for such a
breach would be an inadequate remedy. Consequently, GREAT will have the right,
in addition to any other rights it may have, to obtain injunctive relief to
restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and GREAT will not be obligated to post bond or
other security in seeking such relief.
(b) Without limiting GREAT's rights under this Section 8 or any other
remedies available to GREAT, if Executive (i) breaches any of the provisions of
Section 5 (Confidentiality; Nondisclosure) of this Agreement or (ii) breaches
any of the provisions of Section 2 or Section 3 of the Noncompetition Agreement,
GREAT shall have the right to cease making payments of any amounts otherwise due
to Executive under this Agreement.
9. Termination of Existing Employment Agreement. The existing Employment
Agreement between Executive and GREAT is hereby terminated and shall be of no
further legal effect.
10. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11. Binding Effect. This Agreement shall inure to the benefit of, and shall
be binding upon, the parties hereto and their respective successors, heirs,
assigns and legal representatives. The duties of Executive under this Agreement
are personal and therefore, may not be delegated.
12. Survival. It is the express intention and agreement of the parties
hereto that the provisions of Section 5 (Confidentiality; Nondisclosure) of this
Agreement shall survive the termination of this Agreement and termination of the
employment of Executive with GREAT hereunder or otherwise.
13. Notices. All notices and other communications to any party
hereunder shall be in writing and shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, or by a reputable
courier delivery service or by prepaid telex or telecopy and shall be given to
the address or telex or telecopier number for such party set forth below such
party's signature to this Agreement, or to such other address or telex or
telecopier number as such party may hereafter specify by notice to the other
party. Each such notice or other communication shall be effective (a) if given
by telex or telecopier, when such telex or telecopy is transmitted to the telex
or telecopier number specified by this Section and the appropriate answerback or
confirmation is received or (b) if given by any other means (including, without
limitation, by courier), when delivered at the address specified by this
Section.
14. Headings. The Section headings contained in this Agreement are inserted
for convenience of reference only and shall not in any way define or affect the
meaning, construction or scope of the provisions hereof.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
principles conflict of laws.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
17. Entire Agreement; Amendment. This Agreement supersedes all prior
agreements (whether written or oral) among the parties with respect to the
subject matter, is intended as a complete and exclusive statement of the terms
of the agreement among the parties with respect thereto and cannot be amended or
terminated except by a written instrument by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GROVE REAL ESTATE ASSET TRUST
/s/ Edmund Navarro By:/s/ Joseph R. LaBrosse
Edmund Navarro Name: Joseph R. LaBrosse
Title: Chief Financial Offier
Address: Address:
Business
c/o Grove Real Estate Asset Trust Grove Real Estate Asset Trust
598 Asylum Avenue 598 Asylum Avenue
Hartford, CT 06105 Hartford, CT 06105
Tel: (860) 246-1126 Tel: (860) 246-1126
Fax: (860) 527-0401 Fax: (860) 527-0401
Residence
179 Robin Road
Glastonbury, CT 06033
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of March 14,
1997, by and between Grove Real Estate Asset Trust, a real estate investment
trust organized under the laws of the State of Maryland ("GREAT"), and Joseph
LaBrosse, an individual residing at 9 Coleman Road, Glastonbury, Connecticut
06033 ("Executive").
WHEREAS, on the date hereof, GREAT is entering into a series of related
transactions pursuant to which it will acquire, among other things,
substantially all of the interests of Executive and certain other individuals
and entities in a portfolio of multi-family residential properties (and one
retail mixed-use property) located in the Northeastern United States;
WHEREAS, it is a condition to the consummation of the above-referenced
transactions, that Executive enter into this Agreement with GREAT; and
WHEREAS, Executive desires to be employed by and serve GREAT and GREAT
desires to employ Executive, all on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Certain Definitions. The following capitalized terms, as used in this
Agreement shall have the meanings ascribed to such terms below:
"Cause" means (a) failure of the Executive to perform his
duties under Section 3 of this Agreement or otherwise to perform or observe any
of the material terms or provisions of this Agreement or the Noncompetition
Agreement, in either case after receipt of notice from GREAT specifying such
failure and giving Executive fifteen (15) days to cure such failure; (b) willful
misconduct or other similar action on the part of Executive that is materially
damaging or detrimental to GREAT; (c) conviction of, the indictment for (or its
procedural equivalent), or the entering of a guilty plea or a plea of no contest
by Executive with respect to, a crime involving a felony, fraud, embezzlement or
the like; or (d) misappropriation (or attempted misappropriation) of GREAT's
funds or misuse of GREAT's assets by Executive.
"Change of Control" a "Change of Control" of GREAT shall be
deemed to have occurred upon the happening of any of the following events:
(a) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Trust Managers (as defined in paragraph
(b) below) of GREAT, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act)) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of the combined voting power of the then outstanding Common Shares and
other shares of GREAT entitled to vote generally in the election of trust
managers, but excluding for this purpose:
(i) any such acquisition (or holding) by any Employer (as such
term is defined in GREAT's 1996 Share Incentive Plan), or any employee benefit
plan (or related trust) of such Employer; or
(ii) any such acquisition (or holding) by any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Common Shares
and other voting securities of GREAT immediately prior to such acquisition in
substantially the same proportion as their ownership immediately prior to such
acquisition, of the then outstanding Common Shares of GREAT and of the combined
voting power of the then outstanding voting securities of GREAT entitled to vote
generally in the election of trust managers;
(b) individuals who, as of the date hereof, constitute the Board of
Trust Managers of GREAT (the "Continuing Trust Managers") cease for any reason
to constitute at least a majority of the Board of Trust Managers of GREAT,
provided that any individual becoming a trust manager subsequent to the date
hereof whose election, or nomination for election by the shareholders of the
Company, was approved by a vote of at least a majority of the persons then
comprising the Continuing Trust Managers shall be considered a Continuing Trust
Manager, but excluding, for this purpose, any such individual whose initial
election as a member of the Board of Trust Managers of GREAT is in connection
with an actual or threatened "election contest" relating to the election of the
trust managers of GREAT (as such term is used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(c) approval by the shareholders of GREAT of
(i) a reorganization, merger or consolidation of GREAT, with
respect to which in each case all or substantially all of the individuals and
entities who were the respective beneficial owners of the Common Shares or
voting securities of GREAT immediately prior to such reorganization, merger or
consolidation will not, immediately following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding Common Shares and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors of the entity resulting from such reorganization, merger
or consolidation, or
(ii) a complete liquidation or dissolution of GREAT, or
(iii) the sale or other disposition of all or substantially all of the
assets of GREAT.
"Common Shares" means the common shares of beneficial interest, par value
$0.01 per share of GREAT.
"Company" means, collectively, GREAT and its subsidiaries,
including, without limitation, Grove Operating, L.P.
"Confidential Information" means any and all proprietary
information of the Company of whatever kind or nature pertaining to any aspect
of the Company's business as disclosed as a consequence of or through employment
with GREAT or otherwise. Such proprietary information includes but is not
limited to information relating to the Company's inventions, processes, plans,
products, sources or supply of material, operating and other cost data, property
purchase prices, list of present, past, and prospective customers or tenants,
customer or seller proposals, price or rent lists and data relating to
determination of rental rates or pricing of the Company's products or services,
any of which information is not generally known to the public or to actual or
potential competitors of the Company.
"Disability" means that Executive shall have been unable to
perform in any material respect Executive's duties under this Agreement by
reason of illness, or physical or mental disability or other similar incapacity,
which inability shall continue for more than 120 consecutive days, or 180 days
during any twelve-month period, but only to the extent that such definition does
not violate the Americans With Disabilities Act, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Good Reason" means (a) the assignment of Executive without
his consent to a position, responsibilities or duties of a materially lesser
status or degree of responsibility than his position, responsibilities, or
duties as set forth in Section 3 hereof or (b) failure of GREAT to perform or
observe any of the material terms or provisions of this Agreement, and the
continued failure of GREAT to cure such default within thirty (30) days after
written notice of such default and demand for performance has been given to
GREAT by Executive, which notice and demand shall describe specifically the
nature of such alleged failure to perform or observe such material terms or
provisions; provided, however, that if cure is impossible within such thirty
(30) days, it shall be sufficient for GREAT to commence such cure within said
thirty (30) day period, and pursue such cure diligently to completion within the
shortest possible reasonable time.
"Noncompetition Agreement" means that certain Noncompetition
Agreement between Executive and GREAT, of even date herewith.
2. Term of Employment. GREAT will employ the Executive, and the
Executive hereby accepts employment by GREAT, on the terms and conditions
contained in this Agreement for the period commencing upon the date of this
Agreement and ending on the date that is three (3) years from the date hereof
(together with any extensions thereof, the "Term"). This Agreement will
automatically extend for successive one-year terms without any further action by
the parties hereto, unless GREAT or Executive gives written notice to the other,
at least 120 days prior to the end of the then current term, of such party's
desire to terminate this Agreement.
3. Position and Duties.
(a) Executive shall serve as the Chief Financial Officer and
Secretary of GREAT, with such duties and responsibilities as are assigned or
delegated to Executive by GREAT's Board of Trust Managers from time to time.
(b) Executive shall devote substantially all of his business
time, attention, skill and energy to the performance of Executive's duties and
the advancement of the business and affairs of GREAT. If Executive is elected as
a director or officer of GREAT or any of its affiliates, Executive will fulfill
his duties as such director or officer without additional compensation.
(c) Subject to the covenants of Executive set forth in the
Noncompetition Agreement, Executive may engage in other activities for
Executive's own account while employed by GREAT hereunder, including, without
limitation, charitable, community and other business activities, provided that
such other activities do not materially interfere with the performance of
Executive's duties hereunder and are not otherwise detrimental to the business
and operations of GREAT and its subsidiaries.
4. Current Compensation.
(a) Base Compensation. During the Term, GREAT shall pay the Executive
an initial annual base salary equal to $50,000, payable in equal installments in
accordance with GREAT's normal practices for payment of executives in existence
from time to time. Executive's salary shall be reviewed by GREAT's Board of
Trust Managers on the employment anniversary date each year, and nothing in this
Agreement shall be deemed to prohibit an increase at any time in the annual rate
of salary of Executive at the sole discretion of GREAT's Board of Trust Managers
.
(b) Bonus Compensation. Executive will be entitled to bonus compensation if
and as determined, and in the form and upon the terms determined, by GREAT's
Board of Trust Managers; including, without limitation pursuant to GREAT's 1996
Share Incentive Plan.
(c) Reimbursement for Expenses. During the Term, GREAT will reimburse
Executive for all documented expenses properly incurred by Executive in the
performance of Executive's duties under this Agreement. Reimbursement for such
expenses shall be made in accordance with the expense reimbursement policies of
GREAT in effect from time to time.
(d) Other Benefits. In addition to the benefits specified in Sections
4(a) through 4(c), during the Term, Executive will be entitled to participate in
any present and future life, disability or health insurance, pension,
retirement, profit sharing or employee stock ownership plan or other
compensation or incentive plan adopted by GREAT for the general and overall
benefit of all principal executives of GREAT.
5. Confidentiality; Nondisclosure. Executive hereby agrees to hold in
confidence and not directly or indirectly to use or disclose, either during or
after the Term, Confidential Information obtained or created by Executive during
the Term, whether or not during working hours, except to the extent authorized
by GREAT. Upon termination of this Agreement (for any reason), or upon an
earlier request by GREAT, Executive shall deliver to GREAT all tangible forms of
Confidential Information in Executive's possession or control, including, but
not limited to, drawings, specifications, records, devices, models,
correspondence, blueprints, manuals, letters, notes, notebooks, reports,
flow-charts, computer programs, proposals, or any other documents, whether in
hard copy or on magnetic or optical media, and any copies or reproductions
thereof.
6. Termination of Employment.
(a) Executive's employment with GREAT hereunder shall terminate upon
Executive's death.
(b) Upon notice to Executive, GREAT may terminate Executive's
employment with GREAT hereunder (i) upon the Disability of Executive, (ii) for
Cause, or (iii) for any other reason in its sole and absolute discretion.
(c) Upon not less than thirty (30) days prior written notice to GREAT,
Executive may terminate Executive's employment with GREAT hereunder (i) for Good
Reason, or (ii) at any time within one (1) year after a Change of Control of
GREAT.
7. Compensation Upon Termination of Employment.
(a) If Executive's employment with GREAT is terminated by Executive's
death, GREAT shall continue to pay to Executive's estate, or as may be directed
by the legal representatives of such estate, Executive's full base salary at the
rate in effect at the time of Executive's death through the end of the calendar
month during which his death occurs.
(b) If Executive's employment with GREAT is terminated by reason of
Executive's Disability, GREAT will continue to pay Executive's full base salary
at the rate in effect at the time notice of Executive's termination as a result
of Executive's Disability is given, through the end of the calendar month during
which such termination is effective and for the lesser of (i) three consecutive
months thereafter, and (ii) the period until disability insurance benefits
commence under the disability insurance coverage furnished by GREAT to
Executive.
(c) If (i) Executive shall terminate Executive's employment with GREAT
in breach of this Agreement or (ii) GREAT terminates Executive's employment with
GREAT for Cause; GREAT shall pay Executive's full salary, at the rate in effect
at the time notice of such termination is given through the date such
termination is effective, and GREAT shall have no further obligations to
Executive under this Agreement.
(d) If (i) GREAT terminates Executive's employment with GREAT pursuant
to clause (iii) of Section 6(b) or (ii) Executive terminates his employment with
GREAT for Good Reason or in the event of a Change of Control of GREAT, (x) GREAT
shall continue to pay the Executive's full base salary at the rate in effect at
the time that notice of such termination is given through the end of the
calendar month during which such termination is effective and (y) GREAT shall
pay to Executive a lump sum amount equal to 200% of (A) Executive's then current
base salary plus (B) an amount equal to the aggregate of all bonuses (whether
cash, stock, options, or otherwise (but specifically excluding Deferred Stock
Grants, if any, granted to Executive under GREAT's 1996 Share Incentive Plan)
granted to Executive for the previous year, and GREAT shall have no further
obligations to Executive under this Agreement.
(e) Notwithstanding anything to the contrary set forth in this Section
7, no termination of Executive's employment with GREAT shall affect the right of
Executive or his estate of beneficiaries to receive any salary or bonus accrued
and due and payable but unpaid at the time of such termination, or any vested
rights which Executive may have at the time of his death pursuant to any
insurance or other death benefit plans or any other plans, policies or
arrangements of GREAT, subject to the terms of such insurance or other plans,
policies or arrangements.
8. Injunctive Relief; Breach of Certain Provisions.
(a) Executive acknowledges that the injury that would be suffered by
GREAT as a result of a breach of the provisions of this Agreement (including,
without limitation, any provision of Section 5 (Confidentiality; Nondisclosure))
would be irreparable, and that an award of monetary damages to GREAT for such a
breach would be an inadequate remedy. Consequently, GREAT will have the right,
in addition to any other rights it may have, to obtain injunctive relief to
restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and GREAT will not be obligated to post bond or
other security in seeking such relief.
(b) Without limiting GREAT's rights under this Section 8 or any other
remedies available to GREAT, if Executive (i) breaches any of the provisions of
Section 5 (Confidentiality; Nondisclosure) of this Agreement or (ii) breaches
any of the provisions of Section 2 or Section 3 of the Noncompetition Agreement,
GREAT shall have the right to cease making payments of any amounts otherwise due
to Executive under this Agreement.
9. Termination of Existing Employment Agreement. The existing Employment
Agreement between Executive and GREAT is hereby terminated and shall be of no
further legal effect.
10. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11. Binding Effect. This Agreement shall inure to the benefit of, and shall
be binding upon, the parties hereto and their respective successors, heirs,
assigns and legal representatives. The duties of Executive under this Agreement
are personal and therefore, may not be delegated.
12. Survival. It is the express intention and agreement of the parties
hereto that the provisions of Section 5 (Confidentiality; Nondisclosure) of this
Agreement shall survive the termination of this Agreement and termination of the
employment of Executive with GREAT hereunder or otherwise.
13. Notices. All notices and other communications to any party
hereunder shall be in writing and shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, or by a reputable
courier delivery service or by prepaid telex or telecopy and shall be given to
the address or telex or telecopier number for such party set forth below such
party's signature to this Agreement, or to such other address or telex or
telecopier number as such party may hereafter specify by notice to the other
party. Each such notice or other communication shall be effective (a) if given
by telex or telecopier, when such telex or telecopy is transmitted to the telex
or telecopier number specified by this Section and the appropriate answerback or
confirmation is received or (b) if given by any other means (including, without
limitation, by courier), when delivered at the address specified by this
Section.
14. Headings. The Section headings contained in this Agreement are inserted
for convenience of reference only and shall not in any way define or affect the
meaning, construction or scope of the provisions hereof.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
principles conflict of laws.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
17. Entire Agreement; Amendment. This Agreement supersedes all prior
agreements (whether written or oral) among the parties with respect to the
subject matter, is intended as a complete and exclusive statement of the terms
of the agreement among the parties with respect thereto and cannot be amended or
terminated except by a written instrument by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GROVE REAL ESTATE ASSET TRUST
/s/ Joseph LaBrosse By: /s/ Damon Navarro
Joseph LaBrosse Name: Damon Navarro
Title: Chief Executive Officer
Address: Address:
Business
c/o Grove Real Estate Asset Trust Grove Real Estate Asset Trust
598 Asylum Avenue 598 Asylum Avenue
Hartford, CT 06105 Hartford, CT 06105
Tel: (860) 246-1126 Tel: (860) 246-1126
Fax: (860) 527-0401 Fax: (860) 527-0401
Residence
9 Coleman Road
Glastonbury, Connecticut 06033
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of March 14,
1997, by and between Grove Real Estate Asset Trust, a real estate investment
trust organized under the laws of the State of Maryland ("GREAT"), and Gerald
McNamara, an individual residing at 15 Hatters Lane, Farmington, Connnecticut
06032 ("Executive").
WHEREAS, on the date hereof, GREAT is entering into a series of related
transactions pursuant to which it will acquire, among other things,
substantially all of the interests of Executive and certain other individuals
and entities in a portfolio of multi-family residential properties (and one
retail mixed-use property) located in the Northeastern United States;
WHEREAS, it is a condition to the consummation of the above-referenced
transactions, that Executive enter into this Agreement with GREAT; and
WHEREAS, Executive desires to be employed by and serve GREAT and GREAT
desires to employ Executive, all on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Certain Definitions. The following capitalized terms, as used in this
Agreement shall have the meanings ascribed to such terms below:
"Cause" means (a) failure of the Executive to perform his
duties under Section 3 of this Agreement or otherwise to perform or observe any
of the material terms or provisions of this Agreement or the Noncompetition
Agreement, in either case after receipt of notice from GREAT specifying such
failure and giving Executive fifteen (15) days to cure such failure; (b) willful
misconduct or other similar action on the part of Executive that is materially
damaging or detrimental to GREAT; (c) conviction of, the indictment for (or its
procedural equivalent), or the entering of a guilty plea or a plea of no contest
by Executive with respect to, a crime involving a felony, fraud, embezzlement or
the like; or (d) misappropriation (or attempted misappropriation) of GREAT's
funds or misuse of GREAT's assets by Executive.
"Change of Control" a "Change of Control" of GREAT shall be
deemed to have occurred upon the happening of any of the following events:
(a) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Trust Managers (as defined in paragraph
(b) below) of GREAT, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act)) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of the combined voting power of the then outstanding Common Shares and
other shares of GREAT entitled to vote generally in the election of trust
managers, but excluding for this purpose:
(i) any such acquisition (or holding) by any Employer (as such
term is defined in GREAT's 1996 Share Incentive Plan), or any employee benefit
plan (or related trust) of such Employer; or
(ii) any such acquisition (or holding) by any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Common Shares
and other voting securities of GREAT immediately prior to such acquisition in
substantially the same proportion as their ownership immediately prior to such
acquisition, of the then outstanding Common Shares of GREAT and of the combined
voting power of the then outstanding voting securities of GREAT entitled to vote
generally in the election of trust managers;
(b) individuals who, as of the date hereof, constitute the Board of
Trust Managers of GREAT (the "Continuing Trust Managers") cease for any reason
to constitute at least a majority of the Board of Trust Managers of GREAT,
provided that any individual becoming a trust manager subsequent to the date
hereof whose election, or nomination for election by the shareholders of the
Company, was approved by a vote of at least a majority of the persons then
comprising the Continuing Trust Managers shall be considered a Continuing Trust
Manager, but excluding, for this purpose, any such individual whose initial
election as a member of the Board of Trust Managers of GREAT is in connection
with an actual or threatened "election contest" relating to the election of the
trust managers of GREAT (as such term is used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(c) approval by the shareholders of GREAT of
(i) a reorganization, merger or consolidation of GREAT, with
respect to which in each case all or substantially all of the individuals and
entities who were the respective beneficial owners of the Common Shares or
voting securities of GREAT immediately prior to such reorganization, merger or
consolidation will not, immediately following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding Common Shares and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors of the entity resulting from such reorganization, merger
or consolidation, or
(ii) a complete liquidation or dissolution of GREAT, or
(iii) the sale or other disposition of all or substantially all of the
assets of GREAT.
"Common Shares" means the common shares of beneficial interest, par value
$0.01 per share of GREAT.
"Company" means, collectively, GREAT and its subsidiaries,
including, without limitation, Grove Operating, L.P.
"Confidential Information" means any and all proprietary information of the
Company of whatever kind or nature pertaining to any aspect of the Company's
business as disclosed as a consequence of or through employment with GREAT or
otherwise. Such proprietary information includes but is not limited to
information relating to the Company's inventions, processes, plans, products,
sources or supply of material, operating and other cost data, property purchase
prices, list of present, past, and prospective customers or tenants, customer or
seller proposals, price or rent lists and data relating to determination of
rental rates or pricing of the Company's products or services, any of which
information is not generally known to the public or to actual or potential
competitors of the Company.
"Disability" means that Executive shall have been unable to
perform in any material respect Executive's duties under this Agreement by
reason of illness, or physical or mental disability or other similar incapacity,
which inability shall continue for more than 120 consecutive days, or 180 days
during any twelve-month period, but only to the extent that such definition does
not violate the Americans With Disabilities Act, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Good Reason" means (a) the assignment of Executive without
his consent to a position, responsibilities or duties of a materially lesser
status or degree of responsibility than his position, responsibilities, or
duties as set forth in Section 3 hereof or (b) failure of GREAT to perform or
observe any of the material terms or provisions of this Agreement, and the
continued failure of GREAT to cure such default within thirty (30) days after
written notice of such default and demand for performance has been given to
GREAT by Executive, which notice and demand shall describe specifically the
nature of such alleged failure to perform or observe such material terms or
provisions; provided, however, that if cure is impossible within such thirty
(30) days, it shall be sufficient for GREAT to commence such cure within said
thirty (30) day period, and pursue such cure diligently to completion within the
shortest possible reasonable time.
"Noncompetition Agreement" means that certain Noncompetition
Agreement between Executive and GREAT, of even date herewith.
2. Term of Employment. GREAT will employ the Executive, and the
Executive hereby accepts employment by GREAT, on the terms and conditions
contained in this Agreement for the period commencing upon the date of this
Agreement and ending on the date that is three (3) years from the date hereof
(together with any extensions thereof, the "Term"). This Agreement will
automatically extend for successive one-year terms without any further action by
the parties hereto, unless GREAT or Executive gives written notice to the other,
at least 120 days prior to the end of the then current term, of such party's
desire to terminate this Agreement.
3. Position and Duties.
(a) Executive shall serve as Vice President of Marketing and
Strategic Planning of GREAT, with such duties and responsibilities as are
assigned or delegated to Executive by GREAT's Board of Trust Managers from time
to time.
(b) Executive shall devote substantially all of his business
time, attention, skill and energy to the performance of Executive's duties and
the advancement of the business and affairs of GREAT. If Executive is elected as
a director or officer of GREAT or any of its affiliates, Executive will fulfill
his duties as such director or officer without additional compensation.
(c) Subject to the covenants of Executive set forth in the
Noncompetition Agreement, Executive may engage in other activities for
Executive's own account while employed by GREAT hereunder, including, without
limitation, charitable, community and other business activities, provided that
such other activities do not materially interfere with the performance of
Executive's duties hereunder and are not otherwise detrimental to the business
and operations of GREAT and its subsidiaries.
4. Current Compensation.
(a) Base Compensation. During the Term, GREAT shall pay the Executive
an initial annual base salary equal to $25,000, payable in equal installments in
accordance with GREAT's normal practices for payment of executives in existence
from time to time. Executive's salary shall be reviewed by GREAT's Board of
Trust Managers on the employment anniversary date each year, and nothing in this
Agreement shall be deemed to prohibit an increase at any time in the annual rate
of salary of Executive at the sole discretion of GREAT's Board of Trust Managers
.
(b) Bonus Compensation. Executive will be entitled to bonus compensation if
and as determined, and in the form and upon the terms determined, by GREAT's
Board of Trust Managers; including, without limitation pursuant to GREAT's 1996
Share Incentive Plan.
(c) Reimbursement for Expenses. During the Term, GREAT will reimburse
Executive for all documented expenses properly incurred by Executive in the
performance of Executive's duties under this Agreement. Reimbursement for such
expenses shall be made in accordance with the expense reimbursement policies of
GREAT in effect from time to time.
(d) Other Benefits. In addition to the benefits specified in Sections
4(a) through 4(c), during the Term, Executive will be entitled to participate in
any present and future life, disability or health insurance, pension,
retirement, profit sharing or employee stock ownership plan or other
compensation or incentive plan adopted by GREAT for the general and overall
benefit of all principal executives of GREAT.
5. Confidentiality; Nondisclosure. Executive hereby agrees to hold in
confidence and not directly or indirectly to use or disclose, either during or
after the Term, Confidential Information obtained or created by Executive during
the Term, whether or not during working hours, except to the extent authorized
by GREAT. Upon termination of this Agreement (for any reason), or upon an
earlier request by GREAT, Executive shall deliver to GREAT all tangible forms of
Confidential Information in Executive's possession or control, including, but
not limited to, drawings, specifications, records, devices, models,
correspondence, blueprints, manuals, letters, notes, notebooks, reports,
flow-charts, computer programs, proposals, or any other documents, whether in
hard copy or on magnetic or optical media, and any copies or reproductions
thereof.
6. Termination of Employment.
(a) Executive's employment with GREAT hereunder shall terminate upon
Executive's death.
(b) Upon notice to Executive, GREAT may terminate Executive's
employment with GREAT hereunder (i) upon the Disability of Executive, (ii) for
Cause, or (iii) for any other reason in its sole and absolute discretion.
(c) Upon not less than thirty (30) days prior written notice to GREAT,
Executive may terminate Executive's employment with GREAT hereunder (i) for Good
Reason, or (ii) at any time within one (1) year after a Change of Control of
GREAT.
7. Compensation Upon Termination of Employment.
(a) If Executive's employment with GREAT is terminated by Executive's
death, GREAT shall continue to pay to Executive's estate, or as may be directed
by the legal representatives of such estate, Executive's full base salary at the
rate in effect at the time of Executive's death through the end of the calendar
month during which his death occurs.
(b) If Executive's employment with GREAT is terminated by reason of
Executive's Disability, GREAT will continue to pay Executive's full base salary
at the rate in effect at the time notice of Executive's termination as a result
of Executive's Disability is given, through the end of the calendar month during
which such termination is effective and for the lesser of (i) three consecutive
months thereafter, and (ii) the period until disability insurance benefits
commence under the disability insurance coverage furnished by GREAT to
Executive.
(c) If (i) Executive shall terminate Executive's employment with GREAT
in breach of this Agreement or (ii) GREAT terminates Executive's employment with
GREAT for Cause; GREAT shall pay Executive's full salary, at the rate in effect
at the time notice of such termination is given through the date such
termination is effective, and GREAT shall have no further obligations to
Executive under this Agreement.
(d) If (i) GREAT terminates Executive's employment with GREAT pursuant
to clause (iii) of Section 6(b) or (ii) Executive terminates his employment with
GREAT for Good Reason or in the event of a Change of Control of GREAT, (x) GREAT
shall continue to pay the Executive's full base salary at the rate in effect at
the time that notice of such termination is given through the end of the
calendar month during which such termination is effective and (y) GREAT shall
pay to Executive a lump sum amount equal to 200% of (A) Executive's then current
base salary plus (B) an amount equal to the aggregate of all bonuses (whether
cash, stock, options, or otherwise (but specifically excluding Deferred Stock
Grants, if any, granted to Executive under GREAT's 1996 Share Incentive Plan)
granted to Executive for the previous year, and GREAT shall have no further
obligations to Executive under this Agreement.
(e) Notwithstanding anything to the contrary set forth in this Section
7, no termination of Executive's employment with GREAT shall affect the right of
Executive or his estate of beneficiaries to receive any salary or bonus accrued
and due and payable but unpaid at the time of such termination, or any vested
rights which Executive may have at the time of his death pursuant to any
insurance or other death benefit plans or any other plans, policies or
arrangements of GREAT, subject to the terms of such insurance or other plans,
policies or arrangements.
8. Injunctive Relief; Breach of Certain Provisions.
(a) Executive acknowledges that the injury that would be suffered by
GREAT as a result of a breach of the provisions of this Agreement (including,
without limitation, any provision of Section 5 (Confidentiality; Nondisclosure))
would be irreparable, and that an award of monetary damages to GREAT for such a
breach would be an inadequate remedy. Consequently, GREAT will have the right,
in addition to any other rights it may have, to obtain injunctive relief to
restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and GREAT will not be obligated to post bond or
other security in seeking such relief.
(b) Without limiting GREAT's rights under this Section 8 or any other
remedies available to GREAT, if Executive (i) breaches any of the provisions of
Section 5 (Confidentiality; Nondisclosure) of this Agreement or (ii) breaches
any of the provisions of Section 2 or Section 3 of the Noncompetition Agreement,
GREAT shall have the right to cease making payments of any amounts otherwise due
to Executive under this Agreement.
9. Termination of Existing Employment Agreement. The existing Employment
Agreement between Executive and GREAT is hereby terminated and shall be of no
further legal effect.
10. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11. Binding Effect. This Agreement shall inure to the benefit of, and shall
be binding upon, the parties hereto and their respective successors, heirs,
assigns and legal representatives. The duties of Executive under this Agreement
are personal and therefore, may not be delegated.
12. Survival. It is the express intention and agreement of the parties
hereto that the provisions of Section 5 (Confidentiality; Nondisclosure) of this
Agreement shall survive the termination of this Agreement and termination of the
employment of Executive with GREAT hereunder or otherwise.
13. Notices. All notices and other communications to any party
hereunder shall be in writing and shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, or by a reputable
courier delivery service or by prepaid telex or telecopy and shall be given to
the address or telex or telecopier number for such party set forth below such
party's signature to this Agreement, or to such other address or telex or
telecopier number as such party may hereafter specify by notice to the other
party. Each such notice or other communication shall be effective (a) if given
by telex or telecopier, when such telex or telecopy is transmitted to the telex
or telecopier number specified by this Section and the appropriate answerback or
confirmation is received or (b) if given by any other means (including, without
limitation, by courier), when delivered at the address specified by this
Section.
14. Headings. The Section headings contained in this Agreement are inserted
for convenience of reference only and shall not in any way define or affect the
meaning, construction or scope of the provisions hereof.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
principles conflict of laws.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
17. Entire Agreement; Amendment. This Agreement supersedes all prior
agreements (whether written or oral) among the parties with respect to the
subject matter, is intended as a complete and exclusive statement of the terms
of the agreement among the parties with respect thereto and cannot be amended or
terminated except by a written instrument by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GROVE REAL ESTATE ASSET TRUST
/s/ Gerald McNamara By:/s/ Joseph R. LaBrosse
Gerald McNamara Name: Joseph R. LaBrosse
Title: Chief Financial Officer
Address: Address:
Business
c/o Grove Real Estate Asset Trust Grove Real Estate Asset Trust
598 Asylum Avenue 598 Asylum Avenue
Hartford, CT 06105 Hartford, CT 06105
Tel: (860) 246-1126 Tel: (860) 246-1126
Fax: (860) 527-0401 Fax: (860) 527-0401
Residence
15 Hatters Lane
Farmington, CT 06032
