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STOCK PURCHASE OPTION AGREEMENT
BY AND AMONG
BOYKIN LODGING COMPANY,
BOYKIN HOTEL PROPERTIES, L.P.
AND
AEW PARTNERS III, L.P.
Dated as of February 1, 1999
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TABLE OF CONTENTS
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1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
20 OPTION TO PURCHASE PREFERRED STOCK IN EXCHANGE FOR JOINT VENTURE INTEREST. . .9
2.1 GRANT OF EXCHANGE OPTION . . . . . . . . . . . . . . . . . . . . . . . .9
2.2 VESTING OF EXCHANGE OPTION . . . . . . . . . . . . . . . . . . . . . . 10
2.3 DETERMINATION OF SHARES UNDERLYING EXCHANGE OPTION . . . . . . . . . . 10
2.4 RIGHT OF REIT TO SUBSTITUTE REIT COMMON STOCK IN EXCHANGE OPTION . . . 10
2.5 PROCEDURE FOR EXERCISING THE EXCHANGE OPTION; CLOSING. . . . . . . . . 11
2.6 RIGHT OF FIRST OFFER AND BUY/SELL. . . . . . . . . . . . . . . . . . . 12
2.7 RIGHTS UPON A CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . 13
30 WARRANTS TO PURCHASE PREFERRED STOCK WITH UNINVESTED CAPITAL . . . . . . . . 14
3.1 ISSUANCE AND SALE OF INITIAL WARRANT . . . . . . . . . . . . . . . . . 14
3.2 EXPANSION CAPITAL WARRANT. . . . . . . . . . . . . . . . . . . . . . . 15
40 RIGHT TO SUBSTITUTE PREFERRED STOCK AS CURRENCY. . . . . . . . . . . . . . . 17
4.1 RIGHT OF PURCHASER TO REQUIRE PAYMENT IN PREFERRED STOCK . . . . . . . 17
4.2 RIGHT OF PURCHASER TO PURCHASE PREFERRED STOCK WITH THE RIGHT OF
FIRST OFFER PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 RIGHT OF REIT TO MAKE PAYMENT IN PREFERRED STOCK OR REIT COMMON
STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5. RIGHT TO RECEIVE PREFERRED STOCK IN CONNECTION WITH A PUT/SALE
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1 PUT/SALE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . 25
5.2 DETERMINATION OF NUMBER OF SHARES . . . . . . . . . . . . . . . . . . 25
5.3 RIGHT OF REIT TO SUBSTITUTE REIT COMMON STOCK . . . . . . . . . . . . 26
5.4 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6. ADJUSTMENT TO OPTION EXERCISE PRICE, EXPANSION OPTION EXERCISE PRICE AND
ADDITIONAL OPTION EXERCISE PRICE . . . . . . . . . . . . . . . . . . . . . . 27
6.1 ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(i)
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6.2 FURTHER ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. . . . . . 29
6.4 OTHER DILUTIVE EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . 30
6.5 WHEN ADJUSTMENTS SHALL BE MADE . . . . . . . . . . . . . . . . . . . . 30
6.6 WHEN ADJUSTMENT NOT REQUIRED . . . . . . . . . . . . . . . . . . . . . 30
6.7 WHEN ADJUSTMENTS CARRIED FORWARD . . . . . . . . . . . . . . . . . . . 31
6.8 NOTICE OF ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 31
7. CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER AT A
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(ai REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 31
(bi PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(ci CLOSING CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 32
(di OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . 32
(ei INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . 32
(fi LEGAL INVESTMENT . . . . . . . . . . . . . . . . . . . . . . . . 32
(gi PROCEEDINGS AND DOCUMENTS. . . . . . . . . . . . . . . . . . . . 32
(hi REGISTRATION RIGHTS AGREEMENT. . . . . . . . . . . . . . . . . . 32
(ii MANAGEMENT RIGHTS LETTER . . . . . . . . . . . . . . . . . . . . 32
(ji TAX REPRESENTATION LETTER. . . . . . . . . . . . . . . . . . . . 33
(ki OWNERSHIP WAIVER LETTER. . . . . . . . . . . . . . . . . . . . . 33
(li RELATED MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 33
(mi NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION. . . . . . . . . 33
(ni GOVERNMENTAL AND THIRD PARTY PERMITS, CONSENTS, ETC. . . . . . . 33
(ii)
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(oi HSR ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(pi NEW YORK STOCK EXCHANGE LISTING. . . . . . . . . . . . . . . . . 34
(qi ADDITIONAL CERTIFICATES. . . . . . . . . . . . . . . . . . . . . 34
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE REIT AT THE CLOSING . . . . 34
(ai REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 34
(bi PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(ci CLOSING CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . 35
(di NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION. . . . . . . . . 35
(ei GOVERNMENTAL AND THIRD PARTY PERMITS, CONSENTS, ETC. . . . . . . 35
(fi HSR ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(gi PROCEEDINGS AND DOCUMENTS. . . . . . . . . . . . . . . . . . . . 35
7.3 INABILITY OF REIT TO SATISFY CONDITIONS PRECEDENT TO CLOSING . . . . . 35
8. REPRESENTATIONS AND WARRANTIES, COVENANTS, ETC. OF EACH OF THE REIT AND
THE OPERATING PARTNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1 ORGANIZATION AND QUALIFICATION; AUTHORITY. . . . . . . . . . . . . . . 36
8.2 LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.3 CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION . . . . . . 37
8.4 VALIDITY AND BINDING EFFECT. . . . . . . . . . . . . . . . . . . . . . 38
8.5 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.6 LITIGATION; DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.7 PUBLIC REPORTS; NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . 39
8.8 PRIVATE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.9 BROKER'S OR FINDER'S COMMISSIONS . . . . . . . . . . . . . . . . . . . 40
8.10 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY; U.S.
ENTITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(iii)
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8.11 ERISA REQUIREMENTS.. . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.12 CREATION OF PREFERRED STOCK AND PREFERRED UNITS. . . . . . . . . . . . 41
8.13 OWNERSHIP LIMIT WAIVER.. . . . . . . . . . . . . . . . . . . . . . . . 42
9. REPRESENTATIONS AND WARRANTIES, COVENANTS, ETC. OF THE PURCHASER . . . . . . 42
9.1 PURCHASE FOR INVESTMENT; SOURCE OF FUNDS . . . . . . . . . . . . . . . 42
9.2 VALIDITY AND BINDING EFFECT. . . . . . . . . . . . . . . . . . . . . . 42
9.3 CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION . . . . . . 43
9.4 LITIGATION; DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . 43
10. ADDITIONAL COVENANTS OF THE REIT . . . . . . . . . . . . . . . . . . . . . . 43
10.1 DELIVERY OF INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 43
10.2 NO IMPAIRMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.3 RESERVATION OF SHARES OF PREFERRED STOCK AND REIT COMMON STOCK . . . . 44
10.4 COMPLIANCE WITH LAWS UPON ISSUANCE . . . . . . . . . . . . . . . . . . 45
10.5 HART-SCOTT-RODINO ACT COMPLIANCE . . . . . . . . . . . . . . . . . . . 45
10.6 PREFERRED STOCK OR REIT COMMON STOCK TO BE DULY AUTHORIZED AND
ISSUED, FULLY PAID AND NON-ASSESSABLE. . . . . . . . . . . . . . . . 45
10.7 TRANSFER TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.8 SHAREHOLDER RIGHTS PLAN. . . . . . . . . . . . . . . . . . . . . . . . 46
10.9 BUSINESS COMBINATION STATUTE, CONTROL SHARE STATUTE. . . . . . . . . . 46
10.10 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11. RESTRICTIONS ON TRANSFER.. . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.1 RESTRICTIVE LEGENDS. . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2 NOTICE OF TRANSFER; OPINIONS OF COUNSEL. . . . . . . . . . . . . . . . 47
11.3 NO RESTRICTIVE LEGENDS.. . . . . . . . . . . . . . . . . . . . . . . . 48
12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.1 INDEMNIFICATION; EXPENSES, ETC.. . . . . . . . . . . . . . . . . . . . 48
12.2 ASSIGNABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.3 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . 50
12.4 USE OF DEPOSITARY SHARES . . . . . . . . . . . . . . . . . . . . . . . 50
12.5 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 50
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SEVERABILITY . . . . . . . 50
12.7 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.8 NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.9 AMENDMENTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.10 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.11 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.12 DESCRIPTIVE HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.13 GENDER, NUMBER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.14 SATISFACTION REQUIREMENT . . . . . . . . . . . . . . . . . . . . . . . 52
12.15 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.16 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(iv)
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12.17 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.18 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. . . . . . . . . . . . . 53
(v)
(vi)
EXHIBITS
EXHIBIT A -- Form of Initial Warrant
EXHIBIT B -- Form of Opinion of REIT Counsel
EXHIBIT C -- Form of Registration Rights Agreement
EXHIBIT D -- Form of Management Rights Letter
EXHIBIT E -- Form of Tax Representation Letter
EXHIBIT F -- Ownership Waiver Letter
EXHIBIT G -- Certificate of Amendment to the Amended and Restated Articles
of Incorporation relating to creation of Series A Cumulative
Preferred Shares, Series 1999-A
EXHIBIT H -- Amendment to Amended and Restated Agreement of Limited
Partnership of Boykin Hotel Properties, L.P.
SCHEDULES
Boykin Disclosure Letter
(vii)
STOCK PURCHASE OPTION AGREEMENT
STOCK PURCHASE OPTION AGREEMENT dated as of February 1, 1999 by and
among Boykin Lodging Company, an Ohio corporation ( the "REIT"), Boykin Hotel
Properties, L.P., an Ohio limited partnership (the "Operating Partnership"),
and AEW Partners III, L.P., a Delaware limited partnership (the "Purchaser").
Unless otherwise defined, capitalized terms used in this Agreement are
defined in Section 1; references to an "Exhibit" are, unless otherwise
specified, to an Exhibit attached to this Agreement; references to a
"Section" are, unless otherwise specified, to a section of this Agreement.
WHEREAS, the Operating Partnership and the Purchaser have formed, and
are the sole members of, Boykin/AEW LLC, a Delaware limited liability company
(the "Joint Venture");
WHEREAS, concurrently herewith, the Operating Partnership and the
Purchaser have entered into that certain Limited Liability Company Agreement
of the Joint Venture (the "Joint Venture Agreement") for the purpose of
setting forth their respective rights, obligations and duties regarding the
Joint Venture;
WHEREAS, the REIT's general partnership interest in the Operating
Partnership constitutes substantially all of the REIT's assets and the REIT
conducts substantially all of its business through the Operating Partnership;
WHEREAS, the REIT desires to provide the Purchaser with certain options
to purchase Capital Stock in the REIT and with the right to receive Capital
Stock in the REIT in lieu of cash owed to it by the Operating Partnership
pursuant to certain rights set forth in the Joint Venture Agreement; and
WHEREAS, the Purchaser desires to grant the REIT and the Operating
Partnership the right to substitute Capital Stock in the REIT for cash owed
to the Purchaser by the Operating Partnership in certain circumstances.
In consideration of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the REIT, the Operating
Partnership and the Purchaser hereby agree with each other as follows:
1. DEFINITIONS
In addition to any terms defined elsewhere herein, as used in
this Agreement, the following terms have the respective meanings set forth
below:
"Accountants" shall have the meaning ascribed thereto in the Joint
Venture Agreement.
"Additional Capital" means the aggregate amount (expressed in dollars)
of all Contributions by the Purchaser to the Joint Venture of Preservation
Capital and all Contributions by the Purchaser to the Joint Venture effected
pursuant to Section 3.7(b) of the Joint Venture Agreement which exceed the
sum of (i) $50,000,000 and, (ii) if the Operating Partnership has approved an
increase in the Capital Contribution Cap under Section 3.7(a) of the Joint
Venture Agreement, an amount equal to the Expansion Capital.
"Additional Option Exercise Price" means the number (expressed in
dollars per share) equal to the quotient determined by dividing (a)
Additional Capital, by (b) the sum of the quotients determined by dividing
(i) the amount of each Contribution of Additional Capital that has occurred
by (ii) the amount (expressed in dollars per share) equal to 120% of the
average last sale price per share of the REIT Common Stock on the NYSE over
the thirty (30) days on which the NYSE is open and for which trades in the
REIT Common Stock are reported immediately preceding the date that such
portion of Additional Capital was contributed to the Joint Venture. The
Additional Option Exercise Price shall be subject to adjustment from time to
time as provided in Section 6 hereof. In the event that the REIT Common
Stock is no longer trading on the NYSE then the Additional Option Exercise
Price shall be determined using the prices reported on the exchange or
automated quotation system on which the REIT Common Stock then trades.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under common control
with such first Person or any of its Subsidiaries, PROVIDED that, for
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by
agreement or otherwise.
"Aggregate Trading Value" has the meaning ascribed thereto in Section
6.2 hereof.
"Agreement" means this Agreement, as amended, modified or supplemented
from time to time, together with any exhibits, schedules, appendices or other
attachments thereto.
"Approvals" has the meaning ascribed thereto in Section 7.1(m) hereof.
"Articles of Incorporation" means the Amended and Restated Articles of
Incorporation of the REIT, as amended to date and presently in effect.
"Buy/Sell" means the right set forth in Section 8.4 of the Joint
Venture Agreement.
"Capital Contribution Cap" has the meaning ascribed thereto in the
Joint Venture Agreement.
"Capital Proceeds" has the meaning ascribed thereto in the Joint Venture
Agreement.
2
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participation rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Cash Flow" shall have the meaning ascribed thereto in the Joint
Venture Agreement.
"Certificate of Amendment" means the Certificate of Amendment of the
REIT's Articles of Incorporation relating to the creation of the Preferred
Stock attached as EXHIBIT G hereto and filed with the Ohio Secretary of State
on February 1, 1999.
"Change in Control" means the occurrence of one or more of the
following events (whether or not approved by the Board of Directors of the
REIT): (i) if any "person" or "group" as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), is or becomes the "beneficial owner,"
directly or indirectly, of more than 50% of the total voting power of the
Capital Stock of the REIT (treating as "beneficially owned" all shares of
Capital Stock of the REIT that such "person" or "group" may receive upon
exchange of units of limited partnership interest in the Operating
Partnership held by such "person" or "group"); (ii) the direct or indirect
sale, lease, exchange or other transfer of all or substantially all of the
assets of the REIT in one transaction or a series of transactions to any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) or group of related persons for purposes of Section 13(d) of the
Exchange Act (a "Group of Persons"); (iii) the REIT consolidates with or
merges with or into another Person or any Person consolidates with, or merges
with or into, the REIT (in each case, whether or not in compliance with the
terms of this Agreement), in any such event pursuant to a transaction in
which immediately after the consummation thereof the stockholders of the REIT
immediately prior to the consummation of the transaction shall cease to have
the power, directly or indirectly (including by way of a general partnership
interest), to vote or direct the voting of securities having in the aggregate
at least a majority of the ordinary voting power for the election of the
directors of the REIT or its successor; or (iv) the adoption of any plan of
liquidation or dissolution of the REIT. For purposes of the foregoing, the
transfer (by lease, assignment, sale or otherwise, in a single transaction or
series of transactions) of all or substantially all of the properties or
assets of the Operating Partnership (or any other Subsidiary of the REIT, the
REIT's interest in which constitutes all or substantially all of the assets
of the REIT), shall be deemed to be the transfer of all or substantially all
of the assets of the REIT.
"Charter Documents" means, with respect to any Person, the certificates
or articles of incorporation, by-laws, code of regulations, or other
equivalent organizational documents, each as amended and/or restated to date
and presently in effect for such Person.
"Closing" shall have the meaning ascribed thereto in Section 7.1 hereof.
"Commission" means the United States Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Contributions" has the meaning ascribed thereto in the Joint Venture
Agreement.
3
"Conversion Multiple" has the meaning ascribed thereto in the
Certificate of Amendment, subject to adjustment as provided from time to time
following the date hereof, as provided therein.
"Depositary Agreement" means the Depositary Agreement dated February 1,
1999 between the REIT and National City Bank.
"Depositary Share" means a fractional interest of one one-hundredth
(1/100) of one share of Preferred Stock, as more fully described, and having
the rights and privileges and being subject to the limitations set forth, in
the Depositary Agreement.
"Disclosure Letter" has the meaning ascribed thereto in Section 8
hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, as amended from time to time.
"Exchange Act," means the Securities Exchange Act of 1934, and the
rules and regulations of the Commission promulgated thereunder, as from time
to time amended.
"Exchange Option" has the meaning ascribed thereto in Section 2.1
hereof.
"Expansion Capital" means the amount (expressed in dollars) equal to
the Purchaser's share of any increase in the Capital Contribution Cap that
has been approved by the Operating Partnership under Section 3.7(a) of the
Joint Venture Agreement.
"Expansion Capital Warrant" has the meaning ascribed thereto in Section
3.2(a) hereof.
"Expansion Option Exercise Price" means the dollar amount equal to 120%
of the average last sale price per share of the REIT Common Stock on the NYSE
over the thirty (30) days on which the NYSE is open and for which trades in
the REIT Common Stock are reported immediately preceding the date that the
Operating Partnership approved an increase in the Capital Contribution Cap
pursuant to Section 3.7(a) of the Joint Venture Agreement, such price being
subject to adjustment from time to time as provided in Section 6 hereof. In
the event that the REIT Common Stock is no longer trading on the NYSE then
the Expansion Option Exercise Price shall be determined using the prices
reported on the exchange or automated quotation system on which the REIT
Common Stock then trades.
"Expansion Warrant Amount" has the meaning ascribed thereto in Section
3.2(c) hereof.
"Expansion Warrant Exercise Price" has the meaning ascribed thereto in
Section 3.2(c) hereof.
4
"General Partner's Certificate" means a certificate executed on behalf
of the Operating Partnership or the Purchaser by their respective general
partners.
"Governmental Authority" means any governmental or quasi-governmental
authority including, without limitation, any federal, state, territorial,
county, municipal or other governmental or quasi-governmental agency, board,
branch, bureau, commission, court, department or other instrumentality or
political unit or subdivision, whether domestic or foreign.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as the same may be amended from time to time.
"HSR Act Filing Request" has the meaning ascribed thereto in Section
10.5 hereof.
"Illegal Transfer Notice" has the meaning ascribed thereto in Section
11.2 hereof.
"Indemnified Party" means either a REIT Indemnified Party or a
Purchaser Indemnified Party, as the context requires.
"Indemnifying Party" has the meaning ascribed thereto in Section
12.1(c) hereof.
"Initial Warrant" has the meaning ascribed thereto in Section 3.1
hereof.
"Investment Period" has the meaning ascribed thereto in Section 10.2 of
the Joint Venture Agreement.
"Joint Venture" has the meaning ascribed thereto in the introduction
hereof.
"Joint Venture Agreement" has the meaning ascribed thereto in the
introduction hereof.
"License" or Licenses" has the meaning ascribed thereto in Section 8.2
hereof.
"Lien" means any mortgage, lien (statutory or otherwise), charge,
pledge, hypothecation, conditional sales agreement, adverse claim, title
retention agreement or other security interest, encumbrance or other title
defect in or on any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale, trust receipt
or other title retention agreement with respect to any Property or asset of
such Person.
"Losses" has the meaning ascribed thereto in Section 12.1(a) hereof.
"Management Rights Letter" mean the Management Rights Letter by and
between the Purchaser and the REIT.
"Material Adverse Effect" has the meaning ascribed thereto in Section
8.1(a) hereof.
5
"NYSE" means the New York Stock Exchange, Inc.
"Officer's Certificate" means a certificate executed on behalf of the
REIT by the President or Chief Executive Officer of the REIT.
"Operating Partnership" has the meaning ascribed thereto in the
introduction hereof and shall include the Operating Partnership's successors
by merger, acquisition, reorganization or otherwise, subject to Section 12.2
hereof.
"Option Exercise Price" means initially $16.48, subject to adjustment
from time to time as provided in Section 6 hereof.
"Partnership Documents" means partnership, limited partnership, limited
liability company and operating agreements with respect to a Person, each as
amended and restated to date and presently in effect, and certificates
required to be filed in such Person's state of organization or formation.
"Partnership Interests" means, with respect to any Person, any and all
shares, units, interests, participation rights in or other equivalents of
such person's interest in the Operating Partnership or any of the Operating
Partnership's or the REIT's subsidiary partnerships, limited partnerships or
limited liability companies.
"Person" means any individual, corporation, limited or general
partnership, limited liability company, joint venture, association, joint
stock company, trust, unincorporated organization, or government or any
agency or political subdivision thereof.
"Plan Assets Regulation" has the meaning ascribed thereto in Section
8.11 hereof.
"Preferred Stock" means the Class A Cumulative Preferred Stock, Series
1999-A, without par value, of the REIT, the terms of which are set forth in
the Certificate of Amendment.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Purchaser" has the meaning ascribed thereto in the introduction hereof
and shall include the Purchaser's successors by assignment, transfer, merger,
acquisition, reorganization or otherwise, subject to Section 12.2 hereof.
"Purchaser's Counsel" means Goodwin, Procter & Hoar LLP or such other
nationally-recognized counsel as may be selected by Purchaser in its
discretion.
"Purchaser Indemnified Party" or "Purchaser Indemnified Parties" has
the meaning ascribed thereto in Section 12.1(a) hereof.
6
"Put/Sale Distribution" means any distribution of Capital Proceeds to
the Purchaser from the Joint Venture arising out of the disposition of an
asset pursuant to Section 6.4.4 of the Joint Venture Agreement.
"Registration Rights Agreement" means the registration rights agreement
by and between the REIT and the Purchaser in substantially the form attached
as EXHIBIT C, as amended or supplemented from time to time in accordance with
the terms thereof.
"REIT" has the meaning ascribed thereto in the introduction hereof and
shall include the REIT's successors by merger, acquisition, reorganization or
otherwise, subject to Section 12.2 hereof.
"REIT Common Stock" means the common stock, no par value, of the REIT.
"REIT Counsel" means Baker and Hostetler LLP, or such other
nationally-recognized counsel as may be selected by the REIT in its
discretion.
"REIT Indemnified Party" has the meaning ascribed thereto in Section
12.1(b) hereof.
"Related Party" has the meaning ascribed thereto in the Joint Venture
Agreement.
"Restricted Security" has the meaning ascribed thereto in Section 11.2
hereof.
"Return of Capital" means the amount, if any, by which (i) all
distributions to the Purchaser by the Joint Venture of Capital Proceeds
pursuant to Section 5.3 of the Joint Venture Agreement (other than Put/Sale
Distributions), EXCEEDS (ii) the aggregate amount of all distributions of
Cash Flow and Capital Proceeds (other than Put/Sale Distributions) necessary
to provide the Purchaser with a cumulative annual return on (as opposed to
"of") its aggregate Contributions of fifteen percent (15.0%) (determined as
if compounded monthly); PROVIDED, HOWEVER, that in no event will the
Purchaser be deemed to have received Return of Capital with respect to
distributions of Capital Proceeds arising with respect to any particular
Property greater than the Contribution made by the Purchaser with respect to
such Property; PROVIDED FURTHER that in no event may Return of Capital be
less than zero.
"Return of Expansion Capital" means the amount, if any, by which (i)
all distributions to the Purchaser by the Joint Venture of Capital Proceeds
pursuant to Section 5.3 of the Joint Venture Agreement (other than Put/Sale
Distributions) after such time as the Purchaser's Unrecouped Capital shall
equal zero, EXCEEDS (ii) the aggregate amount of all distributions of Cash
Flow and Capital Proceeds (other than Put/Sale Distributions) necessary to
provide the Purchaser with a cumulative annual return on (as opposed to "of")
its aggregate Contributions of fifteen percent (15.0%) (determined as if
compounded monthly); PROVIDED, HOWEVER, that in no event will the Purchaser
be deemed to have received Return of Expansion Capital with respect to
distributions of Capital Proceeds arising with respect to any particular
Property greater than the Contribution made by the Purchaser with respect to
such Property; PROVIDED FURTHER that in no event may Return of Expansion
Capital be less than zero.
7
"Return of Additional Capital" means the amount, if any, by which (i)
all distributions to the Purchaser by the Joint Venture of Capital Proceeds
pursuant to Section 5.3 of the Joint Venture Agreement (other than Put/Sale
Distributions) after such time as both Unrecouped Capital and Unrecouped
Expansion Capital shall equal zero, EXCEEDS (ii) the aggregate amount of all
distributions of Cash Flow and Capital Proceeds (other than Put/Sale
Distributions) necessary to provide the Purchaser with a cumulative annual
return on (as opposed to "of") its aggregate Contributions of fifteen percent
(15.0%) (determined as if compounded monthly); PROVIDED, HOWEVER, that in no
event will the Purchaser be deemed to have received Return of Additional
Capital with respect to distributions of Capital Proceeds arising with
respect to any particular Property greater than the Contribution made by the
Purchaser with respect to such Property; PROVIDED FURTHER that in no event
may Return of Additional Capital be less than zero.
"Right of First Offer" means the right set forth in Section 8.2 of the
Joint Venture Agreement.
"Right of First Offer Proceeds" means the amount of Capital Proceeds
distributed to the Purchaser from the Joint Venture arising out of the
consummation of a Right of First Offer in which the Target Asset consisted of
all or substantially all of the properties then owned by the Joint Venture.
"Rule 144" means Rule 144 as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"SEC Filings" means official filings of the REIT filed with the
Commission in accordance with the Securities Act and the Exchange Act with
respect to events occurring, or periods ending on or after December 31, 1997.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder, as from time to time
amended.
"Senior Preferred Stock" has the meaning ascribed thereto in Section
8.12 hereof.
"Subsidiary" and "Subsidiaries" means subsidiary corporations,
partnerships, limited partnerships, joint ventures and limited liability
companies which are directly or indirectly and wholly or majority owned by
the REIT, including, unless the context requires otherwise, the Operating
Partnership.
"Target Asset" has the meaning ascribed thereto in the Joint Venture
Agreement.
"Transaction Documents" means, collectively, this Agreement, the
Registration Rights Agreement, the Management Rights Letter, the Certificate
of Amendment, the Depositary Agreement, the Tax Representation Letter, the
Initial Warrant, the Expansion Capital Warrant,
8
the Amendment to the Amended and Restated Agreement of Limited Partnership of
the Operating Partnership attached as EXHIBIT H and any and all agreements,
certificates, instruments and other documents contemplated hereby, thereby or
executed and delivered in connection herewith or therewith.
"Unrecouped Capital" means the aggregate amount of all Contributions
made by the Purchaser to the Joint Venture LESS (i) any Expansion Capital
that has been contributed, LESS (ii) any Additional Capital, LESS (iii) any
Return of Capital, and LESS (iv) the amount of any Put/Sale Distribution
arising out of the disposition of a Property originally purchased with
Contributions other than Expansion Capital or Additional Capital; PROVIDED,
HOWEVER, that in no event may Unrecouped Capital be less than zero.
"Unrecouped Expansion Capital" means the aggregate amount of all
Contributions made by the Purchaser to the Joint Venture LESS (i)
$50,000,000, LESS (ii) any Additional Capital, LESS (iii) any Return of
Expansion Capital, and LESS (iv) the amount of any Put/Sale Distribution
arising out of the disposition of a Property originally purchased with
Contributions of Expansion Capital; PROVIDED, HOWEVER, that in no event may
Unrecouped Expansion Capital be less than zero.
"Unrecouped Additional Capital" means the aggregate amount of all
Additional Capital contributed by the Purchaser to the Joint Venture LESS (i)
any Return of Additional Capital and LESS (ii) the amount of any Put/Sale
Distribution arising out of the disposition of a Property originally
purchased with Contributions of Additional Capital; PROVIDED, HOWEVER, that
in no event may Unrecouped Additional Capital be less than zero.
The definitions set forth above, including but not limited to
"Unrecouped Capital," "Return of Capital," "Unrecouped Expansion Capital,"
"Return of Expansion Capital, "Unrecouped Additional Capital," and "Return of
Additional Capital" are intended to grant certain rights relating to shares
of Capital Stock in the REIT under the circumstances described in this
Agreement and are not to be applied in any manner to (i) impact the book or
tax capital account balances of the Operating Partnership or the Purchaser in
the Joint Venture, or (ii) impact the distributions upon liquidation of the
Joint Venture, which the parties agree shall be PARI PASSU in accordance with
their positive capital account balances.
20 OPTION TO PURCHASE PREFERRED STOCK IN EXCHANGE FOR JOINT VENTURE
INTEREST
2.1 GRANT OF EXCHANGE OPTION. The REIT, in consideration of
Ten Dollars ($10.00) paid to it by the Purchaser and other good and valuable
consideration, hereby grants to the Purchaser the option to purchase, subject
to the provisions of this Agreement, that number of fully paid and
nonassessable shares of Preferred Stock determined in accordance with Section
2.3 below in exchange for the entire amount of the limited liability company
interests in the Joint Venture then held by the Purchaser (this option being
hereinafter referred to as the "Exchange Option").
9
2.2 VESTING OF EXCHANGE OPTION. Subject to Section 2.6(b)
below, the Exchange Option may be exercised by the Purchaser:
(a) at any time on or after the later to occur of either
(i) the expiration or termination of the Investment Period, or (ii) the first
anniversary of the date hereof;
(b) following the initiation by the Operating Partnership
of the Right of First Offer if the Target Asset offered thereby consists of
75% or more of the properties then owned by the Joint Venture (determined by
number of properties) or the initiation by the Operating Partnership of the
Buy/Sell; or
(c) immediately preceding the consummation or occurrence
of a Change in Control of the REIT.
2.3 DETERMINATION OF SHARES UNDERLYING EXCHANGE OPTION. Upon
exercise of the Exchange Option, the Purchaser shall be entitled to receive
that number of shares of Preferred Stock determined by DIVIDING (a) the sum
of (x) the quotient obtained by dividing (i) Unrecouped Capital, by (ii) the
Option Exercise Price AND (y) if the Operating Partnership has approved an
increase in the Capital Contribution Cap under Section 3.7(a) of the Joint
Venture Agreement, the quotient obtained by dividing (i) Unrecouped Expansion
Capital, by (ii) the Expansion Option Exercise Price AND (z) if any
Additional Capital has been contributed, the quotient obtained by dividing
(i) Unrecouped Additional Capital, by (ii) the Additional Option Exercise
Price, BY (b) the Conversion Multiple, and, if necessary, rounding the
resulting number of shares to the next highest one one-hundredth (1/100) of a
share.
2.4 RIGHT OF REIT TO SUBSTITUTE REIT COMMON STOCK IN EXCHANGE
OPTION. In lieu of delivering shares of Preferred Stock upon exercise of the
Exchange Option, the REIT may elect, at its sole option, to satisfy its
obligations under the Exchange Option by delivering to the Purchaser either:
(a) that number of shares of REIT Common Stock determined
by MULTIPLYING (i) the number of shares of Preferred Stock determined
pursuant to Section 2.3 above to which the Purchaser would be otherwise
entitled BY (ii) the Conversion Multiple, and, if necessary, rounding the
resulting number of shares to the next highest whole number; or
(b) a combination of shares of REIT Common Stock and
Preferred Stock determined as follows: (x) shares of REIT Common Stock up to
that number of shares that, upon delivery, would result in the Purchaser
beneficially owning nine percent (9.0%) of the total number of outstanding
shares of REIT Common Stock (determined pursuant to Section 13(d) of the
Exchange Act or Division C of Article Fourth of the Articles of
Incorporation, whichever is more restrictive), and (y) a number of shares of
Preferred Stock equal to the quotient obtained by DIVIDING (A) the amount, if
any, by which the aggregate number of shares of REIT Common Stock determined
in accordance with Section 2.4(a) above exceeds the number of shares of REIT
Common Stock determined by clause (x) above BY (B)
10
the Conversion Multiple and, if necessary, rounding the resulting number of
shares to the next highest one one-hundredth (1/100) of a share.
Notwithstanding anything in this Agreement to the contrary, the REIT may not
make an election to deliver any shares of REIT Common Stock in lieu of
Preferred Stock pursuant to this Section 2.4 if such election would cause
the REIT to be unable to satisfy the conditions set forth in Section 7.1
hereof in a timely manner.
2.5 PROCEDURE FOR EXERCISING THE EXCHANGE OPTION; CLOSING.
(a) In order to exercise the Exchange Option, the
Purchaser shall deliver to the REIT a written notice of exercise, duly
executed by the Purchaser, which notice shall (i) indicate that the Purchaser
is exercising the Exchange Option and (ii) specify the number of shares of
Preferred Stock to be issued pursuant to such exercise. Within ten (10)
business days of receiving such notice of election, the REIT shall notify the
Purchaser if it disagrees with the Purchaser's determination of the number of
shares of Preferred Stock to be issued pursuant to the exercise of the
Exchange Option and/or if it is electing to deliver any shares of REIT Common
Stock in lieu of Preferred Stock, in which case, the REIT's notice shall
specify the number of shares of REIT Common Stock and/or Preferred Stock to
be issued pursuant to this Section. In the event that the parties disagree
as to the correct number of shares of Preferred Stock and/or REIT Common
Stock, as applicable, to be delivered pursuant to this Section 2, the parties
agree to cooperate in good faith and use their respective best efforts to
resolve the correct determination under Section 2.3 or Section 2.4 hereof, as
applicable, as promptly as possible. If the parties cannot reach agreement
by the sixteenth (16th) business day following the REIT's receipt of the
notice of exercise, the determination will be referred to the Accountants (or
such other Person unaffiliated with either party as the parties mutually
agree) and the parties agree to be bound by such Person's determination.
(b) Subject to the satisfaction of the conditions set
forth in Section 7 hereof, the exercise of the Exchange Option shall be
consummated at a Closing to be held at the offices of Purchaser's Counsel, or
at such other place as may be mutually acceptable to the parties, on the
later of the tenth (10th) business day following the REIT's receipt of the
notice of exercise or the earliest date upon which all of the applicable
conditions to Closing set forth in Section 7 hereof have been satisfied but
in no event later than the sixtieth (60th) day following the REIT's receipt
of the notice of exercise. At the Closing, the REIT will execute or cause to
be executed and deliver or cause to be delivered to the Purchaser a
certificate or certificates representing the shares of Preferred Stock and/or
REIT Common Stock, as applicable, to be sold and purchased in accordance with
Section 2.3 or Section 2.4, as applicable, against delivery of the entire
amount of limited liability company interests in the Joint Venture then held
by the Purchaser. The certificate or certificates so delivered shall be, to
the extent possible, in such denomination or denominations as the Purchaser
shall request in the notice of exercise and shall be registered in the name
of the Purchaser or such other name as shall be designated in the notice of
exercise. The shares of Preferred Stock and/or REIT Common Stock, as
applicable, represented by such certificate or certificates shall be
deemed to be issued, and the Purchaser (or any other Person designated as the
registered holder) shall be
11
deemed to have become a holder of record of such shares of Preferred Stock
and/or REIT Common Stock, as applicable, for all purposes, as of the Closing.
The issuance of certificates for shares of Preferred Stock and/or REIT
Common Stock, as applicable, shall be made without charge to the Purchaser
for any issuance tax in respect thereof or other cost incurred by the REIT or
the Operating Partnership in connection with such exercise and the related
issuance of the shares of Preferred Stock and/or REIT Common Stock, as
applicable. Unless otherwise provided in this Agreement, all other costs
incurred in connection with the consummation of the exercise of the Exchange
Option shall be borne by the party that actually incurred such costs.
(c) In addition to the satisfaction of the conditions to
Closing set forth in Section 7 hereof, the Operating Partnership, in its
capacity as a member of the Joint Venture, agrees to (i) deliver to the
Purchaser at or prior to the Closing contemplated in Section 2.5(b) above its
consent, in writing, to the transfer of the Purchaser's limited liability
company interests to the REIT pursuant to the exercise of the Exchange Option
in accordance with Section 8.1 of the Joint Venture Agreement and to take all
further action necessary to effectuate the transfer and the Purchaser's
simultaneous withdrawal from the Joint Venture, and (ii) obtain for the
benefit of the Purchaser releases from any and all monetary or other
guaranties (including, without limitation, hazardous substances indemnities
and the like) given by the Purchaser to third party lenders; PROVIDED,
HOWEVER, that, if following the exercise of commercially reasonable efforts
the Operating Partnership is unable to obtain releases from all such
guaranties, then the Operating Partnership shall provide to the Purchaser
indemnities reasonably satisfactory to the Purchaser to address the
contingent liability contained in such unreleased guaranties.
2.6 RIGHT OF FIRST OFFER AND BUY/SELL.
(a) In the event that the Purchaser has exercised the
Exchange Option and, prior to such exercise, either member of the Joint
Venture has duly initiated (i) the Right of First Offer (unless the
non-initiating member has declined to purchase the Target Asset so offered,
in which event Section 2.6(b) below shall apply), or (ii) the Buy/Sell, then
such Right of First Offer or Buy/Sell, as applicable, shall be deemed
terminated immediately upon the REIT's receipt of the Purchaser's notice of
exercise relating to the Exchange Option and the parties shall take no
further actions in connection with the procedures under the Joint Venture
Agreement for effectuating such Right of First Offer or Buy/Sell, as
applicable. The parties further agree not to initiate the Right of First
Offer or the Buy/Sell subsequent to the Purchaser's exercise of the Exchange
Option.
(b) In the event that the Purchaser has exercised the
Exchange Option and, prior to such exercise, either member of the Joint
Venture has initiated the Right of First Offer and the non-initiating party
has declined to purchase the Target Asset so offered, then the initiating
party may continue its efforts to sell such Target Asset on the offered
terms; PROVIDED, HOWEVER, that the parties shall prevent the Joint Venture
from distributing any Capital Proceeds arising with respect to the sale of
such Target Asset until the Purchaser's exercise of the Exchange Option has
been consummated. Notwithstanding the foregoing, if (i)
12
the Purchaser is the initiating party under the Right of First Offer, (ii)
the Target Asset consists of 75% or more of the properties then owned by the
Joint Venture (determined by number of properties), and (iii) the Joint
Venture has entered into a contract with a third party for the sale of such
Target Asset, then the Purchaser may not exercise the Exchange Option until
the earlier of the termination of the contract relating to the sale of the
Target Asset or the consummation of the sale thereunder and the distribution
of the Capital Proceeds therefrom.
2.7 RIGHTS UPON A CHANGE IN CONTROL. If, prior to the
expiration or termination of the Investment Period, the REIT enters into an
agreement that contemplates a Change in Control of the REIT or a Change in
Control of the REIT otherwise occurs, then the Purchaser shall have the right
to purchase up to that number of fully paid and nonassessable shares of
Preferred Stock determined below for cash prior to the consummation or
occurrence of such Change in Control. This right shall be in addition to, and
not in limitation of, or otherwise dependent on, any other rights of the
Purchaser under this Agreement.
The Purchaser shall have the right to purchase up to that number of
shares of Preferred Stock equal to the sum of (a) the quotient obtained by
DIVIDING (i) the amount, if any, by which $30,000,000 exceeds the aggregate
amount of all Contributions made by the Purchaser to the Joint Venture, BY
(ii) the product of the Option Exercise Price multiplied by the Conversion
Multiple, and (b) if the Operating Partnership has approved an increase in
the Capital Contribution Cap under Section 3.7(a) of the Joint Venture
Agreement, the quotient obtained by DIVIDING (i) the amount, if any, by which
sixty percent (60%) of the Expansion Capital exceeds the aggregate amount of
all Contributions of Expansion Capital made by the Purchaser to the Joint
Venture, BY (ii) the product of the Expansion Option Exercise Price
multiplied by the Conversion Multiple and, if necessary, rounding the
resulting number of shares to the next highest one one-hundredth (1/100) of a
share. The per share exercise price payable by the Purchaser in order to
exercise this right shall be (x) with respect to the purchase of shares
determined pursuant to clause (a) above, the Option Exercise Price multiplied
by the Conversion Multiple and (y) with respect to the purchase of shares
determined pursuant to clause (b) above, the Expansion Option Exercise Price
multiplied by the Conversion Multiple.
In connection with the right to purchase shares of Preferred Stock
under this Section 2.7, the REIT shall have the same rights with respect to
the delivering of REIT Common Stock or a combination of REIT Common Stock and
Preferred Stock as set forth in Section 2.4. The REIT shall deliver to the
Purchaser a notice of a proposed Change in Control promptly after the
execution of a definitive agreement with respect to such Change in Control,
or if there is no such definitive agreement, promptly after approval by the
REIT's Board of Directors or other similar official corporate action but in
no event less than ten (10) business days prior to the consummation or
occurrence of such Change in Control. The Purchaser shall deliver notice of
its intent to exercise this right within ten (10) business days following the
receipt of such notice from the REIT. Any notice of the Purchaser's intent
to exercise this right shall be deemed null and void AB INITIO in the event
that the contemplated Change in Control is not consummated or does not
otherwise occur or the final terms of such Change in Control materially
differ from those set forth in the REIT's notice to the Purchaser. In the
event that the terms of such Change in Control are materially amended or
altered prior to the
13
consummation or occurrence thereof, the REIT shall provide notice to the
Purchaser promptly following such amendment or alteration and the Purchaser
may elect, within five (5) business days, to rescind its notice of election
or to exercise its rights under this Section with respect to the Change in
Control as so amended or altered. The procedures for consummating an
exercise of this right shall otherwise be substantially similar to the
procedures set forth in Sections 2.5 with respect to an exercise of the
Exchange Option. Notwithstanding anything in this Agreement to the contrary,
the Purchaser's ability to exercise this right shall terminate immediately
following the consummation or occurrence of a Change in Control.
30 WARRANTS TO PURCHASE PREFERRED STOCK WITH UNINVESTED CAPITAL
3.1 ISSUANCE AND SALE OF INITIAL WARRANT.
(a) The REIT has authorized the issuance and sale of a
warrant to purchase 12,136 shares of Preferred Stock, subject to adjustment
in accordance with the terms of such warrant (the "Initial Warrant"). The
Initial Warrant shall be in the form attached hereto as EXHIBIT A. Subject
to the terms and conditions of this Agreement and in reliance upon the
representations and warranties contained herein, the REIT agrees to issue and
sell to the Purchaser, and the Purchaser agrees to purchase from the REIT,
the Initial Warrant as of the date hereof for a purchase price of $500,000
payable in cash by wire transfer of immediately available funds.
(b) Subject to the satisfaction of the conditions set
forth in Section 7 hereof, the consummation of the purchase and sale of the
Initial Warrant shall take place at the offices of Purchaser's Counsel
concurrently with the execution of this Agreement. At such Closing, the REIT
shall execute, or cause to be executed, and deliver, or cause to be
delivered, to the Purchaser the Initial Warrant, dated as of the date hereof
and registered in the Purchaser's name, against payment of the purchase price
therefor. The Initial Warrant shall be deemed to be issued, and the Purchaser
shall be deemed to have become a holder of record of such Initial Warrant for
all purposes, as of the Closing contemplated in this Section 3.1(b). The
issuance of the Initial Warrant shall be made without charge to the Purchaser
for any issuance tax in respect thereof or other cost incurred by the REIT or
the Operating Partnership in connection with the issuance thereof. Unless
otherwise provided in this Agreement, all other costs incurred in connection
with the issuance and sale of the Initial Warrant shall be borne by the party
that actually incurred such costs.
(c) In addition to any other conditions to issuing
Capital Stock of the REIT pursuant to an exercise of the Initial Warrant, the
conditions set forth in Section 7.1 hereof shall be required to be satisfied
prior to such issuance of Capital Stock so long as the Initial Warrant is
held by, and exercised by, the Purchaser under this Agreement; it being
understood that the provisions of this Agreement shall not apply to any
exercise of the Initial Warrant by any transferee of all or a portion of the
Initial Warrant unless such transferee is a permitted transferee of, and has
succeeded to, the Purchaser's rights and obligations under this Agreement in
accordance with Section 12.2 hereof.
14
3.2 EXPANSION CAPITAL WARRANT.
(a) Subject to Section 3.2(b), the REIT has authorized
the issuance and sale of a warrant to purchase an aggregate number of shares
of Preferred Stock determined in accordance with Section 3.2(c) (the
"Expansion Capital Warrant"). The Expansion Capital Warrant shall be
substantially in the form attached hereto as EXHIBIT A, with such changes as
are necessary to effectuate this Section 3.2 or as may agreed upon by the
parties. Subject to Section 3.2(b) and the other terms and conditions of
this Agreement and in reliance upon the representations and warranties
contained herein, the REIT agrees to issue and sell to the Purchaser, and the
Purchaser has the right to purchase from the REIT, the Expansion Capital
Warrant at the closing date set forth in Section 3.2(e) for a purchase price
payable in cash by wire transfer of immediately available funds.
(b) Notwithstanding anything in this Agreement to the
contrary, the REIT shall have no obligation to issue or sell, and the
Purchaser shall have no right to purchase, the Expansion Capital Warrant
until such time, if ever, as the Operating Partnership has approved a
proposed increase in the Capital Contribution Cap pursuant to Section 3.7(a)
of the Joint Venture Agreement.
(c) The Expansion Capital Warrant will be exercisable at
the Purchaser's option for that number of shares of Preferred Stock
determined by DIVIDING (a) an amount (expressed in dollars) equal to forty
percent (40%) of the Expansion Capital (the "Expansion Warrant Amount"), BY
(b) the Expansion Option Exercise Price multiplied by the Conversion Multiple
(the "Expansion Warrant Exercise Price"), and, if necessary, rounding the
quotient to the next highest one one-hundredth (1/100) of a share. The per
share exercise price payable by the Purchaser upon any exercise of the
Expansion Capital Warrant shall be equal to the Expansion Warrant Exercise
Price, subject to adjustment as provided in the Warrant.
(d) The parties agree further that the Expansion Capital
Warrant will provide for an adjustment to the number of shares of Preferred
Stock underlying the Expansion Capital Warrant following Contributions of
Expansion Capital prior to the expiration of the Investment Period,
substantially similar to the adjustment provisions contained in Section 7.1
of the Initial Warrant. Following such adjustment, the maximum number of
shares of Preferred Stock issuable pursuant to the Expansion Capital Warrant
shall be determined by MULTIPLYING (a) the quotient obtained by dividing the
Expansion Warrant Amount by the Expansion Warrant Exercise Price, BY (b) a
fraction, (i) the numerator of which is the Expansion Warrant Amount less the
amount, if any, by which all Contributions made by the Purchaser to the Joint
Venture pursuant to Expansion Capital exceeds sixty percent (60%) of the
Expansion Capital, and (ii) the denominator of which is the Expansion Warrant
Amount. In addition, the Expansion Capital Warrant shall provide that the
REIT shall pay to the Purchaser an adjustment rebate, similar to that
provided for in Section 7.3 of the Initial Warrant, if, prior to the
expiration of the Investment Period, the amount of all Contributions made by
the Purchaser to the Joint Venture pursuant to Expansion Capital exceeds
sixty percent (60%) of the Expansion Capital.
15
(e) Subject to the satisfaction of the conditions set
forth in Section 7 hereof, the consummation of the purchase and sale of the
Expansion Capital Warrant shall take place at the offices of Purchaser's
Counsel on a date mutually agreed upon by the parties, but in no event later
than the tenth (10th) business day following the Operating Partnership's
approval of an increase in the Capital Contribution Cap in accordance with
Section 3.7(a) of the Joint Venture Agreement. At such Closing, the REIT
shall execute, or cause to be executed, and deliver, or cause to be
delivered, to the Purchaser the Expansion Capital Warrant, dated as of the
date of the Closing and registered in the Purchaser's name (or such other
name as the Purchaser shall designate), against payment of the purchase price
therefor. The purchase price for the Expansion Capital Warrant shall be
$500,000; PROVIDED, HOWEVER, that the purchase price shall be reduced
proportionately to the extent that the Expansion Warrant Amount is less than
$20,000,000. The Expansion Capital Warrant shall be deemed to be issued, and
the Purchaser (or any other person designated as the registered holder) shall
be deemed to have become a holder of record of such Expansion Capital Warrant
for all purposes, as of the Closing contemplated in this Section 3.2(e). The
issuance of the Expansion Capital Warrant shall be made without charge to the
Purchaser for any issuance tax in respect thereof or other cost incurred by
the REIT or the Operating Partnership in connection the issuance thereof.
Unless otherwise provided in this Agreement, all other costs incurred in
connection with the issuance and sale of the Expansion Capital Warrant shall
be borne by the party that actually incurred such costs.
(f) In addition to any other conditions to issuing
Capital Stock of the REIT pursuant to an exercise of the Expansion Capital
Warrant, the conditions set forth in Section 7.1 hereof shall be required to
be satisfied prior to such issuance of Capital Stock so long as the Expansion
Capital Warrant is held by, and exercised by, the Purchaser under this
Agreement; it being understood that the provisions of this Agreement shall
not apply to any exercise of the Expansion Capital Warrant by any transferee
of all or a portion of the Expansion Capital Warrant unless such transferee
is a permitted transferee of, and has succeeded to, the Purchaser's rights
and obligations under this Agreement in accordance with Section 12.2 hereof.
16
40 RIGHT TO SUBSTITUTE PREFERRED STOCK AS CURRENCY
4.1 RIGHT OF PURCHASER TO REQUIRE PAYMENT IN PREFERRED STOCK.
In the event that, pursuant to the Buy/Sell or otherwise, the Operating
Partnership at any time becomes the buyer of all or substantially all of the
Purchaser's limited liability company interest in the Joint Venture, the
Purchaser shall have the right, in its sole discretion, to require the REIT
to assume the Operating Partnership's obligations as buyer and to receive the
consideration due to the Purchaser in a combination of cash and Preferred
Stock determined as follows. First, the Purchaser shall determine the
portion of the purchase price ("P") to be received by it in cash ("C"). The
REIT shall pay such amount C in cash in accordance with the terms of the
Joint Venture Agreement. Second, the Purchaser shall calculate the remaining
portion of the purchase price P ("PCP"). PCP shall equal the remainder of P
MINUS C, subject to the limitation described in (a) below, if applicable.
Third, the Purchaser shall determine the method of calculating the number of
shares of Preferred Stock ("S") to be received by it with respect to the PCP.
The Purchaser may, in its sole discretion, choose EITHER (a) or (b) below as
the method to make such calculation.
(a) The Purchaser may elect to receive a number of shares
S determined by the following formula (and, if necessary, rounding the
resulting number to the next highest one one-hundredth (1/100) of a share):
S = (PCP DIVIDED BY Effective Exercise Price) DIVIDED BY
Conversion Multiple
For the purposes of this Section 4.1(a), "EFFECTIVE
EXERCISE PRICE" means the amount (expressed in dollars) determined by the
following formula:
(Unrecouped Capital + Unrecouped Expansion Capital +
Unrecouped Additional Capital) DIVIDED BY [(Unrecouped Capital
DIVIDED BY Option Exercise Price) + (Unrecouped Expansion
Capital DIVIDED BY Expansion Option Exercise Price) +
(Unrecouped Additional Capital DIVIDED BY Additional Option
Exercise Price)]
Notwithstanding the foregoing, however, in the event the
Purchaser elects the method set forth in this subsection (a) to calculate S,
PCP may not exceed the aggregate amount (expressed in dollars) of the sum of
(i) Unrecouped Capital, (ii) Unrecouped Expansion Capital and (iii)
Unrecouped Additional Capital. The number of shares S to which the Purchaser
is entitled pursuant to this Section 4.1(a) shall be determined immediately
prior to the sale of all or substantially all of the Purchaser's limited
liability company interests pursuant to the Buy/Sell or otherwise, without
taking into account the effect of such sale on the calculation hereunder.
17
(b) The Purchaser may elect to receive a number of
shares S determined by the following formula (and, if necessary, rounding the
resulting number to the next highest one one-hundredth (1/100) of a share):
S = (PCP DIVIDED BY Adjusted Stock Price) DIVIDED BY
Conversion Multiple
For the purposes of this Section 4.1(b), "ADJUSTED STOCK
PRICE" means a dollar amount equal to 97% of the average last sale price per
share of the REIT Common Stock on the NYSE over the twenty-one (21) days on
which the NYSE is open and for which trades in the REIT Common Stock are
reported immediately preceding the date that the Purchaser delivers notice of
its election to receive Preferred Stock (adjusted to take into account any
splits, combinations, reclassifications, or other changes in the REIT's
capitalization that occur during such period). In the event that the REIT
Common Stock is no longer trading on the NYSE then the Adjusted Stock Price
shall be determined using the prices reported on the exchange or automated
quotation system on which the REIT Common Stock then trades.
(c) In lieu of delivering shares of Preferred Stock upon
the Purchaser's election under this Section 4.1, the REIT may elect, at its
sole option, to satisfy its obligations under this Section 4.1 by delivering
to the Purchaser either:
(i) that number of shares of REIT Common Stock
determined by MULTIPLYING (i) the number of shares of Preferred Stock
determined pursuant to Section 4.1(a) or (b), as applicable, to which the
Purchaser would be otherwise entitled BY (ii) the Conversion Multiple, and,
if necessary, rounding the resulting number of shares to the next highest
whole number; or
(ii) a combination of shares of REIT Common Stock
and Preferred Stock determined as follows: (x) shares of REIT Common Stock up
to that number of shares that, upon delivery, would result in the Purchaser
beneficially owning nine percent (9.0%) of the total number of outstanding
shares of REIT Common Stock (determined pursuant to Section 13(d) of the
Exchange Act or Division C of Article Fourth of the Articles of
Incorporation, whichever is more restrictive), and (y) a number of shares of
Preferred Stock equal to the quotient obtained by DIVIDING (A) the amount, if
any, by which the aggregate number of shares of REIT Common Stock determined
in accordance with Section 4.1(c)(i) above exceeds the number of shares of
REIT Common Stock determined by clause (x) above BY (B) the Conversion
Multiple and, if necessary, rounding the resulting number to the next highest
one one-hundredth (1/100) of a share.
Notwithstanding anything in this Agreement to the contrary, the REIT may not
make an election to deliver any shares of REIT Common Stock in lieu of
Preferred Stock pursuant to this Section 4.1(c) if such election would cause
the REIT to be unable to satisfy the conditions set forth in Section 7.1
hereof in a timely manner.
18
(d) In order to receive Preferred Stock or REIT Common
Stock, as applicable, under this Section 4.1, the Purchaser shall deliver to
the REIT and the Operating Partnership a written notice of election, duly
executed by the Purchaser, within ten (10) business days following the
determination that the REIT or the Operating Partnership will be the
purchaser of all or substantially all of the Purchaser's limited liability
company interest in the Joint Venture under the Buy/Sell or otherwise. Such
notice shall (i) indicate that it is exercising its rights under this Section
4.1 and (ii) specify the number of shares of Preferred Stock to be issued and
the related calculation under Section 4.1(a) or (b), whichever is elected by
the Purchaser in such notice. Within ten (10) business days of receiving
such notice of election, the REIT shall notify the Purchaser if it disagrees
with the Purchaser's determination of the number of shares of Preferred Stock
to be issued pursuant to the exercise of the Purchaser's rights under this
Section 4.1 and/or if it is electing to deliver any shares of REIT Common
Stock in lieu of Preferred Stock, in which case, the REIT's notice shall
specify the number of shares of REIT Common Stock and/or Preferred Stock to
be issued pursuant to Section 4.1(c). In the event that the parties disagree
as to the correct number of shares of Preferred Stock and/or REIT Common
Stock, as applicable, to be delivered pursuant to this Section 4.1, the
parties agree to cooperate in good faith and use their respective best
efforts to resolve the appropriate determination under Section 4.1(a), (b) or
(c) as applicable as promptly as possible. If the parties cannot reach
agreement by the sixth (6th) business day following the REIT's receipt of the
notice of election, the determination will be referred to the Accountants (or
such other Person unaffiliated with either party as the parties mutually
agree) and the parties agree to be bound by such Person's determination.
(e) The shares of Preferred Stock and/or REIT Common
Stock, as applicable, will be issued at the Closing to be held in accordance
with the provisions of the Buy/Sell, or such other procedures as may be
agreed upon by the parties; PROVIDED, HOWEVER, that, in addition to any
conditions in the Joint Venture Agreement, the conditions set forth in
Section 7 hereof shall be required to be satisfied prior to such Closing. At
the Closing, the REIT will execute or cause to be executed and deliver or
cause to be delivered to the Purchaser a certificate or certificates
representing the shares of Preferred Stock and/or REIT Common Stock, as
applicable, to be sold and purchased in accordance with Section 4.1(a), (b)
or (c), as applicable, against delivery of the consideration to be paid by
the Purchaser pursuant to the terms of the Joint Venture Agreement. The
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as the Purchaser shall request in the
notice and shall be registered in the name of the Purchaser or such other
name as shall be designated in the notice. The shares of Preferred Stock
and/or REIT Common Stock, as applicable, represented by such certificate or
certificates shall be deemed to be issued, and the Purchaser (or any other
person designated as the registered holder) shall be deemed to have become a
holder of record of such shares of Preferred Stock and/or REIT Common Stock,
as applicable, for all purposes, as of the Closing. The issuance of
certificates for shares of Preferred Stock and/or REIT Common Stock, as
applicable, shall be made without charge to the Purchaser for any issuance
tax in respect thereof or other cost incurred by the REIT or the Operating
Partnership in connection with such exercise and the related issuance of the
shares of Preferred Stock and/or REIT Common Stock, as applicable. Unless
otherwise provided in this Agreement or the Joint Venture Agreement, all
other costs incurred
19
in connection with the issuance of the Preferred Stock and/or REIT Common
Stock, as applicable, pursuant to this Section 4.1 shall be borne by the
party that actually incurred such costs.
4.2 RIGHT OF PURCHASER TO PURCHASE PREFERRED STOCK WITH THE
RIGHT OF FIRST OFFER PROCEEDS. In the event that, pursuant to the Right of
First Offer, the Operating Partnership at any time becomes the buyer of all
or substantially all of the properties then owned by the Joint Venture, the
Purchaser shall have the right to elect to purchase from the REIT a number of
shares of Preferred Stock (as determined below) for cash in accordance with
the terms of this Section 4.2. The distribution of the Right of First Offer
Proceeds and the consummation of such purchase of shares of Preferred Stock
shall occur concurrently with the consummation of the sale of the Target
Asset pursuant to the Right of First Offer held in accordance with the terms
of the Joint Venture Agreement. Upon an election pursuant to this Section
4.2, the Purchaser shall first determine the portion of the Right of First
Offer Proceeds that it desires to apply toward the purchase of shares of
Preferred Stock ("PCP"), subject to the limitation described in (a) below, if
applicable. The Purchaser shall be entitled to receive the remainder of the
Right of First Offer Proceeds in accordance with the terms of the Joint
Venture Agreement. Second, the Purchaser shall determine the method of
calculating the number of shares of Preferred Stock ("S") to be received by
it with respect to the PCP. The Purchaser may, in its sole discretion,
choose EITHER (a) or (b) below as the method to make such calculation.
(a) The Purchaser may elect to receive a number of shares
S determined by the following formula (and, if necessary, rounding the
resulting number to the next highest one one-hundredth (1/100) of a share):
S = (PCP DIVIDED BY Effective Exercise Price) DIVIDED BY
Conversion Multiple
For the purposes of this Section 4.2(a), "EFFECTIVE
EXERCISE PRICE" means the amount (expressed in dollars) determined by the
following formula:
(Unrecouped Capital + Unrecouped Expansion Capital +
Unrecouped Additional Capital) DIVIDED BY [(Unrecouped Capital
DIVIDED BY Option Exercise Price) + (Unrecouped Expansion
Capital DIVIDED BY Expansion Option Exercise Price) +
(Unrecouped Additional Capital DIVIDED BY Additional Option
Exercise Price)]
Notwithstanding the foregoing, however, in the event the
Purchaser elects the method set forth in this subsection (a) to calculate S,
PCP may not exceed the aggregate amount (expressed in dollars) of the sum of
(i) Unrecouped Capital, (ii) Unrecouped Expansion Capital and (iii)
Unrecouped Additional Capital. The number of shares S to which the Purchaser
is entitled pursuant to this Section 4.2(a) shall be determined immediately
prior to the distribution of the Right of First Offer Proceeds, without
taking into account the effect of such distribution on the calculation
hereunder.
20
(b) The Purchaser may elect to receive a number of
shares S determined by the following formula (and, if necessary, rounding the
resulting number to the next highest one one-hundredth (1/100) of a share):
S = (PCP DIVIDED BY Adjusted Stock Price) DIVIDED BY
Conversion Multiple
For the purposes of this Section 4.2(b), "ADJUSTED STOCK
PRICE" means a dollar amount equal to 97% of the average last sale price per
share of the REIT Common Stock on the NYSE over the twenty-one (21) days on
which the NYSE is open and for which trades in the REIT Common Stock are
reported immediately preceding the date that the Purchaser delivers notice of
its election to receive Preferred Stock (adjusted to take into account any
splits, combinations, reclassifications, or other changes in the REIT's
capitalization that occur during such period). In the event that the REIT
Common Stock is no longer trading on the NYSE then the Adjusted Stock Price
shall be determined using the prices reported on the exchange or automated
quotation system on which the REIT Common Stock then trades.
(c) In lieu of delivering shares of Preferred Stock upon
the Purchaser's election under this Section 4.2, the REIT may elect, at its
sole option, to satisfy its obligations under this Section 4.2 by delivering
to the Purchaser either:
(i) that number of shares of REIT Common Stock
determined by MULTIPLYING (i) the number of shares of Preferred Stock
determined pursuant to Section 4.2(a) or (b), as applicable, to which the
Purchaser would be otherwise entitled BY (ii) the Conversion Multiple, and,
if necessary, rounding the resulting number of shares to the next highest
whole number; or
(ii) a combination of shares of REIT Common Stock
and Preferred Stock determined as follows: (x) shares of REIT Common Stock up
to that number of shares that, upon delivery, would result in the Purchaser
beneficially owning nine percent (9.0%) of the total number of outstanding
shares of REIT Common Stock (determined pursuant to Section 13(d) of the
Exchange Act or Division C of Article Fourth of the Articles of
Incorporation, whichever is more restrictive), and (y) a number of shares of
Preferred Stock equal to the quotient obtained by DIVIDING (A) the amount, if
any, by which the aggregate number of shares of REIT Common Stock determined
in accordance with Section 4.2(c)(i) above exceeds the number of shares of
REIT Common Stock determined by clause (x) above BY (B) the Conversion
Multiple and, if necessary, rounding the resulting number to the next highest
one one-hundredth (1/100) of a share.
Notwithstanding anything in this Agreement to the contrary, the REIT may not
make an election to deliver any shares of REIT Common Stock in lieu of Preferred
Stock pursuant to this Section 4.2(c) if such election would cause the REIT to
be unable to satisfy the conditions set forth in Section 7.1 hereof in a timely
manner.
21
(d) In order to receive Preferred Stock and/or REIT
Common Stock, as applicable, under this Section 4.2, the Purchaser shall
deliver to the REIT and the Operating Partnership a written notice of
election, duly executed by the Purchaser, within ten (10) business days
following the determination that the Operating Partnerships will be the
purchaser under the Right of First Offer of all or substantially all of the
properties then owned by the Joint Venture. Such notice shall (i) indicate
that it is exercising its rights under this Section 4.2 and (ii) specify the
number of shares of Preferred Stock to be issued and the related calculation
under Section 4.2(a) or (b), whichever is elected by the Purchaser in such
notice. Within ten (10) business days of receiving such notice of election,
the REIT shall notify the Purchaser if it disagrees with the Purchaser's
determination of the number of shares of Preferred Stock to be issued
pursuant to the exercise of the Purchaser's rights under this Section 4.2
and/or if it is electing to deliver any shares of REIT Common Stock in lieu
of Preferred Stock, in which case, the REIT's notice shall specify the number
of shares of REIT Common Stock and/or Preferred Stock to be issued pursuant
to Section 4.2(c). In the event that the parties disagree as to the correct
number of shares of Preferred Stock and/or REIT Common Stock, as applicable,
to be delivered pursuant to this Section 4.2, the parties agree to cooperate
in good faith and use their respective best efforts to resolve the
appropriate determination under Section 4.2(a), (b) or (c) as applicable as
promptly as possible. If the parties cannot reach agreement by the sixth
(6th) business day following the REIT's receipt of the notice of election,
the determination will be referred to the Accountants (or such other Person
unaffiliated with either party as the parties mutually agree) and the parties
agree to be bound by such Person's determination.
(e) The shares of Preferred Stock and/or REIT Common
Stock, as applicable, will be issued at the Closing to be held with respect
to the consummation of the Right of First Offer; PROVIDED, HOWEVER, that, in
addition to any conditions in the Joint Venture Agreement, the conditions set
forth in Section 7 hereof shall be required to be satisfied prior to such
Closing and the parties agree to cause the Joint Venture to distribute the
Right of First Offer Proceeds concurrently with the consummation of the Right
of First Offer. At the Closing, the REIT will execute or cause to be
executed and deliver or cause to be delivered to the Purchaser a certificate
or certificates representing the shares of Preferred Stock and/or REIT Common
Stock, as applicable, to be sold and purchased in accordance with Section
4.2(a), (b) or (c), as applicable, against delivery of the purchase price
therefor. The certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the Purchaser shall
request in the notice and shall be registered in the name of the Purchaser or
such other name as shall be designated in the notice. The shares of
Preferred Stock and/or REIT Common Stock, as applicable, represented by such
certificate or certificates shall be deemed to be issued, and the Purchaser
(or any other person designated as the registered holder) shall be deemed to
have become a holder of record of such shares of Preferred Stock and/or REIT
Common Stock, as applicable, for all purposes, as of the Closing. The
issuance of certificates for shares of Preferred Stock and/or REIT Common
Stock, as applicable, shall be made without charge to the Purchaser for any
issuance tax in respect thereof or other cost incurred by the REIT or the
Operating Partnership in connection with such exercise and the related
issuance of the shares of Preferred Stock and/or REIT Common Stock, as
applicable. Unless otherwise provided in this Agreement or the Joint
22
Venture Agreement, all other costs incurred in connection with the issuance
of the Preferred Stock and/or REIT Common Stock, as applicable, pursuant to
this Section 4.2 shall be borne by the party that actually incurred such
costs.
4.3 RIGHT OF REIT TO MAKE PAYMENT IN PREFERRED STOCK OR REIT
COMMON STOCK. In the event that (i) the Purchaser initiated the Buy/Sell,
(ii) the Operating Partnership becomes the buyer pursuant to such exercise of
the Buy/Sell, and (iii) as of the date thereof, the REIT Common Stock is
listed and publicly traded on a national stock exchange, the REIT shall have
the right to assume the obligations of the Operating Partnership as buyer and
to elect to pay that portion of the consideration payable to the Purchaser in
cash after giving effect to any election under Section 4.1 ("Q") in a
combination of cash and Preferred Stock determined as follows. First, the
REIT shall determine the portion of the amount Q to be paid by it in cash
("C"). The REIT shall pay such amount C in cash in accordance with the terms
of the Joint Venture Agreement. Second, the REIT shall calculate the
remaining portion of the amount Q ("QCP"). QCP shall equal the remainder of Q
MINUS C. Third, the REIT shall calculate the number of shares of Preferred
Stock ("S") to be paid by it with respect to the QCP in accordance with
Section 4.3(a) below.
(a) The REIT will cause to be issued to the Purchaser a
number of shares S determined by the following formula (and, if necessary,
rounding the resulting number to the next highest one one-hundredth (1/100)
of a share):
S = (QCP DIVIDED BY Adjusted Stock Price) DIVIDED BY
Conversion Multiple
(b) For the purposes of this Section 4.3, "ADJUSTED STOCK
PRICE" means a dollar amount equal to 90% of the average last sale price per
share of the REIT Common Stock on the NYSE over the twenty-one (21) days on
which the NYSE is open and for which trades in the REIT Common Stock are
reported immediately preceding the date that it is determined that the
Operating Partnership will be the buyer pursuant to the Buy/Sell (adjusted to
take into account any splits, combinations, reclassifications or other
changes in the REIT's capitalization that occur during such period);
PROVIDED, HOWEVER, that, if, prior to the Operating Partnership's delivery of
the responsive notice contemplated in Section 8.4.3 of the Joint Venture
Agreement, the REIT and/or the Operating Partnership publicly announces or
publicly discloses the fact that the Purchaser has initiated the Buy/Sell,
then, at Purchaser's election, the Adjusted Stock Price may be determined
based on the twenty-one (21) days on which the NYSE is open and for which
trades in the REIT Common Stock are reported immediately preceding the date
of such public announcement. In the event that the REIT Common Stock is no
longer trading on the NYSE then the Adjusted Stock Price shall be determined
using the prices reported on the exchange or automated quotation system on
which the REIT Common Stock then trades.
(c) In lieu of delivering shares of Preferred Stock upon
the Purchaser's election under this Section 4.3, the REIT may elect, at its
sole option, to satisfy its obligations under this Section 4.3 by delivering
to the Purchaser either:
23
(i) that number of shares of REIT Common Stock
determined by MULTIPLYING (i) the number of shares of Preferred Stock
determined pursuant to Section 4.3(a) above to which the Purchaser would be
otherwise entitled BY (ii) the Conversion Multiple, and, if necessary,
rounding the resulting number of shares to the next highest whole number; or
(ii) a combination of shares of REIT Common Stock
and Preferred Stock determined as follows: (x) shares of REIT Common Stock up
to that number of shares that, upon delivery, would result in the Purchaser
beneficially owning nine percent (9.0%) of the total number of outstanding
shares of REIT Common Stock (determined pursuant to Section 13(d) of the
Exchange Act or Division C of Article Fourth of the Articles of
Incorporation, whichever is more restrictive), and (y) a number of shares of
Preferred Stock equal to the quotient obtained by DIVIDING (A) the amount, if
any, by which the aggregate number of shares of REIT Common Stock determined
in accordance with Section 4.3(c)(i) above exceeds the number of shares of
REIT Common Stock determined by clause (x) above BY (B) the Conversion
Multiple and, if necessary, rounding the resulting number to the next highest
one one-hundredth (1/100) of a share.
Notwithstanding anything in this Agreement to the contrary, the REIT may not
make an election to deliver any shares of REIT Common Stock in lieu of
Preferred Stock pursuant to this Section 4.3(c) if such election would cause
the REIT to be unable to satisfy the conditions set forth in Section 7.1
hereof in a timely manner.
(d) In order to elect to make payment in Preferred Stock
and/or REIT Common Stock under this Section 4.3, the REIT shall deliver to
the Purchaser a written notice of election, duly executed by the REIT, within
fifteen (15) business days following the earlier of the REIT's receipt of the
Purchaser's written notice of election to receive all or a portion of the
consideration due to it under Section 4.1 in Preferred Stock or the
expiration of the time period in which the Purchaser may make such election
under Section 4.1 hereof. Such notice shall (i) indicate that the REIT is
exercising its rights under this Section 4.3, (ii) whether the REIT will be
issuing Preferred Stock, REIT Common Stock or a combination thereof under
this Section 4.3, and (iii) specify the number of shares of Preferred Stock
and/or REIT Common Stock, as applicable, to be issued and the related
calculation under Section 4.3(a) and/or (c), as applicable. Within two (2)
business days of receiving such notice of election, the Purchaser shall
notify the REIT if it disagrees with the REIT's determination of the number
of shares of Preferred Stock and/or REIT Common Stock, as applicable, to be
issued pursuant to the exercise of the REIT's rights under this Section 4.3
and the parties agree to cooperate in good faith and use their respective
best efforts to resolve the appropriate determination under this Section 4.3
as promptly as possible. If the parties cannot reach agreement by the sixth
(6th) business day following the Purchaser's receipt of the REIT's notice of
election hereunder, the determination will be referred to the Accountants (or
such other Person unaffiliated with either party as the parties mutually
agree) and the parties agree to be bound by such Person's determination.
24
(e) The shares of Preferred Stock and/or REIT Common
Stock, as applicable, will be issued at the Closing to be held in accordance
with the provisions of the Buy/Sell; PROVIDED, HOWEVER, that, in addition to
any conditions in the Joint Venture Agreement, the conditions set forth in
Section 7 hereof shall be required to be satisfied prior to such Closing. At
the Closing, the REIT will execute or cause to be executed and deliver or
cause to be delivered to the Purchaser a certificate or certificates
representing the shares of Preferred Stock and/or REIT Common Stock, as
applicable, to be sold and purchased in accordance with Section 4.3(a) and/or
(c), as applicable, against delivery of the consideration to be paid by the
Purchaser under the Joint Venture Agreement. The certificate or certificates
so delivered shall be, to the extent possible, in such denomination or
denominations as the Purchaser shall request in the notice and shall be
registered in the name of the Purchaser or such other name as shall be
designated in the notice. The shares of Preferred Stock and/or REIT Common
Stock, as applicable, represented by such certificate or certificates shall
be deemed to be issued, and the Purchaser (or any other person designated as
the registered holder) shall be deemed to have become a holder of record of
such shares of Preferred Stock and/or REIT Common Stock, as applicable, for
all purposes, as of the Closing. The issuance of certificates for shares of
Preferred Stock and/or REIT Common Stock, as applicable, shall be made
without charge to the Purchaser for any issuance tax in respect thereof or
other cost incurred by the REIT or the Operating Partnership in connection
with the issuance of the shares of Preferred Stock and/or REIT Common Stock,
as applicable. Unless otherwise provided in this Agreement or the Joint
Venture Agreement, all other costs incurred in connection with the issuance
of the Preferred Stock and/or REIT Common Stock, as applicable, pursuant to
this Section 4.3 shall be borne by the party that actually incurred such
costs.
5. RIGHT TO RECEIVE PREFERRED STOCK IN CONNECTION WITH A PUT/SALE
DISTRIBUTION
5.1 PUT/SALE DISTRIBUTION. Upon each occurrence of a Put/Sale
Distribution, the Purchaser shall have the obligation to purchase from the
REIT, and the REIT shall have the obligation to issue and sell to the
Purchaser, that number of fully paid and nonassessable shares of Preferred
Stock determined in accordance with Section 5.2 below in exchange for cash in
an amount equal to the Put/Sale Distribution.
5.2 DETERMINATION OF NUMBER OF SHARES. Pursuant to Section 5.1
above, the Purchaser is entitled to receive, and the REIT is obligated to
issue, that number of shares of Preferred Stock determined by DIVIDING (a)
the quotient obtained by dividing (i) the applicable Put/Sale Distribution by
(ii)(x) the Option Exercise Price, if the asset giving rise to the Put/Sale
Distribution was originally purchased by the Joint Venture with Contributions
other than Expansion Capital or Additional Capital, (y) the Expansion Option
Exercise Price, if the asset giving rise to the Put/Sale Distribution was
originally purchased by the Joint Venture with Contributions of Expansion
Capital, or (z) the Additional Option Exercise Price if the asset giving rise
to the Put/Sale Distribution was originally purchased with Contributions of
Additional Capital BY (b) the Conversion Multiple, and, if necessary,
rounding the resulting number to the next highest one one-hundredth (1/100)
of a share.
25
5.3 RIGHT OF REIT TO SUBSTITUTE REIT COMMON STOCK. In lieu of
delivering shares of Preferred Stock under this Section 5 following a
Put/Sale Distribution, the REIT may elect, at its sole option, to satisfy its
obligations under this Section 5 by delivering to the Purchaser either:
(a) that number of shares of REIT Common Stock determined
by MULTIPLYING (i) the number of shares of Preferred Stock determined
pursuant to Section 5.2 above to which the Purchaser would be otherwise
entitled BY (ii) the Conversion Multiple, and, if necessary, rounding the
resulting number of shares to the next highest whole number; or
(b) a combination of shares of REIT Common Stock and
Preferred Stock determined as follows: (x) shares of REIT Common Stock up to
that number of shares that, upon delivery, would result in the Purchaser
beneficially owning nine percent (9.0%) of the total number of outstanding
shares of REIT Common Stock (determined pursuant to Section 13(d) of the
Exchange Act or Division C of Article Fourth of the Articles of
Incorporation, whichever is more restrictive), and (y) a number of shares of
Preferred Stock equal to the quotient obtained by DIVIDING (A) the amount, if
any, by which the aggregate number of shares of REIT Common Stock determined
in accordance with Section 5.4(a) above exceeds the number of shares of REIT
Common Stock determined in clause (x) above BY (B) the Conversion Multiple
and, if necessary, rounding the resulting number to the next highest one
one-hundredth (1/100) of a share.
Notwithstanding anything in this Agreement to the contrary, the REIT may not
make an election to deliver any shares of REIT Common Stock in lieu of
Preferred Stock pursuant to this Section 5 if such election would cause the
REIT to be unable to satisfy the conditions set forth in Section 7.1 hereof
in a timely manner.
5.4 CLOSING. Subject to the satisfaction of the conditions set
forth in Section 7 hereof, the purchase and sale contemplated in Section 5.1
above shall be consummated at a Closing to be held at the offices of
Purchaser's Counsel, or at such other place as may be mutually acceptable to
the parties, on the later of the tenth (10th) business day following any
Put/Sale Distribution or the earliest date upon which all of the applicable
conditions to Closing have been satisfied but in no event later than the
sixtieth (60th) day following such Put/Sale Distribution. Within five (5)
business days following any Put/Sale Distribution, the REIT shall deliver to
the Purchaser notice of its intent to issue Preferred Stock, REIT Common
Stock or a combination thereof pursuant to Section 5.3 hereof. At the
Closing, the REIT will execute or cause to be executed and deliver or cause
to be delivered to the Purchaser a certificate or certificates representing
the shares of Preferred Stock and/or REIT Common Stock, as applicable, to be
sold and purchased in accordance with Section 5.2 or 5.3, as applicable,
against payment of the purchase price therefor. The certificate or
certificates so delivered shall be, to the extent possible, in such
denomination or denominations as the Purchaser shall request and shall be
registered in the name of the Purchaser or such other name as shall be
designated by the Purchaser. The shares of Preferred Stock and/or REIT
Common Stock, as applicable, represented by such certificate or certificates
shall be deemed to be issued, and the Purchaser (or any other Person
designated as the registered holder) shall be
26
deemed to have become a holder or record of such shares of Preferred Stock
and/or REIT Common Stock, as applicable, for all purposes, as of the Closing.
The issuance of certificates for shares of Preferred Stock and/or REIT
Common Stock, as applicable, shall be made without charge to the Purchaser
for any issuance tax in respect thereof or other cost incurred by the REIT or
the Operating Partnership in connection with the issuance of the shares of
Preferred Stock and/or REIT Common Stock, as applicable. Unless otherwise
provided in the Agreement, all other costs incurred in connection with the
issuance of Peferred Stock and/or REIT Common Stock, as applicable, shall be
borne by the party that actually incurred such costs.
6. ADJUSTMENT TO OPTION EXERCISE PRICE, EXPANSION OPTION EXERCISE
PRICE AND ADDITIONAL OPTION EXERCISE PRICE
6.1 ADJUSTMENTS. In the event that the REIT shall at any time:
(a) issue additional shares of REIT Common Stock as a
dividend or other distribution on outstanding shares of REIT Common Stock;
(b) issue additional shares of REIT Common Stock pursuant
to a reclassification of shares of REIT Common Stock;
(c) subdivide the outstanding shares of REIT Common Stock
into a greater number of shares of REIT Common Stock; or
(d) combine the outstanding shares of REIT Common Stock
into a smaller number of shares of REIT Common Stock;
then in each such case (i) the Option Exercise Price shall, simultaneously
with the happening of such dividend, subdivision or combination, be adjusted
by multiplying the then effective Option Exercise Price by a fraction, the
numerator of which shall be the number of shares of REIT Common Stock
outstanding immediately prior to such event and the denominator of which
shall be the number of shares of REIT Common Stock outstanding immediately
after such event, (ii) the Expansion Option Exercise Price shall,
simultaneously with the happening of such dividend, subdivision or
combination, be adjusted by multiplying the then effective Expansion Option
Exercise Price by a fraction, the numerator of which shall be the number of
shares of REIT Common Stock outstanding immediately prior to such event and
the denominator of which shall be the number of shares of REIT Common Stock
outstanding immediately after such event, and (iii) the Additional Option
Exercise Price shall, simultaneously with the happening of such dividend,
subdivision or combination, be adjusted by multiplying the then effective
Additional Option Exercise Price by a fraction, the numerator of which shall
be the number of shares of REIT Common Stock outstanding immediately prior to
such event and the denominator of which shall be the number of shares of REIT
Common Stock outstanding immediately after such event.
27
6.2 FURTHER ADJUSTMENTS. In the event that the REIT shall at
any time take a record of the holders of the REIT Common Stock for the
purpose of entitling them to receive any dividend or other distribution
(including without limitation any distribution by way of spin-off,
reclassification, recapitalization or similar corporate rearrangement or
otherwise) of:
(a) cash (other than regular quarterly dividends payable
out of earnings or earned surplus (plus depreciation and amortization)
legally available for the payment of dividends under the laws of the
jurisdiction of the REIT, and any special additional dividends made for the
purposes of distributing 100% of the REIT's real estate investment trust
taxable income);
(b) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever; or
(c) any securities convertible into, or warrants or
other rights to subscribe for or purchase any evidence of its indebtedness,
any shares of its capital stock or any other securities or property of any
nature, whether or not the rights to exchange or convert thereunder are
immediately exercisable;
then in each such case (i) the Option Exercise Price shall, simultaneously
with the happening of such event, be adjusted by multiplying the then
effective Option Exercise Price by a fraction, the numerator of which shall
be the Aggregate Trading Value of the REIT Common Stock at the time of such
event less the then fair market value of the cash or other assets, rights,
warrants, evidence of indebtedness or other securities so distributed and the
denominator of which shall be the Aggregate Trading Value of the REIT Common
Stock at the time of such event, (ii) the Expansion Option Exercise Price
shall, simultaneously with the happening of such event, be adjusted by
multiplying the then effective Expansion Option Exercise Price by a fraction,
the numerator of which shall be the Aggregate Trading Value of the REIT
Common Stock at the time of such event less the then fair market value of the
cash or other assets, rights, warrants, evidence of indebtedness or other
securities so distributed and the denominator of which shall be the Aggregate
Trading Value of the REIT Common Stock at the time of such event, and (iii)
the Additional Option Exercise Price shall, simultaneously with the happening
of such event, be adjusted by multiplying the then effective Additional
Option Exercise Price by a fraction, the numerator of which shall be the
Aggregate Trading Value of the REIT Common Stock at the time of such event
less the then fair market value of the cash or other assets, rights,
warrants, evidence of indebtedness or other securities so distributed and the
denominator of which shall be the Aggregate Trading Value of the REIT Common
Stock at the time of such event. The fair market value of the cash
distributed will be equal to the amount of cash distributed and the fair
market value of any other assets, rights, warrants, evidence of indebtedness
or other securities distributed will be determined in good faith by the Board
of Directors of the REIT.
For the purposes of this Section 6.2, "Aggregate Trading Value" of the
REIT Common Stock shall mean the product obtained by MULTIPLYING (A) the
average of the last reported sale price per share of REIT Common Stock on the
NYSE over the twenty-one (21)
28
days on which the NYSE is open and for which trades in the REIT Common Stock
are reported immediately preceding the "ex" date with respect to the dividend
or distribution requiring such computation (adjusted to take into account any
splits, combinations, reclassifications, or other changes in the REIT's
capitalization that occur during such period) BY (B) the total number of
shares of REIT Common Stock then outstanding. In the event that the REIT
Common Stock is no longer trading on the NYSE then the Aggregate Trading
Value shall be determined using the prices reported on the exchange or
automated quotation system on which the REIT Common Stock then trades. The
term "'ex' date," when used with respect to this Section 6.2, means the
business day immediately following the date the REIT takes a record of the
holders of the REIT Common Stock for the purpose of entitling them to receive
the dividend or distribution set forth in this Section 6.2. In the event
that, at any time, the REIT Common Stock is not then traded on an exchange or
automated quotation system then "Aggregate Trading Value" shall be determined
using the fair market value of a share of REIT Common Stock agreed upon in
good faith by the parties.
Notwithstanding anything in this Section 6.2 to the contrary, the
occurrence of a distribution of rights to subscribe for or purchase shares of
the REIT's Capital Stock in connection with the adoption of what is commonly
referred to as a "shareholder rights plan" by the REIT ("Rights") shall be
deemed not to be a distribution of securities, warrants or rights for the
purposes of Section 6.2(c) or otherwise give rise to any adjustment of the
Option Exercise Price, the Expansion Option Exercise Price or the Additional
Option Exercise Price pursuant to this Section 6; PROVIDED, HOWEVER, that in
lieu of any adjustment as a result of any such distribution, the REIT shall
make sufficient provisions in the shareholder rights agreement to ensure
that, in connection with the issuance of any shares of REIT Common Stock
pursuant to this Agreement or upon conversion of the Preferred Stock, the
Purchaser will be entitled to simultaneously receive Rights in the same
amount and manner in which Rights would be received on any new issuance by
the REIT at that time of an equal amount of REIT Common Stock.
6.3 ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
In case the REIT after the date hereof (a) shall consolidate with or merge
into any other Person and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall permit any other
Person to consolidate with or merge into the REIT and the REIT shall be the
continuing or surviving Person but, in connection with such consolidation or
merger, the REIT Common Stock and/or the Preferred Stock, shall be changed
into or exchanged for stock or other securities of any other Person or cash
or any other property, or (c) shall transfer directly or indirectly all or
substantially all of its properties or assets to any other Person in one
transaction or a series of transactions, or (d) shall effect a capital
reorganization or reclassification of the REIT Common Stock and/or the
Preferred Stock, then, and in the case of each such transaction, proper
provision shall be made so that, upon such time, if ever, that the Purchaser
would be entitled to receive shares of Preferred Stock and/or REIT Common
Stock under the terms of this Agreement after the consummation of such
transaction, the Purchaser shall be entitled to receive, in lieu of the
Preferred Stock and/or REIT Common Stock issuable under the terms of this
Agreement, the greatest amount of securities, cash or other property to which
the Purchaser would actually have been entitled as a shareholder upon
29
such consummation if the Purchaser had received shares of Preferred Stock
and/or REIT Common Stock pursuant to this Agreement immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in this Section 6;
PROVIDED, HOWEVER, that if (i) a purchase, tender or exchange offer shall
have been made to and accepted by more than fifty percent (50%) of the
outstanding shares of REIT Common Stock prior to the consummation of a
transaction described above and that transaction is consummated, (ii) such
purchase, tender or exchange offer shall have been approved by the REIT's
Board of Directors, and (iii) the purchaser so designates in a notice given
to the REIT on or before the date immediately preceding the final deadline
for acceptance of the terms of such purchase, tender or exchange offer, then
the Purchaser shall be entitled to receive upon such exercise the greatest
amount of securities, cash or other property to which the Purchaser would
actually have been entitled as a shareholder if the Purchaser had exercised
such rights prior to the expiration of such purchase, tender or exchange
offer and accepted such offer, subject to adjustments (from and after the
consummation of such purchase, tender or exchange offer) as nearly equivalent
as possible to the adjustments provided for in this Section 6.
6.4 OTHER DILUTIVE EVENTS. In case any event shall occur as to
which the provisions of this Section 6 hereof are not strictly applicable but
the failure to make any adjustment would not fairly protect the rights to
receive Preferred Stock and/or REIT Common Stock contained in this Agreement
in accordance with the essential intent and principles of such Section, then,
in each such case, at the request of the Purchaser, the REIT shall appoint a
firm of independent investment bankers of recognized national standing (which
shall be completely independent of both the REIT and the Purchaser and shall
be reasonably satisfactory to the Purchaser), which shall give their opinion
upon the adjustment, if any, on a basis consistent with the essential intent
and principles established in this Section 6, necessary to preserve, without
dilution, the rights to receive Preferred Stock and/or REIT Common Stock
contained in this Agreement. Upon receipt of such opinion, the REIT will
promptly mail a copy thereof to the Purchaser and shall make the adjustments
described therein.
6.5 WHEN ADJUSTMENTS SHALL BE MADE. The adjustments required
by this Section 6 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. An adjustment made pursuant to this
paragraph shall be given effect, upon payment of such a dividend or
distribution, as of the record date for the determination of stockholders
entitled to receive such dividend or distribution (on a retroactive basis)
and in the case of a reclassification, subdivision or combination, shall
become effective immediately as of the effective date thereof. All
adjustments pursuant to this Section 6 affecting the number of shares of REIT
Common Stock that the Purchaser may receive pursuant to the terms of this
Agreement shall be made without duplication of the provisions for adjustment
to the conversion rights of the Preferred Stock contained in the Certificate
of Amendment attached as EXHIBIT G hereto with respect to the same
transaction.
6.6 WHEN ADJUSTMENT NOT REQUIRED. If the REIT shall take a
record of the holders of the shares of REIT Common Stock for the purpose of
entitling them to receive a dividend or distribution of additional shares of
REIT Common Stock or other cash or property
30
and shall, thereafter and before such distribution, legally abandon its plan
to pay or deliver such dividend or distribution, then thereafter no
adjustment shall be required by reason of the taking of such record and any
such adjustment previously made in respect thereof shall be rescinded and
annulled.
6.7 WHEN ADJUSTMENTS CARRIED FORWARD. No adjustment in the
Option Exercise Price, the Expansion Option Exercise Price or the Additional
Option Exercise Price in accordance with the provisions of this Section 6
need be made unless such adjustment would amount to a change of at least 1%
therein; PROVIDED, HOWEVER, that the amount by which any adjustment is not
made by reason of the provisions of this Section 6.7 shall be carried forward
and taken into account in determining whether this Section 6.7 is applicable
to any subsequent potential adjustment in the Option Exercise Price, the
Expansion Option Exercise Price or the Additional Option Exercise Price.
6.8 NOTICE OF ADJUSTMENTS. Whenever any adjustment is to be
made pursuant to this Section 6, the REIT shall prepare and deliver to the
Purchaser a notice, executed by the Chief Financial Officer of the REIT, at
least fifteen (15) days prior thereto, such notice to include in reasonable
detail (i) the events precipitating the adjustment, (ii) the computation of
any adjustments, and (iii) the Option Exercise Price, the Expansion Option
Exercise Price and the Additional Option Exercise Price immediately before
and immediately after the adjustment.
7. CONDITIONS TO CLOSING
7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER AT A
CLOSING. The Purchaser's obligation to purchase and pay for the Initial
Warrant, the Expansion Capital Warrant or shares of Preferred Stock and/or
REIT Common Stock, as applicable, to be issued to it at any closing held for
the purpose of consummating (i) the exercise of the Exchange Option, (ii) an
exercise of the Initial Warrant or the Expansion Capital Warrant, (iii) a
transfer pursuant to the Buy/Sell or otherwise with respect to which either
party has made an election pursuant to Section 4.1 or 4.3 hereof, (iv) any
purchase or sale in connection with a distribution of Right of First Offer
Proceeds with respect to which the Purchaser has made an election pursuant to
Section 4.2 hereof, or (v) any purchase or sale in connection with a Put/Sale
Distribution pursuant to Section 5 hereof (each, a "Closing") is subject to
the fulfillment prior to or at the Closing of the following conditions, any
or all of which may be waived in writing at the option of the Purchaser:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the REIT and the Operating Partnership contained in Section
8 hereof shall be true and correct when made and at the time of the Closing,
after giving effect to the sale of the Initial Warrant, Expansion Capital
Warrant or the shares of Preferred Stock or REIT Common Stock, as applicable,
to be issued and the other transactions contemplated to be consummated at the
Closing by this Agreement and the other Transaction Documents, except that
any representations and warranties that relate to a particular date or period
shall be true and correct as of such date or period.
31
(b) PERFORMANCE. The REIT and the Operating Partnership
shall have performed and complied in all material respects with all
agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing.
(c) CLOSING CERTIFICATES. The REIT and the Operating
Partnership shall have delivered to the Purchaser an Officer's Certificate or
General Partner's Certificate, as applicable, each dated as of the Closing,
certifying that the conditions specified in Sections 7.1(a) and (b) have been
fulfilled.
(d) OPINION OF COUNSEL. The Purchaser shall have
received from REIT Counsel their favorable opinion substantially in the form
set forth in EXHIBIT B, addressed to the Purchaser, dated as of the Closing
and otherwise satisfactory in substance and form to the Purchaser.
(e) INTENTIONALLY OMITTED.
(f) LEGAL INVESTMENT. As of the date of the Closing,
the Purchaser's purchase of the Initial Warrant, the Expansion Capital
Warrant, or the shares of Preferred Stock and/or REIT Common Stock, as
applicable, shall be permitted by the laws and regulations of the
jurisdiction to which the Purchaser is subject (including, without
limitation, Section 5 of the Securities Act) and shall not be enjoined
(temporarily or permanently) under, prohibited by or contrary to any
injunction, order or decree applicable to the Purchaser.
(g) PROCEEDINGS AND DOCUMENTS. All corporate,
partnership and other proceedings contemplated by this Agreement and the
other Transaction Documents shall be satisfactory to the Purchaser and the
Purchaser's Counsel, and the Purchaser and the Purchaser's Counsel shall have
received all such counterpart originals or certified or other copies of such
documents as the Purchaser or the Purchaser's Counsel may reasonably request.
(h) REGISTRATION RIGHTS AGREEMENT. Simultaneously with
the execution of this Agreement but in any event prior to the issuance and
sale to the Purchaser of the shares of Preferred Stock and/or REIT Common
Stock, as applicable, to be purchased by the Purchaser at any Closing, the
REIT and the Purchaser shall have duly entered into the Registration Rights
Agreement in the form of EXHIBIT C, the Purchaser shall have received a
fully-executed counterpart of the Registration Rights Agreement, such
agreement shall be in full force and effect and no term or condition thereof
shall have been amended, modified or waived.
(i) MANAGEMENT RIGHTS LETTER. Simultaneously with or
prior to the issuance and sale to the Purchaser of any shares of Preferred
Stock or REIT Common Stock hereunder at the Closing, the REIT and the
Purchaser shall have duly entered into the Management Rights Letter
substantially in the form of EXHIBIT D, the Purchaser shall have received a
fully-executed counterpart of the Management Rights Letter, such agreement
shall
32
be in full force and effect and no term or condition thereof shall have been
amended, modified or waived.
(j) TAX REPRESENTATION LETTER. Simultaneously with or
prior to the issuance and sale to the Purchaser of any shares of Preferred
Stock and/or REIT Common Stock hereunder at the Closing, the REIT, the
Operating Partnership and the Purchaser shall have duly entered into the Tax
Representation Letter substantially in the form of EXHIBIT E, the Purchaser
shall have received a fully-executed counterpart of the Tax Representation
Letter, such agreement shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived.
(k) OWNERSHIP WAIVER LETTER. Simultaneously with, but
in any event prior to, the issuance and sale to the Purchaser of any shares
of Preferred Stock and/or REIT Common Stock hereunder at the Closing, the
REIT shall have duly entered into the Ownership Waiver Letter substantially
in the form of EXHIBIT F, the Purchaser shall have received a fully-executed
counterpart of the Ownership Waiver Letter, such agreement shall be in full
force and effect and no term or condition thereof shall have been amended,
modified or waived.
(l) RELATED MATTERS. As of the Closing, each of (i) the
REIT's Charter Documents and (ii) the Operating Partnership's Partnership
Documents shall not have been modified or amended since the date such
documents were last delivered to the Purchaser by the REIT and Operating
Partnership, which delivery may be made at any time prior to or at such
Closing.
(m) NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION. No
legislation, order, rule, ruling or regulation shall have been enacted or
made after the date hereof by or on behalf of any Governmental Authority, nor
shall any decision of any court of competent jurisdiction within the United
States have been rendered after the date hereof which, in the Purchaser's
reasonable judgment, could materially and adversely affect the shares of
Preferred Stock and/or REIT Common Stock to be issued, or the shares of REIT
Common Stock issuable upon conversion of the Preferred Stock, or any part
thereof as an investment. There shall be no action, suit, investigation or
proceeding pending or threatened, against or affecting the Purchaser, any of
its properties or rights, or any of its Affiliates, associates, officers or
directors, before any Governmental Authority which (i) seeks to restrain,
enjoin, prevent the consummation of or otherwise affect the transactions
contemplated by this Agreement and the other Transaction Documents, or (ii)
questions the validity or legality of any such transactions or seeks to
recover damages or to obtain other relief in connection with any such
transactions, and there shall be no valid basis for any such action,
proceeding or investigation.
(n) GOVERNMENTAL AND THIRD PARTY PERMITS, CONSENTS, ETC.
The REIT, the Operating Partnership and the Subsidiaries shall have duly
applied for and obtained all approvals, orders, licenses, consents and other
authorizations (collectively, the "Approvals") from each Governmental
Authority, department or body, or pursuant to any agreement to which the
REIT, the Operating Partnership and the Subsidiaries is a party or to
33
which it or any of its assets is subject, which may be required in connection
with this Agreement and the other Transaction Documents.
(o) HSR ACT. The waiting period (and any extension
thereof) under the HSR Act applicable to the issuance of any shares of
Preferred Stock and/or REIT Common Stock pursuant to this Agreement shall
have expired or been terminated.
(p) NEW YORK STOCK EXCHANGE LISTING. As of the Closing,
the listing of REIT Common Stock on the NYSE shall not have been terminated,
nor shall the REIT have been notified that such listing may be terminated or
that a termination is contemplated. As of the Closing, the listing of those
shares of REIT Common Stock to be issued, or into which the shares of
Preferred Stock to issued will be convertible, shall have been approved by
the NYSE.
(q) ADDITIONAL CERTIFICATES. The Purchaser shall have
received a certificate, dated as of the Closing, from each of the Secretary
(or Assistant Secretary) of the REIT and the general partner of the Operating
Partnership, (i) certifying as true, complete and correct their Charter
Documents and Partnership Documents (as appropriate) and resolutions relating
to the transactions contemplated hereby attached thereto, (ii) as to the
absence of proceedings or other action for dissolution, liquidation or
reorganization of any of the REIT, the Operating Partnership or the
Subsidiaries, (iii) as to the incumbency and specimen signatures of officers
who shall have executed instruments, agreements and other documents in
connection with the transactions contemplated hereby, (iv) as to the effect
that certain agreements, instruments and other documents are in the form
approved in the resolutions referred to in clause (i) above, and (v) as to
certain tax matters regarding each of the REIT and the Operating Partnership.
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE REIT AT THE
CLOSING. The REIT's obligation to issue the Initial Warrant, the Expansion
Capital Warrant or shares of Preferred Stock and/or REIT Common Stock, as
applicable, at any Closing is subject to the fulfillment prior to or at the
Closing of the following conditions, any or all of which may be waived in
writing at the option of the REIT:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Purchaser in Section 9 hereof shall be true and correct
when made and, without regard to Section 9.4, at the time of the Closing,
after giving effect to the purchase of the Initial Warrant, the Expansion
Capital Warrant or the shares of Preferred Stock and/or REIT Common Stock, as
applicable, to be issued and the other transactions contemplated to be
consummated at the Closing by this Agreement, except that any representations
and warranties that relate to a particular date or period shall be true and
correct as of such date or period.
(b) PERFORMANCE. The Purchaser shall have performed and
complied in all material respects with all agreements and conditions
contained in this Agreement required to be performed or complied with prior
to or at the Closing.
34
(c) CLOSING CERTIFICATE. The Purchaser shall have
delivered to the REIT a General Partner's Certificate, dated as of the
Closing, certifying that the conditions specified in Sections 7.2(a) and (b)
have been fulfilled.
(d) NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION. No
legislation, order, rule, ruling or regulation shall have been enacted or
made after the date hereof by or on behalf of any Governmental Authority, nor
shall any decision of any court of competent jurisdiction within the United
States have been rendered after the date hereof which, in the REIT's
reasonable judgment, could materially and adversely affect the REIT as a
result of the sale and issuance of the shares of Preferred Stock and/or REIT
Common Stock to be issued, or the shares of REIT Common Stock issuable upon
conversion of the Preferred Stock, or any part thereof. There shall be no
action, suit, investigation or proceeding pending or threatened, against or
affecting the REIT, any of its properties or rights, or any of its
Affiliates, associates, officers or directors, before any Governmental
Authority which (i) seeks to restrain, enjoin, prevent the consummation of or
otherwise affect the transactions contemplated by this Agreement, or (ii)
questions the validity or legality of any such transactions or seeks to
recover damages or to obtain other relief in connection with any such
transactions, and there shall be no valid basis for any such action,
proceeding or investigation.
(e) GOVERNMENTAL AND THIRD PARTY PERMITS, CONSENTS, ETC.
The Purchaser shall have duly applied for and obtained all Approvals, from
each Governmental Authority, or pursuant to any agreement to which the
Purchaser is a party or to which it or any of its assets is subject, which
may be required in connection with this Agreement and the other Transaction
Documents.
(f) HSR ACT. The waiting period (and any extension
thereof) under the HSR Act applicable to the issuance of any shares of
Preferred Stock and/or REIT Common Stock pursuant to this Agreement shall
have expired or been terminated.
(g) PROCEEDINGS AND DOCUMENTS. All corporate,
partnership and other proceedings contemplated by this Agreement and the
other Transaction Documents shall be satisfactory to the REIT and the REIT
Counsel, and the REIT and the REIT Counsel shall have received all such
counterpart originals or certified or other copies of such documents as the
REIT or the REIT Counsel may reasonably request.
7.3 INABILITY OF REIT TO SATISFY CONDITIONS PRECEDENT TO
CLOSING. In the event that (a) the REIT fails to satisfy the conditions set
forth in Section 7.1 hereof for any reason (i) within sixty (60) days
following (x) the REIT's receipt of a notice of exercise under the Exchange
Option, (y) the exercise of the Initial Warrant or the Expansion Capital
Warrant by the Purchaser, or (z) the occurrence of any Put/Sale Distribution,
or (ii) by the date scheduled for consummating a transfer pursuant to the
Right of First Offer or the Buy/Sell or otherwise with respect to which
either party has made an election under Section 4 hereof, and (b) the
Purchaser has satisfied its obligations in Section 10.10 hereof, then, in
addition to any other remedies it may have, the Purchaser shall be entitled
to receive at the applicable Closing an amount in cash in immediately
available funds determined by MULTIPLYING (x) the product of the Conversion
Multiple multiplied by the number of shares of Preferred Stock to which the
35
Purchaser would otherwise be entitled (assuming for these purposes that the
REIT has elected to deliver Preferred Stock and has not elected to deliver
REIT Common Stock or a combination of Preferred Stock and REIT Common Stock)
BY (y) the average last sale price per share of the REIT Common Stock on the
NYSE over the twenty-one (21) days on which the NYSE is open and for which
trades in the REIT Common Stock are reported immediately preceding the date
that the Purchaser delivered notice of its exercise of the Exchange Option,
the Initial Warrant or the Expansion Capital Warrant or notice of its
election to receive Preferred Stock under Section 4.1 or to purchase
Preferred Stock under Section 4.2 or, if no such election was made, the date
that the REIT delivered notice of its election to make payment in Preferred
Stock and/or REIT Common Stock under Section 4.3 or the date upon which any
Put/Sale distribution occurred, as applicable (adjusted to take into account
any splits, combinations, reclassifications or other changes in the REIT's
capitalization that occur during such period). In the event that the REIT
Common Stock is no longer trading on the NYSE then the average price shall be
determined using the prices reported on the exchange or automated quotation
system on which the REIT Common Stock then trades. Without limiting the
foregoing, if the REIT can satisfy the conditions set forth in Section 7.1
with respect to a portion, but not all, of the shares of Preferred Stock
and/or REIT Common Stock to which the Purchaser is otherwise entitled then
the REIT shall be obligated to issue as many shares of Preferred Stock and/or
REIT Common Stock, as applicable, as possible while still satisfying the
conditions set forth in Section 7.1 and to deliver the remaining portion of
consideration in cash in accordance with this Section 7.3.
8. REPRESENTATIONS AND WARRANTIES, COVENANTS, ETC. OF EACH OF THE
REIT AND THE OPERATING PARTNERSHIP. In order to induce the Purchaser to
enter into this Agreement, the REIT and the Operating Partnership each hereby
jointly and severally represents and warrants and covenants that, with such
exceptions as are specifically set forth in a letter delivered by the REIT to
the Purchaser prior to the execution of this Agreement (the "Disclosure
Letter," which Disclosure Letter shall be appended to and shall be deemed to
be part of this Agreement):
8.1 ORGANIZATION AND QUALIFICATION; AUTHORITY. Each of the
REIT, the Operating Partnership and the other Subsidiaries, whether wholly or
indirectly owned, is a corporation duly incorporated or partnership, limited
partnership or limited liability company duly formed and is validly existing
and, if applicable, in good standing under the laws of the jurisdiction of
its incorporation or formation, has full corporate, partnership or limited
liability company power and authority to own and lease its respective
properties and carry on its respective business as presently conducted, is
duly qualified, registered or licensed as a foreign corporation, partnership,
limited partnership or limited liability company to do business and is in
good standing in each jurisdiction in which the ownership or leasing of its
respective properties or the character of its present operations makes such
qualification, registration or licensing necessary, except where the failure
so to qualify or be in good standing would not have a material adverse effect
on the condition (financial or otherwise), assets, business or results of
operations of (a "Material Adverse Effect") the REIT and the Subsidiaries on
a consolidated basis. The REIT has heretofore made available to Purchaser's
Counsel complete
36
and correct copies of the REIT's Charter Documents and the Operating
Partnership's Partnership Documents, each as amended and restated to date and
as presently in effect.
8.2 LICENSES. Each of the REIT, the Operating Partnership and
the Subsidiaries holds all licenses, franchises, permits, consents,
registrations, certificates and other approvals (individually, a "License"
and collectively, "Licenses") required for the conduct of its business as now
being conducted, and operates in substantial compliance therewith, except
where the failure to hold any such License or to operate in compliance
therewith would not have a Material Adverse Effect on the REIT, the Operating
Partnership and the Subsidiaries on a consolidated basis. The REIT, the
Operating Partnership and each of the Subsidiaries are in compliance with all
laws, regulations, orders and decrees applicable to them, except in each case
where the failure so to comply would not have a Material Adverse Effect on
the REIT, the Operating Partnership and the Subsidiaries on a consolidated
basis, or a Material Adverse Effect on the ability of the REIT, the Operating
Partnership or any of the Subsidiaries to perform on a timely basis any
obligation that they have or will have under any Transaction Document to
which they are a party.
8.3 CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION.
The execution, delivery and performance by the REIT, the Operating
Partnership and the Subsidiaries of the Transaction Documents to which they
are a party and all other instruments or agreements to be executed in
connection herewith or therewith and, with respect to the REIT, the issuance
and sale to (and the purchase hereunder by) the Purchaser of the Initial
Warrant, the Expansion Capital Warrant or the Preferred Stock and/or REIT
Common Stock pursuant to this Agreement (a) are within the REIT's, the
Operating Partnership's and the Subsidiaries' respective corporate,
partnership or limited liability company powers; (b) have been duly
authorized by all necessary corporate, partnership or limited liability
company action on the part of the REIT, the Operating Partnership and each
such Subsidiary; (c) do not require any License or Approval (except such as
have been obtained); (d) do not contravene or constitute a default under or
violation of (i) any provision of applicable law or regulation of any
Governmental Authority, (ii) the Charter Documents or Partnership Documents
of the REIT, the Operating Partnership or any of the Subsidiaries, (iii) any
agreement (or require the consent of any Person under any agreement that has
not been made or obtained) to which the REIT, the Operating Partnership or
any of the Subsidiaries are a party, or (iv) any judgment, injunction, order,
decree or other instrument binding upon the REIT, the Operating Partnership,
any of the Subsidiaries or any of their respective properties, except where
such contravention, default or violation would not have a Material Adverse
Effect on the REIT, the Operating Partnership and the Subsidiaries on a
consolidated basis; and (e) do not and will not result in the creation or
imposition of any Lien on any asset of the REIT, the Operating Partnership or
any of the Subsidiaries, except where the creation or imposition of such Lien
would not have a Material Adverse Effect on the REIT, the Operating
Partnership and the Subsidiaries on a consolidated basis. The shares of
Preferred Stock or REIT Common Stock to be issued at a Closing and the shares
of REIT Common Stock issuable upon conversion of the Common Stock have been
duly and validly authorized and, when issued and delivered against payment
therefor as provided herein, will be duly and validly issued, free and clear
of all liens, encumbrances, equities or claims of any nature whatsoever.
37
8.4 VALIDITY AND BINDING EFFECT. Each of the Transaction
Documents has been duly executed and delivered by each of the REIT, the
Operating Partnership and any Subsidiary which is a party thereto and is a
valid and binding agreement of the REIT, the Operating Partnership and any
such Subsidiary, as applicable, enforceable against the REIT, the Operating
Partnership and any such Subsidiary, as applicable, in accordance with its
terms.
8.5 CAPITALIZATION.
(a) As of December 31, 1998, the REIT had 17,044,361
shares of REIT Common Stock and no shares of any other class or series of
capital stock issued and outstanding. As of the Closing, upon the issuance
to the Purchaser of shares of Preferred Stock or REIT Common Stock, as
applicable, in connection with the Exchange Option, any Put/Sale Distribution
or an election by either party under Section 4 hereof, such shares of
Preferred Stock or REIT Common Stock, as applicable, will be validly issued,
fully paid and non-assessable and free of any preemptive or similar rights.
(b) As of December 31, 1998, the Operating Partnership
had 16,335,475 partnership units of limited and general partnership interest
issued and outstanding and no partnership units of any other class or series
issued and outstanding.
(c) Except as disclosed in the SEC Filings or the
Operating Partnership's Partnership Documents as provided to the Purchaser,
as of the Closing, there are no outstanding subscriptions, options, warrants,
rights, convertible or exchangeable securities or other agreements or
commitments of any character obligating the REIT, the Operating Partnership
or the Subsidiaries to issue any securities. As of the Closing, there are no
voting trusts or other agreements or understandings to which the REIT, the
Operating Partnership or the Subsidiaries are a party with respect to the
voting of the Capital Stock or Partnership Interests of the REIT, the
Operating Partnership or the Subsidiaries, as the case may be. Except as
contemplated by the Registration Rights Agreement, neither the REIT, the
Operating Partnership nor any of the Subsidiaries has entered into any
agreement to register their equity or debt securities under the Securities
Act.
8.6 LITIGATION; DEFAULTS. There is (a) no action, suit, or
proceeding pending or, to the knowledge of the REIT or the Operating
Partnership, threatened against or affecting the REIT, the Operating
Partnership, any of the Subsidiaries, or any properties of any of the
foregoing, or (b) to the knowledge of the REIT or the Operating Partnership,
no investigation pending against or affecting the REIT, the Operating
Partnership, any of the Subsidiaries, or any properties of any of the
foregoing before or by any Governmental Authority which (individually or in
the aggregate) could reasonably be expected to (i) have a Material Adverse
Effect on the REIT, the Operating Partnership and the Subsidiaries on a
consolidated basis, or (ii) impair the ability of the REIT, the Operating
Partnership or any Subsidiary to perform fully on a timely basis any material
obligation which the REIT, the Operating Partnership or any such Subsidiary
has or will have under any Transaction Document to which the REIT, the
Operating Partnership or any Subsidiary is a party. Neither the REIT, the
Operating Partnership nor any Subsidiary is in violation of, or in default
under (and there does not exist
38
any event or condition which, after notice or lapse of time or both, would
constitute such a default under), any term of its Charter Documents or
Partnership Documents or of any term of any agreement, instrument, judgment,
decree, order, statute, injunction, governmental regulation, rule or
ordinance (including without limitation, those relating to zoning, city
planning or similar matters) applicable to the REIT, the Operating
Partnership or any Subsidiary or to which the REIT, the Operating Partnership
or any Subsidiary is bound, or to any properties of the REIT, the Operating
Partnership or any Subsidiary, except in each case to the extent that such
violations or defaults, individually or in the aggregate, would not (a)
affect the validity of any Transaction Document, (b) have a Material Adverse
Effect on the REIT, the Operating Partnership and the Subsidiaries on a
consolidated basis, or (c) impair the ability of the REIT, the Operating
Partnership or any Subsidiary to perform fully on a timely basis any material
obligation which the REIT, the Operating Partnership or any Subsidiary has or
will have under any Transaction Document to which the REIT, the Operating
Partnership or any Subsidiary is a party.
8.7 PUBLIC REPORTS; NO MATERIAL ADVERSE CHANGE. As of the date
of this Agreement each SEC Filing filed since December 31, 1997 complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and did not when filed contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Except as disclosed
in the SEC Filings, there has been since September 30, 1998 (i) no adverse
change in the condition (financial or other), assets, business, results of
operations or prospects of the REIT, the Operating Partnership or any of the
Subsidiaries which could have a Material Adverse Effect on the REIT, the
Operating Partnership and the Subsidiaries on a consolidated basis, (ii) no
obligation or liability (contingent or otherwise) incurred by the REIT, the
Operating Partnership or any of the Subsidiaries, other than obligations and
liabilities which would not have a Material Adverse Effect on the REIT, the
Operating Partnership or on any of the Subsidiaries on a consolidated basis
and no mortgage, encumbrance or Lien placed on any of the properties of the
REIT, the Operating Partnership or any of the Subsidiaries which remains in
existence on the date hereof other than mortgages, encumbrances and Liens
incurred in the ordinary course of business, and (iii) no acquisition or
disposition of any material assets by the REIT, the Operating Partnership or
any of the Subsidiaries (or any contract or arrangement therefor), or any
other material transaction, otherwise than for fair value in the ordinary
course of business. There is no material fact known to the REIT or the
Operating Partnership which the REIT or the Operating Partnership have not
disclosed in the SEC Filings which have or, insofar as the REIT or the
Operating Partnership can reasonably foresee, may have or will have a
Material Adverse Effect on the REIT, the Operating Partnership or the
Subsidiaries on a consolidated basis or a Material Adverse Effect on the
ability of the REIT or the Operating Partnership to perform their respective
obligations under any of the Transaction Documents to which they are a party
or any document contemplated hereby or thereby.
8.8 PRIVATE OFFERING. No form of general solicitation or
general advertising, including, but not limited to, advertisements, articles,
notices or other communications, published in any newspaper, magazine or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation
39
or general advertising, was used by the REIT, the Operating Partnership or
any of the Subsidiaries or any of the REIT's, Operating Partnership's or such
Subsidiary's representatives, or, to the knowledge of the REIT or the
Operating Partnership, any other Person acting on behalf of the REIT, the
Operating Partnership or any of the Subsidiaries, in connection with the
offering of any shares of Preferred Stock or REIT Common Stock being
purchased under this Agreement or under any other Transaction Document. The
REIT and the Operating Partnership further represent to the Purchaser that,
assuming the accuracy of the representations of, and compliance with the
covenants of, the Purchaser as set forth in Section 10 hereof, neither the
REIT, the Operating Partnership or any of the Subsidiaries nor any Person
acting on the REIT's, the Operating Partnership's, or such Subsidiary's
behalf has taken or will take any action which would subject the issue and
sale of such shares of the Preferred Stock or REIT Common Stock to the
provisions of Section 5 of the Securities Act, except as contemplated by the
Registration Rights Agreement.
8.9 BROKER'S OR FINDER'S COMMISSIONS. In addition to and not
in limitation of any other rights hereunder, the REIT and the Operating
Partnership agree that they will jointly and severally indemnify and hold
harmless the Purchaser from and against any and all claims, demands or
liabilities for broker's, finder's, placement agent's or other similar fees
or commissions arising from the transactions contemplated hereby, except for
fees or commissions contemplated by, and specifically addressed in, the Joint
Venture Agreement.
8.10 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY;
U.S. ENTITY. Neither the REIT nor the Operating Partnership (i) is or, for
so long as the Purchaser has the right to receive, or obligation to accept,
Preferred Common Stock under this Agreement, will become an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
(the "1940 Act"), (ii) is or, for so long as the Purchaser has the right to
receive, or obligation to accept, Preferred Common Stock under this
Agreement, will become an "investment company" for purposes of Section
12(d)(1) of the 1940 Act, (iii) is or, for so long as the Purchaser has the
right to receive, or obligation to accept, Preferred Common Stock under this
Agreement, will become a "holding company" or a "subsidiary company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended,
(iv) is or, for so long as the Purchaser has the right to receive, or
obligation to accept, Preferred Stock or REIT Common Stock under this
Agreement, will be headquartered or organized in any jurisdiction outside the
United States of America or (v) directly or indirectly conducts or, for so
long as the Purchaser has the right to receive, or obligation to accept,
Preferred Stock or REIT Common Stock under this Agreement, will conduct
activities or owns or will own assets in any foreign jurisdiction.
8.11 ERISA REQUIREMENTS. At or before the Closing and annually
thereafter, the REIT and the Operating Partnership shall provide to the
Purchaser any information or documents that the Purchaser may reasonably
request in order for the Purchaser to be able to make a determination as to
whether the REIT is a "real estate operating company" within the meaning of
29 C.F.R. Section 2510.3-101(e) (the "Plan Assets Regulation"). Any such
information or documents provided under this Section 8.11 on an annual basis
shall be provided no later than 30 days after the expiration of each "annual
valuation period" (as that
40
term is defined in the Plan Assets Regulation) which ends on or after any
purchase of securities contemplated herein. For the purposes of this Section
8.11, the REIT's annual valuation period shall be the 90-day period
commencing on each December 31.
8.12 CREATION OF PREFERRED STOCK AND PREFERRED UNITS.
(a) As of the date hereof, the REIT shall have taken all
actions necessary to duly authorize and establish the Preferred Stock,
including without limitation, filing EXHIBIT G and any other necessary
documents with the appropriate state authorities. So long as the Purchaser
has the right to receive, or obligation to accept, Preferred Stock under this
Agreement, the REIT shall not (i) amend, repeal or otherwise alter in any
manner the rights, preferences, privileges, voting power or other terms of
the Preferred Stock, or (ii) authorize or create or increase the authorized
amount of any shares of any class or series, or any security convertible into
any shares of any class or series, ranking senior to the Preferred Stock in
the distribution of assets on any liquidation, dissolution or winding up of
the REIT and/or in the payment of dividends ("Senior Preferred Stock");
PROVIDED, HOWEVER, that, without the consent of the Purchaser, the REIT may
issue up to an aggregate of $50,000,000 of Senior Preferred Stock following
the date hereof to any Person other than a Related Party of the REIT so long
as the terms of any such class or series of Senior Preferred Stock, if sold
in a transaction that has not been registered pursuant to Section 5 of the
Securities Act, (i) do not provide the holders thereof with the right to
receive a dividend with an effective yield in excess of fifteen percent (15%)
(subject to the provisions below) and (ii) if such class or series has
conversion rights, the conversion price of such Senior Preferred Stock, or
such other price used in determining the conversion rights thereof, shall not
be less than the Option Exercise Price. If the terms of the Senior Preferred
Stock provide the holders thereof with the right to receive a dividend with
an effective yield in excess of fifteen percent (15%), then the REIT will not
issue or sell any shares of such Senior Preferred Stock unless it has first
offered to the Purchaser, for a minimum period of at least fifteen (15)
business days, the right to purchase all, but not a portion, of the shares of
Senior Preferred Stock at the same price proposed for such issuance or sale.
If the Purchaser declines to purchase the Senior Preferred Stock so offered,
then the REIT may issue and sell Senior Preferred Stock with terms providing
the holders thereof with the right to receive a dividend with an effective
yield up to, but not in excess of, twenty percent (20%) without the consent
of the Purchaser at any time within the six (6) months following the date the
Purchaser elected not to purchase such Senior Preferred Stock.
(b) As of the date hereof, the REIT and the Operating
Partnership shall have taken all actions necessary to adopt an amendment to
the Operating Partnership's Partnership Documents in the form of EXHIBIT H
attached hereto in order to provide for the issuance of a class of units of
limited partnership interests in the Operating Partnership to the REIT with
designations, preferences and other rights such that the economic interests
attributable to such new class of units are substantially similar to the
designations, preferences and other rights of the Preferred Stock (such
units, the "Preferred Units"). So long as the Purchaser has the right to
receive, or obligation to accept, Preferred Stock under this Agreement,
neither the REIT nor the Operating Partnership shall take any action to amend,
41
repeal or otherwise alter in any manner the rights, preferences, privileges
or other terms of such class of preferred units (it being understood that
this sentence does not prohibit the REIT from issuing any shares of another
series of preferred stock or prohibit the Operating Partnership from issuing
any units ranking on a parity with the units outstanding as of the date
immediately preceding the date hereof or the issuance of any units with
substantially the same economic rights and preferences as another series of
preferred stock issued by the REIT).
8.13 OWNERSHIP LIMIT WAIVER. As of the date hereof, the REIT
has duly entered into the Ownership Waiver Letter substantially in the form
of EXHIBIT F hereto and, so long as the Purchaser has the right to receive,
or obligation to accept, Preferred Stock and/or REIT Common Stock under this
Agreement, the Initial Warrant or the Expansion Capital Warrant, or owns any
shares of Preferred Stock or REIT Common Stock purchased or acquired pursuant
to this Agreement or the Warrants, the REIT shall take no action to amend,
repeal or otherwise alter in any manner such Ownership Waiver Letter. In
addition, so long as the Ownership Waiver Letter is in effect, the REIT shall
not grant any other Person a waiver from the operation of Division C of its
Articles of Incorporation that would permit such Person to own, for the
purposes of Division C of the Articles of Incorporation, in excess of nine
percent (9.0%) of the outstanding shares of REIT Common Stock and of any
other class of equity security with substantially comparable voting rights
unless the Board of Directors of the REIT, after consultation with and based
upon the advice of REIT Counsel, determines in good faith that such waiver is
necessary for the Board of Directors of the REIT to comply with its fiduciary
duties to its stockholders under applicable law.
9. REPRESENTATIONS AND WARRANTIES, COVENANTS, ETC. OF THE PURCHASER.
In order to induce each of the REIT and the Operating Partnership to enter
into this Agreement, the Purchaser hereby represents and warrants and
covenants that:
9.1 PURCHASE FOR INVESTMENT; SOURCE OF FUNDS. The Purchaser is
an accredited investor as defined in Regulation D under the Securities Act
and intends to purchase the Preferred Stock and/or REIT Common Stock, as
applicable, for its own account or for one or more separate accounts
maintained by it or for the account of one or more institutional investors on
whose behalf the Purchaser has authority to make this representation for
investment and not with a view to the distribution thereof or with any
present intention of distributing or selling any of the Preferred Stock
and/or REIT Common Stock, as applicable, except in compliance with the
Securities Act, provided that subject to that compliance the disposition of
the Purchaser's Property shall at all times be within its control. The
Purchaser understands and agrees that, unless a registration statement
covering the issuance thereof is in effect, the shares of Preferred Stock
and/or REIT Common Stock have not been registered under the Securities Act
and may be resold only if registered pursuant to the provisions thereunder or
if an exemption from registration is available.
9.2 VALIDITY AND BINDING EFFECT. The Purchaser has full power
and authority and has taken all action necessary to authorize it to enter
into and perform its obligations under the Transaction Documents and all
other documents or instruments contemplated hereby. Each of the Transaction
Documents has been duly executed and delivered by the Purchaser and
42
is the legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms.
9.3 CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION.
The execution, delivery and performance by the Purchaser of the Transaction
Documents and all other instruments or agreements to be executed in
connection herewith and the purchase hereunder by the Purchaser of the
Initial Warrant, the Expansion Capital Warrant or the Preferred Stock and/or
REIT Common Stock, as applicable, pursuant to this Agreement (a) are within
the Purchaser's partnership powers; (b) have been duly authorized by all
necessary partnership action on the part of the Purchaser; (c) do not require
any License or Approval (except such as have been obtained); (d) do not
contravene or constitute a default under or violation of (i) any provision of
applicable law or regulation of any Governmental Authority, (ii) the
Partnership Documents of the Purchaser; (iii) any agreement (or require the
consent of any Person under any agreement that has not been made or obtained)
to which the Purchaser is a party, or (iv) any judgment, injunction, order,
decree or other instrument binding upon the Purchaser except where such
contravention, default or violation would not have a Material Adverse Effect
on the Purchaser's ability to purchase the shares of Preferred Stock and/or
REIT Common Stock, as applicable, hereunder.
9.4 LITIGATION; DEFAULTS. As of the date of this Agreement,
there is (a) no action, suit, or proceeding, pending or, to the knowledge of
the Purchaser, threatened against or affecting the Purchaser, or (b) to the
knowledge of the Purchaser, no investigation pending against or affecting the
Purchaser before or by any Governmental Authority which (individually or in
the aggregate) could reasonably be expected to (i) have a Material Adverse
Effect on the Purchaser's ability to purchase the shares of Preferred Stock
or REIT Common Stock, as applicable, hereunder, or (ii) impair the ability of
the Purchaser to perform fully on a timely basis any material obligation
which the Purchaser has or will have under any Transaction Document to which
the Purchaser is a party. The Purchaser is not in violation of, or in default
under (and there does not exist any event or condition which, after notice or
lapse of time or both, would constitute such a default under), any term of
its Partnership Documents or of any term of any agreement, instrument,
judgment, decree, order, statute, injunction, governmental regulation, rule
or ordinance (including without limitation, those relating to zoning, city
planning or similar matters) applicable to the Purchaser or to which the
Purchaser is bound, except in each case to the extent that such violations or
defaults, individually or in the aggregate, would not (a) affect the validity
of any Transaction Document, (b) have a Material Adverse Effect on the
Purchaser's ability to purchase the shares of Preferred Stock or REIT Common
Stock, as applicable, hereunder, or (c) impair the ability of the Purchaser
to perform fully on a timely basis any material obligation which the
Purchaser has or will have under any Transaction Document to which the
Purchaser is a party.
10. ADDITIONAL COVENANTS OF THE REIT. So long as this Agreement
remains in effect, the REIT hereby covenants and agrees as follows:
10.1 DELIVERY OF INFORMATION. The REIT will furnish to the
Purchaser copies of its SEC Filings promptly after filing such documents with
the Commission and copies of all
43
materials distributed to its stockholders concurrently with such
distribution, including all quarterly and annual reports to stockholders and
any materials distributed in connection with the solicitation of stockholder
votes.
10.2 NO IMPAIRMENT. The REIT shall not by any action,
including, without limitation, by amendment of its Charter Documents or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the REIT but shall at all times in good
faith assist in the carrying out of all the provisions of this Agreement and
in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Purchaser against impairment.
10.3 RESERVATION OF SHARES OF PREFERRED STOCK AND REIT COMMON
STOCK.
(a) The REIT shall at all times reserve and keep
available out of its authorized and unissued Preferred Stock, solely for
issuance pursuant to the terms of this Agreement or the other Transaction
Documents, free from any preemptive rights or other obligations, a good faith
estimate of the maximum number of shares of Preferred Stock that may from
time to time be issuable under the terms of this Agreement, which shall not
be less than that number of shares of Preferred Stock equal to the product of
(x) three (3) and (y) the quotient obtained by DIVIDING (i) the quotient
obtained by dividing $50,000,000 by the Option Exercise Price BY (ii) the
Conversion Multiple; PROVIDED, HOWEVER, that, if the Operating Partnership
has approved an increase to the Capital Contribution Cap under Section 3.7(a)
of the Joint Venture Agreement, then the REIT shall increase the number of
shares reserved by at least that number equal to the product of (x) 3 and (y)
the quotient obtained by DIVIDING (i) the quotient obtained by dividing
Expansion Capital by the Expansion Option Exercise Price BY (ii) the
Conversion Multiple, and, if any Additional Capital has been contributed,
then the REIT shall increase the number of shares reserved by at least that
number equal to the product of (x) 3 and (y) the quotient obtained by
DIVIDING (i) the quotient obtained by dividing Additional Capital by the
Additional Option Exercise Price BY (ii) the Conversion Multiple.
(b) In addition, the REIT shall at all times reserve and
keep available out of its authorized and unissued REIT Common Stock, solely
for issuance pursuant to the terms of this Agreement or the other Transaction
Documents, free from any preemptive rights or other obligations, a good faith
estimate of the maximum number of shares of REIT Common Stock that may from
time to time be issuable under the terms of this Agreement, which shall not
be less than the number resulting from MULTIPLYING (i) that number of shares
of Preferred Stock reserved for issuance at any time in accordance with
Section 10.3(a) above, BY (ii) the Conversion Multiple.
(c) The REIT shall prepare and shall use its best efforts
to obtain and keep in force such governmental or regulatory permits or other
authorizations as may be required by law, excluding permits or authorizations
relating to registration under federal or state securities laws, in order to
enable the REIT lawfully to issue and deliver to the Purchaser
44
such number of shares of Preferred Stock and/or REIT Common Stock as shall
from time to time be sufficient to effect the issuance of Preferred Stock
and/or REIT Common Stock hereunder or the issuance of REIT Common Stock upon
conversion of the Preferred Stock. The REIT shall from time to time take all
action which may be necessary or appropriate so that the shares of REIT
Common Stock issuable hereunder or issuable upon the conversion of Preferred
Stock, immediately following their issuance, will be listed or quoted, as the
case may be, on the principal securities exchanges or markets within the
United States of America, if any, on which other shares of REIT Common Stock
are then listed or quoted.
(d) The REIT agrees not to (i) issue additional shares of
Preferred Stock as a dividend or other distribution on outstanding shares of
Preferred Stock; (ii) issue additional shares of Preferred Stock pursuant to
a reclassification of shares of Preferred Stock; (iii) subdivide the
outstanding shares of Preferred Stock into a greater number of shares of
Preferred Stock; (iv) combine the outstanding shares of Preferred Stock into
a smaller number of shares of Preferred Stock; or (v) to otherwise issue any
shares of Preferred Stock other than pursuant to the terms of this Agreement,
the Initial Capital Warrant or the Expansion Capital Warrant.
10.4 COMPLIANCE WITH LAWS UPON ISSUANCE. The REIT shall use all
commercially reasonable efforts to ensure that the issuance of shares of
Preferred Stock or REIT Common Stock pursuant to this Agreement will not
violate, or require any consent or approval not already obtained under, any
federal or state statute, rule or regulation, any contract or other
agreement, or the rules and requirements of any stock exchange or any other
self regulatory organization on which the REIT Common Stock is quoted or
listed, including without limiting the generality of the foregoing,
maintaining sufficient issued and outstanding shares of REIT Common Stock so
that stockholder approval is not required prior to the issuance of Preferred
Stock and/or REIT Common Stock under the terms of this Agreement.
10.5 HART-SCOTT-RODINO ACT COMPLIANCE. Prior to issuing any
shares of REIT Common Stock and/or Preferred Stock hereunder, the REIT shall,
upon the request of the Purchaser (an "HSR Act Filing Request"), as promptly
as possible (i) make all filings required, and take all such other action
that may be required or desirable, under or in connection with the HSR Act,
(ii) use all commercially reasonable efforts to cause the expiration or
termination of any waiting period under the HSR Act to occur as promptly as
possible, and (iii) use all commercially reasonable efforts to cause any
other Person (other than the Purchaser) who may be required to make any
filing, or to take any other action, under or in connection with the HSR Act
to do so as promptly as possible. The parties agree that each of the REIT
and the Purchaser shall be responsible for one-half of the aggregate filing
fee in connection with any filing required under the HSR Act.
10.6 PREFERRED STOCK OR REIT COMMON STOCK TO BE DULY AUTHORIZED
AND ISSUED, FULLY PAID AND NON-ASSESSABLE. The REIT will take all such
action as may be necessary to ensure that all shares of Preferred Stock
and/or REIT Common Stock issued hereunder shall, at the time of delivery of
the certificates for such shares, be duly and validly
45
authorized and issued and fully paid and non-assessable shares and free from
all liens and charges with respect to the issuance thereof.
10.7 TRANSFER TAXES. The REIT will pay when due and payable any
and all federal and state transfer taxes and charges (but not income taxes)
which may be payable in respect of the issuance or delivery of any shares of
Preferred Stock and/or REIT Common Stock issued under the terms of this
Agreement.
10.8 SHAREHOLDER RIGHTS PLAN. So long as this Agreement is in
effect, the REIT shall not adopt what is commonly referred to as a
"shareholder rights plan," or issue any convertible securities, the
conversion rights of which would be triggered, accelerated or otherwise
altered by the issuance of shares of Preferred Stock and/or REIT Common Stock
under this Agreement or the issuance of shares of REIT Common Stock upon
conversion of the Preferred Stock unless the exercise of the Purchaser's
rights hereunder and under the Initial Warrant and the Expansion Capital
Warrant are specifically exempted from the application of such shareholder
rights plan or convertible securities. For the purposes of this section, the
REIT shall be deemed to have adopted a shareholder rights plan or issued a
convertible security if it merges with or into, consolidates with or
transfers all or substantially all of its assets to a Person that has such a
plan in effect or that has an outstanding class or series of convertible
securities.
10.9 BUSINESS COMBINATION STATUTE, CONTROL SHARE STATUTE. The
REIT shall use all commercially reasonable efforts to ensure that the
issuance of any shares of Preferred Stock or REIT Common Stock hereunder is
exempted from the application of Chapter 1704 of the Ohio Revised Code and
1701.831 of the Ohio General Corporation Law.
10.10 FURTHER ASSURANCES. Following the exercise of the Exchange
Option, any exercise of the Initial Warrant or the Expansion Capital Warrant,
an election by the Purchaser or the REIT under Section 4 hereof or the
occurrence of a Put/Sale Distribution, each of the REIT, the Operating
Partnership and the Purchaser shall use all commercially reasonable efforts
to perform and fulfill all conditions and obligations on their parts to be
performed and fulfilled under this Agreement and to cause the conditions in
Section 7 hereof to be satisfied in a timely manner prior to any Closing.
11. RESTRICTIONS ON TRANSFER.
11.1 RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 11, each share of Preferred Stock or REIT Common Stock issued
pursuant to this Agreement shall be stamped or otherwise imprinted with a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE SKY"
LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE
TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF, EXCEPT IN
46
ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT
TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE
144 OR RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO
SUCH TRANSFER.
The REIT shall maintain a copy of this Agreement and any amendments
thereto on file in its principal office, and will make such copy available
during normal business hours for inspection to any party thereto or will
provide such copy to the Purchaser or any transferee upon its or their
request.
Whenever the legend requirements imposed by this Section 11.1 shall
terminate, as provided in Section 11.2, the respective holders of shares of
Preferred Stock or REIT Common Stock for which such legend requirements have
terminated shall be entitled to receive from the REIT, at the REIT's expense,
shares of Preferred Stock or REIT Common Stock, as applicable, without such
legend.
11.2 NOTICE OF TRANSFER; OPINIONS OF COUNSEL. The holder of
each of the shares of Preferred Stock or REIT Common Stock bearing the
restrictive legend set forth in Section 11.1 above (a "Restricted Security"),
agrees with respect to any transfer of such Restricted Security to give to
the REIT, (a) written notice describing the transferee and the circumstances,
if any, necessary to establish the availability of an exemption from the
registration requirements of the Securities Act and any state law and (b)
upon reasonable request by the REIT, to such transferring holder, an opinion
of counsel (at the expense of such holder), which is knowledgeable in
securities law matters (including in-house counsel or regular counsel to the
Purchaser or its investment adviser), in form and substance reasonably
satisfactory to the REIT, to the effect that the proposed transfer of such
Restricted Security may be effected without registration of such Restricted
Security under the Securities Act or any state law. If for any reason the
REIT, (after having been furnished with the opinion required to be furnished
pursuant to this Section 11.2) shall fail to notify such holder within ten
(10) business days after such holder shall have delivered such notice or
opinion to the REIT, that, in its or its counsel's opinion, the transfer may
not be legally effective (the "Illegal Transfer Notice"), such holders shall
thereupon be entitled to transfer the Restricted Security as proposed. If the
holder of the Restricted Security delivers to the REIT, an opinion of counsel
(including in-house counsel or regular counsel to the Purchaser or its
investment adviser) in form and substance reasonably satisfactory to the
REIT, that subsequent transfers of such Restricted Security will not require
registration under the Securities Act or any state law, the REIT will
promptly after such contemplated transfer deliver new certificates for such
Restricted Security which do not bear the Securities Act legend set forth in
Section 11.1 above. The restrictions imposed by this Section 11 upon the
transferability of any particular Restricted Security shall cease and
terminate when such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act or at such time as
the shares are eligible to be transferred pursuant to Rule 144(k) promulgated
under the Securities
47
Act. The holder of any Restricted Security as to which such restrictions
shall have terminated shall be entitled to receive from the REIT, a new
security of the same type but not bearing the restrictive Securities Act
legend set forth in Section 11.1 and not containing any other reference to
the restrictions imposed by this Section 11. Notwithstanding any of the
foregoing, no opinion of counsel will be required to be rendered pursuant to
this Section 11.2 with respect to the transfer of any securities on which the
restrictive legend has been removed in accordance with this Section 11.2. As
used in this Section 11.2, the term "transfer" encompasses any sale, transfer
or other disposition of any securities referred to herein.
11.3 NO RESTRICTIVE LEGENDS. Notwithstanding Section 11.1
hereof, shares of Preferred Stock or REIT Common Stock issued under the terms
of this Agreement will not contain any restrictive legend similar to that
provided for in Section 11.1 above in the event that the issuance of such
shares is covered by an effective registration statement filed with the
Commission.
12. MISCELLANEOUS
12.1 INDEMNIFICATION; EXPENSES, ETC.
(a) In addition to any and all obligations of the REIT
and the Operating Partnership to indemnify the Purchaser hereunder the REIT
and the Operating Partnership agree, without limitation as to time, to
jointly and severally indemnify and hold harmless the Purchaser, its
Affiliates, and the employees, officers, directors, trustees, direct and
indirect partners, members, agents and investment advisors of the Purchaser
and such Affiliates (individually, a "Purchaser Indemnified Party" and,
collectively the "Purchaser Indemnified Parties") from and against any and
all losses, claims, damages, liabilities, costs (including the costs of
preparation and reasonable attorneys' fees) and reasonable expenses
(including expenses of investigation) (collectively, "Losses") incurred or
suffered by a Purchaser Indemnified Party in connection with or arising out
of any material breach by the REIT or the Operating Partnership of any
warranty or representation or covenant made by the REIT or the Operating
Partnership in this Agreement; PROVIDED, HOWEVER, that neither the REIT nor
the Operating Partnership shall be liable for any losses resulting from
action on the part of any Purchaser Indemnified Party which is finally
determined in such proceeding to be wrongful or which is an act of gross
negligence, recklessness, or willful misconduct by such Purchaser Indemnified
Party. Each of the REIT and the Operating Partnership agree promptly to
reimburse any Purchaser Indemnified Party for all such Losses as they are
incurred or suffered by such Purchaser Indemnified Party.
Except as otherwise provided herein, each of the REIT and the
Operating Partnership agree (for the benefit of the Purchaser) to pay, and to
hold the Purchaser harmless from and against, all costs and expenses
(including, without limitation, attorneys' fees, expenses and disbursements),
if any, in connection with the enforcement against the REIT or the
Subsidiaries of this Agreement or any other Transaction Document or any other
agreement or instrument furnished pursuant hereto or in connection herewith
in any action in which the
48
Purchaser attempts to enforce any of the foregoing, PROVIDED, that the
Purchaser shall prevail in such action.
(b) In addition to any and all obligations of the Purchaser
to indemnify the REIT and the Subsidiaries hereunder, the Purchaser agrees,
without limitation as to time, to indemnify and hold harmless the REIT, the
Subsidiaries, their Affiliates, and the employees, officers, directors,
trustees, direct and indirect partners, members and agents of the REIT, the
Subsidiaries and their Affiliates (individually, a "REIT Indemnified Party" and,
collectively the "REIT Indemnified Parties") from and against any and all
Losses, incurred or suffered by a REIT Indemnified Party in connection with or
arising out of any material breach by the Purchaser of any warranty or
representation or covenant made by the Purchaser in this Agreement; PROVIDED,
HOWEVER, that the Purchaser shall not be liable for any losses resulting from
action on the part of any REIT Indemnified Party which is finally determined in
such proceeding to be wrongful or which is an act of gross negligence,
recklessness, or willful misconduct by such REIT Indemnified Party. The
Purchaser agrees promptly to reimburse any REIT Indemnified Party for all such
Losses as they are incurred or suffered by such REIT Indemnified Party.
Except as otherwise provided herein, the Purchaser agrees (for the
benefit of the REIT) to pay, and to hold the REIT harmless from and against, all
costs and expenses (including, without limitation, attorneys' fees, expenses and
disbursements), if any, in connection with the enforcement against the Purchaser
of this Agreement or any other Transaction Document or any other agreement or
instrument furnished pursuant hereto or in connection herewith in any action in
which the REIT attempts to enforce any of the foregoing, PROVIDED, that the REIT
shall prevail in such action.
(c) If any Indemnified Party is entitled to indemnification
hereunder, such Indemnified Party or its representative shall give prompt notice
to the REIT or the Purchaser, as the case may be (each, for purposes of this
Section 12.1(c), an "Indemnifying Party" to the extent the context so requires)
of any claim or of the commencement of any proceeding against such Indemnified
Party brought by any third party with respect to which such Indemnified Party
seeks indemnification pursuant hereto; PROVIDED, HOWEVER, that the failure to so
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
obligation or liability except to the extent the Indemnifying Party is
prejudiced by such failure. The Indemnifying Party shall have the right,
exercisable by giving written notice to an Indemnified Party promptly after the
receipt of written notice from such Indemnified Party of such claim or
proceeding, to assume, at the expense of the Indemnifying Party, the defense of
any such claim or proceeding with counsel reasonably satisfactory to such
Indemnified Party. The Indemnified Party or Parties will not be subject to any
liability for any settlement made without its or their consent (but such consent
will not be unreasonably withheld). The Indemnifying Party shall not consent to
entry of any judgment or enter into any settlement in connection with any matter
for which the Indemnified Party is entitled to indemnification hereunder, which
does not include as an unconditional term thereof the giving by claimant or
plaintiff to such Indemnified Party or Parties of a release, in form and
substance satisfactory
49
to the Indemnified Party or Parties, from all liability in respect of such
claim, litigation or proceeding.
12.2 ASSIGNABILITY. No party may directly or indirectly assign or
otherwise transfer any of its respective rights or obligations under this
Agreement without the prior written consent of the other parties hereto;
PROVIDED, HOWEVER, that the Purchaser may transfer its rights and obligations
hereunder in connection with a concurrent transfer of all or substantially all
of its limited liability company interest in the Joint Venture permitted
pursuant to Section 8.1 of the Joint Venture Agreement to the transferee of its
limited liability company interest in the Joint Venture. Notwithstanding any
other provision in this Agreement to the contrary, in the event that the
Purchaser transfers all or substantially all of its limited liability company
interests in the Joint Venture in any transaction other than one permitted
pursuant to Section 8.1.3(a) of the Joint Venture Agreement, the provisions of
Sections 2, 3.2, 4.1 and 4.2 shall be deemed terminated immediately upon the
consummation of such transfer, and the parties and their assignees or
transferees shall have no further rights or obligations with respect to such
sections.
12.3 SUCCESSORS AND ASSIGNS. Subject to Section 12.2, whenever in
this Agreement any of the parties hereto are referred to, such reference shall
be deemed to include the successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of the respective parties
which are contained in this Agreement shall bind and inure to the benefit of the
successors and assigns of all other parties. Except as otherwise provided
herein or in any other Transaction Document, the terms and provisions of this
Agreement and the other Transaction Documents shall inure to the benefit of and
shall be binding upon any assignee or transferee of the Purchaser, and in the
event of such transfer or assignment, the rights and privileges herein conferred
upon the Purchaser shall automatically extend to and be vested in, and become an
obligation of, such transferee or assignee, all subject to the terms and
conditions hereof.
12.4 USE OF DEPOSITARY SHARES. The parties agree that, at any time
at which shares of Preferred Stock are to be issued pursuant to this Agreement,
the REIT may in lieu thereof issue Depositary Shares, in each case at a ratio of
100 Depositary Shares for each share of Preferred Stock, and the Transaction
Documents shall be deemed simultaneously amended in all respects necessary to
adjust the rights, terms and provisions hereunder as appropriate to reflect such
issuance. Each Depositary Share will have, proportionately, the same rights,
privileges, duties and limitations as the share of Preferred Stock in which that
Depositary Share evidences an interest.
12.5 TERMINATION OF AGREEMENT. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall be deemed terminated as of the
dissolution of the Joint Venture and the liquidation of the assets in connection
therewith and the distribution to the members thereof of all funds held by the
Joint Venture.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SEVERABILITY. All
representations and warranties contained in this Agreement or the Transaction
Documents or
50
made in writing by or on behalf of the REIT, the Operating Partnership or the
Purchaser in connection with the transactions contemplated by this Agreement
or the Transaction Documents shall survive, for the duration of any statutes
of limitation applicable thereto, the execution and delivery of this
Agreement, any investigation at any time made by the REIT, the Operating
Partnership, the Purchaser or on such party's behalf, the purchase of any
shares of Preferred Stock or REIT Common Stock by the Purchaser under this
Agreement and any disposition of or payment on such shares of Preferred Stock
or REIT Common Stock. All statements contained in any certificate or other
instrument delivered to the Purchaser by or on behalf of the REIT or
delivered to the REIT by or on behalf of the Purchaser pursuant to this
Agreement or the other Transaction Documents shall be deemed representations
and warranties of the REIT or the Purchaser, as applicable, under this
Agreement. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
12.7 NOTICES. All notices required or permitted to be given
under this Agreement shall be in writing and shall be either personally
delivered or sent by registered or certified mail, return receipt requested,
to the addresses set forth below, as they may be changed from time to time by
the addressee party by written notice to the other parties.
If to the REIT or the Boykin Lodging Company
Operating Partnership: Guildhall Building
45 West Prospect Avenue, Suite 1500
Cleveland, Ohio 44115
Attn: Robert W. Boykin, Chief Executive
Officer
with copies to: Robert A. Weible, Esq.
Baker and Hostetler LLP
3200 National City Center
1900 E. 9th Street
Cleveland, Ohio 44114
Tel: (216) 861-7553
Fax: (216) 696-0740
If to the Purchaser: AEW Partners III, L.P.
225 Franklin Street, 25th Floor
Boston, Massachusetts 02109
Attn: J. Grant Monahon, Esq.
Tel: 617-261-9000
Fax: 617-261-9555
51
with copies to: Michael H. Glazer, P.C.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Tel: 617-570-1420
Fax: 617-523-1231
12.8 NO WAIVER. No waiver or consent shall be effective under
this Agreement unless it is in writing and executed by the party against
which enforcement thereof is sought. Unless otherwise provided herein, the
giving of any consent with respect to this Agreement shall be in the sole
discretion of the party giving such consent. A waiver or consent shall be
effective only with respect to the specific event or circumstances for which
it is given and not any subsequent occurrence, unless otherwise expressly
stated therein.
12.9 AMENDMENTS. No alteration, modification or amendment of
the terms and provisions of this Agreement shall be binding unless in writing
and consented to by the parties hereto.
12.10 FURTHER ASSURANCES. In connection with this Agreement, as
well as all transactions contemplated by this Agreement, each party agrees to
execute and deliver all such additional documents and instruments and to
perform such additional acts as may be necessary or appropriate to effectuate
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.
12.11 ENTIRE AGREEMENT. The Joint Venture Agreement, this
Agreement, the Registration Rights Agreement, the Initial Warrant, the
Expansion Capital Warrant and any other instruments to be executed and
delivered pursuant thereto, constitute the entire agreement between the
parties and supersede all prior understandings and writings, and may be
changed only by a writing signed by the parties thereto.
12.12 DESCRIPTIVE HEADINGS. The headings in this Agreement are
for purposes of reference only and shall not limit or otherwise affect the
meaning hereof.
12.13 GENDER, NUMBER. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or
plural, as the identity of the person or persons may require.
12.14 SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to a particular party, the
determination of such satisfaction shall be made by such party, as the case
may be, in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.
12.15 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES
52
SHALL BE GOVERNED BY, THE LAW OF THE STATE OF OHIO WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAW.
12.16 EXPENSES. The Joint Venture will pay at any Closing (or on
such later date as one or more invoices may be submitted to the Joint
Venture) the legal fees of Purchaser's Counsel incurred in connection with
this Agreement and consummation of the transactions contemplated hereby.
12.17 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, binding on all parties hereto, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
12.18 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Agreement may not be used to interpret another agreement, indenture, loan or
debt agreement of the REIT or any Subsidiary. Any such agreement, indenture,
loan or debt agreement may not be used to interpret this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
53
STOCK PURCHASE OPTION AGREEMENT
If this Agreement is satisfactory, please so indicate by signing the
applicable attached signature page of this Agreement and delivering such
counterpart to the Purchaser, whereupon this Agreement will become binding
among the parties hereto in accordance with its terms.
BOYKIN LODGING COMPANY, an Ohio
corporation
By: /s/ Paul A. O'Neil
--------------------------------
Name: Paul A. O'Neil
Title: Chief Financial Officer
BOYKIN HOTEL PROPERTIES, L.P.
an Ohio limited partnership
By: Boykin Lodging Company,
its General Partner
By: /s/ Richard C. Conti
-------------------------------
Name: Richard C. Conti
Title: Chief Operating Officer
S-1
STOCK PURCHASE OPTION AGREEMENT
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the date first written above:
AEW PARTNERS III, L.P.
By: AEW III, L.L.C.,
its General Partner
By: AEW Partners III, Inc.,
its Managing Member
By: /s/ James J. Finnegan
--------------------------------
Name: James J. Finnegan
Title: Vice President
S-2