SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )
Ambassador Apartments, Inc.
(Name of Issuer)
Class A Senior Cumulative Convertible Preferred Stock
(Title of Class of Securities)
(CUSIP Number)
Mr. Matthew W. Kaplan
Rothschild Realty Inc.
1251 Avenue of the Americas
New York, New York 10020
(212) 403-3500
(Name, address and telephone number of person
authorized to receive notices and communications)
August 16, 1996
(Date of event which requires filing of this statement)
______________________
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the
statement [x]. (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting
beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
Page 1 of 7 Pages
<PAGE>
13D
CUSIP No.
_____________________________________________________________________________
(1) NAME OF REPORTING PERSON Five Arrows Realty Securities L.L.C.
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS
WC
_____________________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
_____________________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER 1,351,351
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER 1,351,351
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 1,351,351
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 100%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON
OO
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 7 Pages
<PAGE>
13D
CUSIP No.
_____________________________________________________________________________
(1) NAME OF REPORTING PERSON Rothschild Realty Investors II L.L.C.
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS
AF
_____________________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
_____________________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER 1,351,351
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER 1,351,351
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 1,351,351
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 100%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON
OO
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 7 Pages
<PAGE>
Item 1. Security and Issuer
This statement on Schedule 13D ("Schedule 13D") is being filed
with respect to the Class A Senior Cumulative Convertible Preferred Stock, par
value $.01 per share (the "Preferred Stock") of Ambassador Apartments, Inc., a
Maryland corporation (the "Company"), whose principal executive offices are
located at 77 West Wacker Drive, Chicago, Illinois 60601.
Item 2. Identity and Background
(a) This Schedule 13D is being filed on behalf of (i) Five Arrows
Realty Securities L.L.C., a Delaware limited liability company ("Five Arrows")
and (ii) Rothschild Realty Investors II L.L.C., a Delaware limited liability
company and sole Managing Member of Five Arrows ("Rothschild").
The reporting entities are making a joint filing pursuant to Rule
13d-1(f) because, by reason of the relationship as described herein, they may
be deemed to be a "group" within the meaning of Section 13(d)(3) with respect
to acquiring, holding and disposing of shares of Preferred Stock.
(b) The business address of each of the Five Arrows and Rothschild
is 1251 Avenue of the Americas, New York, New York 10020.
(c) Five Arrows is a private investment limited liability company.
The principal occupation of Rothschild is acting as managing member of Five
Arrows. The current Managers of Rothschild are John D. McGurck, Matthew W.
Kaplan, James E. Quigley, 3rd, and D. Pike Aloian.
(d) Neither of Five Arrows or Rothschild has, during the last five
years, been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors).
(e) Neither Five Arrows or Rothschild has, during the last five
years, been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as result of such proceeding was or is subject
to a judgment decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or a finding of any violation with respect to such laws.
Page 4 of 7 Pages
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration
The source of funds for the purchases reported by Five Arrows herein
was Five Arrow's capital. The total amount of funds used by Five Arrows to
purchase the 1,351,351 shares of Preferred Stock owned by it is $25,000,000.
Item 4. Purpose of Transaction
The purpose of the acquisition of the shares of Common Stock by Five
Arrows is for investment. Five Arrows intends to review its holdings with
respect to the Company on a continuing basis. Depending on Five Arrows's
evaluation of the Company's business and prospects, and upon future
developments (including, but not limited to, market prices of the shares of
Preferred Stock and availability and alternative uses of funds; as well as
conditions in the securities markets and general economic and industry
conditions), Five Arrows may acquire other securities of the Company; sell
all or a portion of its shares of Preferred Stock or other securities of the
Company, now owned or hereafter acquired, or maintain its position at current
levels.
Pursuant to the Articles Supplementary of the Charter of the
Company, the holders of the Preferred Stock have the right to elect one member
of the Board of Directors of the Company. Additionally, upon the occurrence
of certain other events, the holders of the Preferred Stock shall have the
right to elect a second member of the Board of Directors of the Company.
Consequently, Matthew W. Kaplan has been designated as a member of the Board
of Directors of the Company and has been appointed to the Board of Directors
of the Company by the existing Board of Directors of the Company.
Other than as described above, Five Arrows has no present plans or
proposals which relate to, or would result in, any of the matters enumerated
in paragraphs (b) through (j), inclusive, of Item 4 of Schedule 13D. Five
Arrows may, at any time and from time to time, review or reconsider its
position with respect to the Company, and formulate plans or proposals with
respect to any such matters.
Item 5. Interest in Securities of the Issuer
(a) As of the close of business on August 16, 1996, Five Arrows
owned, within the meaning of Rule 13d-3 under the Exchange Act, 1,351,351
shares of the Preferred Stock. Rothschild, as sole managing member of Five
Arrows, may be deemed the beneficial owner of the 1,351,351 shares of
Preferred Stock held by Five Arrows.
(b) Five Arrows has the sole power to vote and dispose of the
1,351,351 shares of Preferred Stock owned by it, which power may be exercised
by Rothschild.
Page 5 of 7 Pages
<PAGE>
(c) Five Arrows purchased the 1,351,351 shares of Preferred Stock
from the Company on August 16, 1996 pursuant to an Investment Agreement, dated
as of August 15, 1996, among the Company, Five Arrows and Ambassador
Apartments, L.P., a Delaware limited partnership (the "Partnership"). In
consideration for the 1,351,351 shares of Preferred Stock, Five Arrows paid
$18.50 per share for a total of $25,000,000.
(d) Not applicable.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer
Pursuant to the Supplemental Agreement, dated as of August 16, 1996,
between the Company and Five Arrows, Five Arrows has the right to require the
Company to redeem its shares of Preferred Stock at a premium upon the breach
of certain covenants by the Company. Other than as described herein, or the
agreement described in Exhibit 99.1 in Item 7 below, there are no contracts,
understandings or relationships (legal or otherwise) among the persons named
in Item 2 hereof and between such persons or any person with respect to any
securities of the Company, including but not limited to transfer or voting of
any of the Common Stock, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or
loss, or the giving or withholding of proxies.
ITEM 7. Material To Be Filed As Exhibits
Exhibit Number Description
99.1 Joint Acquisition Statement, as required
by Rule 13d-1(f)(1) of the Securities Act
of 1934.
99.2 Investment Agreement, dated as of August
15, 1996, among the Company, Five Arrows
and the Partnership.
99.3 Supplemental Agreement, dated as of
August 16, 1996, between the Company and
Five Arrows.
Page 6 of 7 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of their knowledge and
belief, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Dated: August 26, 1996
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ James E. Quigley 3d
Manager
ROTHSCHILD REALTY INVESTORS II L.L.C.
By: /s/ James E. Quigley 3d
Page 7 of 7 Pages
EXHIBIT 99.1
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-1(f)1
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D, as amended, is filed on behalf of each of the
undersigned and that all subsequent amendments to this statement on
Schedule 13D, as amended, shall be filed on behalf of each of the
undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall
be responsible for the timely filing of such amendments, and for the
completeness and accuracy of the information concerning him or it
contained therein, but shall not be responsible for the completeness
and accuracy of the information concerning the other, except to the
extent that he or it knows or has reason to believe that such
information is inaccurate.
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ James E. Quigley 3d
Manager
ROTHSCHILD REALTY INVESTORS II L.L.C.
By: /s/ James E. Quigley 3d
INVESTMENT AGREEMENT
among
Ambassador Apartments, Inc.,
Ambassador Apartments, L.P.,
and
FIVE ARROWS REALTY SECURITIES L.L.C.
______________________
Dated as of August 15, 1996
______________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINED TERMS
SECTION 1.1 DEFINED TERMS 1
SECTION 1.2 TERMS DEFINED HEREIN 6
ARTICLE 2 SALE AND PURCHASE OF PREFERRED SHARES
SECTION 2.1 SALE OF PREFERRED SHARES 6
SECTION 2.2 PAYMENT FOR THE PREFERRED SHARES 6
SECTION 2.3 TRANSFER TAXES 7
ARTICLE 3 CLOSING
SECTION 3.1 CLOSINGS 7
SECTION 3.2 CANCELLATION OF THE SECOND CLOSING 7
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1 DUE INCORPORATION AND STATUS OF THE COMPANY 7
SECTION 4.2 AUTHORITY 8
SECTION 4.3 VALID AGREEMENT OF THE COMPANY 8
SECTION 4.4 NO DEFAULT 8
SECTION 4.5 NO REQUIRED CONSENTS 8
SECTION 4.6 RESERVATION OF SHARES 9
SECTION 4.7 VALIDITY OF PREFERRED SHARES 9
SECTION 4.8 DISCLOSURE 9
SECTION 4.9 PARTNERSHIP AGREEMENT 9
SECTION 4.10 VALID AGREEMENT OF THE PARTNERSHIP 10
SECTION 4.11 ISSUANCE OF PREFERRED UNITS 10
SECTION 4.12 CAPITALIZATION 10
SECTION 4.13 LITIGATION 10
SECTION 4.14 ERISA 11
SECTION 4.15 ENVIRONMENTAL MATTERS 11
SECTION 4.16 INVESTMENT COMPANY 12
SECTION 4.17 TAXES 12
SECTION 4.18 INSURANCE 12
SECTION 4.19 AFFILIATED TRANSACTIONS 12
SECTION 4.20 LIABILITIES 13
SECTION 4.21 INTEGRATION 13
SECTION 4.22 LIMITED WAIVER OF OWNERSHIP LIMITATIONS 13
SECTION 4.23 NO EVENT OF DEFAULT 14
SECTION 4.24 NO BROKERS 14
SECTION 4.25 FULL DISCLOSURE 14
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
SECTION 5.1 ORGANIZATION 14
SECTION 5.2 ACCREDITED INVESTOR 14
SECTION 5.3 MEMBER INFORMATION 14
SECTION 5.4 VALID AGREEMENTS OF THE INVESTOR 14
SECTION 5.5 NO DEFAULT 15
SECTION 5.6 OPPORTUNITY FOR INQUIRY 15
SECTION 5.7 MATERIALS 15
SECTION 5.8 KNOWLEDGE AND EXPERIENCE 15
SECTION 5.9 NO BROKERS 15
SECTION 5.10 REGISTRATION 15
SECTION 5.11 TRANSFER RESTRICTIONS 15
SECTION 5.12 INVESTMENT COMPANY 16
ARTICLE 6 COVENANTS AND UNDERTAKINGS
SECTION 6.1 PERFORMANCE BY PARTNERSHIP 16
SECTION 6.2 CLOSINGS 16
SECTION 6.3 FEES AND EXPENSES OF ROTHSCHILD REALTY, INC. 16
SECTION 6.4 FEES AND EXPENSES OF SCHULTE ROTH & ZABEL 16
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
INVESTOR TO CLOSE
SECTION 7.1 REPRESENTATIONS AND COVENANTS 17
SECTION 7.2 GOOD STANDING CERTIFICATES 17
SECTION 7.3 GOVERNMENTAL PERMITS AND APPROVALS 17
SECTION 7.4 LEGISLATION 17
SECTION 7.5 LEGAL PROCEEDINGS 18
SECTION 7.6 THIRD PARTY CONSENTS 18
SECTION 7.7 STOCK CERTIFICATES 18
SECTION 7.8 SATISFACTORY BUSINESS REVIEW 18
SECTION 7.9 APPROVAL OF COUNSEL TO THE INVESTOR 18
SECTION 7.10 APPOINTMENT OF DIRECTOR 19
SECTION 7.11 AMENDED PARTNERSHIP AGREEMENT 19
SECTION 7.12 PREFERRED UNITS 19
SECTION 7.13 CERTIFICATE OF DESIGNATION 19
SECTION 7.14 REGISTRATION RIGHTS AGREEMENT 19
SECTION 7.15 SUPPLEMENTAL AGREEMENT 19
SECTION 7.16 OPINION OF KIRKLAND & ELLIS 19
SECTION 7.17 FEES AND EXPENSES OF ROTHSCHILD REALTY, INC. 19
SECTION 7.18 FEES AND EXPENSES OF SCHULTE ROTH & ZABEL 19
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY AND THE PARTNERSHIP TO CLOSE
SECTION 8.1 REPRESENTATIONS AND COVENANTS 20
SECTION 8.2 GOVERNMENTAL PERMITS AND APPROVALS 20
SECTION 8.3 LEGAL PROCEEDINGS 20
SECTION 8.4 THIRD PARTY CONSENTS 20
SECTION 8.5 PURCHASE PRICE 20
SECTION 8.6 APPROVAL OF COUNSEL TO THE COMPANY 20
SECTION 8.7 OPINION 21
ARTICLE 9 ASSIGNMENT
SECTION 9.1 ASSIGNABILITY BY INVESTOR 21
SECTION 9.2 ASSIGNABILITY BY THE COMPANY OR THE PARTNERSHIP 21
SECTION 9.3 BINDING AGREEMENT 21
ARTICLE 10 MISCELLANEOUS
SECTION 10.1 APPLICABLE LAW 21
SECTION 10.2 NOTICES 21
SECTION 10.3 ENTIRE AGREEMENT; AMENDMENT 22
SECTION 10.4 REMEDIES FOR BREACHES OF THIS AGREEMENT 22
SECTION 10.5 CONFIDENTIALITY 23
SECTION 10.6 TERMINATION 24
SECTION 10.7 COUNTERPARTS 25
<PAGE>
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT dated as of August 15, 1996 among
Ambassador Apartments, Inc., a corporation organized under the
laws of the State of Maryland (the "Company"); Ambassador
Apartments, L.P., a Delaware limited partnership (the
"Partnership"); and Five Arrows Realty Securities L.L.C., a
limited liability company organized under the laws of the State
of Delaware (the "Investor").
WHEREAS, the Company wishes to issue the Preferred
Shares (as defined herein) to the Investor, and the Investor
wishes to purchase, acquire and accept the Preferred Shares from
the Company (the "Investment").
WHEREAS, the Investor, as a condition to the
Investment, desires that the Partnership issue a preferred
general partnership interest to the Company in an aggregate
amount of the net proceeds to the Company of the Investment, and
the Company wishes to acquire such preferred general partnership
interest in the Partnership.
NOW THEREFORE, in consideration of the promises and the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE 1 DEFINED TERMS.
Section 1.1 Defined Terms. The following terms
shall, unless the context otherwise requires, have the meanings
set forth in this Section 1.1.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable
attorneys' fees and disbursements.
"Affiliate" means, with respect to any Person, (a) any
member of the Immediate Family of such Person or a trust
established for the benefit of such member, (b) any beneficiary
of a trust described in (a), (c) any Entity which, directly or
indirectly though one or more intermediaries, is deemed to be the
beneficial owner of 25% or more of the voting equity of the
Company for the purposes of Section 13(d) of the Exchange Act,
(d) any officer of the Company or any member of the Board of
Directors of the Company, other than a Preferred Director (as
such term is defined in the Certificate of Designation) or (e)
any Entity which, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with, such Person, including such Person or Persons
referred to in the preceding clauses (a) or (d); provided,
however, that none of the Investor, its partners, members or
Affiliates shall be considered an Affiliate of the Company or the
Partnership or any of their respective Subsidiaries for purposes
of this Agreement.
"Agreement" means this Investment Agreement, as
originally executed and as hereafter from time to time
supplemented, amended and restated.
"Agreement and Waiver" means the Agreement and Waiver,
dated as of the Initial Closing Date, between the Company and the
Investor.
"Amended Partnership Agreement" means the Partnership
Agreement as amended on the Closing Dates by the respective
Amendments.
"Amendments" means the amendments to the Partnership
Agreement set forth in Exhibit A hereto.
"Business Day" means any Monday, Tuesday, Wednesday,
Thursday or Friday which is not a day in which banking
institutions in New York City are authorized or obligated by law
or executive order to close.
"Certificate of Designation" means the Articles
Supplementary classifying 1,351,351 shares of preferred stock as
Class A Senior Cumulative Convertible Preferred Stock of the
Company and 1,351,351 shares of excess stock, par value $.01 per
share, as Excess Class A Preferred Stock of the Company, in the
form of Exhibit C attached hereto.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time or any successor statute thereto.
"Common Stock" means the shares of the common stock,
par value $.01 per share, of the Company.
"Entity" means any general partnership, limited
partnership, corporation, joint venture, trust, business trust,
real estate investment trust, limited liability company,
cooperative or association.
"Environmental Claim" means any complaint, summons,
citation, notice, directive, order, claim, litigation,
investigation, judicial or administrative proceeding, judgment,
letter or other communication from any governmental agency,
department, bureau, office or other authority, or any third party
involving violations of Environmental Laws or Releases of
Hazardous Materials.
"Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. 9601 et seq., as amended; the Resource
Conservation and Recovery Act ("RCRA), 42 U.S.C. 6901 et seq., as
amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as
amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as
amended; the Occupational Safety and Health Act ("OSHA"), 29
U.S.C. 655 et seq., and any other federal, state, local or
municipal laws, statutes, regulations, rules or ordinances
imposing liability or establishing standards of conduct for
protection of the environment.
"Environmental Liabilities" means any monetary
obligations, losses, liabilities (including strict liability),
damages, punitive damages, consequential damages, treble damages,
costs and expenses (including all reasonable out-of-pocket fees,
disbursements and expenses of counsel, reasonable out-of-pocket
expert and consulting fees and reasonable out-of-pocket costs for
environmental site assessments, remedial investigation and
feasibility studies), fines, penalties, sanctions and interest
incurred as a result of any Environmental Claim filed by any
governmental authority or any third party which relate to any
violations of Environmental Laws, Remedial Actions, Releases or
threatened Releases of Hazardous Materials from or onto (i) any
assets, properties or businesses presently or formerly owned by
the Company, the Partnership, their Subsidiaries or a predecessor
in interest, or (ii) any facility which received Hazardous
Materials generated by the Company, the Partnership, any of
their Subsidiaries or a predecessor in interest.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute of similar
import, and regulations thereunder, in each case as in effect
from time to time. References to sections of ERISA shall be
construed also to refer to any successor sections.
"ERISA Affiliate" means any (i) corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Company,
(ii) partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of
Section 414(c) of the Code) with the Company, or (iii) member of
the same affiliated service group (within the meaning of
Section 414(m) of the Code) as the Company, any corporation
described in clause (i) above or any partnership or trade or
business described in clause (ii) above.
"Evaluation Material" means all information furnished
by the Company, the Partnership and their respective
Representatives to the Investor and its Representatives, whether
or not in writing, in connection with the issuance and sale of
the Preferred Shares from the Company to the Investor, provided,
however, such term does not include information which (i) becomes
generally available to the public other than as a result of a
disclosure by the Investor or its Representatives, (ii) was
available to the Investor or its Representatives on a non-
confidential basis prior to its disclosure to the Investor or its
Representatives by the Company or its Representatives, (iii)
becomes available to the Investor or its Representatives on a non-
confidential basis from a source other than the Company or its
Representatives, provided that such source is not known to the
Investor or its Representatives to be bound by a confidentiality
agreement with the Company or (iv) is independently developed by
the Investor or its Representatives without reference to the
Evaluation Material.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"GAAP" means United States Generally Accepted
Accounting Principles, as in effect from time to time.
"General Partner" means the Company for so long as it
is a general partner of the Partnership, and any other person who
is admitted as a successor general partner of the Partnership at
the time of reference thereto.
"Hazardous Materials" means include (a) any element,
compound, or chemical that is defined, listed or otherwise
classified as a contaminant, pollutant, toxic pollutant, toxic or
hazardous substances, extremely hazardous substance or chemical,
hazardous waste, medical waste, biohazardous or infectious waste,
special waste, or solid waste under Environmental Laws; (b)
petroleum, petroleum-based or petroleum-derived products; (c)
polychlorinated biphenyls; (d) any substance exhibiting a
hazardous waste characteristic including but not limited to
corrosivity, ignitibility, toxicity or reactivity as well as any
radioactive or explosive materials; and (e) asbestos-containing
materials.
"Immediate Family" means, with respect to any Person,
such Person's spouse, parents, parents-in-law, descendants,
nephews, nieces, brothers, sisters, brothers-in-law, sisters-in-
law, stepchildren, sons-in-law and daughters-in-law.
"Material Adverse Effect," when used with reference to
events, acts, failures or omissions to act, or conduct of a
specified Person, means that such events, acts, failures or
omissions to act, or conduct would have a material adverse effect
on (i) the condition (financial or otherwise), earnings, business
affairs or business prospects of such Person and its consolidated
subsidiaries, considered as one enterprise, or (ii) the ability
of such Person to perform its obligations under the Operative
Instruments.
"Operative Instruments" means the Partnership
Agreement, the Amendments, this Agreement, the Certificate of
Designation, the Registration Rights Agreement, the Supplemental
Agreement and the Agreement and Waiver.
"Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of the Partnership, dated as of
August 31, 1994, as amended as of September 20, 1994 and June 21,
1996.
"Permit" means a permit, licenses, consent, order or
approval by any federal, state or local governmental agency.
"Person" means any individual or Entity.
"Plan" means an employee benefit plan defined in
Section 3(3) of ERISA in respect of which the Company or any
ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Preferred Shares" means the shares of the Company
designated in the Certificate of Designation as Class A Senior
Cumulative Convertible Preferred Stock.
"Preferred Units" means the Partnership Units
designated as Class A Cumulative Convertible Preferred Units
under the Amended Partnership Agreement and issued to the Company
pursuant to the Amended Partnership Agreement.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated as of the Initial Closing Date, between
the Company and the Investor, in the form of Exhibit B attached
hereto.
"REIT" means a real estate investment trust described
in Code Section 856.
"Release" means any spilling, leaking, pumping,
emitting, emptying, discharging, injecting, escaping, leaching,
migrating, dumping, or disposing of Hazardous Materials
(including the abandonment or discarding of barrels, containers
or other closed receptacles containing Hazardous Materials) into
the environment.
"Remedial Action" means all actions taken to (i) clean
up, remove, remediate, contain, treat, monitor, assess, evaluate
or in any other way address Hazardous Materials in the indoor or
outdoor environment; (ii) prevent or minimize a Release or
threatened Release of Hazardous Materials so they do not migrate
or endanger or threaten to endanger public health or welfare or
the indoor or outdoor environment; (iii) perform pre-remedial
studies and investigations and post-remedial operation and
maintenance activities; or (iv) any other actions authorized by
42 U.S.C. 9601.
"Representatives" means, with respect to any Person,
the directors, officers, employees, Affiliates, representatives
(including, but not limited to, financial advisors, attorneys and
accountants), agents or potential sources of financing of such
person.
"SEC" means the Securities and Exchange Commission or
any successor regulatory authority.
"Securities Act" means the Securities Act of 1933, as
amended.
"Subsidiary" of any Person or Entity means an Entity in
which such Person or Entity has the ability, whether by the
direct or indirect ownership of shares or other equity interests,
by contract or otherwise, to elect a majority of the directors of
a corporation or the trustees of a real estate investment trust,
to select the managing partner of a partnership, or otherwise to
select, or have the power to remove and then select, a majority
of those persons exercising governing authority over such Entity.
In the case of a limited partnership, the sole general partner,
all of the general partners to the extent each has equal
management control and authority, or the managing general partner
or managing general partners thereof shall be deemed to have
control of such partnership and, in the case of a trust other
than a real estate investment trust, any trustee thereof or any
Person having the right to select any such trustee shall be
deemed to have control of such trust.
"Supplemental Agreement" means the Supplemental
Agreement, dated as of the Initial Closing Date, between the
Company and the Investor in the form of Exhibit D attached
hereto.
Section 1.2 Terms Defined Herein. In addition to
the terms defined in Section 1.1 above, the following terms
shall, unless the context otherwise requires, have the meanings
set forth in this Agreement in the section set forth next to such
term.
Defined Term Section
accredited investor 5.2
Breach 4.23
Closing 2.1
Closing Date 3.1
Excess Stock 4.12
Indemnified Party 10.5.3
Indemnifying Party 10.5.3
Initial Closing Date 3.1
Investment 2.3
Liabilities 4.20
1996 10-Qs 4.8
1995 10-K 4.2
1996 Proxy Statement 4.8
Preferred Stock 4.12
Purchase Price 2.1
SDAT 16
Second Closing Date 3.1
Third Party Claim 10.5.3
ARTICLE 2 SALE AND PURCHASE OF PREFERRED SHARES.
Section 2.1 Sale of Preferred Shares. At the
closings provided for in Section 3.1 hereof (each a "Closing"):
(i) the Company shall issue and sell an aggregate of 1,351,351
Preferred Shares to the Investor, and shall deliver to the
Investor a stock certificate or certificates representing all of
the Preferred Shares, registered in the Investor's or its
nominee's name; and (ii) the Investor shall purchase, acquire and
accept such Preferred Shares for $18.50 per share or an aggregate
of twenty-five million dollars ($25,000,000.00) (the "Purchase
Price").
Section 2.2 Payment for the Preferred Shares.
At the Closings and in accordance with the provisions
set forth in Section 3.1, the Purchase Price shall be paid by the
Investor to the Company in United States dollars by wire transfer
of funds immediately available in New York City to such
account(s) as the Company shall designate in a written notice
delivered to the Investor not less than five (5) Business Days
prior to the applicable Closing Date.
Section 2.3 Transfer Taxes. The Company shall pay
all stock transfer taxes, recording fees and other sales,
transfer, use, purchase or similar taxes resulting from the
Investment.
ARTICLE 3 CLOSING.
Section 3.1 Closings. Each Closing of the sale and
purchase of the Preferred Shares shall take place at the offices
of Schulte Roth & Zabel, 900 Third Avenue, New York, New York
10022 at 10:00 a.m. New York City time. The first Closing shall
occur on August 16, 1996, or at such other time and place as the
Company and the Investor mutually agree in writing (the "Initial
Closing Date"). Such Closing shall not be for less than 675,676
Preferred Shares at a purchase price of $18.50 per share, and
shall be for such number of shares as the Company notifies the
Investor not less than five (5) days prior to the Closing Date.
If the Company exercises its option to sell on the Initial
Closing Date less than all of the 1,351,351 Preferred Shares to
the Investor pursuant to this Agreement, than a second Closing
will take place. Such second Closing shall occur on October 15,
1996, or on such earlier date as the Company notifies the
Investor on not less than five (5) days notice (the "Second
Closing Date"). At such second Closing, the Company will sell
the balance of the Preferred Shares to be sold to the Investor
pursuant to this Agreement for $18.50 per share. The Initial
Closing Date and the Second Closing Date shall each be referred
to herein as a "Closing Date."
Section 3.2 Cancellation of the Second Closing.
In the event that a Change of Control (as defined in the
Certificate of Designation) occurs after the Initial Closing
Date, but prior to a second Closing, and the Investor notifies
the Company that it will tender into the Change of Control Offer
(as defined in the Certificate of Designation) such second
Closing shall be canceled and the Company shall immediately pay
to the Investor by wire transfer in immediately available funds
an amount equal to the product of $0.37 and the number of
Preferred Shares which the Company would have been required to
sell to the Investor at such second Closing.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the
Investor as follows:
Section 4.1 Due Incorporation and Status of the
Company
Section 4.1.1 Due Incorporation. The Company and
each of its Subsidiaries has been formed and is existing and in
good standing under the laws of the state of its respective
organization and is qualified or licensed, and in good standing,
to do business in each other jurisdiction in which its ownership
of properties or its conduct of business requires such
qualification or licensing, except where the failure to be so
qualified or licensed, or in good standing, would not have a
Material Adverse Effect on the Company.
Section 4.1.2 REIT Status. Assuming the
correctness of the representations and warranties of the Investor
in Article 5, the Company qualifies as a REIT under the Code and
has taken no action or omitted to take any action, the effect of
which would reasonably be expected to disqualify the Company as a
REIT under the Code.
Section 4.2 Authority. The Company has the power
and authority to own, lease and operate its properties, directly
or indirectly, and to conduct its business as presently conducted
and as contemplated by the Annual Report on Form 10-K as filed by
the Company under the Exchange Act for the year ended December
31, 1995 (the "1995 10-K"), except where the failure to have such
power or authority would not have a Material Adverse Effect on
the Company.
Section 4.3 Valid Agreement of the Company. The
execution, delivery and performance of this Agreement, the
Supplemental Agreement, the Registration Rights Agreement and the
Agreement and Waiver have each been duly authorized by the
Company. This Agreement has been and the Supplemental Agreement,
the Registration Rights Agreement and the Agreement and Waiver,
upon the Closing, will be executed and delivered by the Company.
This Agreement represents and the Supplemental Agreement, the
Registration Rights Agreement and the Agreement and Waiver, upon
the Closing will represent, the valid and binding obligations of
the Company, enforceable against the Company in accordance with
their respective terms.
Section 4.4 No Default. Assuming the correctness of
the representations and warranties of the Investor in Article 5,
except as set forth on Schedule 4.4, the execution and delivery
of the Operative Instruments by such of the Company and the
Partnership as are parties thereto and the performance by such
parties of their respective obligations thereunder do not (or if
not yet executed, upon the execution and delivery thereof will
not) (a) violate the Articles of Incorporation or By-Laws of the
Company; (b) violate the terms of the Partnership Agreement; (c)
violate or constitute a breach of or default under any mortgage,
indenture, loan agreement, promissory note or other agreement to
which the Company, the Partnership or any of their respective
Subsidiaries is a party, or by which any of them is bound, or to
which any property of the Company, the Partnership or any of
their respective Subsidiaries is subject; or (d) conflict with or
violate any law or any regulation, rule, order or decree of any
governmental body, court or administrative agency having
jurisdiction over the Company, the Partnership or any of their
respective Subsidiaries or the properties of any of them except
with respect to clause (c) and (d) above where such conflict,
breach, default or violation would not reasonably be expected to
have a Material Adverse Effect on the Company.
Section 4.5 No Required Consents. Assuming the
correctness of the representations and warranties of the Investor
in Article 5, except as set forth on Schedule 4.5, the execution
and delivery of the Operative Instruments by such of the Company
and the Partnership as are parties thereto and the performance by
such parties of their respective obligations thereunder do not
require any filing or registration with, or the receipt of any
consent by, any governmental or regulatory authority by such
parties or any of their respective Subsidiaries other than any
which have already been obtained or waived.
Section 4.6 Reservation of Shares . The Company has
duly reserved solely for purposes of issuance upon conversion of
the Preferred Shares the shares of Common Stock into which the
Preferred Shares may be converted from time to time.
Section 4.7 Validity of Preferred Shares. The
Company has duly authorized the issuance and delivery of
1,351,351 shares of Preferred Stock pursuant to this Agreement
and, upon delivery thereof and receipt by the Company of the
Purchase Price therefor, such shares of Preferred Stock will be
duly authorized, validly issued, fully paid and nonassessable.
The Preferred Shares have the dividend, conversion, voting and
other terms set forth in the Certificate of Designation and, to
the extent not inconsistent therewith, as set forth in the
Charter and By-Laws of the Company and the Maryland General
Corporation Law.
Section 4.8 Disclosure. The Company has heretofore
delivered to the Investor the Proxy Statement relating to its
1996 Annual Meeting of Shareholders (the "1996 Proxy Statement"),
the 1995 10-K, and the Quarterly Reports on Form 10-Q as filed by
the Company under the Exchange Act for the quarters ended March
31, 1996 and June 30, 1996 (the "1996 10-Qs").
Section 4.8.1 No Misstatement or Omission. At
the time of filing, the 1996 Proxy Statement, the 1995 10-K and
the 1996 10-Qs complied in all material respects with the
requirements of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder. The 1996 Proxy Statement, the
1995 10-K and the 1996 10-Qs do not, as of their respective
dates, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
Section 4.8.2 Financial Statements. The
financial statements, including the notes thereto, and supporting
schedules included in the 1995 10-K and the 1996 10-Qs have been
prepared in conformity with GAAP applied on a consistent basis
(except as otherwise noted therein) and present fairly the
financial position of the Company and its Subsidiaries as of the
dates indicated and the results of their operations for the
periods shown.
Section 4.8.3 Subsequent Events. Since the
respective dates as of which information is given in the 1995 10-
K and the 1996 10-Qs, except as otherwise stated therein or in
the press releases listed on Schedule 4.8.3 hereto and other than
changes in general economic conditions or industry conditions,
there has not been any change in the condition (financial or
otherwise) or in the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of
business which would have a Material Adverse Effect on the
Company.
Section 4.9 Partnership Agreement. The Partnership
Agreement is, and upon execution and delivery on each Closing
Date, the Amended Partnership Agreement will be, a valid
agreement enforceable in accordance with its terms. The
Partnership Agreement has not been amended, modified or waived in
any manner except as expressly set forth therein. The
Partnership has been managed, operated and governed in all
material respects in accordance with the Partnership Agreement.
Section 4.10 Valid Agreement of the Partnership. The
execution, deliver and performance of this Agreement and the
Amendments have been duly authorized by the Company as general
partner of the Partnership. This Agreement has been and the
Amendments, upon the applicable Closing, will be executed and
delivered by the Company as general partner of the Partnership.
This Agreement represents, and the Amendments upon the applicable
Closing will represent, the valid and binding obligations of the
Partnership, enforceable against the Partnership in accordance
with its terms.
Section 4.11 Issuance of Preferred Units. All action
required to be taken by the Partnership and the Company, as
General Partner, for the issuance of the Preferred Units to the
Company has been taken.
Section 4.12 Capitalization. The authorized capital
stock of the Company consists of: (i) 100,000,000 shares of
Common Stock; (ii) 20,000,000 shares of preferred stock having a
par value of one cent ($.01) per share (the "Preferred Stock");
and (iii) 120,000,000 shares of excess stock having a par value
of one cent ($.01) per share (the "Excess Stock"). (i)
8,958,525, 0, and 0 shares of the Common Stock, the Preferred
Stock and the Excess Stock, respectively, were validly issued and
outstanding, fully paid and nonassessable; and (ii) 4,385,567, 0,
and 0 shares of the Common Stock, the Preferred Stock and the
Excess Stock, respectively, were reserved for issuance as set
forth on Schedule 4.12 hereto. Except as contemplated by clauses
(i) through (ii) of this Section 4.12 or as set forth on Schedule
4.12 hereto, there are no other shares of capital stock of the
Company outstanding and no other outstanding options, warrants,
convertible or exchangeable securities, subscriptions, rights
(including preemptive rights), stock appreciation rights, calls
or commitments of any character whatsoever to which the Company
is a party or may be bound requiring the issuance or sale of
shares of any capital stock of the Company, and there are no
contracts or other agreements by which the Company is or may
become bound to issue additional shares of its capital stock or
any options, warrants, convertible or exchangeable securities,
subscriptions, rights (including preemptive rights), stock
appreciation rights, calls or commitments of any character
whatsoever relating to such shares.
Section 4.13 Litigation. Except as set forth on
Schedule 4.13 or in the 1995 10-K or the 1996 10-Qs, the Company
has not received any notice of any outstanding judgments,
rulings, orders, writs, injunctions, awards or decrees of any
court or any foreign, federal, state, county or local government
or any other governmental, regulatory or administrative agency or
authority or arbitral tribunal against or involving the Company,
the Partnership or any of their respective Subsidiaries. Neither
the Company, the Partnership nor any of their respective
Subsidiaries is a party to, or to the knowledge of the Company,
threatened with, any litigation or judicial, governmental,
regulatory, administrative or arbitration proceeding which, if
decided adversely to their respective interests could have an
adverse effect upon the transactions contemplated hereby or that
would have a Material Adverse Effect on their respective
business.
Section 4.14 ERISA. (i) Each of the Company's Plans
is set forth on Schedule 4.14, (ii) each such Plan complies in
all material respects with the applicable provisions of ERISA,
the Code and the terms of such Plan, and (iii) no annual report
(Form 5500 Series) has been filed or required to be filed with
respect to any such Plan. Except as required by Section 4980B of
the Code, the Company does not maintain a welfare plan (as
defined in Section 3(1) of ERISA) which provides post-employment
welfare benefits after a participant's termination of employment.
Neither the Company nor any of its ERISA Affiliates have incurred
any liability under the Worker Adjustment and Retraining
Notification Act.
Section 4.15 Environmental Matters. Except as set
forth in Schedule 4.15 hereto, in the Environmental Reports (as
defined below), or in the 1995 10-K or the 1996 10-Qs:
(a) The operations of the Company, the Partnership, or
any of their Subsidiaries are in compliance with Environmental
Laws except for any such noncompliance that would not reasonably
be expected to have a Material Adverse Effect on the Company;
(b) There has been no Release at any of the (i) any
assets, properties or businesses currently owned or operated by
the Company, the Partnership, any of their Subsidiaries or, to
the best of the Company's knowledge upon reasonable
investigation, any predecessor in interest; (ii) from adjoining
properties or businesses; or (iii) from or onto any facilities
which received Hazardous Materials generated by the Company, the
Partnership, any of their Subsidiaries or, to the best of the
Company's knowledge upon reasonable investigation, any
predecessor in interest that would result in any Environmental
Liabilities except for any such Environmental Liabilities that
would not reasonably be expected to have a Material Adverse
Effect on the Company;
(c) No Environmental Claims have been asserted against
the Company, the Partnership, any of their Subsidiaries or, to
the best of the Company's knowledge upon reasonable
investigation, any predecessor in interest nor does the Company,
the Partnership or any of their Subsidiaries have knowledge or
notice of any threatened or pending Environmental Claims, except
in any case where any such Environmental Claim would not
reasonably be expected to have a Material Adverse Effect on the
Company;
(d) No Environmental Claims have been asserted against
any facilities that may have received Hazardous Materials
generated by the Company, the Partnership, any of their
Subsidiaries or to the best of the Company's knowledge upon
reasonable investigation, any predecessor in interest;
(e) The Company and the Partnership have conducted
Phase 1 Environmental Site Assessments on all of the assets,
properties and businesses owned or operated since January 1, 1991
and have delivered to Investor true and complete copies of all
material environmental reports, studies or investigations
("Environment Reports") in their possession regarding any
Environmental Liabilities at the assets, properties or businesses
of the Company, the Partnership or any of their Subsidiaries; and
(f) None of the assets, properties or businesses owned
or operated by the Company, the Partnership or any Subsidiaries
are located in "wetlands" regulated under Environmental Laws and
no dredged or fill materials have been placed, discharged or
deposited in any wetlands located at any asset, property or
business owned or operated by the Company, the Partnership or any
Subsidiaries except in either case where such was in compliance
with Environmental Laws or would not reasonably be expected to
have a Material Adverse Effect on the Company.
Section 4.16 Investment Company. The Company is not,
and upon the issuance and sale of the Preferred Shares as herein
contemplated will not be, an "investment company" or, assuming
the correctness of the representations and warranties of the
Investor in Article 5, an Entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act
of 1940, as amended.
Section 4.17 Taxes. The Company and the Partnership,
have each filed all federal, state, local or foreign tax returns
that are required to be filed or has duly requested extensions
thereof and has paid all taxes required to be paid by it and any
related assessments, fines or penalties, except for any such tax,
assessment, fine or penalty that is being contested in good faith
and by appropriate proceedings or where the failure to make any
such filing or payment would not be reasonably expected to have a
Material Adverse Effect on the Company; and adequate charges,
accruals and reserves have been provided for in the financial
statements of the Company and the Partnership, respectively, in
respect of all material federal, state, local and foreign taxes
for all periods as to which the tax liability of the Company and
the Partnership, respectively, has not been finally determined or
remains open to examination by applicable taxing authorities.
Neither the Company nor the Partnership has received written
notice that either of them or their respective Subsidiaries is
currently under review by any federal or state taxing authority.
Section 4.18 Insurance. The Company and the
Partnership each carry or is entitled to the benefits of
insurance in such amounts and covering such risks as is
reasonably sufficient under the circumstances and all such
insurance is in full force and effect.
Section 4.19 Affiliated Transactions. Except as set
forth on Schedule 4.19 or as disclosed in the 1995 10-K, the 1996
10-Qs or the 1996 Proxy Statement describe all transactions with,
or payments to, any Affiliate in excess of $60,000 in the
aggregate since August 24, 1994 (other than reimbursement of
expenses and compensation payable to employees or officers or
directors' fees payable to the Company's directors). Neither the
Company nor the Partnership, nor any officer or director of the
Company or the Partnership, nor any of their respective
Subsidiaries, or any Affiliate of any of the foregoing, or any
member of the Immediate Family of any of the foregoing: (i) owns,
directly or indirectly, any interest in (excepting not more than
five (5) percent stock holdings held solely for investment
purposes in securities of any Person which are listed on any
national securities exchange or regularly traded in the over-the-
counter market) or is an owner, sole proprietor, shareholder,
partner, director, officer, employee, consultant or agent of any
person which is a competitor, lessor, lessee, customer or
supplier of the Company, the Partnership or any of their
respective Subsidiaries; (ii) owns, directly or indirectly, in
whole or in part, any property, patent, trademark, service mark,
trade name, copyright, franchise, invention, permit, license or
secret or confidential information which the Company, the
Partnership or any of their respective Subsidiaries is using or
the use of which is necessary for the business of the Company,
the Partnership or their respective Subsidiaries; or (iii) has
any cause of action or other suit, action or claim whatsoever
against, or owes any amount to, the Company, the Partnership or
any of their respective Subsidiaries, in each case (i) through
(iii) except for those in the ordinary course of business and not
involving in excess of $60,000 annually.
Section 4.20 Liabilities. Except as set forth on
Schedule 4.20, to the actual knowledge of the executive officer's
of the Company, the Company, the Partnership and their respective
Subsidiaries do not have any material direct or indirect
indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured,
subordinated or unsubordinated, matured or unmatured, accrued,
absolute, contingent or otherwise, including, without limitation,
liabilities on account of taxes, other governmental, regulatory
or administrative charges or lawsuits brought, whether or not of
a kind required by GAAP to be set forth on a financial statement
(collectively, "Liabilities"), that were not fully and adequately
reflected or reserved for on the 1995 10-K or the March 1995 10-
Q.
Section 4.21 Integration. Neither the Company nor
the Partnership, nor any Person or Entity acting on behalf of the
Company or the Partnership, has offered, transferred, pledged,
sold or otherwise disposed of any Preferred Shares, any interest
in the Preferred Shares or any other similar security to, or
solicited any offer to buy or accept a transfer, pledge or other
disposition of any Preferred Share, any interest in any Preferred
Share or any such other similar security from, or otherwise
approached or negotiated with respect to any Preferred Share, or
any other similar security with, any Person in any manner, or
made any general solicitation by means of general advertising or
in any other manner, or taken any other action, in each case that
would constitute a distribution of the Preferred Shares under the
Securities Act and would disqualify the issuance and sale of the
Preferred Shares without a registration statement by the Company
to the Investor pursuant to Section 4(2) of the Securities Act.
Assuming the correctness of the representations and warranties of
the Investor in Article 5, the Investment is exempt from
registration under applicable federal and state securities laws.
Section 4.22 Limited Waiver of Ownership Limitations.
Subject to the terms and conditions set forth in the Agreement
and Waiver, the Board of Directors of the Company, acting
pursuant to Section 4.5.11 of the Articles of Incorporation of
the Company, has properly voted to exempt the Investor, and has
agreed to exempt any successor in interest to the Investor, any
holder of the Preferred Shares and any holder of shares of Common
Stock issuable upon conversion of Preferred Shares from the
Common Stock Ownership Limit and the Aggregate Stock Ownership
Limit imposed by the Articles of Incorporation of the Company;
provided, however, that such waiver shall not be effective,
unless the terms and conditions of the Agreement and Waiver have
been satisfied, or to exempt any Person from such ownership
limits imposed by the Articles of Incorporation of the Company if
the ownership of such interest by such Person would cause the
Company to fail to qualify as a REIT.
Section 4.23 No Event of Default. No event has
occurred and is continuing and no condition exists which
constitutes, to the Company's knowledge, a breach, an event of
default, or otherwise gives any other party the rights to
accelerate or require payment of any obligation, or with the
passage of time would constitute such an event (a "Breach"),
under any agreement or instrument to which the Company or any of
its Subsidiaries is a party, unless such Breach would not have a
Material Adverse Effect on the Company. Neither the Company nor
any of its Subsidiaries has received any notice that an event has
occurred and is continuing or that a condition exists which
constitutes, to the Company's knowledge, a Breach under any
agreement or instrument to which the Company or any of its
Subsidiaries is a party, unless such Breach would not have a
Material Adverse Effect on the Company.
Section 4.24 No Brokers. In connection with the
Investment, the Company has not retained or become obligated to
any broker or finder other than Rothschild Realty, Inc.
Section 4.25 Full Disclosure. All documents set
forth on Schedule 4.25 and the 1996 10-Qs have been delivered to
the Investor by or on behalf of the Company or the Partnership in
connection with this Agreement and the transactions contemplated
hereby, and all such documents are in all material respects true,
complete, accurate and authentic and, when taken together with
the Company's representations and warranties set forth in this
Agreement, do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
In order to induce the Company and the Partnership to
enter into this Agreement and to consummate the transactions
contemplated hereby, the Investor hereby represents and warrants
to, and covenants with, the Company and the Partnership as
follows:
Section 5.1 Organization. The Investor has been
duly organized and is validly existing and in good standing under
the laws of the State of Delaware.
Section 5.2 Accredited Investor. The Investor is an
"accredited investor," as such term is defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
Section 5.3 Member Information. The representations
and warranties of the Investor in the Agreement and Waiver are
true and correct in all material respects.
Section 5.4 Valid Agreements of the Investor. The
Investor has all right, power and authority to enter into this
Agreement, the Supplemental Agreement and the Registration Rights
Agreement and to consummate the transactions contemplated hereby
and thereby. Each of the Operative Instruments to which the
Investor is a party has each been duly authorized, executed and
delivered by the Investor, and constitutes a legal, valid and
binding obligation of the Investor, enforceable against the
Investor in accordance with its terms.
Section 5.5 No Default. The execution and delivery
of this Agreement, the Registration Rights Agreement and the
Supplemental Agreement by the Investor and the performance by the
Investor of its obligations thereunder do not (or if not yet
executed, upon the execution and delivery thereof will not) (a)
violate the organizational documents of the Investor; (b) violate
or constitute a breach of or default under any mortgage,
indenture, loan agreement, promissory note or other agreement to
which the Investor is a party, or by which the Investor is bound,
or to which any property of the Investor is subject; or (c)
conflict with or violate any law or any regulation, rule, order
or decree of any governmental body, court or administrative
agency having jurisdiction over the Investor or its properties
except with respect to clauses (b) and (c) where such conflict,
breach, default or violation would not reasonably be expected to
have a Material Adverse Effect on the Investor.
Section 5.6 Opportunity for Inquiry. The Investor
has had a reasonable opportunity to ask questions of and receive
answers from representatives of the Company and the Partnership
regarding the business, management and financial affairs of the
Company and the Partnership; it being understood that no inquiry
or investigation shall affect the Investor's ability to rely on
any representation or warranty of the Company or the Partnership
or the conditions to the obligations of the Investor under this
Agreement.
Section 5.7 Materials. The Investor acknowledges
that all documents, agreements, instruments, records, and books
that it has requested pertaining to the Company and the
Partnership and their respective businesses and financial
affairs, have been made available to the Investor and the
Investor's attorneys, accountants and advisors for inspection and
the Investor has received each of the Environmental Reports
listed on Schedule 5.7.
Section 5.8 Knowledge and Experience. The Investor
has such knowledge and experience in financial and business
matters that the Investor is capable of evaluating the merits and
risks involved in connection with the Investment.
Section 5.9 No Brokers. In connection with the
Investment, the Investor has not retained or become obligated to
any broker or finder.
Section 5.10 Registration. The Preferred Shares to
be acquired by Investor pursuant to this Agreement and the Common
Stock to be received upon conversion of the Preferred Shares are
being acquired by Investor for its own account and not with a
view to, or intention of, distribution thereof in violation of
the Securities Act, or any applicable state securities laws.
Section 5.11 Transfer Restrictions. The
certificates representing the Preferred Shares and the Common
Stock received upon conversion of the Preferred Shares shall bear
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM.
The Investor may not sell, transfer or dispose of any of the
Preferred Shares or the Common Stock received upon conversion of
the Preferred Shares (except pursuant to an effective
registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with
such transfer and the written agreement of the transferee to be
bound by the provisions of this Section 5.11.
Section 5.12 Investment Company. The Investor is
not, and upon the purchase of the Preferred Shares as herein
contemplated, will not be, an "investment company" or an Entity
"controlled" by and "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended.
ARTICLE 6 COVENANTS AND UNDERTAKINGS.
Section 6.1 Performance by Partnership. The
Company, as General Partner shall cause the Partnership timely
and diligently to observe in all material respects all of its
covenants and responsibilities under the Amended Partnership
Agreement.
Section 6.2 Closings. The Company and the
Partnership shall each use their best efforts to comply with all
conditions precedent to the Closings, including, without limiting
the foregoing, the Company shall cause the Certificate of
Designation to have been adopted, filed with the State Department
of Assessment and Taxation of Maryland (the "SDAT") and become
effective and the Company shall cause the Amendments to be
adopted at the applicable Closing.
Section 6.3 Fees and Expenses of Rothschild Realty
Inc. The Company agrees to pay to Rothschild Realty Inc. at the
first Closing a placement fee in the amount of $500,000 and to
reimburse Rothschild Realty Inc. at each Closing for its
reasonable out-of-pocket expenses documented to the reasonable
satisfaction of the Company. All such amounts paid pursuant to
this Section 6.3 shall be paid by wire transfer of funds
immediately available in New York City to such account(s) as
Rothschild Realty Inc. shall designate in a written notice
delivered to the Company not less than two Business Days prior to
the Initial Closing Date; provided, however, that the Investor,
on behalf of the Company, may directly pay out of the Purchase
Price payable hereunder such fees and expenses to Rothschild
Realty Inc.
Section 6.4 Fees and Expenses of Schulte Roth &
Zabel. The Company agrees to pay to Schulte Roth & Zabel,
counsel to the Investor, at each Closing reasonable fees and
expenses in connection with services rendered and expenses
incurred in connection with the issuance and sale of Preferred
Shares to the Investor (Schulte Roth & Zabel to provide to the
Company reasonable detail as to fees and expenses incurred). All
such amounts paid pursuant to this Section 6.4 shall be paid by
wire transfer of funds immediately available in New York City to
such account(s) as Schulte Roth & Zabel shall designate in a
written notice delivered to the Company not less than two
Business Days prior to each Closing Date; provided, however, that
the Investor, on behalf of the Company, may directly pay out of
the Purchase Price hereunder such fees and expenses to Schulte
Roth & Zabel.
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE INVESTOR TO CLOSE.
The obligation of the Investor to complete each Closing is
subject, at its option, to the fulfillment on or prior to the
related Closing Date (unless otherwise provided) the following
conditions, any one (1) or more of which may be waived by it in
its sole discretion:
Section 7.1 Representations and Covenants. The
representations and warranties of the Company contained in this
Agreement shall be true, complete and accurate in all material
respects on and as of the related Closing Date with the same
force and effect as though made on and as of the related Closing
Date, except for changes contemplated or permitted by this
Agreement and except to the extent that any representation or
warranty is made as of a specified date, in which case, such
representation and warranty shall be true and correct in all
material respects as of such date. The Company shall have
performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by the Company and the Partnership on
or prior to the related Closing Date. The Company shall have
delivered to the Investor a certificate, dated the related
Closing Date and signed by the President and Chief Financial
Officer of the Company, to the foregoing effect and stating that
all conditions to the Investor's obligations hereunder have been
satisfied.
Section 7.2 Good Standing Certificates. The Company
shall have delivered to the Investor: (i) copies of its Amended
and Restated Articles of Incorporation, including all amendments
thereto, certified by the SDAT or other appropriate official of
its jurisdiction of incorporation; (ii) copies of the Partnership
Agreement, including all amendments thereto, of the Partnership;
(iii) certificates from the Secretary of State or other
appropriate official of the respective jurisdiction of
incorporation or formation to the effect that the Company and the
Partnership, respectively, is in good standing and subsisting in
such jurisdiction and listing all charter documents of the
Company and the Partnership on file in such state; (iv) a
certificate from the Secretary of State or other appropriate
official in each State in which the Company and the Partnership
is qualified to do business to the effect that the Company and
the Partnership is in good standing in such State; and (v) a
certificate as to the Tax status of the Company and the
Partnership from the appropriate official in its respective
jurisdiction of incorporation or formation and each State in
which the Company and the Partnership is qualified to do
business, in each case, dated as of a date within reasonable
proximity to the related Closing Date.
Section 7.3 Governmental Permits and Approvals. Any
and all Permits necessary for the consummation of the
transactions contemplated hereby shall have been obtained and a
copy thereof shall have been delivered to the Investor.
Section 7.4 Legislation. No legislation shall have
been proposed or enacted, and no statute, law, ordinance, code,
rule or regulation shall have been adopted, revised or
interpreted, by any foreign, federal, state, county or local
government or any other governmental, regulatory or
administrative agency or authority, which would require, upon or
as a condition to the acquisition of the Preferred Shares by the
Investor, the divestiture or cessation of the conduct of any
business presently conducted by the Company or the Partnership,
on the one hand, or by the Investor, on the other hand, or which,
in the good faith judgment of the Investor, may, individually or
in the aggregate, have a material adverse effect on it or on the
Company or the Partnership in the event that the transactions
contemplated hereby are consummated.
Section 7.5 Legal Proceedings. No suit, action,
claim, proceeding or investigation shall have been instituted or
threatened by or before any court or any foreign, federal, state,
county or local government or any other governmental, regulatory
or administrative agency or authority seeking to restrain,
prohibit or invalidate the issuance or sale of the Preferred
Shares to the Investor hereunder or the consummation of the
transactions contemplated hereby or to seek damages in connection
with such transactions.
Section 7.6 Third Party Consents. All consents,
waivers, licenses, variances, exemptions, franchises, permits,
approvals and authorizations from parties to any contracts and
other agreements (including any amendments and modifications
thereto) with the Company and the Partnership which may be
required in connection with the performance by the Company and
the Partnership of their obligations under this Agreement or to
assure such contracts and other agreements continue in full force
and effect after the consummation of the transactions
contemplated hereby (without any Breach by the Company or any of
its Subsidiaries) shall have been obtained.
Section 7.7 Stock Certificates. The Company shall
have tendered to the Investor the stock certificate or
certificates representing the Preferred Shares to be purchased on
such Closing Date in accordance with Section 3.1 hereof,
registered in the Investor's or it's nominee's name.
Section 7.8 Satisfactory Business Review. With
respect to the first Closing only, the Investor shall have
satisfied itself, after the Investor and its representatives have
completed the review of the assets, properties and businesses of
the Company and the Partnership contemplated hereby, that none of
the information revealed thereby or in the financials has
resulted in, or in the opinion of the Investor may result in a
Material Adverse Effect to the Company and its Subsidiaries,
taken as a whole.
Section 7.9 Approval of Counsel to the Investor.
The Company and the Partnership shall furnish to counsel for the
Investor such certificates and documents as may reasonably be
requested by counsel to the Investor to enable such counsel to
pass on or evaluate the satisfaction of the conditions set forth
in this Article 7. All actions and proceedings hereunder and all
documents and other papers required to be delivered by the
Company and the Partnership hereunder or in connection with the
consummation of the transactions contemplated hereby, and all
other related matters, shall be subject to the reasonable
approval of Schulte Roth & Zabel, counsel to the Investor, as to
their form and substance.
Section 7.10 Appointment of Director. Prior to or
concurrent with the initial Closing, the nominee designated by
the Investor as a director of the Company shall have been elected
and qualified to become a member of the Board of Directors of the
Company, and prior to and concurrent with any second Closing, the
nominee designated by the Investor as a director of the Company
shall be continuing to serve as a member of the Board of
Directors of the Company.
Section 7.11 Amended Partnership Agreement. The
Amendment with respect to such Closing Date shall be effective
and shall reflect the capital contribution by the Company to the
Partnership of the purchase price paid for the Preferred Shares
on such Closing Date net of expenses incurred in connection with
the Investment.
Section 7.12 Preferred Units. The Company shall
have, subject to the receipt of the purchase price reflecting the
number of Preferred Shares being sold on such Closing Date under
this Agreement, contributed the amount of such purchase price net
of expenses incurred in connection with the Investment to the
Partnership, and in exchange, the Company shall have received
Preferred Units in the Partnership in an amount equal to such
number of Preferred Shares sold on such Closing Date.
Section 7.13 Certificate of Designation. The
Certificate of Designation shall be effective.
Section 7.14 Registration Rights Agreement. The
Company shall have executed and delivered to the Investor the
Registration Rights Agreement.
Section 7.15 Supplemental Agreement. The Company
shall have executed and delivered to the Investor the
Supplemental Agreement.
Section 7.16 Opinion. The Investor shall have
received opinion letters from Kirkland & Ellis and Ballard Spahr
Andrews & Ingersoll substantially in the form of Exhibit E and
Exhibit F hereto, respectively.
Section 7.17 Fees and Expenses of Rothschild Realty
Inc. Rothschild Realty Inc. shall have received the fees and
expenses to be paid by the Company as described under Section
6.3.
Section 7.18 Fees and Expenses of Schulte Roth &
Zabel. Schulte Roth & Zabel shall have received the fees and
disbursements to be paid by the Company as described under
Section 6.4.
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE COMPANY AND THE PARTNERSHIP TO CLOSE.
The obligation of each of the Company and the Partnership to
complete each Closing is subject, at its option, to the
fulfillment on or prior to the related Closing Date of the
following conditions, any one (1) or more of which may be waived
it in its sole discretion:
Section 8.1 Representations and Covenants. The
representations and warranties of the Investor contained in this
Agreement shall be true, complete and accurate in all material
respects on and as of the related Closing Date with the same
force and effect as though made on and as of the related Closing
Date, except for changes contemplated or permitted by this
Agreement and except to the extent that any representation or
warranty is made as of a specified date, in which case, such
representation and warranty shall be true, complete and accurate
in all material respects as of such date. The Investor shall
have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the related
Closing Date. The Investor shall have delivered to the Company a
certificate, dated the related Closing Date and signed by an
officer of the Investor to the foregoing effect and stating that
all conditions to the Company's obligations hereunder have been
satisfied.
Section 8.2 Governmental Permits and Approvals. Any
and all Permits necessary for the consummation of the
transactions contemplated hereby shall have been obtained.
Section 8.3 Legal Proceedings. No suit, action,
claim, proceeding or investigation shall have been instituted or
threatened before any court or any foreign, federal, state,
county or local government or any other governmental, regulatory
or administrative agency or authority seeking to restrain,
prohibit or invalidate the sale of the Preferred Shares to the
Investor hereunder or the consummation of the transactions
contemplated hereby or to seek damages in connection with such
transactions.
Section 8.4 Third Party Consents. All consents,
waivers, licenses, variances, exemptions, franchises, permits,
approvals and authorizations from parties to any contracts and
other agreements (including any amendments and modifications
thereto) with the Investor which may be required in connection
with the performance by the Investor of its obligations under
this Agreement shall have been obtained.
Section 8.5 Purchase Price. The Investor shall have
tendered payment for the Preferred Shares in the amount and in
the manner specified in Section 3.1 hereof.
Section 8.6 Approval of Counsel to the Company. The
Investor shall furnish to counsel for the Company such
certificates and documents as may reasonably be requested by
counsel to the Company to enable such counsel to pass on or
evaluate the satisfaction of the conditions set forth in this
Article 8. All actions and proceedings hereunder and all
documents or other papers required to be delivered by the
Investor hereunder or in connection with the consummation of the
transactions contemplated hereby, and all other related matters,
shall be subject to the reasonable approval of Kirkland & Ellis,
counsel to the Company, as to their form and substance.
Section 8.7 Opinion. The Company shall have
received an opinion letter from Schulte Roth & Zabel
substantially in the form of Exhibit G hereto.
ARTICLE 9 ASSIGNMENT.
Section 9.1 Assignability by Investor. The Investor
may, without the consent or approval of the Company, assign its
rights and obligations under this Agreement to a Person to whom
the Investor assigns its interest in the Preferred Shares, pro
rata based upon the percentage of Preferred Shares transferred,
provided that such assignee agrees in writing to be bound by the
terms of this Agreement. Notwithstanding the foregoing, the
Investor may not, prior to the Second Closing Date, assign or
delegate any of its rights or obligations under this Agreement
other than an assignment and/or a delegation to an Affiliate of
the Investor, by operation of law or otherwise (including by a
change of ownership or control of the Investor), without the
prior written consent of the Company, in the sole and absolute
discretion of the Company.
Section 9.2 Assignability by the Company or the
Partnership. Without the prior written consent of the Investor,
in the sole and absolute discretion of the Investor, neither the
Company nor the Partnership may assign or delegate its rights or
obligations hereunder.
Section 9.3 Binding Agreement. Subject to the
provisions of Sections 9.1 and 9.2, this Agreement shall be
binding upon the heirs, successors and assigns of the parties.
ARTICLE 10 MISCELLANEOUS.
Section 10.1 Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York as applied between residents of that State
entering into contracts to be performed wholly within that State.
Section 10.2 Notices. All notices hereunder shall be
in writing and shall be given: (a) if to the Company or the
Partnership, at 77 West Wacker Drive, 40th Floor, Chicago,
Illinois, Attention: President, or such other address or
addresses of which the Investor shall have been given notice,
with copies to Kirkland & Ellis, 200 East Randolph Drive, 54th
Floor, Chicago, Illinois 60601, Attention: Robert Osborne, P.C.,
or such other address of which the Investor shall have been given
notice; and (b) if to the Investor, at Rothschild Realty Inc.,
1251 Avenue of the Americas, New York, New York 10020, Attn:
Matthew Kaplan, or such other address of which the Company shall
have been given notice, with copies to Schulte Roth & Zabel, 900
Third Avenue, New York, New York 10022, Attention: Andre Weiss,
Esq., or such other address of which the Company shall have been
given notice. Any notice shall be deemed to have been given if
personally delivered or sent by United States mail or by
commercial courier or delivery service or by telegram or telex
and shall be deemed received, unless earlier received, (i) if
sent by certified or registered mail, return receipt requested,
three business days after deposit in the mail, postage prepaid,
(ii) if sent by United States Express Mail or by commercial
courier or delivery service, one Business Day after delivery to a
United States Post Office or delivery service, postage prepaid,
(iii) if sent by telegram, telex or facsimile transmission, when
receipt is acknowledged by answerback, and (iv) if delivered by
hand, on the date of receipt.
Section 10.3 Entire Agreement; Amendments. This
Agreement and other agreements referred to herein set forth the
entire understanding of the parties hereto, and this Agreement
shall not be amended except by an instrument in writing executed
by the Company and the Investor.
Section 10.4 Remedies for Breaches of This Agreement.
Section 10.4.1 Survival of Representations and
Warranties. All of the representations and warranties of the
Company contained in Article 4 above (other than Section 4.2
through 4.7) shall survive the Closing hereunder and continue in
full force and effect for a period of two years thereafter. All
of the other representations and warranties of the parties
contained in this Agreement (including the representations and
warranties of the Investor contained in Article 5 and the
representations and warranties of the Company contained in
Section 4.2 through 4.7) shall survive the Closing and continue
in full force and effect forever thereafter (subject to any
applicable statutes of limitations).
Section 10.4.2 Indemnification Provisions for
Benefit of the Investor. In the event the Company breaches any
of its representations, warranties, and covenants contained
herein (other than the covenants in Sections 2.1 and 3.1), and,
if there is an applicable survival period pursuant to Section
10.4(a), provided that the Investor makes a written claim for
indemnification against the Company pursuant to Section 10.2
within such survival period, then the Company and the Partnership
agree to indemnify the Investor from and against the entirety of
any Adverse Consequences the Investor may suffer through and
after the date of the claim for indemnification (including any
Adverse Consequences the Investor, its members or Rothschild
Realty Inc. may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the
nature of, or caused by such breach.
Section 10.4.3 Matters Involving Third Parties.
(i) If any third party shall notify any party
entitled to be indemnified hereunder (the "Indemnified
Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against
the Company or the Partnership (the "Indemnifying Party")
under this Section 10.4, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(ii)Any Indemnifying Party will have the right to
assume the defense of the Third Party Claim with counsel of
his or its choice reasonably satisfactory to the Indemnified
Party at any time within 15 days after the Indemnified Party
has given notice of the Third Party Claim; provided,
however, that the Indemnifying Party must conduct the
defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard;
and provided further that the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has
assumed and is conducting the defense of the Third Party
Claim in accordance with Section 10.4.3(ii) above, the
Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless
the judgment or proposed settlement involves only the
payment of money damages by one or more of the Indemnifying
Parties and does not impose an injunction or other equitable
relief upon the Indemnified Party.
(iv)So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in
accordance with Section 10.4.3(ii) above, the Indemnified
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably).
(v) In the event none of the Indemnifying Parties
assumes and conducts the defense of the Third Party Claim in
accordance with Section 10.4.3(ii) above, (A) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner he or it
reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith) and (B) the
Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 10.4.
Section 10.5 Confidentiality. The Investor agrees
not to use, and that the Investor's Representatives will not use,
any Evaluation Material for any purpose other than in connection
with evaluating the Investment. The Investor agrees that it and
its Representatives will keep the Evaluation Material
confidential; provided, however, that (i) any of such information
may be disclosed by the Investor to such of Representatives of
the Investor who need to know such information for the purpose of
evaluating the Investment (it being understood that such
Representatives shall be informed by the Investor of the
confidential nature of such information and the Investor agrees
to be responsible for any such breach of this Section 10.5 by
such Representatives), and (ii) any disclosure of such
information may be made if the Company shall consent thereto.
Except as required by law, without the prior written consent of
the other party or until such time as a mutually agreeable public
announcement is made, no party hereto will disclose to any Person
other than Representatives either the fact that discussion or
negotiations are taking place concerning the Investment or any of
the terms, conditions or other facts with respect to the
Investment, including status or that the Evaluation Material has
been made available to the Investor and its Representatives.
In the event that the Investor or any of its
Representatives are requested or required (by oral question,
interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any
Evaluation Material, the Investor will, to the extent permitted
by law, promptly notify the Company of such request or
requirement so that the Company may seek an appropriate
protective order or exception. The Investor shall use reasonable
efforts at the Company's request and expense to assist the
Company in obtaining such an order or exception. In the event
that such protection is not obtained, the Investor agrees that it
or its Representatives may furnish only that portion of the
Evaluation Material that it is advised by counsel is legally
required to be disclosed.
Section 10.6 Termination. This Agreement may be
terminated at any time prior to the second Closing:
(a) by the mutual written consent of the Investor and
the Company; or
(b) by the Company or the Investor if the first
Closing has not occurred on or prior to August 30, 1996, or if
the second Closing, if one is to occur, has not occurred on or
prior to November 29, 1996; providing that the party attempting
to terminate this Agreement is not in material breach of any of
its representations, warranties, covenants or agreements
contained in this Agreement. In the event of termination by the
Company or the Investor pursuant to this Section 10.6, written
notice thereof shall forthwith be delivered to the other party.
Section 10.7 Counterparts. This Agreement may be
executed in more than one counterpart, each of which may be
executed by fewer than all the parties, with the same effect as
if the parties executed one counterpart as of the day and year
first above written.
IN WITNESS WHEREOF, the parties hereto have hereunto
set their hands and seals as of the day and year first above
written.
AMBASSADOR APARTMENTS, INC.
By: /s/ David M. Glickman
Name: David M. Glickman
Title: Chairman of the Board
AMBASSADOR APARTMENTS, L.P.
By: AMBASSADOR APARTMENTS, INC.,
General Partner
By: /s/ David M. Glickman
Name: David M. Glickman
Title: Chairman of the Board
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ Matthew W. Kaplan
Name: Matthew W. Kaplan
Title: Manager
SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT dated as of August 16, 1996 between
Ambassador Apartments, Inc., a corporation organized under the
laws of the State of Maryland (the "Company"), and Five Arrows
Realty Securities L.L.C., a limited liability company organized
under the laws of the State of Delaware (the "Investor"), for the
benefit of the Investor and any subsequent registered holder of
Preferred Shares (as hereinafter defined).
WHEREAS, pursuant to the Investment Agreement (as defined
below) the Company has agreed to issue the Preferred Shares (as
defined herein) to the Investor, and the Investor has agreed to
purchase, acquire and accept the Preferred Shares from the
Company (the "Investment").
WHEREAS, the parties hereto desire to set forth their
understanding with respect to certain terms of the Investment and
the Preferred Shares.
NOW THEREFORE, in consideration of the promises and the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
As used in this Supplemental Agreement, the following
capitalized terms shall have the following meanings:
"Affiliate" means, with respect to any Person, (a) any
member of the Immediate Family of such Person or a trust
established for the benefit of such member, (b) any beneficiary
of a trust described in (a), (c) any Entity which, directly or
indirectly though one or more intermediaries, is deemed to be the
beneficial owner of 25% or more of the voting equity of such
Person for the purposes of Section 13(d) of the Exchange Act, (d)
any officer of such Person or any member of the Board of
Directors of such Person, other than, in the case of the Company,
a Preferred Director (as such term is defined in the Certificate
of Designation) or (e) any Entity which, directly or indirectly
through one or more intermediaries, controls, is controlled by,
or is under common control with, such Person, including such
Person or Persons referred to in the preceding clauses (a) or
(d); provided, however, that none of the Investor, its partners,
members or Affiliates shall be considered an Affiliate of the
Company or the Partnership or any of their Subsidiaries for
purposes of this Agreement.
"Certificate of Designation" means the Articles
Supplementary classifying 1,351,351 shares of preferred stock as
Class A Senior Cumulative Convertible Preferred Stock of the
Company and 1,351,351 shares of excess stock, par value $.01 per
share, as Excess Class A Preferred Stock of the Company.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time or any successor statute thereto.
"Common Stock" means the shares of the common stock, par
value $.01 per share, of the Company.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate
investment trust, limited liability company, cooperative or
association.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Immediate Family" means, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews,
nieces, brothers, sisters, brothers-in-law, sisters-in-law,
stepchildren, sons-in-law and daughters-in-law.
"Investment Agreement" means the Investment Agreement, dated
as of August 15, 1996 among the Company, the Partnership and the
Investor.
"Issuance Date" means the date of original issuance of the
Preferred Shares.
"Partnership" means Ambassador Apartments, L.P., a Delaware
limited partnership.
"Person" means any individual or Entity.
"Preferred Shares" means the shares of the Company
designated in the Certificate of Designation as Class A Senior
Cumulative Convertible Preferred Stock.
"REIT" means a real estate investment trust described in
Code Section 856.
"Subsidiary" of any Person or Entity means an Entity in
which such Person or Entity has the ability, whether by the
direct or indirect ownership of shares or other equity interests,
by contract or otherwise, to elect a majority of the directors of
a corporation or the trustees of a real estate investment trust,
to select the managing partner of a partnership, or otherwise to
select, or have the power to remove and then select, a majority
of those persons exercising governing authority over such Entity.
In the case of a limited partnership, the sole general partner,
all of the general partners to the extent each has equal
management control and authority, or the managing general partner
or managing general partners thereof shall be deemed to have
control of such partnership and, in the case of a trust other
than a real estate investment trust, any trustee thereof or any
Person having the right to select any such trustee shall be
deemed to have control of such trust.
2. REIT Status.
So long as any Preferred Shares remain outstanding, the
Company will continue to qualify as a REIT.
3. Maintenance of Listing of Shares of Common Stock.
The Company shall, prior to August 31, 1996, make an
application to list the Common Stock issuable upon the conversion
of the Preferred Shares on the New York Stock Exchange (the
"NYSE"). The Company shall use its best efforts to keep the
Common Stock listed on the NYSE. If, notwithstanding its
exercise of its reasonable best efforts, the Common Stock fails
to be listed on the NYSE, the Company shall, at its own expense,
cause the Common Stock to be listed or admitted to trading on the
NASDAQ National Market System.
4. Repurchase of Preferred Shares or Common Stock.
So long as the Investor or an Affiliate of the
Investor, or one of their respective members or partners, is the
holder of (i) six hundred seventy-five thousand six hundred
seventy-five (675,675) or more Preferred Shares or (ii) an amount
of Preferred Shares which if converted into shares of Common
Stock would exceed five (5) percent of the Common Stock on a
fully diluted basis (determined on the basis of then convertible,
exercisable or exchangeable securities, warrants or options
issued by the Company or the Partnership), the Company shall not
repurchase any shares of Common Stock or Preferred Shares at a
price which is greater than the market price for such Common
Stock or Preferred Shares except pursuant to an agreement listed
in Schedule 1 hereto.
5. Affiliate Transactions.
So long as the Investor or an Affiliate of the
Investor, or one of their respective members or partners, is the
holder of (i) six hundred seventy-five thousand six hundred
seventy-five (675,675) or more Preferred Shares or (ii) an amount
of Preferred Shares which if converted into shares of Common
Stock would exceed five (5) percent of the Common Stock on a
fully diluted basis (determined on the basis of then convertible,
exercisable or exchangeable securities, warrants or options
issued by the Company or the Partnership), the Company and the
Partnership will not, and will not permit any of their respective
Subsidiaries to, directly or indirectly, enter into any
transaction or series of transactions (including, without
limitation, the sale, purchase, exchange or lease of any assets
or properties or the rendering of any services) with any
Affiliate (other than among the Company, the Partnership or their
respective Subsidiaries) (an "Affiliate Transaction") unless (i)
such transaction or series of related transactions is on terms
that are no less favorable to the Company, the Partnership or
their respective Subsidiaries, as the case may be, than would
available in a comparable transaction in arm's-length dealings
with an unrelated third party and (ii) with respect to any one
transaction or series of related transactions involving aggregate
payments in excess of $1,000,000, the Company delivers a
certificate, certified by an officer of the Company, to the
Investor certifying that such transaction or series of related
transaction complies with clause (i) above and such transaction
or series of related transactions has received the approval of a
majority of the disinterested members of the Board of Directors
of the Company; provided, however, that such provision shall not
apply to any transaction arising out of any agreement existing on
the date hereof or any transaction in which all holders of any
class or series of outstanding capital stock of the Company have
the right to participate on a pro rata basis.
6. Change in Nature of Business.
So long as the Investor or any Affiliate of the
Investor is the holder of (i) 675,675 or more Preferred Shares or
(ii) an amount of Preferred Shares which if converted into shares
of Common Stock would exceed 5% of the Common Stock on a fully
diluted basis (determined on the basis of then convertible,
exercisable or exchangeable securities, warrants or options
issued by the Company or the Partnership), the Company and the
Partnership will not, without the prior written consent of the
Investor, cease to be primarily in the business of owning and
managing multi-family properties directly or through
subsidiaries, as carried on as of the date hereof and described
in the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for the year ended December
31, 1995 and the Company's Quarterly Report on Form 10-Q as filed
with the Securities and Exchange Commission for the quarterly
period ended March 31, 1996.
7. Committees.
At least one Preferred Director (as defined in the
Certificate of Designation), as determined by the holders of a
majority of the outstanding Preferred Shares shall be designated
as a member of each Committee of the Board of Directors of the
Company.
8. Indemnification and Insurance of Directors.
The Company shall not amend, or permit the amendment,
of the Charter or By-Laws of the Company so as to limit the right
to indemnification provided to any present or future member or
members of the Board of Directors of the Company elected by the
holders of the Preferred Stock so long as the Investor or any
Affiliate of the Investor is the holder of (i) 675,675 or more
Preferred Shares or (ii) an amount of Preferred Shares which if
converted into shares of Common Stock would exceed 5% of the
Common Stock on a fully diluted basis (determined on the basis of
then convertible, exercisable or exchangeable securities,
warrants or options issued by the Company or the Partnership),
and shall obtain and maintain directors' and officers'
reimbursement and liability insurance in the name of each
Preferred Director in an amount not less than the amount provided
to other outside directors of the Company or less than the amount
of the current policy therefor; provided that such directors
supply the information required by the Company's insurance
carrier and meet the qualifications established by such carrier,
if any, which shall not be more burdensome than those of the
Company's current policy.
9. Inspection Rights.
So long as the Investor or any Affiliate of the
Investor is the holder of (i) 675,675 or more Preferred Shares or
(ii) an amount of Preferred Shares which if converted into shares
of Common Stock would exceed 5% of the Common Stock on a fully
diluted basis (determined on the basis of then convertible,
exercisable or exchangeable securities, warrants or options
issued by the Company or the Partnership), the Company shall
permit, and cause the Partnership and each of their respective
Subsidiaries to permit, the Investor or any agents or
representatives thereof to examine and inspect the books and
records of the Company and the Partnership and take copies and
extracts therefrom on reasonable prior notice and at reasonable
times and during normal business hours. Any such information
obtained by the Investor or any such agents or representatives
shall be Evaluation Material as such term is used in the
Investment Agreement, and the Investor and any such agents or
representatives shall be bound by the provisions set forth in
Section 10.5 of the Investment Agreement with respect thereto.
10. Reservation of Shares.
The Company will continue to maintain as reserved those
shares of Common Stock reserved in accordance with Section 4.6 of
the Investment Agreement, for purposes of conversion of the
Preferred Shares and shall take all such action as may be
required from time to time in order that it may validly and
legally issue fully paid and non-assessable shares of Common
Stock in accordance herewith and therewith.
11. Preferred Shares.
So long as any Preferred Shares remain outstanding, the
Company shall comply with all terms of the Preferred Shares, as
provided for in the Certificate of Designation, and shall take no
action, nor permit any action to be taken, which would adversely
affect the rights, powers and preferences of the Preferred Shares
or the holders thereof in their capacity as such, in each case as
set forth in the Certificate of Designation, other than as
permitted by the Certificate of Designation.
12. Election of Directors.
Until such time as the Investor has either (x)
transferred more than 50% of the Preferred Shares to a non-
Affiliate third party or (y) converted more than 50% of the
Preferred Shares into Common Stock, the Investor agrees, and
prior to the transfer of any Preferred Shares to a third party
will require such third party (and to cause its tranferees) to
agree that it, and that it will cause any member of a group (as
such term is used in Section 13(d)(2) of the Exchange Act) in
which it is also a member (i) with respect any Preferred Shares
and any Common Stock owned by such person or any member of a
group (as such term is used in Section 13(d)(2) of the Exchange
Act) that includes such person, not to nominate any person for
election to the Board of Directors of the Company (other than as
a Preferred Director, as such term is defined in the Certificate
of Designation), and (ii) in any election of the members of the
Board of Directors of the Company when the only persons nominated
for election to the Board of Directors of the Company have been
nominated by members of the then existing Board of Directors of
the Company, to vote all of its Preferred Shares with respect to
the persons so nominated by the Board of Directors of the Company
in the same proportion as the votes cast by the Common Stock in
such election. The Investor agrees that the Company can include
a legend on the Preferred Shares referring to the restrictions
set forth in this Section 12 of this Supplemental Agreement.
13. Certain Expenses Paid by the Company.
In the event that the holders of the Preferred Shares
deliver an Acceptance Notice (as defined in Section 4(l) of the
Certificate of Designation) pursuant to the provisions of clause
(ii) of Section 4(l) of the Certificate of Designation, but the
purchase of the Offered Shares (as defined in Section 4(l) of the
Certificate of Designation) thereunder is not consummated, the
Company shall be required to pay, in addition to amounts required
to be paid pursuant to the Offer (as defined in Section 4(l) of
the Certificate of Designation), but without duplication the
reasonable fees and expenses, not to exceed $50,000, of the
holders of the Preferred Shares relating to the finalization and
negotiation of definitive documents relating to the Offer.
14. Miscellaneous.
14.1 Remedies. If the Company shall breach its
obligations under this Supplemental Agreement, each holder of
Preferred Shares will be entitled to exercise all rights provided
herein or granted by law (including recovery of damages) or in
equity. Additionally, if the Company shall breach its
obligations under Section 4, 5, 6 or 7 of this Supplemental
Agreement in any material respect, each holder of Preferred
Shares will also be entitled, pursuant to Section 9 of the
Certificate of Designation, to require the Company to purchase
such holder's Preferred Shares at a purchase price payable in
cash in an amount equal to 100% of the Liquidation Value (as
defined in the Certificate of Designation) thereof, plus accrued
and unpaid dividends, if any, to the date of purchase.
14.2 Assignment and Transfers. This Supplemental
Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and each of their respective successors and
assigns to the extent specifically applicable thereto. This
Supplemental Agreement is intended for the benefit of holders of
the Preferred Shares who are entitled to the benefits hereof as
though they were a party hereto.
14.3 Amendments and Waivers. The provisions of this
Supplemental Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may
not be given, unless the Investor, as long as the Investor holds
any Preferred Shares, or, if the Investor shall not longer hold
any Preferred Shares, the holders of more than 50% of the
aggregate outstanding principal amount of the Preferred Shares
consent in writing to such amendment, modification, supplement or
waiver. Each such consent or waiver shall be effective only in
the specific instance and for the specific purpose for which
given.
14.4 Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
14.5 Headings. The headings in this Supplemental
Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
14.6 Governing Law; Conflicts. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York as applied between residents of that State
entering into contracts wholly to be performed in that State.
Any conflict between the terms of the Investment Agreement and
the terms of this Supplemental Agreement shall be resolved in
favor of the terms of this Supplemental Agreement.
14.7 Notices. Any notice or other communication
required or permitted hereunder shall be deemed to be delivered
if in writing addressed as provided below and if either (a)
actually delivered to said address, (b) in the case of overnight
delivery of a notice, the next business day after properly posted
with postage prepaid, or (c) in the case of a letter, 3 business
days shall have elapsed after the same shall have been deposited
in the United States mails, postage prepaid and registered or
certified:
If to the Company, then to Prime Residential,
Inc., 77 West Wacker Drive, 40th Floor, Chicago,
Illinois, Attention: President, or such other address
or addresses of which the Investor shall have been
given notice, with copies to Kirkland & Ellis, 200 East
Randolph Drive, 54th Floor, Chicago, Illinois 60601,
Attention: Robert Osborne, P.C., or such other address
of which the Investor shall have been given notice.
If to any holder of Preferred Shares, to it at its
address set forth on the books and records of the
Company.
The failure to deliver a copy of any notice to any
party's counsel shall not affect the validity of such
notice.
14.8 Counterparts. This Supplemental Agreement may be
executed in any number of counterparts and by the parties hereto
in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto
set their hands and seals as of the day and year first above
written.
AMBASSADOR APARTMENTS, INC.
By: /s/ David M. Glickman
Name: David M. Glickman
Title: Chairman of the Board
FIVE ARROWS REALTY SECURITIES L.L.C.
By: /s/ Matthew W. Kaplan
Name: Matthew W. Kaplan
Title: Manager
