UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 2)
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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GRUBB & ELLIS REALTY ADVISORS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Common stock of Grubb & Ellis Realty Advisors, Inc.
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(2)
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Aggregate number of securities to which transaction applies:
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29,834,403 shares
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
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Actual consideration paid ($42,738,708) plus the aggregate amount of mortgage debt assumed
($120,500,000) totaling an aggregate transaction value of $163,238,708
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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þ
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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This proxy statement is
dated
and is first being mailed to GERA stockholders on or about .
Grubb &
Ellis Realty Advisors, Inc.
500 West Monroe Street, Suite 2800
Chicago, Illinois 60661
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON
TO THE STOCKHOLDERS OF GRUBB & ELLIS REALTY ADVISORS,
INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Grubb & Ellis Realty Advisors, Inc. (GERA
or the Company), a Delaware corporation, will be
held at 10:00 a.m. Eastern Time,
on ,
at .
You are cordially invited to attend the meeting, which will be
held for the following purposes:
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(1)
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To consider and vote upon the acquisition by the Company of all
the issued and outstanding membership interests of GERA Property
Acquisition, LLC (Property Acquisition) from the
Companys sponsor and affiliate, Grubb & Ellis
Company (GBE), pursuant to a membership interest
purchase agreement, dated as of June 18, 2007 (the
LLC Acquisition Agreement). Property Acquisition,
through three separate wholly owned special purpose entities,
owns three discrete commercial real estate properties located in
Dallas, Texas, Rosemont, Illinois, and Danbury, Connecticut. We
refer to this proposal as the Properties Acquisition
Proposal. GBE has already approved and adopted the LLC
Acquisition Agreement.
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(2)
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To consider and vote upon an amendment to the certificate of
incorporation of GERA to remove the preamble, sections A
through D, inclusive, and section F of Article Sixth
from the certificate of incorporation from and after the closing
of the acquisition, as these provisions will no longer be
applicable to GERA, and to redesignate section E of
Article Sixth as Article Sixth. We refer to this
proposal as the Article Sixth Amendment
Proposal.
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(3)
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To consider and vote upon the approval of the 2007 Omnibus
Equity Plan (an equity-based incentive compensation plan). We
refer to this proposal as the 2007 Equity Plan
Proposal.
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(4)
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To elect one director, William Downey, for a three year term
expiring in 2010. We refer to this proposal as the
Director Nomination Proposal.
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(5)
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To ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the year 2007.
We refer to this proposal as the E&Y Ratification
Proposal.
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These items of business are described in the attached proxy
statement, which we encourage you to read in its entirety before
voting. Only holders of record of GERAs common stock at
the close of business
on
are entitled to notice of the special meeting and to vote and
have their votes counted at the special meeting and any
adjournments or postponements of the special meeting. GERA will
not transact any other business at the special meeting or any
adjournment or postponement of it.
The Properties Acquisition Proposal must be approved by the
holders of a majority of the GERA common stock issued in its
initial public offering (the IPO), present in person
or represented by proxy and entitled to vote at the special
meeting. The Article Sixth Amendment Proposal must be
approved by the holders of a majority of the outstanding shares
of GERA common stock, and the 2007 Equity Plan Proposal,
Director Nomination Proposal and E&Y Ratification Proposal
must be approved by the holders of a majority of the shares of
GERA common stock present in person or represented by proxy and
entitled to vote at the special meeting.
The adoption of the Article Sixth Amendment Proposal, the
2007 Equity Plan Proposal, the Director Nomination Proposal and
the E&Y Ratification Proposal are not conditions to the
Properties Acquisition Proposal but, if the Properties
Acquisition Proposal is not approved, the Article Sixth
Amendment Proposal and the 2007 Equity Plan Proposal will not be
presented for adoption at the special meeting.
Each GERA stockholder who holds shares of common stock issued in
the IPO has the right to vote against the Properties Acquisition
Proposal and at the same time demand that GERA convert such
stockholders shares into cash equal to such
stockholders pro rata portion of the funds from the IPO
that are being held in a trust account (including interest
thereon, but excluding taxes on such interest and any amounts
representing the underwriters deferred discount);
provided, however, that a GERA stockholder shall only be
entitled to receive such cash for the conversion of its shares
if the Properties Acquisition Proposal is approved and the
acquisition contemplated by the LLC Acquisition Agreement is
consummated. The exact per share conversion amount will be
determined as of a date which is two business days prior to the
consummation of the acquisition. The exercise of conversion
rights will have no effect on the warrants that are owned by a
stockholder.
On ,
the record date for the special meeting of stockholders, the
conversion amount would have been approximately $ in cash for
each share of GERA common stock. If, however, the holders of 20%
(4,791,667) or more shares of the common stock issued in the IPO
vote against the Properties Acquisition Proposal and demand
conversion of their shares, GERA will not consummate the
acquisition. PRIOR TO EXERCISING CONVERSION RIGHTS, GERA
STOCKHOLDERS SHOULD VERIFY THE MARKET PRICE OF GERAS
COMMON STOCK AS THEY MAY RECEIVE HIGHER PROCEEDS FROM THE SALE
OF THEIR COMMON STOCK IN THE PUBLIC MARKET THAN FROM EXERCISING
THEIR CONVERSION RIGHTS. Shares of GERAs common stock are
quoted on American Stock Exchange under the symbol GAV.
On ,
the record date, the last sale price of GERAs common stock
was $ .
GERAs initial stockholders who purchased their shares of
common stock prior to the IPO, and presently own an aggregate of
approximately % of the outstanding
shares of GERA common stock, have agreed to vote all of the
shares they purchased prior to the IPO on the Properties
Acquisition Proposal in accordance with the vote of the majority
of the votes cast by the holders of shares issued in the IPO.
The initial stockholders have also indicated that they will vote
such shares FOR the adoption of the
Article Sixth Amendment Proposal, the 2007 Equity Plan
Proposal, the Director Nomination Proposal and the E&Y
Ratification Proposal, and will vote any shares they acquired in
and after the IPO FOR all of the proposals.
After careful consideration, GERAs board of directors,
acting on the unanimous recommendation of a special committee
composed of directors who are not officers or employees of GERA
and who the board of directors believes meet the American Stock
Exchange criteria as independent directors, has
determined that the Properties Acquisition Proposal is fair to
and in the best interests of GERA and its stockholders.
GERAs board of directors has also determined that the
Article Sixth Amendment Proposal, 2007 Equity Plan
Proposal, Director
2
Nomination Proposal and E&Y Ratification Proposal, are in
the best interests of GERAs stockholders. GERAs
board of directors unanimously recommends that you vote or give
instruction to vote FOR the adoption of the
Properties Acquisition Proposal, the Article Sixth
Amendment Proposal, the 2007 Equity Plan Proposal, the Director
Nomination Proposal and the E&Y Ratification Proposal.
All GERA stockholders are cordially invited to attend the
special meeting in person. To ensure your representation at the
special meeting, however, you are urged to complete, sign, date
and return the enclosed proxy card as soon as possible. If you
are a stockholder of record of GERA common stock, you may also
cast your vote in person at the special meeting. If your shares
are held in an account at a brokerage firm or bank, you must
instruct your broker or bank on how to vote your shares. If you
do not vote or do not instruct your broker or bank how to vote,
it will have the same effect as voting against the
Article Sixth Amendment Proposal.
A complete list of GERA stockholders of record entitled to vote
at the special meeting will be available for 10 days before
the special meeting at the principal executive offices of GERA
for inspection by stockholders during ordinary business hours
for any purpose germane to the special meeting.
Your vote is important regardless of the number of shares you
own. Whether you plan to attend the special meeting or not,
please sign, date and return the enclosed proxy card as soon as
possible in the envelope provided.
3
Thank you for your participation. We look forward to your
continued support.
By Order of the Board of Directors
C. Michael Kojaian
Chairman of the Board
[date]
Neither the Securities and Exchange Commission (SEC)
nor any state securities commission has determined if this proxy
statement is truthful or complete. Any representation to the
contrary is a criminal offense.
SEE RISK FACTORS FOR A DISCUSSION OF VARIOUS FACTORS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE ACQUISITION.
4
TABLE OF
CONTENTS
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Section
Heading
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Page
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9
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11
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Results of operations for the
period from September 7, 2005 (inception) through
June 30, 2006
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F-1
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ANNEXES
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A-1
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B-1
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C-1
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D-1
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E-1
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8
SUMMARY
OF THE MATERIAL TERMS OF THE ACQUISITION
The parties to the acquisition are:
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GBE, the sponsor and an affiliate of the Company, and its wholly
owned subsidiary formed to effect the acquisition with the
Company, Property Acquisition, which in turn wholly owns three
special purpose entities, GERA Abrams Centre LLC, GERA 6400
Shafer LLC and GERA Danbury LLC, which are collectively referred
to as the SPEs. GERA Abrams Centre LLC owns a
discrete commercial real estate property located in Dallas,
Texas (the Dallas Property or Abrams
Centre), GERA 6400 Shafer LLC owns a discrete commercial
real estate property located in Rosemont, Illinois (the
Rosemont Property or 6400 Shafer Court),
and GERA Danbury LLC owns a discrete commercial real estate
property located in Danbury, Connecticut (the Danbury
Property or Danbury Corporate Center and
together with the Dallas Property and the Rosemont Property, the
Properties).
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On closing of the acquisition, GERA will acquire the Properties
through its ownership of Property Acquisition. The consideration
to be paid by GERA for the acquisition of Property Acquisition
will represent the amounts invested in or advanced to Property
Acquisition by GBE to fund the aggregate purchase price paid by
Property Acquisition for the Properties plus interest expense,
imputed interest on cash advanced to Property Acquisition or any
of the SPEs by GBE and costs and expenses associated with
the evaluation, acquisition, financing and operation of the
Properties. See the section entitled
The Properties
Acquisition Proposal.
GBEs
Investment in Property Acquisition
As of September 15, 2007, GBEs investment in Property
Acquisition was approximately $165.1 million. The
investment in Property Acquisition consists of
$120.5 million of mortgage debt secured by the Properties
and an aggregate equity investment of approximately
$44.6 million.
Property Acquisition purchased the Properties for an aggregate
contract purchase price of $122.2 million
($20.0 million for the Dallas Property, $21.45 million
for the Rosemont Property and $80.75 million for the
Danbury Property) and as a result of adjustments at the closings
of the purchases of the Properties received aggregate credits
against the purchase prices of approximately $6.6 million.
In addition, through September 15, 2007, Property
Acquisition paid an aggregate of approximately $1.3 million
in other direct acquisition costs. Imputed interest on amounts
advanced by GBE to Property Acquisition through
September 15, 2007 was approximately $2.2 million. In
addition, Property Acquisition funded approximately
$43.6 million of reserves and paid approximately
$2.4 million in fees in connection with the mortgage loans
discussed below for a total investment of approximately
$165.1 million.
On June 15, 2007, simultaneously with the acquisition of
the Danbury Property by GERA Danbury, LLC, Property
Acquisitions SPEs, received mortgage loans from Wachovia
Bank, N.A. totaling $120.5 million secured by the
Properties. One mortgage loan is in the amount of
$42.5 million, which is secured jointly by the Dallas
Property and the Rosemont Property (the Dallas and
Rosemont Wachovia Loan) (GBE has internally allocated
approximately $22 million to the Rosemont Property and
approximately $20.5 million to the Dallas Property), and
the other mortgage loan is in the amount of $78 million
which is secured by the Danbury Property (the Danbury
Wachovia Loan; the Dallas and Rosemont Wachovia Loan and
the Danbury
9
Wachovia Loan, collectively, the Wachovia Mortgage
Loans). The aggregate proceeds of the Wachovia Mortgage
Loans were $120.5 million which were used as follows:
(i) $72.3 million to pay the purchase price of the
Danbury Property (net of closing adjustments);
(ii) $43.6 million to fund required tax, insurance,
interest, engineering, debt and leasing reserves which are held
by Wachovia; (iii) $2.4 million to pay the
lenders fees and costs; and (iv) $2.2 million to
reduce GBEs aggregate equity in the Properties.
Purchase Price of
Property Acquisition
If the business combination was consummated on
September 15, 2007, the aggregate amount of consideration
paid by GERA would be approximately $165.1 million
consisting of cash of approximately $44.6 million (which is
the amount of GBEs equity in Property Acquisition as of
such date) plus the indirect assumption of $120.5 million
in debt under the Wachovia Mortgage Loans. The amount of cash
consideration paid to GBE at the closing of the business
combination will be adjusted pursuant to the LLC Acquisition
Agreement to reflect imputed interest through the closing date
on amounts invested in or advanced to Property Acquisition by
GBE to fund the aggregate purchase price paid by Property
Acquisition for the Properties and on cash advanced to Property
Acquisition or any of the SPEs by GBE and to reflect any
additional costs and expenses associated with the evaluation,
acquisition, financing and operation of the Properties.
Additionally, on the closing of the acquisition, and pursuant to
the master agreement for services dated February 27, 2006
among GERA and GBE (the Services Agreement), GERA
will pay GBE an acquisition fee equal to one percent of the
acquisition price for each of the Properties. Accordingly, in
addition to the LLC Purchase Price, at the closing of the LLC
Acquisition Agreement, GERA shall pay GBE an acquisition fee of
approximately $1.2 million with respect to the Properties.
See the section entitled
The LLC Acquisition
Agreement Acquisition Consideration.
Furthermore, in addition to the LLC Purchase Price and
acquisition fee GBE is to receive from GERA at the closing of
the transactions contemplated by the LLC Acquisition Agreement,
GBE received a commission from Danbury Buildings Co., L.P. and
Danbury Buildings, Inc. (collectively, Buildings
Co.), the seller of the Danbury Property, in an amount
equal to 1% of the purchase price of the Danbury Property
($807,500) at the time of GBEs acquisition of the Danbury
Property pursuant to a pre-existing agreement between Buildings
Co. and GBE effective as of June 27, 2006 whereby GBE was
retained to find a buyer for the Danbury Property.
Peter J. Solomon Company L.P., the financial advisor to the
special committee of our board of directors, has advised GERA
that, in undertaking its analysis of whether the aggregate
consideration to be paid by GERA under the terms of the LLC
Acquisition Agreement is fair from a financial point of view to
GERA, it took into account the fee paid to GBE by the seller of
the Danbury Property.
10
QUESTIONS
AND ANSWERS ABOUT THE PROPOSALS
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Q.
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Why am I receiving this proxy statement?
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A.
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The Company has agreed to acquire Property Acquisition from the
Companys sponsor and affiliate, GBE, pursuant to the terms
of the LLC Acquisition Agreement (a copy of it is attached to
this proxy statement as Annex A and we encourage you to
read it) and as a consequence thereof, the Company shall
indirectly acquire the Properties.
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In order to complete the acquisition of Property Acquisition,
GERA stockholders that hold shares of common stock that were
issued in the IPO must vote to approve the Properties
Acquisition Proposal. GERA stockholders will also be asked to
vote to approve (i) the Article Sixth Amendment
Proposal, (ii) the 2007 Equity Plan Proposal,
(iii) the Director Nomination Proposal, and (iv) the
E&Y Ratification Proposal, but such approvals are not
conditions to the acquisition. If approved by the GERA
stockholders, GERAs amended and restated certificate of
incorporation, as it will appear if all amendments to its
certificate of incorporation are approved, is attached as
Annex B hereto, and the 2007 Omnibus Equity Plan is
attached as Annex C hereto. Regardless of the vote on the
Article Sixth Amendment Proposal, if the Properties
Acquisition Proposal is approved, and subject to the
satisfaction or waiver of the conditions to closing set forth in
the LLC Acquisition Agreement, the transaction will be
completed.
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GERA will hold a special meeting of its stockholders to vote on
the proposals outlined in this proxy statement. This proxy
statement contains important information about the Properties
Acquisition Proposal, the Article Sixth Amendment Proposal,
the 2007 Equity Plan Proposal, the Director Nomination Proposal
and the E&Y Ratification Proposal, and the special meeting
of GERA stockholders. You should read it carefully.
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Your vote is important. We encourage you to vote as soon as
possible after carefully reviewing this proxy statement.
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Q.
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What vote is required?
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A.
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Pursuant to GERAs certificate of incorporation, the
approval of the Properties Acquisition Proposal will require the
affirmative vote of the holders of a majority of the shares of
GERA common stock issued in the IPO present in person or
represented by proxy and entitled to vote at the special
meeting. There are currently 29,834,403 shares of GERA
common stock outstanding, of which 23,958,334 shares were
issued in the IPO. The acquisition will not be consummated if
the holders of 20% or more of the common stock issued in the IPO
(4,791,667 shares or more) exercise their conversion
rights. Approval of the Article Sixth Amendment Proposal
will require the affirmative vote of the holders of a majority
of the outstanding shares of GERA common stock on the record
date, and approval of the 2007 Equity Plan Proposal, Director
Nomination Proposal and E&Y Ratification Proposal will
require the affirmative vote of the holders of a majority of the
outstanding shares of GERA common stock represented in person or
by proxy and entitled to vote at the special meeting.
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Q.
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Why is GERA proposing the acquisition?
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A.
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GERA was organized for the purpose of acquiring, through a
purchase, asset acquisition or other business combination, one
or more United States commercial real estate properties and/or
assets. In order to facilitate GERAs objective of real
estate acquisition,
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GBE, an affiliate and sponsor of GERA, formed Property
Acquisition as a holding company, which in turn established
three special purpose entities, the SPEs, to acquire the
Properties. GERAs board believes that the Properties are
underperforming and that the value of the Properties can be
improved through the repositioning of the Properties in the
marketplace, superior marketing, improved tenant management, and
the structuring of flexible leasing arrangements.
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Q.
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Do I have conversion rights?
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A.
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If you hold shares of common stock issued in the IPO, then you
have the right to vote against the Properties Acquisition
Proposal and demand that GERA convert such shares into a pro
rata portion of the trust account (including interest thereon,
but excluding taxes on such interest and any amounts
representing the underwriters deferred discount) in which
a substantial portion of the net proceeds of the IPO are held.
The right to convert your shares into a pro rata portion of the
trust account (including interest thereon, but excluding taxes
on such interest and any amounts representing the
underwriters deferred discount) will only become
applicable if the Properties Acquisition Proposal is approved
and the acquisition contemplated by the LLC Acquisition
Agreement is consummated. If the Properties Acquisition Proposal
is not approved, conversion of your shares will not be permitted
and your shares will not be converted into cash. However, if the
contemplated business combination is not consummated by
March 3, 2008, we will be forced to liquidate GERA and all
holders of shares issued in the IPO will receive their pro rata
distribution of the funds held in the trust account, plus any
interest earned thereon (less any taxes due on such interest),
together with any remaining out-of-trust net assets after
payment of its liabilities from non-trust account funds. We
sometimes refer to these rights to vote against the Properties
Acquisition Proposal and demand conversion of the shares into a
pro rata portion of the trust account (including interest
thereon, but excluding taxes on such interest and any amounts
representing the underwriters deferred discount) as
conversion rights.
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Q.
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How do I exercise my conversion rights?
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A.
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If you wish to exercise your conversion rights, you must
(i) vote against the Properties Acquisition Proposal,
(ii) demand that GERA convert your shares into cash,
(iii) continue to hold your shares through the closing of
the acquisition and (iv) then deliver your shares to the
transfer agent within the period specified in a notice you will
receive from the Company, which period will be not less than
20 days from the date of such notice. In lieu of delivering
your stock certificate, you may deliver your shares to the
transfer agent electronically using Depository
Trust Companys DWAC (Deposit Withdrawal at Custodian)
System. Your vote on any proposal other than the Properties
Acquisition Proposal will have no impact on your right to seek
conversion.
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You may exercise your conversion rights either by checking the
box on the proxy card or by submitting your request in writing
to GERA at the address listed at the end of this section. If you
(i) initially vote for the Properties Acquisition Proposal
but then wish to vote against it and exercise your conversion
rights, or (ii) initially vote against the Properties
Acquisition Proposal and wish to exercise your conversion rights
but do not check the box on the proxy card providing for the
exercise of your conversion rights or do not send a written
request to GERA to exercise your conversion rights, or
(iii) initially vote against the Properties Acquisition
Proposal but later wish to vote for it, you may request GERA to
send you another proxy card on which you may indicate your
intended vote and, if that
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vote is against the Properties Acquisition Proposal, exercise
your conversion rights by checking the box provided for such
purpose on the proxy card. You may make such request by
contacting GERA at the phone number or address listed at the end
of this section. Any corrected or changed proxy card or written
demand of conversion rights must be received by GERA prior to
the special meeting. No demand for conversion will be honored
unless the holders stock certificate has been delivered
(either physically or electronically) to the transfer agent
after the meeting.
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If you have validly exercised your conversion rights, and
notwithstanding your negative vote the acquisition is completed,
then you will be entitled to receive a pro rata portion of the
trust account, including any interest earned thereon, but
excluding taxes on such interest and any amounts representing
the underwriters deferred discount, calculated as of two
business days prior to the date of the consummation of the
acquisition. As of the record date, there was approximately
$ in trust, including accrued
interest, but excluding taxes due on such interest and any
amounts representing the underwriters deferred discount,
which would amount to approximately
$ per share upon conversion. If
you exercise your conversion rights, then you will be exchanging
your shares of GERA common stock for cash and will no longer own
these shares.
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See the section entitled
Special Meeting of GERA
Stockholders Conversion Rights
for the
procedures to be followed if you wish to convert your shares
into cash.
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Exercise of your conversion rights does not result in either the
conversion or a loss of your warrants. Your warrants will
continue to be outstanding and exercisable following a
conversion of your common stock unless we do not consummate the
acquisition.
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Q.
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If I vote against the proposed acquisition, do I have
appraisal rights?
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A.
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GERA stockholders do not have appraisal rights in connection
with the acquisition under the General Corporation Law of the
State of Delaware (DGCL).
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Q.
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What happens to the funds deposited in the trust account
after consummation of the acquisition?
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A.
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After consummation of the acquisition, GERA stockholders validly
electing to exercise their conversion rights will receive their
pro rata portion of the funds in the trust account determined as
set forth above promptly after their shares are delivered to the
transfer agent either physically or electronically. The balance
of the funds in the trust account will be released to GERA and
will become general funds of GERA, with a portion of such funds
being used to pay the LLC Purchase Price.
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Q.
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What happens if the acquisition is not consummated?
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A.
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In the event that the acquisition is not completed by
March 3, 2008, GERA must be liquidated. In any liquidation,
the funds held in the trust account, plus any interest earned
thereon (less any taxes due on such interest), together with any
remaining out-of-trust net assets, will be distributed pro rata
to the holders of GERAs common stock issued in the IPO.
Holders of GERA common stock issued prior to the IPO have waived
any right to any liquidation distribution with respect to those
shares.
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Q.
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When do you expect the acquisition to be completed?
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A.
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If approved by the stockholders at the special meeting, it is
currently anticipated that the acquisition will be consummated
promptly following the special meeting.
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For a description of the conditions to completion of the
acquisition, see the sections entitled
The LLC
Acquisition Agreement Conditions to the Closing of
the Acquisition
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Q.
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What do I need to do now?
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A.
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GERA urges you to read carefully and consider the information
contained in this proxy statement, including the annexes, and to
consider how the acquisition will affect you as a stockholder of
GERA. You should then vote as soon as possible in accordance
with the instructions provided in this proxy statement and on
the enclosed proxy card.
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Q.
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How do I vote?
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A.
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If you are a holder of record of GERA common stock, you may vote
in person at the special meeting or by submitting a proxy for
the special meeting. You may submit your proxy by completing,
signing, dating and returning the enclosed proxy card in the
accompanying pre-addressed postage paid envelope. If you hold
your shares in street name, which means your shares
are held of record by a broker, bank or nominee, you must
provide the record holder of your shares with instructions on
how to vote your shares.
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Q.
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If my shares are held in street name, will my
broker, bank or nominee automatically vote my shares for me?
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A.
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No. Your broker, bank or nominee cannot vote your shares
unless you provide instructions on how to vote in accordance
with the information and procedures provided to you by your
broker, bank or nominee.
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YOUR VOTE IS IMPORTANT. PLEASE VOTE OR PROVIDE
INSTRUCTIONS ON HOW TO VOTE TO THE RECORD HOLDER OF YOUR
SHARES AS SOON AS POSSIBLE AFTER CAREFULLY REVIEWING THIS PROXY
STATEMENT.
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Q.
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Can I change my vote after I have mailed my signed proxy
card?
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A.
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Yes. Send a later-dated, signed proxy card to GERAs
secretary at the address of GERAs corporate headquarters
prior to the date of the special meeting or attend the special
meeting in person and vote. You also may revoke your proxy by
sending a notice of revocation to GERAs secretary, which
must be received by GERAs secretary prior to the special
meeting.
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Q.
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Do I need to send in my stock certificates?
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A.
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GERA stockholders who do not elect to have their shares
converted into the pro rata share of the trust account should
not submit their stock certificates after the acquisition,
because their shares will not be converted or exchanged in the
acquisition. GERA stockholders who vote against the Properties
Acquisition Proposal and exercise their conversion rights must
deliver their stock certificates to our transfer agent within
the period specified in a notice you will receive from GERA,
which period will be not less than 20 days from the date of
such notice.
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Q.
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What should I do if I receive more than one set of voting
materials?
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A.
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You may receive more than one set of voting materials, including
multiple copies of this proxy statement and multiple proxy cards
or voting instruction cards. For example, if you hold your
shares in more than one brokerage account, you will receive a
separate voting instruction card for each brokerage account in
which you hold shares. If you are a holder
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of record and your shares are registered in more than one name,
you will receive more than one proxy card. Please complete,
sign, date and return each proxy card and voting instruction
card that you receive in order to cast a vote with respect to
all of your GERA shares.
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Q.
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Who can help answer my questions?
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A.
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If you have questions about the proposals or if you need
additional copies of the proxy statement or the enclosed proxy
card you should contact:
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Robert Slaughter
Corporate Secretary
Grubb & Ellis Realty Advisors, Inc.
500 West Monroe, Suite 2800
Chicago, Illinois 60661
Tel:
(312) 698-4900
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You may also obtain additional information about GERA from
documents filed with the SEC by following the instructions in
the section entitled
Where You Can Find More
Information
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If you intend to vote against the Properties Acquisition
Proposal and seek conversion of your shares, you will need to
deliver your stock certificate to our transfer agent within the
period specified in a notice you will receive from the Company,
which period will be not less than 20 days from the date of
such notice. If you have questions regarding the certification
of your position or delivery of your stock certificate, please
contact:
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Greg Denman
Continental Stock Transfer & Trust Company
17 Battery Place, 8th Floor
New York, New York 10004
Tel:
(212) 845-3287
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SUMMARY
OF THE PROXY STATEMENT
This summary highlights selected information from this proxy
statement and does not contain all of the information that is
important to you. To better understand the Properties
Acquisition Proposal, you should read this entire document
carefully, including the LLC Acquisition Agreement attached as
Annex A to this proxy statement. The LLC Acquisition
Agreement is the legal document that governs the acquisition and
the other transactions that will be undertaken in connection
with the acquisition. It is also described in detail elsewhere
in this proxy statement.
Grubb &
Ellis Realty Advisors, Inc.
GERA is a blank check company organized as a corporation under
the laws of the State of Delaware on September 7, 2005. The
Company was formed for the purpose of acquiring, through a
purchase, asset acquisition or other business combination, one
or more United States commercial real estate properties
and/or
assets. In March 2006, the Company consummated the IPO of its
equity securities, from which it derived net proceeds of
approximately $133,400,000, including proceeds from the exercise
of the underwriters over-allotment option. Approximately
$132,325,004 of the net proceeds of the IPO, along with the
initial capital from GBE ($2,500,000) and a deferred
underwriting discount ($2,675,000), were placed in a trust
account. Such funds, with the interest earned thereon, will be
released to GERA upon consummation of the business acquisition,
and will also be used to pay any amounts payable to GERA
stockholders who vote against the business acquisition and
exercise their conversion rights. Remaining proceeds, if any,
will be used for working capital, which to the extent available
will be used to fund organic growth and additional acquisitions.
The remainder of the net proceeds of the IPO, or approximately
$1,075,000, was held outside of the trust account and has been
and will be used by GERA to pay the expenses incurred in its
pursuit of a business combination
and/or
acquisition. As of June 30 ,2007, the amount in the trust
account including accrued interest but net of taxes and deferred
underwriters discount was approximately $141,200,000 and
as of July 10, 2007 GERA had approximately $53,000
remaining out of trust, and approximately $372,000 of accrued
expenses. Other than the IPO and the pursuit of a business
combination, GERA has not engaged in any business to date.
In the event that the acquisition of Property Acquisition is not
consummated by March 3, 2008, GERA must be liquidated. Upon
approval of GERAs stockholders, GERA will dissolve and
promptly distribute to its public stockholders the amount in its
trust account plus remaining net assets after payment of its
liabilities from non-trust account funds.
The GERA common stock, warrants to purchase common stock and
units (each unit consisting of one share of common stock and two
warrants to purchase common stock) are quoted on the American
Stock Exchange (AMEX) under the symbols GAV for the
common stock, GAV.WS for the warrants and GAV.U for the units.
The mailing address of GERAs principal executive office is
Grubb & Ellis Realty Advisors, Inc., 500 West
Monroe Street, Suite 2800, Chicago, Illinois 60661 and its
telephone number is
(312) 698-4900.
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GBE
GBE, the sponsor and an affiliate of GERA, is a corporation
formed in Delaware in 1980. Property Acquisition is a limited
liability company formed in Delaware, on October 2, 2006,
and a wholly owned subsidiary of GBE. GBE formed Property
Acquisition as a holding company, which in turn established the
SPEs, to acquire the Dallas Property, the Rosemont Property and
the Danbury Property. See the section entitled
Business
of GBE and Property Acquisition.
GBEs principal executive offices, which are also the
executive offices of GERA, are located at 500 West Monroe
Street, Suite 2800, Chicago, Illinois 60661 and its
telephone number is
(312) 698-6700.
The LLC Acquisition Agreement provides for a business
combination transaction in which GERA will acquire Property
Acquisition, which, in turn, owns 100% of the SPEs that own the
Properties. This will be accomplished through a purchase by GERA
of all the issued and outstanding membership interests of
Property Acquisition from GBE in exchange for the LLC Purchase
Price. Such consideration represents the amounts invested in or
advanced to Property Acquisition by GBE to fund the aggregate
purchase price paid by Property Acquisition for the Properties
plus interest expense, imputed interest on cash advanced to
Property Acquisition or any of the SPEs by GBE, and costs and
expenses associated with the evaluation, acquisition and
operation of the Properties. The SPEs and the Properties will be
subject to the Wachovia Mortgage Loans at the time of the
Companys acquisition of Property Acquisition.
GERA and GBE have agreed that pursuant to the Services
Agreement, GERA will pay GBE an acquisition fee equal to one
percent of the acquisition price for each of the Properties.
Accordingly, in addition to the LLC Purchase Price, at the
closing of the LLC Acquisition Agreement, GERA shall pay GBE an
acquisition fee of $1,222,000 with respect to the Properties.
GERA plans to complete the business combination promptly after
the GERA special meeting provided that:
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the requisite GERA stockholders have approved the Properties
Acquisition Proposal;
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holders of fewer than 20% of the shares of common stock issued
in the IPO have voted against the Properties Acquisition
Proposal and demanded conversion of their shares into
cash; and
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the other conditions specified in the LLC Acquisition Agreement
have been satisfied or waived.
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The
Article Sixth Amendment Proposal
An amendment to GERAs certificate of incorporation is
being proposed, upon consummation of the acquisition, to
eliminate certain provisions that are applicable to GERA only
prior to its completion of a business combination. As a result
of the amendment, after the acquisition, Article Sixth of
GERAs certificate of incorporation will address only its
classified board of directors, with existing provisions that
relate to it as a blank check company being deleted.
17
The
2007 Equity Plan Proposal
The plan is designed to attract, retain and motivate selected
eligible employees and key non-employees of the Company and its
affiliates, and reward them for making major contributions to
the success of the Company and its affiliates. These objectives
are accomplished by making long-term incentive awards under the
plan that will offer participants an opportunity to have a
greater proprietary interest in, and closer identity with, the
Company and its affiliates and their financial success. The
various types of incentive awards that may be provided under the
plan will enable GERA to respond to changes in compensation
practices, tax laws, accounting regulations and the size and
diversity of its business. The plan is attached as Annex C
to this proxy statement. We encourage you to read the plan in
its entirety.
The
Director Nomination Proposal
Our board of directors is divided into three classes, each of
which will generally serve for a term of three years with only
one class of directors being elected in each year. The term of
office of the first class of directors, consisting of William
Downey, is expiring at the special meeting. Our board of
directors has unanimously approved the nomination of William
Downey as a member of our board of directors to serve for a
three-year term expiring in 2010.
The
E&Y Ratification Proposal
The Audit Committee has appointed Ernst & Young LLP
(E&Y) as GERAs independent registered
public accounting firm for the year 2007. E&Y was first
retained as GERAs independent registered public accounting
firm in September 2005. Although this appointment is not
required to be submitted to a vote of the stockholders, the
board of directors believes it appropriate at this time to
request that the stockholders ratify the appointment of the
independent registered public accounting firm for the year 2007.
In the event a majority of the votes cast at the special meeting
are not voted in favor of this proposal, the Audit Committee
will reconsider the appointment, but may decide to maintain its
appointment of E&Y.
We anticipate that a representative of E&Y will be present
at the special meeting. The representative will be given the
opportunity to make a statement if he or she desires to do so,
and is expected to be available to respond to any appropriate
questions that may be submitted by stockholders at the special
meeting.
GERAs
Recommendations to Stockholders; Reasons for the
Acquisition
After careful consideration of the terms and conditions of the
LLC Acquisition Agreement, the certificate of incorporation
amendment, the incentive compensation plan, the election of
William Downey, and E&Ys ratification, the board of
directors of GERA has determined that the proposed acquisition,
the certificate of incorporation amendment, the incentive
compensation plan, the election of William Downey, and
E&Ys ratification, are fair to and in the best
interests of GERA and its stockholders. In reaching its decision
with respect to the LLC Acquisition Agreement and the
transactions contemplated thereby, the board of directors of
GERA relied on the unanimous recommendation of a special
committee composed of directors who are not officers or
employees of GERA and who the board of directors believes meet
the American Stock Exchange criteria as independent
directors. Accordingly, GERAs board of directors
unanimously recommends that GERA stockholders vote:
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FOR
the Properties Acquisition Proposal;
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FOR
the Article Sixth Amendment Proposal;
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FOR
the 2007 Equity Plan Proposal;
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FOR
the Director Nomination Proposal; and
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FOR
the E&Y Ratification Proposal.
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As of September 19, 2007, Messrs. Kojaian, Rose,
Downey, Lazar and Stillman, and GBE (the GERA Inside
Stockholders) beneficially owned and were entitled to vote
7,920,506 shares of GERA common stock, or approximately
26.54% of GERAs outstanding common stock, 5,876,069 of
which (Original Shares) were issued to the GERA
Inside Stockholders prior to the IPO at approximately $0.43 per
share and the balance of which were purchased in the IPO or in
open market transactions. In connection with the IPO, GERA and
Deutsche Bank Securities Inc., the managing underwriter of the
IPO, entered into agreements with each of the GERA Inside
Stockholders pursuant to which each GERA Inside Stockholder
agreed to vote his or its Original Shares on the Properties
Acquisition Proposal in accordance with the majority of the
votes cast by the holders of shares issued in the IPO.
Accordingly, the vote of the Original Shares has no bearing on
the outcome of the Properties Acquisition Proposal. The GERA
Inside Stockholders have also indicated that they intend to vote
their Original Shares in favor of all other proposals being
presented at the special meeting and that they will vote the
shares they purchased in the IPO or in open market transactions
in favor of all of the proposals being presented at the special
meeting, including the Properties Acquisition Proposal.
Mr. Kojaian is currently the chairman of our board,
Mr. Rose is currently our chief executive officer and a
director, and Messrs. Downey, Lazar and Stillman are
currently directors and members of the special committee. In
addition, each of the Company and its officers, directors, and
affiliates have the right to purchase shares of the
Companys common stock either in open market or privately
negotiated transactions subsequent to the Companys mailing
of this proxy statement. At this time, however, there are no
understandings, agreements or arrangements by the Company or any
of its officers, directors or affiliates to effect any such
purchases.
Acquisition
Consideration
Upon closing of the LLC Acquisition Agreement, GBE will receive
from GERA the LLC Purchase Price in cash. Such consideration
represents the amounts invested in or advanced to Property
Acquisition by GBE to fund the aggregate purchase price paid by
Property Acquisition for the Properties plus interest expense,
imputed interest on cash advanced to Property Acquisition or any
of the SPEs by GBE, and costs and expenses associated with the
evaluation, acquisition and operation of the Properties.
Moreover, GERA and GBE have agreed that pursuant to the Services
Agreement, GERA will pay GBE an acquisition fee equal to one
percent of the acquisition price for each of the Properties.
Accordingly, in addition to the LLC Purchase Price, at the
closing of the LLC Acquisition Agreement, GERA shall pay GBE an
acquisition fee of $1,222,000 with respect to the Properties.
GERAs board or directors determined that the aggregate
fair market value of the Properties is equal to at least 80% of
GERAs net assets based upon the amount of proceeds held in
a trust account as of June 6, 2007.
Peter J. Solomon Company L.P., or PJSC, delivered an opinion to
the special committee of our board of directors, to the effect
that, as of June 4, 2007, based upon the qualifications,
19
assumptions, limitations and other matters set forth in its
written opinion, the aggregate consideration to be paid by GERA
under the terms of the LLC Acquisition Agreement is fair from a
financial point of view to GERA. The full text of the written
opinion of PJSC, dated June 4, 2007, which sets forth the
assumptions made, the matters considered, and the qualifications
and limitations on the review undertaken by PJSC in connection
with its opinion, is attached as Annex E to this proxy
statement. The opinion was provided to the special committee for
use in connection with its consideration as to whether the
aggregate consideration to be paid by GERA under the terms of
the LLC Acquisition Agreement is fair from a financial point of
view to GERA. The opinion did not constitute a recommendation to
the special committee, our board of directors or any holder of
shares of our common stock as to how to vote in connection with
the transactions contemplated by the LLC Acquisition Agreement.
Under the terms of the engagement letter between GERA and PJSC,
PJSC provided the special committee financial advisory services
and GERA agreed to pay PJSC certain fees for such services. Upon
the signing of the engagement letter, PJSC received a
non-refundable fee of $50,000. Upon the delivery of its opinion,
PJSC was paid an additional $125,000, resulting in total
compensation to PJSC of $175,000.
Date,
Time and Place of Special Meeting of GERAs
Stockholders
The special meeting of the stockholders of GERA will be held at
10:00 a.m., Eastern Time,
on ,
at
to consider and vote upon the Properties Acquisition Proposal,
the Article Sixth Amendment Proposal, the 2007 Equity Plan
Proposal, the Director Nomination Proposal and the E&Y
Ratification Proposal.
Voting
Power; Record Date
You will be entitled to vote or direct votes to be cast at the
special meeting if you owned shares of GERA common stock at the
close of business
on ,
which is the record date for the special meeting. You will have
one vote for each share of GERA common stock you owned at the
close of business on the record date. GERA warrants do not have
voting rights. On the record date, there
were shares
of GERA common stock outstanding.
GBEs board of directors has approved the LLC Acquisition
Agreement and the transactions contemplated thereby at a meeting
convened by the board of directors of GBE on June 6, 2007.
No further action by GBE is needed to approve the sale of
Property Acquisition by GBE.
Quorum
and Vote of GERA Stockholders
A quorum of GERA stockholders is necessary to hold a valid
special meeting. A quorum will be present at the GERA special
meeting if a majority of the outstanding shares entitled to vote
at the special meeting are represented in person or by proxy.
Abstentions and broker non-votes will count as present for the
purposes of establishing a quorum.
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Pursuant to GERAs certificate of incorporation, the
approval of the Properties Acquisition Proposal will require the
affirmative vote of the holders of a majority of the shares of
GERA common stock issued in the IPO present in person or
represented by proxy and entitled to vote at the special
meeting. There are currently 29,834,403 shares of GERA
common stock outstanding, of which 23,958,334 shares were
issued in the IPO. The acquisition will not be
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consummated if the holders of 20% or more of the common stock
issued in the IPO (4,791,667 shares or more) exercise their
conversion rights.
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The approval of the Article Sixth Amendment Proposal will
require the affirmative vote of the holders of a majority of the
outstanding shares of GERA common stock on the record date.
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The approval of the 2007 Equity Plan Proposal, Director
Nomination Proposal and E&Y Ratification Proposal will
require the affirmative vote of the holders of a majority of the
shares of GERA common stock represented in person or by proxy
and entitled to vote at the special meeting.
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A consequence of the difference in these voting requirements is
that the vote of holders of fewer shares may be required for the
approval of the Properties Acquisition Proposal, the 2007 Equity
Plan Proposal, the Director Nomination Proposal and the E&Y
Ratification Proposal, than for the approval of the
Article Sixth Amendment Proposal being presented at the
special meeting.
Abstentions will have the same effect as a vote
AGAINST all of the proposals. Broker non-votes,
while considered present for the purposes of establishing a
quorum, will have the effect of votes AGAINST the
proposal to amend the certificate of incorporation, but will
have no effect on the Properties Acquisition Proposal, the 2007
Equity Plan Proposal, the Director Nomination Proposal and the
E&Y Ratification Proposal. Please note that you cannot seek
conversion of your shares unless you affirmatively vote against
the Properties Acquisition Proposal.
The approval of the Article Sixth Amendment Proposal, 2007
Equity Plan Proposal, Director Nomination Proposal and E&Y
Ratification Proposal are not conditions to the consummation of
the acquisition but, if the Properties Acquisition Proposal is
not approved, the Article Sixth Amendment Proposal and 2007
Equity Plan Proposal will not be presented at the special
meeting for adoption. The 2007 Equity Plan Proposal and the
E&Y Ratification Proposal have been approved by GERAs
board of directors and will take effect upon consummation of the
acquisition, subject to stockholder approval of the plan.
Pursuant to GERAs certificate of incorporation, a holder
of shares of GERAs common stock issued in the IPO may, if
the stockholder affirmatively votes against the Property
Acquisition Proposal and complies with the other terms described
in this proxy statement, demand that GERA convert such shares
into cash. Demand may be made by checking the box on the proxy
card provided for that purpose and returning the proxy card in
accordance with the instructions provided. Demand may also be
made in any other writing that clearly states that conversion is
demanded and is delivered so that it is received by GERA at any
time prior to the special meeting. Additionally, holders seeking
conversion must tender their stock certificates to our transfer
agent within the period specified in a notice you will receive
from the Company, which will be not less than 20 days from
the date of such notice, after the special meeting. If properly
demanded, GERA will convert each share of common stock issued in
the IPO in respect of which a conversion request is made into a
pro rata portion of the trust account (including interest
thereon, but excluding taxes on such interest and any amounts
representing the underwriters deferred discount),
calculated as of two business days prior to the anticipated
consummation of the acquisition. As of July 24, 2007, this
would amount to approximately $5.89 per share. If you exercise
your conversion rights, then you will be exchanging your shares
of
21
GERA common stock for cash and will no longer own the shares.
You will be entitled to receive cash for these shares only if
you affirmatively vote against the Properties Acquisition
Proposal, properly demand conversion, and tender your stock
certificate to our transfer agent within the period specified in
a notice you will receive from the Company, which period will be
not less than 20 days from the date of such notice. If the
LLC Acquisition Agreement is not consummated, these shares will
not be converted into cash. However, if the contemplated
business combination is not consummated by March 3, 2008,
we will be forced to liquidate and all holders of shares issued
in the IPO will receive a pro rata portion of the trust account
(including interest thereon, but excluding taxes on such
interest), calculated as of two business days prior to the
anticipated consummation of the acquisition.
The acquisition will not be consummated if the holders of 20% or
more of the common stock issued in the IPO
(4,791,667 shares or more) exercise their conversion rights.
GERA stockholders do not have appraisal rights in connection
with the acquisition under the DGCL.
Proxies may be solicited by mail, telephone or in person. GERA
has engaged
[ ]
to assist in the solicitation of proxies.
If you grant a proxy, you may still vote your shares in person
if you revoke your proxy before the special meeting.
Interests
of GERA and GBE Directors and Officers in the
Acquisition
When you consider the recommendation of GERAs board of
directors in favor of adoption of the Properties Acquisition
Proposal, you should keep in mind that GERAs executive
officers and some members of GERAs board are also
executive officers of GBE and members of GBEs board of
directors and, as a result, have interests in the acquisition
transaction that are different from, or in addition to, your
interests as a stockholder. These interests include, among other
things:
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if the acquisition is not consummated by March 3, 2008,
GERA will be required to liquidate. In such event, the
5,876,069 shares of common stock held by the GERA Inside
Stockholders, including GERAs officers and directors and
their affiliates and other persons, that were acquired prior to
the IPO for an aggregate purchase price of $2,500,000, will be
worthless because GERAs Inside Stockholders are not
entitled to receive any liquidation proceeds with respect to
such shares. Such shares had an aggregate market value of
$ based on the last sale price of
$ on the AMEX
on ,
the record date.
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Kojaian Ventures, LLC, with which Mr. Kojaian, the chairman
of our board, is affiliated, purchased 1,666,667 units in
the IPO, for an aggregate purchase price of $10,000,002, at
$6.00 per unit. Such units included 3,333,334 warrants.
Following the IPO, GBE purchased 4,645,521 warrants for an
aggregate purchase price of $2,178,297 (or approximately $0.47
per warrant), pursuant to an agreement between GBE and Deutsche
Bank Securities, Inc., entered into in connection with the IPO.
This agreement was entered into by GBE at a time when it was not
in possession of any material non-public information relating to
GERA. The agreement provided that GBE place an irrevocable order
with a broker-dealer who did not
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22
participate in the IPO to purchase up to $3,500,000 worth of
warrants, without any further instructions, at prices not to
exceed $0.70 per warrant during the forty-trading period
commencing on the date separate trading of GERAs warrants
commenced, in compliance with
Rule 10b5-1.
On June 28, 2006, GBE agreed to a
sixty-day
extension of this agreement. All of the warrants will become
worthless if the LLC Acquisition Agreement is not consummated.
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Additionally, GERA has engaged GBE to provide GERA with
brokerage services pursuant to the Services Agreement and
Grubb & Ellis Management Services, Inc.
(GEMS), GBEs wholly owned subsidiary, to
provide GERA with property management services pursuant to a
property management agreement dated February 27, 2006 (the
Property Management Agreement) following the
consummation of a business combination. Pursuant to the Services
Agreement, GERA will pay GBE an acquisition fee equal to one
percent of the acquisition price for each of the Properties.
Accordingly, in addition to the LLC Purchase Price, at the
closing of the LLC Acquisition Agreement, GERA shall pay GBE an
acquisition fee of $1,222,000 with respect to the Properties.
Furthermore, pursuant to the Property Management Agreement, GEMS
will serve as GERAs sole exclusive managing agent for all
real property we acquire. The Property Management Agreement has
an initial term of twelve (12) months from the date of the
consummation of a business combination and shall be
automatically renewed for successive terms, each with a duration
of one (1) year unless otherwise terminated in accordance
with its terms. Additionally, the Property Management Agreement
entitles GEMS to a monthly management fee equal to the greater
of (a) three percent (3%) of a propertys monthly
gross cash receipts from the operations of the property, or
(b) a minimum monthly fee to be determined by mutual
agreement subject to the approval of a majority of the
independent members of the Companys board of directors
which will take into consideration, among other things, then
current market prices and terms for services for comparable
projects. In addition, we are required to reimburse GEMS for
salaries and other expenses paid or incurred by it that are
directly related to managing the asset or assets. Furthermore,
for each project under a master agreement for project management
services dated February 27, 2006 (the Project
Management Agreement), GBE will receive a fee equal to
five percent (5%) of the total project costs. If a business
combination is not completed by March 3, 2008, GBE and GEMS
will be unable to collect fees payable to them pursuant to the
agreements discussed above. For additional information regarding
each of the Services Agreement, the Property Management
Agreement and the Project Management Agreement, please see the
section entitled
Certain Relationships and Related
Party Transactions
.
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Furthermore, in the event GERA effects a business combination,
GERA has agreed to grant Mark W. Chrisman, a member of our
investment committee and executive vice president of
acquisitions of GBE, $250,000 worth of restricted shares of our
common stock based on the per share price that is equal to the
average of the high and low market price of GERA common stock on
the date the business combination is consummated. Such shares
shall vest in three equal installments of thirty-three and
one-third percent
(33
1
/
3
%)
on the date the business combination is consummated and on the
second and third anniversaries of such date, subject to
Mr. Chrisman continuing to be employed by GBE or the
Company on such dates. Mr. Chrisman does not have an
employment agreement with the Company and the Company is under
no obligation to enter into an employment agreement with
Mr. Chrisman or any other individuals. However, in the
event Mr. Chrisman remains employed by GBE or the Company,
it is presently anticipated that he would be providing services
to the Company.
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If a business combination is not completed by March 3,
2008, Mr. Chrisman will not be issued the stock discussed
above.
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In addition, provided that the business combination is approved,
GBE has agreed to transfer to Ms. Maureen Ehrenberg,
executive vice president of GBE and president of GBEs
Global Client Services, $150,000 worth of its Original Shares
(subject to all of the terms and conditions of such Original
Shares) for services provided to GBE in connection with the IPO.
Ms. Ehrenberg has not provided any other services to GBE
with respect to the Company and has not provided any other
services to or on behalf of the Company, and it is not
anticipated that Ms. Ehrenberg will do so upon the
consummation of the business combination.
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Each SPE has entered into an exclusive agency agreement with GBE
whereby GBE has been retained as each SPEs exclusive
leasing agent with a right to lease tenant space at the
Properties. As consideration for its services, GBE shall receive
a commission for each new lease of space, and for certain
renewals and expansions, as follows:
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For new leases and tenant expansions at the Dallas Property, not
involving an outside broker, GBE shall be paid 4.5% of the basic
rental (the fixed rents excluding certain specified charges),
and for renewals at the Dallas Property not involving an outside
broker GBE shall be paid 3.5% of the basic rental.
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For new leases, expansions and renewals at the Dallas Property
involving an outside broker, GBE shall be paid 2.25% of the
basic rental.
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For new leases, expansions and renewals at the Rosemont Property
not involving an outside broker, GBE shall be paid a commission
equal to $1.00 per rentable square foot of leased space per
lease year.
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For new leases, expansions and renewals at the Rosemont Property
in which an outside broker is involved, GBE shall be paid an
amount equal to 50% of the amount payable to the outside
procuring broker under a separate agreement between the SPE and
the procuring broker, and the SPE shall be responsible for all
payments to the procuring broker.
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For new leases, expansions and renewals at the Danbury Property
not involving an outside procuring broker, GBE shall be paid 5%
of the rents for the first five lease years, 2.5% of the rents
for lease years 6 through 10, and 1% of the rents for any lease
years thereafter for the balance of the term.
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For new leases, expansions and renewals at the Danbury Property
involving an outside broker as procuring broker, GBE shall be
paid an amount equal to 150% of the amount which would have been
paid had there been no outside broker involved in the
transaction, with the proviso that GBE shall be responsible for
paying two-thirds of that amount to the outside broker, so that
GBE shall retain an amount equal to 50% of what it would have
received had no outside broker been involved in the transaction.
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The agency leasing agreement for the Rosemont Property shall
remain in effect through May 1, 2009, unless sooner
terminated in accordance with the terms of the agreement. The
term of the agency leasing agreement for the Dallas Property
shall, unless sooner terminated, remain in effect through
March 1, 2010. The term of the agency leasing agreement for
the Danbury Property shall, unless sooner terminated, remain in
effect through June 14, 2008. Each of the
24
agency leasing agreements may be terminated by either the owner
or the broker by providing thirty days advance written notice of
termination to the other party.
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Additionally, each SPE has entered into property management
agreements (the Management Agreements) with GEMS.
The Management Agreements appoint GEMS as each SPEs sole
exclusive management agent for the Properties. For its services,
GEMS will receive for the Dallas Property a fee equal to three
percent (3%) of the propertys monthly gross cash receipts
from the operations of such property plus reimbursement for
salaries and other expenses that are directly related to
managing the property. Under the Management Agreement for the
Rosemont Property, GEMS is to receive a monthly management fee
equal to the greater of (a) three percent (3%) of the
propertys monthly gross cash receipts from the operations
of the property, or (b) a minimum monthly fee of $5,000.
Under the Management Agreement for the Danbury Property, GEMS is
to receive a monthly management fee equal to the greater of
(a) three percent (3%) of the propertys monthly gross
cash receipts from the operations of the property, or (b) a
minimum monthly fee of $30,500. The Management Agreements have
an initial term of twelve (12) months from the effective
date of the agreements and shall be automatically renewed for
successive terms, each with a duration of one (1) year
unless otherwise terminated in accordance with the terms of the
agreements. Each SPE reimburses GEMS for an agreed upon
percentage of GEMS salary, benefits and burden expenses
for each GEMS employee dedicated to that SPEs
property. The percentage of the reimbursement is based upon each
employees time dedicated to the property and may be
changed from time to time by agreement of the parties based upon
the needs of the property. There are currently three GEMS
employees dedicated to each of the Properties and the
reimbursement percentage for all such employees is 100%, except
that the reimbursement percentage for one GEMS employee at the
Rosemont Property is 75%.
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Furthermore, in addition to the LLC Purchase Price and
acquisition fee GBE is to receive from GERA at the closing of
the transactions contemplated by the LLC Acquisition Agreement,
GBE received a commission from Buildings Co., the seller of the
Danbury Property, in an amount equal to 1% of the purchase price
of the Danbury Property ($807,500) at the time of GBEs
acquisition of the Danbury Property pursuant to a pre-existing
agreement between Buildings Co. and GBE effective as of
June 27, 2006 whereby GBE was retained to find a buyer for
the Danbury Property.
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The Company and GBE have entered into the LLC Acquisition
Agreement whereby the Company will through the acquisition of
Property Acquisition, acquire the Properties. For more
information regarding the LLC Acquisition Agreement, please see
the section of this proxy statement entitled
The LLC
Acquisition Agreement.
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Conditions
to the Closing of the Acquisition
Consummation of the LLC Acquisition Agreement is conditioned on
the holders of a majority of the shares of GERA common stock
that were issued in the IPO present in person or represented by
proxy and entitled to vote at the special meeting voting to
approve the Properties Acquisition Proposal. The GERA
stockholders will also be asked to approve the 2007 Equity Plan
Proposal, the Article Sixth Amendment Proposal, the
Director Nomination Proposal and the E&Y Ratification
Proposal. The acquisition is not dependent on the approval of
such other proposals. If stockholders owning 20% or more of the
shares issued in the IPO vote against the Properties Acquisition
Proposal and exercise their right to convert their shares
purchased in the IPO into a pro-rata portion of the funds held
in trust by GERA for the benefit of the holders of shares
purchased in the IPO, then the acquisition cannot be consummated.
25
In addition, the consummation of the LLC Acquisition Agreement
is conditioned upon no governmental entity having enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect
and which has the effect of making the transactions contemplated
by the LLC Acquisition Agreement illegal or otherwise
prohibiting or restraining the consummation of such transactions
on substantially the terms contemplated by the LLC Acquisition
Agreement.
GBEs
Conditions to Closing of the Acquisition under the LLC
Acquisition Agreement
The obligations of GBE to consummate the transactions
contemplated by the LLC Acquisition Agreement, in addition to
the conditions described above, are conditioned upon each of the
following, among other things:
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GBE shall have received by wire transfer the acquisition
consideration and the acquisition fee;
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Each representation and warranty of GERA contained in the LLC
Acquisition Agreement that is (i) qualified as to
materiality shall have been true and correct in all respects
(A) as of the date of the LLC Acquisition Agreement and
(B) on and as of the closing, with the same force and
effect as if made on and as of the closing of the acquisition,
and (ii) not qualified as to materiality shall have been
true and correct in all material respects (A) as of the
date of the LLC Acquisition Agreement and (B) on and as of
the closing of the acquisition, with the same force and effect
as if made on and as of the closing of the acquisition; and
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GERA shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to
be performed or complied with by it on or prior to the closing
of the acquisition.
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GERAs
Conditions to Closing of the Acquisition under the LLC
Acquisition Agreement
The obligations of GERA to consummate the transactions
contemplated by the LLC Acquisition Agreement, in addition to
the conditions described above, are conditioned upon each of the
following, among other things:
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Each representation and warranty of GBE and Property Acquisition
contained in the LLC Acquisition Agreement that is
(i) qualified as to materiality or Material Adverse Effect
shall have been true and correct in all respects (A) as of
the date of the LLC Acquisition Agreement and (B) on and as
of the closing of the acquisition, with the same force and
effect as if made on and as of the closing, and (ii) not
qualified as to materiality or Material Adverse Effect shall
have been true and correct in all material respects (A) as
of the date of the LLC Acquisition Agreement and (B) on and
as of the closing of the acquisition, with the same force and
effect as if made on and as of the closing; provided, that the
representations and warranties of GBE and Property Acquisition
set forth in Section 2.2 of the LLC Acquisition Agreement
shall have been true and correct in all respects as of the date
of the LLC Acquisition Agreement and on and as of the closing of
the acquisition, with the same force and effect as if made on
and as of the closing;
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Property Acquisition and GBE shall have performed or complied in
all material respects with all agreements and covenants required
by the LLC Acquisition Agreement to be performed or complied
with by them at or prior to the closing of the
acquisition; and
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No Material Adverse Effect shall have occurred since the date of
the LLC Acquisition Agreement.
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The term Material Adverse Effect is defined in the
LLC Acquisition Agreement as any change, event, violation,
inaccuracy, circumstance or effect which, individually or when
aggregated with all other changes, events, violations,
inaccuracies, circumstances or effects, has had or is reasonably
likely to have a material adverse effect on the business, assets
(including intangible assets), condition (financial or
otherwise) or results of operations of Property Acquisition, the
SPEs or the Properties taken as a whole, it being understood
that none of the following alone or in combination shall be
deemed, in and of itself, to constitute a Material Adverse
Effect: (i) changes directly attributable to the public
announcement or pendency of the transactions contemplated by the
LLC Acquisition Agreement, (ii) changes in general national
or general regional economic conditions, or (iii) any SEC
rulemaking requiring enhanced disclosure of reverse acquisition
transactions with a public shell; provided, however, that the
matters referred to in the foregoing clauses (ii) and
(iii) shall be considered in determining whether a Material
Adverse Effect has occurred if such matters affect Property
Acquisition, any of the SPEs or any of the Properties in a
materially disproportionate manner when compared to the effect
of such matters on other persons engaged in the same industry in
which Property Acquisition or the SPEs operate.
Termination
of the LLC Acquisition Agreement
The LLC Acquisition Agreement may be terminated at any time, but
not later than the closing, as follows:
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by mutual written consent of GERA, Property Acquisition and GBE
at any time;
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by either GERA or GBE if the acquisition shall not have been
consummated by December 31, 2007 for any reason; provided,
however, that the right to terminate the LLC Acquisition
Agreement under this provision shall not be available to any
party whose action or failure to act has been a principal cause
of or resulted in the failure of the acquisition to occur on or
before such date and such action or failure to act constitutes a
breach of the LLC Acquisition Agreement;
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by either GERA or GBE if a governmental entity shall have issued
an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or
otherwise prohibiting the acquisition, which order, decree,
ruling or other action is final and nonappealable;
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by GBE or Property Acquisition, upon a breach of any
representation, warranty, covenant or agreement on the part of
GERA set forth in the LLC Acquisition Agreement, or if any
representation or warranty of GERA shall have become untrue, in
either case such that the conditions set forth in
Article VI of the LLC Acquisition Agreement would not be
satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided,
that if such breach by GERA is curable by GERA prior to the
closing, then neither Property Acquisition nor GBE may terminate
the LLC Acquisition Agreement under this provision for thirty
(30) days after delivery of written notice from Property
Acquisition or GBE to GERA of such breach, provided GERA
continues to exercise commercially reasonable efforts to cure
such breach (and neither Property Acquisition nor GBE may
terminate the LLC Acquisition Agreement pursuant to this
provision if it is then in material breach of the LLC
Acquisition Agreement or if such breach by GERA is cured during
such thirty (30)-day period);
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by GERA, upon a breach of any representation, warranty, covenant
or agreement on the part of GBE or Property Acquisition set
forth in the LLC Acquisition Agreement, or if any
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representation or warranty of GBE or Property Acquisition shall
have become untrue, in either case such that the conditions set
forth in Article VI of the LLC Acquisition Agreement would
not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue,
provided, that if such breach is curable by GBE or Property
Acquisition prior to the closing, then GERA may not terminate
the LLC Acquisition Agreement under this provision for thirty
(30) days after delivery of written notice from GERA to GBE
or Property Acquisition of such breach, provided GBE or Property
Acquisition, as applicable, continues to exercise commercially
reasonable efforts to cure such breach (and GERA may not
terminate the LLC Acquisition Agreement pursuant to this
provision if it is then in material breach of the LLC
Acquisition Agreement or if such breach by GBE or Property
Acquisition is cured during such thirty (30)-day period);
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by either GERA, GBE or the Company, if, at the special meeting
(including any adjournments thereof) GERA has failed to obtain
the requisite approval of the GERA stockholders; or
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by GBE on or after September 30, 2007 if it is required to
terminate the LLC Acquisition Agreement pursuant to the terms of
Section 5.01(s) of the Amended and Restated Credit
Agreement, dated as of April 14, 2006, by and among GBE, as
borrower, the guarantors named therein, Deutsche Bank
Trust Company Americas, as administrative agent and as
syndication agent, the financial institutions identified therein
as lenders, and Deutsche Bank Securities Inc., as sole book
running manager and sole lead arranger, as amended by each of
that certain First Letter Amendment dated as of June 16,
2006, and that certain Second Letter Amendment dated as of
February 16, 2007, as in effect on the date the of the LLC
Acquisition Agreement; provided, however, that GBE shall only be
permitted to terminate the LLC Acquisition Agreement pursuant to
this provision if GBE has used its reasonable best efforts to
cause the provisions of such Section 5.01(s) to be waived,
modified or extended so as to permit the transactions
contemplated by the LLC Acquisition Agreement to be consummated
subsequent to September 30, 2007. On September 24,
2007, the Amended and Restated Credit Agreement was amended to
provide for, among other items, the extension of time to
consummate the transactions contemplated by the LLC Acquisition
Agreement until March 31, 2008.
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The transactions contemplated by the LLC Acquisition Agreement
are not subject to any additional federal or state regulatory
approval, including under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, or HSR Act.
In evaluating the Properties Acquisition Proposal, you should
carefully read this proxy statement and especially consider the
factors discussed in the section entitled Risk
Factors.
28
SELECTED
HISTORICAL FINANCIAL INFORMATION
We are providing the following selected financial information to
assist you in your analysis of the financial aspects of the
acquisition.
GERAs balance sheet data as of June 30, 2007 and
June 30, 2006 and its statement of operations data for the
year ended June 30, 2007, for the period from
September 7, 2005 (inception) to June 30, 2006 and for
the period from September 7, 2005 (inception) to
June 30, 2007 are derived from the GERA historical
financial statements included elsewhere in this proxy statement.
The selected financial information of GERA is only a summary and
should be read in conjunction with GERAs historical
consolidated financial statements and related notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations contained elsewhere in
this proxy statement. The information presented is not
indicative of future performance of GERA after the acquisition.
Grubb &
Ellis Realty Advisors, Inc.
(a corporation in the development stage)
(amounts in thousands except per share data)
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Period From
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Period From
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September 7,
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September 7,
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2005
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2005
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Year
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(Date of
Inception)
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(Date of
Inception)
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Ended
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through
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through
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June 30,
2007
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June 30,
2006
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June 30,
2007
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Statement of Operations
Data:
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Operating expenses
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$
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1,332
|
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$
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308
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$
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1,640
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Interest earned on investments
held in trust
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6,906
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2,128
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9,035
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Net Income
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3,653
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1,201
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|
|
4,854
|
|
Deferred interest, net of taxes,
attributable to common stock subject to possible redemption
|
|
|
(911
|
)
|
|
|
(281
|
)
|
|
|
(1,192
|
)
|
Net income allocable to common
stock
|
|
|
2,742
|
|
|
|
920
|
|
|
|
3,662
|
|
Net income per weighted average
common share outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
Weighted average common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,045
|
|
|
|
12,709
|
|
|
|
19,521
|
|
Diluted
|
|
|
25,045
|
|
|
|
12,709
|
|
|
|
19,521
|
|
29
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and
investments held in trust
|
|
$
|
143,670
|
|
|
$
|
139,628
|
|
Total assets
|
|
|
144,106
|
|
|
|
140,529
|
|
Deferred Underwriting Discount
|
|
|
2,675
|
|
|
|
2,675
|
|
Total liabilities
|
|
|
3,274
|
|
|
|
3,350
|
|
Common stock subject to possible
redemption
|
|
|
26,952
|
|
|
|
26,952
|
|
Total stockholders equity
|
|
|
112,689
|
|
|
|
109,947
|
|
30
SELECTED
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
We have presented below selected unaudited pro forma condensed
combined financial information that reflects the Properties
Acquisition Proposal, including the Wachovia Mortgage Loans. We
are providing this information to aid you in your analysis of
the financial aspects of the Properties Acquisition Proposal
including the Wachovia Mortgage Loans. The following selected
unaudited pro forma condensed combined financial information has
been derived from, and should be read in conjunction with, the
unaudited pro forma condensed combined financial statements and
related notes thereto included elsewhere in this proxy statement.
The unaudited pro forma condensed combined financial information
has been derived from and should be read in conjunction with the
following financial statements which are included elsewhere in
this proxy:
|
|
|
the financial statements and related notes of GERA as of
June 30, 2007, for the Period from September 7, 2005
(Date of Inception) through June 30, 2006 and for the
Period from September 7, 2005 (Date of Inception) through
June 30, 2007;
|
|
|
the financial statements and related notes of 6400 Shafer Court
for the Year Ended December 31, 2006 (audited), for the Six
Months Ended June 30, 2006 (unaudited), for the Period from
January 1, 2007 through February 27, 2007 (Previous
Owner) (unaudited), and for the Period from February 28,
2007 through June 30, 2007 (GBE Owner) (unaudited);
|
|
|
the financial statements and related notes of Abrams Centre for
the Year Ended December 31, 2006 (audited), for the Six
Months Ended June 30, 2006 (unaudited), for the Period from
January 1, 2007 through February 19, 2007 (Previous
Owner) (unaudited), and for the Period from February 20,
2007 through June 30, 2007 (GBE Owner) (unaudited); and
|
|
|
the financial statements and related notes of Danbury Corporate
Center for the Year Ended December 31, 2006 (audited) and
for the Six Months Ended June 30, 2007 and 2006 (unaudited).
|
This information should also be read together with
Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in
this proxy statement.
The selected unaudited pro forma condensed combined balance
sheet data at June 30, 2007 reflects the historical
information of GERA as of such date, as adjusted to give pro
forma effect to the Properties Acquisition Proposal including
the Wachovia Mortgage Loans as if they had occurred on
June 30, 2007. The assets and liabilities of the acquired
Properties pursuant to the Properties Acquisition Proposal have
been recorded at fair value in accordance with Statement of
Financial Accounting Standards No. 141Business
Combinations. The purchase price allocation has not been
finalized and is subject to change based upon recording of
actual transaction costs, finalization of working capital
adjustments, and completion of appraisals of tangible and
intangible assets of the acquired Properties.
The selected unaudited pro forma condensed combined statements
of operations data for the year ended June 30, 2007 reflect
the historical information of GERA adjusted to give pro forma
effect to the Properties Acquisition Proposal, including the
Wachovia Mortgage Loans, as if they had occurred on July 1,
2006. Amounts for the Properties have also been adjusted for
fiscal year presentation.
31
The selected unaudited pro forma condensed combined financial
information have been prepared using two different levels of
approval of the transaction by GERA stockholders, as follows:
|
|
|
Assuming No Redemption: This presentation assumes that none of
the GERA stockholders exercise their redemption rights; and
|
|
|
Assuming Maximum Redemption: This presentation assumes that
19.9% of the GERA stockholders exercise their redemption rights.
|
The pro forma adjustments are based upon available information
and assumptions that we believe are reasonable. The selected
unaudited pro forma condensed combined statements of operations
data and the selected unaudited pro forma condensed combined
balance sheet data do not purport to represent the results of
operations which would have occurred had such transactions been
consummated on the dates indicated or the financial position for
any future date or period.
Grubb &
Ellis Realty Advisors, Inc.
Selected Unaudited Pro Forma Condensed
Combined Balance Sheet Information
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
As of
June 30, 2007
|
|
|
|
Assuming No
|
|
|
Assuming
|
|
|
|
Share
|
|
|
Maximum Share
|
|
|
|
Redemption
|
|
|
Redemption
|
|
|
Total assets
|
|
$
|
273,670
|
|
|
$
|
245,526
|
|
Total liabilities
|
|
$
|
132,838
|
|
|
$
|
132,838
|
|
Total stockholders equity
|
|
$
|
140,832
|
|
|
$
|
112,688
|
|
32
Grubb &
Ellis Realty Advisors, Inc.
Selected Unaudited Pro Forma Condensed Combined Statement of
Operations Data
(amounts in thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
Year Ended
June 30, 2007
|
|
|
|
|
|
|
Assuming
|
|
|
|
Assuming
|
|
|
Maximum
|
|
|
|
No Share
|
|
|
Share
|
|
|
|
Redemption
|
|
|
Redemption
|
|
|
Total revenues
|
|
$
|
20,755
|
|
|
$
|
20,755
|
|
Total expenses
|
|
$
|
31,841
|
|
|
$
|
31,841
|
|
Net income (loss)
|
|
$
|
(8,201
|
)
|
|
$
|
(8,201
|
)
|
Net income (loss) allocable to
common stock
|
|
$
|
(8,201
|
)
|
|
$
|
(8,201
|
)
|
Net income (loss) per weighted
average common share outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.27
|
)
|
|
$
|
(0.33
|
)
|
Diluted
|
|
$
|
(0.27
|
)
|
|
$
|
(0.33
|
)
|
Weighted average common shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
29,834
|
|
|
|
25,045
|
|
Diluted
|
|
|
29,834
|
|
|
|
25,045
|
|
33
You should carefully consider the following risk factors,
together with all of the other information included in this
proxy statement, before you decide whether to vote or instruct
your vote to be cast to adopt the Properties Acquisition
Proposal.
Risks
Related to our Business and Operations Following the Acquisition
of Property Acquisition
The real
estate market in general is subject to a number of economic
conditions that are not within our control.
The commercial real estate market is subject to various risks
and fluctuations and cycles in value and demand for real estate
in local markets, many of which are beyond our control. Changes
in one or more of these factors could either favorably or
unfavorably impact the volume of transactions and prices or
lease terms for real estate. Consequently, our revenue and our
corresponding cash flow and financial condition could be
materially and adversely impacted by changes in these factors.
These factors include:
|
|
|
adverse changes in international, national, regional or local
economic, demographic and market conditions;
|
|
|
adverse changes in financial conditions of buyers, sellers and
tenants of properties;
|
|
|
competition from other real estate investors with significant
capital;
|
|
|
reductions in the level of demand for commercial space, and
changes in the relative popularity of properties;
|
|
|
fluctuations in interest rates, which could adversely effect our
ability, or the ability of buyers and tenants of properties, to
obtain financing on favorable terms or at all;
|
|
|
unanticipated increases in operating expenses, including,
without limitation, insurance costs, labor costs, construction
cost, energy prices and costs of compliance with laws,
regulations and governmental policies;
|
|
|
unanticipated additional real estate developments which increase
overall market supply and competition;
|
|
|
changes in, and changes in enforcement of, laws, regulations and
governmental policies, including, without limitation, health,
safety, environmental, zoning and tax laws and governmental
fiscal policies, and changes in the related costs of compliance
with laws, regulations and governmental polices; and
|
|
|
civil unrest, acts of God, including earthquakes, floods and
other natural disasters and acts of war or terrorism, including
the consequences of terrorist acts such as those that occurred
on September 11, 2001, which may result in uninsured losses.
|
Major
unexpected mechanical or building system failures may result in
adverse changes in the performance of our properties and harm
our financial condition.
Major unexpected mechanical or building system failures may
result in the disruption of building operations resulting in
loss of rents as well as require us to make significant,
unbudgeted capital expenditures. Such expenditures and loss of
rents could reduce our cash flows and funds available for future
dividends.
34
Increasing
competition for the acquisition of real estate may impede our
ability to make future acquisitions, which could adversely
affect our operating results and financial
condition.
The commercial real estate industry is highly competitive on an
international, regional and local level. We will face
competition from REITs, institutional pension funds, and other
public and private real estate companies and private real estate
investors. Although many of our competitors are local or
regional firms that are substantially smaller than we are as a
whole, some of these firms are substantially larger than we are
in the local or regional area in which we actually compete with
these firms. These competitors may prevent us from acquiring
desirable properties or increase the price we must pay for real
estate. Our competitors may have greater resources than we do,
and may be willing to pay more or may have a more compatible
operating philosophy with our acquisition targets. In
particular, REITs may enjoy significant competitive advantages
that result from, among other things, a lower cost of capital
and enhanced operating efficiencies. Our competitors may also
adopt transaction structures similar to ours, which would
decrease our competitive advantage in offering flexible
transaction terms. In addition, the number of entities and the
amount of funds competing for suitable investment properties may
increase, resulting in increased demand and increased prices
paid for such properties. If we pay higher prices for
properties, our profitability may decrease and we may experience
a lower return on our investments. Increased competition for
properties may also preclude us from acquiring those properties
that would generate the most attractive returns to us.
Illiquidity of
real estate investments could significantly impede our ability
to respond to adverse changes in the performance of our
properties and harm our financial condition.
Because real estate investments are relatively illiquid, our
ability to promptly sell one or more properties or investments
in our portfolio in response to changing economic, financial and
investment conditions may be limited. In particular, these risks
could arise from weakness in or even the lack of an established
market for a property, changes in the financial condition or
prospects of prospective purchasers, changes in national or
international economic conditions, and changes in laws,
regulations or fiscal policies of jurisdictions in which the
property is located. We may be unable to realize our investment
objectives by sale, other disposition or to refinance at
attractive prices within any given period of time or may
otherwise be unable to complete any exit strategy.
Increasing
interest rates could have a negative impact our real estate
investments in multiple ways.
An environment of rising interest rates creates the risk of
incurring increased interest rate payments on any current
financings, such as the Wachovia Mortgage Loans, new financings
or re-financings that we may pursue or higher interest rates if
an interest rate adjustment occurs as a term of an existing loan
on any of the properties.
Rising interest rates also may be accompanied by weakening
economic conditions, which will typically lead to constrained
business expansion by companies. Such a condition may have a
direct impact on the commercial real estate market. Businesses
that would otherwise accommodate their growth by leasing space
in commercial buildings may no longer pursue an expansion
strategy.
35
In addition, higher interest rates may create financial
pressures on existing tenants causing them to vacate or reduce
the amount of space they occupy or cause a tenant to delay
paying its rent or cause them to default on their rental
payments. Under such a situation a tenant may ask for rent
forgiveness. In extreme situations a tenant may decide to
declare bankruptcy.
Reduced demand for space and increasing vacancy resulting from
increasing interest rates may affect our ability to achieve our
leasing objectives in terms of occupancy, rental rates and
leasing concessions. When tenant demand for leased space falls,
rental rates may follow suit. Weakening market conditions can
trigger higher tenant concessions that may become necessary to
provide a financial inducement to attract new tenants to lease
vacant space in the properties and to entice existing tenants to
renew their leases. These incentives usually take the form of
free rent and tenant improvement allowances of a higher amount
than we had otherwise planned on providing.
Under each of the scenarios described above there could be a
reduction in the amount of cash flow available to fund
operations, improve the properties or to distribute as dividends
to stockholders. If the conditions become too severe, there is
always the risk that we may not be able to meet debt service
payments resulting in the lender initiating foreclosure
proceedings on the loan. When the property has been offered as
collateral for the loan the lender would acquire title to the
property as a result of the foreclosure and we would lose our
ownership interests and rights in the property.
A rising interest rate environment combined with deteriorating
real estate market fundamentals could also affect investor
demand for real estate and ultimately the value of real estate.
Higher interest rates affect our ability to underwrite
transactions and may impair our ability to meet future targeted
returns. When debt becomes more costly, buyers relying on
financing to fund their acquisitions will either leave the
market or they will be forced to submit offers at lower prices,
making them less competitive. The absence of this group of
buyers may reduce the competition among buyers, which may affect
the price the remaining active buyers will bid for a property.
Deteriorating market fundamentals may cause buyers to modify how
they underwrite their purchases. If they are more cautious in
their interpretation of market trends, the value of our
properties when we sell them may be less than what we paid for
them. In addition to the risk of a loss on the sale of a
property there is the further risk of the value being
insufficient to repay the principal on any loans that may be
outstanding.
Rising
operating expenses and decrease in rents at our properties could
reduce our cash flow and funds available for future
dividends.
Our properties will likely be subject to operating risks common
to real estate in general, any or all of which may negatively
affect us. In addition, the Properties are subject to certain
floating operating expenses for market based purchases (such as,
electricity, gas and other utilities) that have short term
fluctuation risk. Furthermore, if any property is not fully
occupied or if rents are being paid in an amount that is
insufficient to cover operating expenses, we could be required
to expend funds for that propertys operating expenses. If
our competitors offer space at rental rates below market rates,
or below the rental rates we charge our tenants, we may lose
existing or potential tenants and we may be pressured to reduce
our rental rates below those we charge in order to retain
tenants when our tenants leases expire. Our properties
could also be subject to increases in real estate and other tax
rates, utility costs, operating expenses,
36
insurance costs, repairs and maintenance and administrative
expenses. Increases in operating expenses and loss of rents
could reduce our cash flows and funds available for future
dividends.
Our ability to
pay dividends is limited and we may be unable to pay future
dividends.
GERA has not paid cash dividends in the past and does not expect
to pay dividends in the foreseeable future. The holders of our
common stock are entitled to receive dividends when and if
declared by our board of directors out of funds available
therefore. As part of our consideration to pay cash dividends,
we intend to retain adequate funds from future earnings to
support the development and growth of our business. Furthermore,
the payment of future dividends is at the discretion of
GERAs board of directors and is subject to a number of
factors, including results of operations, general business
conditions, growth, financial condition, contractual
restrictions and other factors deemed relevant by GERAs
board of directors. Such factors may also prevent GERA from
issuing dividends in the foreseeable future.
Environmental
regulation and issues, over certain of which we may have no
control, may adversely impact our business.
Federal, state and local laws and regulations impose
environmental controls, disclosure rules and zoning restrictions
which directly impact the management, development, use,
and/or
sale
of real estate. Such laws and regulations tend to discourage
sales and leasing activities and mortgage lending with respect
to some properties, and may therefore adversely affect us
specifically, and the real estate industry in general. Failure
by us to uncover and adequately protect against environmental
issues in connection with a target acquisition may subject us to
liability as buyer of such property or asset. Environmental laws
and regulations impose liability on current or previous real
property owners or operators for the cost of investigating,
cleaning up or removing contamination caused by hazardous or
toxic substances at the property. We may be held liable for such
costs as a subsequent owner of such property. Liability can be
imposed even if the original actions were legal and we had no
knowledge of, or were not responsible for, the presence of the
hazardous or toxic substances. Further, we may also be held
responsible for the entire payment of the liability if we are
subject to joint and several liability and the other responsible
parties are unable to pay. We may also be liable under common
law to third parties for damages and injuries resulting from
environmental contamination emanating from the site, including
the presence of asbestos containing materials. Insurance for
such matters may not be available. Additionally, new or modified
environmental regulations could develop in a manner which could
adversely affect us.
Certain
environmental conditions exist at the Danbury Property that will
require remediation in accordance with applicable state
law.
Environmental assessments conducted at the Danbury Property
revealed that certain additional remediation will be required in
connection with two underground heating oil storage tanks
removed from the property in 1992. The Danbury Property is
subject to the Connecticut Transfer Act (the Transfer
Act) which requires that environmental conditions at the
property be assessed and remediated in connection with a sales
transaction. Buildings Co., the sellers of the Danbury Property,
are responsible for compliance with the Transfer Act and have
agreed to perform and pay all costs associated with completing,
in accordance with the requirements of the Transfer Act, all
required assessments and remediation of any environmental
conditions (including conditions related to the removal of the
underground storage tanks) existing at the
37
property prior to closing identified by such assessments. In
addition, to secure the performance of its obligations, at the
closing, Buildings Co. deposited $2,000,000 in an escrow account
which will remain in place until the completion of the Transfer
Act requirements, and Buildings Co., together with Buckeye Casa
Grande, L.P. and Bridgewater Investments, Inc. have agreed to
indemnify Property Acquisition with respect to substantially all
liabilities which may be incurred under the Transfer Act in
connection with the remediation of existing hazardous substances
at the Danbury Property or caused by Building Co.s
remediation activities. A Phase I Environmental Site Assessment
revealed that in addition to conditions related to the removal
of the underground storage tanks, additional investigation may
be required with respect to potential environmental impacts from
visible staining and leakage of hydraulic oil in the area of a
trash compactor and loading docks adjacent to a trench drain,
and visible staining within the chauffer garage adjacent to a
storm drain. The remediation of the conditions related to the
removal of the underground storage tanks and the remaining
assessment work will be completed at the expense of Buildings
Co. If Buildings Co. fails to perform its obligations under the
Transfer Act and Buckeye Casa Grande, L.P. and Bridgewater
Investments, Inc. do not satisfy their indemnification
obligations, Property Acquisition may incur such liability as
the current owner of the Danbury Property. Furthermore, any
subsequent transfer of the Danbury Property prior to the
completion of the Transfer Act requirements will also be subject
to the requirements of the Transfer Act. Transfer of the Danbury
Property subsequent to completion of the Transfer Act
requirements may also be subject to the Transfer Act if certain
hazardous materials activities occur at the Danbury Property
thereafter.
Our properties
may contain or develop harmful mold, which could lead to
liability for adverse health effects and costs of remediating
the problem.
When excessive moisture accumulates in buildings or on building
materials, mold growth may occur, particularly if the moisture
problem remains undiscovered or is not addressed over a period
of time. Some molds may produce airborne toxins or irritants.
Concern about indoor exposure to mold has been increasing as
exposure to mold may cause a variety of adverse health effects
and symptoms, including allergic or other reactions. As a
result, the presence of significant mold at any of our
properties could require us to undertake a costly remediation
program to contain or remove the mold from the affected
property. In addition, the presence of significant mold could
expose us to liability from our tenants, employees of our
tenants and others if property damage or health concerns arise.
Our properties
may contain asbestos which could lead to liability for adverse
health effects and costs of remediating asbestos.
Certain laws and regulations govern the removal, encapsulation
or disturbance of asbestos containing materials (or ACMs), when
those materials are in poor condition or in the event of
building renovation or demolition, impose certain worker
protection and notification requirements and govern emissions of
and exposure to asbestos fibers in the air. These laws may also
impose liability for a release of ACMs and may enable third
parties to seek recovery against us for personal injury
associated with ACMs. There may be ACMs at certain of the
properties we acquire.
38
Compliance
with the Americans with Disabilities Act and fire, safety and
other regulations may require us to make substantial unintended
expenditures.
Any properties we acquire will be required to comply with the
Americans with Disabilities Act of 1990, or the ADA. The ADA has
separate compliance requirements for public
accommodations and commercial facilities, but
generally requires that buildings be made accessible to people
with disabilities. Compliance with the ADA requirements could
require removal of access barriers and non-compliance could
result in imposition of fines by the U.S. government or an
award of damages to private litigants, or both. While the
tenants to whom we lease properties will be obligated by law to
comply with the ADA provisions, and the tenants under our net
leases will typically be obligated to cover costs associated
with compliance, if required changes involve greater
expenditures than anticipated, or if the changes must be made on
a more accelerated basis than anticipated, the ability of such
tenants to cover costs could be adversely affected and we could
be required to expend our own funds to comply with the
provisions of the ADA, which could adversely affect our results
of operations and financial condition. In addition, we will be
required to operate our properties in compliance with fire and
safety regulations, building codes and other land use
regulations, as they may be adopted by governmental agencies and
bodies and become applicable to our properties. We may be
required to make substantial capital expenditures to comply with
those requirements.
Failure of our
tenants to pay rent could seriously harm our operating results
and financial condition.
We will rely on rental payments from tenants of a target
acquisition as a source of cash. At any time, any of our tenants
may experience a downturn in its business that may weaken its
financial condition. As a result, a tenant may delay lease
commencement, fail to make rental payments when due, decline to
extend a lease upon its expiration, become insolvent or declare
bankruptcy. Any tenant bankruptcy, insolvency, or failure to
make rental payments when due could result in the termination of
the tenants lease and material losses to our company. A
default by a large tenant on one of these properties could have
a material adverse effect on our operating results and financial
condition.
In particular, if any of our significant tenants becomes
insolvent, suffers a downturn in its business and decides not to
renew its lease or vacates a property and prevents us from
leasing that property by continuing to pay base rent for the
balance of the term, it may seriously harm our business. Failure
on the part of a tenant to comply with the terms of a lease may
give us the right to terminate the lease, repossess the
applicable property and enforce the payment obligations under
the lease; however, we would be required to find another tenant.
We cannot assure you that we would be able to find another
tenant without incurring substantial costs, or at all, or that,
if another tenant was found, we would be able to enter into a
new lease on favorable terms.
The bankruptcy
or insolvency of our tenants under their leases could seriously
harm our operating results and financial
condition.
Any bankruptcy filings by or relating to one of our tenants
could bar us from collecting pre-bankruptcy debts from that
tenant or its property. A tenant bankruptcy could delay our
efforts to collect past due balances under the relevant leases,
and could ultimately preclude full collection of these sums. If
a lease is assumed by the tenant in bankruptcy, all
pre-bankruptcy balances due under the lease must be paid to us
in full. However, if a lease is rejected by a tenant in
bankruptcy, we would have only a general unsecured claim for
damages. Any unsecured claim
39
we hold against a bankrupt entity may be paid only to the extent
that funds are available and only in the same percentage as is
paid to all other holders of unsecured claims. We may recover
substantially less than the full value of any unsecured claims,
which would harm our operating results and financial condition.
Increases in
our property taxes could adversely affect our cash flow and
financial condition.
Each of our properties will be subject to real and personal
property taxes. These taxes on our properties may increase as
tax rates change and as the properties are assessed or
reassessed by taxing authorities. Many U.S. states and
localities are considering increases in their income
and/or
property tax rates (or increases in the assessments of real
estate) to cover revenue shortfalls. If property taxes increase,
it may adversely affect our cash flow and financial condition.
Uninsured and
underinsured losses may adversely affect
operations.
We, or in certain instances, tenants of our properties, are
likely to carry commercial general liability, fire and extended
coverage insurance with respect to our properties. We plan to
obtain coverage that has policy specifications and insured
limits that we believe are customarily carried for similar
properties. However, certain types of losses, generally of a
catastrophic nature, such as earthquakes and floods, may be
either uninsurable or not economically insurable. Should a
property sustain damage, we may incur losses due to insurance
deductibles, to co-payments on insured losses or to uninsured
losses. In the event of a substantial property loss, the
insurance coverage may not be sufficient to pay the full current
market value or current replacement cost of the property. In the
event of an uninsured loss, we could lose some or all of our
capital investment, cash flow and anticipated profits related to
one or more properties. Inflation, changes in building codes and
ordinances, environmental considerations, and other factors also
might make it not feasible to use insurance proceeds to replace
a property after it has been damaged or destroyed. Under such
circumstances, the insurance proceeds we receive might not be
adequate to restore our economic position with respect to such
property.
In the event of an underinsured loss with respect to a property
relating to a title defect, the insurance proceeds we receive
might not be adequate to restore our economic position with
respect to such property. In the event of a significant loss at
one or more of the properties covered by the blanket policy, the
remaining insurance under our policy, if any, could be
insufficient to adequately insure our remaining properties. In
this event, securing additional insurance, if possible, could be
significantly more expensive than our current policy.
If we are
unable to promptly relet or renew leases as they expire, our
cash flow and ability to service our indebtedness, may be
adversely affected.
We are subject to the risks that upon expiration of leases for
space located in our buildings (a) such leases may not be
renewed, (b) such space may not be relet or (c) the
terms of renewal or reletting, taking into account the cost of
required renovations, may be less favorable than the current
lease terms. If we are unable to promptly relet, or renew the
leases for, a substantial portion of the space located in our
buildings, or if the rental rates upon such renewal or reletting
are significantly lower than expected rental rates, or if our
reserves for these purposes prove inadequate, our cash flow and
ability to service our indebtedness may be adversely affected.
40
The
Companys officer and directors will allocate some portion
of their time to other businesses thereby causing conflicts of
interest in their determination as to how much time to devote to
the Companys affairs.
The Companys officers and directors are not required to
commit their full time to the Companys affairs, which
could create a conflict of interest when allocating their time
between the Companys operations and their other
commitments. The Company does not intend to have any full time
employees after the consummation of a business combination. All
of the Companys executive officers are currently employed
by GBE and are not obligated to devote any specific number of
hours to the Companys affairs. If GBE requires them to
devote more substantial amounts of time to its business and
affairs, it could limit their ability to devote time to the
Companys affairs and could have a negative impact on the
Company.
Risks
Related to the Acquisition
Our working
capital will be reduced if GERA stockholders exercise their
right to convert their shares into cash. This would reduce our
cash reserve after the acquisition.
Pursuant to our certificate of incorporation, holders of shares
issued in the IPO may vote against the acquisition and demand
that we convert their shares, calculated as of two business days
prior to the anticipated consummation of the acquisition, into a
pro rata share of the trust account where a substantial portion
of the net proceeds of the IPO are held. We will not consummate
the acquisition if holders of 4,791,667 or more shares of common
stock issued in the IPO exercise these conversion rights. To the
extent the acquisition is consummated and holders have demanded
to so convert their shares, there will be a corresponding
reduction in the amount of funds available to us following the
acquisition. As
of ,
the record date, assuming the Properties Acquisition Proposal is
approved, the maximum amount of funds that could be disbursed to
our stockholders upon the exercise of their conversion rights is
approximately $ , or approximately
20% of the funds held in the trust account. Any payment upon
exercise of conversion rights will reduce our cash after the
acquisition, which may limit our ability to implement our
business plan.
If GERA
stockholders fail to vote or abstain from voting on the
Properties Acquisition Proposal, they may not exercise their
conversion rights to convert their shares of common stock of
GERA into a pro rata portion of the trust account.
GERA stockholders holding shares of GERA stock issued in the IPO
who affirmatively vote against the Properties Acquisition
Proposal may, at the same time, demand that we convert their
shares into a pro rata portion of the trust account, calculated
as of two business days prior to the anticipated consummation of
the acquisition. GERA stockholders who seek to exercise this
conversion right must affirmatively vote against the acquisition
and tender their stock certificates to our transfer agent within
the period specified in a notice you will receive from the
Company, which period will be not less than 20 days from
the date of such notice. Any GERA stockholder who fails to vote
or who abstains from voting on the Properties Acquisition
Proposal or who fails to tender their stock certificate
(physically or electronically) within the period specified in a
notice you will receive from the Company, which period will be
not less than 20 days from the date of such notice, may not
exercise his conversion rights and will not receive a pro rata
portion of the trust account for conversion of his shares.
41
GBE currently
owns shares of the Companys stock and warrants which will
not participate in liquidation distributions. Consequently, they
may have a conflict of interest.
GBE owns 5,667,719 shares of the Companys common
stock that were issued prior to the IPO, but has waived its
right to receive distributions with respect to those shares upon
the Companys liquidation if the Company is unable to
consummate a business combination. Additionally, GBE has
purchased approximately 4.6 million warrants for an
aggregate purchase price excluding commissions of approximately
$2.2 million in the open market. These shares of common
stock and warrants owned by GBE will be worthless if the Company
does not consummate a business combination.
Certain of our
current directors and executive officers own shares of common
stock and warrants that will be worthless if the acquisition is
not approved. Consequently, they may have a conflict of
interest.
Our chief executive officer, Mark E. Rose and all of our
directors and certain of their affiliates beneficially own stock
in GERA that they were issued prior to the IPO. Additionally,
certain of these persons purchased units in connection with the
IPO, which
contained
warrants and also
purchased warrants
in the public market after the IPO. Our executives and directors
and their affiliates are not entitled to receive any of the cash
proceeds that may be distributed upon our liquidation with
respect to shares they acquired prior to the IPO. Therefore, if
the acquisition is not approved and we are forced to liquidate,
such shares held by such persons will be worthless, as will the
warrants.
If we do not
consummate the acquisition and are forced to dissolve and
liquidate, payments from the trust account to our public
stockholders may be delayed.
In the event that the LLC Acquisition Agreement is not
consummated by March 3, 2008, GERA must be liquidated. We
anticipate that, if we are forced to liquidate, the following
will occur:
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our board of directors will convene and adopt a specific plan of
dissolution and liquidation, which it will then vote to
recommend to our stockholders; at such time it will also cause
to be prepared a preliminary proxy statement setting out such
plan of dissolution and liquidation as well as the boards
recommendation of such plan;
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we will promptly file our preliminary proxy statement with the
SEC;
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if the SEC does not review the preliminary proxy statement,
then, 10 days following the filing of such preliminary
proxy statement, we will mail the definitive proxy statement to
our stockholders, and, 20 days following the mailing of
such definitive proxy statement, we will convene a special
meeting of our stockholders, at which they will vote on our plan
of dissolution and liquidation; and
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if the SEC does review the preliminary proxy statement, we
currently estimate that we will receive their comments
30 days after the filing of such proxy statement. We would
then mail the definite proxy statement to our stockholders
following the conclusion of the comment and review process (the
length of which we cannot predict with any certainty, and which
may be substantial) and we will convene a special meeting of our
stockholders at which they will vote on our plan of dissolution
and liquidation.
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We expect that all costs associated with the implementation and
completion of our plan of dissolution and liquidation will be
funded by any remaining net assets not held in the trust
account, although we cannot assure you that there will be
sufficient funds for such purpose.
We will not liquidate the trust account unless and until our
stockholders approve our plan of dissolution and liquidation.
Accordingly, the foregoing procedures may result in substantial
delays in our liquidation and the distribution to our public
stockholders of the funds in our trust account and any remaining
net assets as part of our plan of dissolution and liquidation.
Our
stockholders may be held liable for claims by third parties
against us to the extent of distributions received by
them.
If we are unable to complete the acquisition of Property
Acquisition, we will dissolve and liquidate pursuant to
Section 275 of the DGCL. Under Sections 280 through
282 of the DGCL, stockholders may be held liable for claims by
third parties against a corporation to the extent of
distributions received by them in dissolution. Pursuant to
Section 280, if the corporation complies with certain
procedures intended to ensure that it makes reasonable
provisions for all claims against it, including a
60-day
notice period during which any third-party claims can be brought
against the corporation, a
90-day
period during which the corporation may reject any claims
brought, and an additional
150-day
waiting period before any liquidating distributions are made to
stockholders, any liability of a stockholder with respect to a
liquidating distribution is limited to the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution. Although we will seek stockholder approval to
liquidate the trust account to our public stockholders as part
of our plan of dissolution and liquidation, we will seek to
conclude this process as soon as possible and as a result do not
intend to comply with those procedures. Because we will not be
complying with those procedures, we are required, pursuant to
Section 281 of the DGCL, to adopt a plan that will provide
for our payment, based on facts known to us at such time, of
(i) all existing claims, (ii) all pending claims and
(iii) all claims that may be potentially brought against us
within the subsequent 10 years. Accordingly, we would be
required to provide for any creditors known to us at that time
or those that we believe could be potentially brought against us
within the subsequent 10 years prior to distributing the
funds held in the trust to stockholders. We cannot assure you
that we will properly assess all claims that may be potentially
brought against us. As such, our stockholders could potentially
be liable for any claims to the extent of distributions received
by them in dissolution (but no more) and any liability of our
stockholders may extend well beyond the third anniversary of
such dissolution. Accordingly, we cannot assure you that third
parties will not seek to recover from our stockholders amounts
owed to them by us.
Additionally, if we are forced to file a bankruptcy case or an
involuntary bankruptcy case is filed against us that is not
dismissed, any distributions received by stockholders in our
dissolution might be viewed under applicable debtor/creditor
and/or
bankruptcy laws as either a preferential transfer or
a fraudulent conveyance. As a result, a bankruptcy
court could seek to recover all amounts received by our
stockholders in our dissolution. Furthermore, because we intend
to distribute the proceeds held in the trust account to our
public stockholders as soon as possible after our dissolution,
this may be viewed or interpreted as giving preference to our
public stockholders over any potential creditors with respect to
access to or distributions from our assets. Furthermore, our
board of directors may be viewed as having breached their
fiduciary duties to our creditors
and/or
may
have acted in bad faith, and thereby exposing itself and our
company to claims of punitive damages, by paying public
stockholders from the trust
43
account prior to addressing the claims of creditors
and/or
complying with certain provisions of the DGCL with respect to
our dissolution and liquidation. We cannot assure you that
claims will not be brought against us for these reasons.
The Company
has entered into a long term brokerage services agreement, a
long term facilities management agreement and a long term
project management agreement with GBE, and due to the fact that
all of the Companys current officers are employed by GBE
and certain of the Companys directors also serve on the
board of directors of GBE, a conflict of interest may
arise.
The Company has entered into a long term brokerage services
agreement, a long term facilities management agreement and a
long term project management agreement with GBE. Pursuant to
these agreements, GBE will serve as the Companys exclusive
agent with respect to commercial real estate brokerage and
facilities management, and will perform project management
services at the Companys request. As a result, GBE will
stand to earn substantial fees and revenues in accordance with
the terms and conditions of these agreements. Furthermore, due
to the fact that the Companys officers are also officers
of GBE and certain of the Companys directors are also
directors of GBE, a conflict of interest could arise when
determining whether the terms, conditions and timing of a
particular business combination are appropriate and in the
Companys stockholders best interest. In addition,
GBE, as a commercial real estate broker, has relationships with
a significant number of clients pursuant to which they would be
expected to provide certain business opportunities that could be
appropriate for presentation to the Company. The Company does
not have preferential rights to be presented with any such
opportunities. Accordingly, although GBE is the Companys
exclusive agent with respect to commercial real estate brokerage
and facilities management, it provides such services to the
Company on a non-exclusive basis.
44
FORWARD-LOOKING
STATEMENTS
We believe that some of the information in this proxy statement
constitutes forward-looking statements within the definition of
the Private Securities Litigation Reform Act of 1995. However,
the safe-harbor provisions of that act do not apply to
statements made in this proxy statement. You can identify these
statements by forward-looking words such as may,
expect, anticipate,
contemplate, believe,
estimate, intends, and
continue or similar words. You should read
statements that contain these words carefully because they:
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discuss future expectations;
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contain projections of future results of operations or financial
condition; or
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state other forward-looking information.
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We believe it is important to communicate our expectations to
our stockholders. However, there may be events in the future
that we are not able to predict accurately or over which we have
no control. The risk factors and cautionary language discussed
in this proxy statement provide examples of risks, uncertainties
and events that may cause actual results to differ materially
from the expectations described by us in such forward-looking
statements, including among other things:
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the number and percentage of our stockholders voting against the
Properties Acquisition Proposal and seeking conversion;
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fluctuations in customer demand;
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management of rapid growth;
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general economic conditions;
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Property Acquisitions business strategy and plans; and
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the result of future financing efforts.
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You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of
this proxy statement.
All forward-looking statements included herein attributable to
any of GERA, Property Acquisition or any person acting on either
partys behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this
section. Except to the extent required by applicable laws and
regulations, GERA and GBE undertake no obligations to update
these forward-looking statements to reflect events or
circumstances after the date of this proxy statement or to
reflect the occurrence of unanticipated events.
Before you grant your proxy or instruct how your vote should be
cast or vote on the adoption of the Properties Acquisition
Proposal, you should be aware that the occurrence of the events
described in the Risk Factors section and elsewhere
in this proxy statement could have a material adverse effect on
GERA, Property Acquisition
and/or
GBE.
45
SPECIAL
MEETING OF GERA STOCKHOLDERS
We are furnishing this proxy statement to GERA stockholders as
part of the solicitation of proxies by our board of directors
for use at the special meeting of GERA stockholders to be held
on ,
and at any adjournment or postponement thereof. This proxy
statement is first being furnished to our stockholders on or
about
in connection with the vote on the Properties Acquisition
Proposal, the Article Sixth Amendment Proposal, the 2007
Equity Plan Proposal, the Director Nomination Proposal, and the
E&Y Ratification Proposal. This document provides you with
the information you need to know to be able to vote or instruct
your vote to be cast at the special meeting.
The special meeting of stockholders will be held
on ,
at 10:00 a.m., Eastern Time,
at .
Purpose
of the GERA Special Meeting
At the special meeting, we are asking holders of GERA common
stock to:
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approve the acquisition of Property Acquisition and as a
consequence thereof, the acquisition of the Properties
(Properties Acquisition Proposal);
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approve an amendment to our certificate of incorporation to
remove the preamble, Sections A through D, inclusive, and
Section F of Article Sixth from the certificate of
incorporation from and after the closing of the acquisition, as
these provisions will no longer be applicable to us, and to
redesignate section E of Article Sixth, which relates
to the staggered board, as Article Sixth
(Article Sixth Amendment Proposal);
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approve the adoption of the 2007 Omnibus Equity Plan (2007
Equity Plan Proposal);
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elect William Downey to our board of directors (Director
Nomination Proposal); and
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ratify the appointment of E&Y as our independent public
accountants for the year 2007 (E&Y Ratification Proposal).
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Recommendation
of GERA Board of Directors
Our board of directors:
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has unanimously determined that each of the Properties
Acquisition Proposal, Article Sixth Amendment Proposal,
2007 Equity Plan Proposal, Director Nomination Proposal and
E&Y Ratification Proposal, is fair to and in the best
interests of us and our stockholders;
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has unanimously approved the Properties Acquisition Proposal,
the Article Sixth Amendment Proposal, the 2007 Equity Plan
Proposal, the Director Nomination Proposal and the E&Y
Ratification Proposal;
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unanimously recommends that our common stockholders vote
FOR the Properties Acquisition Proposal;
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unanimously recommends that our common stockholders vote
FOR the Article Sixth Amendment Proposal;
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unanimously recommends that our common stockholders vote
FOR the 2007 Omnibus Equity Plan Proposal;
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unanimously recommends that our common stockholders vote
FOR the Director Nomination Proposal; and
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unanimously recommends that our common stockholders vote
FOR the E&Y Ratification Proposal.
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The recommendation of our board of directors with respect to the
Properties Acquisition Proposal is based in part on the
unanimous recommendation of the special committee of the board
that was formed to consider and evaluate the transaction.
Record
Date; Who is Entitled to Vote
We have fixed the close of business
on ,
as the record date for determining GERA stockholders
entitled to notice of and to attend and vote at the special
meeting. As of the close of business
on ,
there
were shares
of our common stock outstanding and entitled to vote. Each share
of our common stock is entitled to one vote per share at the
special meeting.
Pursuant to agreements with us, the 5,876,069 shares of our
common stock held by stockholders who purchased their shares of
common stock prior to the IPO will be voted on the Properties
Acquisition Proposal in accordance with the majority of the
votes cast at the special meeting.
The presence, in person or by proxy, of a majority of all the
outstanding shares of common stock constitutes a quorum at the
special meeting.
Abstentions
and Broker Non-Votes
Proxies that are marked abstain and proxies relating
to street name shares that are returned to us but
marked by brokers as not voted will be treated as
shares present for purposes of determining the presence of a
quorum on all matters. The latter will not be treated as shares
entitled to vote on the matter as to which authority to vote is
withheld from the broker. If you do not give the broker voting
instructions, under the rules of the National Association of
Securities Dealers (NASD), your broker may not vote
your shares on the Properties Acquisition Proposal, the
Article Sixth Amendment Proposal, the 2007 Equity Plan
Proposal, the Director Nomination Proposal, or the E&Y
Ratification Proposal. Since a stockholder must affirmatively
vote against the Properties Acquisition Proposal to have
conversion rights, individuals who fail to vote or who abstain
from voting may not exercise their conversion rights. Beneficial
holders of shares held in street name that are voted
against the Properties Acquisition Proposal may exercise their
conversion rights, provided that they have their shares
delivered to our transfer agent within the period specified in a
notice you will receive from the Company, which period will be
not less than 20 days from the date of such notice. See the
information set forth in
Special Meeting of GERA
StockholdersConversion Rights.
If you choose to have your shares certificated, we have been
informed that our transfer agent, Continental Stock &
Trust Company, will not charge any fees in connection with
the tender of physical certificates. If you elect to have
physical delivery of your share certificates, you would have to
comply with the following steps. If your shares are held in
street name, you must instruct
47
your account executive at your bank or broker to withdraw the
shares from the your account and request that a physical
certificate be issued in the your name. Our transfer agent, will
be available to assist with this process. After the meeting, the
Company will send a notice to all Converting Stockholders
advising them of the requirement to deliver their shares to the
transfer agent, which notice will specify the time period (which
will be not less than 20 days from the date of the notice)
during which such delivery must be made. Once you have received
such notice, you must submit your certificated shares to the
transfer agent within the period specified in the notice.
Certificates that have not been tendered in accordance with
these procedures will not be converted into cash.
Vote
of Our Stockholders Required
The approval of the Properties Acquisition Proposal will require
the affirmative vote of the holders of a majority of the shares
of GERA common stock issued in the IPO present in person or
represented by proxy and entitled to vote at the special
meeting. Abstentions will have the same effect as a vote
AGAINST the Properties Acquisition Proposal and
broker non-votes, while considered present for the purposes of
establishing a quorum, will have no effect on the Properties
Acquisition Proposal. You cannot seek conversion unless you
affirmatively vote against the Properties Acquisition Proposal.
The Article Sixth Amendment Proposal will require the
affirmative vote of the holders of a majority of GERA common
stock outstanding on the record date. Because this proposal to
amend our charter requires the affirmative vote of a majority of
the shares of common stock outstanding, abstentions and shares
not entitled to vote because of a broker non-vote will have the
same effect as a vote against this proposal.
The approval of the 2007 Equity Plan Proposal, the Director
Nomination Proposal and the E&Y Ratification Proposal will
require the affirmative vote of the holders of a majority of our
common stock represented and entitled to vote at the special
meeting. Abstentions are deemed entitled to vote on the
proposals. Therefore, they have the same effect as a vote
against the proposal. Broker non-votes are not deemed entitled
to vote on the proposal and, therefore, they will have no effect
on the vote on the proposal.
Each share of GERA common stock that you own in your name
entitles you to one vote. Your proxy card shows the number of
shares of our common stock that you own.
There are two ways to vote your shares of GERA common stock at
the special meeting:
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You can vote by signing and returning the enclosed proxy
card.
If you vote by proxy card, your
proxy, whose name is listed on the proxy card, will
vote your shares as you instruct on the proxy card. If you sign
and return the proxy card but do not give instructions on how to
vote your shares, your shares will be voted as recommended by
our board
FOR
the adoption of the Properties
Acquisition Proposal, the Article Sixth Amendment Proposal,
the 2007 Equity Plan Proposal, the Director Nomination Proposal
and the E&Y Ratification Proposal. Votes received after a
matter has been voted upon at the special meeting will not be
counted.
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You can attend the special meeting and vote in
person.
We will give you a ballot when you
arrive. However, if your shares are held in the name of your
broker, bank or another
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nominee, you must get a proxy from the broker, bank or other
nominee. That is the only way we can be sure that the broker,
bank or nominee has not already voted your shares.
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IF YOU DO NOT VOTE YOUR SHARES OF OUR COMMON STOCK IN ANY OF
THE WAYS DESCRIBED ABOVE, IT COULD HAVE THE SAME EFFECT AS A
VOTE AGAINST THE ADOPTION OF THE PROPERTIES ACQUISITION
PROPOSAL, BUT WILL NOT HAVE THE EFFECT OF A DEMAND FOR
CONVERSION OF YOUR SHARES INTO A PRO RATA SHARE OF THE
TRUST ACCOUNT IN WHICH A SUBSTANTIAL PORTION OF THE
PROCEEDS OF THE IPO (AND THE INTEREST EARNED FROM THEREON) ARE
HELD.
If you give a proxy, you may revoke it at any time before it is
exercised by doing any one of the following:
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you may send another proxy card with a later date;
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you may notify Robert Slaughter, our corporate secretary, in
writing before the special meeting that you have revoked your
proxy; or
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you may attend the special meeting, revoke your proxy, and vote
in person, as indicated above.
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Who
Can Answer Your Questions About Voting Your Shares
If you have any questions about how to vote or direct a vote in
respect of your shares of our common stock, you may call
[ ]
,
our proxy solicitor, at
[ ]
,
or Robert Slaughter, our corporate secretary at
(312) 698-6700.
No
Additional Matters May Be Presented at the Special
Meeting
This special meeting has been called only to consider the
adoption of the Properties Acquisition Proposal,
Article Sixth Amendment Proposal, 2007 Equity Plan
Proposal, Director Nomination Proposal and E&Y Ratification
Proposal. Other than procedural matters incident to the conduct
of the special meeting, no other matters will be considered at
the special meeting if they are not included in the notice of
the special meeting.
Any of our stockholders holding shares of GERA common stock
issued in the IPO as of the record date who affirmatively votes
these shares against the Properties Acquisition Proposal may
demand that we convert such shares into a pro rata portion of
the trust account (including interest thereon, but excluding
taxes on such interest and any amounts representing the
underwriters deferred discount), calculated as of two
business days prior to the anticipated consummation of the
acquisition. Demand may be made by checking the box on the proxy
card provided for that purpose and returning the proxy card in
accordance with the instructions provided. Demand may also be
made in any other writing that clearly states that conversion is
demanded and is delivered so that it is received by GERA at any
time prior to the special meeting. If demand is properly made,
the Properties Acquisition Proposal is approved and the LLC
Acquisition Agreement is consummated, we will convert these
shares into a pro rata portion of funds held in the trust
account (including interest thereon, but excluding taxes on such
interest and any amounts representing the underwriters
deferred discount), calculated as of two business days prior to
the anticipated consummation of the acquisition.
49
GERA stockholders who seek to exercise this conversion right
(Converting Stockholders) must affirmatively vote
against the acquisition proposal. Abstentions and broker
non-votes do not satisfy this requirement. Additionally, holders
demanding conversion must deliver their stock certificates
(either physically or electronically using Depository
Trust Companys DWAC (Deposit Withdrawal at Custodian)
System) to our transfer agent after the meeting. After the
meeting, the Company will send a notice to all Converting
Stockholders advising them of the requirement to deliver their
shares to the transfer agent, which notice will specify the time
period (which will be not less than 20 days from the date
of the notice) during which such delivery must be made. If you
hold the shares in street name, you will have to coordinate with
your broker to have your shares certificated or delivered
electronically. Certificates that have not been tendered (either
physically or electronically) in accordance with these
procedures will not be converted into cash.
If you choose to have your shares certificated, we have been
informed that our transfer agent, Continental Stock &
Trust Company, will not charge any fees in connection with
the tender of physical certificates. If you elect to have
physical delivery of your share certificates, you would have to
comply with the following steps. If your shares are held in
street name, you must instruct your account executive at your
bank or broker to withdraw the shares from the your account and
request that a physical certificate be issued in the your name.
Our transfer agent, will be available to assist with this
process. After the meeting, the Company will send a notice to
all Converting Stockholders advising them of the requirement to
deliver their shares to the transfer agent, which notice will
specify the time period (which will be not less than
20 days from the date of the notice) during which such
delivery must be made. Once you have received such notice, you
must submit your certificated shares to the transfer agent
within the period specified in the notice. Certificates that
have not been tendered in accordance with these procedures will
not be converted into cash.
The closing price of our common stock
on (the
record date) was $ and the
per-share, pro-rata cash held in the trust account on the record
date was approximately $ . Prior to
exercising conversion rights, our stockholders should verify the
market price of our common stock as they may receive greater
proceeds from the sale of their common stock in the public
market than from exercising their conversion rights if the
market price per share is higher than the conversion price. We
cannot assure our stockholders that they will be able to sell
their shares of GERA common stock in the open market, even if
the market price per share is higher than the conversion price
stated above, as there may not be sufficient liquidity in our
securities when our stockholders wish to sell their shares.
If the holders of 4,791,667 or more shares of common stock
issued in the IPO (an amount equal to 20% or more of those
shares), vote against the acquisition and properly demand
conversion of their shares, we will not be able to consummate
the acquisition.
If you exercise your conversion rights, then you will be
exchanging your shares of our common stock for cash and will no
longer own those shares. You will be entitled to receive cash
for these shares only if you affirmatively vote against the
acquisition proposal, properly demand conversion, and deliver
your stock certificate (either physically or electronically) to
our transfer agent after the meeting within the period specified
in a notice that you will receive from the Company, which period
will be not less than 20 days after the date of such notice.
50
Stockholders of GERA do not have appraisal rights in connection
with the acquisition under the DGCL.
We are soliciting proxies on behalf of our board of directors.
This solicitation is being made by mail but also may be made by
telephone or in person. We and our directors, officers and
employees may also solicit proxies in person, by telephone or by
other electronic means.
We have hired
[ ]
to assist in the proxy solicitation process. We will pay
[ ]
a fee of approximately $ plus
disbursements. Such fee will be paid with non-trust account
funds.
We will ask banks, brokers and other institutions, nominees and
fiduciaries to forward its proxy materials to their principals
and to obtain their authority to execute proxies and voting
instructions. We will reimburse them for their reasonable
expenses.
THE
PROPERTIES ACQUISITION PROPOSAL
The discussion in this document of the acquisition and the
principal terms of the LLC Acquisition Agreement is qualified in
its entirety by reference to the LLC Acquisition Agreement. A
copy of the LLC Acquisition Agreement is attached as
Annex A to this proxy statement.
General
Description of the Acquisition
Pursuant to the LLC Acquisition Agreement, GERA will acquire all
of the issued and outstanding membership interests of Property
Acquisition and as a consequence thereof will indirectly acquire
the Properties. Upon the closing of the transactions
contemplated by the LLC Acquisition Agreement, GBE will receive
from GERA the LLC Purchase Price in cash. The LLC Purchase Price
represents the amounts invested in or advanced to Property
Acquisition by GBE to fund the aggregate purchase price paid by
Property Acquisition for the Properties plus interest expense,
imputed interest on cash advanced to Property Acquisition or any
of the SPEs by GBE, and costs and expenses associated with the
evaluation, acquisition, financing and operation of the
Properties.
GERA and GBE have also agreed that pursuant to the Services
Agreement, GERA will pay GBE an acquisition fee equal to one
percent of the acquisition price for each of the Properties.
Accordingly, in addition to the LLC Purchase Price, at the
closing of the LLC Acquisition Agreement, GERA shall pay GBE an
acquisition fee of $1,222,000 with respect to the Properties.
Background
of the Acquisition
GERA was formed on September 7, 2005 for the purpose of
acquiring, through a purchase, asset acquisition or other
business combination, one or more United States commercial real
estate properties
and/or
assets. In March 2006, GERA consummated the IPO, from which it
derived net proceeds of approximately $133.4 million,
including proceeds from the exercise of the underwriters
over-allotment option. Approximately $132.3 million of the
net proceeds from the IPO, along with the initial capital from
GBE of $2.5 million and a deferred underwriting discount of
approximately $2.7 million, were placed in a trust account.
51
Following the completion of the IPO, GBE, acting on behalf of
GERA established a group of professionals (the GERA
Acquisition Team) led by Mark Chrisman, executive vice
president of acquisitions of GBE and a member of our investment
committee, to identify and review acquisition opportunities that
fit within GERAs identified investment strategy as set
forth in the final prospectus for the IPO. In addition to
sourcing investment opportunities for GERA through the GBE
network of brokers, the GERA Acquisition Team marketed
GERAs business plan to, and sourced investment
opportunities from, real estate professionals (including brokers
and owners of large real estate portfolios) from outside of the
GBE network of brokers. The GERA Acquisition Team reviewed
acquisition opportunities that had an aggregate value of
approximately $5.8 billion and that consisted of
approximately 60 million square feet of rentable space in
30 states. The acquisition opportunities that were
considered by the GERA Acquisition Team included entire
companies, distinct property portfolios, individual properties
and joint ventures.
As a result of the GERA Acquisition Teams contacts with
real estate professionals outside of the GBE network of brokers,
the GERA Acquisition Team became aware of the availability of
the Dallas Property in June 2006. The property was listed by CB
Richard Ellis and presented to the GERA Acquisition Team
directly by the listing broker. During August 2006, GERA
tendered a non-binding letter of intent to acquire the Dallas
Property and two other properties (all of which were owned by
the same entity) located in the Dallas metropolitan area. The
owner sold the other two properties to an unaffiliated
purchaser, but as a consequence of the non-binding letter of
intent tendered by GERA, in October 2006, pursuant to a
warehousing strategy authorized by the GBE board, as
more fully described below, Property Acquisition entered into a
contract to acquire the Dallas Property. Pursuant to this
contract, Property Acquisition had the right to terminate the
contract for any reason without loss of its earnest money
deposit or other penalty during a specified due diligence
period. During December 2006 through February 2007, the contract
for the Dallas Property was amended a number of times to, among
other things, extend the due diligence period several times,
reduce the purchase price, cause the terms of a tenant lease to
be modified and extend the closing date. The Dallas Property was
purchased by GERA Abrams Centre LLC, a wholly-owned subsidiary
of Property Acquisition, on February 20, 2007 pursuant to
this negotiated process.
As a result of the GERA Acquisition Teams contacts with
real estate professionals outside of the GBE network of brokers,
the GERA Acquisition Team became aware of the availability the
Rosemont Property in October 2006. The property, which was
managed by GEMS, a wholly-owned subsidiary of GBE, was presented
to the GERA Acquisition Team by the then owner of the property
on a direct basis as an off-market transaction. The property was
not marketed for sale by a listing broker. During December 2006,
GERA entered into a non-binding letter of intent to acquire the
Rosemont Property, and as a consequence of the non-binding
letter of intent entered into by GERA, in February 2007,
pursuant to the warehousing strategy being pursued by GBE,
Property Acquisition entered into a contract to acquire the
Rosemont Property. Pursuant to this contract, Property
Acquisition had the right to terminate the contract for the
Rosemont Property for any reason without loss of its earnest
money deposit or other penalty during a specified due diligence
period. The Rosemont Property was purchased by GERA 6400 Shafer
LLC, a wholly-owned subsidiary of Property Acquisition, on
February 28, 2007 pursuant to this negotiated process.
The GERA Acquisition Team became aware of the Danbury Property
in July 2006. The property was listed by GBE and was managed by
GEMS, a wholly-owned subsidiary of GBE. GBE became the leasing
agent for the Danbury Property in April 2002 and GBE became the
listing
52
broker of the sale of the Danbury Property in June 2006. GEMS
entered into a contract in June 2006 to commence management of
the Danbury Property in January 2007. GBE, in its capacity as
the broker for Buildings Co., the seller of the Danbury
Property, conducted an auction process for the Danbury Property.
The GERA Acquisition Team did not participate in the auction
process. As a result of the auction process, Buildings Co. with
the assistance of GBE, in its capacity as the broker for
Buildings Co., selected a preferred purchaser and entered into
negotiations with this purchaser. However, Buildings Co. and the
preferred purchaser from the auction process were unable to
enter into a definitive agreement with respect to the
transaction. Following the termination of the discussions
between Buildings Co. and the preferred purchaser from the
auction process, the GERA Acquisition Team entered into
discussions with Buildings Co. and began its due diligence
review of the Danbury Property. As a result of these
discussions, in February 2007, Property Acquisition, in
accordance with GBEs warehousing strategy, entered into a
contract to acquire the Danbury Property and another nearby
parcel, which permitted Property Acquisition to terminate the
contract for any reason without loss of its earnest money
deposit or other penalty during a specified due diligence
period. During March and April 2007, the contract was amended a
number of times to, among other things, extend the due diligence
period several times, reduce the purchase price, exclude the
smaller parcel from the transaction, address certain
environmental issues and extend the closing date. The Danbury
Property was purchased by GERA Danbury LLC, a wholly-owned
subsidiary of Property Acquisition, on June 15, 2007
through this negotiated process.
The concept of GBE warehousing properties for the GERA business
combination was introduced to the GBE board of directors at its
August 15, 2006 meeting. At this meeting, GBEs chief
executive officer, Mark Rose, provided the GBE board of
directors with an update on the status of GBEs review of
acquisition opportunities identified by the GERA Acquisition
Team to date. Mr. Rose explained to GBEs board of
directors that, because of the legal requirements that must be
satisfied for GERA to accomplish its business combination, the
process of identifying suitable acquisition opportunities for
GERA and completing the business combination faced two principal
challenges, transaction size and transaction speed. In order to
address these challenges, Mr. Rose proposed to GBEs
board of directors a strategy under which GBE would purchase
properties with the intention of re-selling them to GERA on a
basis that is cost neutral to GBE at such time as GBE had
accumulated assets of sufficient value for GERA to seek approval
of a business combination from its stockholders. Mr. Rose
then explained that the proposed strategy had not been
considered by the members of the board of directors of GERA
(other than persons who were also members of GBEs board of
directors) and, as a result, that there were no understandings,
arrangements or agreements of any nature whatsoever between GERA
and GBE with respect to any properties.
At a meeting of GBEs board of directors on
September 21, 2006, GBE management sought approval from
GBEs board of directors to pursue the warehousing strategy
discussed at the boards August 15, 2006 meeting and
approval of the acquisition of the Dallas Property as part of
the warehousing strategy. In connection with its proposals,
GBEs management reiterated to GBEs board of
directors that neither the purchase of the Dallas Property nor
the warehousing strategy had been considered by GERAs
board of directors (other than persons who were also members of
GBEs board of directors) and, as a result, that there were
no understandings, arrangements or agreements of any nature
whatsoever between GERA and GBE with respect to any properties,
including the Dallas Property.
At a meeting of GBEs board of directors on
September 25, 2006, GBEs board of directors
authorized the warehousing strategy and authorized GBE, through
Property Acquisition, to
53
enter into a contract to purchase the Dallas Property pursuant
to such strategy. GBEs board of directors authorized GBE,
through Property Acquisition, to enter into contracts to acquire
the Rosemont Property and the Danbury Property on
January 8, 2007. In addition, on February 10, 2007,
GBEs board of directors authorized GBE to enter into
specific modifications to its credit facility to facilitate the
warehousing strategy.
The warehousing concept was not introduced for consideration to
GERAs board of directors until GERAs officers were
reasonably comfortable that GBE would be able to aggregate
properties that appeared to meet GERAs acquisition
strategy and that would collectively satisfy the criteria for a
business combination.
On January 16, 2007, GERA held a telephonic meeting of its
board of directors. All members of the board were present along
with Mark Chrisman, executive vice president of acquisitions of
GBE, Don Olinger, interim chief financial officer of GERA and
interim chief financial officer of GBE, Robert Slaughter,
executive vice president and general counsel of GBE, and
Clifford Brandeis, Esq. of Zukerman Gore &
Brandeis, LLP, outside counsel to GERA. Mark Rose, the chief
executive officer of GERA and a member of the board of directors
of GERA, who is also the chief executive officer and a member of
the board of directors of GBE, opened the meeting by reminding
the board of certain requirements and timing issues related to
GERA completing a business combination. Mr. Rose
specifically noted that: (a) GERA must complete a business
combination by the beginning of September 2007 (or the beginning
of March 2008, if GERA has entered into a letter of intent,
agreement in principle or definitive agreement with respect to a
business combination prior to the beginning of September 2007),
and if GERA is unable to complete a business combination within
this time frame, GERA would be liquidated and dissolved and the
proceeds held in trust would be distributed to GERAs
public stockholders; (b) the business combination must have
a fair market value equal to at least 80% of the amount held in
trust from time to time; (c) the target entity, asset or
property for the business combination must have audited
financial statements; and (d) the business combination must
be approved by the holders of a majority of GERA common stock
issued in the IPO present in person or represented by proxy at
the special meeting, and the holders of 20% or more of the
common stock issued in the IPO must not vote against the
business combination and exercise their conversion rights.
Mr. Rose then updated the GERA board of directors with
respect to the actions taken by GBE on behalf of GERA since the
closing of the IPO. Mr. Rose next explained to the GERA
board the challenges that the GERA Acquisition Team encountered
in connection with pursuing acquisition opportunities on behalf
of GERA. Specifically, Mr. Rose explained to the board that
speed was an issue in the competitive commercial real estate
market and that, in the current environment, sellers of
desirable commercial real estate properties were typically
unwilling to agree to the uncertainty and lengthy delay between
executing a definitive agreement and closing that would result
in connection with selling properties to GERA due to the
necessity to obtain stockholder approval, of which there could
be no assurances. Mr. Rose then explained to the GERA board
that in response to these challenges, and in an attempt to
mitigate this competitive disadvantage, the GBE board of
directors authorized GBE to pursue a warehousing strategy under
which GBE would acquire commercial real estate properties with
the intention of re-selling the properties to GERA in the
business combination. Mr. Rose emphasized, however, that
there were no understandings, arrangements or agreements of any
nature whatsoever between GERA and GBE with respect to any
properties.
At this same meeting, Mr. Chrisman advised the board that
there were three properties GBE had identified to implement this
strategy. Mr. Chrisman indicated that the subject
properties fit
54
well with GERAs acquisition strategy and would
collectively satisfy the criteria for a business combination.
Mr. Rose then explained to the board that GBE was prepared
to own the properties for its own account in the event that the
board did not want to pursue the proposed strategy or if the
business combination was not ultimately approved by the board or
the stockholders of GERA. Mr. Rose further explained to the
board that, at the time, GBE was under contract to acquire the
Dallas Property, close to signing a contact to acquire the
Rosemont Property, and was in negotiations to acquire the
Danbury Property. Mr. Rose reiterated to the board that
GBEs determination to enter into a definitive agreement in
respect of the Dallas Property and to pursue the other
Properties did not impose any obligation on the board to approve
this strategy or on GERA to purchase the Properties, even if the
board determined to undertake further investigation of the
proposed strategy. Mr. Chrisman then described the
Properties in detail and a discussion ensued regarding the
proposed strategy, the Properties, the proposed terms of the
purchase of the Properties by GBE, and the possible terms and
structure of the purchase of the Properties by GERA from GBE,
including the need to create a special committee of the board
comprised solely of independent directors to consider and
evaluate any such transaction between GBE and GERA.
In February 2007, GBE, through subsidiaries of Property
Acquisition, acquired the Dallas Property for an aggregate
purchase price of $20 million. In addition, on
February 9, 2007, a subsidiary of GBE entered into a
definitive agreement to acquire the Rosemont Property for an
aggregate purchase price of $21.45 million, and the
acquisition of this property was completed on March 1,
2007. On February 20, 2007, a subsidiary of GBE entered
into a definitive agreement to acquire the Danbury Property for
an aggregate purchase price of $86 million, and the
acquisition of this property was completed on June 15, 2007.
On March 5, 2007, the board of directors of GERA held a
meeting to discuss the proposed acquisition strategy outlined at
its previous meeting, as well as issues relating to, and the
structure of, a possible transaction with GBE. All of the board
members were in attendance along with Richard W. Pehlke,
executive vice president and chief financial officer of GBE (who
was appointed chief financial officer of GERA at the meeting)
and Messrs. Slaughter, Chrisman and Brandeis. During this
meeting, Mr. Rose updated the board on the status of the
acquisitions of the Properties by subsidiaries of GBE.
Mr. Rose explained to the board that the acquisitions of
the Dallas Property and the Rosemont Property were complete, and
that a subsidiary of GBE had entered into a definitive agreement
to acquire the Danbury Property. Mr. Rose then described
for the board the terms of the acquisitions that had been
completed, as well as the financial condition and other
attributes of all of the Properties. In discussing the general
attributes of the Properties, Mr. Rose noted for the board
that the Properties fit well with the acquisition strategy of
GERA described in its final IPO prospectus. The board then
discussed the Properties, GBEs due diligence of the
Properties (including possible environmental issues at the
Danbury Property), the plans for repositioning the Properties,
the economic condition of the commercial real estate market
generally and in the specific markets in which the Properties
are located and potential exit strategies for the Properties.
Following Mr. Roses presentation, the board,
including all of the independent members of the board,
unanimously determined that pursuing the acquisition strategy
was in the best interests of GERA and its public stockholders.
Following this discussion, Messrs. Slaughter and Brandeis
advised the board that due to the fact that pursuing the
acquisition strategy would involve the purchase by GERA of
assets from GBE, the founding stockholder of GERA, and the fact
that two of the board members, Mr. Kojaian and
Mr. Rose, were also affiliates of GBE, it would be
advisable to establish a special committee of the board
comprised solely of the
55
independent members of the board to consider and evaluate a
possible transaction between GERA and GBE. Following this
discussion, the board established a special committee consisting
of William Downey, Melvin Lazar and Alan Stillman to consider
and evaluate the proposed transaction with GBE. Each of
Messrs. Downey, Lazar and Stillman are independent
directors as defined by American Stock Exchange rules
governing its listed companies.
On March 8, 2007, the special committee of the board
retained Willkie Farr & Gallagher LLP, or Willkie
Farr, as its counsel. Following its retention, and at the
direction of the special committee, Willkie Farr began
confirmatory due diligence of each of the Properties, focusing
primarily on any issues that were identified by GBE and its
counsel during their due diligence review of the Properties.
On March 21, 2007, a telephonic meeting of the special
committee was held. All members of the special committee were
present along with representatives from Willkie Farr. At the
meeting, the special committee and Willkie Farr discussed the
three Properties in detail, focusing primarily on the status of
the acquisition of the Danbury Property, including the
environmental due diligence issues that had been identified to
date, as well as the anticipated special committee process.
On April 16, 2007, the board of directors of GERA held a
telephonic meeting attended by all of the members of the board,
including the members of the special committee. Also attending
the meeting were Messrs. Pehlke, Slaughter, Chrisman and
Brandeis. At the meeting, Mr. Rose advised the board that
GBE was in the process of re-negotiating its agreement with
respect to the proposed purchase of the Danbury Property,
principally to bifurcate the purchase into two parcels so as to
facilitate GBEs purchase of the larger parcel as soon as
practicable. Mr. Rose explained to the board that it was
anticipated that this would result in a reduction of the
proposed purchase price with respect to the Danbury Property of
approximately $4.75 million. The board was advised that the
Danbury Property was being divided so as to eliminate, for the
time being, the smaller parcel from the transaction given
certain potential environmental issues that had been identified
during the course of due diligence.
Mr. Pehlke then advised the board that GBE had executed a
term sheet with Wachovia Bank to provide financing with respect
to the Properties. Mr. Pehlke also explained to the board
that Wachovia Bank was in the process of obtaining independent
appraisals of the Properties and preparing the documentation
with respect to the loan transaction. Mr. Lazar requested
that a copy of the term sheet be forwarded to the special
committees counsel, Willkie Farr.
Mr. Rose then gave the board an update on the commercial
real estate environment surrounding the Dallas Property and the
Rosemont Property. Specifically, Mr. Rose advised the board
that GBE believed that leasing prospects for the Dallas Property
had improved since GBE acquired the property, as evidenced by
the new leases that were being negotiated at the Dallas Property
at higher rental rates. In addition, Mr. Rose advised the
board that GBE believed that the value of the Dallas Property
had appreciated since the date of acquisition because sales of
comparable properties in the vicinity of the Dallas Property
which were in process had per square foot sales prices that were
greater than the per square foot purchase price paid by GBE for
the Dallas Property. Mr. Rose also noted renewed interest
in the Rosemont Property.
From March 21, 2007 through April 24, 2007, the
special committee interviewed a number of prospective financial
advisors and held several separate meetings. At a meeting of the
special committee held on April 23, 2007, in addition to
focusing on the interviews with the prospective financial
advisors that had taken place to date, the special committee and
Willkie Farr had
56
detailed discussions regarding the due diligence that Willkie
Farr had undertaken since March 2007. In addition, at this
meeting, Steven Seidman of Willkie Farr discussed with the
special committee its fiduciary duties in the context of the
proposed transaction. On April 24, 2007, at a meeting of
the special committee, the special committee unanimously
determined to retain Peter J. Solomon Company, or PJSC, as its
financial advisor. On May 8, 2007, GERA entered into a
letter agreement with PJSC with respect to its engagement as
financial advisor to the special committee.
On April 30, 2007, Property Acquisition entered into an
amendment to the purchase and sale agreement in respect of the
Danbury Property. Under the terms of the amendment, among other
things, the parties agreed to exclude from the transaction the
smaller parcel located at the Danbury Property. As a result of
the exclusion of the smaller parcel from the transaction, the
aggregate purchase price was reduced by $5.25 million to
$80.75 million.
On May 10, 2007, a telephonic meeting of the special
committee was held. All of the members of the special committee
were present along with representatives from Willkie Farr and
Jeffrey Hornstein of PJSC. At the meeting, the special
committee, Willkie Farr and PJSC discussed the various
transactions that had been entered into or would be entered into
between GERA and GBE or its affiliates in connection with the
proposed transaction. At the meeting, Willkie Farr and PJSC also
described for the special committee the transaction structure
that was being proposed by GBE, which involved the purchase by
GERA of all of the membership interests of Property Acquisition.
Willkie Farr explained to the special committee that through
GERAs acquisition of all of the membership interests of
Property Acquisition, GERA would indirectly acquire all of the
Properties. Following this discussion, the special committee
instructed Willkie Farr and PJSC to schedule a conference call
with GBE and its advisors to discuss and clarify several aspects
of the GBE proposal.
On May 11, 2007, a draft of the LLC Acquisition Agreement
was distributed to the special committee and its advisors. On
May 15, 2007, Willkie Farr distributed a
mark-up
of
the LLC Acquisition Agreement to counsel for GBE.
On May 14, 2007, Willkie Farr and PJSC participated in a
conference call with counsel to GBE. During this conference
call, counsel to GBE clarified several matters for Willkie Farr
and PJSC regarding the GBE proposal, including several questions
regarding the computation of the purchase price in the proposed
transaction. Specifically, on this conference call, counsel to
GBE provided an explanation of the nature of the fees and
expenses incurred by GBE in connection with its acquisition of
each of the Properties, as well as an explanation of the
computation of the imputed interest component of the purchase
price. Counsel to GBE explained that the interest rate utilized
for purposes of computing the imputed interest component of the
purchase price was based on GBEs borrowing cost under its
senior secured credit facility.
On May 21, 2007, a telephonic meeting of the special
committee was held. All of the members of the special committee
were present along with representatives from Willkie Farr and
Jeffrey Hornstein of PJSC. At the meeting, Willkie Farr and
PJSC updated the special committee on the status of the
negotiation of the proposed transaction, including the
conference call held with counsel to GBE on May 14.
Following this discussion, the special committee requested that
Willkie Farr organize a conference call with Mark Rose, the
chief executive officer and a member of the board of directors
of GBE, to provide additional information regarding, among other
things, certain of the terms contained in the agreements entered
into between GBE and GERA.
57
On May 22, 2007, GBE announced that it had entered into a
definitive merger agreement with NNN Realty Advisors. GBE
announced that the merger would be effected through the issuance
of shares of GBE common stock in exchange for all of the
outstanding shares of common stock of NNN Realty, with the
shareholders of NNN Realty owning approximately 59% of the
common stock of the combined company following the completion of
the merger.
On May 29, 2007, a conference call between the members of
the special committee and Mr. Rose was held. Counsel to GBE
participated in the conference call, as did representatives from
Willkie Farr and Jeffrey Hornstein from PJSC. On the conference
call, Mr. Rose provided additional information regarding
certain of the terms contained in the agreements entered into
between GBE and GERA. Mr. Rose and counsel to GBE also
provided additional information with respect to the proposed
transaction between GBE and NNN Realty, including the impact
that the transaction would have on GERA. Mr. Rose and
counsel to GBE explained that the proposed transaction between
GBE and NNN Realty would not have any adverse effect on the
proposed transaction between GBE and GERA, and that the
transaction between GBE and NNN Realty would likely have a
positive impact on GERA by expanding the scope of expertise that
would be available to GERA.
On May 29, 2007, following the conference call with
Mr. Rose and counsel to GBE, a meeting of the special
committee was convened. At the meeting, the special committee,
Willkie Farr and PJSC discussed the information provided by
Mr. Rose and counsel to GBE on the conference call. In
addition, the special committee, Willkie Farr and PJSC discussed
corporate governance matters with respect to transactions that
may be entered into between GBE and GERA in the future.
Following this discussion, the special committee requested that
Willkie Farr contact counsel to GBE to request that the board of
directors of GERA adopt a resolution that, subject to limited
exceptions, would require that a majority of the independent
members of GERAs board of directors approve any
transaction between GERA or any subsidiary thereof, on the one
hand, and GBE or any affiliate thereof (other than GERA or its
subsidiaries), on the other hand, and that this resolution may
not be revoked, amended or otherwise modified without the prior
consent of a majority of the independent members of the board.
In connection with this proposal, the special committee and
Willkie Farr also discussed requiring that GERA amend its bylaws
to take into account the terms of the proposed resolution.
On May 31, 2007, representatives from PJSC participated in
a conference call with Mr. Chrisman regarding the services
provided to and that would be provided to GERA in connection
with its acquisition of real estate properties. Following this
conference call, PJSC convened a conference call with Willkie
Farr and Messrs. Lazar and Stillman, two of the three
members of the special committee. On this conference call, PJSC
updated Willkie Farr and Messrs. Lazar and Stillman on its
discussions with Mr. Chrisman.
On June 1, 2007, representatives from Willkie Farr
participated in a conference call with counsel to GBE regarding
the remaining issues in the draft LLC Acquisition Agreement,
primarily consisting of the scope of certain of the
representations and warranties and the related indemnification
provisions.
On June 4, 2007, counsel to GBE informed representatives
from Willkie Farr that the request of the special committee
regarding independent director approval of transactions entered
into between GBE and GERA, together with the related amendment
to GERAs bylaws, was acceptable.
On June 4, 2007, a telephonic meeting of the special
committee was held. All of the members of the special committee
were present along with representatives from Willkie Farr and
Jeffrey
58
Hornstein of PJSC. At the meeting, representatives from Willkie
Farr led the special committee through a detailed discussion of
the terms and conditions of the LLC Acquisition Agreement, as
well as the draft resolution regarding independent director
approval of certain related party transactions. Following this
discussion, PJSC reviewed in detail for the special committee
its analyses of the proposed transaction, including the
aggregate consideration to be paid by GERA in connection with
the proposed transaction. Following its presentation, PJSC
provided orally to the special committee its opinion (which
opinion was subsequently confirmed in writing), to the effect
that, as of June 4, 2007, and based upon the
qualifications, assumptions, limitations and other matters set
forth in its written opinion, the aggregate consideration to be
paid by GERA under the terms of the LLC Acquisition Agreement
was fair from a financial point of view to GERA.
With the benefit of these presentations and advice, the special
committee discussed the terms and merits of the proposed
transaction in more detail. Following this discussion, the
special committee unanimously resolved that the LLC Acquisition
Agreement was fair to and in the best interests of GERA and
recommended that the board of directors of GERA approve the LLC
Acquisition Agreement and all of the transactions contemplated
thereby, and that the board of directors recommend to the
stockholders of GERA that they vote to approve the LLC
Acquisition Agreement and all of the transactions contemplated
thereby.
On June 5, 2007, a meeting of the full board of directors
was convened. After receiving the special committees
recommendation, the full board discussed and deliberated the
proposed transaction. Thereafter, the board of directors
unanimously determined that the LLC Acquisition Agreement and
the transactions contemplated thereby were fair to and in the
best interests of GERA, approved the LLC Acquisition Agreement
in substantially the form presented to the special committee
(subject to final revisions to the document as approved by the
counsel to the special committee) and the transactions
contemplated thereby, and recommended that the stockholders of
GERA vote to approve the LLC Acquisition Agreement and the
transactions contemplated thereby.
On June 6, 2007, a meeting of the board of directors of GBE
was convened. At this meeting the board of directors of GBE
approved GBEs execution of the LLC Acquisition, in
substantially the form presented to the board of directors
(subject to final revisions to the document as approved by
GBEs counsel) and the consummation of the transactions
contemplated thereby.
The
Special Committees Reasons for the Recommendation of the
LLC Acquisition Agreement
In the course of reaching its decision to recommend that the
board of directors approve the LLC Acquisition Agreement and the
transactions contemplated thereby, the special committee
consulted with senior management of GBE and GERA and the special
committees financial and legal advisors, and reviewed a
significant amount of information and considered a number of
factors weighing positively in favor of the transactions
contemplated by the LLC Acquisition Agreement, including the
following material factors:
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the fact that the consideration to be paid by GERA to GBE under
the terms of the LLC Acquisition Agreement represents the amount
invested or advanced to Property Acquisition by GBE to fund the
aggregate purchase price paid by Property Acquisition for the
Properties plus interest expense, imputed interest on cash
advanced to Property Acquisition or any of the SPEs by GBE, and
costs and expenses associated with the evaluation, acquisition,
financing and operation of the Properties, and that GBE
therefore was not seeking to profit
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from or otherwise capture any appreciation that may have accrued
with respect to the Properties since the date of the acquisition
thereof by GBE;
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the fact that the Properties fit well with the articulated
strategy of GERA of identifying underperforming office and
industrial properties in suburban areas of major metropolitan
markets that could be turned around or repositioned through
traditional value-enhancing techniques such as strong operating
expense controls, superior marketing, improved tenant management
and the structuring of flexible leasing arrangements;
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the fact that real estate fundamentals, including continued
economic growth, rising employment and strong trade volume,
provide a positive outlook for commercial real estate, coupled
with the fact that demand for commercial real estate is not
expected to dissipate in the near term due, in part, to the high
levels of investor liquidity and historically low interest rates;
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the fact that job growth remains strong and net absorption, a
key indicator of leasing demand, continues to outpace
completions, leading to declining vacancy rates; in addition,
the special committee took into consideration the fact that
lower occupancy costs in suburban markets as compared to the
central business districts of major markets will likely be
favorable for suburban assets, as tenants may be priced out of
central business districts in the major markets;
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with respect to each Property specifically, the special
committee considered the following material factors, among
others:
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the fact that the Dallas Property is a property that competes
for a wide range of users with rents in the average range for
the area (a Class B Property), is well located
in the recovering LBJ Freeway submarket in northeast Dallas, and
that the Dallas Property at the time of acquisition had an
occupancy rate of approximately 53% as compared to occupancy
rates of approximately 76% for other properties in the submarket
based upon GBEs proprietary database, which should enable
GERA to implement its articulated strategy thereby resulting in
value creation to the public stockholders of GERA; the special
committee also considered the fact that employment growth in the
Dallas/Fort Worth area is projected to average over 2.5%
annually through 2010, with most of the gains concentrated in
the business and professional services industries which are
predominant in the Dallas Property;
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the fact that at the time of acquisition, the Rosemont Property
had an occupancy rate of approximately 56% as compared to
occupancy rates of approximately 78% in the submarket based upon
GBEs proprietary database, which should enable GERA to
implement its articulated strategy thereby resulting in value
creation to the public stockholders of GERA; in addition, the
special committee considered the fact that a full-building
renovation of common areas, main lobby, elevators, restrooms and
landscaping was recently completed at the Rosemont Property,
enabling the commencement of accelerated marketing efforts; the
special committee also considered the fact that the submarket in
which the Rosemont Property is located has experienced positive
net absorption over the last several months, and the fact that
there appears to be a lack of available sites for new
development, which in combination should create a favorable
backdrop for sustainable recovery in the submarket in which the
Rosemont Property is located;
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the fact that the Danbury Property is a multi-tenant building
competing for premier office users with rents above average for
the area (a Class A Property), and that the
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Danbury Property had an occupancy rate of approximately 64% at
the time of acquisition as compared to occupancy rates of
approximately 83% for other Class A Properties in the
submarket based upon GBEs proprietary database
calculations, which should enable GERA to implement its
articulated strategy thereby resulting in value creation to the
public stockholders of GERA; and
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the presentation of PJSC (including an independent consideration
by the special committee of many of the factors identified in
the presentation and a review of the assumptions and
methodologies underlying the analyses in connection therewith)
and the opinion of PJSC to the special committee dated
June 4, 2007, a copy of which is attached to this proxy
statement as Annex E and which you should read carefully in
its entirety, to the effect that, as of such date and based upon
the qualifications, assumptions, limitations and other matters
set forth in its written opinion, the aggregate consideration to
be paid by GERA pursuant to the terms of the LLC Acquisition
Agreement is fair from a financial point of view to GERA.
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The special committee also considered a number of factors
relating to the procedural safeguards involved in the
negotiation of the transaction with GBE, each of which
contributes to the special committees belief that the
transaction is fair to our public stockholders and supports the
determinations made by the special committee:
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the special committee is comprised solely of independent
directors who are not employees of GBE or GERA;
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pursuant to the authority vested in the special committee by the
board of directors of GERA, the special committee had ultimate
authority to decide whether or not to recommend the proposed
transaction;
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the terms and conditions of the LLC Acquisition Agreement were
the product of arms length negotiations between the
special committee and its advisors, on the one hand, and GBE and
its advisors, on the other hand; and
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the special committee retained and received advice from its own
advisors, including PJSC, in evaluating, negotiating and
recommending the terms of the LLC Acquisition Agreement.
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In the course of its deliberations, the special committee also
considered a variety of risks and other countervailing factors
weighing negatively against the proposed transaction with GBE,
including:
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the fact that GERA is party to and will continue to be party to
numerous agreements and transactions with GBE, its founding
stockholder, thereby creating an actual or potential conflict of
interest between the public stockholders of GERA, on the one
hand, and GBE and members of its management, on the other hand;
however, the special committee considered the fact that in
connection with the execution of the LLC Acquisition Agreement,
the full board of directors of GERA adopted a resolution and a
related bylaw amendment that, subject to limited exceptions,
will require that a majority of the independent members of our
board of directors approve any transaction between GERA or any
subsidiary thereof, on the one hand, and GBE or any affiliate
thereof (other than GERA or its subsidiaries), on the other
hand, and that this resolution may not be revoked, amended or
otherwise modified without the prior consent of a majority of
the independent members of the board;
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the various related party transactions entered into in
connection with, or that will become effective upon the
completion of, the business combination transaction, which may
create an actual or potential conflict of interest, including,
among others:
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the fact that GERA has engaged GBE and its affiliates to provide
brokerage, property management, project management and related
real estate services, and the fact that GERA will be required to
deal exclusively with GBE and its affiliates with respect to
certain services, including real estate brokerage and consulting
services relating to real property acquisitions and
dispositions; in connection with its consideration of these
arrangements, which are described in detail elsewhere in this
proxy statement, the special committee also considered the fees
payable under the terms of such arrangements and the ability of
GERA to terminate these arrangements and the consequences
thereof;
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the fact that, upon the closing of the transactions contemplated
by the LLC Acquisition Agreement, GERA will be required to pay
GBE an acquisition fee of approximately $1.2 million; in
addition, with respect to the Danbury Property, the special
committee considered the fact that GBE or one of its affiliates
acted as the broker for the seller in the transaction and
received a fee of approximately $807,500 upon GBEs
purchase thereof;
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the fact that Kojaian Ventures, LLC, an entity controlled by
Michael Kojaian, the chairman of our board of directors,
purchased 1,666,667 units in the IPO, and that Kojaian
Ventures, LLC is permitted to vote such shares in its sole
discretion in connection with the proposed business combination;
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the fact that if the proposed business combination is not
approved by GERAs shareholders or GERA is unable to
complete the business combination by March 3, 2008, GERA
will be required to liquidate, thereby resulting in a complete
loss of GBEs initial $2,500,000 investment in GERA;
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the fact that environmental assessments conducted at the Danbury
Property revealed that certain additional remediation may be
required; however, the special committee took into consideration
the fact that (i) the seller in the transaction has agreed
to perform and pay all costs associated with completing, in
accordance with the requirements of applicable law, all required
assessments and remediation of any environmental conditions
existing at the Danbury Property prior to closing as identified
by such assessments and (ii) to secure the performance of
its obligations, at the closing, the seller of the Danbury
Property deposited $2 million in an escrow account which
will remain in place until the completion of the required
remediation, and that the seller of the Danbury Property,
together with certain related entities, have agreed to indemnify
Property Acquisition with respect to substantially all
liabilities which may be incurred under applicable law in
connection with the remediation of existing hazardous substances
at the Danbury Property or that are caused by the sellers
remediation activities;
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the fact that demand for the Properties may be significantly
affected by the general level of economic activity (including
employment growth (or reduction) and global investment) and
property values in the United States and that, as economic
activity slows customers may reduce their utilization of
commercial real estate property, thereby resulting in
competitive pricing pressures during periods of economic
downturn; and
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the fact that GERA will be heavily reliant on GBE to provide
substantial services required for the day-to-day operation of
its business, together with the fact that GERAs success
may depend, in part, on its ability to attract and retain
qualified personnel who possess the skills and experience
necessary to successfully operate GERA, which personnel may be
difficult to attract and retain.
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The foregoing discussion of the factors considered by the
special committee is not intended to be exhaustive, but it does
set forth the principal factors considered by the special
committee. The special committee reached the unanimous
conclusion to recommend that our board of directors approve the
LLC Acquisition Agreement and the transactions contemplated
thereby in light of the various factors described above and
other factors that each member of the special committee felt
were appropriate. In view of the wide variety of factors
considered by the special committee in connection with its
evaluation of the transactions contemplated by the LLC
Acquisition Agreement and the complexity of these matters, the
special committee did not consider it practical, and did not
attempt, to quantify, rank or otherwise assign relative weights
to the specific factors it considered in reaching its decision.
Rather, the special committee made its recommendation based on
the totality of information presented to it and the
investigation conducted by it and it advisors. In considering
the factors discussed above, individual members of the special
committee may have given different weights to different factors.
Recommendation
of Our Board of Directors
Our board of directors, acting largely on the recommendation of
the special committee, and after deliberation at a meeting on
June 5, 2007 as described above, determined by unanimous
vote that the LLC Acquisition Agreement and the transactions
contemplated thereby are fair to and in the best interests of
GERA and its stockholders, approved the LLC Acquisition
Agreement and the transactions contemplated thereby, and
recommended that the stockholders of GERA vote to approve the
LLC Acquisition Agreement and the transactions contemplated
thereby.
Our board recommends that you vote FOR
the approval of the Properties Acquisition Proposal.
In connection with approving the execution of the LLC
Acquisition Agreement and the transactions contemplated thereby,
our board of directors determined that the fair market value of
the Properties was at least equal to 80% of our net assets
(including the funds held in the trust account other than the
portion representing the underwriters deferred discount) at the
time of the execution of the LLC Acquisition Agreement. In
reaching this conclusion, the Companys board of directors
considered the fact that the fair market value of an asset is
generally determined by reference to the price at which a
willing buyer would agree to purchase an asset from a willing
seller. Cognizant that GBE had purchased each Property from an
unaffiliated third party in an arms length negotiated
transaction, the board of directors determined that the
aggregate contract purchase price paid by GBE for the Properties
of $122.2 million generally represented the aggregate fair
market value of the Properties, and that such aggregate contract
purchase price was in excess of 80% of the Companys net
assets at the time of the execution of the LLC Acquisition
Agreement. At the time of the execution of the LLC Acquisition
Agreement, the Company had net assets (including the funds held
in the trust account other than the portion representing the
underwriters deferred discount) of approximately
$140.8 million, and therefore the aggregate contract
purchase price for the Properties of $122.2 million (which
the board of directors determined generally represented the fair
market value of the Properties) was in excess of approximately
$112.7 million, representing 80% of the Companys net
assets at that time (as of September 20, 2007, the Company
had net assets
63
(including the funds held in the trust account other than the
portion representing the underwriters deferred discount) of
approximately $141.7 million, and 80% of this amount is
equal to approximately $113.4 million). In addition, in
reaching this conclusion, the board of directors considered the
fairness opinion rendered by PJSC and the analysis undertaken by
PJSC in connection therewith, as well as the actual and
projected sales, earnings and cash flow of each Property.
Opinion
of Peter J. Solomon Company L.P.
Pursuant to an engagement letter dated May 8, 2007, the
special committee of the board of directors of GERA engaged PJSC
to act as the financial advisor to the special committee with
respect to the transactions contemplated by the LLC Acquisition
Agreement, including to render to the special committee an
opinion as to the fairness, from a financial point of view, to
GERA of the aggregate consideration to be paid by GERA pursuant
to the terms of the LLC Acquisition Agreement. On June 4,
2007, PJSC rendered its oral opinion to the special committee,
which opinion was subsequently confirmed by delivery of a
written opinion dated June 4, 2007, to the effect that,
based upon the qualifications, assumptions, limitations and
other matters set forth in its written opinion, as of the date
of such opinion, the aggregate consideration to be paid by GERA
under the terms of the LLC Acquisition Agreement is fair from a
financial point of view to GERA.
The full text of PJSCs opinion, which sets forth
assumptions made, procedures followed, matters considered, and
limitations on and scope of the review by PJSC in rendering its
opinion, is attached as Annex E to this proxy statement. As
set forth in the text of the written opinion attached as
Appendix E to this proxy statement, PJSC has consented to
the inclusion of its written opinion in this proxy statement.
PJSCs opinion was directed only to the fairness, from a
financial point of view, to GERA of the aggregate consideration
to be paid by GERA pursuant to the terms of the LLC Acquisition
Agreement, was provided to the special committee in connection
with its evaluation of the transactions contemplated by the LLC
Acquisition Agreement, did not address GERAs underlying
business decision to undertake any part of the transactions or
any other aspect of such transactions and did not, and does not,
constitute a recommendation to any holder of GERAs common
stock or any other person as to how such holder or person should
vote or act on any matter relating to any part of the proposed
transaction with GBE described in this proxy statement or any
other matter. The summary of PJSCs opinion set forth in
this proxy statement is qualified in its entirety by reference
to the full text of such opinion. Holders of GERA common stock
are encouraged to read PJSCs opinion carefully and in its
entirety.
In connection with PJSCs opinion, PJSC:
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reviewed certain financial and other information regarding the
Properties that was provided to it by or on behalf of GERA and
GBE, including projections for the Properties that were prepared
by or on behalf of GBE;
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reviewed certain appraisals (the appraisals) that
were provided to PJSC by GBE and that were obtained by Wachovia
Bank, N.A. in connection with the Wachovia Mortgage Loans, and,
in connection with the review of the foregoing appraisals, PJSC
also reviewed and analyzed the supporting analytics and
methodology of the appraiser set forth therein;
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reviewed the terms and conditions of the commitment letters for
the Wachovia Mortgage Loans;
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reviewed information regarding the financial terms of certain
sales of commercial real estate that PJSC deemed comparable, in
whole or in part, to the Properties;
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reviewed the LLC Acquisition Agreement, as well as the purchase
and sale agreement, including any amendments thereto, relating
to each Property that was executed by Property Acquisition or a
subsidiary thereof; and
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performed such other analyses and reviewed such other material
and information as it deemed appropriate.
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PJSC assumed and relied upon the accuracy and completeness of
the information provided to PJSC for the purposes of PJSCs
opinion and PJSC did not assume any responsibility for
independent verification of such information, including, without
limitation, the information set forth in the appraisals. With
respect to the financial projections regarding the Properties
that were provided to PJSC, PJSC assumed that such financial
projections were reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the future
financial performance of the Properties. PJSC did not conduct a
physical inspection of the Properties. In addition, PJSC did not
conduct or assume any responsibility for any independent
valuation or appraisal of the assets or liabilities of Property
Acquisition, its subsidiaries or the Properties, nor was PJSC
furnished with any such valuation or appraisal (other than the
appraisals). Furthermore, PJSC did not consider any tax,
accounting or legal effects of the consummation of the
transactions contemplated by the LLC Acquisition Agreement
(including the indirect purchase of the Properties) or the
transaction structure on any person or entity.
PJSC also assumed that the transactions contemplated by the LLC
Acquisition Agreement, the commitment letters for the Wachovia
Mortgage Loans and the purchase and sale agreement for the
Danbury Property would be consummated in full in accordance with
the terms set forth therein, without waiver, modification or
amendment of any material term, condition or agreement, or, that
in the course of obtaining any regulatory or third party
approvals or consents, if required, no delay, limitation,
restriction or condition would be imposed that would have an
adverse effect on the Properties. PJSCs opinion was
necessarily based on economic, market and other conditions as in
effect on, and information made available to PJSC as of,
June 1, 2007. Furthermore, PJSCs opinion did not
address GERAs underlying business decision to undertake
the transactions contemplated by the LLC Acquisition Agreement.
In addition, PJSCs opinion did not address any other
aspect or implication of the consummation of the transactions
contemplated by the LLC Acquisition Agreement or any other
agreement, arrangement or understanding entered into in
connection with the consummation of such transactions or
otherwise, except as expressly identified in PJSCs opinion.
The following summarizes the significant financial analyses
performed by PJSC and reviewed with the special committee of the
board of directors of GERA on June 4, 2007 in connection
with the delivery of PJSCs opinion. The financial analyses
summarized below include information presented in tabular
format. In order to fully understand PJSCs financial
analyses, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete
description of the financial analyses. Considering the data in
the tables below without considering the full narrative
description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of PJSCs financial
analyses.
65
Illustrative
Discounted Cash Flow Analysis
General
PJSC performed an illustrative discounted cash flow analysis on
each Property. PJSC calculated the discounted cash flow values
of each Property as the sum of the net present values of
(i) the estimated future cash flow that each Property will
generate during certain assumed holding periods, covering the
period from 2008 through 2018, plus (ii) the terminal value
of each Property determined by applying certain assumed terminal
capitalization rates, or terminal cap rates, to the forecasted
net operating income of each Property in the year following an
assumed year of exit. The estimated future cash flows, as well
as the forecasted amount of net operating income, were based on
the financial projections for each Property for the years 2008
through 2017 that were prepared by GBEs management, as
well as financial projections that were contained in the
appraisals of each of the Properties that were reviewed by PJSC.
With respect to 2018, in certain cases, PJSC used certain
assumed growth rates that were consistent with the growth rates
utilized in managements projections and in the appraisals.
In addition, in performing this analysis, PJSC used certain
assumed discount rates, as well as certain other market based
assumptions that were contained in the projections provided to
PJSC by management and in the appraisals, including with respect
to market rent per square foot and market rent growth. The
assumed discount rates were based on PJSCs judgment of the
estimated weighted average cost of capital of each of the
Properties.
Dallas
PropertyManagement Projections
In performing its illustrative discounted cash flow analysis on
the Dallas Property using managements projections, PJSC
utilized an assumed terminal cap rate ranging from 7.0% to 8.0%
and a discount rate ranging from 8.0% to 10.0%. In addition, in
performing this analysis, PJSC utilized a variety of other
management assumptions, including an assumed market rent per
square foot of $13.50 and an assumed market rent growth rate of
7.41% for 2008 and 3.0% for 2009 and beyond. For purposes of
this analysis, PJSC assumed holding periods of three, five,
seven and ten years, and determined that the present value of
the free cash flow generated during the applicable holding
period plus the terminal value of the Dallas Property as of the
assumed exit date, was in the range of $17.9 million to
$28.5 million.
PJSC also performed a sensitivity analysis of the discounted
cash flow value of the Dallas Property assuming certain
deviations from managements assumptions with respect to
market rent per square foot and market rent growth rate. The
following table sets forth the results of PJSCs
sensitivity analysis assuming a terminal cap rate of 7.5%, a
discount rate of 9.0% and an assumed ten year holding period:
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Market
Rent
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Market
Rent Growth
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1.0%
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3.0%
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5.0%
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$11.50
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$
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17.4 million
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$
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19.2 million
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$
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21.1 million
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$13.50
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$
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20.9 million
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$
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22.9 million
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$
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25.2 million
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$15.50
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$
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24.4 million
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$
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26.7 million
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$
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29.3 million
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Dallas
PropertyAppraisal Projections
In performing its illustrative discounted cash flow analysis on
the Dallas Property using the appraisal projections, PJSC
utilized the same terminal cap rates and discount rates that it
utilized in performing the analysis based on the management
projections (terminal cap rate
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ranging from 7.0% to 8.0% and discount rate ranging from 8.0% to
10.0%). In addition, in performing this analysis, PJSC utilized
a variety of other assumptions that were contained in the
appraisal of the Dallas Property, including an assumed market
rent per square foot of $13.50 and an assumed market rent growth
rate of 3.0% for 2008 and beyond. For purposes of this analysis,
PJSC assumed holding periods of three, five, seven and ten
years, and determined that the present value of the free cash
flow generated during the applicable holding period plus the
terminal value of the Dallas Property as of the assumed exit
date, was in the range of $16.0 million to
$24.6 million.
PJSC also performed a sensitivity analysis of the discounted
cash flow value of the Dallas Property assuming certain
deviations from the appraisal assumptions with respect to market
rent per square foot and market rent growth rate. The following
table sets forth the results of PJSCs sensitivity analysis
assuming a terminal cap rate of 7.5%, a discount rate of 9.0%
and an assumed ten year holding period:
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Market
Rent
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Market
Rent Growth
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1.0%
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3.0%
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5.0%
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$11.50
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$
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16.2 million
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$
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17.8 million
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$
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19.6 million
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$13.50
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$
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19.5 million
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$
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21.4 million
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$
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23.5 million
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$15.50
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$
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22.7 million
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$
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24.9 million
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$
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27.3 million
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Rosemont
PropertyManagement Projections
In performing its illustrative discounted cash flow analysis on
the Rosemont Property using managements projections, PJSC
utilized an assumed terminal cap rate ranging from 7.0% to 8.0%
and a discount rate ranging from 8.0% to 10.0%. In addition, in
performing this analysis, PJSC utilized a variety of other
management assumptions, including an assumed market rent per
square foot of $12.00 and an assumed market rent growth rate of
5.0% for 2008 and beyond. For purposes of this analysis, PJSC
assumed holding periods of three, five, seven and ten years, and
determined that the present value of the free cash flow
generated during the applicable holding period plus the terminal
value of the Rosemont Property as of the assumed exit date, was
in the range of $20.8 million to $26.9 million.
PJSC also performed a sensitivity analysis of the discounted
cash flow value of the Rosemont Property assuming certain
deviations from managements assumptions with respect to
market rent per square foot and market rent growth rate. The
following table sets forth the results of PJSCs
sensitivity analysis assuming a terminal cap rate of 7.5%, a
discount rate of 9.0% and an assumed ten year holding period:
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Market
Rent
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Market
Rent Growth
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1.0%
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3.0%
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5.0%
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$10.00
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$
|
19.8 million
|
|
|
$
|
20.6 million
|
|
|
$
|
21.6 million
|
|
$12.00
|
|
$
|
21.9 million
|
|
|
$
|
22.9 million
|
|
|
$
|
24.1 million
|
|
$14.00
|
|
$
|
24.0 million
|
|
|
$
|
25.2 million
|
|
|
$
|
26.5 million
|
|
Rosemont
PropertyAppraisal Projections
In performing its illustrative discounted cash flow analysis on
the Rosemont Property using the appraisal projections, PJSC
utilized the same terminal cap rates and discount rates that it
utilized in performing the analysis based on the management
projections (terminal cap rate
67
ranging from 7.0% to 8.0% and discount rate ranging from 8.0% to
10.0%). In addition, in performing this analysis, PJSC utilized
a variety of other assumptions that were contained in the
appraisal of the Rosemont Property, including an assumed market
rent per square foot of $12.00 and an assumed market rent growth
rate of 3.0% for 2008 and beyond. For purposes of this analysis,
PJSC assumed holding periods of three, five, seven and ten
years, and determined that the present value of the free cash
flow generated during the applicable holding period plus the
terminal value of the Rosemont Property as of the assumed exit
date, was in the range of $19.0 million to
$26.3 million.
PJSC also performed a sensitivity analysis of the discounted
cash flow value of the Rosemont Property assuming certain
deviations from the appraisal assumptions with respect to market
rent per square foot and market rent growth rate. The following
table sets forth the results of PJSCs sensitivity analysis
assuming a terminal cap rate of 7.5%, a discount rate of 9.0%
and an assumed ten year holding period:
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
Rent
|
|
Market
Rent Growth
|
|
|
|
|
|
1.0%
|
|
|
|
3.0%
|
|
|
|
5.0%
|
|
$10.00
|
|
$
|
18.3 million
|
|
|
$
|
19.1 million
|
|
|
$
|
20.1 million
|
|
$12.00
|
|
$
|
20.4 million
|
|
|
$
|
21.5 million
|
|
|
$
|
22.6 million
|
|
$14.00
|
|
$
|
22.5 million
|
|
|
$
|
23.8 million
|
|
|
$
|
25.2 million
|
|
Danbury
PropertyManagement Projections
In performing its illustrative discounted cash flow analysis on
the Danbury Property using managements projections, PJSC
utilized an assumed terminal cap rate ranging from 8.0% to 9.0%
and a discount rate ranging from 9.0% to 11.0%. In addition, in
performing this analysis, PJSC utilized a variety of other
management assumptions, including an assumed market rent per
square foot of $20.99 (representing the blended market rent of
office space and the data center at the Danbury Property) and an
assumed market rent growth rate of 0.0% for 2008 and 3.0% for
2009 and beyond. For purposes of this analysis, PJSC assumed
holding periods of three, five, seven and ten years, and
determined that the present value of the free cash flow
generated during the applicable holding period plus the terminal
value of the Danbury Property as of the assumed exit date, was
in the range of $82.7 million to $109.1 million.
PJSC also performed a sensitivity analysis of the discounted
cash flow value of the Danbury Property assuming certain
deviations from managements assumptions with respect to
market rent per square foot and market rent growth rate. The
following table sets forth the results of PJSCs
sensitivity analysis assuming a terminal cap rate of 8.5%, a
discount rate of 10.0% and an assumed ten year holding period:
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
Rent
|
|
Market
Rent Growth
|
|
|
|
|
|
1.0%
|
|
|
|
3.0%
|
|
|
|
5.0%
|
|
$19.00
|
|
$
|
76.0 million
|
|
|
$
|
84.7 million
|
|
|
$
|
94.2 million
|
|
$21.00
|
|
$
|
86.8 million
|
|
|
$
|
96.4 million
|
|
|
$
|
107.0 million
|
|
$23.00
|
|
$
|
97.7 million
|
|
|
$
|
108.2 million
|
|
|
$
|
119.7 million
|
|
Danbury
PropertyAppraisal Projections
In performing its illustrative discounted cash flow analysis on
the Danbury Property using the appraisal projections, PJSC
utilized the same terminal cap rates and discount rates that it
68
utilized in performing the analysis based on the management
projections (terminal cap rate ranging from 8.0% to 9.0% and
discount rate ranging from 9.0% to 11.0%). In addition, in
performing this analysis, PJSC utilized a variety of other
assumptions that were contained in the appraisal for the Danbury
Property, including an assumed market rent per square foot of
$21.50 (representing the market rent of office space (excluding
the data center) at the Danbury Property) and an assumed market
rent growth rate of 3.0% for 2008 and beyond. For purposes of
this analysis, PJSC assumed holding periods of three, five,
seven and ten years, and determined that the present value of
the free cash flow generated during the applicable holding
period plus the terminal value of the Danbury Property as of the
assumed exit date, was in the range of $79.7 million to
$104.6 million.
PJSC also performed a sensitivity analysis of the discounted
cash flow value of the Danbury Property assuming certain
deviations from the appraisal assumptions with respect to market
rent per square foot and market rent growth rate. The following
table sets forth the results of PJSCs sensitivity analysis
assuming a terminal cap rate of 8.5%, a discount rate of 10.0%
and an assumed ten year holding period:
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
Rent
|
|
Market
Rent Growth
|
|
|
|
|
|
1.0%
|
|
|
|
3.0%
|
|
|
|
5.0%
|
|
$19.50
|
|
$
|
72.1 million
|
|
|
$
|
80.7 million
|
|
|
$
|
90.1 million
|
|
$21.50
|
|
$
|
82.7 million
|
|
|
$
|
92.1 million
|
|
|
$
|
102.5 million
|
|
$23.50
|
|
$
|
93.3 million
|
|
|
$
|
103.6 million
|
|
|
$
|
115.0 million
|
|
Illustrative
Discounted Cash Flow AnalysisSummary
Based on the illustrative discounted cash flow analysis
described above, PJSC determined that the aggregate theoretical
present value of the Properties, taking into account both the
management projections and the projections set forth in the
appraisals, was in the range of $114.7 million to
$164.5 million.
Analysis of
Selected Precedent Transactions
To analyze the aggregate consideration to be paid by GERA under
the terms of the LLC Acquisition Agreement relative to the
purchase price paid by other purchasers of commercial real
estate properties in selected similar precedent transactions,
PJSC analyzed a list of selected similar precedent transactions
in or surrounding the markets in which each Property is located.
Dallas
Property
To analyze the consideration paid by a subsidiary of Property
Acquisition in respect of the Dallas Property (and therefore the
consideration to be indirectly paid by GERA for the Dallas
Property through its acquisition of Property Acquisition)
relative to the consideration paid by purchasers in selected
similar precedent transactions, PJSC analyzed selected precedent
transactions that, for purposes of PJSCs analysis, PJSC
deemed similar to the Dallas Property based on PJSCs
experience, including transactions involving the following
buildings located in the Dallas metropolitan area:
|
|
|
North Central Plaza III, a Class B Property of
approximately 346,575 square feet that was purchased in
August 2005 for approximately $68 per square foot;
|
69
|
|
|
DFW East and West, a Class B Property of approximately
171,112 square feet that was purchased in August 2005 for
approximately $81 per square foot;
|
|
|
TriWest Plaza, a Class B Property of approximately
369,052 square feet that was purchased in May 2006 for
approximately $102 per square foot;
|
|
|
The Landmark, a Class B Property of approximately
158,649 square feet that was purchased in August 2006 for
approximately $83 per square foot; and
|
|
|
Valley View Tower, a Class B Property of approximately
77,056 square feet that was purchased in July 2006 for
approximately $94 per square foot.
|
Based on this information and other market information that PJSC
deemed relevant, PJSC determined that the purchase price range
for comparable transactions was between $70 and $95 per square
foot. Based on this information, PJSC determined the implied
valuation of the Dallas Property was in the range of
$22.8 million to $30.9 million.
Rosemont
Property
To analyze the consideration paid by a subsidiary of Property
Acquisition in respect of the Rosemont Property (and therefore
the consideration to be indirectly paid by GERA for the Rosemont
Property through its acquisition of Property Acquisition)
relative to the consideration paid by purchasers in selected
similar precedent transactions, PJSC analyzed selected precedent
transactions that, for purposes of PJSCs analysis, PJSC
deemed similar to the Rosemont Property based on PJSCs
experience, including transactions involving the following
buildings located in the Chicago metropolitan area:
|
|
|
OHare Plaza, a Class A Property of approximately
473,646 square feet that was purchased in December 2004 for
approximately $152 per square foot;
|
|
|
Northwest Plaza, a Class B Property of approximately
315,000 square feet that was purchased in November 2004 for
approximately $86 per square foot;
|
|
|
Triangle Plaza, a Class A Property of approximately
631,400 square feet that was purchased in March 2006 for
approximately $144 per square foot;
|
|
|
Riverway I, II & III, a Class A
Property of approximately 878,000 square feet that was
purchased in May 2005 for approximately $199 per square foot;
|
|
|
OHare International I & II, a Class A
Property of approximately 503,003 square feet that was
purchased in May 2005 for approximately $163 per square foot;
|
|
|
Columbia Center II, a Class B Property of approximately
148,680 square feet that was purchased in September 2005
for approximately $99 per square foot;
|
|
|
One OHare Center, a Class A Property of approximately
370,593 square feet that was purchased in January 2006 for
approximately $205 per square foot;
|
|
|
OHare Corporate Towers, a Class B Property of
approximately 202,325 square feet that was purchased in
January 2006 for approximately $53 per square foot;
|
|
|
Point OHare, a Class A Property of approximately
262,994 square feet that was purchased in February 2006 for
approximately $219 per square foot; and
|
|
|
OHare Plaza II, a Class A Property of approximately
232,944 square feet that was purchased in March 2006 for
approximately $129 per square foot.
|
70
Based on this information and other market information that PJSC
deemed relevant, PJSC determined that the purchase price range
for comparable transactions was between $85 and $200 per square
foot. Based on this information, PJSC determined the implied
valuation of the Rosemont Property was in the range of
$15.3 million to $36.0 million.
Danbury
Property
To analyze the consideration paid by a subsidiary of Property
Acquisition in respect of the Danbury Property (and therefore
the consideration to be indirectly paid by GERA for the Danbury
Property through its acquisition of Property Acquisition)
relative to the consideration paid by purchasers in selected
similar precedent transactions, PJSC analyzed selected precedent
transactions that, for purposes of PJSCs analysis, PJSC
deemed similar to the Danbury Property based on PJSCs
experience, including transactions involving the following
buildings located in or around the Danbury, Connecticut area:
|
|
|
Danbury Office Center, a Class B Property of approximately
126,855 square feet that was purchased in December 2005 for
approximately $136 per square foot;
|
|
|
Lee Farm Corporate Center, a Class A Property of
approximately 215,000 square feet that was purchased in
February 2007 for approximately $174 per square foot;
|
|
|
River Park, a Class A Property of approximately
403,227 square feet that was purchased in January 2005 for
approximately $181 per square foot;
|
|
|
Wilton Corporate Center, a Class A Property of
approximately 137,269 square feet that was purchased in
December 2005 for approximately $212 per square foot; and
|
|
|
Xerox Corporate Center, a Class A Property of approximately
255,000 square feet that was purchased in December 2006 for
approximately $215 per square foot.
|
Based on this information and other market information that PJSC
deemed relevant, PJSC determined that the purchase price range
for comparable transactions was between $135 and $210 per square
foot. Based on this information, PJSC determined the implied
valuation of the Danbury Property was in the range of
$141.3 million to $219.8 million.
Analysis of
Selected Precedent TransactionsSummary
Applying the analysis of selected precedent transactions
described above, PJSC determined that the aggregate implied
valuation of the Properties was in the range of
$179.4 million to $286.7 million.
Miscellaneous
In arriving at its opinion, PJSC performed a variety of
financial analyses, the material portions of which are
summarized above. The preparation of a fairness opinion is a
complex process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances
and, therefore, such an opinion is not necessarily susceptible
to a partial analysis or summary description. In arriving at its
opinion, PJSC did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative
judgments as to significance and relevance of each analysis and
factor. Accordingly, PJSC believes that its analyses must be
considered as a whole and that selecting portions of its
analyses, without considering all such analyses, could create an
incomplete view of the process underlying PJSCs opinion.
71
In performing its analyses, PJSC relied on numerous assumptions
made by management, the assumptions set forth in the appraisals
and made certain judgments of its own, many of which, in each
case, are beyond the control of GERA. Actual values will depend
upon several factors, including changes in market conditions,
general economic conditions and other factors that generally
influence the commercial real estate market in the markets in
which each of the Properties are located. The analyses performed
by PJSC are not necessarily indicative of actual values or
future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were
prepared solely as a part of PJSCs analysis of the
fairness, from a financial point of view, to GERA of the
aggregate consideration to be paid by GERA under the terms of
the LLC Acquisition Agreement and were provided to the special
committee of the board of directors of GERA in connection with
the delivery of PJSCs opinion. The analyses do not purport
to be appraisals or necessarily reflect the prices at which the
Properties might actually be sold, which may be higher or lower
than the purchase price to be paid by GERA under the terms of
the LLC Acquisition Agreement and which are inherently subject
to uncertainty. Because such analyses are inherently subject to
uncertainty, neither GERA, PJSC nor any other person or entity
assumes responsibility for their accuracy.
With regard to the selected precedent transactions analysis
summarized above, PJSC used these transactions for reference
purposes only; however, no transaction utilized as a comparison
is identical to the proposed transaction and none of the
individual properties included in this analysis is identical to
any of the Properties. Accordingly, an analysis of the foregoing
was not mathematical; rather, it involved complex considerations
and judgments concerning differences in financial and operating
characteristics (including the size) of the selected properties
and other factors that could affect the acquisition value of the
selected properties to which the Properties were being compared.
The aggregate consideration to be paid under the terms of the
LLC Acquisition Agreement generally represents the amount
invested or advanced to Property Acquisition by GBE to fund the
aggregate purchase price paid by Property Acquisition for the
Properties plus interest expense, imputed interest on cash
advanced to Property Acquisition or any of its subsidiaries by
GBE, and costs and expenses associated with the evaluation,
acquisition and operation of the Properties, and this aggregate
consideration was approved by the special committee of the board
of directors and the full board of directors of GERA. In
addition, as described elsewhere in this proxy statement,
PJSCs opinion was one of many factors taken into
consideration by the special committee of the board of directors
of GERA in evaluating the transactions contemplated by the LLC
Acquisition Agreement. Consequently, the PJSC analyses described
above should not be viewed as determinative of the opinion of
the special committee of the board of directors or the full
board of directors with respect to the proposed transaction.
As part of its investment banking activities, PJSC is regularly
engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, restructurings and
valuations for corporate or other purposes. The special
committee of the board of directors of GERA selected PJSC to
deliver an opinion with respect to the fairness, from a
financial point of view, to GERA of the aggregate consideration
to be paid by GERA under the terms of the LLC Acquisition
Agreement on the basis of such experience.
Upon the signing of the engagement letter, PJSC received a
non-refundable fee of $50,000. Upon the delivery of its opinion,
PJSC was paid an additional $125,000, resulting in total
compensation to PJSC of $175,000. In addition, subject to
certain limitations, GERA has agreed to reimburse PJSC for its
reasonable out-of-pocket expenses incurred in connection with
its engagement and to indemnify PJSC and certain related persons
against liabilities and
72
expenses, including liabilities under the federal securities
laws, relating to or arising out of its engagement.
PJSC has not received compensation during the last two years for
providing investment banking services to GERA or GBE.
Projected
Financial Information
Upon the closing of the proposed transaction, GERA does not
intend as a matter of course to publicly disclose detailed
long-term forecasts or internal projections as to future
revenues, earnings or financial condition, and is especially
wary of making such projections due to the unpredictability of
the underlying assumptions and estimates (see the discussion
regarding forward-looking statements based on estimates and
assumptions under the heading entitled
Forward-Looking
Information
of this proxy statement). However, we have
set forth below a summary of the financial projections for each
of the Properties that were prepared by senior management of GBE
in connection with GBEs acquisition of the Properties, as
well as the financial projections for each of the Properties
that were contained in the appraisals for each of the Properties
that were obtained by Wachovia Bank, N.A. in connection with the
Wachovia Mortgage Loans. These financial projections are being
included in this proxy statement because this information was
made available to our board of directors, the special committee
and PJSC prior to the execution and delivery of the LLC
Acquisition Agreement. This information was not prepared with a
view towards public disclosure, but rather was prepared to
facilitate GBEs and Wachovia Bank, N.A.s, as the
case may be, due diligence investigation and analysis of each of
the Properties.
The projections reflect numerous estimates and assumptions with
respect to general market information (including market rent per
square foot and market rent growth) and general business,
economic and financial conditions, as well as matters specific
to our proposed business, many of which are beyond our control.
As a result, there can be no assurance that the projected
results will be realized or that actual results will not be
significantly higher or lower than projected. Important factors
that may affect actual results and result in the forecasted
results not being achieved include, but are not limited to, the
risks summarized under the heading entitled
Risk
Factors
of this proxy statement. In addition, the
projections cover multiple years and such information by its
nature becomes less reliable with each successive year. The
financial projections were prepared solely to facilitate
GBEs and Wachovia Bank, N.A.s, as the case may be,
due diligence investigation and analysis of each of the
Properties, and were not prepared with a view toward public
disclosure or toward complying with U.S. generally accepted
accounting principles, the published guidelines of the SEC
regarding projections or the guidelines established by the
American Institute of Certified Public Accountants for
preparation and presentation of prospective financial
information. Neither our independent registered public
accounting firm, nor any other independent accountants, have
compiled, examined, or performed any procedures with respect to
the prospective financial information contained herein, nor have
they expressed any opinion or any other form of assurance on
such information or its achievability. Furthermore, the
financial projections do not take into account any circumstances
or events occurring after the date they were prepared.
You are cautioned not to place undue reliance on the projections
set forth below. No one has made or makes any representation to
any stockholder or any other person regarding the information
included in these projections. The inclusion of projections in
this proxy statement should not be regarded as an indication
that such projections will be an accurate prediction of future
events, and they should not be relied on as such. We undertake
no obligation to update,
73
or otherwise revise the projections to reflect circumstances
existing after the date when made or to reflect the occurrence
of future events, even in the event that any or all of the
assumptions are shown to be in error.
Dallas
Property-Managements Projections
The financial projections prepared by GBEs senior
management in connection with its acquisition of the Dallas
Property, which were provided to our board of directors, the
special committee and PJSC, included the following estimates of
the future financial performance of the Dallas Property (all
amounts expressed in the table below are in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018*
|
|
|
Revenue
|
|
$
|
2.4
|
|
|
$
|
3.7
|
|
|
$
|
5.2
|
|
|
$
|
5.7
|
|
|
$
|
6.0
|
|
|
$
|
5.6
|
|
|
$
|
5.2
|
|
|
$
|
5.8
|
|
|
$
|
6.6
|
|
|
$
|
6.9
|
|
|
$
|
7.1
|
|
Net Operating Income
|
|
$
|
0.4
|
|
|
$
|
1.3
|
|
|
$
|
2.3
|
|
|
$
|
2.7
|
|
|
$
|
2.9
|
|
|
$
|
2.6
|
|
|
$
|
2.1
|
|
|
$
|
2.6
|
|
|
$
|
3.1
|
|
|
$
|
3.3
|
|
|
$
|
3.4
|
|
Property Cash Flow
|
|
$
|
(2.3
|
)
|
|
$
|
(1.3
|
)
|
|
$
|
0.7
|
|
|
$
|
2.2
|
|
|
$
|
2.7
|
|
|
$
|
1.3
|
|
|
$
|
0.1
|
|
|
$
|
1.3
|
|
|
$
|
2.8
|
|
|
$
|
3.1
|
|
|
$
|
3.2
|
|
|
|
|
*
|
|
Projections for 2018 were not provided by GBE senior management.
Such projections were determined by PJSC using certain assumed
growth rates that were consistent with the growth rates utilized
in the projections prepared by senior management of GBE.
|
The material assumptions utilized by GBE senior management in
preparing these financial projections included (i) an
assumed market rent per square foot of $13.50, (ii) assumed
market rent growth rates of 7.41% for 2008 and 3.0% for 2009 and
beyond, (iii) a stabilized occupancy rate of 93.0% and
(iv) a renewal probability rate of 75.0%.
Dallas
Property-Appraisal Projections
The financial projections included in the appraisal of the
Dallas Property, which were provided to our board of directors,
the special committee and PJSC, included the following estimates
of the future financial performance of the Dallas Property (all
amounts expressed in the table below are in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018*
|
|
|
Revenue
|
|
$
|
2.6
|
|
|
$
|
3.0
|
|
|
$
|
4.0
|
|
|
$
|
4.8
|
|
|
$
|
5.1
|
|
|
$
|
4.5
|
|
|
$
|
4.6
|
|
|
$
|
5.2
|
|
|
$
|
6.1
|
|
|
$
|
5.9
|
|
|
$
|
6.1
|
|
Net Operating Income
|
|
$
|
0.6
|
|
|
$
|
0.8
|
|
|
$
|
1.6
|
|
|
$
|
2.2
|
|
|
$
|
2.4
|
|
|
$
|
1.8
|
|
|
$
|
1.8
|
|
|
$
|
2.3
|
|
|
$
|
3.0
|
|
|
$
|
2.8
|
|
|
$
|
2.9
|
|
Property Cash Flow
|
|
$
|
(0.2
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
0.5
|
|
|
$
|
1.2
|
|
|
$
|
1.8
|
|
|
$
|
1.0
|
|
|
$
|
0.5
|
|
|
$
|
1.3
|
|
|
$
|
2.3
|
|
|
$
|
2.2
|
|
|
$
|
2.2
|
|
|
|
|
*
|
|
Projections for 2018 were not included in the appraisal for the
Dallas Property. Such projections were determined by PJSC using
certain assumed growth rates that were consistent with the
growth rates utilized in the projections that were contained in
the appraisal of the Dallas Property.
|
The material assumptions utilized by the appraiser in preparing
these financial projections included (i) an assumed market
rent per square foot of $13.50, (ii) assumed market rent
growth rates of 3.0% for 2008 and beyond, (iii) a
stabilized occupancy rate of 85.0% and (iv) a renewal
probability rate of 70.0%.
74
Rosemont
Property-Managements Projections
The financial projections prepared by GBEs senior
management in connection with its acquisition of the Rosemont
Property, which were provided to our board of directors, the
special committee and PJSC, included the following estimates of
the future financial performance of the Rosemont Property (all
amounts expressed in the table below are in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018*
|
|
|
Revenue
|
|
$
|
2.5
|
|
|
$
|
3.7
|
|
|
$
|
4.1
|
|
|
$
|
4.3
|
|
|
$
|
4.5
|
|
|
$
|
4.3
|
|
|
$
|
4.4
|
|
|
$
|
4.8
|
|
|
$
|
5.0
|
|
|
$
|
5.1
|
|
|
$
|
5.2
|
|
Net Operating Income
|
|
$
|
0.7
|
|
|
$
|
1.8
|
|
|
$
|
2.2
|
|
|
$
|
2.3
|
|
|
$
|
2.4
|
|
|
$
|
2.2
|
|
|
$
|
2.3
|
|
|
$
|
2.6
|
|
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
$
|
2.8
|
|
Property Cash Flow
|
|
$
|
(1.4
|
)
|
|
$
|
0.3
|
|
|
$
|
1.9
|
|
|
$
|
2.3
|
|
|
$
|
2.4
|
|
|
$
|
1.0
|
|
|
$
|
0.4
|
|
|
$
|
2.4
|
|
|
$
|
2.6
|
|
|
$
|
2.4
|
|
|
$
|
2.4
|
|
|
|
|
*
|
|
Projections for 2018 were not provided by GBE senior management.
Such projections were determined by PJSC using certain assumed
growth rates that were consistent with the growth rates utilized
in the projections prepared by senior management of GBE.
|
The material assumptions utilized by GBE senior management in
preparing these financial projections included (i) an
assumed market rent per square foot of $12.00, (ii) assumed
market rent growth rates of 5.0% for 2008 and beyond,
(iii) a stabilized occupancy rate of 95.0% and (iv) a
renewal probability rate of 70.0%.
Rosemont
Property-Appraisal Projections
The financial projections included in the appraisal of the
Rosemont Property, which were provided to our board of
directors, the special committee and PJSC, included the
following estimates of the future financial performance of the
Rosemont Property (all amounts expressed in the table below are
in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
Revenue
|
|
$
|
2.5
|
|
|
$
|
3.4
|
|
|
$
|
4.0
|
|
|
$
|
4.3
|
|
|
$
|
4.4
|
|
|
$
|
4.4
|
|
|
$
|
4.2
|
|
|
$
|
4.7
|
|
|
$
|
4.8
|
|
|
$
|
4.9
|
|
|
$
|
4.9
|
|
Net Operating Income
|
|
$
|
0.7
|
|
|
$
|
1.5
|
|
|
$
|
2.1
|
|
|
$
|
2.2
|
|
|
$
|
2.3
|
|
|
$
|
2.2
|
|
|
$
|
2.0
|
|
|
$
|
2.4
|
|
|
$
|
2.5
|
|
|
$
|
2.5
|
|
|
$
|
2.5
|
|
Property Cash Flow
|
|
$
|
(0.7
|
)
|
|
$
|
0.0
|
|
|
$
|
1.9
|
|
|
$
|
2.2
|
|
|
$
|
2.3
|
|
|
$
|
1.1
|
|
|
$
|
0.1
|
|
|
$
|
2.0
|
|
|
$
|
2.5
|
|
|
$
|
2.2
|
|
|
$
|
1.5
|
|
The material assumptions utilized by the appraiser in preparing
these financial projections included (i) an assumed market
rent per square foot of $12.00, (ii) assumed market rent
growth rates of 3.0% for 2008 and beyond and (iii) a
renewal probability rate of 70.0%.
Danbury
Property-Managements Projections
The financial projections prepared by GBEs senior
management in connection with its acquisition of the Danbury
Property, which were provided to our board of directors, the
special committee and PJSC, included the following estimates of
the future financial performance of the Danbury Property (all
amounts expressed in the table below are in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018*
|
|
|
Revenue
|
|
$
|
14.8
|
|
|
$
|
17.5
|
|
|
$
|
20.5
|
|
|
$
|
23.2
|
|
|
$
|
24.1
|
|
|
$
|
25.1
|
|
|
$
|
26.0
|
|
|
$
|
26.6
|
|
|
$
|
27.3
|
|
|
$
|
27.4
|
|
|
$
|
28.2
|
|
Net Operating Income
|
|
$
|
4.4
|
|
|
$
|
6.3
|
|
|
$
|
8.8
|
|
|
$
|
11.0
|
|
|
$
|
11.6
|
|
|
$
|
12.2
|
|
|
$
|
12.7
|
|
|
$
|
12.9
|
|
|
$
|
13.2
|
|
|
$
|
13.0
|
|
|
$
|
13.3
|
|
Property Cash Flow
|
|
$
|
(2.0
|
)
|
|
$
|
(3.0
|
)
|
|
$
|
1.1
|
|
|
$
|
7.1
|
|
|
$
|
9.4
|
|
|
$
|
11.5
|
|
|
$
|
11.9
|
|
|
$
|
11.9
|
|
|
$
|
13.1
|
|
|
$
|
4.5
|
|
|
$
|
4.7
|
|
75
|
|
|
*
|
|
Projections for 2018 were not provided by GBE senior management.
Such projections were determined by PJSC using certain assumed
growth rates that were consistent with the growth rates utilized
in the projections prepared by senior management of GBE.
|
The material assumptions utilized by GBE senior management in
preparing these financial projections included (i) an
assumed market rent per square foot of $20.99 (representing the
blended market rent for office space and the data center at the
Danbury Property), (ii) assumed market rent growth rates of
0.0% for 2008 and 3.0% for 2009 and beyond, (iii) a
stabilized occupancy rate of 90.0% and (iv) a renewal
probability rate of 75.0%.
Danbury
Property-Appraisal Projections
The financial projections included in the appraisal of the
Danbury Property, which were provided to our board of directors,
the special committee and PJSC, included the following estimates
of the future financial performance of the Danbury Property (all
amounts expressed in the table below are in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
Revenue
|
|
$
|
15.2
|
|
|
$
|
18.8
|
|
|
$
|
22.3
|
|
|
$
|
23.9
|
|
|
$
|
24.4
|
|
|
$
|
25.0
|
|
|
$
|
26.2
|
|
|
$
|
25.0
|
|
|
$
|
27.6
|
|
|
$
|
26.7
|
|
|
$
|
28.6
|
|
Net Operating Income
|
|
$
|
3.6
|
|
|
$
|
6.5
|
|
|
$
|
9.4
|
|
|
$
|
10.5
|
|
|
$
|
10.6
|
|
|
$
|
10.7
|
|
|
$
|
11.6
|
|
|
$
|
10.1
|
|
|
$
|
12.0
|
|
|
$
|
10.9
|
|
|
$
|
12.2
|
|
Property Cash Flow
|
|
$
|
0.5
|
|
|
$
|
1.4
|
|
|
$
|
2.4
|
|
|
$
|
9.9
|
|
|
$
|
9.6
|
|
|
$
|
9.1
|
|
|
$
|
11.2
|
|
|
$
|
9.7
|
|
|
$
|
3.1
|
|
|
$
|
9.6
|
|
|
$
|
(2.4
|
)
|
The material assumptions utilized by the appraiser in preparing
these financial projections included (i) an assumed market
rent per square foot of $21.50 (representing the market rent of
office space (excluding the data center) at the Danbury
Property), (ii) assumed market rent growth rates of 3.0%
for 2008 and beyond, (iii) a stabilized occupancy rate of
84.0% and (iv) a renewal probability rate of 84.0%.
The acquisition and the transactions contemplated by the LLC
Acquisition Agreement is not subject to any additional federal
or state regulatory requirement or approval, including the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, or HSR Act.
Newly
Adopted Board Resolution
In connection with the execution of the LLC Acquisition
Agreement, at the request of the special committee of the board
of directors, the full board of directors of GERA executed a
unanimous written consent, dated as of June 18, 2007, which
provides that, subject to limited exceptions, neither GERA nor
any subsidiary thereof will enter into any agreement,
arrangement or other transaction after June 18, 2007 that
is between GERA or any subsidiary thereof, on the one hand, and
any affiliate of GERA or any subsidiary thereof (other than GERA
or a subsidiary thereof), on the other hand, unless and until
such agreement, arrangement or other transaction has been
reviewed by, and received the prior approval of, a majority of
the independent directors of GERA. In addition, under the terms
of this resolution, neither GERA nor any subsidiary thereof will
amend, modify, supplement, extend or terminate (other than at
the stated expiration date) any agreement, arrangement or other
transaction between GERA or any subsidiary thereof, on the one
hand, and any affiliate of GERA or any subsidiary thereof (other
than GERA or a subsidiary thereof), on the other hand, that is
in existence on or before June 18,
76
2007, unless and until such amendment, modification,
supplementation, extension or termination has been reviewed by,
and received the prior approval of, a majority of the
independent directors of GERA. For purposes of this resolution,
so long as GBE or any of its affiliates or successors owns
beneficially more than 5% of the outstanding shares of common
stock of GERA, GBE and its affiliates and successors will be
deemed affiliates of GERA and its subsidiaries. In addition,
this resolution may not be amended, modified, supplemented,
revoked or repealed without the vote of the majority of
independent directors of GERA.
In connection with the adoption of this resolution, the board of
directors of GERA also amended and restated the bylaws of GERA
to give effect to this resolution.
77
THE
LLC ACQUISITION AGREEMENT
The following summary of the material provisions of the LLC
Acquisition Agreement is qualified by reference to the complete
text of the LLC Acquisition Agreement, a copy of which is
attached as Annex A to this proxy statement. All
stockholders are encouraged to read the LLC Acquisition
Agreement in its entirety for a more complete description of the
terms and conditions of the acquisition.
On June 18, 2007, GERA entered into the LLC Acquisition
Agreement with Property Acquisition and GBE, the sponsor and an
affiliate of GERA, to acquire Property Acquisition. As
consideration for the acquisition of Property Acquisition,
pursuant to which GERA will indirectly acquire the Properties,
GERA will pay to GBE the LLC Purchase Price.
Closing
of the Acquisition
The closing of the acquisition will take place promptly
following the satisfaction of the conditions described below
under
The LLC Acquisition AgreementConditions to
the Closing
, unless GERA and GBE agree in writing to
another time. The acquisition is expected to be consummated
promptly after the special meeting of GERAs stockholders
described in this proxy statement, provided that the requisite
stockholder approval is obtained and the other conditions to
closing are satisfied.
Acquisition
Consideration
On closing of the acquisition, GERA will acquire the Properties
through its ownership of Property Acquisition. The consideration
to be paid by GERA for the acquisition of Property Acquisition
will represent the amounts invested in or advanced to Property
Acquisition by GBE to fund the aggregate purchase price paid by
Property Acquisition for the Properties plus interest expense,
imputed interest on cash advanced to Property Acquisition or any
of the SPEs by GBE and costs and expenses associated with
the evaluation, acquisition, financing and operation of the
Properties.
GBEs
Investment in Property Acquisition
As of June 15, 2007, GBEs investment in Property
Acquisition was approximately $163.2 million. The
investment in Property Acquisition consists of
$120.5 million of mortgage debt secured by the Properties
and an aggregate equity investment of approximately
$42.7 million of which approximately:
(a) $8.4 million is attributed to the Rosemont
Property; (b) $7.8 million is attributed to the Dallas
Property; and (c) $26.5 million is attributed to the
Danbury Property.
Property Acquisition purchased the Properties for an aggregate
contract purchase price of $122.2 million
($20.0 million for the Dallas Property, $21.45 million
for the Rosemont Property and $80.75 million for the
Danbury Property) and as a result of adjustments at the closings
of the purchases of the Properties received aggregate credits
against the purchase prices of approximately $6.6 million.
In addition, through June 15, 2007, Property Acquisition
paid an aggregate of approximately $0.4 million in other
direct acquisition costs. Imputed interest on amounts advanced
by GBE to Property Acquisition through June 15, 2007 were
approximately $1.2 million. In addition, Property
Acquisition funded approximately $43.6 million of reserves
and paid approximately $2.4 million in fees in connection
with the mortgage loans discussed below for a total investment
of approximately $163.2 million.
78
On June 15, 2007, simultaneously with the acquisition of
the Danbury Property by GERA Danbury, LLC, Property
Acquisitions SPEs, received mortgage loans from Wachovia
Bank, N.A. totaling $120.5 million secured by the
Properties. One mortgage loan is in the amount of
$42.5 million, which is secured jointly by the Dallas
Property and the Rosemont Property (the Dallas and
Rosemont Wachovia Loan) (GBE has internally allocated
approximately $22 million to the Rosemont Property and
approximately $20.5 million to the Dallas Property), and
the other mortgage loan is in the amount of $78 million
which is secured by the Danbury Property (the Danbury
Wachovia Loan; the Dallas and Rosemont Wachovia Loan and
the Danbury Wachovia Loan, collectively, the Wachovia
Mortgage Loans). The aggregate proceeds of the Wachovia
Mortgage Loans were $120.5 million which were used as
follows: (i) $72.3 million to pay the purchase price
of the Danbury Property (net of closing adjustments);
(ii) $43.6 million to fund required tax, insurance,
interest, engineering, debt and leasing reserves which are held
by Wachovia; (iii) $2.4 million to pay the
lenders fees and costs; and (iv) $2.2 million to
reduce GBEs aggregate equity in the Properties.
Purchase Price of
Property Acquisition
Pursuant to the LLC Acquisition Agreement, as consideration for
the acquisition of Property Acquisition, GERA will pay to GBE
the sum of items (a) through (f) below (collectively,
the LLC Purchase Price):
|
|
|
|
(a)
|
$42,739,000 (the Preliminary Purchase
Price)
(1)
;
plus
|
|
|
(b)
|
interest on the Preliminary Purchase Price calculated at the
rate per annum, which rate shall be adjusted monthly at and as
of the 15th day of each month (or, if the 15th day is
not a business day, the next business day of such month), equal
to the one-month London Inter-Bank Offered Rate (LIBOR) plus
3.50% (the Interest Rate) from June 16, 2007
through and including the closing date; plus
|
|
|
(c)
|
all direct costs (including, without limitation, due diligence
and closing costs, audit and accounting fees, financing fees,
and third party legal fees and costs) paid by GBE on or after
June 16, 2007 in connection with the acquisition of any of
the Properties (the Property Acquisition Costs); plus
|
|
|
(d)
|
interest on the Property Acquisition Costs calculated at the
Interest Rate from the date of payment of any such cost through
and including the closing date; plus
|
|
|
(e)
|
the amount of any advances made by GBE to Property Acquisition
or any of its subsidiaries on or after June 16, 2007 (and
not repaid to GBE with interest prior to the closing date) to
fund any operating losses incurred with respect to any of the
Properties at any time after June 15, 2007 through the
closing date (the Property Advances); plus
|
|
|
|
|
(f)
|
interest on the Property Advances calculated at the Interest
Rate from the date of each such advance through and including
the closing date.
|
79
|
|
|
|
(1)
|
the Preliminary Purchase Price was calculated as follows
(amounts in thousands):
|
|
|
|
|
|
Property contract purchase price
|
|
$
|
122,200
|
|
Property closing adjustments, net
|
|
|
(6,646
|
)
|
Other direct acquisition costs (as
of June 15, 2007)
|
|
|
450
|
|
Interest on property acquisition
costs (as of June 15, 2007)
|
|
|
1,261
|
|
Wachovia Mortgage Loans assumed
|
|
|
(120,500
|
)
|
Financing reserves
|
|
|
43,574
|
|
Financing fees
|
|
|
2,400
|
|
|
|
|
|
|
Preliminary Purchase Price
|
|
|
42,739
|
|
In addition, GERA will indirectly acquire the Properties subject
to the Wachovia Mortgage Loans.
The following is an example of a calculation of the LLC Purchase
Price. If the business combination was consummated on
September 15, 2007, the amount of cash consideration paid
to GBE would be approximately $44.6 million based upon the
sum of the Preliminary Purchase Price (approximately
$42.7 million) plus interest accrued on the Preliminary
Purchase Price since June 15, 2007 (estimated as of
September 15, 2007 as approximately $0.9 million) and
all additional Property Acquisition Costs since June 15,
2007 (estimated as of September 15, 2007 as approximately
$1.0 million). In addition, GERA will indirectly acquire
the Properties subject to the Wachovia Mortgage Loans totaling
$120.5 million. Therefore, if the business combination was
consummated on September 15, 2007 the aggregate
consideration would be approximately $165.1 million.
Additionally, on the closing of the acquisition, and pursuant to
the Services Agreement, GERA will pay GBE an acquisition fee
equal to one percent of the acquisition price for each of the
Properties. Accordingly, in addition to the LLC Purchase Price,
at the closing of the LLC Acquisition Agreement, GERA shall pay
GBE an acquisition fee of approximately $1.2 million with
respect to the Properties.
Representations
and Warranties
The LLC Acquisition Agreement contains representations and
warranties of each of GBE and Property Acquisition relating,
among other things, to:
|
|
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proper organization and similar matters;
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capital structure of each constituent company;
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the authorization, performance and enforceability of the LLC
Acquisition Agreement;
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no conflict; required filings and consents;
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title to properties and assets and environmental and other
conditions thereof;
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compliance with laws;
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absence of litigation;
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environmental matters;
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absence of changes;
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80
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financial statements; absence of undisclosed liabilities;
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contracts;
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insurance;
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affiliate transactions;
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employees;
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brokers; third party expenses; and
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taxes.
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GERA, GBE and Property Acquisition have each agreed to take such
actions as are necessary, proper or advisable to consummate the
acquisition. GBE and Property Acquisition have also agreed that
Property Acquisition and its subsidiaries will continue to
operate their respective businesses in the ordinary course prior
to the closing and that Property Acquisition and it subsidiaries
will not, subject to certain exceptions, take the following
actions without the prior written consent of GERA:
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(a)
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issue, deliver, sell, authorize, pledge or otherwise encumber,
or agree to any of the foregoing with respect to, any Property
Acquisition membership interests or any SPE membership
interests, or securities convertible into or exchangeable for
Property Acquisition membership interests or SPE membership
interests or enter into other agreements or commitments of any
character obligating it to issue any Property Acquisition
membership interests or SPE membership interests or such
convertible or exchangeable securities;
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(b)
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amend its charter documents;
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(c)
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acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a material portion of the assets of, or
by purchasing the stock of, or by any other manner, any person
or any business or division thereof or (ii) any property or
assets, except for purchases of inventory, equipment, supplies
and other assets in the ordinary course of business consistent
with past practice;
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(d)
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(i) modify, amend or terminate (other than at its stated
expiration date) any lease other than in a manner that Property
Acquisition reasonably and in good faith believes is in the best
commercial interests of Property Acquisition and the SPEs,
provided that, in the case of any material lease, Property
Acquisition has given prior written notice thereof to GERA,
(ii) enter into or commit to enter into any lease, license
or other occupancy agreement relating to or affecting any of the
Properties other than any such lease, license or other occupancy
agreement that Property Acquisition reasonably and in good faith
believes is in the best commercial interests of Property
Acquisition and the SPEs, provided that, in the case of a
material lease, Property Acquisition has given prior written
notice thereof to GERA, or (iii) modify, amend or terminate
the Wachovia Mortgage Loans or any document relating thereto;
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(e)
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(i) incur, agree to incur or assume any indebtedness for
borrowed money, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other
person or (iii) make any loans, advances or capital
contributions to, or investments in, any other person;
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81
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(f)
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declare or pay any dividends on its membership interests
(whether in cash, stock or other property), or set apart any
money, membership interests or other property for such payment
or make any distributions to or for the account of its members,
or redeem, repurchase or otherwise acquire, directly or
indirectly, any of its membership interests;
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(g)
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make any capital expenditures in excess of $50,000 individually,
or in excess of $100,000 in the aggregate other than capital
expenditures contemplated by the operating plan of Property
Acquisition or the applicable SPE;
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(h)
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lease, license, sell, dispose of, abandon or otherwise transfer
any property or assets, except that this clause shall not apply
to the lease, licensing, sale, disposition or transfer of any
property or assets in the ordinary course of business consistent
with past practice, subject in all cases to the other terms set
forth in the LLC Acquisition Agreement;
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(i)
|
subject any of its assets, properties or rights, or any part
thereof, to any lien or suffer such to exist, other than
permitted liens;
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(j)
|
except in the ordinary course of business, hire any employees or
enter into any employment, consulting or similar agreement with
any prospective employee or adopt or authorize any plan or
arrangement for the benefit of any employee of Property
Acquisition or the SPEs;
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(k)
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fail to maintain and pay all premiums with respect to all
policies of insurance relating to its business, and its assets
and properties, as are presently held in its name (or
replacements therefor) and timely renew all such policies (or
arrange for replacements therefor) with financially responsible
insurance companies in such amounts and against such risks and
losses as are consistent with past practice;
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(l)
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make any change in any method of accounting or accounting
principle, method, estimate or practice, except as required by
United States generally accepted accounting principles;
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(m)
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make, change or revoke any tax election or settle or compromise
any tax liability;
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(n)
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enter into any contract or commitment limiting or restraining
such Property Acquisition or any of its subsidiaries from
engaging or competing in any lines of business or with any
person;
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(o)
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enter into or authorize any contract, agreement, understanding
or arrangement with GBE or any affiliate thereof (other than
Property Acquisition or the SPEs), or otherwise enter into or
effect any transaction with GBE or any affiliate thereof (other
than Property Acquisition or the SPEs) other than pursuant to
the terms of any contract, agreement, understanding or
arrangement that is in effect on the date of the LLC Acquisition
Agreement and that is disclosed on an applicable schedule of the
LLC Acquisition Agreement;
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(p)
|
take or omit to take any action which would be reasonably
anticipated, individually or in the aggregate, to have a
Material Adverse Effect; and
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(q)
|
agree in writing or otherwise agree, commit or resolve to take
any of the actions described in sections (a) through
(p) above.
|
82
The LLC Acquisition Agreement also contains additional covenants
of the parties, including covenants providing for:
|
|
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the parties to use commercially reasonable efforts to obtain all
necessary approvals from stockholders, governmental agencies and
other third parties that are required for the consummation of
the transactions contemplated by the LLC Acquisition Agreement;
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GERA to prepare and file this proxy statement; and
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The parties to deliver all information concerning themselves and
such other matters as may be reasonably necessary or advisable
in connection with the actions contemplated under the LLC
Acquisition Agreement.
|
General
Conditions
Consummation of the LLC Acquisition Agreement is conditioned on
the holders of a majority of the shares of GERA common stock
issued in the IPO present in person or by proxy at the special
meeting voting to approve the Properties Acquisition Proposal.
The GERA stockholders will also be asked to approve the 2007
Equity Plan Proposal, the Article Sixth Amendment Proposal,
the Director Nomination Proposal and the E&Y Ratification
Proposal. The consummation of the acquisition is not dependent
on the approval of such other proposals.
In addition, the consummation of the transactions contemplated
by the LLC Acquisition Agreement is conditioned on no
governmental entity having enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the
effect of making the transactions contemplated by the LLC
Acquisition Agreement illegal or otherwise prohibiting or
restraining the consummation of such transactions on
substantially the terms contemplated by the LLC Acquisition
Agreement.
GBEs
Conditions to Closing
The obligations of GBE to consummate the transactions
contemplated by the LLC Acquisition Agreement, in addition to
the conditions described above, are conditioned upon each of the
following, among other things:
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GBE shall have received by wire transfer the acquisition
consideration and the acquisition fee;
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Each representation and warranty of GERA contained in the LLC
Acquisition Agreement that is (i) qualified as to
materiality shall have been true and correct in all respects
(A) as of the date of the LLC Acquisition Agreement and
(B) on and as of the closing, with the same force and
effect as if made on and as of the closing of the acquisition,
and (ii) not qualified as to materiality shall have been
true and correct in all material respects (A) as of the
date of the LLC Acquisition Agreement and (B) on and as of
the closing of the acquisition, with the same force and effect
as if made on and as of the closing of the acquisition; and
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GERA shall have performed or complied in all material respects
with all agreements and covenants required by the LLC
Acquisition Agreement to be performed or complied with by it on
or prior to the closing of the acquisition.
|
83
GERAs
Conditions to Closing
The obligations of GERA to consummate the transactions
contemplated by the LLC Acquisition Agreement, in addition to
the conditions described above, are conditioned upon each of the
following, among other things:
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Each representation and warranty of GBE and Property Acquisition
contained in the LLC Acquisition Agreement that is
(i) qualified as to materiality or Material Adverse Effect
shall have been true and correct in all respects (A) as of
the date of the LLC Acquisition Agreement and (B) on and as
of the closing of the acquisition, with the same force and
effect as if made on and as of the closing, and (ii) not
qualified as to materiality or Material Adverse Effect shall
have been true and correct in all material respects (A) as
of the date of the LLC Acquisition Agreement and (B) on and
as of the closing of the acquisition, with the same force and
effect as if made on and as of the closing; provided, that the
representations and warranties of GBE and Property Acquisition
set forth in Section 2.2 of the LLC Acquisition Agreement
shall have been true and correct in all respects as of the date
of the LLC Acquisition Agreement and on and as of the closing of
the acquisition, with the same force and effect as if made on
and as of the closing;
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|
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Property Acquisition and GBE shall have performed or complied in
all material respects with all agreements and covenants required
by the LLC Acquisition Agreement to be performed or complied
with by them at or prior to the closing of the
acquisition; and
|
|
|
No Material Adverse Effect shall have occurred since the date of
the LLC Acquisition Agreement.
|
The LLC Acquisition Agreement may be terminated at any time, but
not later than the closing, as follows:
|
|
|
by mutual written consent of GERA, Property Acquisition and GBE
at any time;
|
|
|
by either GERA or GBE if the acquisition shall not have been
consummated by December 31, 2007 for any reason; provided,
however, that the right to terminate the LLC Acquisition
Agreement under this provision shall not be available to any
party whose action or failure to act has been a principal cause
of or resulted in the failure of the acquisition to occur on or
before such date and such action or failure to act constitutes a
breach of the LLC Acquisition Agreement;
|
|
|
by either GERA or GBE if a governmental entity shall have issued
an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or
otherwise prohibiting the acquisition, which order, decree,
ruling or other action is final and nonappealable;
|
|
|
by GBE or Property Acquisition, upon a breach of any
representation, warranty, covenant or agreement on the part of
GERA set forth in the LLC Acquisition Agreement, or if any
representation or warranty of GERA shall have become untrue, in
either case such that the conditions set forth in
Article VI of the LLC Acquisition Agreement would not be
satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided,
that if such breach by GERA is curable by GERA prior to the
closing, then neither Property Acquisition nor GBE may terminate
the LLC Acquisition Agreement under this provision for thirty
(30) days after delivery of written notice from
|
84
Property Acquisition or GBE to GERA of such breach, provided
GERA continues to exercise commercially reasonable efforts to
cure such breach (and neither Property Acquisition nor GBE may
terminate the LLC Acquisition Agreement pursuant to this
provision if it is then in material breach of the LLC
Acquisition Agreement or if such breach by GERA is cured during
such thirty (30)-day period);
|
|
|
by GERA, upon a breach of any representation, warranty, covenant
or agreement on the part of GBE or Property Acquisition set
forth in the LLC Acquisition Agreement, or if any representation
or warranty of GBE or Property Acquisition shall have become
untrue, in either case such that the conditions set forth in
Article VI of the LLC Acquisition Agreement would not be
satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided,
that if such breach is curable by GBE or Property Acquisition
prior to the closing, then GERA may not terminate the LLC
Acquisition Agreement under this provision for thirty
(30) days after delivery of written notice from GERA to GBE
or Property Acquisition of such breach, provided GBE or Property
Acquisition, as applicable, continues to exercise commercially
reasonable efforts to cure such breach (and GERA may not
terminate this Agreement pursuant to this provision if it is
then in material breach of the LLC Acquisition Agreement or if
such breach by GBE or Property Acquisition is cured during such
thirty (30)-day period);
|
|
|
by either GERA, GBE or the Company, if, at the special meeting
(including any adjournments thereof) GERA has failed to obtain
the requisite approval of the GERA stockholders; or
|
|
|
|
by GBE on or after September 30, 2007 if it is required to
terminate the LLC Acquisition Agreement pursuant to the terms of
Section 5.01(s) of the Amended and Restated Credit
Agreement, dated as of April 14, 2006, by and among GBE, as
borrower, the guarantors named therein, Deutsche Bank
Trust Company Americas, as administrative agent and as
syndication agent, the financial institutions identified therein
as lenders, and Deutsche Bank Securities Inc., as sole book
running manager and sole lead arranger, as amended by each of
that certain First Letter Amendment dated as of June 16,
2006, and that certain Second Letter Amendment dated as of
February 16, 2007, as in effect on the date the of the LLC
Acquisition Agreement; provided, however, that GBE shall only be
permitted to terminate the LLC Acquisition Agreement pursuant to
this provision if GBE has used its reasonable best efforts to
cause the provisions of such Section 5.01(s) to be waived,
modified or extended so as to permit the transactions
contemplated by the LLC Acquisition Agreement to be consummated
subsequent to September 30, 2007. On September 24,
2007, the Amended and Restated Credit Agreement was amended to
provide for, among other things, the extension of time to
consummate the transactions contemplated by the LLC Acquisition
Agreement until March 31, 2008.
|
In the event of proper termination by either GERA, GBE or
Property Acquisition, the LLC Acquisition Agreement will become
void and have no effect, without any liability or obligation on
the part of GERA, GBE or Property Acquisition, except that:
|
|
|
the confidentiality obligations set forth in the LLC Acquisition
Agreement will survive;
|
|
|
the rights of the parties to bring actions against each other
for breach of the LLC Acquisition Agreement that occurred prior
to any such termination will survive; and
|
85
|
|
|
the provisions regarding the payment of the fees and expenses
incurred in connection with the LLC Acquisition Agreement will
survive.
|
Pursuant to the LLC Acquisition Agreement, GBE has agreed to
indemnify, defend and hold harmless GERA, from and against all
losses asserted against, resulting to, imposed upon, or incurred
by GERA by reason of, arising out of or resulting from:
(i) the inaccuracy or breach of any representation or
warranty of GBE or Property Acquisition contained in or made
pursuant to the LLC Acquisition Agreement or any schedule or any
certificate delivered by GBE or Property Acquisition to GERA
pursuant to the LLC Acquisition Agreement; and
(ii) the non-fulfillment or breach of any covenant or
agreement of GBE or Property Acquisition contained in the LLC
Acquisition Agreement.
The representations and warranties of GBE and Property
Acquisition contained in the LLC Acquisition Agreement will
survive for a period of nine months after the Closing, subject
to extended survival periods in respect of certain
representations and warranties, including the representations
and warranties pertaining to the capitalization of Property
Acquisition and each of the SPEs. The covenants and agreements
of GBE and Property Acquisition contained in the LLC Acquisition
Agreement will survive the closing indefinitely.
Under the terms of the LLC Acquisition Agreement, the aggregate
indemnification obligations of GBE arising from the breach of
representations and warranties made by GBE and Property
Acquisition in the LLC Acquisition Agreement will not, subject
to limited exceptions, exceed 20% of the LLC Purchase Price. In
addition, subject to limited exceptions, GERA will not be
entitled to receive any indemnification payment from GBE
resulting from a breach of the representations or warranties of
GBE and Property Acquisition contained in the LLC Acquisition
Agreement unless and until the aggregate amount of all
indemnifiable losses otherwise payable by GBE resulting from a
breach of such representations and warranties exceeds three and
one-half percent of the LLC Purchase Price, in which event the
amount payable shall only be the amount in excess of such amount.
Subject to limited exceptions, the right of indemnification
provided pursuant to the terms of the LLC Acquisition Agreement
will be GERAs sole remedy with respect to any and all
claims for money damages arising out of or relating to the LLC
Acquisition Agreement.
Waiver
of Claims Against Trust Fund
Under the terms of the LLC Acquisition Agreement, GBE and
Property Acquisition have agreed to waive all rights against
GERA to collect from the trust account that holds a substantial
portion of the proceeds from IPO any moneys that may be owed to
them by GERA for any reason whatsoever, including but not
limited to a breach of the LLC Acquisition Agreement by GERA.
However, this waiver shall not apply if both (a) GERA
willfully fails or refuses to consummate the transactions
contemplated by this Agreement or GBE and Property Acquisition
terminate the LLC Agreement pursuant to Section 8.1(d)
thereof, and (b) GERA consummates another business
combination with another person.
86
All fees and expenses incurred in connection with the LLC
Acquisition Agreement and the transactions contemplated thereby
will be paid by the party incurring such expenses whether or not
the LLC Acquisition Agreement is consummated, except as
otherwise provided in the LLC Acquisition Agreement.
The LLC Acquisition Agreement may be amended by the parties
thereto at any time by execution of an instrument in writing
signed on behalf of each of the parties.
At any time prior to the closing, any party to the LLC
Acquisition Agreement may, to the extent legally allowed,
(i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any
document delivered pursuant thereto and (iii) waive
compliance with any of the agreements or conditions for the
benefit of such party contained therein.
GERA and GBE have agreed that until closing or termination of
the LLC Acquisition Agreement, the parties will:
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|
|
cooperate in good faith to jointly prepare all press releases
and public announcements pertaining to the LLC Acquisition
Agreement and the transactions governed by it; and
|
|
|
not issue or otherwise make any public announcement or
communication pertaining to the LLC Acquisition Agreement or the
transaction without the prior consent of the other party, which
shall not be unreasonably withheld by the other party, except as
may be required by applicable laws or court process.
|
The LLC Acquisition Agreement is governed by and construed in
accordance with the law of the State of Delaware regardless of
the law that might otherwise govern under applicable principles
of conflicts of law thereof. Each of the parties agreed to
irrevocably submit to the exclusive jurisdiction of any state or
Federal courts of the United States of America sitting in the
State of Delaware for purposes of any suit, action or proceeding
arising in connection with the execution and delivery of the LLC
Acquisition Agreement and the consummation of the transactions
contemplated thereby. Each of the parties irrevocably waived any
objection or defense any such party may have to venue or
personal jurisdiction in any such court including any claim that
the suit, action or proceeding has been brought in an
inconvenient forum and any right to which it may become entitled
on account of place of residence or domicile.
87
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined balance sheet and
statements of operations are adjusted to give pro forma effect
to the Properties Acquisition Proposal, including the Wachovia
Mortgage Loans, as if they had occurred on June 30, 2007
and July 1, 2006, respectively. We are providing this
information to aid you in your analysis of the financial aspects
of the Properties Acquisition Proposal including the Wachovia
Mortgage Loans.
The unaudited pro forma condensed combined financial information
has been derived from and should be read in conjunction with the
following financial statements which are included elsewhere in
this proxy:
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|
|
the financial statements and related notes of GERA as of
June 30, 2007, for the Period from September 7, 2005
(Date of Inception) through June 30, 2006 and for the
Period from September 7, 2005 (Date of Inception) through
June 30, 2007;
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|
the financial statements and related notes of 6400 Shafer Court
for the Year Ended December 31, 2006 (audited), for the Six
Months Ended June 30, 2006 (unaudited), for the Period from
January 1, 2007 through February 27, 2007 (Previous
Owner) (unaudited), and for the Period from February 28,
2007 through June 30, 2007 (GBE Owner) (unaudited);
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|
|
|
the financial statements and related notes of Abrams Centre for
the Year Ended December 31, 2006 (audited), for the Six
Months Ended June 30, 2006 (unaudited), for the Period from
January 1, 2007 through February 19, 2007 (Previous
Owner) (unaudited), and for the Period from February 20,
2007 through June 30, 2007 (GBE Owner) (unaudited); and
|
|
|
|
the financial statements and related notes of Danbury Corporate
Center for the Year Ended December 31, 2006 (audited) and
for the Six Months Ended June 30, 2007 and 2006 (unaudited).
|
This information should also be read together with
Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in
this proxy statement.
The unaudited pro forma condensed combined balance sheet at
June 30, 2007 reflects the historical information of GERA
as of such date, as adjusted to give pro forma effect to the
Properties Acquisition Proposal, including the Wachovia Mortgage
Loans, as if they had occurred on June 30, 2007. The assets
and liabilities of the acquired Properties pursuant to the
Properties Acquisition Proposal have been recorded at fair value
in accordance with Statement of Financial Accounting Standards
No. 141Business Combinations. The purchase price
allocation has not been finalized and is subject to change based
upon recording of actual transaction costs, finalization of
working capital adjustments, and completion of appraisals of
tangible and intangible assets of the acquired Properties.
The unaudited pro forma condensed combined statements of
operations for the year ended June 30, 2007 reflect the
historical information of GERA adjusted to give pro forma effect
to the Properties Acquisition Proposal, including the Wachovia
Mortgages Loans, as if they had occurred on July 1, 2006.
Amounts for the Properties have also been adjusted for fiscal
year presentation.
88
The unaudited pro forma condensed combined financial information
have been prepared using two different levels of approval of the
transaction by GERA stockholders, as follows:
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Assuming No Redemption:
This presentation
assumes that none of the GERA stockholders exercise their
redemption rights; and
|
|
|
Assuming Maximum Redemption:
This presentation
assumes that 19.9% of the GERA stockholders exercise their
redemption rights.
|
The pro forma adjustments are based upon available information
and assumptions that we believe are reasonable. The unaudited
pro forma condensed combined statements of operations and the
unaudited pro forma condensed combined balance sheet do not
purport to represent the results of operations which would have
occurred had such transactions been consummated on the dates
indicated or the financial position for any future date or
period.
89
Grubb &
Ellis Realty Advisors, Inc.
Unaudited Pro
Forma Condensed Combined Balance Sheet
As of June 30, 2007
(amounts in thousands except per share data)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Pro
|
|
|
Pro
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
|
|
|
Forma
|
|
|
Forma
|
|
|
|
Grubb &
|
|
|
|
|
|
|
|
|
Forma
|
|
|
Adjustments
|
|
|
(assuming
|
|
|
|
Ellis
|
|
|
|
|
|
Pro
|
|
|
(assuming
|
|
|
(maximum
|
|
|
maximum
|
|
|
|
Realty
|
|
|
The
|
|
|
Forma
|
|
|
no share
|
|
|
share
|
|
|
share
|
|
|
|
Advisors
|
|
|
Properties
|
|
|
Adjustments
|
|
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redemption)
|
|
|
redemption)
|
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|
redemption)
|
|
|
|
(A)
|
|
|
(B)
|
|
|
(C)
|
|
|
|
|
|
(D)
|
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|
Assets:
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Rental real estate, net
|
|
$
|
|
|
|
$
|
125,789
|
|
|
$
|
|
|
|
$
|
125,789
|
|
|
$
|
|
|
|
$
|
125,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
60
|
|
|
|
48
|
|
|
|
99,709
|
|
|
|
99,817
|
|
|
|
(28,144
|
)
|
|
|
71,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments held in trust
|
|
|
143,670
|
|
|
|
|
|
|
|
(143,670
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Cash
|
|
|
|
|
|
|
43,574
|
|
|
|
|
|
|
|
43,574
|
|
|
|
|
|
|
|
43,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
376
|
|
|
|
4,114
|
|
|
|
|
|
|
|
4,490
|
|
|
|
|
|
|
|
4,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
144,106
|
|
|
$
|
173,525
|
|
|
$
|
(43,961
|
)
|
|
$
|
273,670
|
|
|
$
|
(28,144
|
)
|
|
$
|
245,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities &
stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Loans
|
|
$
|
|
|
|
$
|
120,500
|
|
|
$
|
|
|
|
$
|
120,500
|
|
|
$
|
|
|
|
$
|
120,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
599
|
|
|
|
985
|
|
|
|
|
|
|
|
1,584
|
|
|
|
|
|
|
|
1,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred underwriting discount
|
|
|
2,675
|
|
|
|
|
|
|
|
|
|
|
|
2,675
|
|
|
|
|
|
|
|
2,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
8,079
|
|
|
|
|
|
|
|
8,079
|
|
|
|
|
|
|
|
8,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,274
|
|
|
|
129,564
|
|
|
|
|
|
|
|
132,838
|
|
|
|
|
|
|
|
132,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, subject to possible
redemption4,789 shares at $5.63 per share
|
|
|
26,952
|
|
|
|
|
|
|
|
(26,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred interest attributable to
common stock subject to possible redemption (net of taxes of
$614)
|
|
|
1,192
|
|
|
|
|
|
|
|
(1,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments and contingencies
|
|
|
28,144
|
|
|
|
|
|
|
|
(28,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock$0.0001 par
value; 120,000 shares authorized; 29,834 issued and
outstanding
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock$0.0001 par value; 5,000 shares authorized;
0 issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets of the Properties
(estimated Acquisition Consideration)
|
|
|
|
|
|
|
43,961
|
|
|
|
(43,961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
109,023
|
|
|
|
|
|
|
|
26,952
|
|
|
|
135,975
|
|
|
|
(26,952
|
)
|
|
|
109,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings accumulated during the
development stage
|
|
|
3,662
|
|
|
|
|
|
|
|
1,192
|
|
|
|
4,854
|
|
|
|
(1,192
|
)
|
|
|
3,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
112,688
|
|
|
|
43,961
|
|
|
|
(15,817
|
)
|
|
|
140,832
|
|
|
|
(28,144
|
)
|
|
|
112,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities &
stockholders equity
|
|
$
|
144,106
|
|
|
$
|
173,525
|
|
|
$
|
(43,961
|
)
|
|
$
|
273,670
|
|
|
$
|
(28,144
|
)
|
|
$
|
245,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited condensed combined pro forma financial
statements
90
Notes to
Unaudited Pro Forma Condensed Combined Balance Sheet
(amounts in thousands)
(A) Reflects the historical Balance Sheet of
Grubb & Ellis Realty Advisors as of June 30, 2007.
(B) Reflects the estimated allocation of the
Acquisition Consideration for the purchase of Property
Acquisition pursuant to the LLC Acquisition Agreement. See the
section entitled
The LLC Acquisition
AgreementAcquisition Consideration.
On closing
of the acquisition, GERA will acquire the Properties through its
ownership of Property Acquisition. The Acquisition Consideration
to be paid by GERA for the acquisition of Property Acquisition
will represent the amounts invested in or advanced to Property
Acquisition by GBE to fund the aggregate purchase price paid by
Property Acquisition for the Properties plus interest expense,
imputed interest on cash advanced to Property Acquisition or any
of the SPEs by GBE and costs and expenses associated with
the evaluation, acquisition, financing and operation of the
Properties. In addition, pursuant to the Wachovia Mortgage
Loans, reserves in the amount of approximately $43,574 (the
Reserves) have been established for the cost of
certain capital expenditures, maintenance and repairs, leasing
commissions and tenant improvements, rent concessions and debt
service coverage. The Reserves were funded from the proceeds of
the Wachovia Mortgage Loans. The Reserves are held by Wachovia
and, in accordance with the terms of the Wachovia Mortgage
Loans, may be drawn upon from time to time to fund the items for
which the Reserves were established. The Reserves are assets
that GERA will indirectly acquire as a result of its acquisition
of Property Acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Danbury
|
|
|
|
|
|
|
6400 Shafer
|
|
|
Abrams
|
|
|
Corporate
|
|
|
|
|
Calculation
of the estimated allocable Acquisition Consideration
|
|
Court
|
|
|
Centre
|
|
|
Center
|
|
|
Total
|
|
|
Property contract purchase price
|
|
$
|
21,450
|
|
|
$
|
20,000
|
|
|
$
|
80,750
|
|
|
$
|
122,200
|
|
Property closing adjustments, net
|
|
|
(26
|
)
|
|
|
(175
|
)
|
|
|
(6,444
|
)
|
|
|
(6,646
|
)
|
Other direct acquisition costs
|
|
|
98
|
|
|
|
183
|
|
|
|
169
|
|
|
|
450
|
|
Interest on property acquisition
costs
|
|
|
563
|
|
|
|
648
|
|
|
|
49
|
|
|
|
1,261
|
|
Reserves
|
|
|
7,837
|
|
|
|
7,330
|
|
|
|
28,407
|
|
|
|
43,574
|
|
Financing costs
|
|
|
437
|
|
|
|
409
|
|
|
|
1,554
|
|
|
|
2,400
|
|
Acquisition fee payable to GBE
|
|
|
214
|
|
|
|
200
|
|
|
|
808
|
|
|
|
1,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allocable Acquisition
Consideration
|
|
$
|
30,573
|
|
|
$
|
28,596
|
|
|
$
|
105,292
|
|
|
$
|
164,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Danbury
|
|
|
|
|
|
|
6400 Shafer
|
|
|
Abrams
|
|
|
Corporate
|
|
|
|
|
Estimated
Acquisition Consideration
|
|
Court
|
|
|
Centre
|
|
|
Center
|
|
|
Total
|
|
|
Cash consideration paid
|
|
|
8,613
|
|
|
|
8,056
|
|
|
|
27,292
|
|
|
|
43,961
|
|
Wachovia Mortgage Loans assumed
|
|
|
21,960
|
|
|
|
20,540
|
|
|
|
78,000
|
|
|
|
120,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allocable Acquisition
Consideration
|
|
$
|
30,573
|
|
|
$
|
28,596
|
|
|
$
|
105,292
|
|
|
$
|
164,461
|
|
91
The Acquisition Consideration allocation has not been finalized
and is subject to change based upon recording of actual
transaction costs, finalization of working capital adjustments,
and completion of appraisals of tangible and intangible assets
of the acquired Properties. The estimated Acquisition
Consideration was allocated to the assets acquired and
liabilities assumed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Danbury
|
|
|
|
|
|
|
6400 Shafer
|
|
|
Abrams
|
|
|
Corporate
|
|
|
|
|
Estimated
allocation of the Acquisition Consideration
|
|
Court
|
|
|
Centre
|
|
|
Center
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
3,671
|
|
|
$
|
3,439
|
|
|
$
|
12,076
|
|
|
$
|
19,186
|
|
Buildings
|
|
|
15,734
|
|
|
|
14,019
|
|
|
|
48,306
|
|
|
|
78,059
|
|
Lease intangibles
|
|
|
3,927
|
|
|
|
3,844
|
|
|
|
20,773
|
|
|
|
28,544
|
|
Cash and cash equivalents
|
|
|
4
|
|
|
|
44
|
|
|
|
|
|
|
|
48
|
|
Restricted cash (Reserves)
|
|
|
7,837
|
|
|
|
7,330
|
|
|
|
28,407
|
|
|
|
43,574
|
|
Other assets
|
|
|
2,052
|
|
|
|
499
|
|
|
|
1,563
|
|
|
|
4,114
|
|
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage debt (Wachovia Mortgage
Loans assumed)
|
|
|
(21,960
|
)
|
|
|
(20,540
|
)
|
|
|
(78,000
|
)
|
|
|
(120,500
|
)
|
Accounts payable
|
|
|
(541
|
)
|
|
|
(444
|
)
|
|
|
|
|
|
|
(985
|
)
|
Other liabilities
|
|
|
(2,111
|
)
|
|
|
(135
|
)
|
|
|
(5,833
|
)
|
|
|
(8,079
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets of the Properties (cash
consideration paid)
|
|
$
|
8,613
|
|
|
$
|
8,056
|
|
|
$
|
27,292
|
|
|
$
|
43,961
|
|
The above costs are based upon the contract purchase price and
include estimated closing costs and estimated pro rated amounts
for certain liabilities and assets. The above amounts include an
estimated allocation of the purchase prices to their fair value
components (land, building and improvements and lease
intangibles) in accordance with Statement of Financial
Accounting Standards No. 141 Business
Combinations (SFAS No. 141).
(C) Reflects the cash payment of Acquisition
Consideration and adjustments to reclassify certain amounts
pursuant to the Properties Acquisition Proposal assuming no
share redemptions:
|
|
|
|
1)
|
To record payment of the Acquisition Consideration for the
purchase of Property Acquisition:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
(43,961
|
)
|
Net assets of the Properties (cash
consideration paid)
|
|
$
|
43,961
|
|
|
|
|
|
2)
|
To reclassify investments previously held in trust to cash:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
143,670
|
|
Investments held in trust
|
|
$
|
(143,670
|
)
|
|
|
|
|
3)
|
To reclassify additional paid-in capital previously subject to
redemption:
|
|
|
|
|
|
Common stock, subject to possible
redemption4,789 shares at $5.63 per share
|
|
$
|
(26,952
|
)
|
Additional paid-in capital
|
|
$
|
26,952
|
|
|
|
|
|
4)
|
To reclassify interest income attributable to the common stock,
subject to possible redemption:
|
|
|
|
|
|
Deferred interest attributable to
common stock subject to possible redemption (net of taxes of
$614)
|
|
$
|
(1,192
|
)
|
Earnings accumulated during the
development stage
|
|
$
|
1,192
|
|
(D) Reflects the adjustment to record funding the
maximum redemption of shares and their related interest income.
92
Grubb &
Ellis Realty Advisors, Inc.
Unaudited Pro
Forma Condensed Combined Statement of Operations
for the Year Ended June 30, 2007
(amounts in thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Grubb &
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Adjustments
|
|
|
(assuming
|
|
|
|
Ellis
|
|
|
|
|
|
Pro
|
|
|
(assuming
|
|
|
(maximum
|
|
|
maximum
|
|
|
|
Realty
|
|
|
The
|
|
|
Forma
|
|
|
no share
|
|
|
share
|
|
|
share
|
|
|
|
Advisors
|
|
|
Properties
|
|
|
Adjustments
|
|
|
redemption)
|
|
|
redemption)
|
|
|
redemption)
|
|
|
|
(A)
|
|
|
(B)
|
|
|
(C)
|
|
|
|
|
|
(D)
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenue
|
|
$
|
|
|
|
$
|
18,867
|
|
|
$
|
|
|
|
$
|
18,867
|
|
|
$
|
|
|
|
$
|
18,867
|
|
Tenant reimbursements
|
|
|
|
|
|
|
1,888
|
|
|
|
|
|
|
|
1,888
|
|
|
|
|
|
|
|
1,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
20,755
|
|
|
|
|
|
|
|
20,755
|
|
|
|
|
|
|
|
20,755
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating &
maintenance
|
|
|
|
|
|
|
5,094
|
|
|
|
|
|
|
|
5,094
|
|
|
|
|
|
|
|
5,094
|
|
Utilities
|
|
|
|
|
|
|
3,891
|
|
|
|
|
|
|
|
3,891
|
|
|
|
|
|
|
|
3,891
|
|
Real estate taxes
|
|
|
|
|
|
|
3,005
|
|
|
|
|
|
|
|
3,005
|
|
|
|
|
|
|
|
3,005
|
|
Property management
|
|
|
|
|
|
|
548
|
|
|
|
|
|
|
|
548
|
|
|
|
|
|
|
|
548
|
|
Other operating expenses
|
|
|
1,332
|
|
|
|
1,155
|
|
|
|
|
|
|
|
2,487
|
|
|
|
|
|
|
|
2,487
|
|
Insurance
|
|
|
|
|
|
|
291
|
|
|
|
|
|
|
|
291
|
|
|
|
|
|
|
|
291
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
10,082
|
|
|
|
10,082
|
|
|
|
|
|
|
|
10,082
|
|
Depreciation &
amortization
|
|
|
|
|
|
|
|
|
|
|
6,443
|
|
|
|
6,443
|
|
|
|
|
|
|
|
6,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
1,332
|
|
|
|
13,984
|
|
|
|
16,525
|
|
|
|
31,841
|
|
|
|
|
|
|
|
31,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(1,332
|
)
|
|
|
6,771
|
|
|
|
(16,525
|
)
|
|
|
(11,086
|
)
|
|
|
|
|
|
|
(11,086
|
)
|
Interest and other income
|
|
|
6,906
|
|
|
|
43
|
|
|
|
(2,143
|
)
|
|
|
4,806
|
|
|
|
|
|
|
|
4,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before income
taxes
|
|
|
5,574
|
|
|
|
6,814
|
|
|
|
(18,668
|
)
|
|
|
(6,280
|
)
|
|
|
|
|
|
|
(6,280
|
)
|
Provision for income taxes
|
|
|
1,921
|
|
|
|
|
|
|
|
|
|
|
|
1,921
|
|
|
|
|
|
|
|
1,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
3,653
|
|
|
|
6,814
|
|
|
|
(18,668
|
)
|
|
|
(8,201
|
)
|
|
|
|
|
|
|
(8,201
|
)
|
Deferred interest, net of taxes,
attributable to common stock subject to possible redemption
|
|
|
911
|
|
|
|
|
|
|
|
(911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) allocable to
common stock
|
|
$
|
2,742
|
|
|
$
|
6,814
|
|
|
$
|
(17,757
|
)
|
|
$
|
(8,201
|
)
|
|
$
|
|
|
|
$
|
(8,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per weighted
average common share outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.27
|
)
|
|
|
|
|
|
$
|
(0.33
|
)
|
- Diluted
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.27
|
)
|
|
|
|
|
|
$
|
(0.33
|
)
|
Weighted average common share
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
|
29,834
|
|
|
|
|
|
|
|
|
|
|
|
29,834
|
(E)
|
|
|
(4,789
|
)
|
|
|
25,045
|
|
- Diluted
|
|
|
29,834
|
|
|
|
|
|
|
|
|
|
|
|
29,834
|
(E)
|
|
|
(4,789
|
)
|
|
|
25,045
|
|
Net income (loss) per weighted
average common share outstanding exclusive of shares subject to
possible redemption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Diluted
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common share
outstanding exclusive of shares subject to possible redemption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
|
25,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Diluted
|
|
|
25,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations
93
Notes to
Unaudited Pro Forma Condensed Combined Statement of
Operations
for the Year Ended June 30, 2007
(amounts in thousands except share data and per share
data)
(A) Reflects the audited historical Statement of
Operations of Grubb & Ellis Realty Advisors for the
year ended June 30, 2007 contained elsewhere within this
proxy.
(B) Reflects the combined results of operations of
the Properties for the year ended June 30, 2007 adjusted to
give pro forma effect to the acquisition as if it had occurred
on July 1, 2006 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Danbury
|
|
|
|
|
|
|
6400 Shafer
|
|
|
Abrams
|
|
|
Corporate
|
|
|
|
|
|
|
Court
(1)
|
|
|
Centre
(2)
|
|
|
Center
(3)
|
|
|
Total
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenue
|
|
$
|
1,252
|
|
|
$
|
2,604
|
|
|
$
|
15,011
|
|
|
$
|
18,867
|
|
Tenant reimbursements
|
|
|
1,067
|
|
|
|
25
|
|
|
|
796
|
|
|
|
1,888
|
|
Other income
|
|
|
12
|
|
|
|
18
|
|
|
|
13
|
|
|
|
43
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,331
|
|
|
|
2,647
|
|
|
|
15,820
|
|
|
|
20,798
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating &
maintenance
|
|
|
480
|
|
|
|
508
|
|
|
|
4,106
|
|
|
|
5,094
|
|
Utilities
|
|
|
231
|
|
|
|
552
|
|
|
|
3,108
|
|
|
|
3,891
|
|
Real estate taxes
|
|
|
729
|
|
|
|
454
|
|
|
|
1,822
|
|
|
|
3,005
|
|
Property management
|
|
|
40
|
|
|
|
35
|
|
|
|
473
|
|
|
|
548
|
|
Other operating expenses
|
|
|
184
|
|
|
|
343
|
|
|
|
628
|
|
|
|
1,155
|
|
Insurance
|
|
|
44
|
|
|
|
74
|
|
|
|
173
|
|
|
|
291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
1,708
|
|
|
|
1,966
|
|
|
|
10,310
|
|
|
|
13,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Income
|
|
$
|
623
|
|
|
$
|
681
|
|
|
$
|
5,510
|
|
|
$
|
6,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects the results of operations of 6400 Shafer Court for the
fiscal year ended June 30, 2007. The amounts presented have
been derived from the audited Statements of Revenues and Certain
Expenses for the calendar year ended December 31, 2006 for
6400 Shafer Court contained elsewhere herein and have been
adjusted for fiscal year presentation as follows:
|
94
Notes to
Unaudited Pro Forma Condensed Combined Statement of
Operations
for the Year Ended June 30, 2007
(amounts in thousands except share data and per share
data)(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
|
|
|
|
Historical
|
|
|
|
|
|
Fiscal Year
|
|
|
|
Year Ended
|
|
|
Pro Forma
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
Adjustments
|
|
|
June 30,
|
|
6400
Shafer Court
|
|
2006
|
|
|
(a)
|
|
|
2007
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenue
|
|
$
|
1,175
|
|
|
$
|
77
|
|
|
$
|
1,252
|
|
Tenant reimbursements
|
|
|
1,204
|
|
|
|
(137
|
)
|
|
|
1,067
|
|
Other income
|
|
|
11
|
|
|
|
1
|
|
|
|
12
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,390
|
|
|
|
(59
|
)
|
|
|
2,331
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating &
maintenance
|
|
|
489
|
|
|
|
(9
|
)
|
|
|
480
|
|
Utilities
|
|
|
193
|
|
|
|
38
|
|
|
|
231
|
|
Real estate taxes
|
|
|
798
|
|
|
|
(69
|
)
|
|
|
729
|
|
Property management
|
|
|
60
|
|
|
|
(20
|
)
|
|
|
40
|
|
Other operating expenses
|
|
|
69
|
|
|
|
115
|
|
|
|
184
|
|
Insurance
|
|
|
41
|
|
|
|
3
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
1,650
|
|
|
|
58
|
|
|
|
1,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Income
|
|
$
|
740
|
|
|
$
|
(117
|
)
|
|
$
|
623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The pro forma adjustments in the table below reflect removal of
historical financial results from the period from
January 1, 2006 to June 30, 2006 and the addition of
historical financial results from January 1, 2007 to
June 30, 2007. No other adjustments or assumptions have
been made.
|
95
Notes to
Unaudited Pro Forma Condensed Combined Statement of
Operations
for the Year Ended June 30, 2007
(amounts in thousands except share data and per share
data)(Continued)
|
|
|
(2)
|
|
Reflects the results of operations of Abrams Centre for the
fiscal year ended June 30, 2007. The amounts presented have
been derived from the audited Statements of Revenues and Certain
Expenses for the calendar year ended December 31, 2006 for
Abrams Centre contained elsewhere herein and have been adjusted
for fiscal year presentation as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
|
|
|
|
Historical
|
|
|
|
|
|
Fiscal
|
|
|
|
Year Ended
|
|
|
Pro Forma
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
Adjustments
|
|
|
June 30,
|
|
Abrams
Centre
|
|
2006
|
|
|
(a)
|
|
|
2007
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenue
|
|
$
|
2,426
|
|
|
$
|
178
|
|
|
$
|
2,604
|
|
Tenant reimbursements
|
|
|
23
|
|
|
|
2
|
|
|
|
25
|
|
Other income
|
|
|
22
|
|
|
|
(4
|
)
|
|
|
18
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,471
|
|
|
|
176
|
|
|
|
2,647
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating &
maintenance
|
|
|
513
|
|
|
|
(5
|
)
|
|
|
508
|
|
Utilities
|
|
|
619
|
|
|
|
(67
|
)
|
|
|
552
|
|
Real estate taxes
|
|
|
479
|
|
|
|
(25
|
)
|
|
|
454
|
|
Property management
|
|
|
35
|
|
|
|
|
|
|
|
35
|
|
Other operating expenses
|
|
|
156
|
|
|
|
187
|
|
|
|
343
|
|
Insurance
|
|
|
72
|
|
|
|
2
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
1,874
|
|
|
|
92
|
|
|
|
1,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Income
|
|
$
|
597
|
|
|
$
|
84
|
|
|
$
|
681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The pro forma adjustments in the table below reflect removal of
historical financial results from the period from
January 1, 2006 to June 30, 2006 and the addition of
historical financial results from January 1, 2007 to
June 30, 2007. No other adjustments or assumptions have
been made.
|
96
Notes to
Unaudited Pro Forma Condensed Combined Statement of
Operations
for the Year Ended June 30, 2007
(amounts in thousands except share data and per share
data)(Continued)
|
|
|
(3)
|
|
Reflects the results of operations of Danbury Corporate Center
for the fiscal year ended June 30, 2007. This property had
been operated by its previous owner under a single-tenant master
net lease agreement which expired December 31, 2006. The
single-tenant had a number of subleases in place which converted
to direct leases upon expiration of the master net lease
agreement on December 31, 2006. The property is now
operated as a typical multi-tenant office building. The
historical amounts included in the audited Statements of
Revenues and Certain Expenses for the Danbury Corporate Center,
presented elsewhere herein this proxy, are comprised primarily
of the lease income receipts and related expenses under the
master net lease agreement. Since the master lease agreement has
expired and the property is now operated as a typical
multi-tenant office building, the historical amounts presented
above have been adjusted to present the revenues and certain
expenses as if the property had been operated as a typical
multi-tenant office building during the period presented. The
adjustments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
to add the
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
adjustment
|
|
|
and Certain
|
|
|
|
|
|
|
|
|
|
to remove the
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
as if
|
|
|
|
|
|
|
|
|
|
and Certain
|
|
|
operated as
|
|
|
Adjusted
|
|
|
|
Historical
|
|
|
Expenses
|
|
|
a typical
|
|
|
Fiscal Year
|
|
|
|
Year Ended
|
|
|
associated
|
|
|
multi-tenant
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
with the
|
|
|
office
|
|
|
June 30,
|
|
Danbury
Corporate Centre
|
|
2006
|
|
|
Master
Lease
|
|
|
building(a)
|
|
|
2007
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenue
|
|
$
|
34,769
|
|
|
$
|
(34,769
|
)
|
|
$
|
15,011
|
|
|
$
|
15,011
|
|
Tenant reimbursements
|
|
|
1,881
|
|
|
|
(1,881
|
)
|
|
|
796
|
|
|
|
796
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
13
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
36,650
|
|
|
|
(36,650
|
)
|
|
|
15,820
|
|
|
|
15,820
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating &
maintenance
|
|
|
|
|
|
|
|
|
|
|
4,106
|
|
|
|
4,106
|
|
Utilities
|
|
|
|
|
|
|
|
|
|
|
3,108
|
|
|
|
3,108
|
|
Real estate taxes
|
|
|
1,881
|
|
|
|
(59
|
)
|
|
|
|
|
|
|
1,822
|
|
Property management
|
|
|
64
|
|
|
|
(64
|
)
|
|
|
473
|
|
|
|
473
|
|
Other operating expenses
|
|
|
|
|
|
|
|
|
|
|
628
|
|
|
|
628
|
|
Insurance
|
|
|
|
|
|
|
|
|
|
|
173
|
|
|
|
173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
1,945
|
|
|
|
(123
|
)
|
|
|
8,488
|
|
|
|
10,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Income
|
|
$
|
34,705
|
|
|
$
|
(36,527
|
)
|
|
$
|
7,332
|
|
|
$
|
5,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The pro forma adjustments presented above reflect the revenues
from contractual subleases in place during the period presented
along with specifically identified expenses relating to the
operations of the property and are based on the following
assumptions:
|
97
Notes to
Unaudited Pro Forma Condensed Combined Statement of
Operations
for the Year Ended June 30, 2007
(amounts in thousands except share data and per share
data)(Continued)
|
|
|
|
a.
|
Rental revenues reflect the straight-line contractual lease
revenue based on the leases in place during the period presented
with the exception of one lease agreement. This lease agreement
was amended effective January 1, 2007 wherein the tenant
previously paid a prorated portion of the master net lease
described above which expired December 31, 2006. The lease
was amended and restructured to be consistent with a more
traditional office lease at market rates. This amendment
significantly reduced the monthly base rental rate to be paid by
the tenant on a go-forward basis from approximately $37 per
square foot to approximately $17 per square foot. The amendment
has been incorporated into this pro forma statement to reflect
the rental revenue amounts as-if the amendment had been in place
as of July 1, 2006.
|
|
|
|
|
b.
|
Tenant reimbursements reflect contractual reimbursements
received based on the leases in place during the period.
|
|
|
c.
|
Property operating and maintenance expense includes the
specifically identified cleaning, repairs &
maintenance, landscaping, security, administrative and other
expenses incurred by the property during the period.
|
|
|
d.
|
Utility and real estate tax expenses reflect these actual
expenses incurred by the property during the period. It should
be noted, specifically, that future real estate taxes may vary
significantly from the historical real estate taxes presented
due to property assessments previously based on the
single-tenant master lease property while future assessments
will reflect a typical multi-tenant office building property.
|
|
|
e.
|
Property management expense reflects estimated property
management fees based on 3% of total revenues.
|
|
|
|
|
f.
|
Other operating expenses include other specifically identified
expenses incurred by the property during the period.
|
|
|
|
|
g.
|
Insurance expense includes estimated insurance costs based on
the current contractual insurance costs of the property which
management believes are more indicative of future insurance
costs.
|
It is managements belief that presenting these adjusted
historical results of operations provides a more comparable base
upon which to estimate the property operations on a go-forward
basis and will better assist you in your analysis of the
financial aspects of the acquisition.
(C) Reflects the following adjustments to present
certain amounts pursuant to the Acquisition Proposal, which
includes the Wachovia Mortgage Loans, assuming no share
redemptions:
|
|
|
|
(1)
|
To adjust interest income to reflect cash used to complete the
acquisition that had previously been held in trust and invested.
Funding of the acquisition of the Properties includes previously
invested cash of approximately $43,961 with an expected yield
during the period presented of approximately 4.88% resulting in
an elimination of
|
98
Notes to
Unaudited Pro Forma Condensed Combined Statement of
Operations
for the Year Ended June 30, 2007
(amounts in thousands except share data and per share
data)(Continued)
|
|
|
|
|
interest income of approximately $2,143 (eliminating interest
earned included in the historical statement of operations for
GERA during the year ended June 30, 2007).
|
|
|
|
|
(2)
|
To adjust interest expense to reflect borrowings under the
Wachovia Mortgage Loans discussed elsewhere in this proxy.
Funding of the acquisition of the Properties includes
approximately $120,500 of total borrowings the Wachovia Mortgage
Loans which, pursuant to the terms of the loans, would accrue
interest adjusted monthly at a floating rate of interest per
annum equal to the
30-day
LIBOR
plus a spread of 250 basis points. For purposes of these
pro forma statements a
30-day
LIBOR
rate of 5.20% has been used which yields an interest expense
adjustment of approximately $9,279 for the period presented. In
addition, the interest expense adjustment also includes a
straight-line amortization of approximately $2,400 of financing
fees, or $803, resulting in a total interest expense adjustment
of $10,082.
|
|
|
(3)
|
To adjust for the depreciation expense related to the buildings
and the amortization expense related to the lease intangibles
acquired. Buildings are depreciated on a straight-line basis
over a 39 year life and the lease intangibles are amortized
over the contractual life of the related leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Amortization
|
|
|
Depreciation
|
|
|
|
Depreciation
|
|
|
of Lease
|
|
|
and
|
|
|
|
Expense
|
|
|
Intangibles
|
|
|
Amortization
|
|
|
6400 Shafer Court
|
|
$
|
409
|
|
|
$
|
587
|
|
|
$
|
996
|
|
Abrams Centre
|
|
|
355
|
|
|
|
1,458
|
|
|
|
1,813
|
|
Danbury Corporate Center
|
|
|
1,118
|
|
|
|
2,516
|
|
|
|
3,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,882
|
|
|
$
|
4,561
|
|
|
$
|
6,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
The adjustment for the tax effects of the aforementioned
adjustments and the earnings from the properties calculated
below is based on an estimated effective tax rate of 40% and
further assumes that any tax benefit is fully reserved due to
uncertainty regarding realization of this asset.
|
|
|
|
|
|
|
|
Amount
|
|
|
Net income from the Properties
|
|
$
|
6,814
|
|
Interest income adjustment
|
|
|
(2,143
|
)
|
Interest expense adjustment
|
|
|
(10,082
|
)
|
Depreciation and Amortization
expense adjustment
|
|
|
(6,443
|
)
|
|
|
|
|
|
Total basis for tax effects
adjustment
|
|
|
(11,854
|
)
|
Estimated effective tax rate
|
|
|
40
|
%
|
|
|
|
|
|
Benefit adjustment for income taxes
|
|
|
(4,742
|
)
|
Increase in valuation allowance
|
|
|
4,742
|
|
|
|
|
|
|
Adjustment for provision for
income taxes
|
|
|
|
|
99
Notes to
Unaudited Pro Forma Condensed Combined Statement of
Operations
for the Year Ended June 30, 2007
(amounts in thousands except share data and per share
data)(Continued)
(D) Reflects the adjustment to weighted average
common shares outstanding for the maximum redemption of the
shares.
(E) This statement assumes the IPO occurred on
July 1, 2006 for purposes of calculating the basic weighted
average common shares outstanding. In connection with the IPO,
47,916,668 warrants were issued with an exercise price of $5.00
per warrant. These warrants will become exercisable upon
completion of the Proposed Acquisition. In addition, Deutsche
Bank Securities, in connection with the IPO, purchased 958,333
options with 1,916,666 warrants attached with an exercise price
of $6.60 per option and $6.25 per attached warrant. No potential
common shares are being included in the computation of pro forma
diluted net loss per share as the effect would be antidilutive
100
ARTICLE SIXTH
AMENDMENT PROPOSAL
Subject to the closing of the transactions contemplated by the
LLC Acquisition Agreement, we will remove the preamble,
Sections A through D, inclusive, and Section F of
Article Sixth of GERAs certificate of incorporation
and will redesignate section E of Article Sixth as
Article Sixth. If the Properties Acquisition Proposal is
not approved, the Article Sixth Amendment Proposal will not
be presented at the special meeting.
Sections A through D of GERAs certificate of
incorporation discuss matters such as the vote required to
authorize a business combination, conversion rights of
stockholders of GERA holding shares of common stock issued in
the IPO, and rights of stockholders if a business combination is
not consummated. Upon consummation of the acquisition, these
provisions will no longer be pertinent.
In the judgment of our board of directors, the
Article Sixth Amendment Proposal is desirable, as
sections A through D relate to the operation of GERA as a
blank check company prior to the consummation of a business
combination. Such sections will not be applicable upon
consummation of the acquisition.
The approval of the Article Sixth Amendment Proposal will
require the affirmative vote of the holders of a majority of the
outstanding shares of GERA common stock on the record date.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
ARTICLE SIXTH AMENDMENT PROPOSAL.
101
Background
GERA 2007 Omnibus Equity Plan has been approved by
GERAs board of directors and will take effect upon
consummation of the acquisition, provided that it is approved by
the stockholders at the special meeting.
The Plan is designed to attract, retain and motivate selected
eligible employees and key non-employees (including directors)
of the Company and its affiliates, and reward them for making
major contributions to the success of the Company and its
affiliates. These objectives are accomplished by making
long-term incentive awards under the Plan that will offer
participants an opportunity to have a greater proprietary
interest in, and closer identity with, the Company and its
affiliates and their financial success. The various types of
incentive awards that may be provided under the plan will enable
GERA to respond to changes in compensation practices, tax laws,
accounting regulations and the size and diversity of its
business.
All eligible employees and key non-employees of the Company or
its affiliates will be eligible to be granted awards under the
plan. No allocations of shares that may be subject to awards
have been made in respect of the executive officers or any other
group, except as set forth below. All awards will be subject to
the recommendations of the compensation committee and approval
by the board of directors or the compensation committee.
A summary of the principal features of the plan is provided
below, but is qualified in its entirety by reference to the full
text of the plan, which is attached to this proxy statement as
Annex C.
General.
The purpose of the Plan is to assist
the Company in attracting and retaining key employees and key
non-employees (including directors) and, to give such persons a
greater proprietary interest in, and closer identity with, the
Company and its financial success. The Plan authorizes the
Company to make grants (Awards) of incentive stock
options (within the meaning of Section 422 of the Code),
non-qualified (or non-statutory) stock options (the incentive
and non-qualified stock options issued under the Plan are
referred to collectively as options), restricted
stock, formula restricted stock, stock appreciation rights
(SARs), dividend equivalents, other stock-based
awards, performance awards and cash awards.
Administration of the Plan.
The Plan will be
administered by a committee of the board consisting of two or
more non-employee members of the board. The committee will have
discretion pursuant to the provisions of the Plan to determine
who will be recipients of Awards under the Plan and to establish
the terms, conditions and limitations of each Award (subject to
the terms of the Plan and the applicable provisions of the
Code), including the type and amount of the Award, the number of
shares of common stock to be subject to options or restricted
stock, the amount of cash to be included in the Award, the
exercise price of any options and the date or dates upon which
the options become exercisable or upon which any restrictions
applicable to any common stock included in the Award lapse. The
committee also has full power to construe and interpret the Plan
and the Awards granted under the Plan, and to establish rules
and regulations necessary or advisable for its administration.
The determination of the committee pursuant to the provisions of
the Plan with respect to any matter under the Plan to be acted
upon by the committee is final and binding.
Awards under the Plan may be granted only to key employees and
key non-employees (outside directors, independent contractors or
other consultants) of the Company and its subsidiaries.
102
The committee will determine whether a particular employee or
non-employee qualifies as a key employee or
key non-employee. Awards may be granted to a
prospective employee, conditioned upon such person becoming an
employee.
The board may amend the Plan in any respect, except that
amendments will be subject to the approval of the Companys
stockholders if such stockholder approval is required by the
Code, any federal or state law or regulation, the rules of the
AMEX (or any other stock exchange or automated quotation system
on which the Companys shares may be listed or quoted), or
if the board, in its discretion, determines to submit such
changes to the Companys stockholders for approval.
Terms and Conditions of Awards under the
Plan.
Awards under the Plan may consist of any
combination of one or more incentive or non-qualified options,
restricted stock, formula restricted stock, SARs, dividend
equivalents, other stock-based awards, performance awards or
cash awards, on a stand alone, combination or tandem basis. The
committee may specify that Awards other than options will be
paid in cash, shares of common stock or a combination of cash
and common stock.
The committee is permitted to cancel any unexpired, unpaid,
unexercised or deferred Awards at any time if a participant is
not in compliance with the applicable provisions of his or her
Award agreement or the Plan. Unless otherwise described below
for options or formula restricted stock awards, or as may be
provided in any individual Award agreement, all unexpired,
unpaid, unexercised or deferred Awards will be canceled
immediately if a participant ceases his or her service with the
Company or its subsidiaries, except for (a) retirement
under one of the Companys retirement plans,
(b) retirement in the Companys best interest (as
determined by the committee or a designated executive officer),
or (c) termination of the participants employment
upon his or her death or disability. Upon retirement under one
of the Companys retirement plans or termination in the
Companys best interests, the committee may permit Awards
to continue, and may accelerate exercisability and vesting. Upon
the death or disability of a participant, his or her estate or
beneficiaries (or the participant in the case of disability) may
exercise or receive benefits under the Award until the original
expiration date as provided in the Award (or within one year in
the case of options) and the committee may in its discretion
accelerate the vesting or terminate the restrictions to which
the Award is subject.
Upon any change in the nature or number of the Companys
outstanding shares of common stock due to a stock split, stock
dividend, merger, reorganization or similar event, adjustments
will be made to the numbers of shares and the applicable
exercise and base prices under outstanding Awards to prevent
dilution or enlargement of the Awards previously granted.
Both incentive and non-qualified options may be granted pursuant
to the Plan. Incentive options must have an exercise price per
share equal to at least the fair market value of a share at the
time the Award is granted. As required by the Code, if an
incentive option is granted to any participant who owns more
than ten percent of the voting power of the Companys
outstanding stock (a Significant Stockholder), then
the exercise price per share to such participant will be not
less than one hundred and ten percent (110%) of fair market
value on the date of grant. Fair market value equals the closing
sales price of the common stock on the date of grant. The
exercise price for non-qualified options will be determined by
the committee in its sole discretion on the date of grant, and,
except as may be determined by the committee to be appropriate
to comply with Sections 162(m) or 409A of the Code, may be
less than fair market value. The maximum term of all incentive
options granted under the Plan is ten years. (Incentive options
granted to a Significant Stockholder have a maximum term of five
years.) The term of non-
103
qualified options may be set by the committee in its discretion.
No options may be granted more than ten years from the date the
Plan was adopted. Except as otherwise determined by the
committee (and except for the rights of the estate or any
beneficiary of any deceased participant described above), all
options are non-transferable and may be exercised during a
participants lifetime only by the participant. The
aggregate number of shares as to which incentive options may be
granted from time to time under the Plan shall not exceed
3,000,000.
Unless otherwise specified by the committee at the time an
option is granted, options will generally vest in three
substantially equal annual installments over a period of three
(3) years. The vesting of the option will be automatically
accelerated upon a change in control, unless otherwise
determined by the committee at the time of grant. The
permissible manner of payment for the purchase price upon
exercise of the option (such as cash, check, the transfer of
previously owned, fully paid shares, or through a
cashless exercise) will be set by the committee in
the particular Award agreement or by general rules.
A participant who ceases to be an employee or key non-employee
of the Company or its subsidiaries for any reason other than
death, disability or termination for cause will be
permitted to exercise any option, to the extent it was
exercisable on the date of such cessation, but only within three
months of such cessation. A participant who is terminated for
cause will immediately lose all rights to exercise
any options. If a participant dies, his or her estate or
personal representative may exercise the option, to the extent
it was exercisable on the date of death. If a participant
becomes permanently disabled, he or she may exercise an option
to the extent it was exercisable at the time of the onset of the
disability. In the case of either death or disability, the
option must be exercised within twelve (12) months after
the date of death or onset of disability, and prior to the
original expiration date of the option.
The committee may award shares of common stock (or grant an
Award denominated in units of common stock) on a restricted
basis. The terms of a restricted stock award, including the
consideration, if any, to be paid by the participant to acquire
the stock, will be determined by the committee at the time the
Award is made and will be described in the Award agreement.
Unless otherwise determined by the committee at the time an
Award is made, the restrictions will lapse in substantially
equal annual installments over a period of three (3) years,
subject to accelerated vesting in the event of a change in
control prior to the expiration of such three (3) year
period. After the restricted stock is awarded, the participant
will be a stockholder with respect to such stock, and will have
rights to vote and receive dividends with respect to such stock.
Shares of restricted stock may not be transferred, assigned or
pledged prior to the lapse of the applicable restrictions. The
committee, in its discretion, may accelerate the date on which
the restrictions lapse.
The committee may award SARs either alone, in tandem or in
combination with an option or other Award. An SAR will permit
the participant to receive, upon exercise, cash or shares of
common stock equal in value to the excess of the fair market
value of a share of common stock as of the exercise date over
the base price set by the committee at the time the SAR is
granted, multiplied by the number of shares of common stock then
being exercised under the SAR. The base price will be at least
the fair market value of a share of common stock on the date of
grant, unless a lower base price is approved by the board. SARs
will become exercisable upon the date or dates, or the
occurrence of the events, set by the committee at the time of
grant. An SAR may only be exercised by the participant or, if
applicable, by the participants personal representative.
104
Under the provisions of the Plan, the board of directors has the
right to institute a program whereby each member of the board
who is not otherwise affiliated with the Company (an
outside director) will receive a formula award of
restricted stock for a number of shares having a fair market
value equal up to $50,000 at the time the Award is granted. All
grants of formula restricted stock will be made from shares to
be made available outside of the shares being reserved under the
Plan. All other terms of the formula restricted stock grants
will be governed by the Plan. The formula awards of restricted
stock will be made annually to each outside director for so long
as the participant continues to be an outside director and will
also be made when an individual participates in his or her first
meeting of the board after first being elected as an outside
director. Such restricted stock awards will vest in three
substantially equal annual installments, subject to accelerated
vesting upon a change in control. Awards will continue to vest
regardless of whether a participant ceases to be an outside
director, unless the participant is removed from the board for
cause.
The committee may award other stock-based awards, as well as
performance awards or cash awards, under the Plan, subject to
restrictions and conditions and other terms as determined by the
committee at the time of the Award. The committee may use such
business criteria and other measures of performance as it deems
appropriate in establishing any conditions, and may exercise its
discretion to increase or decrease the amounts payable under any
Awards subject to performance conditions, except as otherwise
may be limited in the case of a performance award intended to
qualify under Code Section 162(m). These Awards will be
subject to cancellation or forfeiture upon the terms set forth
above.
Federal Income
Tax Effects
Under the Code, as presently in effect, the grant of an option
or SAR at fair market value or the award of restricted stock
under the Plan will not generate federal income to a participant
or a deduction to the Company.
Upon exercise of a non-qualified option or an SAR, the
participant will normally be deemed to have received ordinary
income in an amount equal to the difference between the exercise
price for the option and the fair market value of the
Companys common stock on the exercise date or, in the case
of an SAR, equal to the amount of payment received from the
Company (less any exercise price, if applicable). The Company
will be entitled to a tax deduction in the same amount as is
recognized by the participant and at the same time, provided
that the Company includes and reports such amounts on a timely
filed
Form W-2
or
Form 1099-MISC
(or similar such IRS form filing). Upon a disposition of shares
acquired upon exercise of a non-qualified option, any amount
received in excess of the fair market value of the shares at the
time of exercise of the option generally will be treated as
long-term or short-term capital gain, depending on the holding
period of the shares. The Company will not be entitled to any
tax deduction upon such subsequent disposition.
In the case of incentive options, the participant typically
recognizes no ordinary income on the date of grant or exercise.
If the participant holds the stock acquired through exercise of
an incentive option for one year from the date of exercise and
two years from the date of grant, the participant will
thereafter recognize long-term capital gain or loss upon a
subsequent sale of the stock, based on the difference between
the incentive options exercise price and the sale price.
If the stock is sold before the requisite holding period, the
participant will recognize ordinary income based upon the
difference between the exercise price and the lesser of the
sales price or the fair market value upon the date of exercise.
The Company generally will be allowed a
105
business expense deduction only if, and to the extent, the
participant recognizes ordinary income.
For Awards of restricted stock, the fair market value of the
stock is not taxable to the participant as ordinary income until
the year the participants interest is freely transferable
or no longer subject to a substantial risk of forfeiture.
Section 83 of the Code, however, permits a participant to
elect to have the fair market value of the stock taxed as
ordinary income in the year the Award is received. Dividends on
restricted stock are treated as ordinary income at the time
paid. The Company generally will be entitled to a deduction
equal to the amount of ordinary income recognized by the
participant.
Upon the grant of a performance or cash Award, the participant
will recognize ordinary income equal to the amount of the Award,
which amount will be includable in the participants
taxable income in the year such Award is paid. The Company will
be entitled to a deduction in the same year equal to the amount
of the Award.
Recommendation
and Vote Required
Approval of our incentive compensation plan will require the
affirmative vote of the holders of a majority of the outstanding
shares of our common stock represented in person or by proxy and
entitled to vote at the special meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE 2007
EQUITY PLAN PROPOSAL.
106
THE
DIRECTOR NOMINATION PROPOSAL
Our board of directors is presently comprised of five directors
divided into three classes of one or two directors each. Each
class will generally serve for a term of three years with only
one class of directors being elected in each year. The term of
office of our Class A directors, presently consisting of
William Downey, will expire at the special meeting. At the
special meeting, one director is to be elected to serve for a
three-year term expiring in 2010 and until his successor is duly
elected and qualified.
Our board of directors has approved the nomination of William
Downey to serve for a three-year term expiring in 2010. Unless a
stockholder requests that voting of the proxy be withheld for a
nominee in accordance with the instructions set forth on the
proxy card, it presently is intended that shares represented by
proxies will be voted for the election of this nominee for the
class to which the nominee was nominated. This nominee has
consented to being named in this proxy statement and to serve if
elected.
Recommendation
and Vote Required
For election as director, a nominee must receive the affirmative
vote of the holders of a majority of the outstanding shares of
our common stock represented in person or by proxy and entitled
to vote at the special meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR
STOCKHOLDERS VOTE FOR THE ELECTION OF WILLIAM DOWNEY
AS A CLASS A DIRECTOR.
107
THE
E&Y RATIFICATION PROPOSAL
The Audit Committee has appointed Ernst & Young LLP
(E&Y) as GERAs independent registered
public accounting firm for the year 2007. E&Y was first
retained as GERAs independent registered public accounting
firm in September 2005. E&Y currently also serves as
GBEs independent registered public accounting firm and has
served in such position since January 1993. Although this
appointment is not required to be submitted to a vote of the
stockholders, the board of directors believes it appropriate at
this time to request that the stockholders ratify the
appointment of the independent registered public accounting firm
for the year 2007. In the event a majority of the votes cast at
the special meeting are not voted in favor of this proposal, the
Audit Committee will reconsider the appointment, but may decide
to maintain its appointment of E&Y.
We anticipate that a representative of E&Y will be present
at the special meeting. The representative will be given the
opportunity to make a statement if he or she desires to do so,
and is expected to be available to respond to any appropriate
questions that may be submitted by stockholders at the special
meeting.
Recommendation
and Vote Required
Approval of the E&Y Ratification Proposal will require the
affirmative vote of the holders of a majority of the outstanding
shares of our common stock represented in person or by proxy and
entitled to vote at the special meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR
STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR 2007.
108
OTHER
INFORMATION RELATED TO GERA
GERA was formed on September 7, 2005, to acquire, through a
purchase, or other business combination, commercial real estate
properties
and/or
assets. Prior to executing the LLC Acquisition Agreement with
GBE, GERAs efforts were limited to organizational
activities, completion of the IPO and the evaluation of possible
business combinations and property acquisitions.
Offering
Proceeds Held in Trust
GERA consummated the IPO on March 3, 2006. The net proceeds
of the offering, including proceeds from the exercise of the
underwriters over-allotment option, and after payment of
underwriting discounts and expenses were approximately
$133,400,000. Of that amount, $132,325,004 was placed in the
trust account and invested in government securities. The
remaining proceeds have been used by GERA in its pursuit of a
business combination. The trust account will not be released
until the earlier of the consummation of a business combination
or the liquidation of GERA. The trust account contained
approximately $ as
of ,
the record date. If the acquisition of Property Acquisition is
consummated, the trust account will be released to GERA, less
the amounts paid to stockholders of GERA who vote against the
Properties Acquisition Proposal and elect to convert their
shares of common stock into their pro-rata share of the trust
account.
The holders of shares of GERA common stock issued in the IPO
will be entitled to receive funds from the trust account only in
the event of GERAs liquidation or if the stockholders seek
to convert their respective shares into cash and the acquisition
is actually completed. In no other circumstances shall a
stockholder have any right or interest of any kind to or in the
trust account.
Fair
Market Value of Properties
The initial target business or properties that GERA acquires
must have a fair market value equal to at least 80% of
GERAs net assets at the time of such acquisition.
GERAs board of directors determined that this test was met
in connection with its acquisition of the Properties. See the
section entitled Recommendation of Our Board of
Directors.
Stockholder
Approval of Business Combination
GERA will proceed with the acquisition contemplated by the LLC
Acquisition Agreement only if a majority of the GERA shares
issued in the IPO, present in person or represented by proxy and
entitled to vote at the special meeting, are voted in favor of
the Properties Acquisition Proposal. The GERA Inside
Stockholders have agreed to vote their shares of common stock
issued prior to the IPO on the Properties Acquisition Proposal
in accordance with the vote of holders of a majority of the GERA
shares issued in the IPO present in person or represented by
proxy and entitled to vote at the special meeting. If the
holders of 20% or more of GERAs common stock issued in the
IPO vote against the Properties Acquisition Proposal and
properly demand that GERA convert their shares into their pro
rata share of the trust account, then GERA will not consummate
the acquisition. In this case, GERA will be forced to liquidate
if the contemplated business combination is not consummated by
March 3, 2008.
109
Liquidation
If No Business Combination
GERAs certificate of incorporation provides for mandatory
liquidation of GERA if GERA does not consummate a business
combination within 18 months from the date of consummation
of the IPO, or 24 months from the consummation of the IPO
if certain extension criteria have been satisfied. Such dates
are September 3, 2007 and March 3, 2008, respectively.
GERA signed the LLC Acquisition Agreement with GBE on
June 18, 2007. As a result of having signed the LLC
Acquisition Agreement, GERA satisfied the extension criteria and
now has until March 3, 2008 to complete this acquisition.
If GERA does not complete this acquisition by March 3, 2008
GERA will be dissolved pursuant to Section 275 of the
Delaware General Corporation Law. In connection with such
dissolution, the expected procedures of which are set forth
below, GERA will distribute to all of its public stockholders,
in proportion to their respective equity interests, an aggregate
sum equal to the amount in the trust account, inclusive of any
interest (but excluding taxes on such interest), plus remaining
assets of GERA. GERAs stockholders who obtained their GERA
stock prior to the IPO have waived their rights to participate
in any liquidation distribution with respect to shares of common
stock owned by them immediately prior to the IPO. There will be
no distribution from the trust account with respect to
GERAs warrants.
We anticipate that, if we are unable to complete the acquisition
of Property Acquisition by March 3, 2008, the following
will occur:
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our board of directors will adopt a specific plan of dissolution
and liquidation, which it will then vote to recommend to our
stockholders; at such time it will also cause to be prepared a
preliminary proxy statement setting out such plan of dissolution
and liquidation as well as the boards recommendation of
such plan;
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we will promptly file our preliminary proxy statement with the
SEC;
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if the SEC does not review the preliminary proxy statement,
then, 10 days following the filing of such preliminary
proxy statement, we will mail the definitive proxy statement to
our stockholders, and 20 days following the mailing of such
definitive proxy statement, we will convene a special meeting of
our stockholders, at which they will vote on our plan of
dissolution and liquidation; and
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if the SEC does review the preliminary proxy statement, we
currently estimate that we will receive their comments
30 days after the filing of such proxy statement. We would
then mail the definitive proxy statement to our stockholders
following the conclusion of the comment and review process (the
length of which we cannot predict with any certainty, and which
may be substantial) and we will convene a special meeting of our
stockholders at which they will vote on our plan of dissolution
and liquidation.
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We expect that all costs associated with the implementation and
completion of our plan of dissolution and liquidation will be
funded by any remaining net assets not held in the trust
account, although we cannot assure you that there will be
sufficient funds for such purpose.
We will not liquidate the trust account unless and until our
stockholders approve our plan of dissolution and liquidation.
Accordingly, the foregoing procedures may result in substantial
delays in our liquidation and the distribution to our public
stockholders of the funds in our trust account and any remaining
net assets as part of our plan of dissolution and liquidation.
If GERA were to expend all of the net proceeds of the IPO, other
than the proceeds deposited in the trust account, the per-share
liquidation price as
of ,
the record date, would be
110
approximately $ , or $ less than
the
per-unit
offering price of $6.00 in the IPO. The proceeds deposited in
the trust account could, however, become subject to the claims
of GERAs creditors and there is no assurance that the
actual per-share liquidation price will not be less than
$ , due to those claims. We cannot
assure you that the per-share distribution from the trust fund,
if we liquidate, will not be less than $6.00, plus interest, due
to claims of creditors.
Additionally, if we are forced to file a bankruptcy case or an
involuntary bankruptcy case is filed against us that is not
dismissed, the proceeds held in the trust account could be
subject to applicable bankruptcy law, and may be included in our
bankruptcy estate and subject to the claims of third parties
with priority over the claims of our stockholders. Also, in any
such case, any distributions received by stockholders in our
dissolution might be viewed under applicable debtor/creditor
and/or
bankruptcy laws as either a preferential transfer or
a fraudulent conveyance. As a result, a bankruptcy
court could seek to recover all amounts received by our
stockholders in our dissolution. Furthermore, because we intend
to distribute the proceeds held in the trust account to our
public stockholders as soon as possible after our dissolution,
this may be viewed or interpreted as giving preference to our
public stockholders over any potential creditors with respect to
access to or distributions from our assets. In addition, our
board of directors may be viewed as having breached their
fiduciary duties to our creditors
and/or
may
have acted in bad faith, thereby exposing itself and our company
to claims of punitive damages, by paying public stockholders
from the trust account prior to addressing the claims of
creditors
and/or
complying with certain provisions of the Delaware General
Corporation Law with respect to our dissolution and liquidation.
We cannot assure you that claims will not be brought against us
for these reasons.
To the extent any bankruptcy or other claims deplete the trust
account, we cannot assure you we will be able to return to our
public stockholders at least $ per
share.
Under Sections 280 through 282 of the Delaware General
Corporation Law, stockholders may be held liable for claims by
third parties against a corporation to the extent of
distributions received by them in dissolution. Pursuant to
Section 280, if the corporation complies with certain
procedures intended to ensure that it makes reasonable provision
for all claims against it, including a
60-day
notice period during which any third-party claims can be brought
against the corporation, a
90-day
period during which the corporation may reject any claims
brought, and an additional
150-day
waiting period before any liquidating distributions are made to
stockholders, any liability of a stockholder with respect to a
liquidating distribution is limited to the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution. Although we will seek stockholder approval to
liquidate the trust account to our public stockholders as part
of our plan of dissolution and liquidation, we will seek to
conclude this process as soon as possible and as a result do not
intend to comply with those procedures. Because we will not be
complying with the foregoing provisions, Section 281(b) of
the Delaware General Corporation Law requires us to adopt a plan
that will provide for our payment, based on facts known to us at
such time, of (i) all existing claims, (ii) all
pending claims and (iii) all claims that may be potentially
brought against us within the subsequent 10 years. However,
because we are a blank check company, rather than an operating
company, and our operations have been limited to searching for
prospective target businesses to acquire, the only likely claims
to arise would be from our vendors and service providers to whom
we owe money and potential target businesses, all of whom
weve received agreements waiving any right, title,
interest or claim of any kind they may have in or to any monies
held in the trust account. As a result, the claims that could be
made against us will be significantly limited and the likelihood
that any
111
claim would result in any liability extending to the trust is
remote. Nevertheless, such agreements may or may not be
enforceable. Because we will not be complying with those
procedures, we are required, pursuant to Section 281 of the
Delaware General Corporation Law, to adopt a plan that will
provide for our payment, based on facts known to us at such
time, of (i) all existing claims, (ii) all pending
claims and (iii) all claims that may be potentially brought
against us within the subsequent 10 years. Accordingly, we
would be required to provide for any creditors known to us at
that time or those that we believe could be potentially brought
against us within the subsequent 10 years prior to
distributing the funds held in the trust to stockholders. We
cannot assure you that we will properly assess all claims that
may be potentially brought against us. As such, our stockholders
could potentially be liable for any claims to the extent of
distributions received by them in dissolution (but no more) and
any liability of our stockholders may extend well beyond the
third anniversary of such dissolution. Accordingly, we cannot
assure you that third parties will not seek to recover from our
stockholders amounts owed to them by us.
Business
of the Company Upon Completion of the Business
Combination
In the event the business combination is approved by the
Companys stockholders and consummated, it is the present
intention of the Company to continue its current business plan,
which it is to manage the Properties acquired in the business
combination and seek to acquire other commercial real estate
properties. As such, following the consummation of the business
combination, the Company intends to continue to be externally
managed on a day to day basis by GBE upon the same terms and
conditions as it was prior to the business combination, except
that Mr. Mark Rose, the Companys current chief
executive officer, will be replaced in that capacity by the
Companys chairman of the board, Mr. C. Michael
Kojaian on the closing of the proposed merger of GBE and NNN
Realty Advisors as described in the section
Business of
GBE and Property AcquisitionGBE.
On June 18, 2007, GBE and GERA entered into a trademark
license agreement (the Trademark Agreement) whereby
GBE granted to GERA a perpetual, nonexclusive, nontransferable,
and royalty-free license to use GBEs trademarks, trade
names, emblems, and logos (the Licensed Marks).
Although GERA has been using the Licensed Marks, with GBEs
express knowledge and consent, and in such a manner in which GBE
fully approves, the parties never memorialized their
understanding in regards to the use of such marks. The Trademark
Agreement formally sets forth the terms and conditions on which
GERA shall continue to use the Licensed Marks. A copy of the
trademark license agreement is attached to this proxy statement
as Annex D and we encourage you to read it.
GERA maintains executive offices at 500 West Monroe Street,
Suite 2800, Chicago, Illinois 60661 which are also the
executive offices of GBE. The cost for this space is included in
a $7,500 per-month fee that GBE charges GERA for general and
administrative services. GERA believes, based on rents and fees
for similar services in the Chicago, Illinois area, that the
fees charged by GBE are at least as favorable as GERA could have
obtained from an unaffiliated person. GERA considers its current
office space adequate for current operations. Upon consummation
of the acquisition, the principal executive offices of GERA will
continue to be located at 500 West Monroe Street,
Suite 2800, Chicago, Illinois 60661.
112
GERA has two executive officers and five directors. GERA
executive officers, Mark E. Rose and Richard W. Pehlke, are also
executive officers of GBE. Additionally, GERA directors C.
Michael Kojaian, our chairman of the board, and Mark E. Rose,
are also directors of GBE. These individuals are not obligated
to contribute any specific number of hours per week and devote
only as much time as they deem necessary to our affairs.
Periodic
Reporting and Audited Financial Statements
GERA has registered its securities under the Securities Exchange
Act of 1934 and has reporting obligations, including the
requirement to file annual and quarterly reports with the SEC.
In accordance with the requirements of the Securities Exchange
Act of 1934, GERAs annual reports contain financial
statements audited and reported on by GERAs independent
accountants. GERA has filed with the SEC a
Form 10-K
covering the fiscal year ended June 30, 2006 and its most
recent
Forms 10-Q
covering the fiscal quarters ended December 31, 2006 and
March 31, 2007.
GERA maintains insurance coverage for general liability,
automobile liability, workers compensation and
employers liability, and directors and
officers liability. Management of GERA believes that the
types of coverage, deductibles and limits of liability currently
in place are adequate.
There are no legal proceedings pending against GERA.
Off-Balance
Sheet Arrangements
There were no off-balance sheet arrangements during the period
from September 7, 2005 (inception) through
December 31, 2006, that have or are reasonably likely to
have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources
that is material to GERA.
113
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF GERA
The following discussion of the financial condition and
results of operations of GERA should be read the in conjunction
with GERAs historical consolidated financial statements
and related notes contained elsewhere herein. Among other
things, those historical consolidated financial statements
include more detailed information regarding the basis of
presentation for the following information.
Critical
Accounting Policies and Estimates
Basis of
Presentation
The Companys financial statements have been prepared in
accordance with U.S. generally accepted accounting
principles, which require the Company to make estimates and
judgments that affect the reported amount of assets,
liabilities, revenues and expenses, and the related disclosure.
Actual results could differ from those estimates.
Cash, Cash
Equivalents and Investments Held in Trust
Amounts held in the Trust Account are primarily invested in
U.S. Treasury Bills of various maturities ranging from
thirty to ninety days. At June 30, 2007 the fair market
value of the U.S. Treasury Bills approximated their
carrying amount, which includes interest accrued through that
date. As of June 30, 2007, the Company had invested
approximately $143.7 million in U.S. Treasury Bills
with a maturity date of August 23, 2007.
For the year ended June 30, 2007, the Company generated net
income of approximately $2.7 million, primarily due to
interest earned on investments held in trust. This income was
partially offset by operating expenses incurred during the
period, which consisted primarily of costs incurred in
connection with the Properties Acquisition Proposal, audit fees
and the provision for income taxes.
For the period from September 7, 2005 (inception) through
June 30, 2006, the Company generated net income of
approximately $920,000, primarily due to interest earned on
investments held in trust. This income was partially offset by
operating expenses incurred during the period, which consisted
primarily of audit fees, stock-based compensation expense and
insurance expense, and the provision for income taxes.
Liquidity
and Capital Resources
The registration for the Companys initial public offering
(the Offering) was declared effective by the
Securities and Exchange Commission on February 27, 2006.
The Company closed the Offering on March 3, 2006 and
received net proceeds of approximately $133,400,000 after
payment of related offering costs. A portion of the net proceeds
from the Offering ($132,325,004) was placed in a
Trust Account along with the initial capital from the
founding stockholder ($2,500,000) and the deferred underwriting
discount ($2,675,000). The amounts held in the
Trust Account have been and will continue to be invested in
government securities until the earlier of (i) the
consummation of a Business Combination or (ii) the
distribution of the Trust Account as described in
Item 1 of this report. The remaining net proceeds from the
Offering have been and may be used to pay for business, legal,
and accounting due diligence
114
on potential acquisitions, for a Business Combination and for
continuing general and administrative expenses.
For the year ended June 30, 2007, the Company used cash and
cash equivalents of approximately $725,000. Cash from operations
of approximately $3.3 million includes approximately
$6.9 million of interest earned on investments held in
trust which was partially offset by federal income tax payments
of approximately $2.6 million and operating expenses
related to costs incurred in connection with the Properties
Acquisition Proposal and audit fees. The Company reinvested
approximately $4.0 million of interest earned on
investments held in trust into U.S. Treasury Bills.
For the period from September 7, 2005 (date of inception)
through June 30, 2006, the Company generated cash and cash
equivalents of approximately $784,000. Financing activities
provided cash of approximately $138.6 million, primarily
through the sale of common stock via the public offering and the
initial sale to the corporate sponsor, as described above. The
Company placed a significant portion of these funds into the
Trust Account, which invested approximately
$137.5 million into U.S. Treasury Bills. Cash used in
operating activities, which totaled approximately $280,000,
related primarily to insurance and audit fees and the monthly
fee paid to Grubb & Ellis described below.
Grubb & Ellis, the Companys corporate sponsor,
had agreed that, commencing on February 27, 2006, the
effective date of the registration statement, through the
closing of a Business Combination, it would make available to
the Company a small amount of office space and certain office
and secretarial services, as may be required from time to time.
The Company pays Grubb & Ellis $7,500 per month for
these services. This arrangement is solely for the
Companys benefit and is not intended to provide
compensation in lieu of fees. The Company will reimburse certain
out of pocket expenses incurred by Grubb & Ellis in
connection with seeking to effect a Business Combination. In
addition, as of March 2, 2006, Grubb & Ellis had
loaned the Company $510,842 during the initial phase through
direct payment of certain costs on behalf of the Company
associated with the Offering. The loan was repaid without
interest on March 3, 2006 from net proceeds upon the
closing of the Offering. As of June 30, 2007,
Grubb & Ellis had loaned the Company approximately
$203,000 through direct payment of certain operating costs.
Impact of the
Properties Acquisition Proposal
On June 18, 2007, the Company entered into the LLC
Acquisition Agreement to acquire all of the issued and
outstanding membership interests of Property Acquisition from
GBE. The LLC Purchase Price represents the amounts invested in
or advanced to Property Acquisition by GBE to fund the aggregate
purchase price paid by Property Acquisition for the Properties
plus interest expense, imputed interest on cash advanced to
Property Acquisition by GBE. Therefore if, for example, the
business combination was consummated on July 15, 2007 the
aggregate consideration would be approximately
$163.9 million, consisting of cash consideration paid to
GBE of approximately $43.4 million and the assumption of
the Wachovia Mortgage Loans totaling $120.5 million.
As part of the Companys plan to reposition the Properties,
the Company has budgeted to undertake certain cosmetic
renovations at the Dallas Property and the Danbury Property
(including lobby renovations, restroom upgrades and common area
upgrades) and certain upgrades or replacements of original
mechanical systems (including chillers, cooling towers, roofs
and some elevator components) over a five-year period. The
Company has also budgeted
115
to replace the roof at the Rosemont Property within the first
five years after consummation of the business combination. In
connection with the Wachovia Mortgage Loans approximately
$43.6 million is held by Wachovia as reserves to fund
future real estate tax, insurance and interest payments and to
fund the budgeted engineering projects and leasing commissions
that are part of the Companys plan to reposition the
Properties.
Quantitative
and Qualitative Disclosures About Market Risk
Market risk is the sensitivity of income to changes in interest
rates, foreign exchanges, commodity prices, equity prices, and
other market-driven rates or prices. The Company is not
presently engaged in and, if a suitable business combination is
not identified prior to the prescribed liquidation date of the
trust account, the Company may not engage in any substantive
commercial business. Accordingly, the Company is not exposed to
risks associated with foreign exchange rates, commodity prices,
equity prices or other market-driven rates or prices until such
time as a business combination is consummated. The net proceeds
of the Companys initial public offering held in the trust
account have been invested only in U.S. Treasury Bills.
Given the limited risk inherent with U.S. Treasury Bills,
the Company does not view its interest rate risk to be
significant.
116
BUSINESS
OF GBE AND PROPERTY ACQUISITION
Property
Acquisition
Property Acquisition is a limited liability company formed in
Delaware, on October 2, 2006, and is a wholly owned
subsidiary of GBE. Property Acquisition was formed as a holding
company, and in turn established three special purpose entities,
GERA Abrams Centre LLC, GERA 6400 Shafer LLC, and GERA Danbury
LLC, which have each acquired discrete commercial real estate
properties in Dallas, Texas, Rosemont, Illinois, and Danbury,
Connecticut, respectively.
GBE
GBE, the sponsor and an affiliate of GERA, is a corporation
formed in Delaware in 1980 and is one of the largest and most
recognized full service commercial real estate services firms in
the United States. Founded nearly 50 years ago,
Chicago-based GBE has grown to become one of the largest
publicly traded real estate services organizations in the world
as measured by revenues.
With nearly 5,000 real estate employees and professionals,
including approximately 1,500 brokers who operate under the GBE
brand nationwide, GBE provides services at every stage of the
real estate process, including strategic planning, feasibility
studies, site selection, leasing, property and facilities
management, construction management, lease administration,
acquisition and dispositions.
GBE possesses one of the largest footprints in the commercial
real estate services industry. Its office network encompasses
114 locations, consisting of 52 owned offices and 62 affiliate
offices across 39 states, allowing it to execute locally in
primary markets and key secondary and tertiary markets
throughout the U.S. as well as internationally through a
best in class network of service providers. This
strong local presence provides GBE with national brand awareness
and an extensive internal referral network, and enables the
company to deliver a full range of commercial real estate
services to corporate and institutional clients with multiple
real estate needs, including complete outsourcing solutions.
GBEs clients include many Fortune 500 companies,
institutional and private investors, retailers, government and
academic institutions as well as owners and occupiers of office,
industrial and retail space.
GBEs professionals are supported by approximately 100
research analysts who produce in-depth local, regional and
national market research from market data generated by both
owned and affiliate offices. In addition, the company supports
industry vertical segments through Specialty Councils and
practice groups focused on the office, industrial, retail,
private capital, institutional investments and land industry
segments.
On May 22, 2007, GBE entered into a definitive Agreement
and Plan of Merger (the Merger Agreement) by and
among GBE, NNN Realty Advisors, Inc. (NNN Realty
Advisors) and B/C Corporate Holding, Inc. (Merger
Sub), a wholly owned subsidiary of GBE. Pursuant to the
Merger Agreement, NNN Realty Advisors shall become a wholly
owned subsidiary of GBE. The Merger will not have any impact on
GERA except that upon the consummation of the Merger the
chairman of the board, Mr. C. Michael Kojaian, will assume
the duties of chief executive officer of the Company, replacing
Mr. Mark E. Rose in that capacity. GBE will remain the
largest stockholder of the Company, and each of the Services
Agreement, the Property Management Agreement and the Project
Management Agreement will not be affected by the Merger.
117
The Merger will be effected through the issuance of
0.88 shares of GBE common stock for each share of NNN
Realty Advisors common stock outstanding. Following the merger,
GBE stockholders will own approximately 41% of the combined
company and NNN Realty Advisors stockholders will own
approximately 59% of the combined company. The merged companies
will retain GBEs name and will continue to be listed on
the New York Stock Exchange under the ticker symbol
GBE. The combined company will be headquartered in
Santa Ana, CA and GBEs board of directors will be
increased to nine members which will include six nominees from
NNN Realty Advisors and three nominees from GBE. Anthony W.
Thompson, Founder and chairman of the board of NNN Realty
Advisors, will join GBE as chairman of the board. Mr. C.
Michael Kojaian, currently our chairman of the board of
directors and chairman of the board of directors of GBE, will
remain on the board of directors of GBE. Scott D. Peters,
president and chief executive officer of NNN Realty Advisors
will become chief executive officer of GBE and will also join
GBEs board of directors.
The transaction is expected to close in the third or fourth
quarter of 2007, subject to approval by the stockholders of both
companies and other customary closing conditions of transactions
of this type. Certain entities affiliated with the chairman of
the board of GBE, which collectively own approximately 39% of
the outstanding shares of GBE common stock, have agreed to vote
their shares in favor of the merger. Similarly, members of
management and the board of directors of NNN Realty Advisors who
collectively own approximately 28% of the outstanding shares of
NNN Realty Advisors common stock have agreed to vote their
shares in favor of the merger.
Pursuant to GBEs strategy of facilitating the
Companys business combination by acquiring and
warehousing properties for future sale to GERA, the
GERA Acquisition Team reviewed a significant number of
acquisition opportunities to find commercial real estate
properties that fit with the Companys strategy and
articulated investment criteria. In connection with such
strategy, Property Acquisition has completed three such
transactions through three of its subsidiaries. The following is
a description of the properties acquired by Property
Acquisitions subsidiaries:
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1.
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Abrams CentreDallas, Texas:
This
property is comprised of a fifteen story, multi-tenant,
Class B Property which was originally constructed in 1983
and was acquired by GERA Abrams Centre LLC on February 20,
2007. It consists of 325,616 square feet of rentable space
and a parking ratio of 3.53 per 1,000 square feet. The
propertys location has excellent regional accessibility
with direct access to Dallas major highway systems.
Currently, the property has a 54.2% occupancy rate. The purchase
price of the property was $20,000,000.
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|
2.
|
6400 Shafer CourtRosemont,
Illinois:
This property consists of a seven
story, multi-tenant, Class B Property which was originally
constructed in 1979 and renovated in 1990 and again in 2006. The
property was acquired by GERA 6400 Shafer LLC on
February 28, 2007. It consists of 179,343 square feet
of rentable space with a parking ratio of 3.07 per
1,000 square feet. The property is easily accessible to
OHare International Airport and Interstates 294 and 90.
Currently, the property has an occupancy rate of 61%, 43% of
which is comprised of three major tenants whose average
remaining lease term is nine years. The property had a purchase
price of $21,450,000.
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3.
|
Danbury PropertyDanbury,
Connecticut:
The Corporate Center located in
Danbury, Connecticut is comprised of fifteen four story,
multi-tenant, Class A Properties which were constructed in
1981. The property is the former headquarters of Union Carbide,
which made significant investments in improvements to the
buildings on the property. The buildings have a total rentable
space of 1,046,800 square feet and a parking ratio of 2.83
per 1,000 square feet. The Corporate Center has direct
access to five major highway systems servicing New York, New
York, New Haven, Connecticut and Rhode Island. Currently, the
property has an occupancy rate of 65.3%, 58% of which consists
of five major tenants with an average remaining lease term of
8 years. The purchase price of the property was
$80,750,000. At closing, $2,000,000 of the purchase price paid
to Buildings Co. was placed in escrow to cover the cost of
certain environmental remediation work on the Danbury Property,
and upon completion of such remediation work, any remaining
balance in such escrow account shall be remitted to Buildings
Co. Furthermore, in addition to the LLC Purchase Price and
acquisition fee GBE is to receive from GERA at the closing of
the transactions contemplated by the LLC Acquisition Agreement,
GBE received a commission from Buildings Co. (the seller of the
Danbury Property) in an amount equal to 1% of the purchase price
of the Danbury Property ($807,500) at the time of GBEs
acquisition of the Danbury Property.
|
The Company believes that at the time of acquisition, each of
the Properties was under leased. Additionally, the Properties
were not managed to a level of similarly situated Class A
Properties and Class B Properties. In connection with its
due diligence review of the Properties, GBE identified that as a
result of under management by the prior owners there were areas
of significant operational under management, such as, lack of
attention to cleanliness, landscaping, tenant service and
retention, and items of deferred maintenance on property
operating systems (which we budgeted to update in our original
underwriting and for loans which we believe adequate reserves
have been reestablished in connection with the Wachovia Mortgage
Loans). Furthermore, as part of the plan to reposition the
Properties, the Company has budgeted to undertake certain
cosmetic renovations at the Dallas Property and the Danbury
Property (including lobby renovations, restroom upgrades and
common area upgrades) and certain upgrades or replacements of
original mechanical systems (including chillers, cooling towers,
roofs and some elevator components) over a five-year period. The
Company has also budgeted to replace the roof at the Rosemont
Property within the first five years after consummation of the
business combination.
Dallas and
Rosemont Wachovia Loan
GERA Abrams Centre LLC and GERA 6400 Shafer LLC have received
from Wachovia Bank, N.A. a mortgage loan in the amount of
$42,500,000, which is secured by the Dallas Property and the
Rosemont Property. In the event that the GERA stockholders
approve the Properties Acquisition Proposal, GERA Abrams Centre
LLC and GERA 6400 Shafer LLC will become our indirect wholly
owned subsidiaries and the mortgage loan will remain in
existence and continue to be secured by the Dallas Property and
the Rosemont Property. The expected cash flows from the
Properties together with a debt service reserve of approximately
$5.6 million established under the Wachovia Mortgage Loans,
which will be drawn over the term of the loans, result in a 1.0
debt service coverage during the life of the initial term of the
loans. Upon maturity of the loans, if the Properties remain in
their current condition, we will be able to repay the principal
of the loans assuming that we can sell the Properties for what
we paid for them. We
119
have assumed that we expect to be able to sell the Properties at
a price based on the then increased net operating income and
assumed residual capitalization rates which are 150 basis
points higher than the estimated residual capitalization rates
for the Properties today, we would have the ability to repay the
principal of the loans through a refinance or sale of the
Properties. Certain principle terms of the Dallas and Rosemont
Wachovia Loan are summarized below.
Initial Term and Extensions.
The mortgage loan
has an initial term of two (2) years with three extension
options, each one year in length, subject to the satisfaction of
certain conditions, including the purchase of an interest rate
cap on
30-day
LIBOR
with a LIBOR strike price of 6%. Subject to the satisfaction of
certain conditions, each of the extension options may be
exercised without payment by Property Acquisition or any of its
subsidiaries of any fee to the lender, provided that the
borrower will be responsible for the payment of all costs and
expenses (including reasonable attorneys fees) incurred by
the lender in connection with any extension and for the payment
of any costs incurred in connection with the extension or
replacement of the interest rate cap.
Interest Rate and Fees; Interest Rate Cap; Prepayment
Rights.
Interest on the mortgage loan will be
paid and adjusted monthly at a floating rate of interest per
annum equal to the
30-day
LIBOR
plus a spread of 250 basis points. GERA Abrams Centre LLC
and GERA 6400 Shafer LLC have purchased an interest rate cap on
30-day
LIBOR
with a LIBOR strike price of 6%, thereby locking the maximum
interest rate on borrowings under the mortgage loan at 8.50% for
the initial two year term of the mortgage loan. Prepayments of
borrowings under the mortgage loan may not be made during the
first year of the term.
Reserves.
Pursuant to the mortgage loan,
reserves in the amount of approximately $15.2 million have
been established for the cost of certain capital expenditures,
maintenance and repairs, leasing commissions and tenant
improvements, rent concessions and debt service coverage. The
reserves were funded from the proceeds of the Wachovia Mortgage
Loans. The reserves are held by Wachovia and, in accordance with
the terms of the Wachovia Mortgage Loans, may be drawn upon from
time to time to fund the items for which the reserves were
established. The reserves are assets that GERA will indirectly
acquire as a result of its acquisition of Property Acquisition.
Security; Non-Recourse.
All obligations under
the mortgage loan are secured by, among other things, (i) a
first mortgage lien encumbering the fee-simple of the Dallas
Property and the Rosemont Property, (ii) an assignment of
all related leases, rents, deposits, letters of credit, income
and profits with respect to such properties, (iii) an
assignment of the interest rate cap described above, and
(iv) an assignment of all other contracts, agreements and
personal property relating to such properties. Liability under
the mortgage loan is limited to GERA Abrams Centre LLC and GERA
6400 Shafer LLC which will have liability only for non-recourse
carve-outs which are customary for credit facilities similar in
type and size to the mortgage loan. Property Acquisition has no
contractual personal liability for the repayment of borrowings
under the mortgage loan.
Covenants and Other Terms.
The mortgage loan
contains other customary covenants, closing conditions,
representations and warranties and events of default for a loan
of this type.
Danbury Wachovia
Loan
GERA Danbury LLC has received from Wachovia Bank, N.A. a
mortgage loan in an amount of $78,000,000, which is secured by
the Danbury Property. In the event that the GERA stockholders
approve the Properties Acquisition Proposal, GERA Danbury LLC
will become our indirect wholly owned subsidiary and the
mortgage loan will remain in existence and continue to
120
be secured by the Danbury Property. The expected cash flows from
the Properties together with a debt service reserve of
approximately $5.2 million established under the Wachovia
Mortgage Loans, which will be drawn over the term of the loans,
result in a 1.0 debt service coverage during the life of the
initial term of the loans. Upon maturity of the loans, if the
Properties remain in their current condition, we expect to be
able to repay the principal of the loans assuming that we can
sell the Properties for what we paid for them. We have assumed
that we will be able to sell the Properties at a price based on
the then increased net operating income and assumed residual
capitalization rates which are 150 basis points higher than
the estimated residual capitalization rates for the Properties
today, we would have the ability to repay the principal of the
loans through a refinance or sale of the Properties. Certain
principle terms of the Danbury Wachovia Loan are summarized
below.
Initial Term and Extensions.
The mortgage loan
has an initial term of two (2) years with three extension
options, each one year in length, subject to the satisfaction of
certain conditions, including the purchase of an interest rate
cap on
30-day
LIBOR
with a LIBOR strike price of 6%. Subject to the satisfaction of
certain conditions, each of the extension options may be
exercised without payment by Property Acquisition or any of its
subsidiaries of any fee to the lender, provided that the
borrower will be responsible for the payment of all costs and
expenses (including reasonable attorneys fees) incurred by
the lender in connection with any extension and for the payment
of any costs incurred in connection with the extension or
replacement of the interest rate cap.
Interest Rate and Fees; Interest Rate Cap; Prepayment
Rights.
Interest on the mortgage loan will be
paid and adjusted monthly at a floating rate of interest per
annum equal to the
30-day
LIBOR
plus a spread of 250 basis points. GERA Danbury LLC has
purchased an interest rate cap on
30-day
LIBOR
with a LIBOR strike price of 6%, thereby locking the maximum
interest rate on borrowings under the mortgage loan at 8.50% for
the initial two year term of facility. Prepayments of borrowings
under the mortgage loan may not be made during the first year of
the term.
Reserves.
Pursuant to the mortgage loan,
reserves in the amount of approximately $28.4 million have
been established for the cost of certain capital expenditures,
maintenance and repairs, leasing commissions and tenant
improvements, rent concessions and debt service coverage. The
reserves were funded from the proceeds of the Wachovia Mortgage
Loans. The reserves are held by Wachovia and, in accordance with
the terms of the Wachovia Mortgage Loans, may be drawn upon from
time to time to fund the items for which the reserves were
established. The reserves are assets that GERA will indirectly
acquire as a result of its acquisition of Property Acquisition.
Security; Non-Recourse.
All obligations under
the mortgage loan are secured by, among other things, (i) a
first mortgage lien encumbering the fee-simple of the Danbury
Property, (ii) an assignment of all related leases, rents,
deposits, letters of credit, income and profits with respect to
such property, (iii) an assignment of the interest rate cap
described above, and (iv) an assignment of all other
contracts, agreements and personal property relating to such
property. Liability under the mortgage loan is limited to GERA
Danbury LLC which will have liability only for non-recourse
carve-outs which are customary for credit facilities similar in
type and size to the mortgage loan. Property Acquisition has no
contractual personal liability for the repayment of borrowings
under the mortgage loan.
Covenants and Other Terms.
The mortgage loan
contains other customary covenants, closing conditions,
representations and warranties and events of default for a loan
of this type.
121
The headquarters of Property Acquisition and GBE are located at
500 West Monroe, Suite 2800, Chicago, Illinois 60661,
which are also the executive offices of GERA.
Each of the SPEs maintains insurance coverage for general
liability, umbrella liability and all risk physical
damage to real property, including loss of rental income and
boiler and machinery protecting their interest as well as the
interests of Property Acquisition and GBE. Management of
Property Acquisition believes that the types of coverage,
deductibles and limits of liability currently in place are
adequate.
Property Acquisition does not have any claims levied against it
nor is it involved in any lawsuits arising out of the conduct of
its business.
Property Acquisition currently has no employees. Mark E. Rose,
our chief executive officer and Richard W. Pehlke, our chief
financial officer, serve as Property Acquisitions
president and executive vice president, respectively, and Mark
Chrisman, GBEs executive vice president, acquisitions,
also serves as an executive vice president of Property
Acquisition. These individuals are responsible for all of our
day to day operations. None of these individuals currently
receives compensation from the Company or Property Acquisition
for such services.
122
DIRECTORS
AND EXECUTIVE OFFICERS OF GERA
The board of directors and executive officers of GERA are as
follows:
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|
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Name
|
|
Age
|
|
Position
|
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C. Michael Kojaian
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|
|
44
|
|
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Chairman of the Board
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Mark E. Rose
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43
|
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Chief Executive Officer and
Director
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Richard W. Pehlke
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|
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53
|
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Chief Financial Officer
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William H. Downey
|
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62
|
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Director
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Melvin F. Lazar
|
|
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67
|
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|
Director
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Alan M. Stillman
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44
|
|
|
Director
|
C. Michael Kojaian
has served as our chairman
of the board since our inception. Mr. Kojaian has been
chairman of the board of directors of the GBE since June 2002.
He has been the president of Kojaian Ventures, L.L.C. and also
executive vice president, a director and a shareholder of
Kojaian Management Corporation, both of which are investment
firms headquartered in Bloomfield Hills, Michigan, for more than
five (5) years. He has also been a director of Arbor Realty
Trust, Inc., since June 2003.
Mark E. Rose
has served as our chief executive
officer and as a member of our board of directors since our
inception. Mr. Rose has served as the chief executive
officer of GBE since March 2005. From 1993 to 2005,
Mr. Rose served in various positions with Jones Lang
LaSalle, including serving as chief innovation officer from 2000
to 2002, as chief financial officer from 2002 to 2003, and as
chief operating officer and chief financial officer of the
Americas in 2003 through his departure in 2005. Prior to joining
Jones Lang LaSalle, Mr. Rose was the chairman and chief
executive officer of the U.S. Real Estate Investment Trust
of the British Coal Corporation Pension Funds, where he oversaw
the management and subsequent disposal of a $1 billion
portfolio real estate assets. Mr. Rose serves on the board
of directors of the Chicago Shakespeare Theater, Chicago Botanic
Garden, and the Chicago Central Area Committee.
Richard W. Pehlke
has served as our chief
financial officer since March of 2007. Mr. Pehlke has
served as the executive vice president and chief financial
officer of GBE since February 2007. He spent the three previous
years at Hudson Highland Group, a publicly held global
professional staffing and recruiting business, as its executive
vice president and chief financial officer and a member of its
board of directors. In this role, he was responsible for all of
the firms financial functions worldwide. From 2001 to
2003, Pehlke operated his own consulting business specializing
in financial strategy and leadership development. In 2000, he
was executive vice president and chief financial officer of ONE,
Inc. a privately held software implementation business. From
1986 to 1999, Pehlke served as vice president, treasurer and
vice president, investor relations at Ameritech Corporation.
Earlier, he was director of investor relations at Household
International and director of investor relations, financial
planning and financial reporting at Beatrice Companies. Pehlke
currently serves on the boards of Edward Health Services
Corporation in Naperville, Ideal Industries and Valparaiso
University. He holds a bachelors degree from Valparaiso
University and an MBA from DePaul University.
William H. Downey
has served as a member of our
board of directors since October 2005. Since October 2003,
Mr. Downey has served as the president, chief operating
officer and member of the board of directors of Great Plains
Energy Incorporated, a NYSE listed company based in Kansas City,
Missouri. In 2000, Mr. Downey joined Kansas City
Power & Light
123
Company, a full-service energy provider, where he initially
served as executive vice president and president of KCPL
Delivery. In May 2002, KCPL became part of Great Plains Energy,
a holding company where Mr. Downey served as executive vice
president and president of KCPL. In October 2003,
Mr. Downey was promoted to president and chief operating
officer of Great Plains Energy and president and chief executive
officer of Kansas City Power & Light, and was also
elected to Great Plains Energys board of directors. Since
2002, Mr. Downey has served on the board of directors of
Enterprise Financial Services Corp., a publicly traded financial
holding company. Mr. Downey received a B.S. from Boston
University, a M.S. from Columbia University and a M.B.A. from
the University of Chicago.
Melvin F. Lazar
has served as a member of our
board of directors since October 2005. Mr. Lazar is the
founder of Lazar Levine & Felix LLP, a certified
public accounting firm that also provides business
consultations. Mr. Lazar retired as a partner of Lazar
Levine & Felix LLP on October 1, 2002.
Mr. Lazar is currently a member of the board of directors
and chairman of the audit committee of Arbor Realty Trust, Inc.,
a New York Stock Exchange listed real estate investment trust
and a member of the board or directors and audit committee of
Enzo Biochem, Inc., a New York Stock Exchanged listed
biotechnology company specializing in gene identification and
regulation technologies for diagnostic and therapeutic
applications.
Alan M. Stillman
has served as a member of our
board of directors since November 2005. Mr. Stillman joined
the Southfield, Michigan law firm of Seyburn Kahn Ginn Bess and
Serlin, P.C. in 1989 as an associate, and has been a
shareholder of the firm since 1994. Mr. Stillman graduated
from Michigan State University with honors in 1984, and received
his J.D. from Wayne State University in 1987.
GERAs board of directors consists of five directors and is
divided into three classes with only one class of directors
being elected in each year and each class serving a three-year
term. Our bylaws provide that the number of directors which may
constitute the board of directors shall not be less than one or
more than nine. The term of office of the first class of
directors, consisting of William H. Downey, will expire at our
first annual meeting of stockholders. The term of office of the
second class of directors, consisting of Melvin F. Lazar and
Alan M. Stillman, will expire at the second annual meeting. The
term of the third class of directors, consisting of C. Michael
Kojaian, our chairman of the board, and Mark E. Rose, will
expire at the third annual meeting.
Other
Significant Employees
Mark W. Chrisman has served as executive vice president of
acquisitions of GBE since January 2006 and serves on GERAs
investment committee. During 2005, Mr. Chrisman was a
principal at Sterling Real Estate Partners. During the more than
eight year period prior to joining Sterling Real Estate
Partners, Mr. Chrisman served in the capital transactions
group at Trizec Properties, Inc. serving as vice president from
2000 to 2005 and director of the Western Region from 1997. In
the event GERA effects a business combination, the Company has
agreed to grant Mr. Chrisman $250,000 worth of restricted
shares of GERA common stock based on the per share price that is
equal to the average of the high and low market price of GERA
common stock on the date the business combination is
consummated. Such shares shall vest in three equal installments
of thirty-three and one-third percent
(33
1
/
3
%)
on the date the business combination is consummated and on the
second and third anniversaries of such date, subject to
Mr. Chrisman continuing to be employed by GBE or the
Company on such dates. Mr. Chrisman does not have an
employment agreement with the Company and the Company is under
no obligation to enter into an employment agreement with
Mr. Chrisman or any other individuals. However, in the
event Mr. Chrisman remains employed by GBE or the Company,
it is presently anticipated that he would be providing
124
services to the Company. If a business combination is not
completed by March 3, 2008, Mr. Chrisman will not be
issued the stock discussed above.
Meetings
and Committees of the Board of Directors of GERA
During the fiscal year ended June 30, 2006, GERAs
board of directors held one meeting. Although GERA does not have
any formal policy regarding director attendance at annual
stockholder meetings, GERA will attempt to schedule its annual
meetings so that all of its directors can attend. GERA expects
its directors to attend all board and committee meetings and to
spend the time needed and meet as frequently as necessary to
properly discharge their responsibilities.
Independence
of Directors
GERAs board of directors has determined that William H.
Downey, Melvin F. Lazar and Alan M. Stillman, a majority of the
directors on our board, are independent directors as
defined in the American Stock Exchange listing standards and
Rule 10A-3
of the Securities Exchange Act. By independent
director, we mean a person other than an officer or
employee of ours or any other individual having a relationship,
which, in the opinion of our board of directors would interfere
with the directors exercise of independent judgment in
carrying out the responsibilities of a director. GERAs
independent directors will have regularly scheduled meetings at
which only independent directors are present.
GERAs audit committee consists of Mr. Lazar, as
chairman, and Messrs. Downey and Stillman, each of whom is
an independent director. The audit committees duties,
which are specified in GERAs audit committee charter,
include, but are not limited to:
|
|
|
serving as an independent and objective party to monitor our
financial reporting process, audits of our financial statements
and internal control system;
|
|
|
reviewing and appraising the audit efforts of our independent
registered public accounting firm and internal finance
department; and
|
|
|
providing an open avenue of communications among our independent
registered public accounting firm, financial and senior
management, our internal finance department, and the board of
directors.
|
Financial Experts
on Audit Committee
GERAs audit committee will at all times be composed
exclusively of independent directors who are
financially literate, meaning they are able to read
and understand fundamental financial statements, including a
companys balance sheet, income statement and cash flow
statement.
In addition, the committee has, and will continue to have, at
least one member who has past employment experience in finance
or accounting, requisite professional certification in
accounting, or other comparable experience or background that
results in the individuals financial sophistication. The
board of directors has determined that Mr. Lazar satisfies
the definition of financial sophistication and also qualifies as
an audit committee financial expert, as defined
under the SECs rules and regulations.
125
Principal
Accountant Fees and Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 7,
2005
|
|
|
|
For the Nine
|
|
|
(Date of
Inception)
|
|
|
|
Months Ended
|
|
|
through
|
|
|
|
March 31,
2007(1)
|
|
|
June 30,
2006(1)
|
|
|
Audit Fees(2)
|
|
$
|
38,000
|
|
|
$
|
219,100
|
|
Audit Related Services Fees
|
|
|
|
|
|
|
|
|
Tax Related Services Fees
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
38,000
|
|
|
$
|
219,100
|
|
|
|
|
(1)
|
|
All fees were approved by the audit committee of the
Companys board of directors.
|
|
|
|
(2)
|
|
$47,100 of these fees was paid by GBE on behalf of the Company.
The Company repaid these fees without interest to GBE on
March 3, 2006 from net proceeds upon the closing of the IPO.
|
Investment
Committee Information
In order to assist in evaluating potential target acquisitions
(and if a business combination is consummated, potential
acquisitions thereafter), GERA formed an Investment Committee,
comprised of our chairman of the board, chief executive officer,
chief financial officer and Mark W. Chrisman, executive
vice president of acquisitions of GBE. The investment committee
reports directly to our board of directors.
Nominating
Committee Information
GERAs nominating committee of the board of directors
consists of Mr. Stillman, as chairman and
Messrs. Downey and Lazar, each of whom is an independent
director. The nominating committee is responsible for overseeing
the selection of persons to be nominated to serve on our board
of directors. The nominating committee considers persons
identified by its members, management, stockholders, investment
bankers and others.
GERA does not have any restrictions on stockholder nominations
under its certificate of incorporation or by-laws. The only
restrictions are those applicable generally under Delaware
corporate law and the federal proxy rules. Prior to the
consummation of the LLC Acquisition Agreement, GERA has not had
a nominating committee or a formal means by which stockholders
can nominate a director for election. Currently, the entire
board of directors decides on nominees, on the recommendation of
one or more members of the board. The board of directors will
consider suggestions from individual stockholders, subject to
evaluation of the persons merits. Stockholders may
communicate nominee suggestions directly to any of the board
members, accompanied by biographical details and a statement of
support for the nominees. The suggested nominee must also
provide a statement of consent to being considered for
nomination. Although there are no formal criteria for nominees,
the board of directors believes that persons should be actively
engaged in business endeavors.
Compensation
of Officers and Directors
No executive officer of GERA has received any cash or non-cash
compensation for services rendered to GERA. Each executive
officer has agreed not to take any compensation prior to the
consummation of a business combination, and there are no present
intentions to provide compensation to any officers of the
Company.
126
In the event GERA effects a business combination, the Company
has agreed to grant Mark W. Chrisman, a member of our
investment committee and executive vice president of
acquisitions of GBE $250,000 worth of restricted shares of our
common stock based on the per share price that is equal to the
average of the high and low market price of GERA common stock on
the date the business combination is consummated. Such shares
shall vest in three equal installments of thirty-three and
one-third percent
(33
1
/
3
%)
on the date the business combination is consummated and on the
second and third anniversaries of such date, subject to
Mr. Chrisman continuing to be employed by GBE or the
Company on such dates. Mr. Chrisman does not have an
employment agreement with the Company and the Company is under
no obligation to enter into an employment agreement with
Mr. Chrisman or any other individuals. However, in the
event Mr. Chrisman remains employed by GBE or the Company,
it is presently anticipated that he would be providing services
to the Company. If a business combination is not completed by
March 3, 2008, Mr. Chrisman will not be issued the
stock discussed above.
In addition, provided that the business combination is approved,
GBE has agreed to transfer to Ms. Maureen Ehrenberg,
executive vice president of GBE and president of GBEs
Global Client Services, $150,000 worth of its Original Shares
(subject to all of the terms and conditions of such Original
Shares) for services to GBE in connection with the IPO of the
Company. Ms. Ehrenberg has not provided any other services
to GBE with respect to the Company and has not provided any
other services to or on behalf of the Company, and it is not
anticipated that Ms. Ehrenberg will do so upon the
consummation of the business combination.
Commencing February 27, 2006, GERA has and will continue to
pay GBE, our sponsor and affiliate, a fee of $7,500 per month
fee for providing GERA with office space and certain office and
secretarial services. GBE may also earn fees pursuant to the
Services Agreement, a Property Management Agreement and a
Project Management Agreement for providing the Company certain
services prior and following the consummation of the business
combination. Other than the restricted stock to be issued to
Mr. Chrisman, the fees payable to GBE pursuant to the
agreements described above, and the $7,500 per-month office and
secretarial services fee, no compensation of any kind, including
finders and consulting fees, have been or prior to the business
combination, will be paid to any of GERAs officers. GERA
reimburses its officers and directors for any reasonable
out-of-pocket expenses incurred by them in connection with
certain activities on GERAs behalf such as identifying and
investigating possible target businesses and business
combinations. However, from GERAs inception in September
2005, through December 31, 2006, GERA has made no
reimbursements for expense incurred by them on its behalf,
including travel, meals and entertainment.
GERAs directors do not currently receive any cash
compensation for their service as members of the board of
directors. However, in the future, non-employee directors may
receive certain cash fees and stock awards that the GERA board
of directors may determine to pay, although at the present time
no determination of any such compensation has been made.
Management
of the Company Subsequent to the Business Combination
Upon the consummation of the business combination, it is
presently anticipated that the Company will continue to be
externally managed by GBE on a day to day basis on the same
terms and conditions as it was prior to the business
combination, except that on the closing of the proposed Merger
of GBE and NNN Realty Advisors, the Companys chairman of
the board, Mr. C. Michael Kojaian, will assume the duties
of chief executive officer, replacing
Mr. Mark E. Rose in that capacity. The board of
the Company may thereafter, when it deems appropriate or
necessary, hire executives and other personnel on a full time
basis to operate the Company.
127
BENEFICIAL
OWNERSHIP OF SECURITIES
Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the
beneficial ownership of our common stock as of
September 20, 2007 and after consummation of the
acquisition by:
|
|
|
each person known by us to be the beneficial owner of more than
5% of our outstanding shares of common stock on
September 20, 2007;
|
|
|
|
each of our current executive officers and directors; and
|
|
|
all our current executive officers and directors as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
Ownership of Our Common Stock on
|
|
|
Beneficial
Ownership of Our Common Stock on Upon
|
|
|
|
September 20,
2007
|
|
|
Consummation of a
Business Combination
|
|
|
|
Number
|
|
|
Percent of
|
|
|
Number
|
|
|
Percent of
|
|
Name
and Address of Beneficial
Owner
(1)
|
|
of
Shares
(2)
|
|
|
Class
|
|
|
of
Shares
(2)
|
|
|
Class
|
|
|
Grubb & Ellis Company
|
|
|
5,667,719
|
|
|
|
19.00
|
%
|
|
|
10,313,240
|
(3)
|
|
|
34.57
|
%
|
Fir Tree
Inc.
(4)
|
|
|
2,952,400
|
|
|
|
9.90
|
%
|
|
|
2,952,400
|
|
|
|
9.90
|
%
|
The Baupost Group,
L.L.C.
(5)
|
|
|
2,948,100
|
|
|
|
9.88
|
%
|
|
|
2,948,100
|
|
|
|
9.88
|
%
|
SAK
Corporation
(5)
|
|
|
2,948,100
|
|
|
|
9.88
|
%
|
|
|
2,948,100
|
|
|
|
9.88
|
%
|
Seth A.
Klarman
(5)
|
|
|
2,948,100
|
|
|
|
9.88
|
%
|
|
|
2,948,100
|
|
|
|
9.88
|
%
|
Wellington Management Company,
LLP
(6)
|
|
|
2,521,700
|
|
|
|
8.45
|
%
|
|
|
2,521,700
|
|
|
|
8.45
|
%
|
Sapling,
LLC
(4)
|
|
|
2,018,686
|
|
|
|
6.77
|
%
|
|
|
2,018,686
|
|
|
|
6.77
|
%
|
Michael
Kojaian
(7)
|
|
|
1,908,337
|
|
|
|
6.40
|
%
|
|
|
5,241,671
|
(9)
|
|
|
17.57
|
%
|
Kojaian
Ventures-MM,
Inc.
(7)(8)
|
|
|
1,866,667
|
|
|
|
6.26
|
%
|
|
|
5,200,001
|
(9)
|
|
|
17.43
|
%
|
Kojaian Ventures,
L.L.C.
(7)(8)
|
|
|
1,866,667
|
|
|
|
6.26
|
%
|
|
|
5,200,001
|
(9)
|
|
|
17.43
|
%
|
D.B. Zwirn & Co.,
L.P.
(10)
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
DBZ GP,
LLC
(10)
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
Zwirn Holdings,
LLC
(10)
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
Daniel B.
Zwirn
(10)
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
Mark E. Rose
|
|
|
219,440
|
(11)
|
|
|
|
*
|
|
|
319,440
|
(11)(12)
|
|
|
1.07
|
%
|
William Downey
|
|
|
41,670
|
|
|
|
|
*
|
|
|
41,670
|
|
|
|
|
*
|
Alan M. Stillman
|
|
|
41,670
|
|
|
|
|
*
|
|
|
41,670
|
|
|
|
|
*
|
Melvin F. Lazar
|
|
|
41,670
|
|
|
|
|
*
|
|
|
41,670
|
|
|
|
|
*
|
Richard W. Pehlke
|
|
|
0
|
|
|
|
|
*
|
|
|
0
|
|
|
|
|
*
|
All Directors and Additional
Officers as a Group
|
|
|
2,252,787
|
|
|
|
7.55
|
%
|
|
|
5,686,121
|
|
|
|
19.06
|
%
|
128
|
|
|
(1)
|
|
Unless otherwise indicated, the business address of each of the
stockholders is 500 West Monroe Street, Suite 2800,
Chicago, Illinois 60661.
|
|
(2)
|
|
Unless otherwise indicated, all ownership is direct beneficial
ownership.
|
|
|
|
(3)
|
|
Beneficially owned shares include 4,645,521 shares of
common stock issuable upon exercise of warrants that will become
exercisable upon the consummation of a business combination.
|
|
|
|
(4)
|
|
Sapling, LLC (Sapling) and Fir Tree Recovery Master
Fund, L.P. (Fir Tree Recovery) are the beneficial
owners of 2,018,686 shares of GERA common stock and
933,714 shares of GERA common stock, respectively. Fir Tree
Inc. may be deemed to beneficially own the shares of GERA common
stock held by Sapling and Fir Tree Recovery as a result of being
the investment manager of Sapling and Fir Tree Recovery. Fir
Tree Recovery may direct the vote and disposition of
933,714 shares of Company common stock and Sapling may
direct the vote and disposition of 2,018,686 shares of
Company common stock. The address of each of these shareholders
is 535 Fifth Avenue, 31st Floor, New York City, New York
10017. Jeff Tannenbaum is the president of each Fir Tree Inc.
and Fir Tree Recovery.
|
|
|
|
(5)
|
|
The Baupost Group, L.L.C. (Baupost) is a registered
investment advisor. SAK Corporation (SAK) is the
manager of Baupost. Seth A. Klarman (Klarman), as
sole director of SAK Corporation and a controlling person of
Baupost, may be deemed to have beneficial ownership of the
securities beneficially owned by Baupost. Securities
beneficially owned by Baupost, SAK and Klarman include
securities purchase on behalf of various investment limited
partnerships. The address for each of Baupost, SAK and Klarman
is 10 St. James Avenue, Suite 2000, Boston, Massachusetts,
02116.
|
|
|
|
(6)
|
|
Wellington Management, LLP, (Wellington) in its
capacity as investment advisor, may be deemed to beneficially
own 2,521,700 shares of GERA common stock which are held of
record by clients of Wellington. Wellingtons clients have
the right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of, such
securities. The address for Wellington is 75 State Street,
Boston, Massachusetts, 02109. Perry Traquina is the chief
executive officer of Wellington.
|
|
|
|
(7)
|
|
C. Michael Kojaian, the chairman of the Companys board of
directors, is affiliated with Kojaian Ventures, L.L.C. and
Kojaian
Ventures-MM,
Inc. Pursuant to the rules established under Securities Exchange
Act of 1934, the foregoing parties may be deemed to be a
group, as defined in Section 13(d) of such Act.
|
|
|
|
(8)
|
|
Kojaian
Ventures-MM,
Inc. is the managing member of Kojaian Ventures, L.L.C. The
address for each of Kojaian Ventures, L.L.C. and Kojaian
Ventures-MM,
Inc. is 39400 Woodward Ave., Suite 250, Bloomfield Hills,
Michigan 48304.
|
|
|
|
(9)
|
|
Beneficially owned shares include 3,333,334 shares of
common stock issuable upon exercise of warrants that will become
exercisable upon the consummation of a business combination.
|
|
|
|
(10)
|
|
D.B. Zwirn & Co., L.P., DBZ GP, LLC, Zwirn Holdings,
LLC, and Daniel B. Zwirn may each be deemed the beneficial owner
of (i) 534,752 shares of GERA common stock owned by
D.B. Zwirn Special Opportunities Fund, L.P.,
(ii) 930,628 shares of GERA common stock owned by D.B.
Zwirn Special Opportunities Fund, Ltd. and
(iii) 173,000 shares of GERA common stock owned by
HCM/Z Special Opportunities, LLC (each entity referred to in
(i) through (iii) is herein referred to as a
Fund and, collectively, as the Funds).
D.B. Zwirn & Co., L.P. is the manager of each of the
Funds, and consequently has voting
|
129
|
|
|
|
|
control and investment discretion over the GERA common stock
held by each of the Funds. Daniel B. Zwirn is the managing
member of an thereby controls, Zwirn Holdings, LLC, which in
turn is the managing member of and thereby controls D.B.
Zwirn & Co., L.P. The address of each D.B.
Zwirn & Co., L.P., DBZ GP, LLC, Zwirn Holdings, LLC,
and Daniel B. Zwirn is 745 Fifth Avenue, 18th Floor, New
York, NY 10151.
|
|
|
|
(11)
|
|
Beneficially owned shares do not include 42,772 shares of
restricted stock of the Company which will vest in equal
installments each March 8, 2008 and March 8, 2009.
Additionally, beneficially owned shares do not include
53,191 shares of restricted stock of the Company that will
vest on March 8, 2008.
|
|
|
|
(12)
|
|
Beneficially owned shares include 100,000 shares of common
stock issuable upon exercise of warrants that will become
exercisable upon the consummation of a business combination.
|
130
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
GERA
Related Party Transactions
In October 2005, we issued 5,876,069 shares of our common
stock to GBE, a sponsor and affiliate of the Company, for
$2,500,000 in cash, at an average purchase price of
approximately $0.43 per share. GBE subsequently transferred
shares of our common stock to the individuals and in the amounts
set forth below:
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Name
|
|
Shares
|
|
Relationship
to Us
|
|
C. Michael Kojaian
|
|
|
41,670
|
|
|
Chairman of the Board
|
Mark E. Rose
|
|
|
41,670
|
|
|
Director and Chief Executive
Officer
|
William Downey
|
|
|
41,670
|
|
|
Director
|
Melvin F. Lazar
|
|
|
41,670
|
|
|
Director
|
Alan M. Stillman
|
|
|
41,670
|
|
|
Director
|
Pursuant to an escrow agreement between us, the GERA Inside
Stockholders and Continental Stock Transfer &
Trust Company, all of the GERA Inside Stockholders
shares purchased prior to the IPO (Inside Shares)
were placed in escrow, with Continental acting as escrow agent
until the earliest of:
|
|
|
February 27, 2009;
|
|
|
our liquidation; or
|
|
|
the consummation of a liquidation, acquisition, stock exchange
or other similar transaction which results in all of our
stockholders having the right to exchange their shares of common
stock for cash, securities or other property subsequent to our
consummating a business combination with a target business.
|
During the escrow period, the shares placed in escrow cannot be
sold, but the GERA Inside Stockholders will retain all other
rights as stockholders, including, without limitation, the right
to vote their shares of common stock and the right to receive
cash dividends, if declared. Additionally, if dividends are
declared and payable in shares of common stock, such dividends
will also be placed in escrow.
If GERA is unable to effect a business combination and
liquidates, none of the stockholders who purchased common stock
prior to the IPO will receive any portion of the liquidation
proceeds with respect to common stock owned by them prior to the
IPO.
We also entered into a registration rights agreement with the
GERA Inside Stockholders pursuant to which the holders of the
majority of the Inside Shares will be entitled to make up to two
demands that we register these shares. The holders of the
majority of these shares may elect to exercise these
registration rights at any time after the date on which these
shares of common stock are released from escrow. In addition,
these stockholders have certain piggy-back
registration rights on registration statements filed subsequent
to the date on which these shares of common stock are released
from escrow. We will bear the expenses incurred in connection
with the filing of any such registration statements.
131
Each GERA Inside Stockholder also entered into a letter
agreement with us and Deutsche Bank Securities, Inc. pursuant to
which, among other things:
|
|
|
each agreed to vote all Inside Shares owned by him in accordance
with the holders of a majority of the shares of GERAs
common stock sold in the IPO present in person or represented by
proxy and entitled to vote at the special meeting if we solicit
approval of our stockholders for a business combination;
|
|
|
if we fail to consummate a business combination by
September 3, 2007 or by March 3, 2008 each agreed to
take all reasonable actions within his power to cause us to
liquidate as soon as reasonably practicable;
|
|
|
each agreed that he and his affiliates will not be entitled to
receive and will not accept any compensation for services
rendered to us prior to the consummation of our business
combination; and
|
|
|
Other then with respect to the Services Agreement, each agreed
that he and his affiliates will not be entitled to receive or
accept a finders fee or any other compensation in the
event he or his affiliates originate a business combination.
|
GBE has agreed that it will make available to us a small amount
of office space and certain office and secretarial services, as
we may require from time to time. We have agreed to pay GBE
$7,500 per month for these services.
As part of our initial public offering, we sold
1,666,667 units to Kojaian Ventures, L.L.C., an entity
affiliated with C. Michael Kojaian, the chairman of our board of
directors and the chairman of the board of directors of our
corporate stockholder, at a per unit price of $6.00.
GBE agreed with Deutsche Bank Securities Inc to purchase up to
$3,500,000 of our warrants in the public marketplace on behalf
of GBE if the public marketplace price is $0.70 or less per
warrant during the period commencing May 3, 2006 through
June 28, 2006. On June 28, 2006, GBE agreed to a
sixty-day
extension of this agreement. Pursuant to the agreement, GBE
purchased 4,645,521 warrants through August 27, 2006, the
new expiration date of the agreement, for an aggregate purchase
price excluding commissions of $2,178,297, or approximately
$0.47 per warrant.
The Company engaged GBE to provide brokerage services, pursuant
to the Services Agreement, and GEMS, its wholly owned
subsidiary, to provide property management and project
management services following the consummation of a business
combination pursuant to the Property Management. Pursuant to the
Services Agreement, GBE will act as our exclusive agent with
respect to commercial real estate brokerage and consulting
services relating to real property acquisitions, dispositions as
well as agency leasing at the customary prevailing rates in the
market where the applicable property is located. The Services
Agreement has an initial term of five years. Furthermore, GERA
and GBE have agreed, pursuant to the Services Agreement, that
GERA will pay GBE an acquisition fee equal to one percent of the
acquisition price for each of the Properties. Accordingly, in
addition to the LLC Purchase Price, at the closing, GERA shall
pay GBE an acquisition fee of $1,222,000 with respect to the
Properties. Pursuant to that certain Property Management
Agreement, GEMS will serve as our sole exclusive managing agent
for all real property we acquire. The Property Management
Agreement has an initial term of 12 months from the date of
consummation of a business combination and shall be
automatically renewed for successive terms, each with durations
of one (1) year unless otherwise terminated in accordance
with the terms of the agreements. The Property Management
Agreement also entitles GEMS to a monthly management fee equal
to the
132
greater of (a) three percent (3%) of a propertys
monthly gross cash receipts from the operations of the property,
or (b) a minimum monthly fee determined by mutual agreement
subject to the approval of a majority of the independent members
of GERAs board of directors, which will take into
consideration, among other things, then current market prices
and terms for services for comparable projects, plus
reimbursement for salaries and other expenses that are directly
related to managing the asset or assets. GBE has also been
retained by us to perform at our request project management
services pursuant to the Project Management Agreement, including
consulting and project management of interior office space
and/or
building infrastructure improvements. The Project Management
Agreement will remain in effect until terminated by either party
with or without cause upon sixty (60) days prior written
notice. For each project under the Project Management Agreement,
GEMS will receive a fee equal to five percent (5%) of the total
project costs, including without limitation, all costs of
architects, engineers, consultants involved in design and
construction, and all construction costs and, under certain
circumstances, reimbursement for salaries and benefits of staff
assigned to such project along with their travel expenses and
project management software costs.
Each SPE has entered into an exclusive agency agreement with GBE
whereby GBE has been retained as each SPEs exclusive
leasing agent with a right to lease tenant space at the
Properties. As consideration for its services, GBE shall receive
a commission for each new lease of space, and for certain
renewals and expansions, as follows:
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For new leases and tenant expansions at the Dallas Property, not
involving an outside broker, GBE shall be paid 4.5% of the basic
rental (the fixed rents excluding certain specified charges),
and for renewals at the Dallas Property not involving an outside
broker GBE shall be paid 3.5% of the basic rental.
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For new leases, expansions and renewals at the Dallas Property
involving an outside broker, GBE shall be paid 2.25% of the
basic rental.
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For new leases, expansions and renewals at the Rosemont Property
not involving an outside broker, GBE shall be paid a commission
equal to $1.00 per rentable square foot of leased space per
lease year.
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For new leases, expansions and renewals at the Rosemont Property
in which an outside broker is involved, GBE shall be paid an
amount equal to 50% of the amount payable to the outside
procuring broker under a separate agreement between the SPE and
the procuring broker, and the SPE shall be responsible for all
payments to the procuring broker.
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For new leases, expansions and renewals at the Danbury Property
not involving an outside procuring broker, GBE shall be paid 5%
of the rents for the first five lease years, 2.5% of the rents
for lease years 6 through 10, and 1% of the rents for any lease
years thereafter for the balance of the term.
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For new leases, expansions and renewals at the Danbury Property
involving an outside broker as procuring broker, GBE shall be
paid an amount equal to 150% of the amount which would have been
paid had there been no outside broker involved in the
transaction, with the proviso that GBE shall be responsible for
paying two-thirds of that amount to the outside broker, so that
GBE shall retain an amount equal to 50% of what it would have
received had no outside broker been involved in the transaction.
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The agency leasing agreement for the Rosemont Property shall
remain in effect through May 1, 2009, unless sooner
terminated in accordance with the terms of the agreement. The
term of the agency leasing agreement for the Dallas Property
shall, unless sooner terminated, remain in
133
effect through March 1, 2010. The term of the agency
leasing agreement for the Danbury Property shall, unless sooner
terminated, remain in effect through June 14, 2008. Each of
the agency leasing agreements may be terminated by either the
owner or the broker by providing thirty days advance written
notice of termination to the other party.
Additionally, each SPE has entered into Management Agreements
with GEMS. The Management Agreements appoint GEMS as each
SPEs sole exclusive management agent for the Properties.
For its services, GEMS will receive for the Dallas Property a
fee equal to three percent (3%) of the propertys monthly
gross cash receipts from the operations of such property plus
reimbursement for salaries and other expenses that are directly
related to managing the asset. Under the Management Agreement
for the Rosemont Property, GEMS is to receive a monthly
management fee equal to the greater of (a) three percent
(3%) of the propertys monthly gross cash receipts from the
operations of the property, or (b) a minimum monthly fee of
$5,000. Under the Management Agreement for the Danbury Property,
GEMS is to receive a monthly management fee equal to the greater
of (a) three percent (3%) of the propertys monthly
gross cash receipts from the operations of the property, or
(b) a minimum monthly fee of $30,500. Each SPE reimburses
GEMS for an agreed upon percentage of GEMS salary,
benefits and burden expenses for each GEMS employee
dedicated to that SPEs property. The percentage of the
reimbursement is based upon each employees time dedicated
to the property and may be changed from time to time by
agreement of the parties based upon the needs of the property.
There are currently three GEMS employees dedicated to each
of the Properties and the reimbursement percentage for all such
employees is 100%, except that the reimbursement percentage for
one GEMS employee at the Rosemont Property is 75%. The
Management Agreements have an initial term of twelve
(12) months from the effective date of the agreements and
shall be automatically renewed for successive terms, each with a
duration of one (1) year unless otherwise terminated in
accordance with the terms of the agreements.
We will reimburse GBE, subject to board approval, all reasonable
out-of-pocket business expenses incurred by it in connection
with activities on our behalf. GBE advanced an aggregate of
$510,842 to us as of the effective date of the registration
statement to cover expenses related to the IPO . The loans were
repaid without interest on March 3, 2006 from net proceeds
upon the closing of the IPO. In addition, as of April 30,
2007, the Company has paid $96,260 to GBE to reimburse it for
third party expenses incurred in connection with activities
completed on the Companys behalf (such as identifying
potential target businesses and performing due diligence on
suitable business combinations) and GBE has requested
reimbursement from the Company with respect to an additional
$94,400 for similar expenses.
In the event we effect a business combination, we have agreed to
grant Mark W. Chrisman, a member of our investment committee and
executive vice president of acquisitions of GBE, $250,000 worth
of restricted shares of our common stock based on the per share
price that is equal to the average of the high and low market
price of our common stock on the date the business combination
is consummated. Such shares shall vest in three equal
installments of thirty-three and one-third percent
(33
1
/
3
%)
on the date the business combination is consummated and on the
second and third anniversaries of such date, subject to
Mr. Chrisman continuing to be employed by GBE or the
Company on such dates. Mr. Chrisman does not have an
employment agreement with the Company and the Company is under
no obligation to enter into an employment agreement with
Mr. Chrisman or any other individuals; however, in the
event that Mr. Chrisman remains employed by GBE or the
Company, it is presently anticipated that Mr. Chrisman
would provide services for the Company.
134
The Company and GBE have entered into the LLC Acquisition
Agreement whereby the Company will through the acquisition of
Property Acquisition, acquire the Properties. For more
information regarding the LLC Acquisition Agreement, please see
the section of this proxy statement entitled
The LLC
Acquisition Agreement.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934,
as amended, requires GERA directors, officers and persons owning
more than 10% of GERAs common stock to file reports of
ownership and changes of ownership with the Securities ad
Exchange Commission. Based on its review of the copies of such
reports furnished to GERA, or representations from certain
reporting persons that no other reports were required, GERA
believes that all applicable filing requirements were complied
with during the fiscal year ended June 30, 2006 and its
most recent
Forms 10-Q
covering the fiscal quarters ended December 31, 2006 and
September 30, 2006.
135
DESCRIPTION
OF GERA COMMON STOCK AND OTHER SECURITIES
GERA consummated the IPO on March 3,
2006.
In the IPO, GERA sold
23,958,334 units, which include all of the
3,125,000 units that were subject to the underwriters
over allotment option. Each unit consists of one share of
GERAs common stock and two redeemable common stock
purchase warrants, each to purchase one share of GERAs
common stock. GERAs common stock, warrants and units are
quoted on the AMEX under the symbols GAV, GAV.WS and GAV.U,
respectively. GERAs units commenced public trading on
February 28, 2006, and its common stock and warrants
commenced separate public trading on March 27, 2006. The
closing price for each share of common stock, warrant and unit
of GERA on June 15, 2007, the last trading day before
announcement of the execution of the LLC Acquisition Agreement,
was $5.74, $0.46 and $6.60, respectively. It is expected that
the common stock, warrants and units will continue to be quoted
on AMEX.
The certificate of incorporation of GERA authorizes the issuance
of 120,000,000 shares of common stock, par value $0.0001,
and 5,000,000 shares of preferred stock, par value $0.0001.
As of the record
date, shares
of common stock were outstanding and no shares of preferred
stock were outstanding.
The holders of common stock are entitled to one vote for each
share held of record on all matters to be voted on by
stockholders. In connection with the vote required for any
business combination, all of the existing stockholders,
including all officers and directors of GERA, have agreed to
vote their respective shares of common stock owned by them
immediately prior to the IPO in accordance with the vote of the
holders of a majority of the shares of GERA common stock sold in
the IPO present in person or represented by proxy and entitled
to vote at the special meeting. This voting arrangement does not
apply to shares included in units purchased in the IPO or
purchased following the IPO in the open market by any of
GERAs stockholders, officers and directors. GERAs
stockholders, officers and directors may vote their shares in
any manner they determine, in their sole discretion, with
respect to any other items that come before a vote of our
stockholders.
GERA will proceed with the acquisition only if stockholders who
own at least a majority of the shares of common stock sold in
the IPO vote in favor of the acquisition and stockholders owning
fewer than 20% of the shares of common stock issued in the IPO
exercise conversion rights discussed below.
Our board of directors is divided into three classes, each of
which will generally serve for a term of three years with only
one class of directors being elected in each year. There is no
cumulative voting with respect to the election of directors,
with the result that the holders of more than 50% of the shares
voted for the election of directors can elect all of the
directors standing for election in each class.
If GERA is required to liquidate, the holders of GERA common
stock issued in the IPO will be entitled to share ratably in the
trust account, inclusive of any interest, and any net assets
remaining available for distribution to them after payment of
liabilities. Holders of common stock issued prior to the IPO
have agreed to waive their rights to share in any distribution
with respect to common stock owned by them prior to the IPO if
GERA is forced to liquidate.
136
Holders of GERA common stock do not have any conversion,
preemptive or other subscription rights and there are no sinking
fund or redemption provisions applicable to the common stock,
except that the holders of GERA common stock issued in the IPO
have the right to have their shares of common stock converted to
cash equal to their pro rata share of the trust account if they
vote against the Properties Acquisition Proposal, properly
demand conversion and the acquisition is approved and completed.
Holders of common stock who convert their stock into their
shares of the trust account still have the right to exercise the
warrants that they received as part of the units.
The certificate of incorporation of GERA authorizes the issuance
of 5,000,000 shares of a blank check preferred stock with
such designations, rights and preferences as may be determined
from time to time by GERAs board of directors.
Accordingly, GERAs board of directors is empowered,
without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which
could adversely affect the voting power or other rights of the
holders of common stock, although GERA has entered into an
underwriting agreement which prohibits GERA, prior to a business
combination, from issuing preferred stock which participates in
any manner in the proceeds of the trust account, or which votes
as a class with the common stock on a business combination. GERA
may issue some or all of the preferred stock to effect a
business combination. In addition, the preferred stock could be
utilized as a method of discouraging, delaying or preventing a
change in control of GERA. There are no shares of preferred
stock outstanding and GERA does not currently intend to issue
any preferred stock.
GERA currently has outstanding approximately 47.9 million
redeemable common stock purchase warrants. Each warrant entitles
the registered holder to purchase one share of our common stock
at a price of $5.00 per share, subject to adjustment as
discussed below, at any time commencing on the later of the
completion of a business combination and one year from the
effective date of the registration statement. The warrants
expire on February 27, 2010 at 5:00 p.m., New York
City time. GERA may call the warrants for redemption:
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in whole and not in part;
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at a price of $0.01 per warrant at any time after the warrants
become exercisable;
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upon not less than 30 days prior written notice of
redemption to each warrant holder; and
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if, and only if, the reported last sale price of the common
stock equals or exceeds $8.50 per share for any 20 trading days
within a 30 trading day period ending on the third business day
prior to the notice of redemption to warrant holders.
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The exercise price and number of shares of common stock issuable
on exercise of the warrants may be adjusted in certain
circumstances including in the event of a stock dividend, or
GERAs recapitalization, reorganization, acquisition or
consolidation. However, the warrants will not be adjusted for
issuances of common stock at a price below the exercise price.
The warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date at the offices of
the warrant agent, with the exercise form on the reverse side of
the warrant certificate completed and executed as indicated,
accompanied by full payment of the exercise price, by certified
check payable to GERA, for the number of warrants being
137
exercised. The warrant holders do not have the rights or
privileges of holders of common stock and any voting rights
until they exercise their warrants and receive shares of common
stock. After the issuance of shares of common stock upon
exercise of the warrants, each holder will be entitled to one
vote for each share held of record on all matters to be voted on
by stockholders.
No warrants will be exercisable unless at the time of exercise a
prospectus relating to common stock issuable upon exercise of
the warrants is current and the common stock has been registered
or qualified or deemed to be exempt under the securities laws of
the state of residence of the holder of the warrants. Under the
terms of a warrant agreement, GERA has agreed to maintain a
current prospectus relating to common stock issuable upon
exercise of the warrants until the expiration of the warrants.
However, there is no assurance that GERA will be able to do so.
The warrants may be deprived of any value and the market for the
warrants may be limited if the prospectus relating to the common
stock issuable upon the exercise of the warrants is not current
or if the common stock is not qualified or exempt from
qualification in the jurisdictions in which the holders of the
warrants reside.
PRICE
RANGE OF GERA SECURITIES AND DIVIDENDS
GERAs units, common stock and warrants are traded on AMEX
under the symbols GAV.U, GAV and GAV.WS, respectively. The
following table sets forth the range of high and low closing bid
prices for the units, common stock and warrants for the periods
indicated since the units commenced public trading on
February 28, 2006 and since the common stock and warrants
commenced public trading on March 27, 2006. The AMEX
quotations reflect inter-dealer prices, without retail
mark-up,
mark-down or commission and may not necessarily reflect actual
transactions.
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Units
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Common
Stock
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Warrants
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High
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Low
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High
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Low
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High
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Low
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2007:
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First Quarter
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$
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6.50
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$
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6.05
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$
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5.75
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$
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5.55
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$
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0.43
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$
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0.28
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Second Quarter
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$
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6.80
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$
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6.26
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$
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5.87
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$
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5.67
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$
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0.56
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$
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0.39
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Third Quarter (through
September 19, 2007)
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$
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6.70
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$
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6.10
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$
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5.85
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$
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5.70
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$
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.053
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$
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0.20
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First Quarter (commencing
March 27, 2006)
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$
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6.60
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$
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6.05
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$
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5.55
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$
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5.45
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$
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0.65
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$
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0.49
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Second Quarter
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$
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6.95
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$
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6.20
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$
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5.80
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$
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5.45
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$
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0.65
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$
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0.45
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Third Quarter
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$
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6.63
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$
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6.31
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$
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5.63
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$
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5.40
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$
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0.49
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$
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0.36
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Fourth Quarter
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$
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6.55
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$
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6.00
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$
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5.70
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$
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5.10
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$
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0.40
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$
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0.24
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The closing price for each share of common stock, warrant and
unit of GERA on June 15, 2007, the last trading day before
announcement of the execution of the LLC Acquisition Agreement,
was $5.74, $0.46 and $6.60, respectively. The closing price for
each share of common stock, warrant and unit of GERA on
September 19, 2007 was $5.80, $0.29 and $6.34,
respectively. As
of ,
the record date, the closing price for each share of common
stock, warrant and unit of GERA was
$ ,
$ and
$ , respectively.
Holders of GERA common stock, warrants and units should obtain
current market quotations for their securities. The market price
of GERA common stock, warrants and units could vary at any time
before the acquisition.
138
As
of ,
the record date, there
was
holder of record of GERA
units, holders
of record of GERA common stock
and
holder of record of GERA warrants. GERA believes that the
beneficial holders of the units, common stock and warrants to be
in excess
of
persons each. Other than the Original Shares
(5,876,069 shares of common stock issued prior to the IPO),
all shares of common stock representing approximately 80.3% of
the issued and outstanding shares of GERA common stock are held
in street name.
GERA has not paid any dividends on its common stock to date and
does not intend to pay dividends prior to the completion of the
acquisition. It is the present intention of GERAs board of
directors to retain all earnings, if any, for use in our
business operations and, accordingly, our board does not
anticipate declaring any dividends in the foreseeable future.
The payment of dividends subsequent to the acquisition will be
within the discretion of our then board of directors and will be
contingent upon our revenues and earnings, if any, capital
requirements and general financial condition subsequent to
completion of the acquisition.
GERA stockholders do not have appraisal rights under the DGCL in
connection the acquisition or the issuance of GERA common stock
pursuant to the acquisition.
The GERA 2008 annual meeting of stockholders will be held on or
about
[ ]
unless the date is changed by the board of directors. If you
are a stockholder and you want to include a proposal in the
proxy statement for the year 2008 annual meeting, you need to
provide it to us by no later than
[ ]
.
You should direct any proposals to our secretary at GERAs
principal office which will be in Chicago, Illinois. If you want
to present a matter of business to be considered at the year
2008 annual meeting, under GERAs by-laws you must give
timely notice of the matter, in writing, to our secretary. To be
timely, the notice has to be given between 60 and 90 days
before the date of the meeting. If GERA is liquidated as a
result of not consummating this business combination transaction
before March 3, 2008 there will be no annual meeting in
2008.
WHERE
YOU CAN FIND MORE INFORMATION
GERA files reports, proxy statements and other information with
the SEC as required by the Securities Exchange Act of 1934, as
amended. You may read and copy reports, proxy statements and
other information filed by GERA with the SEC at the SEC public
reference room located at 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
You may also obtain copies of the materials described above at
prescribed rates by writing to the SEC, Public Reference
Section, 100 F Street, N.E., Washington, D.C.
20549. You may access information on GERA at the SEC web site
containing reports, proxy statements and other information at:
http://www.sec.gov.
139
Information and statements contained in this proxy statement or
any annex to this proxy statement are qualified in all respects
by reference to the copy of the relevant contract or other annex
filed as an exhibit to this proxy statement.
All information contained in this document relating to GERA has
been supplied by GERA, all such information relating to GBE and
Property Acquisition has been supplied by GBE Information
provided by one another does not constitute any representation,
estimate or projection of the other.
If you would like additional copies of this document or if you
have questions about the acquisition, you should contact via
phone or in writing:
Robert Slaughter
Corporate Secretary
Grubb & Ellis Realty Advisors, Inc.
500 West Monroe Street, Suite 2800
Chicago, Illinois 60661
(312) 698-6700
140
INDEX
TO FINANCIAL STATEMENTS
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GRUBB & ELLIS REALTY
ADVISORS FINANCIAL STATEMENTS
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As of June 30, 2007, for
the Period from September 7, 2005 (Date of Inception)
through June 30, 2006 and for the Period from
September 7, 2005 (Date of Inception) through June 30,
2007
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F-2
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F-4
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F-5
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F-6
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F-7
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F-8
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FINANCIAL STATEMENTS OF THE
PROPERTIES ACQUIRED
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6400 Shafer Court
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F-15
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F-16
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F-18
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for the Period from
January 1, 2007 through February 27, 2007 (Previous
Owner) (unaudited), and
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F-18
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for the Period from
February 28, 2007 through June 30, 2007 (GBE Owner)
(unaudited)
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F-18
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Abrams Centre
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F-20
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F-21
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F-24
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for the Period from
January 1, 2007 through February 19, 2007 (Previous
Owner) (unaudited), and
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F-24
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for the Period from
February 20, 2007 through June 30, 2007 (GBE Owner)
(unaudited)
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F-24
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Danbury Corporate
Center
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F-27
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F-28
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F-31
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F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Grubb & Ellis Realty Advisors, Inc.
We have audited the accompanying balance sheets of
Grubb & Ellis Realty Advisors, Inc. (a development
stage company) as of June 30, 2007 and 2006, and the
related statements of income, stockholders equity, and
cash flows for the year ended June 30, 2007 and for the
period September 7, 2005 (date of inception) through
June 30, 2006 and for the period September 7, 2005
(date of inception) through June 30, 2007. These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Grubb & Ellis Realty Advisors, Inc. at
June 30, 2007 and 2006, and the results of its operations
and its cash flows for the year ended June 30, 2007 and for
the period September 7, 2005 (date of inception) through
June 30, 2006 and for the period September 7, 2005
(date of inception) through June 30, 2007, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of Grubb & Ellis Realty Advisors,
Inc.s internal control over financial reporting as of
June 30, 2007, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our
report dated September 11, 2007 expressed an unqualified
opinion thereon.
Chicago, Illinois
September 11, 2007
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Grubb & Ellis Realty Advisors, Inc.
We have audited Grubb & Ellis Realty Advisors,
Inc.s internal control over financial reporting as of
June 30, 2007, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Grubb & Ellis Realty Advisors, Inc.s
management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting
included in the accompanying Managements Report on
Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Grubb & Ellis Realty Advisors, Inc.
maintained, in all material respects, effective internal control
over financial reporting as of June 30, 2007, based on the
COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
balance sheets as of June 30, 2007 and 2006, and the
related statements of operations, stockholders equity, and
cash flows for the year ended June 30, 2007 and for the
period September 7, 2005 (date of inception) through
June 30, 2006 and for the period September 7, 2005
(date of inception) through June 30, 2007 of
Grubb & Ellis Realty Advisors, Inc. and our report
dated September 11, 2007 expressed an unqualified opinion
thereon.
Chicago, Illinois
September 11, 2007
F-3
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
BALANCE
SHEETS
as of June 30, 2007 and June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
59,620
|
|
|
$
|
784,327
|
|
Cash, cash equivalents and
investments held in trust
|
|
|
143,670,115
|
|
|
|
139,628,364
|
|
Interest receivable on investments
held in trust
|
|
|
157,436
|
|
|
|
|
|
Prepaid expenses
|
|
|
218,919
|
|
|
|
116,446
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
144,106,090
|
|
|
$
|
140,529,137
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses
|
|
$
|
598,518
|
|
|
$
|
55,940
|
|
Income taxes payable
|
|
|
|
|
|
|
618,808
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
598,518
|
|
|
|
674,748
|
|
Deferred underwriting discount
|
|
|
2,675,000
|
|
|
|
2,675,000
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,273,518
|
|
|
|
3,349,748
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies:
|
|
|
|
|
|
|
|
|
Common stock, subject to possible
redemption; 4,789,271 shares at $5.63 per share
|
|
|
26,951,518
|
|
|
|
26,951,518
|
|
Deferred interest attributable to
common stock subject to possible redemption (net of taxes of
$614,042 and $144,656 as of June 30, 2007 and 2006,
respectively)
|
|
|
1,191,964
|
|
|
|
280,783
|
|
|
|
|
|
|
|
|
|
|
Total Commitments and Contingencies
|
|
|
28,143,482
|
|
|
|
27,232,301
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock$0.0001 par
value; 120,000,000 shares authorized; 29,834,403 issued and
outstanding (including 4,789,721 shares of common stock
subject to possible redemption)
|
|
|
2,983
|
|
|
|
2,983
|
|
Preferred
stock$0.0001 par value; 5,000,000 shares
authorized; 0 issued and outstanding
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
109,023,672
|
|
|
|
109,023,672
|
|
Earnings accumulated during the
development stage
|
|
|
3,662,435
|
|
|
|
920,433
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
112,689,090
|
|
|
|
109,947,088
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
144,106,090
|
|
|
$
|
140,529,137
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-4
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
STATEMENTS OF OPERATIONS
for the period from September 7, 2005 (date of inception)
through June 30, 2007,
for the period from September 7, 2005 (date of inception)
through June 30, 2006 and
for the Year Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
Period from
|
|
|
|
|
|
|
September 7,
|
|
|
September 7,
|
|
|
|
|
|
|
2005
|
|
|
2005
|
|
|
|
|
|
|
(date of
inception)
|
|
|
(date of
inception)
|
|
|
|
Year Ended
|
|
|
through
|
|
|
through
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
Cost and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
1,331,673
|
|
|
$
|
308,336
|
|
|
$
|
1,640,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on investments held in
trust
|
|
|
6,906,187
|
|
|
|
2,128,360
|
|
|
|
9,034,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
6,906,187
|
|
|
|
2,128,360
|
|
|
|
9,034,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes
|
|
|
5,574,514
|
|
|
|
1,820,024
|
|
|
|
7,394,538
|
|
Provision for income taxes
|
|
|
(1,921,331
|
)
|
|
|
(618,808
|
)
|
|
|
(2,540,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3,653,183
|
|
|
|
1,201,216
|
|
|
|
4,854,399
|
|
Deferred interest, net of taxes,
attributable to common stock subject to possible redemption
|
|
|
(911,181
|
)
|
|
|
(280,783
|
)
|
|
|
(1,191,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to common
stock
|
|
$
|
2,742,002
|
|
|
$
|
920,433
|
|
|
$
|
3,662,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per weighted average
common share outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
Weighted average common shares
outstanding exclusive of shares subject to possible redemption:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
Diluted
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
The accompanying notes are an integral part of the financial
statements.
F-5
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
STATEMENTS
OF STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
during the
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Capital
|
|
|
Stage
|
|
|
Total
|
|
|
Stock issuance on September 7,
2005 at $0.43
|
|
|
5,876,069
|
|
|
$
|
588
|
|
|
$
|
2,499,412
|
|
|
|
|
|
|
$
|
2,500,000
|
|
Stock issuance on March 3,
2006 at $6.00
|
|
|
23,958,334
|
|
|
|
2,395
|
|
|
|
143,747,609
|
|
|
|
|
|
|
|
143,750,004
|
|
Proceeds from issuance of option to
underwriters
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
Expenses of offering
|
|
|
|
|
|
|
|
|
|
|
(10,360,576
|
)
|
|
|
|
|
|
|
(10,360,576
|
)
|
Net proceeds subject to possible
redemption of 4,789,271 shares
|
|
|
|
|
|
|
|
|
|
|
(26,951,518
|
)
|
|
|
|
|
|
|
(26,951,518
|
)
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
88,645
|
|
|
|
|
|
|
|
88,645
|
|
Net income allocable to common
stock for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
920,433
|
|
|
|
920,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30,
2006
|
|
|
29,834,403
|
|
|
|
2,983
|
|
|
|
109,023,672
|
|
|
|
920,433
|
|
|
|
109,947,088
|
|
Net income allocable to common
stock for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,742,002
|
|
|
|
2,742,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30,
2007
|
|
|
29,834,403
|
|
|
$
|
2,983
|
|
|
$
|
109,023,672
|
|
|
$
|
3,662,435
|
|
|
$
|
112,689,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-6
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
STATEMENTS OF CASH FLOWS
for the period from September 7, 2005 (date of inception)
through June 30, 2006 and
for the Year Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
Period from
|
|
|
|
|
|
|
September 7,
|
|
|
September 7,
|
|
|
|
|
|
|
2005
|
|
|
2005
|
|
|
|
|
|
|
(date of
|
|
|
(date of
|
|
|
|
|
|
|
inception)
|
|
|
inception)
|
|
|
|
Year Ended
|
|
|
through
|
|
|
through
|
|
|
|
June 30,
2007
|
|
|
June 30,
2006
|
|
|
June 30,
2007
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to common stock
|
|
$
|
2,742,002
|
|
|
$
|
920,433
|
|
|
$
|
3,662,435
|
|
Adjustments to reconcile net income
allocable to common stock to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax benefit
|
|
|
(91,631
|
)
|
|
|
(22,509
|
)
|
|
|
(114,140
|
)
|
Increase in deferred tax valuation
allowance
|
|
|
91,631
|
|
|
|
22,509
|
|
|
|
114,140
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
88,645
|
|
|
|
88,645
|
|
Deferred interest attributable to
common stock subject to possible redemption
|
|
|
911,181
|
|
|
|
280,783
|
|
|
|
1,191,964
|
|
Accrued interest on investments
held in trust
|
|
|
(157,436
|
)
|
|
|
(2,128,360
|
)
|
|
|
(2,285,796
|
)
|
Increase in prepaid expenses
|
|
|
(102,473
|
)
|
|
|
(116,446
|
)
|
|
|
(218,919
|
)
|
Increase in accounts payable
|
|
|
542,578
|
|
|
|
55,940
|
|
|
|
598,518
|
|
(Decrease) / increase in income
taxes payable
|
|
|
(618,808
|
)
|
|
|
618,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash generated by / (used in)
operating activities
|
|
|
3,317,044
|
|
|
|
(280,197
|
)
|
|
|
3,036,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of investments held in
trust, net
|
|
|
(4,041,751
|
)
|
|
|
(137,500,004
|
)
|
|
|
(141,541,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities
|
|
|
(4,041,751
|
)
|
|
|
(137,500,004
|
)
|
|
|
(141,541,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from public offering, net
|
|
|
|
|
|
|
133,900,270
|
|
|
|
133,900,270
|
|
Proceeds from sale of common stock
to founders
|
|
|
|
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
Proceeds from issuance of
underwriters option
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
Deferral of underwriting fees
|
|
|
|
|
|
|
2,675,000
|
|
|
|
2,675,000
|
|
Repayment to corporate sponsor of
loan for offering expenses
|
|
|
|
|
|
|
(510,842
|
)
|
|
|
(510,842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
|
|
|
|
138,564,528
|
|
|
|
138,564,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) / increase in cash
and cash equivalents
|
|
|
(724,707
|
)
|
|
|
784,327
|
|
|
|
59,620
|
|
Cash and cash
equivalentsbeginning of period
|
|
|
784,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsend
of period
|
|
$
|
59,620
|
|
|
$
|
784,327
|
|
|
$
|
59,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
2,630,541
|
|
|
$
|
|
|
|
$
|
2,630,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-7
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
|
|
1.
|
Organization and
Business Operations
|
Grubb & Ellis Realty Advisors, Inc. (the
Company) is a blank check company organized for the
purpose of acquiring, through a purchase, asset acquisition or
other business combination (Business Combination),
one or more United States commercial real estate properties
and/or
assets, principally industrial and office properties. The
Company was incorporated in Delaware on September 7, 2005
and is a taxable C corporation under the Internal Revenue Code
with a fiscal-year end of June 30. The Company is
considered in the development stage and is subject to the risks
associated with development stage companies.
The registration for the Companys initial public offering
(the Offering) was declared effective by the
Securities and Exchange Commission on February 27, 2006.
The Company closed the Offering on March 3, 2006 and
received net proceeds of approximately $133.4 million after
payment of related offering costs. The Business Combination must
be a target acquisition with fair value of at least 80%
(excluding the amount held in the trust representing a portion
of the fees of the underwriters) of the net assets of the
Company at the time of acquisition. Furthermore, there is no
assurance the Company will be able to successfully effect a
Business Combination. A portion of the net proceeds from the
Offering (approximately $132.3 million) was placed in a
trust account (Trust Account) along with the
initial capital from the founding stockholder
($2.5 million) and the deferred underwriting discount
(approximately $2.7 million). The net proceeds deposited
into the Trust Account totaled approximately
$137.5 million and will be invested in government
securities until the earlier of (i) the consummation of a
Business Combination or (ii) the distribution of the
Trust Account as described below. The remaining net
proceeds from the Offering may be used to pay for business,
legal, and accounting due diligence on potential acquisitions,
for a Business Combination and for continuing general and
administrative expenses. As of June 30, 2007, there was
approximately $143.8 million, including accrued interest of
approximately $157,000 and net of taxes of approximately
$2.6 million, held in the Trust Account.
The Company will submit the Business Combination to its
stockholders for approval. The Company will proceed with a
Business Combination only if (i) a majority of the shares
of common stock voted by the public stockholders are voted in
favor of the Business Combination and (ii) public
stockholders owning less than 20% of the shares sold in the
offering both exercise their conversion rights and vote against
a Business Combination. Public stockholders voting against a
Business Combination will be entitled to convert their common
stock into an amount of cash equal to their pro rata share of
the Trust Account, including net interest earned but
exclusive of the deferred underwriting discount, if the Business
Combination is approved and completed. Such approval and
completion of a Business Combination would result in the payment
of the deferred underwriting discount of $2,675,000 to the
underwriters. The initial stockholders will not have such
conversion rights with respect to any shares of common stock
owned by them, directly or indirectly, prior to the Offering.
Public stockholders who convert their common stock into their
pro rata share of the Trust Account will continue to have
the right to exercise any warrants they may hold.
In the event the Company does not complete a Business
Combination within 18 months after the consummation of the
Offering, or within 24 months after the consummation of the
Offering
F-8
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS(Continued)
based on certain criteria, the Company will be dissolved. Upon
dissolution, the Company will distribute to all of the public
stockholders, in proportion to their respective equity
interests, an aggregate sum equal to the entire amount in the
Trust Account, inclusive of the deferred underwriting
discount and any interest earned (net of taxes) from the trust
assets, plus any remaining net assets of the Company. The
Companys initial stockholders have waived their rights to
participate in any such liquidation distribution with respect to
shares of common stock owned by them immediately prior to the
Offering. There will be no distribution from the
Trust Account with respect to the warrants which will
expire worthless. The Company will pay the costs of liquidation
and dissolution from its remaining assets outside of the
Trust Account.
On June 18, 2007, the Company entered into a membership
interest purchase agreement with GBE to acquire all of the
issued and outstanding membership interests of GERA Property
Acquisition, LLC from GBE (see Note 10 for more
information).
Basis of
Presentation
The financial statements have been prepared in conformity with
U.S. generally accepted accounting principles, which
require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities (including
disclosure of contingent assets and liabilities) at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and cash
equivalents
The Company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
Income
taxes
Deferred income taxes are recorded based on enacted statutory
rates to reflect the tax consequences in future years of the
differences between the tax bases of assets and liabilities and
their financial reporting amounts. Deferred tax assets, such as
net operating loss carryforwards, which will generate future tax
benefits are recognized to the extent that realization of such
benefits through future taxable earnings or alternative tax
strategies in the foreseeable short term future is more likely
than not.
Cash, cash
equivalents and investments held in trust
Amounts held in the Trust Account are primarily invested in
U.S. Treasury Bills of various maturities ranging from
thirty to ninety days. At June 30, 2007 the fair market
value of the U.S. Treasury Bills approximated their
carrying amount, which includes interest of approximately
$157,000 accrued through that date. As of June 30, 2007,
the Company had invested $143,666,946 in U.S. Treasury
Bills with a maturity date of August 23, 2007.
F-9
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS(Continued)
Reclassifications
Certain amounts in prior periods have been reclassified to
conform to the 2007 presentation. This reclassification has no
material effect on the consolidated balance sheets or statement
of operations of the Company.
|
|
3.
|
Recently Issued
Accounting Pronouncements
|
In December 2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 123 (revised 2004),
Share based payment (SFAS 123(R)).
SFAS 123(R)requires all share-based payments to employees,
including grants of employee stock options, to be recognized in
the financial statements based on their fair values. The Company
adopted SFAS 123(R) upon formation, the adoption of which
did not have a material impact on the financial statements of
the Company. During the period ended June 30, 2006, the
Companys directors received, in the aggregate,
208,350 shares of the Companys common stock from the
initial shares acquired by the founding stockholder, at a price
of $0.43 per share, which is equal to the consideration paid for
the initial common stock issuance. Compensation expense related
to these awards totaled $88,645.
The Financial Accounting Standards Board issued Interpretation
No. 48, Accounting for Uncertainty in Income Taxes
(FIN 48). FIN 48 prescribes a
recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return.
FIN 48 also provides guidance on accounting for
derecognition, interest, penalties, accounting in interim
periods, disclosure and classifications of matters related to
uncertainty in income taxes, and transitional requirements upon
adoption of FIN 48. The provisions of FIN 48 are
effective for fiscal years beginning after December 15,
2006. The Company does not expect that the adoption of
FIN 48 will have a material impact on its financial
position or results of operations.
|
|
4.
|
Initial Public
Offering
|
As of March 3, 2006, the Company had sold
23,958,334 units (Units), which includes
3,125,000 additional Units sold to cover over-allotments
pursuant to a public offering. Of the 23,958,334 Units offered,
22,291,667 Units were sold to the public and 1,666,667 Units
were sold to Kojaian Holdings, L.L.C., an entity affiliated with
the Chairman of the Board of both the Company and corporate
sponsor. Each Unit consists of one share of common stock and two
warrants. Each warrant will entitle the holder to purchase one
share of common stock for $5.00. Warrants are exercisable on the
later of (a) one year from the effective date of the
registration statement, or (b) the completion of a Business
Combination. The warrants expire four years from the effective
date of the registration statement. The warrants will be
redeemable at a price of $0.01 per warrant upon 30 days
prior notice and after the warrants become exercisable, only in
the event the last sales price of the common stock is at least
$8.50 per share for any 20 trading days within a 30 day
trading period ending on the third day prior to the date on
which notice of redemption is given.
F-10
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS(Continued)
The Company has authorized 120,000,000 shares of common
stock at a par value of $0.0001 per share and
5,000,000 shares of preferred stock with a par value of
$0.0001 per share. There are 29,834,403 shares of common
stock issued and outstanding as of both June 30, 2007 and
June 30, 2006 after giving effect to the stock splits noted
below. There are no shares of preferred stock outstanding as of
both June 30, 2007 and June 30, 2006. The Company sold
to Deutsche Bank Securities Inc. (Underwriter) for
$100, as additional compensation, an option to purchase up to
958,333 Units at $6.60 per Unit, with warrants issued as part of
the units exercisable at $6.25 per share. The Company
determined, based upon a Black-Scholes model, that the fair
value of the option on the date of sale was approximately
$1.4 million using an expected life of five years,
volatility of 20.9% and a risk-free interest rate of 4.51%. At
that time, the Company had no trading history, and as a result
it was not possible to value this option based on historical
trades. To estimate the value of this option, the Company
considered a basket of U.S. commercial real estate
companies. Management believes that this volatility is a
reasonable benchmark to use in estimating the value of this
option. The actual volatility of this option depended on many
factors that cannot be precisely valued. The Company accounted
for the fair value of the option, inclusive of the receipt of
the $100 cash payment, as an expense of the public offering
resulting in a charge directly to stockholders equity.
All common stock and common stock related information has been
adjusted to give retroactive effect to a 1 for 1.441932 reverse
stock split of the Companys common stock effected
February 3, 2006 and subsequent retroactive effect to a
1.25 for 1 forward stock split of the Companys common
stock effected February 23, 2006.
The provision for income taxes for the year ended June 30,
2007 and period from September 7, 2005 (date of inception)
through June 30, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 7,
2005
|
|
|
|
|
|
|
(Date of
Inception)
|
|
|
|
Year Ended
|
|
|
Through
|
|
|
|
June 30,
2007
|
|
|
June 30,
2006
|
|
|
Current provision
|
|
$
|
(1,921,331
|
)
|
|
$
|
(618,808
|
)
|
Deferred benefit
|
|
|
91,631
|
|
|
|
22,509
|
|
Increase in valuation allowance
|
|
|
(91,631
|
)
|
|
|
(22,509
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,921,331
|
)
|
|
$
|
(618,808
|
)
|
|
|
|
|
|
|
|
|
|
The Company has recorded deferred tax assets totaling $114,140
related to state net operating loss carryforwards, which expire
through 2019; however, the Company fully reserved these deferred
tax assets due to the uncertainty in regards to the realization
of these assets in future periods.
F-11
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS(Continued)
|
|
7.
|
Earnings per
Common Share
|
The following table sets forth the computation of basic and
diluted earnings per common share from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 7,
2005
|
|
|
September 7,
2005
|
|
|
|
|
|
|
(Date of
Inception)
|
|
|
(Date of
Inception)
|
|
|
|
Year Ended
|
|
|
Through
|
|
|
Through
|
|
|
|
June 30,
2007
|
|
|
June 30,
2006
|
|
|
June 30,
2007
|
|
|
Net income to common
stockholders
|
|
$
|
2,742,002
|
|
|
$
|
920,433
|
|
|
$
|
3,662,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding exclusive of shares subject to possible redemption:
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
sharebasic
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding exclusive of shares subject to possible redemption:
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
sharediluted
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has approximately 47.9 million warrants
outstanding, which are not reflected as dilutive securities
since their exercisability is contingent upon the later of
February 27, 2007 or a successful Business Combination.
|
|
8.
|
Related Party
Transactions
|
Grubb & Ellis Company (Grubb &
Ellis) is the Companys corporate sponsor. For an
initial investment of $2,500,000, Grubb & Ellis, on
behalf of itself and all directors, purchased an aggregate
5,876,069 shares of common stock. Grubb & Ellis
also agreed to purchase up to $3,500,000 of warrants in the open
market place if the market price was less than $0.70 during the
period commencing May 3, 2006 through June 28, 2006.
On June 28, 2006, the Company agreed to a
sixty-day
extension of this agreement. Pursuant to the agreement,
Grubb & Ellis purchased 4,645,521 warrants through
August 27, 2006, the new expiration date of the agreement,
for an aggregate purchase price excluding commissions of
$2,178,297, or approximately $0.47 per warrant.
Grubb & Ellis had loaned the Company $510,842 during
its initial phase through direct payment on behalf of the
Company of certain costs associated with the Offering. The loan
was repaid without interest on March 3, 2006 from net
proceeds upon the closing of the Offering. As of June 30,
2007, Grubb & Ellis had loaned the Company
approximately $203,000 through direct payment of certain
operating costs.
F-12
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS(Continued)
All of the officers of the Company are also officers of
Grubb & Ellis. The officers and directors of the
Company will not initially receive compensation from the
Company; however, each of the directors of the Company received
41,670 shares from the initial shares purchased by
Grubb & Ellis. In the event the Company effects a
Business Combination, the Company has agreed to grant $250,000
worth of restricted shares of common stock to Mark W. Chrisman
that will vest over three years based on certain conditions.
Grubb & Ellis has agreed that, commencing on
February 27, 2006, the effective date of the registration
statement, through the closing of a Business Combination, it
will make available to the Company a small amount of office
space and certain office and secretarial services, as may be
required from time to time. The Company pays Grubb &
Ellis $7,500 per month for these services. This arrangement is
solely for the Companys benefit and is not intended to
provide compensation in lieu of fees. As of June 30, 2007,
the Company had incurred cumulative such fees totaling $135,000
to Grubb & Ellis. The Company will reimburse certain
out of pocket expenses incurred by Grubb & Ellis in
connection with seeking to effect a Business Combination.
The Company has entered into a Master Agreement for Services
(MSA) with Grubb & Ellis, whereby
Grubb & Ellis will serve as the exclusive agent with
respect to commercial real estate brokerage and consulting
services relating to real property acquisitions, dispositions as
well as agency leasing. The initial term of the MSA is five
years and is cancelable based on certain conditions as defined.
The Company also entered into a Property Management Agreement
(PMA) with Grubb & Ellis wholly
owned subsidiary, Grubb & Ellis Management Services
(GEMS), whereby GEMS will serve as sole exclusive
managing agent for all real property acquired. The initial term
of the PMA is 12 months and will automatically renew unless
notice is given within 30 days prior to the end of the
term. Either party can terminate with 60 days notice and
based on various conditions as defined within the PMA.
|
|
9.
|
Selected
Quarterly Financial Data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
June 30, 2006
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Operating loss
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(83,627
|
)
|
|
$
|
(224,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to common
stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
215,343
|
|
|
$
|
705,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share:
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
|
|
|
|
|
|
|
|
11,839,777
|
|
|
|
25,045,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-13
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
June 30, 2007
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Operating loss
|
|
$
|
(91,255
|
)
|
|
$
|
(123,353
|
)
|
|
$
|
(412,192
|
)
|
|
$
|
(704,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to common
stock
|
|
$
|
821,723
|
|
|
$
|
857,831
|
|
|
$
|
623,941
|
|
|
$
|
438,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share:
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, net
|
|
|
25,045,132
|
|
|
|
25,045,132
|
|
|
|
25,045,132
|
|
|
|
25,045,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On October 2, 2006, GBE formed GERA Property Acquisition,
LLC (Property Acquisition), a wholly owned
subsidiary of GBE. GBE formed Property Acquisition as a holding
company, which in turn established three separate wholly owned
special purpose entities (the SPEs), to
acquire Abrams Centre located in Dallas, Texas (Abrams
Centre), 6400 Shafer Court located in Rosemont, Illinois
(6400 Shafer), and Danbury Corporate Center located
in Danbury, Connecticut (the Corporate Center)
(collectively the Properties) with the intention of
re-selling them to the Company on a basis that is cost neutral
to GBE.
On June 18, 2007, the Company entered into a membership
interest purchase agreement (the LLC Acquisition
Agreement) to acquire all of the issued and
outstanding membership interests of Property Acquisition from
GBE. The LLC Acquisition Agreement provides for a Business
Combination transaction in which GERA will acquire Property
Acquisition, which, in turn, owns 100% of the SPEs that
own the Properties. This will be accomplished through a purchase
by GERA of all the issued and outstanding membership interests
of Property Acquisition from GBE in exchange for the LLC
Purchase Price as described in the LLC Acquisition Agreement.
|
|
11.
|
Concentration of
Credit Risk
|
Financial instruments that potentially subject the Company to
credit risk consist principally of the Companys interest
bearing investments. Substantially all of the Companys
interest bearing investments are in U.S. Treasury Bills.
F-14
6400 Shafer
CourtRosemont, Illinois
Statement of
Revenue and Certain Expenses
For The Year Ended December 31, 2006
Report
of Independent Registered Public Accounting Firm
The Board of Directors of Grubb & Ellis Company
We have audited the accompanying statement of revenue and
certain expenses of the 6400 Shafer CourtRosemont,
Illinois (the Property) for the year ended December 31,
2006. The statement of revenue and certain expenses is the
responsibility of the Propertys management. Our
responsibility is to express an opinion on the statement of
revenue and certain expenses based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenue and
certain expenses are free of material misstatement. We were not
engaged to perform an audit of the Propertys internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Propertys internal control
over financial reporting. Accordingly we express no such
opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement
of revenue and certain expenses, assessing the accounting
principles used and significant estimates made by management,
and evaluating the overall presentation of the statement of
revenue and certain expenses. We believe that our audit provides
a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the SEC, as described in Note 2, and is not
intended to be a complete presentation of the Propertys
revenue and expenses.
In our opinion, the statement of revenue and certain expenses
referred to above present fairly, in all material respects, the
revenue and certain expenses described in Note 2 for the
years ended December 31, 2006 in conformity with
U.S. generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 19, 2007
F-15
6400 Shafer
CourtRosemont, Illinois
Statement
of Revenue and Certain Expenses
For The Year Ended December 31, 2006
(amounts in thousands)
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Revenue
|
|
|
|
|
Rental income
|
|
$
|
1,175
|
|
Tenant reimbursements
|
|
|
1,204
|
|
Other income
|
|
|
11
|
|
|
|
|
|
|
|
|
|
2,390
|
|
Certain Expenses
|
|
|
|
|
Salaries and Wages
|
|
|
166
|
|
Maintenance
|
|
|
71
|
|
Cleaning
|
|
|
159
|
|
Security
|
|
|
70
|
|
Landscaping
|
|
|
23
|
|
Utilities
|
|
|
193
|
|
Management Fees
|
|
|
60
|
|
Insurance
|
|
|
41
|
|
Real estate taxes
|
|
|
798
|
|
Other expenses
|
|
|
69
|
|
|
|
|
|
|
|
|
|
1,650
|
|
|
|
|
|
|
Revenue in excess of certain
expenses
|
|
$
|
740
|
|
|
|
|
|
|
See accompanying notes.
F-16
6400 Shafer
CourtRosemont, Illinois
Notes to
Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2006
(amounts in thousands)
|
|
1.
|
Description of
the Property
|
The 6400 Shafer CourtRosemont, Illinois (the Property)
located at 6400 Shafer Court, Rosemont, Illinois, is an office
building that is leased primarily to office tenants.
|
|
2.
|
Summary of
Significant Accounting Policies
|
The accompanying statement of revenue and certain expenses for
the year ended December 31, 2006 was prepared for purposes
of complying with the rules and regulations of the SEC. The
accompanying financial statement is not representative of the
actual operations of the Property for the period presented nor
indicative of future operations as certain expenses, primarily
depreciation, amortization and interest expense, which may not
be comparable to the expenses expected to be incurred in future
operations of the Property, have been excluded.
In the preparation of the statement of revenue and certain
expenses in conformity with U.S. generally accepted
accounting principles, management makes estimates and
assumptions that affect the reported amounts of revenue and
expenses during the reporting periods. Actual results could
differ from these estimates.
|
|
3.
|
Revenue
Recognition and Related Expenses
|
Rental income is recognized on the straight-line basis over the
life of the related lease. The related straight-line rental
adjustment increased rental income by approximately $105 for the
year ended December 31, 2006.
The length of the lease terms range from one to thirteen years
from lease inception. Certain leases also contain provisions to
recover real estate taxes and certain operating expenses at an
amount in excess of the tenants base year amount, as
defined. Such revenue is included in tenant reimbursements in
the statement of revenue and certain expenses.
The total future minimum rental to be received under
non-cancelable operating leases executed at December 31,
2006, exclusive of tenant reimbursements and contingent rentals,
are as follows:
|
|
|
|
|
Year
ending December 31
|
|
|
|
|
2007
|
|
$
|
1,299
|
|
2008
|
|
|
1,239
|
|
2009
|
|
|
1,213
|
|
2010
|
|
|
1,215
|
|
2011
|
|
|
1,260
|
|
Thereafter
|
|
|
5,606
|
|
|
|
|
|
|
|
|
$
|
11,832
|
|
|
|
|
|
|
F-17
6400 Shafer
CourtRosemont, Illinois
Statements of Revenue and Certain Expenses
For the Six Months Ended June 30, 2006,
For the Period from January 1, 2007 through
February 27, 2007 (Previous Owner), and
For the Period from February 28, 2007 through June 30,
2007 (GBE Owner)
(unaudited)
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Period
from
|
|
|
The Period
from
|
|
|
|
|
|
|
February 28,
|
|
|
January 1,
|
|
|
|
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
through
|
|
|
through
|
|
|
Six
|
|
|
|
June 30,
|
|
|
February 27,
|
|
|
Months Ended
|
|
|
|
2007
|
|
|
2007
|
|
|
June 30,
|
|
|
|
(GBE
Owner)
|
|
|
(Previous
Owner)
|
|
|
2006
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
604
|
|
|
$
|
194
|
|
|
$
|
754
|
|
Tenant reimbursements
|
|
|
304
|
|
|
|
147
|
|
|
|
583
|
|
Other income
|
|
|
4
|
|
|
|
6
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
912
|
|
|
|
347
|
|
|
|
1,340
|
|
Certain Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and Wages
|
|
|
6
|
|
|
|
30
|
|
|
|
92
|
|
Maintenance
|
|
|
58
|
|
|
|
23
|
|
|
|
33
|
|
Cleaning
|
|
|
46
|
|
|
|
28
|
|
|
|
79
|
|
Security
|
|
|
31
|
|
|
|
4
|
|
|
|
29
|
|
Utilities
|
|
|
71
|
|
|
|
51
|
|
|
|
84
|
|
Management Fees
|
|
|
1
|
|
|
|
10
|
|
|
|
30
|
|
Insurance
|
|
|
16
|
|
|
|
6
|
|
|
|
20
|
|
Real estate taxes
|
|
|
268
|
|
|
|
64
|
|
|
|
398
|
|
Other expenses
|
|
|
128
|
|
|
|
13
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
625
|
|
|
|
229
|
|
|
|
812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in excess of certain
expenses
|
|
$
|
287
|
|
|
$
|
118
|
|
|
$
|
528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-18
6400 Shafer
CourtRosemont, Illinois
Notes to Statements of Revenue and Certain Expenses
For the Six Months Ended June 30, 2006,
For the Period from January 1, 2007 through
February 27, 2007 (Previous Owner), and
For the Period from February 28, 2007 through June 30,
2007 (GBE Owner)
(unaudited)
(amounts in thousands)
|
|
1.
|
Description of
the Property
|
The 6400 Shafer CourtRosemont, Illinois (the Property)
located at 6400 Shafer Court, Rosemont, Illinois, is an office
building that is leased primarily to office tenants.
|
|
2.
|
Summary of
Significant Accounting Policies
|
Basis of
Presentation
The accompanying statements of revenue and certain expenses were
prepared for purposes of complying with the rules and
regulations of the SEC. The accompanying financial statements
are not representative of the actual operations of the Property
for the periods presented nor indicative of future operations as
certain expenses, primarily depreciation, amortization and
interest expense, which may not be comparable to the expenses
expected to be incurred in future operations of the Property,
have been excluded.
Unaudited Interim
Periods
These unaudited interim statements of revenue and certain
expenses were prepared in conformity with U.S. generally
accepted accounting principles. Management makes estimates and
assumptions that affect the reported amounts of revenue and
expenses during the reporting periods. Actual results could
differ from these estimates.
Change in
Ownership
The 2007 periods presented reflect a change in ownership. On
February 28, 2007, the Property was acquired by GERA 6400
Shafer LLC (GBE Owner), a special purpose entity formed by GERA
Property Acquisition, LLC to acquire the Property.
|
|
3.
|
Revenue
Recognition and Related Expenses
|
Rental income is recognized on the straight-line basis over the
life of the related lease. The related straight-line rental
adjustment increased rental income by approximately $60 for the
Six Months Ended June 30, 2006, $13 for the Period from
January 1, 2007 through February 27, 2007 (Previous
Owner), and $14 for the Period from February 28, 2007
through June 30, 2007 (GBE Owner).
The length of the lease terms range from one to thirteen years
from lease inception. Certain leases also contain provisions to
recover real estate taxes and certain operating expenses at an
amount in excess of the tenants base year amount, as
defined. Such revenue is included in tenant reimbursements in
the statement of revenue and certain expenses.
F-19
Abrams Office
CentreDallas, Texas
Statement of
Revenue and Certain Expenses
For The Year Ended December 31, 2006
Report
of Independent Registered Public Accounting Firm
The Board of Directors of Grubb & Ellis Company
We have audited the accompanying statement of revenue and
certain expenses of the Abrams Office CentreDallas, Texas
(the Property) for the year ended December 31, 2006. The
statement of revenue and certain expenses are the responsibility
of the Propertys management. Our responsibility is to
express an opinion on the statement of revenue and certain
expenses based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of revenue and
certain expenses are free of material misstatement. We were not
engaged to perform an audit of the Propertys internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Propertys internal control
over financial reporting. Accordingly we express no such
opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement
of revenue and certain expenses, assessing the accounting
principles used and significant estimates made by management,
and evaluating the overall presentation of the statement of
revenue and certain expenses. We believe that our audit provide
a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the SEC, as described in Note 2, and is not
intended to be a complete presentation of the Propertys
revenue and expenses.
In our opinion, the statement of revenue and certain expenses
referred to above present fairly, in all material respects, the
revenue and certain expenses described in Note 2 for the
year ended December 31, 2006 in conformity with
U.S. generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 20, 2007
F-20
Abrams Office
CentreDallas, Texas
Statement
of Revenue and Certain Expenses
For The Year Ended December 31, 2006
(amounts in thousands)
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Revenue
|
|
|
|
|
Rental income
|
|
$
|
2,426
|
|
Tenant reimbursements
|
|
|
23
|
|
Other income
|
|
|
22
|
|
|
|
|
|
|
|
|
|
2,471
|
|
Certain Expenses
|
|
|
|
|
Salaries and Wages
|
|
|
104
|
|
Maintenance
|
|
|
148
|
|
Cleaning
|
|
|
120
|
|
Security
|
|
|
141
|
|
Utilities
|
|
|
619
|
|
Management Fees
|
|
|
35
|
|
Insurance
|
|
|
72
|
|
Real estate taxes
|
|
|
479
|
|
Bad debt
|
|
|
16
|
|
Other expenses
|
|
|
140
|
|
|
|
|
|
|
|
|
|
1,874
|
|
|
|
|
|
|
Revenue in excess of certain
expenses
|
|
$
|
598
|
|
|
|
|
|
|
See accompanying notes.
F-21
Abrams Office
CentreDallas, Texas
Notes
to Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2006
(amounts in thousands)
|
|
1.
|
Description of
the Property
|
The Abrams Office CentreDallas, Texas (the Property),
located at 9330 LBJ Freeway, Dallas, Texas, is an office
building that is leased primarily to office tenants.
|
|
2.
|
Summary of
Significant Accounting Policies
|
Basis of
Presentation
The accompanying statement of revenue and certain expenses for
the year ended December 31, 2006 was prepared for purposes
of complying with the rules and regulations of the SEC. The
accompanying financial statement is not representative of the
actual operations of the Property for the period presented nor
indicative of future operations as certain expenses, primarily
depreciation, amortization and interest expense, which may not
be comparable to the expenses expected to be incurred in future
operations of the Property, have been excluded.
In the preparation of the statement of revenue and certain
expenses in conformity with U.S. generally accepted
accounting principles, management makes estimates and
assumptions that affect the reported amounts of revenue and
expenses during the reporting periods. Actual results could
differ from these estimates.
Bad Debt
Expense
Bad debt expense is recorded by management of the Property upon
determination of certain tenants inability to meet the
contractual obligations under their lease agreements. Management
actively reviews receivables from tenants and determines the
probability of collection for receivables identified as
potentially uncollectible.
|
|
3.
|
Revenue
Recognition and Related Expenses
|
Rental income is recognized on the straight-line basis over the
life of the related lease. The related straight-line rental
adjustment decreased rental income by approximately $67 for the
year ended December 31, 2006.
The length of the lease terms range from two to eleven years
from lease inception. Certain leases also contain provisions to
recover real estate taxes and certain operating expenses at an
amount in excess of the tenants base year amount, as
defined. Such revenue is included in tenant reimbursements in
the statement of revenue and certain expenses.
F-22
Abrams Office
CentreDallas, Texas
Notes to Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2006
(amounts in thousands) (Continued)
The total future minimum rental to be received under
non-cancelable operating leases executed at December 31,
2006, exclusive of tenant reimbursements and contingent rentals,
are as follows:
|
|
|
|
|
Year ending December
31
|
|
|
|
|
2007
|
|
$
|
2,381
|
|
2008
|
|
|
1,516
|
|
2009
|
|
|
490
|
|
2010
|
|
|
300
|
|
2011
|
|
|
171
|
|
Thereafter
|
|
|
370
|
|
|
|
|
|
|
|
|
$
|
5,228
|
|
|
|
|
|
|
|
|
4.
|
Related Party
Transactions
|
The Property pays an affiliate of one of the Propertys
owners monthly fees for property management services provided as
well as reimbursements for costs paid on behalf of the Property.
Amounts incurred are as follows:
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
2006
|
|
Management
fee
(a)
|
|
$
|
35
|
|
Payroll and other operating
costs
(b)
|
|
|
176
|
|
|
|
|
(a)
|
|
Management fee equal to 1% of the monthly gross cash receipts,
as defined.
|
|
(b)
|
|
Reimbursement for payroll and insurance costs paid by the
affiliate on behalf of the Property.
|
Abrams Executive Suites, an affiliate of one of the
Propertys owners, leases 22 square feet of office
space from the Property. The Property earns rental revenue of
$384 annually with respect to the Abrams Executive Suites office
space. Such amount is included in rental income in the
statements of revenues and certain expenses.
The majority owner of the Property pays approximately
$60 monthly to the Property pursuant to a master lease
agreement executed in September 2004. Such revenue has been
excluded from the statements of revenues and certain expenses as
the master lease receipts do not reflect the on-going operations
of the Property.
F-23
Abrams Office
CentreDallas, Texas
Statements of
Revenue and Certain Expenses
For the Six Months Ended June 30, 2006,
For the Period from January 1, 2007 through
February 19, 2007 (Previous Owner), and
For the Period from February 20, 2007 through June 30,
2007 (GBE Owner)
(unaudited)
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Period
from
|
|
|
The Period
from
|
|
|
|
|
|
|
February 20,
|
|
|
January 1,
|
|
|
|
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
through
|
|
|
through
|
|
|
Six
|
|
|
|
June 30,
|
|
|
February 19,
|
|
|
Months Ended
|
|
|
|
2007
|
|
|
2007
|
|
|
June 30,
|
|
|
|
(GBE
Owner)
|
|
|
(Previous
Owner)
|
|
|
2006
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
879
|
|
|
$
|
511
|
|
|
$
|
1,319
|
|
Tenant reimbursements
|
|
|
21
|
|
|
|
1
|
|
|
|
14
|
|
Other income
|
|
|
4
|
|
|
|
3
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
904
|
|
|
|
515
|
|
|
|
1,339
|
|
Certain Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and Wages
|
|
|
23
|
|
|
|
7
|
|
|
|
53
|
|
Maintenance
|
|
|
58
|
|
|
|
19
|
|
|
|
67
|
|
Cleaning
|
|
|
72
|
|
|
|
17
|
|
|
|
70
|
|
Security
|
|
|
47
|
|
|
|
23
|
|
|
|
75
|
|
Utilities
|
|
|
192
|
|
|
|
46
|
|
|
|
305
|
|
Management Fees
|
|
|
7
|
|
|
|
10
|
|
|
|
16
|
|
Insurance
|
|
|
37
|
|
|
|
1
|
|
|
|
36
|
|
Real estate taxes
|
|
|
191
|
|
|
|
56
|
|
|
|
180
|
|
Bad debt
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Other expenses
|
|
|
158
|
|
|
|
20
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
785
|
|
|
|
199
|
|
|
|
873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in excess of certain
expenses
|
|
$
|
119
|
|
|
$
|
316
|
|
|
$
|
466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-24
Abrams Office
CentreDallas, Texas
Notes to
Statements of Revenue and Certain Expenses
For the Six Months Ended June 30, 2006,
For the Period from January 1, 2007 through
February 19, 2007 (Previous Owner), and
For the Period from February 20, 2007 through June 30,
2007 (GBE Owner)
(unaudited)
(amounts in thousands)
|
|
1.
|
Description of
the Property
|
The Abrams Office CentreDallas, Texas (the Property),
located at 9330 LBJ Freeway, Dallas, Texas, is an office
building that is leased primarily to office tenants.
|
|
2.
|
Summary of
Significant Accounting Policies
|
Basis of
Presentation
The accompanying statements of revenue and certain expenses were
prepared for purposes of complying with the rules and
regulations of the SEC. The accompanying financial statements
are not representative of the actual operations of the Property
for the periods presented nor indicative of future operations as
certain expenses, primarily depreciation, amortization and
interest expense, which may not be comparable to the expenses
expected to be incurred in future operations of the Property,
have been excluded.
Unaudited Interim
Periods
These unaudited interim statements of revenue and certain
expenses were prepared in conformity with U.S. generally
accepted accounting principles. Management makes estimates and
assumptions that affect the reported amounts of revenue and
expenses during the reporting periods. Actual results could
differ from these estimates.
Change in
Ownership
The 2007 periods presented reflect a change in ownership. On
February 20, 2007, the Property was acquired by GERA Abrams
Centre LLC (GBE Owner), a special purpose entity formed by GERA
Property Acquisition, LLC to acquire the Property.
Bad Debt
Expense
Bad debt expense is recorded by management of the Property upon
determination of certain tenants inability to meet the
contractual obligations under their lease agreements. Management
actively reviews receivables from tenants and determines the
probability of collection for receivables identified as
potentially uncollectible.
|
|
3.
|
Revenue
Recognition and Related Expenses
|
Rental income is recognized on the straight-line basis over the
life of the related lease. The related straight-line rental
adjustment increased rental income by approximately $19 for the
Six Months Ended June 30, 2006, $13 for the Period from
January 1, 2007 through February 19, 2007 (Previous
Owner), and $26 for the Period from February 20, 2007
through June 30, 2007 (GBE Owner).
F-25
Abrams Office
CentreDallas, Texas
Notes to
Statements of Revenue and Certain Expenses
For the Six Months Ended June 30, 2006,
For the Period from January 1, 2007 through
February 19, 2007 (Previous Owner), and
For the Period from February 20, 2007 through June 30,
2007
(GBE Owner)(Continued)
The length of the lease terms range from two to eleven years
from lease inception. Certain leases also contain provisions to
recover real estate taxes and certain operating expenses at an
amount in excess of the tenants base year amount, as
defined. Such revenue is included in tenant reimbursements in
the statements of revenue and certain expenses.
|
|
4.
|
Related Party
Transactions
|
Abrams Centre Executive Suites, an affiliate of one of the
Propertys owners during the period from January 1,
2007 through February 19, 2007 and during the three months
ended March 31, 2006, leases 22 square feet of office
space from the Property. The Property earns rental revenue of
$380 annually with respect to the Abrams Centre Executive Suites
office space. Such amount is included in rental income in the
statements of revenues and certain expenses.
The majority owner of the Property paid approximately
$60 monthly to the Property pursuant to a master lease
agreement executed in September 2004. The master lease was
terminated when GBE acquired the Property. Such revenue has been
excluded from the statements of revenues and certain expenses as
the master lease receipts do not reflect the on-going operations
of the Property.
F-26
Danbury Office
BuildingDanbury, Connecticut
Statement of
Revenue and Certain Expenses
For The Year Ended December 31, 2006
Report
of Independent Registered Public Accounting Firm
The Board of Directors of
Grubb & Ellis Company
We have audited the accompanying statement of revenue and
certain expenses of the Danbury Office BuildingDanbury,
Connecticut (the Property) for the year ended December 31,
2006. The statement of revenue and certain expenses is the
responsibility of the Propertys management. Our
responsibility is to express an opinion on the statement of
revenue and certain expenses based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenue and
certain expenses is free of material misstatement. We were not
engaged to perform an audit of the Propertys internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Propertys internal control
over financial reporting. Accordingly we express no such
opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement
of revenue and certain expenses, assessing the accounting
principles used and significant estimates made by management,
and evaluating the overall presentation of the statement of
revenue and certain expenses. We believe that our audit provides
a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the SEC, as described in Note 2, and is not
intended to be a complete presentation of the Propertys
revenue and expenses.
In our opinion, the statement of revenue and certain expenses
referred to above present fairly, in all material respects, the
revenue and certain expenses described in Note 2 for the
year ended December 31, 2006 in conformity with
U.S. generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
April 12, 2007
F-27
Danbury Office
BuildingDanbury, Connecticut
Statement
of Revenue and Certain Expenses
For The Year Ended December 31, 2006
(amounts in thousands)
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Revenue
|
|
|
|
|
Rental income
|
|
$
|
34,769
|
|
Tenant reimbursements
|
|
|
1,881
|
|
|
|
|
|
|
|
|
|
36,650
|
|
Certain Expenses
|
|
|
|
|
Management Fees
|
|
|
64
|
|
Real estate taxes
|
|
|
1,881
|
|
|
|
|
|
|
|
|
|
1,945
|
|
|
|
|
|
|
Revenue in excess of certain
expenses
|
|
$
|
34,705
|
|
|
|
|
|
|
See accompanying notes.
F-28
Danbury Office
BuildingDanbury, Connecticut
Notes to Statement of Revenue and Certain
Expenses
For The Year Ended December 31, 2006
(amounts in thousands)
|
|
1.
|
Description of
the Property
|
The Danbury Office BuildingDanbury, Connecticut (the
Property) located at 39 Old Ridgebury Road, Danbury,
Connecticut, is an office building that is master leased to
Union Carbide Corporation.
|
|
2.
|
Summary of
Significant Accounting Policies
|
Basis of
Presentation
The accompanying statement of revenue and certain expenses for
the year ended December 31, 2006 was prepared for purposes
of complying with the rules and regulations of the SEC. The
accompanying financial statement is not representative of the
actual operations of the Property for the period presented nor
indicative of future operations as certain expenses, primarily
depreciation, amortization and interest expense, which may not
be comparable to the expenses expected to be incurred in future
operations of the Property, have been excluded.
In the preparation of the statement of revenue and certain
expenses in conformity with U.S. generally accepted
accounting principles, management makes estimates and
assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could
differ from these estimates.
|
|
3.
|
Revenue
Recognition and Related Expenses
|
The Property is leased to Union Carbide Corporation pursuant to
a net lease arrangement. As such, Union Carbide Corporation is
responsible for the payment of the majority of the operating
expenses of the Property as further defined in the lease
agreement. The lease term extended for a period of 20 years
and expired on December 31, 2006.
Rental income from the master lease is recognized on the
straight-line basis over the life of the master lease. The
straight-line rental adjustment decreased rental income by
$10,840 for the year ended December 31, 2006.
The master lease also contains provisions to recover real estate
taxes. Such revenue is included in tenant reimbursements in the
statement of revenue and certain expenses.
F-29
Danbury Office
BuildingDanbury, Connecticut
Notes to Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2006
(amounts in thousands)(Continued)
Subsequent to the expiration of the master lease on
December 31, 2006, the Property was leased to various
tenants, with lease terms ranging from one to ten years. The
total future minimum rental to be received under noncancelable
operating leases executed at January 1, 2007, exclusive of
tenant reimbursements and contingent rentals are as follows:
|
|
|
|
|
Year ending December
31
|
|
|
|
|
2007
|
|
$
|
13,006
|
|
2008
|
|
|
12,812
|
|
2009
|
|
|
12,641
|
|
2010
|
|
|
12,707
|
|
2011
|
|
|
12,922
|
|
Thereafter
|
|
|
50,930
|
|
|
|
|
|
|
|
|
$
|
115,018
|
|
|
|
|
|
|
F-30
Danbury Office
BuildingDanbury, Connecticut
Statements of
Revenue and Certain Expenses
For the Six Months Ended June 30, 2007 and 2006
(unaudited)
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
7,214
|
|
|
$
|
17,385
|
|
Tenant reimbursements
|
|
|
518
|
|
|
|
941
|
|
Other income
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,744
|
|
|
|
18,326
|
|
Certain Expenses
|
|
|
|
|
|
|
|
|
Maintenance
|
|
|
954
|
|
|
|
|
|
Cleaning
|
|
|
503
|
|
|
|
|
|
Security
|
|
|
379
|
|
|
|
|
|
Utilities
|
|
|
1,756
|
|
|
|
|
|
Management Fees
|
|
|
127
|
|
|
|
32
|
|
Insurance
|
|
|
87
|
|
|
|
|
|
Real estate taxes
|
|
|
911
|
|
|
|
941
|
|
Other expenses
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,905
|
|
|
|
973
|
|
|
|
|
|
|
|
|
|
|
Revenue in excess of certain
expenses
|
|
$
|
2,839
|
|
|
$
|
17,353
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-31
Danbury Office
BuildingDanbury, Connecticut
Notes to
Statements of Revenue and Certain Expenses
For the Three Months Ended March 31, 2007 and 2006
(unaudited)
(amounts in thousands)
|
|
1.
|
Description of
the Property
|
The Danbury Office BuildingDanbury, Connecticut (the
Property) located at 39 Old Ridgebury Road, Danbury,
Connecticut, is an office building that is master leased to
Union Carbide Corporation.
|
|
2.
|
Summary of
Significant Accounting Policies
|
Basis of
Presentation
The accompanying statements of revenue and certain expenses were
prepared for purposes of complying with the rules and
regulations of the SEC. The accompanying financial statements
are not representative of the actual operations of the Property
for the periods presented nor indicative of future operations as
certain expenses, primarily depreciation, amortization and
interest expense, which may not be comparable to the expenses
expected to be incurred in future operations of the Property,
have been excluded.
Unaudited Interim
Periods
These unaudited interim statements of revenue and certain
expenses were prepared in conformity with U.S. generally
accepted accounting principles. Management makes estimates and
assumptions that affect the reported amounts of revenue and
expenses during the reporting periods. Actual results could
differ from these estimates.
During the six months ended June 30, 2006 the Property was
master leased to Union Carbide Corporation under a single-tenant
master net lease agreement which expired December 31, 2006.
The historical amounts presented for the six months ended
June 30, 2006 reflect the revenues and certain expenses
under the master net lease agreement. Union Carbide Corporation
had a number of subleases in place which converted to direct
leases upon expiration of the master net lease agreement on
December 31, 2006. Beginning January 1, 2007, the
property has been operated as a typical multi-tenant office
building. The historical amounts presented for the six months
ended June 30, 2007 reflect the revenues and certain
expenses of the Property operated as a typical multi-tenant
office building.
|
|
3.
|
Revenue
Recognition and Related Expenses
|
Rental income is recognized on the straight-line basis over the
life of the related lease. The related straight-line rental
adjustment increased rental income by approximately $628 for the
six months ended June 30, 2007 and decreased rental income
by approximately $2,810 for the six months ended June 30,
2006.
The length of the lease terms range from two to ten years from
lease inception. Certain leases also contain provisions to
recover real estate taxes and certain operating expenses at an
amount in excess of the tenants base year amount, as
defined. Such revenue is included in tenant reimbursements in
the statements of revenue and certain expenses.
F-32
Execution Copy
MEMBERSHIP
INTEREST PURCHASE AGREEMENT
BY AND AMONG
GRUBB & ELLIS COMPANY,
GERA PROPERTY ACQUISITION, LLC
AND
GRUBB & ELLIS REALTY ADVISORS, INC.
DATED AS OF JUNE 18, 2007
MEMBERSHIP
INTEREST PURCHASE AGREEMENT
MEMBERSHIP INTEREST PURCHASE AGREEMENT (this
Agreement
), dated as of June 18, 2007,
by and among Grubb & Ellis Company, a Delaware
corporation (
GBE
), GERA Property Acquisition,
LLC, a Delaware limited liability company (the
Company
), and Grubb & Ellis Realty
Advisors, Inc., a Delaware corporation
(
GERA
). Capitalized terms that are used
herein and not otherwise defined herein shall have the meanings
set forth in Section 9.2 hereof.
RECITALS
WHEREAS, GBE formed GERA as a special purpose acquisition
company for the purpose of acquiring one or more United States
commercial real estate properties
and/or
assets; and
WHEREAS, in March 2006, GERA consummated an initial public
offering (the
IPO
) of its equity securities
and placed approximately $132.3 million in a trust account
(consisting of a portion of the net proceeds of the IPO,
GBEs initial capital contribution to GERA and a deferred
underwriting discount); and
WHEREAS, (a) GERA is required to complete a business
combination by the beginning of September 2007 (or the beginning
of March 2008, if GERA has entered into a letter of intent,
agreement in principle, or definitive agreement prior to the
beginning of September 2007), at which time the proceeds held in
trust will be released to GERA, and, if GERA is unable to
complete a business combination within this time frame, GERA is
required to be liquidated and dissolved and the proceeds held in
trust are required to be distributed to GERAs public
stockholders; (b) the business combination is required to
have a value equal to at least 80% of the amount held in trust
from time to time; and (c) the business combination must be
approved by the holders of a majority of the shares of GERA
Common Stock issued in the IPO present in person or represented
by proxy at the special meeting, and the holders of 20% or more
of the GERA Common Stock issued in the IPO must not both vote
against the business combination and exercise their conversion
rights; and
WHEREAS, speed of execution is a critical factor in successfully
competing for commercial properties in the highly competitive
commercial real estate market and the special purpose
acquisition company rules applicable to GERA prior to its
business combination make it difficult for GERA to execute
purchases of commercial real estate with speed common in the
marketplace; and
WHEREAS, in order to accomplish speed of execution and to
facilitate GERAs business combination, GBE undertook on
its own accord a warehousing strategy in which GBE would acquire
and hold properties, as the agent
and/or
nominee for the intended beneficial owner, GERA, with the
intention of transferring the properties to GERA in its business
combination on a basis that is cost neutral to GBE once the
aggregate value of the acquired properties became sufficient to
meet the special purpose acquisition company requirements for a
business combination; and
WHEREAS, (i) GBE formed the Company for the purpose of
holding the equity interests of subsidiary companies that, in
turn, would own the properties purchased by GBE under its
warehousing strategy and (ii) GBE owns all of the issued
and outstanding membership interests of the Company (the
Company Membership Interests
); and
A-1
WHEREAS, the Company owns all of the issued and outstanding
membership interests of each of 6400 Shafer LLC, a Delaware
limited liability company (
IL LLC
), GERA
Abrams Center LLC, a Delaware limited liability company
(
TX LLC
), and GERA Danbury LLC, a Delaware
limited liability company (
CT LLC
). (IL LLC,
TX LLC, and CT LLC are collectively referred to herein as the
SPEs
); and
WHEREAS, (a) IL LLC owns all right, title and interest in
and to that certain real property located at 6400 Shafer Court,
Rosemont, Illinois 60018 more particularly described on
Exhibit A-1
attached hereto (together with all appurtenances and rights,
privileges, development rights, air rights, rights of way and
easements appurtenant thereto, the
IL
Property
), (b) TX LLC owns all right, title and
interest in and to that certain real property located at 9330
LBJ Freeway, Dallas, Texas 75243 more particularly described on
Exhibit A-2
attached hereto (together with all appurtenances and rights,
privileges, development rights, air rights, rights of way and
easements appurtenant thereto (the
TX
Property
), and (c) CT LLC owns all right, title
and interest in and to that certain real property located at 39
Old Ridgebury Road, Danbury Connecticut 06810, as more
particularly described on
Exhibit A-3
attached hereto (together with all appurtenances and rights,
privileges, development rights, air rights, rights of way and
easements appurtenant thereto, the
CT
Property
, and collectively with the IL Property and
the TX Property, the
Properties
); and
WHEREAS, pursuant to its warehousing strategy, GBE, through its
subsidiaries, has acquired the TX Property, the IL Property, and
the CT Property, in all cases, as the agent
and/or
nominee for the intended beneficial owner, GERA, subject to the
satisfaction or waiver of all of the conditions to Closing set
forth herein; and
WHEREAS, GBE desires to sell to GERA, and GERA desires to
purchase from GBE, all of the issued and outstanding Company
Membership Interests upon the terms and subject to the
conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE
ACQUISITION
|
|
1.1
|
Closing.
The closing (the
Closing
) of the purchase and sale of the
Company Membership Interests shall take place at 10:00 a.m.
(New York time) at the offices of Zukerman Gore &
Brandeis, LLP, 875 Third Avenue, New York, New York 10022, no
later than the third (3rd) business day after the satisfaction
or waiver of the conditions set forth in Article VI (other
than conditions with respect to actions the respective parties
hereto will take at the Closing itself, it being understood that
the occurrence of the Closing shall remain subject to the
satisfaction or waiver of any such conditions), or at such other
time, date and location as the parties hereto shall agree in
writing. At the Closing, (i) GBE shall sell, transfer,
convey, assign and deliver to GERA, and GERA shall purchase,
acquire and accept from GBE, 100% of the Company Membership
Interests, free and clear of any and all Liens or rights of any
kind and GBE shall thereafter cease to have any rights or
interests as a member of the Company, and (ii) GERA shall
deliver to GBE the Acquisition Consideration pursuant to
Section 1.2 below (the
Acquisition
).
|
A-2
|
|
1.2
|
Acquisition Consideration.
As full and total
consideration for the Company Membership Interests, GERA shall
deliver to GBE at Closing by wire transfer of immediately
available funds to an account or accounts designated by GBE, the
aggregate consideration set forth on Schedule 1.2 attached
hereto (the
Acquisition Consideration
).
|
ARTICLE II
REPRESENTATIONS
AND WARRANTIES OF GBE AND THE COMPANY
Subject to the exceptions set forth in the correspondingly
numbered section of the Disclosure Schedule of the Company and
GBE attached hereto (it being agreed that each Schedule
contained in the Disclosure Schedule shall be deemed to
incorporate by reference all information disclosed in any other
Schedule contained in the Disclosure Schedule (whether or not
information in any Schedule is expressly cross-referenced to any
other Schedule) to the extent that it is reasonably apparent
that such information is responsive to the representation or
warranty to which such Schedule relates), GBE and the Company
hereby jointly and severally represent and warrant to GERA, as
follows:
|
|
2.1
|
Organization and Qualification
.
|
|
|
|
|
(a)
|
Each Target Company is a limited liability company duly
organized, validly existing and in good standing under the laws
of the State of Delaware. Each Target Company has the requisite
power and authority to own, lease and operate the Properties and
is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals
and orders (collectively
Approvals
) necessary
to own, lease and operate the Properties as they are currently
owned, leased and operated, except such Approvals, the failure
of which to posses, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and
(i) all such Approvals are valid and in full force and
effect, except where the failure of such Approvals to be valid
and in full force and effect would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect and (ii) no such Approval is subject to any pending
or, to the knowledge of GBE or the Company, threatened
administrative, judicial or other proceeding to revoke, cancel,
suspend, modify or declare such Approval invalid in any material
respect. Complete and correct copies of the certificate of
formation and the operating agreement (or other comparable
governing instruments with different names) of each Target
Company, as amended and currently in effect (collectively
referred to herein as
Charter Documents
),
have been heretofore delivered to counsel to the special
committee of the board of directors of GERA. None of the Target
Companies are in violation of any of the provisions of their
respective Charter Documents.
|
|
|
(b)
|
Each Target Company is duly qualified or licensed to do business
as a foreign limited liability company and is in good standing
in each jurisdiction where the Properties are located and in
each other jurisdiction, if any, where the nature of its
activities makes such qualification or licensing necessary,
except for such failures to be so duly qualified or licensed and
in good standing that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
|
|
|
|
|
(c)
|
The minute books of each Target Company contain true, complete
and accurate records of all meetings and consents in lieu of
meetings of their respective members
|
A-3
|
|
|
|
|
or boards of directors or managers (and any committees thereof)
or similar governing bodies (
Corporate
Records
) since the time of their organization. Copies
of such Corporate Records of each Target Company have been
heretofore delivered to counsel to the special committee of the
board of directors of GERA.
|
|
|
|
|
(d)
|
The ownership records of each Target Company contain true,
complete and accurate records of the membership interest
ownership as of the date of such records and the transfers
involving the Company Membership Interests and other securities
of each Target Company since their organization. Copies of such
records of the Target Companies have been heretofore delivered
to counsel to the special committee of the board of directors of
GERA.
|
2.2
Capitalization
.
|
|
|
|
(a)
|
Since the date of formation of the Company, all of the Company
Membership Interests have been beneficially owned and owned of
record by GBE, and since the date of formation of each of the
SPEs, all of the membership interests of each of the SPEs (the
SPE Membership Interests
) have been
beneficially owned and owned of record by the Company.
|
|
|
(b)
|
(i) No Company Membership Interests are reserved for
issuance upon the exercise of outstanding options to purchase
such membership interests granted to employees of the Company or
any other Person (
the Company Options
) and
there are no outstanding Company Options or agreements,
understandings or other arrangements to purchase, issue or grant
such Company Options, whether contingent or otherwise;
(ii) no Company Membership Interests are reserved for
issuance upon the exercise of outstanding warrants to purchase
the Company Membership Interests (
the Company
Warrants
) and there are no outstanding Company
Warrants or agreements, understandings or other arrangements to
purchase, issue or grant such Company Warrants, whether
contingent or otherwise; and (iii) no Company Membership
Interests are reserved for issuance upon the conversion of any
outstanding convertible notes, debentures or other securities
(
the Company Convertible Securities
) and
there are no outstanding Company Convertible Securities or
agreements, understandings or other arrangements to purchase,
issue or grant such Company Convertible Securities, whether
contingent or otherwise.
|
|
|
|
|
(c)
|
(i) No SPE Membership Interests are reserved for issuance
upon the exercise of outstanding options to purchase such
membership interests granted to employees of the Company or any
other Person (
the SPE Options
) and there are
no outstanding SPE Options or agreements, understandings or
other arrangements to purchase, issue or grant such SPE Options,
whether contingent or otherwise; (ii) no SPE Membership
Interests are reserved for issuance upon the exercise of
outstanding warrants to purchase the SPE Membership Interests
(
the SPE Warrants
) and there are no
outstanding SPE Warrants or agreements, understandings or other
arrangements to purchase, issue or grant such SPE Warrants,
whether contingent or otherwise; and (iii) no SPE
Membership Interests are reserved for issuance upon the
conversion of any outstanding convertible notes, debentures or
other securities (
the SPE Convertible
Securities
) and there are no outstanding SPE
Convertible Securities or agreements, understandings or other
arrangements to purchase, issue or grant such SPE Convertible
Securities, whether contingent or otherwise.
|
A-4
|
|
|
|
(d)
|
All Company Membership Interests have been duly authorized and
validly issued and such Company Membership Interests have been
fully paid and are nonassessable, and all SPE Membership
Interests have been duly authorized and validly issued and all
such SPE Membership Interests have been fully paid and are
nonassessable.
|
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(e)
|
There are no registrations rights, and there is no voting trust,
proxies, rights plan, anti-takeover plan or other agreements or
understandings to which any Target Company is a party or by
which any Target Company is bound with respect to any equity
security of any class of any Target Company.
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2.3
|
Authority Relative to this Agreement
. Each of
GBE and the Company has all necessary corporate or limited
liability company, as applicable, power and authority to execute
and deliver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby,
including but not limited to the Acquisition. The execution and
delivery of this Agreement and the consummation by GBE and the
Company of the transactions contemplated hereby, including but
not limited to the Acquisition, have been duly and validly
authorized by all necessary corporate or limited liability
company, as applicable, actions on the part of GBE and the
Company, and no other corporate or limited liability company, as
applicable, proceeding on the part of the Company or GBE is
necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by GBE and the Company and,
assuming the due authorization, execution and delivery thereof
by the other parties hereto, constitutes the legal and binding
obligation of GBE and the Company, enforceable against GBE and
the Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors rights
generally and by general principles of equity. GBE, by its
execution of this Agreement, in its capacity as the sole member
of the Company, hereby approves and adopts this Agreement and
authorizes the Company, its directors (if any) and officers to
take all actions necessary for the consummation of the
Acquisition and the other transactions contemplated hereby
pursuant to the terms of this Agreement.
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2.4
|
No Conflict; Required Filings and Consents
.
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(a)
|
The execution and delivery of this Agreement by GBE and the
Company does not and the performance of this Agreement by GBE
and the Company (including the consummation by GBE and the
Company of the transactions contemplated hereby) shall not
(i) conflict with or violate (x) GBEs
certificate of incorporation or by-laws or (y) the
Companys or any other Target Companys Charter
Documents, (ii) violate any Legal Requirements that are
applicable to any Target Company or any of the Properties,
(iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become
a default) under, materially impair any Target Companys
rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any Material Contract (as
hereinafter defined), or result in the creation of a Lien on any
of the properties or assets of any Target Company, including but
not limited to the Properties, (iv) without limiting the
terms set forth in clause (iii) immediately above, result
in any breach of or constitute a default (or an event that with
notice or the lapse of time or both would become a default)
under the provisions of Section 4 of that certain Amendment
No. 4 to the Office Building Lease dated April 1, 2007
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between Abrams Properties Limited Partnership, as landlord and
Abrams Centre National Bank, as tenant, or (v) result in
the cancellation, modification, revocation or suspension of any
of the Approvals, except such Approvals, the failure of which to
possess, would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
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(b)
|
Other than as set forth on Schedule 2.4, no consent,
waiver, authorization, approval, order, license, certificate or
permit of or from, or registration, declaration or filing with,
or notice to any court or other Governmental Entity or any other
Person, nor under any Material Contract or any Approval, is
required in connection with the execution and delivery by GBE
and the Company of this Agreement or the consummation by GBE and
the Company of the transactions contemplated hereby, except
where the failure to obtain or make, as applicable, any such
consent, waiver, authorization, approval, order, license,
certificate, permit, registration, declaration, filing or notice
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
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2.5.
|
Compliance
. To the knowledge of GBE and the
Company, each Target Company has complied in all material
respects with, and is not in material violation of, any material
Legal Requirements that are applicable to such Target Company,
including, without limitation, with respect to the operation of
its business and the ownership and operation of the Properties.
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2.6.
|
Litigation
. Except as set forth in
Schedule 2.6, there are no claims, suits, actions or
proceedings pending or, to the knowledge of GBE and the Company,
threatened against GBE or any Target Company before any court or
other Governmental Entity, or any arbitrator, in each case that
seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which otherwise names any
Target Company as a party thereto or which could reasonably be
expected, either individually or in the aggregate with all such
claims, suits, actions or proceedings, to have a Material
Adverse Effect.
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2.7
|
Title to Properties; Leases of the Properties; No Default
.
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(a)
|
(i) TX LLC owns the TX Property free and clear of all Liens
except as set forth in the title insurance policy obtained by TX
LLC in connection with its acquisition of the TX Property and
except for Permitted Liens, (ii) IL LLC owns the IL
Property free and clear of all Liens except as set forth in the
title insurance policy obtained by IL LLC in connection with its
acquisition of the IL Property and except for Permitted Liens,
and (iii) CT LLC owns the CT Property free and clear of all
Liens except as set forth in the title insurance policy obtained
by CT LLC in connection with its acquisition of the CT Property
and except for Permitted Liens. True and complete copies of the
title insurance policies obtained by TX LLC in connection with
its acquisition of the TX Property, IL LLC in connection with
its acquisition of the IL Property and CT LLC in connection with
its acquisition of the CT Property have been heretofore
delivered to counsel to the special committee of the board of
directors of GERA. For purposes hereof,
Permitted
Liens
means: (v) any Lien on any real property in
respect of taxes not yet due and payable;
(w) mechanics, carriers, workmens,
repairmens and other similar Liens incurred in the
ordinary course of business and which (A) are not yet due
and payable and (B) do not materially detract from the
value of or materially interfere with the present use of the
applicable property subject thereto or
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affected thereby; (x) rights of tenants under existing
leases and leases entered into in accordance with this
Agreement; (y) other Liens not securing the payment of
money, suffered in the ordinary course of business which do not
materially detract from the value of or materially interfere
with the present use of the applicable property subject thereto
or affected thereby; and (z) any Liens securing the
indebtedness outstanding under the Wachovia Loan Facility. Other
than the Properties, no Target Company owns or leases, or has
ever owned or leased, any other real property.
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(b)
|
Attached hereto as
Schedule 2.7(b-1)
is a complete and accurate list as of the date of this Agreement
of the leases, licenses and other occupancy agreements demising
any portion of the space in any of the Properties (together with
any amendments, modifications, supplements and guarantees
relating thereto, the
Leases
), and copies of
all such Leases have heretofore been delivered or made available
by the Company to counsel to the special committee of the board
of directors of GERA, and all such copies of such Leases so
delivered or made available are true, complete and correct
copies thereof as exist in the Companys possession. The
Leases are the only leases, licenses and other occupancy
agreements relating to or affecting the Properties as of the
date of this Agreement. As of the date of this Agreement, there
are no lease brokerage agreements, leasing commission
agreements, management agreements, acquisition and disposition
brokerage agreements or other agreements providing for payments
of any amounts for leasing activities, procuring tenants,
acquisition, disposition or management with respect to the
Properties (collectively, the
Commission
Agreements
) other than as set forth in
Schedule 2.7(b-2)
or in Schedule 2.11, and true and complete copies of all
such Commission Agreements as they exist in the Companys
possession have heretofore been delivered or made available by
the Company to counsel to the special committee of the board of
directors of GERA. Except as set forth in Schedules 2.7(b-1) and
2.7(b-2) as of the date of this Agreement: (A) each of the
Leases is in full force and effect, (B) no tenant under any
of the Leases has given any Target Company or received from any
Target Company a written notice of monetary or other material
default which default remains uncured for more than
30 days, and there exists no other event that with notice
or lapse of time or both would become a material default under
any of the Leases, (C) there are no pending or threatened
in writing audits by any tenants for operating expenses of any
of the Properties under any of the Leases, and (D) there
are no tenant improvements or work currently required to be
performed by the landlord under the Leases, or payments, costs
and expenses currently required, or required in connection with
the occupancy under any such Lease, to be paid by the landlord
pursuant to the Leases, or commissions outstanding with respect
to any Lease, including, without limitation, tenant improvement
costs, lease buyout costs, reimbursement of tenants moving
expenses or other out of pocket costs or allowances, required to
be paid by the landlord under the Leases, other than as set
forth on
Schedule 2.7(b-3).
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(c)
|
Except as set forth on Schedule 2.7(c), no part of any
Property, including without limitation, any building or
improvement thereon, is subject to any purchase option, right of
first refusal or first offer or other similar right except for
rights of first offer or refusal in favor of tenants at any of
the Properties with respect to a specific portion of the
applicable Property (and not such Property as a whole).
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(d)
|
Neither GBE nor any Target Company has received written notice
(i) of any pending or threatened condemnation or eminent
domain proceedings affecting the Properties or any part thereof,
other than in connection with the existing threatened
condemnation action affecting the TX Property which is described
on Schedule 2.7(d), (ii) from any utility company or
municipality of any fact or condition that would be reasonably
likely to result in the discontinuation of presently available
sewer, water, electric, gas, telephone or other utilities or
services for the Properties, or (iii) of any pending or
contemplated rezoning proceeding affecting any Property other
than in connection with the existing threatened condemnation
action affecting the TX Property which is described on
Schedule 2.7(d).
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2.8
|
Environmental Matters
.
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(a)
|
Except as disclosed in Schedule 2.8 hereto and except for
such matters that would not, individually or in the aggregate,
reasonably be excepted to have a Material Adverse Effect:
(i) to the knowledge of GBE and the Company, each Target
Company has, with respect to the Properties, complied in all
respects with all applicable Environmental Laws (as defined
below); (ii) to the knowledge of GBE and the Company, the
Properties currently (including soils, groundwater, surface
water, air, buildings or other structures) are not contaminated
with any Hazardous Substances (as defined below) and, to the
knowledge of GBE and the Company, were not contaminated with any
Hazardous Substances during any period prior to any Target
Companys ownership thereof; (iii) to the knowledge of
GBE and the Company, neither the Company nor any other Target
Company is subject to any liability under any Environmental Law
for any Hazardous Substance disposal or contamination on any
third party or public property (whether above, on or below
ground or in the atmosphere or water); (iv) neither the
Company nor any other Target Company has been associated with
any release or threat of release of any Hazardous Substance
which would be reasonably likely to cause either the Company or
any Target Company any liability; (v) neither the Company
nor any other Target Company has received any notice, demand,
letter, claim or request for information alleging that the
Company or any other Target Company may be in violation of or
liable under any Environmental Law; and (vi) neither the
Company nor any other Target Company is subject to any orders,
decrees, injunctions or other arrangements with any Governmental
Entity or subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or
relating to Hazardous Substances.
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(b)
|
As used in this Agreement, the term
Environmental
Law
means any federal, state, local or foreign law,
regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment,
health and safety, or natural resources; (B) the handling,
use, presence, disposal, release or threatened release of any
Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to
persons or property.
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(c)
|
As used in this Agreement, the term
Hazardous
Substance
means any substance that is:
(i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or
by-product, asbestos-containing material, lead-containing paint
or plumbing, polychlorinated biphenyls, radioactive materials,
radon, mold or
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urea formaldehyde; or (iii) any other substance which is
the subject of regulatory action by any Governmental Entity
pursuant to any Environmental Law.
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(a)
|
Since January 1, 2007 to the date of this Agreement, there
has not been: (i) any change, event, violation, inaccuracy,
circumstance or effect which, individually or in the aggregate,
has had or is reasonably likely to have a Material Adverse
Effect; or (ii) any material loss, damage, destruction or
other material casualty to the assets or properties of any
Target Company, including the Properties (whether or not covered
by insurance).
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(b)
|
Since January 1, 2007 to the date of this Agreement, the
Target Companies have operated in the ordinary course of
business and, except as set forth in Schedule 2.9(b), no
Target Company has: (i) mortgaged, pledged or subjected to
any Lien any of its assets, properties or rights (including the
Properties), except for Permitted Liens; (ii) sold or
transferred any of its assets or properties or canceled any
debts or claims, or otherwise waived any material rights, except
in the ordinary course of business; (iii) declared, paid or
set aside for payment any dividends or other distributions on
its membership interests, or redeemed, repurchased or otherwise
acquired any of its membership interests or otherwise returned
any capital or profits to its members; (iv) written off as
uncollectible any of its accounts receivable or any portion
thereof; (v) made any material capital expenditure, or
additions to property, plant and equipment used in its
operations other than ordinary repairs and maintenance; or
(vi) entered into any agreement or made any commitment to
do any of the foregoing.
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2.10
|
Financial Statements; Absence of Undisclosed Liabilities
.
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(a)
|
Schedule 2.10(a)(i) sets forth a true and complete copy of
(i) the audited statement of revenue and certain expenses
of the IL Property for the year ended December 31, 2006
(the
IL Property Financial Statements
),
(ii) the audited statement of revenue and certain expenses
of the TX Property for the year ended December 31, 2006
(the
TX
Property
Financial Statements
)
and (iii) the audited statement of revenue and certain
expenses of the CT Property for the year ended December 31,
2006 (the
CT Property Financial Statements
and, together with the IL Property Financial Statements and the
TX Property Financial Statements, the
Property
Financial Statements
). Schedule 2.10(a)(ii) sets
forth a true and complete copy of the unaudited consolidated
balance sheet of the Company as of March 31, 2007 (the
Most Recent Balance Sheet
), together with the
related unaudited consolidated statements of operations of the
Company for the year-to-date period then ended (collectively
referred to herein as the
Recent Financial
Statements
, and the Recent Financial Statements and
the Property Financial Statements are collectively referred to
herein as the
Financial Statements
). The
Financial Statements are based upon the books and records of the
applicable Property or the Company and its subsidiaries, as the
case may be, and have been prepared in accordance with GAAP
applied during the periods indicated and present fairly, in all
material respects, the financial position and results of
operations of the applicable Property or the Company and its
subsidiaries, as the case may be, at the respective dates and
for the respective periods indicated, except that the Recent
Financial Statements may not contain all footnote disclosures
required by GAAP and that the
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Recent Financial Statements are subject to normal year-end audit
adjustments which will not, individually or in the aggregate, be
material to the Company.
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(b)
|
Except for liabilities incurred after the date of the Most
Recent Balance Sheet in the ordinary course of business, no
Target Company has any material liabilities, absolute or
contingent, individually or in the aggregate, which is not shown
or provided for on the Most Recent Balance Sheet.
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(a)
|
Schedule 2.11 sets forth a complete and correct list and,
if such contract, agreement, understanding or arrangement is not
in writing, a description of any material terms thereof, of the
following contracts, agreements, understandings or arrangements
to which any Target Company is a party or by which any of their
respective assets or properties are subject or bound (together
with any amendment, supplement or other modification thereto),
as in effect on the date hereof (collectively, the
Material Contracts
):
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(i)
|
any credit agreement, loan agreement, letter of credit,
repurchase agreement, mortgage, security agreement, guarantee,
pledge agreement, trust indenture, promissory note or other
document or arrangement relating to the borrowing of money
(whether as lender or borrower) or for lines of credit;
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(ii)
|
any employment, severance, consulting, change of control or
similar contract, agreement, understanding or arrangement;
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(iii)
|
any contract, agreement, understanding or arrangement limiting
or restraining any Target Company from engaging or competing in
any lines of business or with any Person;
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(iv)
|
any partnership, joint venture or similar contract, agreement,
understanding or arrangement;
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(v)
|
any contract, agreement, understanding or arrangement relating
to the issuance, voting or transfer of any membership interests
of any Target Company (or any securities convertible into or
exercisable for any membership interests in any Target Company);
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(vi)
|
any contract, agreement, understanding or arrangement that
(x) involves, or is reasonably likely to involve, aggregate
future payments to or by any Target Company in excess of
$100,000 in any calendar year or in excess of $250,000 over the
term of any such contract, agreement, understanding or
arrangement, (y) extends for a period of more than twelve
(12) months and cannot be cancelled by the applicable
Target Company upon thirty (30) or fewer days prior notice
without further payment or penalty of any kind or
(z) provides for brokerage, leasing, property management,
project management or other real estate related
services; and
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(vii)
|
without duplication of the foregoing, any other contract,
agreement, understanding or arrangement which is material to the
business of the Target Companies taken as a whole.
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(b)
|
Each Material Contract is valid, binding and enforceable against
the Target Company party thereto and, to the knowledge of GBE
and the Company, the other
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A-10
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parties thereto. (i) The Target Companies have performed
all material obligations required to be performed by them under
each Material Contract, (ii) no Target Company is in
default of any material obligation under any Material Contract,
and (iii) no event has occurred which, with due notice or
lapse of time or both, would constitute a default of any
material obligation by any Target Company under any Material
Contract. To the knowledge of GBE and the Company, no other
party to any Material Contract is in default in respect of a
material obligation thereunder, and no event has occurred which,
with due notice or lapse of time or both, would constitute a
default in respect of any material obligation by any such other
party thereunder. GBE or the Company has delivered or made
available to counsel to the special committee of the board of
directors of GERA true and complete originals or copies of all
the Material Contracts in the Companys possession.
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2.12
|
Insurance
. Schedule 2.12 sets forth a
complete and correct list of all policies of insurance that are
owned or held by any Target Company or under which any Target
Company or any of their respective assets or properties are
covered as of the date hereof (collectively, the
Insurance Policies
). (i) None of the
insurance limits under any of the Insurance Policies have been
exhausted or materially diminished, (ii) all of the
Insurance Policies are with insurance carriers that, to the
knowledge of GBE and the Company, are not insolvent or in
liquidation and (iii) there is no claim pending under any
of the Insurance Policies relating to any Target Company or any
of their respective assets or properties for which coverage has
been questioned, denied or disputed by the insurance company or
companies providing coverage thereunder, and a true and complete
list of all claims pending under any of the Insurance Policies
is set forth in Schedule 2.12. All of the Insurance
Policies are in good standing, valid and subsisting, and are in
full force and effect in accordance with their terms. No Target
Company has received written notice of any pending or threatened
termination or material premium increases with respect to any
Insurance Policy and the Target Companies are in compliance, in
all material respects, with all conditions contained therein.
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2.13
|
Affiliate Transactions
. Except as set forth on
Schedules 2.7(b-1), 2.7(b-2), 2.7(b-3), 2.11 or 2.13, no Target
Company is a party to any contract, agreement, understanding or
arrangement with GBE or any Affiliate thereof (other than a
Target Company) under which it: (a) leases any real or
personal property (either to or from such Person); (b) is
obligated to purchase any tangible or intangible asset from or
sell such asset to such Person; (c) purchases products or
services from such Person, (d) pays or receives
commissions, rebates or other payments; or (e) lends or
borrows money. Neither GBE nor any Affiliate thereof (other than
a Target Company) owns or has any rights in or to any of the
assets, properties or rights used by any Target Company in their
respective businesses as presently conducted and as presently
proposed to be conducted.
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2.14
|
Employees.
As of the date hereof, the Target
Companies do not have any employees and do not maintain any
plans, arrangements, agreements, programs, policies, practices,
undertakings or other employee benefit or similar plans, whether
oral or written, in each case that has any application to
employees.
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2.15
|
Brokers; Third Party Expenses
. Except that
GERA has agreed to pay GBE at Closing an acquisition fee of
$1,222,000 with respect to the acquisition of the Properties
pursuant to the Master Brokerage Service Agreement, neither GBE
nor any Target Company has incurred, nor will it incur, directly
or indirectly, any liability for brokerage,
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finders fees, agents commissions or any similar
charges in connection with this Agreement or any transactions
contemplated hereby.
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2.16
|
Taxes
. Each Target Company has (i) timely
filed (or has had timely filed on its behalf), within any
applicable extension periods, all income tax returns and all
other material tax returns, all of which were correct and
complete in all material respects when filed; and
(ii) timely and properly paid (or has had paid on its
behalf) all taxes shown to be due and payable on such tax
returns. No deficiency for any taxes has been proposed, asserted
or assessed in writing against any Target Company that has not
been resolved. There is no pending and, to the knowledge of GBE
and the Company, there is no threatened, tax audit or other
administrative proceeding or court proceeding with regard to any
taxes or tax returns of any Target Company.
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2.17
|
Representations and Warranties
Complete.
Except as set forth in this
Article II and in Sections 5.1(c) and 5.3 of this
Agreement, neither GBE nor the Company makes any express or
implied representations or warranties.
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2.18
|
Survival of Representations and
Warranties
. The representations and warranties of
GBE and the Company set forth in this Agreement shall survive
the Closing and shall terminate and be of no further force or
effect upon the end of the Indemnity Period.
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ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF GERA
GERA represents and warrants to GBE and the Company, as follows:
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3.1
|
Organization and Qualification
. GERA is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the
requisite corporate power and authority to own, lease and
operate its assets and properties and to carry on its business
as currently conducted.
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3.2
|
Authority Relative to this Agreement
. GERA has
all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby, including
but not limited to the Acquisition. The execution and delivery
of this Agreement and the consummation by GERA of the
transactions contemplated hereby, including but not limited to
the Acquisition, have been duly and validly authorized by all
necessary corporate action on the part of GERA, and no other
corporate proceedings on the part of GERA are necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby, other than the GERA Stockholder Approval.
This Agreement has been duly and validly executed and delivered
by GERA and, assuming the due authorization, execution and
delivery thereof by the other parties hereto, constitutes the
legal and binding obligation of GERA, enforceable against GERA
in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors rights generally
and by general principles of equity.
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3.3
|
No Conflict; Required Filings and Consents
.
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(a)
|
The execution and delivery of this Agreement by GERA does not,
and the performance of this Agreement by GERA (including the
consummation by GERA of the transactions contemplated hereby)
shall not: (i) conflict with or violate GERAs
certificate of incorporation or by-laws; (ii) violate any
Legal Requirements that are
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applicable to GERA; or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or materially impair
GERAs rights or alter the rights or obligations of any
third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any contract,
agreement, understanding or arrangement to which GERA is a party
or by which any of its assets or properties are subject or
bound
,
or result in the creation of a Lien on any of the
properties or assets of GERA, expect in the case of
clauses (ii) and (iii) immediately above, where such
breach, default, impairment, alteration, termination, amendment,
acceleration, cancellation or Lien would not be reasonably
likely, individually or in the aggregate, to have a material
adverse effect on the ability of GERA to consummate the
transactions contemplated by this Agreement, including, but not
limited to, the Acquisition.
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(b)
|
Other than the GERA Stockholder Approval (including the review
of the Proxy Statement (as herein defined) by the SEC, no
consent, waiver, authorization, approval, order, license,
certificate or permit of or from, or registration, declaration
or filing with, or notice to any court or other Governmental
Entity or any other Person, nor under any contract, agreement,
understanding or arrangement to which GERA is a party or by
which any of its assets or properties are subject or bound, is
required in connection with the execution and delivery by GERA
of this Agreement or the consummation by GERA of the
transactions contemplated hereby, expect where the failure to
obtain or make, as applicable, any such consent, waiver,
authorization, approval, order, license, certificate, permit,
registration, declaration, filing or notice would not be
reasonably likely, individually or in the aggregate, to have a
material adverse effect on the ability of GERA to consummate the
transactions contemplated by this Agreement.
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3.4
|
Brokers
. Except as set forth in
Section 2.15, GERA has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or
finders fees or agents commissions or any similar
charges in connection with this Agreement or any transaction
contemplated hereby.
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3.5.
|
Trust Fund
. As of the date hereof and at
the Closing (but before giving effect to the transactions to be
effected at Closing), GERA has and will have no less than
$142,323,000 invested in a trust account administered by
Continental Stock Transfer & Trust Company (the
Trust Fund
). There are no pending or, to
GERAs knowledge, threatened claims against GERA involving
the funds held in the Trust Fund or directly against the
Trust Fund, and there is, to GERAs knowledge, no
reasonable basis for a claim against the Trust Fund or the
funds therein.
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3.6.
|
Representations and Warranties
Complete
. Except as set forth in this
Article III and in Section 5.3 of this Agreement, GERA
does not make any express or implied representations or
warranties.
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3.7
|
Survival of Representations and
Warranties
. The representations and warranties of
GERA set forth in this Agreement shall survive until the Closing.
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A-13
ARTICLE IV
CONDUCT PRIOR
TO THE CLOSING
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4.1
|
Conduct of Business
. During the period from
the date of this Agreement and continuing until the earlier of
the termination of this Agreement pursuant to its terms or the
Closing, except as otherwise agreed to in writing by GERA, the
Company shall, and GBE and the Company shall cause each other
Target Company to, carry on its business in the usual, regular
and ordinary course consistent with past practices, in
substantially the same manner as heretofore conducted, pay its
debts and taxes when due subject to good faith disputes over
such debts or taxes, pay or perform other material obligations
when due, and use its commercially reasonable efforts to
preserve substantially intact its present business organization.
In addition, except as required by the terms of this Agreement
or set forth in Schedule 4.1 hereto, without the prior
written consent of GERA (which consent shall not be unreasonably
withheld, delayed or conditioned), during the period from the
date of this Agreement and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the
Closing, the Company shall not, and GBE and the Company shall
cause each other Target Company not to, do any of the following:
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(a)
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issue, deliver, sell, authorize, pledge or otherwise encumber,
any Company Membership Interests, or any SPE Membership
Interests or securities convertible into or exchangeable for
Company Membership Interests or SPE Membership Interests or
enter into any agreement or commitment (other than this
Agreement) of any character obligating it (contingently or
otherwise) to issue, deliver, sell, authorize, pledge or
otherwise encumber any such Company Membership Interests or SPE
Membership Interests or such convertible or exchangeable
securities;
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(b)
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amend its Charter Documents;
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(c)
|
acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a material portion of the assets of, or
by purchasing the stock of, or by any other manner, any Person
or any business or division thereof or (ii) any property or
assets, except, with respect to this clause (ii), for purchases
of inventory, equipment, supplies and other assets in the
ordinary course of business consistent with past practice;
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(d)
|
(i) modify, amend or terminate (other than at its stated
expiration date) any Lease other than in a manner that the
Company reasonably and in good faith believes is in the best
commercial interests of the Company and the other Target
Companies, provided that, in the case of any Material Lease, the
Company has given prior written notice thereof to GERA,
(ii) enter into or commit to enter into any lease, license
or other occupancy agreement relating to or affecting any of the
Properties other than any such lease, license or other occupancy
agreement that the Company reasonably and in good faith believes
is in the best commercial interests of the Company and the other
Target Companies, provided that, in the case of a Material
Lease, the Company has given prior written notice thereof to
GERA, or (iii) modify, amend or terminate the Wachovia Loan
Facility or any document relating thereto;
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(e)
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(i) incur, agree to incur or assume any indebtedness for
borrowed money, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other
Person
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A-14
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or (iii) make any loans, advances or capital contributions
to, or investments in, any other Person;
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(f)
|
declare or pay any dividends on its membership interests
(whether in cash, stock or other property), or set apart any
money, membership interests or other property for such payment
or make any distributions to or for the account of its members,
or redeem, repurchase or otherwise acquire, directly or
indirectly, any of its membership interests;
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(g)
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make any capital expenditures in excess of $50,000 individually,
or in excess of $100,000 in the aggregate, other than capital
expenditures contemplated by the operating plan of the Company
or the applicable Property, a copy of which is attached as
Schedule 4.1(g);
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(h)
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lease, license, sell, dispose of, abandon or otherwise transfer
any property or assets, except that this clause (h) shall
not apply to the lease, licensing, sale, disposition or transfer
of any property or assets in the ordinary course of business
consistent with past practice, subject in all cases to the other
terms set forth herein, including clause (d) immediately
above;
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(i)
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subject any of its assets, properties or rights, or any part
thereof, to any Lien or suffer such to exist, other than
Permitted Liens;
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(j)
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except in the ordinary course of business, hire any employees or
enter into any employment, consulting or similar agreement with
any prospective employee or adopt or authorize any plan or
arrangement for the benefit of any employee of any Target
Company;
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(k)
|
fail to maintain and pay all premiums with respect to all
policies of insurance relating to its business, and its assets
and properties, as are presently held in its name (or
replacements therefor) and timely renew all such policies (or
arrange for replacements therefor) with financially responsible
insurance companies in such amounts and against such risks and
losses as are consistent with past practice;
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(l)
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make any change in any method of accounting or accounting
principle, method, estimate or practice, except as required by
GAAP;
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(m)
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make, change or revoke any tax election or settle or compromise
any material tax liability;
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(n)
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enter into any contract or commitment limiting or restraining
such Target Company from engaging or competing in any lines of
business or with any Person;
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(o)
|
enter into or authorize any contract, agreement, understanding
or arrangement with GBE or any Affiliate thereof (other than a
Target Company), or otherwise enter into or effect any
transaction with GBE or any Affiliate thereof (other than Target
Company) other than pursuant to the terms of any contract,
agreement, understanding or arrangement that is in effect on the
date hereof and that is disclosed on the applicable Schedule
hereto;
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(p)
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take or omit to take any action which would be reasonably
anticipated, individually or in the aggregate, to have a
Material Adverse Effect; or
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(q)
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agree in writing or otherwise agree, commit or resolve to take
any of the actions described in Section 4.1(a) through
(p) above.
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A-15
ARTICLE V
ADDITIONAL
AGREEMENTS
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5.1
|
Proxy Statement; Special Meeting
.
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(a)
|
As soon as is reasonably practicable after the execution hereof,
GERA shall prepare and file with the Securities and Exchange
Commission (the
SEC
) proxy materials for the
purpose of soliciting proxies from holders of common stock, par
value $0.01 per share, of GERA (
GERA Common
Stock
), to vote at a special meeting of the
stockholders of GERA (the
Special Meeting
) in
favor of, among other things, the approval of the Acquisition
pursuant to the terms of this Agreement in accordance with the
GERA Stockholder Approval. Such proxy materials shall be in the
form of a proxy statement to be used for the purpose of
soliciting proxies from holders of GERA Common Stock for the
matters to be acted upon at the Special Meeting as set forth
herein (the
Proxy Statement
). The Company and
GBE shall, and GBE and the Company shall cause each other Target
Company to, furnish to GERA all information concerning the
Target Companies and the Properties (to the extent such
information with respect to the Properties is in GBEs or
the applicable Target Companys possession) as GERA may
reasonably request in connection with the preparation of the
Proxy Statement. The Company and its counsel shall be given an
opportunity to review and comment on the Proxy Statement prior
to its filing with the SEC. GERA, with the assistance of the
Company, shall promptly respond to any SEC comments on the Proxy
Statement and shall otherwise use commercially reasonable
efforts to cause the Proxy Statement to be approved for
distribution by the SEC as promptly as practicable.
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(b)
|
As soon as practicable following the approval for distribution
of the Proxy Statement by the SEC, GERA shall distribute the
Proxy Statement to the holders of GERA Common Stock and,
pursuant thereto, shall call the Special Meeting for a date no
later than 30 days after the mailing of the Proxy Statement
to the holders of GERA Common Stock in accordance with the
Delaware General Corporation Law (the
DGCL
)
and, subject to the other provisions of this Agreement, solicit
proxies from such holders to vote in favor of the approval of
the Acquisition pursuant to the terms of this Agreement and the
other matters presented for approval or adoption at the Special
Meeting.
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(c)
|
GERA shall comply in all material respects with all applicable
provisions of and rules under the Securities Exchange Act of
1934, as amended (the
Exchange Act
), and all
applicable provisions of the DGCL and any applicable stock
exchange rules in the preparation, filing and distribution of
the Proxy Statement, the solicitation of proxies thereunder, and
the calling and holding of the Special Meeting. Without limiting
the foregoing, GERA shall ensure that the Proxy Statement (or
any amendment or supplement thereto) does not, as of the date on
which it is first distributed to the holders of GERA Common
Stock, and as of the date of the Special Meeting, contain any
untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading
(provided that GERA shall not be responsible for the accuracy or
completeness of any information relating to GBE or any Target
Company or any other information furnished by GBE or any Target
Company for inclusion in the Proxy Statement). GBE and the
Company jointly and
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A-16
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severally represent and warrant that the information relating to
GBE and the Target Companies supplied by GBE or any Target
Company for inclusion in the Proxy Statement will not as of the
date on which the Proxy Statement (or any amendment or
supplement thereto) is first distributed to the holders of GERA
Common Stock or at the time of the Special Meeting contain any
statement which, at such time and in light of the circumstances
under which it is made, is false or misleading with respect to
any material fact, or omits to state any material fact required
to be stated therein or necessary in order to make the statement
therein not false or misleading.
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(d)
|
Without limiting the right of the board of directors of GERA to
take a contrary position if required pursuant to its fiduciary
duties under Delaware law, GERA, acting through its board of
directors, and based on the recommendation of the special
committee of its board of directors, shall include in the Proxy
Statement the recommendation of its board of directors that the
holders of GERA Common Stock vote in favor of the Acquisition
pursuant to the terms of this Agreement, and shall otherwise use
reasonable best efforts to obtain the GERA Stockholder Approval.
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(a)
|
At least five (5) days prior to Closing, GERA shall prepare
a draft
Form 8-K
disclosing the closing of the transactions contemplated by this
Agreement and the actions contemplated hereunder, together with
such other information that may be required to be disclosed with
respect to the Acquisition, which shall be in a form reasonably
acceptable to the Company.
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(b)
|
GBE, the Company and GERA shall, and GBE and the Company shall
cause the other Target Companies to, further cooperate with each
other and use their respective commercially reasonable efforts
to take or cause to be taken all actions, and do or cause to be
done all things, necessary, proper or advisable on its part
under this Agreement and applicable laws to consummate the
Acquisition and the other transactions contemplated hereby as
soon as practicable, including but not limited to preparing and
filing as soon as practicable all documentation to effect all
necessary notices, reports and other filings and to obtain as
soon as practicable all consents, registrations, approvals,
permits and authorizations necessary or advisable to be obtained
from any third party (including the respective independent
accountants of the Company and GERA)
and/or
any
Governmental Entity and shall execute and deliver any additional
instruments reasonably necessary to consummate the Acquisition
or any of the other transactions contemplated by, and to fully
carry out the purposes of, this Agreement. Subject to applicable
laws relating to the exchange of information and the
preservation of any applicable attorney-client privilege,
work-product doctrine, self-audit privilege or other similar
privilege, each of the Company and GERA shall have the right to
review and comment on in advance, and to the extent practicable
each will consult the other on, all the information relating to,
this Agreement or the transactions contemplated hereby that
appear in any filing made with, or written materials submitted
to, any third party
and/or
any
Governmental Entity in connection with the Acquisition and the
other transactions contemplated hereby. In exercising the
foregoing right, each of the Company and GERA shall act
reasonably and as promptly as practicable.
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(c)
|
At least one day prior to Closing, GBE shall deliver to GERA a
written notice stating the aggregate Acquisition Consideration
to be delivered to GBE at Closing pursuant
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A-17
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to Section 1.2 of this Agreement, together with such
supporting documentation as GERA may reasonably request.
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5.3
|
Required Information
. In connection with the
preparation of the Proxy Statement or any other filing required
to be made with the SEC, GBE, the Company and GERA each shall,
and GBE and the Company shall cause the other Target Companies
to, upon request, furnish the other with all information
concerning themselves and such other matters as may be
reasonably necessary or advisable in connection with the
Acquisition, or any other statement, filing, notice or
application made by or on behalf of GBE, the Company, GERA or
any Target Company to any third party
and/or
any
Governmental Entity in connection with the Acquisition and the
other transactions contemplated hereby. Each party warrants and
represents to the other party that all such information shall be
true and correct in all material respects and will not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances
under which they were made, not misleading.
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5.4
|
Access to Information
. GBE and the Company
shall, and shall cause the other Target Companies to, afford
GERA and its financial advisors, accountants, counsel and other
representatives reasonable access during normal business hours,
upon reasonable notice, to the books and records of the Target
Companies during the period prior to the Closing to obtain all
information concerning the Properties or the business or
operations of the Target Companies, including the status of all
Leases and any potential leases with respect to any Property. No
information or knowledge obtained by GERA or its financial
advisors, accountants, counsel or other representatives in any
investigation pursuant to this Section 5.4 or otherwise
will affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations
of the parties to consummate the Acquisition or the right of
GERA to seek indemnification or any other claim hereunder.
Without limiting any of the other terms and conditions set forth
in this Agreement, GBE and the Company shall send to GERA copies
of any Leases or letters of intent or other similar agreements
relating to Leases relating to the Properties entered into after
the date hereof, promptly following execution thereof.
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5.5
|
Public Disclosure
. From the date of this
Agreement until Closing or the termination of this Agreement in
accordance with its terms, the parties shall cooperate in good
faith to jointly prepare all press releases and public
announcements pertaining to this Agreement and the transactions
contemplated hereby, and, except with respect to the Proxy
Statement and any amendments or supplements thereto in respect
of which the terms set forth in Section 5.1 hereof shall
apply, no party shall (and GBE and the Company shall cause the
Target Companies not to) issue or otherwise make any public
announcement or communication pertaining to this Agreement or
the transactions contemplated hereby without the prior consent
of GERA (in the case of GBE, the Company or any Target Company)
or the Company and GBE (in the case of GERA), except as required
by any legal requirement or by the rules and regulations of, or
pursuant to, any agreement of a stock exchange or trading
system. Each party will not unreasonably withhold approval from
the other with respect to any press release or public
announcement. This provision will not apply to communications by
any party to its counsel, accountants and other professional
advisors. The parties hereto agree that as promptly as
practicable after the execution of this Agreement, GERA will
prepare and file a Current Report on
Form 8-K
pursuant to the Exchange Act to report the execution of this
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A-18
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Agreement with respect to which the Company may review and
comment upon prior to filing and that any language included in
such Current Report that reflects the Companys comments,
as well as any text as to which the Company has not commented
upon after being given a reasonable opportunity to comment,
shall be deemed to have been approved by the Company and may
thereafter be used by GERA in other filings made by it with the
SEC and in other documents distributed by GERA in connection
with the transactions contemplated by this Agreement without
further review or consent of the Company.
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5.6
|
Further Assurances; Reasonable Efforts
. Upon
the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its commercially
reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most
expeditious manner practicable, the Acquisition and the other
transactions contemplated by this Agreement, including using
commercially reasonable efforts to accomplish the following:
(i) the taking of all reasonable acts necessary to cause
the conditions precedent set forth in Article VI to be
satisfied, (ii) the obtaining of all necessary actions,
waivers, consents, approvals, orders and authorizations from
Governmental Entities and the making of all necessary
registrations, declarations and filings (including
registrations, declarations and filings with Governmental
Entities, if any) and the taking of all reasonable steps as may
be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the obtaining
of all consents, approvals or waivers from third parties
required as a result of the transactions contemplated in this
Agreement, and (iv) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation
of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed. Without
limiting the foregoing, in the event that GERA elects (at its
own discretion and expense) to obtain an owners policy of
title insurance or a survey with respect to any of the
Properties (or updates thereof of the Target Companies
existing policies
and/or
surveys), GBE and the Company shall, and shall cause the other
Target Companies to, reasonably cooperate with GERA to obtain
such policies
and/or
surveys (or updates thereof), including, with respect to any
title policy (or update thereof) by providing affidavits and
other similar instruments as are reasonably required by the
title company issuing the policy (or update thereof) for the
deletion of any standard or printed exceptions in the title
policy that are customarily deleted by virtue of a seller
delivering such instruments in commercial real estate
transactions in the state in which the Property, which the
subject of such policy, (or update) is located.
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5.7
|
Further Disclosure of Certain
Matters
. Subsequent to the execution hereof, and
prior to the Closing, each of GERA, the Company and GBE, will
provide the others with prompt written notice of any event,
development or condition that (a) would cause any of such
partys representations and warranties to become untrue or
misleading or which may affect its ability to consummate the
transactions contemplated by this Agreement, (b) had it
existed or been known on the date hereof would have been
required to be disclosed under this Agreement, (c) gives
such party any reason to believe that any of the conditions set
forth in Article VI will not be satisfied, (d) is of a
nature that is or may be materially adverse to the operations,
prospects or condition (financial or otherwise) of
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A-19
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the Target Companies or the Properties or (e) would require
any amendment or supplement to the Proxy Statement.
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5.8
|
Acquisition Fee.
GBE and GERA have agreed that
pursuant to the Master Agreement for Services, at and subject to
the occurrence of the Closing, GERA shall pay GBE an acquisition
fee equal to one percent of the Property Acquisition Price for
each of the Properties. Accordingly, at Closing, in addition to
the Acquisition Consideration, GERA shall pay GBE an acquisition
fee of $1,222,000 with respect to the Properties. For purposes
of this Agreement, Property Acquisition Price shall
mean $21,450,000 for the IL Property, $20,000,000 for the TX
Property and $80,750,000 for the CT Property.
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5.9
|
No Claim Against Trust Fund.
GBE and the
Company acknowledge and agree that, if the transactions
contemplated by this Agreement are not consummated, GERA may be
obligated, under certain circumstances, to return to its
stockholders the amounts being held in the Trust Fund. GBE
and the Company hereby waive all rights against GERA to collect
from the Trust Fund any moneys that may be owed to them by GERA
for any reason whatsoever, including but not limited to a breach
of this Agreement by GERA or any negotiations, agreements or
understandings with GERA, and will not seek recourse against the
Trust Fund for any reason whatsoever. The foregoing waiver
shall not apply if both (a) GERA willfully fails or refuses
to consummate the transactions contemplated by this Agreement or
GBE and the Company terminate this Agreement pursuant to
Section 8.1(d), and (b) GERA consummates another
business combination with another Person.
|
ARTICLE VI
CONDITIONS TO
THE TRANSACTION
|
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6.1
|
Conditions to Obligations of Each Party to Effect the
Acquisition
. The respective obligations of each
party to this Agreement to effect the Acquisition shall be
subject to the satisfaction at or prior to the Closing of the
following conditions:
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(a)
|
GERA Stockholder Approval
. The GERA
Stockholder Approval with respect to the Acquisition shall have
been duly obtained by the requisite stockholder vote under the
laws of the State of Delaware and the certificate of
incorporation of GERA.
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(b)
|
No Order
. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in
effect and which has the effect of making the Acquisition
illegal or otherwise prohibiting or restraining the consummation
of the Acquisition on substantially the terms contemplated by
the Agreement.
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6.2
|
Additional Conditions to Obligations of GBE and the
Company
. The obligations of GBE and the Company
to consummate and effect the Acquisition shall be subject to the
satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, by the
Company and GBE:
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(a)
|
Acquisition Consideration and Acquisition
Fee
. GBE shall have received by wire transfer the
Acquisition Consideration and the Acquisition Fee.
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A-20
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(b)
|
Representations and Warranties
. Each
representation and warranty of GERA contained in this Agreement
that is (i) qualified as to materiality shall have been
true and correct in all respects (A) as of the date of this
Agreement and (B) on and as of the Closing, with the same
force and effect as if made on and as of the Closing, and
(ii) not qualified as to materiality shall have been true
and correct in all material respects (A) as of the date of
this Agreement and (B) on and as of the Closing, with the
same force and effect as if made on and as of the Closing. The
Company shall have received a certificate with respect to the
foregoing signed on behalf of GERA by an authorized officer of
GERA (
GERA Closing Certificat
e).
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(c)
|
Agreements and Covenants
. GERA shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing, and
the GERA Closing Certificate shall include a provision to such
effect.
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(d)
|
No Litigation
. No action, suit or proceeding
shall be pending or threatened before any Governmental Entity
which is reasonably likely to (i) prevent consummation of
any of the transactions contemplated by this Agreement, or
(ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation and no order,
judgment, decree, stipulation or injunction to any such effect
shall be in effect.
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(f)
|
Other Deliveries
. At or prior to Closing, GERA
shall have delivered to GBE (i) copies of resolutions and
actions taken by GERAs board of directors and stockholders
in connection with the approval of this Agreement and the
transactions contemplated hereunder, and (ii) such other
documents or certificates as shall reasonably be required by the
Company and its counsel in order to consummate the transactions
contemplated hereunder.
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6.3
|
Additional Conditions to the Obligations of
GERA
. The obligations of GERA to consummate and
effect the Acquisition shall be subject to the satisfaction at
or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, exclusively by GERA:
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(a)
|
Representations and Warranties
. Each
representation and warranty of GBE and the Company contained in
this Agreement that is (i) qualified as to materiality or
Material Adverse Effect shall have been true and correct in all
respects (A) as of the date of this Agreement and
(B) on and as of the Closing, with the same force and
effect as if made on and as of the Closing, and (ii) not
qualified as to materiality or Material Adverse Effect shall
have been true and correct in all material respects (A) as
of the date of this Agreement and (B) on and as of the
Closing, with the same force and effect as if made on and as of
the Closing; provided, however, that notwithstanding anything
contained in this clause (ii) to the contrary, the
representations and warranties of GBE and the Company set forth
in Section 2.2 hereof shall have been true and correct in
all respects as of the date of this Agreement and on and as of
the Closing, with the same force and effect as if made on and as
of the Closing. GERA shall have received a certificate with
respect to the foregoing signed on behalf of GBE and the Company
by an authorized officer of GBE and the Company
(
Company Closing Certificat
e).
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(b)
|
Agreements and Covenants
. The Company and GBE
shall have performed or complied in all material respects with
all agreements and covenants required by this
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A-21
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Agreement to be performed or complied with by them at or prior
to the Closing, and the Company Closing Certificate shall
include a provision to such effect.
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(c)
|
No Litigation
. No action, suit or proceeding
shall be pending or threatened before any Governmental Entity
which is reasonably likely to (i) prevent consummation of
any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or
(iii) affect materially and adversely the right of GERA to
own, operate or control any of the Target Companies or the
Properties following the Acquisition and no order, judgment,
decree, stipulation or injunction to any such effect shall be in
effect.
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(d)
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Intentionally Omitted
.
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(e)
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Material Adverse Effect
. No Material Adverse
Effect shall have occurred since the date of this Agreement.
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(f)
|
Other Deliveries
. At or prior to Closing, GBE
and the Company shall have delivered to GERA: (i) copies of
resolutions and actions taken by GBEs board of directors
in connection with the adoption and approval of this Agreement
and the transactions contemplated hereunder, and (ii) such
other documents or certificates as shall reasonably be required
by GERA and its counsel in order to consummate the transactions
contemplated hereunder.
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ARTICLE VII
INDEMNIFICATION
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7.1
|
Indemnification of GERA
.
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(a)
|
Subject to the terms and conditions of this Article VII
(including without limitation the limitations set forth in
Section 7.4), GERA and its representatives, Affiliates,
successors and permitted assigns (the
GERA
Indemnitees
) shall be indemnified, defended and held
harmless by GBE, from and against all Losses asserted against,
resulting to, imposed upon, or incurred by any GERA Indemnitee
by reason of, arising out of or resulting from:
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(i)
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the inaccuracy or breach of any representation or warranty of
GBE or the Company contained in or made pursuant to this
Agreement, any Schedule or any certificate delivered by GBE or
the Company to GERA pursuant to this Agreement; and
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(ii)
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the non-fulfillment or breach of any covenant or agreement of
GBE or the Company contained in this Agreement.
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(b)
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As used in this Article VII, the term
Losses
shall include all losses, liabilities,
damages, judgments, awards, orders, penalties, settlements,
costs and expenses (including, without limitation, interest,
penalties, court costs and reasonable legal fees and expenses),
including those arising from any demands, claims, suits,
actions, costs of investigation, notices of violation or
noncompliance, causes of action, proceedings and assessments
whether or not made by third parties and whether or not
ultimately determined to be valid, and shall not include any
special, punitive or consequential damages unless a GERA
Indemnitee is required to pay a
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A-22
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third party any such damages, in which such damages shall
constitute Losses hereunder. Solely for the purpose of
determining the amount of any Losses for which GERA Indemnitees
may be entitled to indemnification pursuant to this
Article VII and for purposes of determining whether any
representation or warranty of GBE or the Company contained
herein is inaccurate or has been breached, any representation or
warranty contained in this Agreement that is qualified by a term
or terms such as material, materially or
Material Adverse Effect shall be deemed made or
given without such qualification and without giving effect to
such words.
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7.2
|
Indemnification of Third Party Claims. The
indemnification obligations of GBE under this Article VII
with respect to actions, proceedings, lawsuits, investigations,
demands or other claims brought against any GERA Indemnitee by a
third party (a
Third Party Claim
) shall be
subject to the following terms and conditions:
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(a)
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Notice of Claim
. GERA will give GBE prompt
written notice after receiving written notice of any Third Party
Claim or discovering the liability, obligation or facts giving
rise to such Third Party Claim (a
Notice of
Claim
), which Notice of Claim shall set forth
(i) a brief description of the nature of the Third Party
Claim, (ii) to the extent known, the total amount of the
actual out-of-pocket Loss or the anticipated potential Loss
(including any costs or expenses which have been or may be
reasonably incurred in connection therewith) and
(iii) whether such Loss may be covered (in whole or in
part) under any insurance and the estimated amount of such Loss
which may be covered under such insurance.
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(b)
|
Defense
. Subject to the terms of this
Article VII, including the terms set forth in
Section 7.2(f) hereof, GBE shall have the right, at its
option (subject to the limitations set forth in
Section 7.2(c) below) and at its own expense, by written
notice to GERA, to assume the entire control of, subject to the
right of GERA to participate (at its expense and with counsel of
its choice, provided that if GERA reasonably determines that
joint representation of GBE and any GERA Indemnitee creates an
actual conflict of interest, GERA shall be entitled to retain
separate counsel at the cost and expense of GBE) in, the
defense, compromise or settlement of the Third Party Claim as to
which such Notice of Claim has been given, and shall be entitled
to appoint a recognized and reputable counsel reasonably
acceptable to GERA to be the lead counsel in connection with
such defense. If GBE is permitted and elects to assume the
defense of a Third Party Claim:
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(i)
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GBE shall diligently and in good faith defend such Third Party
Claim and shall keep GERA reasonably informed of the status of
such defense; provided, however, that in the case of any
settlement providing for remedies other than monetary damages
for which indemnification is provided, and without limiting the
terms of Section 7.2(f) hereof, GERA shall have the right
to approve the settlement, which approval will not be
unreasonably withheld or delayed; and
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(ii)
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GERA shall cooperate fully in all respects with GBE in any such
defense, compromise or settlement thereof, including, without
limitation, the selection of counsel, and GERA shall make
available to GBE all pertinent information and documents under
its control.
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(c)
|
Limitations of Right to Assume Defense
. GBE
shall not be entitled to assume control of such defense if
(i) the Third Party Claim relates to or arises in
connection with any criminal proceeding, action, indictment,
allegation or investigation; (ii) the
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A-23
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Third Party Claim seeks an injunction or equitable relief
against GERA or any subsidiary thereof; or (iii) there is a
reasonable probability that a Third Party Claim may materially
and adversely affect GERA other than as a result of money
damages or other money payments.
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(d)
|
Other Limitations
. Failure to give a prompt
Notice of Claim or to provide copies of relevant available
documents or to furnish relevant available data shall not
constitute a defense (in whole or in part) to any
indemnification claim made by any GERA Indemnitee against GBE
and shall not affect GBEs duty or obligations under this
Article VII, except to the extent (and only to the extent that)
such failure shall have materially and adversely affected the
ability of GBE to defend against or reduce its liability or
caused or increased materially such liability or otherwise
caused the damages for which GBE is obligated to be greater in
any material respect than such damages would have been had the
applicable GERA Indemnitee given GBE prompt notice hereunder. So
long as GBE is defending any such action actively and in good
faith, GERA shall not settle such action without the prior
written consent of GBE. GERA shall make available to GBE all
relevant records and other relevant materials required by them
in the possession or under the control of GERA, for the use of
GBE and its representatives in defending any such action, and
shall in other respects give reasonable cooperation in such
defense.
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(e)
|
Failure to Defend
. If GBE promptly (and, in
any event within thirty days) after receiving a Notice of Claim,
fails to defend such Third Party Claim actively and in good
faith, GERA will (upon further written notice to GBE) have the
right, at the expense of GBE, to undertake the defense,
compromise or settlement of such Third Party Claim as it may
determine in its reasonable discretion, provided that GBE shall
have the right to approve any settlement, which approval will
not be unreasonably withheld or delayed.
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(f)
|
GERAs Rights
. Anything in this
Section 7.2 to the contrary notwithstanding, GBE shall not,
without the written consent of GERA, settle or compromise any
action or consent to the entry of any judgment which does not
include as an unconditional term thereof the giving by the
claimant or the plaintiff to the GERA Indemnitees of a full and
unconditional release from all liability and obligation in
respect of such action without any payment by any GERA
Indemnitee.
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7.3
|
Insurance Effect
. To the extent that any
Losses that are subject to indemnification pursuant to this
Article VII are covered by insurance, GERA shall use
commercially reasonable efforts, at the expense of GBE, to
obtain the maximum recovery under such insurance; provided that
the GERA Indemnitees shall nevertheless be entitled to bring a
claim for indemnification under this Article VII in respect
of such Losses and the time limitations set forth in
Section 7.4 hereof for bringing a claim of indemnification
under this Agreement shall be tolled during the pendency of such
insurance claim. The existence of a claim by GERA for monies
from an insurer or against a third party in respect of any Loss
shall not, however, delay any payment pursuant to the
indemnification provisions contained herein that are determined
to be due and owing to GERA Indemnitees from GBE, it being
understood and agreed that GBE shall be required to make
indemnification payments to GERA Indemnitees notwithstanding any
pending (or potential) insurance claim. If GERA has received an
indemnification payment required by this Agreement from GBE in
respect of any Loss and later receives proceeds from insurance
or other amounts in respect of such Loss, then it shall hold
such proceeds or other
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A-24
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amounts in trust for the benefit of GBE and shall pay to GBE, as
promptly as practicable after receipt, a sum equal to the amount
of such proceeds or other amount received, up to the aggregate
amount of any payments received from GBE pursuant to this
Agreement in respect of such Loss. Notwithstanding any other
provisions of this Agreement, it is the intention of the parties
that no insurer or any other third party shall be
(i) entitled to a benefit it would not be entitled to
receive in the absence of the foregoing indemnification
provisions, or (ii) relieved of the responsibility to pay
any claims for which it is obligated.
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7.4
|
Limitations on Indemnification
.
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(a)
|
Survival, Time Limitation
;
Maximum
Liability
. The representations and warranties of
GBE and the Company contained in this Agreement or in any
writing delivered by GBE or the Company to GERA in connection
with this Agreement (including the certificate required to be
delivered by GBE and the Company pursuant to Section 6.3(a))
shall survive for a period of nine (9) months after the
Closing; provided, however, that the representations and
warranties of GBE and the Company set forth in
(i) Sections 2.2 and 2.3 hereof shall survive the
Closing indefinitely and (ii) Section 2.16 shall
survive the Closing for a period of five (5) years after
the Closing (the representation and warranties set forth in
Sections 2.2 and 2.16 are collectively referred to herein
as the
Excluded Warranties
); provided,
further however, that there shall be no limitation on the time
within which notice of a claim based on fraud or a material
intentional or material willful misrepresentation or material
willful omission may be made hereunder. The covenants and
agreements of GBE and the Company contained in this Agreement or
in any writing delivered by GBE or the Company to GERA in
connection with this Agreement (including the certificate
required to be delivered by the Company pursuant to
Section 6.3(b)) shall survive the Closing indefinitely. The
Indemnity Period in respect of any representation, warranty,
covenant or agreement shall be the period applicable to such
representation, warranty, covenant or agreement as set forth in
this Section 7.4(a). In no event shall GBE be liable to
provide indemnification hereunder in respect of indemnification
claims made pursuant to Section 7.1(a)(i) hereof for any
amount in excess of 20% of the Acquisition Consideration;
provided, however, that the foregoing limitation on liability
shall not apply in the case of (i) fraud or a material
intentional or material willful misrepresentation or material
willful omission or (ii) the Excluded Warranties and, in
the case of fraud, a material intentional or material willful
misrepresentation or material willful omission or the inaccuracy
or breach of the Excluded Warranties, the indemnification
obligations of GBE hereunder shall not exceed the total
Acquisition Consideration.
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(b)
|
Any claim made by a party in writing hereunder prior to the
expiration of the Indemnity Period shall be preserved despite
the subsequent expiration of the Indemnity Period and any claim
set forth in a Notice of Claim sent prior to the expiration of
the Indemnity Period shall survive until final resolution
thereof. Except as set forth in the immediately preceding
sentence, no claim for indemnification under this
Article VII shall be brought or permitted after the end of
the Indemnity Period.
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(c)
|
Deductible
. No Losses shall be payable by GBE
to a GERA Indemnitee in respect of an indemnification claim made
pursuant to Section 7.1(a)(i) hereof unless and until the
aggregate amount of all indemnifiable Losses otherwise payable
in respect
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A-25
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of all indemnification claims made pursuant to said
Section 7.1(a)(i) exceeds three and one-half percent of the
Acquisition Consideration (the
Deductible
),
in which event the amount payable shall only be the amount in
excess of the Deductible; provided, however, that any Losses
incurred by any GERA Indemnitee arising out of (i) fraud or
a material intentional or material willful misrepresentation or
material willful omission or (ii) the inaccuracy or breach
of any Excluded Warranty shall not be subject to the Deducible
and, in such circumstances, the GERA Indemnitees shall be
entitled to receive any and all Losses incurred by them from the
first dollar of such Losses.
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7.5
|
Exclusive Remedy
. GERA, on behalf of itself
and all GERA Indemnitees, hereby acknowledges and agrees that,
from and after the Closing, its sole remedy with respect to any
and all claims for money damages arising out of or relating to
this Agreement shall be pursuant and subject to the requirements
of the indemnification provisions set forth in this Article VII.
Notwithstanding any of the foregoing, nothing contained in this
Article VII shall in any way impair, modify or otherwise
limit the GERA Indemnitees right to bring any claim,
demand or suit against GBE based upon GBEs actual fraud or
a material intentional or material willful misrepresentation or
material willful omission, it being understood that a mere
breach of a representation and warranty, without material
intentional or material willful misrepresentation or material
willful omission, does not constitute fraud.
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7.6
|
Tax Treatment of Indemnification Payments
. Any
indemnification payments made pursuant to this Agreement shall
be treated for tax purposes as an adjustment to the Acquisition
Consideration, unless otherwise required by applicable law.
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ARTICLE VIII
TERMINATION
|
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8.1
|
Termination
. This Agreement may be terminated
at any time prior to the Closing:
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(a)
|
by mutual written agreement of GERA, the Company and GBE at any
time;
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(b)
|
by either GERA or GBE if the Acquisition shall not have been
consummated by December 31, 2007 for any reason; provided,
however, that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any party whose
action or failure to act has been a principal cause of or
resulted in the failure of the Acquisition to occur on or before
such date and such action or failure to act constitutes a breach
of this Agreement;
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(c)
|
by either GERA or GBE if a Governmental Entity shall have issued
an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Acquisition, which order, decree,
ruling or other action is final and nonappealable;
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(d)
|
by GBE or the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of GERA set forth in
this Agreement, or if any representation or warranty of GERA
shall have become untrue, in either case such that the
conditions set forth in Article VI would not be satisfied
as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided,
that if such breach by GERA is curable by GERA prior to the
Closing,
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A-26
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then neither the Company nor GBE may terminate this Agreement
under this Section 8.1(d) for thirty (30) days after
delivery of written notice from the Company or GBE to GERA of
such breach, provided GERA continues to exercise commercially
reasonable efforts to cure such breach (it being understood that
neither the Company nor GBE may terminate this Agreement
pursuant to this Section 8.1(d) if it is then in material
breach of this Agreement or if such breach by GERA is cured
during such thirty (30)-day period);
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(e)
|
by GERA, upon a breach of any representation, warranty, covenant
or agreement on the part of GBE or the Company set forth in this
Agreement, or if any representation or warranty of GBE or the
Company shall have become untrue, in either case such that the
conditions set forth in Article VI would not be satisfied
as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided,
that if such breach is curable by GBE or the Company prior to
the Closing, then GERA may not terminate this Agreement under
this Section 8.1(e) for thirty (30) days after
delivery of written notice from GERA to GBE or the Company of
such breach, provided GBE or the Company, as applicable,
continues to exercise commercially reasonable efforts to cure
such breach (it being understood that GERA may not terminate
this Agreement pursuant to this Section 8.1(e) if it is
then in material breach of this Agreement or if such breach by
GBE or the Company is cured during such thirty (30)-day period);
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(f)
|
by either GERA, GBE or the Company, if, at the Special Meeting
(including any adjournments thereof) GERA has failed to obtain
the GERA Stockholder Approval; or
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(g)
|
by GBE on or after September 30, 2007 if it is required to
terminate this Agreement pursuant to the terms of
Section 5.01(s) of the DB Credit Facility as in effect on
the date hereof; provided, however, that GBE shall only be
permitted to terminate this Agreement pursuant to this
Section 8.1(g) if GBE has used its reasonable best efforts
to cause the provisions of such Section 5.01(s) to be
waived, modified or extended so as to permit the transactions
contemplated by this Agreement to be consummated subsequent to
September 30, 2007.
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8.2
|
Notice of Termination; Effect of
Termination
. Any termination of this Agreement
under Section 8.1 above will be effective immediately upon
(or, if the termination is pursuant to Section 8.1(d) or
Section 8.1(e) and the proviso therein is applicable,
thirty (30) days after) the delivery of written notice of
the terminating party to the other parties hereto. In the event
of the termination of this Agreement as provided in
Section 8.1, this Agreement shall be of no further force or
effect and the Acquisition shall be abandoned, except for and
subject to the following: (i) Sections 5.5, 8.2, 8.3 and
Article IX shall survive the termination of this Agreement;
and (ii) no such termination shall relieve any party hereto
for any breach of this Agreement by such party arising prior to
the date of such termination.
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8.3
|
Fees and Expenses
. Except as otherwise set
forth in this Agreement, including in Article VII hereof,
all fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the
party incurring such expenses whether or not the Acquisition is
consummated.
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A-27
ARTICLE IX
GENERAL
PROVISIONS
|
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9.1
|
Notices
. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered
personally or by commercial delivery service, or sent via
telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like
notice):
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if to GERA, to:
Grubb & Ellis Realty Advisors, Inc.
c/o C.
Michael Kojaian
Chairman of the Board
39400 Woodward Avenue
Suite 250
Bloomfield Hills, MI 48304
Facsimile:
248-644-7620
with a copy simultaneously by like means to:
Zukerman Gore & Brandeis, LLP
875 Third Avenue, 28th Floor
New York, New York, 10022
Attention: Clifford A. Brandeis, Esq.
Facsimile:
212-223-6433
and
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York, 10019
Attention: Steven A. Seidman, Esq.
Facsimile:
212-728-9763
if to the Company or GBE to:
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500 West Monroe Street, Suite 2800
Chicago, Illinois 60661
Attention:
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Mark E. Rose
Chief Executive Officer
Facsimile:
312-698-5944
|
with a copy simultaneously by like means to:
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500 West Monroe Street, Suite 2800
Chicago, Illinois 60661
Attention:
|
Robert Z. Slaughter, Esq.
General Counsel
Facsimile:
(312) 423-5423
|
Any notice or other communication so addressed shall be deemed
to be given: if delivered personally or by telecopy, on the date
of such delivery, provided receipt is confirmed in the case
A-28
of a telecopy; or if mailed by commercial delivery service, on
the first business day following the date of such mailing.
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9.2
|
Interpretation
. The definitions of the terms
herein shall apply equally to the singular and plural forms of
the terms defined. Whenever the context shall require, any
provision shall include the corresponding masculine, feminine
and neuter forms. When a reference is made in this Agreement to
an Exhibit or Schedule, such reference shall be to an Exhibit or
Schedule to this Agreement unless otherwise indicated. When a
reference is made in this Agreement to Sections or subsections,
such reference shall be to a Section or subsection of this
Agreement. Unless otherwise indicated the words
include, includes and
including when used herein shall be deemed in each
case to be followed by the words without limitation.
The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. For purposes of
this Agreement:
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(a)
|
the term
Affiliate
means, as applied to any
Person, any other Person directly or indirectly controlling,
controlled by or under direct or indirect common control with,
such Person. For purposes of this definition,
control (including with correlative meanings, the
terms controlling, controlled by and
under common control with), as applied to any
Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise;
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(b)
|
the term
DB Credit Facility
means that
certain Amended and Restated Credit Agreement, dated as of
April 14, 2006, by and among GBE, as borrower, the
guarantors named therein, Deutsche Bank Trust Company Americas,
as administrative agent and as syndication agent, the financial
institutions identified therein as lenders, and Deutsche Bank
Securities Inc., as sole book running manager and sole lead
arranger, as amended by each of that certain First Letter
Amendment dated as of June 16, 2006, and that certain
Second Letter Amendment dated as of February 16, 2007;
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(c)
|
the term
GAAP
means United States generally
accepted accounting principles;
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(d)
|
the term
GERA Stockholder Approval
means
(i) the holders of a majority of the shares of GERA Common
Stock that were issued in the IPO (the
Public
Stockholders
) affirmatively approving the Acquisition
in accordance with the terms of this Agreement, and
(ii) less than twenty percent (20%) of the Public
Stockholders voting against the Acquisition and exercising their
right to convert their GERA Common Stock for cash as described
in GERAs final prospectus with respect to the IPO dated
February 27, 2006, as filed with the SEC on
February 28, 2006 pursuant to Rule 424(B)(4) of the
Securities Act of 1933, as amended;
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(e)
|
the term
Governmental Entity
means any
federal, national, supranational, state, provincial,
departmental, local, foreign or similar government,
governmental, regulatory or administrative authority, branch,
agency or commission or any court, tribunal or judicial body;
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(f)
|
the term knowledge, best knowledge or
any similar phrase means, (i) when used with respect to GBE
or the Company, the actual knowledge, after a reasonable
inquiry, of each of the Persons whose names are set forth on
Schedule 9.2(f-1),
and (ii) when used with respect to GERA, the actual
knowledge, after a reasonable
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A-29
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inquiry, of each of the Persons whose names are set forth on
Schedule 9.2(f-2),
and for purposes of clauses (i) and (ii) immediately
above, the reasonable inquiry standard shall be deemed satisfied
so long as such Persons shall have (x) reviewed the
representations and warranties with respect to which the phrase
to the knowledge of GBE and the Company or to
the knowledge of GERA, as applicable, pertains and
(y) discussed the representations and warranties with
respect to which such phrase pertains with those individuals
within their respective organizations who have direct
responsibility over the matter in question and, in the case of
GBE and the Company, those individuals employed or, to the
extent that such Persons have deemed necessary, retained by GBE
that conducted the due diligence review of the Properties in
connection with GBEs indirect acquisition thereof;
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(g)
|
the term
Legal Requirements
means any
federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance,
code, edict, decree, rule, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental
Entity;
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(h)
|
the term
Lien
means any mortgage, pledge,
security interest, encumbrance, lien, claim, restriction or
charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in
the nature thereof or any agreement to give any security
interest);
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(i)
|
the term
Master Agreement for Services
means
that certain brokerage service agreement dated February 27,
2006 among GERA and GBE pursuant to which GBE will act
GERAs exclusive agent with respect to commercial real
estate brokerage and consulting services;
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(j)
|
the term
Material Adverse Effect
means any
change, event, violation, inaccuracy, circumstance or effect
which, individually or when aggregated with all other changes,
events, violations, inaccuracies, circumstances or effects, has
had or is reasonably likely to have a material adverse effect on
the business, assets (including intangible assets), condition
(financial or otherwise) or results of operations of the Target
Companies or the Properties taken as a whole, it being
understood that none of the following alone or in combination
shall be deemed, in and of itself, to constitute a Material
Adverse Effect: (i) changes directly attributable to the
public announcement or pendency of the transactions contemplated
hereby, (ii) changes in general national or general
regional economic conditions, or (iii) any SEC rulemaking
requiring enhanced disclosure of reverse acquisition
transactions with a public shell;
provided
,
however
, that the matters referred to in the foregoing
clauses (ii) and (iii) shall be considered in
determining whether a Material Adverse Effect has occurred if
such matters affect any Target Company or any Property in a
materially disproportionate manner when compared to the effect
of such matters on other Persons engaged in the same industry in
which the Target Companies operate;
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(k)
|
the term
Material Leases
means any leases,
licenses or other occupancy agreements affecting the Properties,
which (x) have a term of more than ten (10) years, or
(y) require payment of basic rent or other amounts on an
annual basis, in excess of $500,000;
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(l)
|
the term
Person
means any individual,
corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership,
joint
|
A-30
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venture, estate, trust, company (including any limited liability
company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity;
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(m)
|
the term
Target Companies
means,
collectively, the Company and the SPEs, and each such Person is
sometimes referred to herein as a
Target
Company
;
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(n)
|
the term
Wachovia Loan Facility
means those
two certain mortgage loan facilities, each dated June 15,
2007, provided by Wachovia Bank, N.A. in an aggregate amount of
$120,500,000. The first loan facility is between CT LLC, as
borrower, and Wachovia Bank, N.A., as lender, and the second
loan facility is by and among TX LLC and IL LLC, as borrowers,
and Wachovia Bank, N.A., as lender.
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9.3
|
Counterparts; Facsimile Signatures
. This
Agreement and each other document executed in connection with
the transactions contemplated hereby may be executed in one or
more counterparts, all of which shall be considered one and the
same document and shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all
parties need not sign the same counterpart. Delivery by
facsimile to counsel for the other party of a counterpart
executed by a party shall be deemed to meet the requirements of
the previous sentence.
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9.4
|
Entire Agreement; Third Party
Beneficiaries
. This Agreement and the documents
and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Exhibits
and Schedules hereto, constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede
all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof; and
are not intended to confer upon any other Person any rights or
remedies hereunder (except as specifically provided in this
Agreement, including in Article VII hereof).
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9.5
|
Severability
. In the event that any provision
of this Agreement, or the application thereof, becomes or is
declared by a court of competent jurisdiction to be illegal,
void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted
so as reasonably to effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or
unenforceable provision.
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9.6
|
Other Remedies; Specific Performance
. Except
as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of
any one remedy will not preclude the exercise of any other
remedy. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions
to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law
or in equity.
|
A-31
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9.7
|
Governing Law; Venue; WAIVER OF JURY
TRIAL
. This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware
regardless of the law that might otherwise govern under
applicable principles of conflicts of law thereof. Each of the
parties hereto irrevocably submits to the exclusive jurisdiction
of any state or Federal courts of the United States of America
sitting in the State of Delaware for purposes of any suit,
action or proceeding arising in connection with the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby. Each of the parties hereto
irrevocably waives any objection or defense any such party may
have to venue or personal jurisdiction in any such court
including any claim that the suit, action or proceeding has been
brought in an inconvenient forum and any right to which it may
become entitled on account of place of residence or domicile.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
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9.8
|
Rules of Construction
. The parties hereto
agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore,
waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such
agreement or document.
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9.9
|
Assignment
. No party may assign either this
Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other
parties. Subject to the first sentence of this Section 9.9,
this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors
and permitted assigns.
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9.10
|
Amendment; Action by GERA
. This Agreement may
be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties.
Notwithstanding anything contained in this Agreement to the
contrary, any and all actions of GERA hereunder shall not be
effective unless and until such actions are approved in writing
by the special committee of the board of directors of GERA or at
a meeting of the special committee of the board of directors of
GERA or, if such special committee is no longer in existence, by
a majority of the independent directors then on the board of
directors of GERA.
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9.11
|
Extension; Waiver
. At any time prior to the
Closing, any party hereto may, to the extent legally allowed,
(i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any
document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on
behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
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9.12
|
Confidentiality
. GBE agrees that all
information in its possession or in the possession of its
Affiliates (other than a Target Company) (GBE and such
Affiliates are referred to in this Section 9.12 as the
Restricted Persons
) regarding any of the
Target Companies or any of their respective assets, properties
or businesses (collectively, the
Confidential
Information
) shall, from and after the Closing Date,
be kept in strict confidence by such
|
A-32
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Restricted Person and such Restricted Person shall not
(a) disclose Confidential Information to any third party,
except, if applicable, to its shareholders, directors, officers,
employees, partners, members, agents and attorneys who have a
bona fide need to know such Confidential Information for
purposes of the transactions contemplated hereby and who are
subject to nondisclosure obligations comparable in scope to
those contained in this Section 9.12 or (b) use such
Confidential Information for any purpose other than in
connection with the consummation of the transactions
contemplated by this Agreement; provided, however, that the
foregoing shall not prohibit the use and disclosure of
Confidential Information by Restricted Persons pursuant to
commercial agreements entered into between Restricted Persons
and any Target Company and, in such circumstances, the
confidentiality provisions set forth in any such commercial
agreement shall control. Such Confidential Information shall be
maintained to the same degree as such party maintains its own
confidential information (and, in any event such Confidential
Information shall be maintained to the same degree that a
reasonably prudent Person would maintain such Confidential
Information) and shall be maintained until such time, if any, as
any such data or information either is, or becomes, a matter of
public knowledge through no fault or omission on the part of any
such Restricted Person. In addition, a Restricted Person shall
be permitted to make such disclosures to the public or to any
Governmental Entity to the extent required by a court order or
if otherwise required by law, provided that such Restricted
Person (i) to the extent practicable, gives GERA reasonable
prior written notice of the disclosure, (ii) uses
reasonable legal efforts, at the expense of GERA, to resist
disclosing the Confidential Information and
(iii) cooperates with GERA, at the expense of GERA, on a
request to obtain a protective order or otherwise limit the
disclosure of the Confidential Information. Each Restricted
Persons obligation to maintain confidentiality pursuant to
this Section 9.12 shall survive the Closing under this
Agreement. Notwithstanding anything contained in this Agreement
to the contrary, GERA, the Company and GBE hereby acknowledge
and agree that GBE and the Company shall have the right, without
having to obtain prior approval of GERA or satisfying items (i),
(ii) and (iii) of this Section 9.12, to file any
notice or other documents or take any other action required with
respect to the transaction under the rules and regulations of
the SEC
and/or
any
securities exchange.
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[Rest of
Page Intentionally Left Blank]
A-33
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above.
GRUBB & ELLIS COMPANY
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Title:
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Chief Executive Officer
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GERA PROPERTY ACQUISITION, LLC
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Title:
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Chief Executive Officer
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GRUBB & ELLIS REALTY ADVISORS, INC.
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Title:
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Chief Financial Officer
|
A-34
Schedule 1.2
Acquisition
Consideration
Acquisition Consideration is the sum of:
|
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(a)
|
$42,738,708 (the
Preliminary Purchase Price
);
plus
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(b)
|
interest on the Preliminary Purchase Price calculated at the
rate per annum, which rate shall be adjusted monthly at and as
of the 15th day of each month (or, if the 15th day is
not a business day, the next business day of such month), equal
to the one month London Inter-Bank Offered Rate (LIBOR) plus
3.50% (the
Interest Rate
) from June 16,
2007 through and including the date of Closing; plus
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(c)
|
all direct costs (including, without limitation, due diligence
and closing costs, audit and accounting fees, financing fees,
and third party legal fees and costs) paid by GBE on or after
June 16, 2007 in connection with the acquisition of any of
the Properties (the
Property Acquisition
Costs
); plus
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(d)
|
interest on the Property Acquisition Costs calculated at the
Interest Rate from the date of payment of any such cost through
and including the date of Closing; plus
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(e)
|
the amount of any advances made by GBE to the Company or any of
the SPEs on or after June 16, 2007 (and not repaid to GBE
with interest prior to the Closing) to fund any operating losses
incurred with respect to any of the Properties at anytime after
June 15, 2007 through the date of Closing (the
Property Advances
); plus
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(f)
|
interest on the Property Advances calculated at the Interest
Rate from the date of each such advance through and including
the date of Closing.
|
A-35
FOURTH AMENDED
AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GRUBB & ELLIS REALTY ADVISORS, INC.
Grubb & Ellis Realty Advisors, Inc., a corporation
organized and existing under the laws of the State of Delaware,
hereby certifies as follows:
1) The name of the corporation is Grubb &
Ellis Realty Advisors, Inc. The date of filing of its original
Certificate of Incorporation with the Secretary of State of the
State of Delaware was September 7, 2005; the date of filing
of its amended and restated Certificate of Incorporation with
the Secretary of State of the State of Delaware was
February 3, 2006; the date of filing of its second amended
and restated Certificate of Incorporation with the Secretary of
State of the State of Delaware was February 21, 2006; and
the date of filing of its third amended and restated Certificate
of Incorporation with the Secretary of State of the State of
Delaware was February 23, 2006.
2) This Fourth Amended and Restated Certificate of
Incorporation of Grubb & Ellis Realty Advisors, Inc.
has been duly adopted in accordance with the provisions of
Sections 245 and 242 of the General Corporation Law (the
GCL) of the State of Delaware.
3) The text of the second amended and restated
Certificate of Incorporation is hereby amended and restated in
its entirety to read in full as follows:
FIRST: The name of the corporation is
Grubb & Ellis Realty Advisors, Inc. (hereinafter
sometimes referred to as the Corporation).
SECOND: The registered office of the Corporation is
to be located at 2711 Centerville Road, Suite 400, in the
City of Wilmington, County of New Castle. The name of its
registered agent at that address is Corporation Service Company.
THIRD: The purpose of the Corporation shall be to
engage in any lawful act or activity for which corporations may
be organized under the GCL.
FOURTH: The total number of shares of all classes of
capital stock which the Corporation shall have authority to
issue is 125,000,000, of which 120,000,000 shares shall be
common stock of the par value of $.0001 per share (Common
Stock) and 5,000,000 shares shall be preferred stock
of the par value of $.0001 per share (Preferred
Stock).
A. Preferred Stock. The Board
of Directors is expressly granted authority to issue shares of
the Preferred Stock, in one or more series, and to fix for each
such series such voting powers, full or limited, and such
designations, preferences and relative, participating, optional
or other special rights and such qualifications, limitations or
restrictions thereof as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors
providing for the issue of such series (a Preferred Stock
Designation) and as may be permitted by the GCL. The
number of authorized shares of Preferred Stock may be increased
or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a
majority of the voting power of all of the then outstanding
shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a
single class, without a separate
vote of the holders of the Preferred Stock, or any series
thereof, unless a vote of any such holders is required pursuant
to any Preferred Stock Designation.
B. Common Stock. Except as
otherwise required by law or as otherwise provided in any
Preferred Stock Designation, the holders of the Common Stock
shall exclusively possess all voting power and each share of
Common Stock shall have one vote.
C. Reverse Stock Split. As of
February 3, 2006 (the Reverse Split Effective
Time), each 1.441932 shares of Common Stock (the
Original Common Stock), issued and outstanding
immediately prior to the Reverse Split Effective Time, was
automatically reclassified as and converted into 1.0 share
of Common Stock (the Converted Common Stock).
Notwithstanding the immediately preceding sentence, no
fractional shares of Converted Common Stock were issued to the
holders of record of Original Common Stock. Any stock
certificate that, immediately prior to the Reverse Split
Effective Time, represented shares of the Original Common Stock
was, from and after the Reverse Split Effective Time,
automatically and without the necessity of presenting the same
for exchange, representative of the number of whole shares of
Converted Common Stock into which the shares of Original Common
Stock were reclassified, provided, however, that each holder of
record of a certificate that represented shares of Original
Common Stock would be entitled to receive, upon surrender of
such certificate, a new certificate representing the number of
whole shares of Converted Common Stock into which the shares of
Original Common Stock represented by such certificate were
reclassified.
D. Forward Stock Split. Upon
the effective date of the Third Amended and Restated Certificate
of Incorporation of the Corporation (the Forward Split
Effective Time), each 1.0 share of Converted Common
Stock, issued and outstanding immediately prior to the Forward
Split Effective Time, automatically was reclassified as and
converted into 1.25 shares of Common Stock (the New
Common Stock). Notwithstanding the immediately preceding
sentence, any fractional shares of New Common Stock held by the
holders of record of Converted Common Stock rounded downward to
the nearest whole share, and no fractional shares of New Common
Stock shall be issued to the holders of record of Converted
Common Stock. Any stock certificate that, immediately prior to
the Forward Split Effective Time, represented shares of the
Converted Common Stock will, from and after the Forward Split
Effective Time, automatically and without the necessity of
presenting the same for exchange, represent the number of whole
shares of New Common Stock into which the shares of Converted
Common Stock shall have been reclassified, provided, however,
that each holder of record of a certificate that represented
shares of Converted Common Stock shall receive upon surrender of
such certificate a new certificate representing the number of
whole shares of New Common Stock into which the shares of
Converted Common Stock represented by such certificate shall
have been reclassified.
FIFTH: The name and mailing address of the sole
incorporator of the Corporation is as follows:
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Name
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Address
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Jonathan D. Kukulski, Esq.
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c/o Zukerman
Gore & Brandeis, LLP 875 Third Avenue
28
th
Floor
New York, New York 10022
|
B-2
SIXTH: The Board of Directors shall be divided into
three classes: Class A, Class B and Class C. The
number of directors in each class shall be as nearly equal as
possible. The directors in Class A shall be elected for a
term expiring at the first Annual Meeting of Stockholders, the
directors in Class B shall be elected for a term expiring
at the second Annual Meeting of Stockholders and the directors
in Class C shall be elected for a term expiring at the
third Annual Meeting of Stockholders. Commencing at the first
Annual Meeting of Stockholders, and at each annual meeting
thereafter, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at
the third succeeding annual meeting of stockholders after their
election. Except as the GCL may otherwise require, in the
interim between annual meetings of stockholders or special
meetings of stockholders called for the election of directors
and/or
the
removal of one or more directors and the filling of any vacancy
in that connection, newly created directorships and any
vacancies in the Board of Directors, including unfilled
vacancies resulting from the removal of directors for cause, may
be filled by the vote of a majority of the remaining directors
then in office, although less than a quorum (as defined in the
Corporations Bylaws), or by the sole remaining director.
All directors shall hold office until the expiration of their
respective terms of office and until their successors shall have
been elected and qualified. A director elected to fill a vacancy
resulting from the death, resignation or removal of a director
shall serve for the remainder of the full term of the director
whose death, resignation or removal shall have created such
vacancy and until his successor shall have been elected and
qualified.
SEVENTH: The following provisions are inserted for
the management of the business and for the conduct of the
affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and
of its directors and stockholders:
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A.
|
Election of directors need not be by ballot unless the by-laws
of the Corporation so provide.
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B.
|
The Board of Directors shall have the power, without the assent
or vote of the stockholders, to make, alter, amend, change, add
to or repeal the by-laws of the Corporation as provided in the
by-laws of the Corporation.
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C.
|
The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the
stockholders or at any meeting of the stockholders called for
the purpose of considering any such act or contract, and any
contract or act that shall be approved or be ratified by the
vote of the holders of a majority of the stock of the
Corporation which is represented in person or by proxy at such
meeting and entitled to vote thereat (provided that a lawful
quorum of stockholders be there represented in person or by
proxy) shall be as valid and binding upon the Corporation and
upon all the stockholders as though it had been approved or
ratified by every stockholder of the Corporation, whether or not
the contract or act would otherwise be open to legal attack
because of directors interests, or for any other reason.
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D.
|
In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation; subject,
nevertheless, to the provisions of the statutes of Delaware, of
this Certificate of Incorporation, and to any by-laws from time
to time made by the stockholders; provided, however, that no
by-law so made
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B-3
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shall invalidate any prior act of the directors which would have
been valid if such by-law had not been made.
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EIGHTH: A. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the
directors duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the GCL, or
(iv) for any transaction from which the director derived an
improper personal benefit. If the GCL is amended to authorize
corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent
permitted by the GCL, as so amended. Any repeal or modification
of this paragraph A by the stockholders of the Corporation
shall not adversely affect any right or protection of a director
of the Corporation with respect to events occurring prior to the
time of such repeal or modification.
B. The Corporation, to the full extent permitted by
Section 145 of the GCL, as amended from time to time, shall
indemnify all persons whom it may indemnify pursuant thereto.
Expenses (including attorneys fees) incurred by an officer
or director in defending any civil, criminal, administrative, or
investigative action, suit or proceeding for which such officer
or director may be entitled to indemnification hereunder shall
be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized
hereby.
NINTH: Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any class
of them
and/or
between this Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this
Corporation under Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for this Corporation
under Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors,
and/or
of
the stockholders or class of stockholders of this Corporation,
as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three
fourths in value of the creditors or class of creditors,
and/or
of
the stockholders or class of stockholders of this Corporation,
as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be
binding on all the creditors or class of creditors,
and/or
on
all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
[Signature appears
on the following page.]
B-4
IN WITNESS WHEREOF, the Corporation has caused this Certificate
to be executed
by ,
its ,
on this day
of 2007.
GRUBB & ELLIS REALTY ADVISORS, INC.
Name:
Title:
B-5
GRUBB &
ELLIS REALTY ADVISORS, INC.
2007 OMNIBUS
EQUITY PLAN
TABLE OF
CONTENTS
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I.
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PURPOSE
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C-1
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II.
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DEFINITIONS
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C-1
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A. Affiliate
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C-1
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B. Award
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C-1
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C. Award Agreement
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C-2
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D. Board
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C-2
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E. Cash Award
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C-2
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F. Change in Control
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C-2
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G. Code
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C-2
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H. Committee
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C-2
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I. Common Stock
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C-3
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J. Company
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C-3
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K. Disability or
Disabled
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C-3
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L. Dividend
Equivalent
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C-3
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M. Eligible Employee
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C-3
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N. Exchange Act
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C-3
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O. Fair Market Value
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C-3
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P. Formula Restricted
Stock
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C-4
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Q. Incentive Option
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C-4
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R. Key Non-Employee
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C-4
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S. Non-Affiliated Board
Member
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C-4
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T. Nonstatutory
Option
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C-4
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U. Option
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C-4
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V. Other Stock-Based
Award
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C-4
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W. Participant
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C-4
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X. Performance Award
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C-4
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Y. Plan
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C-4
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Z. Restricted Stock
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C-4
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AA. Right
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C-4
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BB. Shares
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C-4
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III.
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SHARES SUBJECT TO THE
PLAN
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C-4
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IV.
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ADMINISTRATION OF THE
PLAN
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C-5
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V.
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ELIGIBILITY FOR
PARTICIPATION
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C-6
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VI.
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AWARDS UNDER THIS
PLAN
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C-7
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A. Incentive Option
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C-7
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B. Nonstatutory
Option
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C-7
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C. Formula Restricted
Stock
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C-7
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D. Restricted Stock
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C-7
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C-i
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E. Stock Appreciation
Right
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C-7
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F. Dividend
Equivalents
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C-7
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G. Other Stock-Based
Awards
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C-7
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H. Performance Awards
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C-7
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I. Cash Awards
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C-8
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VII.
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TERMS AND CONDITIONS OF
INCENTIVE OPTIONS AND NONSTATUTORY OPTIONS
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C-8
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A. Option Price
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C-8
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B. Number of Shares
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C-8
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C. Term of Option
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C-8
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D. Date of Exercise
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C-8
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E. Medium of Payment
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C-9
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F. Termination of
Employment
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C-9
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G. Total and Permanent
Disability
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C-10
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H. Death
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C-11
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I. Exercise of Option and
Issuance of Stock
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C-11
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J. Rights as a
Stockholder
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C-11
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K. Assignability and
Transferability of Option
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C-12
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L. Other Provisions
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C-12
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M. Purchase for
Investment
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C-12
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VIII.
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FORMULA RESTRICTED
STOCK
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C-13
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IX.
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TERMS AND CONDITIONS OF
RESTRICTED STOCK
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C-13
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X.
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TERMS AND CONDITIONS OF STOCK
APPRECIATION RIGHTS
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C-15
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XI.
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TERMS AND CONDITIONS OF
DIVIDEND EQUIVALENTS
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C-15
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XII.
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TERMS AND CONDITIONS OF OTHER
STOCK BASED AWARDS
|
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C-15
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XIII.
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TERMS AND CONDITIONS OF
PERFORMANCE AWARDS
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C-16
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XIV.
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TERMS AND CONDITIONS OF CASH
AWARDS
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C-17
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XV.
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TERMINATION OF EMPLOYMENT OR
SERVICE
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C-18
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A. Retirement under a Company
or Affiliate Retirement Plan
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C-18
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B. Termination in the Best
Interests of the Company or an Affiliate
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C-18
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C. Death or Disability of a
Participant
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C-18
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XVI.
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CANCELLATION AND RESCISSION OF
AWARDS
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C-19
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XVII.
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PAYMENT OF RESTRICTED STOCK,
RIGHTS, OTHER STOCK-BASED AWARDS, PERFORMANCE AWARDS AND CASH
AWARDS
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C-19
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XVIII.
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WITHHOLDING
|
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C-19
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XIX.
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SAVINGS CLAUSE
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C-20
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XX.
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ADJUSTMENTS UPON CHANGES IN
CAPITALIZATION; CORPORATE TRANSACTIONS
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C-20
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XXI.
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DISSOLUTION OR LIQUIDATION OF
THE COMPANY
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C-21
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XXII.
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|
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TERMINATION OF THE
PLAN
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C-21
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C-ii
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XXIII.
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|
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AMENDMENT OF THE PLAN
|
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C-21
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XXIV.
|
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EMPLOYMENT
RELATIONSHIP
|
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C-22
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XXV.
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INDEMNIFICATION OF
COMMITTEE
|
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C-22
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XXVI.
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UNFUNDED PLAN
|
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C-22
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XXVII.
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MITIGATION OF EXCISE
TAX
|
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C-22
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XXVIII.
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|
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EFFECTIVE DATE
|
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C-23
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XXIX.
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|
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FOREIGN JURISDICTIONS
|
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C-23
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XXX.
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GOVERNING LAW
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C-23
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C-iii
GRUBB &
ELLIS REALTY ADVISORS, INC.
2007 OMNIBUS EQUITY PLAN
The Grubb & Ellis Realty Advisors, Inc. 2007 Omnibus
Equity Plan is adopted by the Board
on ,
subject to approval by the stockholders of the Company.
The Plan is designed to attract, retain and motivate selected
Eligible Employees and Key Non-Employees of the Company and its
Affiliates, and reward them for making major contributions to
the success of the Company and its Affiliates. These objectives
are accomplished by making long-term incentive awards under the
Plan that will offer Participants an opportunity to have a
greater proprietary interest in, and closer identity with, the
Company and its Affiliates and their financial success.
The Awards may consist of:
1. Incentive Options;
2. Nonstatutory Options;
3. Formula Restricted Stock;
4. Restricted Stock;
5. Rights;
6. Dividend Equivalents;
7. Other Stock-Based Awards;
8. Performance Awards; or
9. Cash Awards;
or any combination of the foregoing, as the Committee may
determine.
The Plan is intended to qualify certain compensation awarded
under the Plan for tax deductibility under Section 162(m)
of the Code to the extent deemed appropriate by the Committee.
The Plan and the grant of Awards hereunder are expressly
conditioned upon the Plans approval by the stockholders of
the Company. If such approval is not obtained, then this Plan
and all Awards hereunder shall be null and void ab initio.
A.
Affiliate
means any individual,
corporation, partnership, association, limited liability
company, joint-stock company, trust, unincorporated association
or other entity (other than the Company) that, for purposes of
Section 424 of the Code, is a parent or subsidiary of the
Company, direct or indirect.
B.
Award
means the grant to any
Eligible Employee or Key Non-Employee of any form of Option,
Restricted Stock, Right, Dividend Equivalent, Other Stock-Based
Award, Performance Award or Cash Award, whether granted singly,
in combination or in tandem, and pursuant to such terms,
conditions, and limitations as the Committee may establish in
order to fulfill the objectives of the Plan.
C-1
C.
Award Agreement
means a written
agreement entered into between the Company and a Participant
under which an Award is granted and which sets forth the terms,
conditions, and limitations applicable to the Award.
D.
Board
means the Board of Directors
of the Company.
E.
Cash Award
means an Award of cash,
subject to the requirements of Article XIV and such other
restrictions as the Committee deems appropriate or desirable.
F.
Change in Control
means and shall
occur upon: (a) the acquisition by any person, entity or
group (other than a Current Investor, an Affiliate of a Current
Investor, the Company or an Affiliate of the Company) in one or
more transactions, of beneficial ownership (as defined in
Rule 13d-3
under the Exchange Act) of 50% or more of the Voting Stock of
the Company; (b) the completion by any person, entity or
group (other than a Current Investor, an Affiliate of a Current
Investor, the Company or an Affiliate of the Company) of a
tender offer or an exchange offer for more than 50% of the
outstanding Voting Stock of the Company; (c) the effective
time of (1) a merger or consolidation of the Company with
one or more corporations (other than a corporation or
corporations in which at least 50% the Voting Stock is
beneficially owned by a Current Investor or an Affiliate of a
Current Investor) as a result of which the holders of the
outstanding Voting Stock of the Company immediately prior to
such merger or consolidation directly or indirectly hold less
than 50% of the Voting Stock of the surviving or resulting
corporation or (2) a transfer of all or substantially all
of the property or assets of the Company (other than to an
entity in which a Current Investor, an Affiliate of a Current
Investor, the Company or an Affiliate of the Company owns at
least 50% of the Voting Stock); (d) individuals who
constitute the Board as of the effective date of the adoption of
this Plan (the Incumbent Board) ceasing for any
reason to constitute at least a majority of the Board (provided,
however, that any individual becoming a director subsequent to
such date whose appointment or election, or nomination for
election by the Companys stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered a member of the Incumbent
Board, but excluding for this purpose any such individual whose
initial election or appointment to the Board occurs as a result
of an election contest with respect to the election or removal
of directors or other solicitation of proxies or consents by or
on behalf of a person other than the Board); or (e) a
complete liquidation of the Company. For purposes of this
definition of Change in Control: (i) Current
Investor shall mean any stockholder of the Company, who or
that, as of the effective date of the adoption of this Plan,
either alone or together with their or its Affiliates
beneficially owns more than five percent (5%) of the outstanding
Voting Stock of the Company and is a director or member of the
Company; (ii) Affiliate shall have the meaning
given to such term in Rule 405 under the Securities Act of
1933, as amended; and (iii) Voting Stock shall
mean the outstanding capital stock or equity interests of any
entity that are entitled to vote for the election of directors
of such entity.
G.
Code
means the Internal Revenue Code
of 1986, as amended from time to time, or any successor statute
thereto. References to any provision of the Code shall be deemed
to include regulations thereunder and successor provisions and
regulations thereto.
H.
Committee
means the committee to
which the Board delegates the power to act under or pursuant to
the provisions of the Plan, or the Board if no committee is
selected. If the Board delegates powers to a committee, and if
the Company is or becomes subject to Section 16 of the
Exchange Act, then, if necessary for compliance therewith, such
C-2
committee shall consist initially of not less than two
(2) members of the Board, each member of which must be a
non-employee director, within the meaning of the
applicable rules promulgated pursuant to the Exchange Act. If
the Company is or becomes subject to Section 16 of the
Exchange Act, no member of the Committee shall receive any Award
pursuant to the Plan or any similar plan of the Company or any
Affiliate while serving on the Committee, unless the Board
determines that the grant of such an Award satisfies the then
current
Rule 16b-3
requirements under the Exchange Act. Notwithstanding anything
herein to the contrary, and insofar as the Board determines that
it is desirable in order for compensation recognized by
Participants pursuant to the Plan to be fully deductible to the
Company for federal income tax purposes, each member of the
Committee also shall be an outside director (as
defined in regulations or other guidance issued by the Internal
Revenue Service under Code Section 162(m)).
I.
Common Stock
means the common stock
of the Company.
J.
Company
means Grubb &
Ellis Realty Advisors, Inc., a Delaware corporation, and
includes any successor or assignee corporation or corporations
into which the Company may be merged, changed, or consolidated;
any corporation for whose securities the securities of the
Company shall be exchanged; and any assignee of or successor to
substantially all of the assets of the Company.
K.
Disability or Disabled
means a
permanent and total disability as defined in
Section 22(e)(3) of the Code.
L.
Dividend Equivalent
means an Award
subject to the requirements of Article XI.
M.
Eligible Employee
means an employee
of the Company or of an Affiliate who is designated by the
Committee as being eligible to be granted one or more Awards
under the Plan.
N.
N. Exchange Act
means the Securities
Exchange Act of 1934, as amended from time to time, or any
successor statute thereto. References to any provision of the
Exchange Act shall be deemed to include rules promulgated
thereunder and successor provisions and rules thereto.
O.
Fair Market Value
means, if the
Shares are listed on any national securities exchange, the
closing sales price, if any, on the largest such exchange on the
valuation date, or, if none, on the most recent trade date
immediately prior to the valuation date provided such trade date
is no more than thirty (30) days prior to the valuation
date. If the Shares are not then listed on any such exchange,
the fair market value of such Shares shall be the closing sales
price if such is reported, or otherwise the mean between the
closing Bid and the closing Ask prices,
if any, as reported in the National Association of Securities
Dealers Automated Quotation System (NASDAQ) for the
valuation date, or if none, on the most recent trade date
immediately prior to the valuation date provided such trade date
is no more than thirty (30) days prior to the valuation
date. If the Shares are not then either listed on any such
exchange or quoted on NASDAQ, or there has been no trade date
within such thirty (30) day period, the fair market value
shall be the mean between the average of the Bid and
the average of the Ask prices, if any, as reported
in the National Daily Quotation System for the valuation date,
or, if none, for the most recent trade date immediately prior to
the valuation date provided such trade date is no more than
thirty (30) days prior to the valuation date. If the fair
market value cannot be determined under the preceding three
sentences, it shall be determined in good faith by the Committee.
C-3
P.
Formula Restricted Stock
means an
Award made in Common Stock to a Non-Affiliated Board Member in
accordance with and subject to the requirements of
Article VIII.
Q.
Incentive Option
means an Option
that, when granted, is intended to be an incentive stock
option, as defined in Section 422 of the Code.
R.
Key Non-Employee
means a
Non-Affiliated Board Member, independent contractor or other
consultant or advisor of the Company or of an Affiliate who is
designated by the Committee as being eligible to be granted one
or more Awards under the Plan.
S.
Non-Affiliated Board Member
means a
director of the Company who is neither an employee of the
Company or any of its Affiliates, nor otherwise affiliated with
the Company other than as a director. For purposes of the Plan,
a Non-Affiliated Board Member shall be deemed to include the
employer or other designee of such Non-Affiliated Board Member,
if the Non-Affiliated Board Member is required, as a condition
of his or her employment, to provide that any Award granted
hereunder be made to the employer or other designee.
T.
Nonstatutory Option
means an Option
that, when granted, is not intended to be an incentive
stock option, as defined in Section 422 of the Code,
or that subsequently fails to comply with the requirements of
Section 422 of the Code.
U.
Option
means a right or option to
purchase Common Stock, including Restricted Stock if the
Committee so determines.
V.
Other Stock-Based Award
means a
grant or sale of Common Stock that is valued in whole or in part
based upon the Fair Market Value of Common Stock.
W.
Participant
means an Eligible
Employee or Key Non-Employee to whom one or more Awards are
granted under the Plan.
X.
Performance Award
means an Award
subject to the requirements of Article XIII, and such
performance conditions as the Committee deems appropriate or
desirable.
Y.
Plan
means the Grubb &
Ellis Realty Advisors 2007 Omnibus Equity Plan, as amended from
time to time.
Z.
Restricted Stock
means an Award made
in Common Stock or denominated in units of Common Stock and
delivered under the Plan, subject to the requirements of
Article IX, such other restrictions as the Committee deems
appropriate or desirable, and as awarded in accordance with the
terms of the Plan.
AA.
Right
means a stock appreciation
right delivered under the Plan, subject to the requirements of
Article X and as awarded in accordance with the terms of
the Plan.
BB.
Shares
means the following shares
of the capital stock of the Company as to which Options or
Restricted Stock have been or may be granted under the Plan and
upon which Rights, units of Restricted Stock or Other
Stock-Based Awards may be based: treasury or authorized but
unissued Common Stock, $.01 par value, of the Company, or
any shares of capital stock into which the Shares are changed or
for which they are exchanged within the provisions of
Article XX of the Plan.
III. Shares
Subject to the Plan
The aggregate number of Shares as to which Awards may be granted
from time to time shall
be Shares
(subject to adjustment for stock splits, stock dividends, and
other adjustments
C-4
described in Article XX hereof). The aggregate number of
Shares as to which Incentive Options may be granted from time to
time shall be 3,000,000 Shares (subject to adjustment for
stock splits, stock dividends and other adjustments described in
Article VI hereof). Notwithstanding anything herein to the
contrary, no Award of Formula Restricted Stock may be made from
the pool of Shares identified pursuant to this Article III.
All Awards of Formula Restricted Stock shall be made from Shares
to be made available outside of the Plan. All other terms of the
Formula Restricted Stock Awards shall be governed by the terms
of the Plan.
In accordance with Code Section 162(m), if applicable, the
aggregate number of Shares as to which Awards may be granted in
any one calendar year to any one Eligible Employee shall not
exceed 500,000 Shares (subject to adjustment for stock
splits, stock dividends, and other adjustments described in
Article XX hereof).
From time to time, the Committee
and/or
appropriate officers of the Company shall take whatever actions
are necessary to file required documents with governmental
authorities
and/or
stock
exchanges so as to make Shares available for issuance pursuant
to the Plan. Shares subject to Awards that are forfeited,
terminated, expire unexercised, canceled by agreement of the
Company and the Participant (whether for the purpose of
repricing such Awards or otherwise), settled in cash in lieu of
Common Stock or in such manner that all or some of the Shares
covered by such Awards are not issued to a Participant (or, if
issued to the Participant, are returned to the Company by the
Participant pursuant to a right of repurchase or right of first
refusal exercised by the Company), or are exchanged for Awards
that do not involve Common Stock, shall immediately become
available for Awards. In addition, if the exercise price of any
Award is satisfied by tendering Shares to the Company (by actual
delivery or attestation), only the number of Shares issued net
of the Shares tendered shall be deemed delivered for purposes of
determining the maximum number of Shares available for Awards.
Awards payable in cash shall not reduce the number of Shares
available for Awards under the Plan.
|
|
IV.
|
Administration of
the Plan
|
The Plan shall be administered by the Committee. A majority of
the Committee shall constitute a quorum at any meeting thereof
(including by telephone conference) and the acts of a majority
of the members present, or acts approved in writing by a
majority of the entire Committee without a meeting, shall be the
acts of the Committee for purposes of this Plan. The Committee
may authorize one or more of its members or an officer of the
Company to execute and deliver documents on behalf of the
Committee. A member of the Committee shall not exercise any
discretion respecting himself or herself under the Plan. The
Board shall have the authority to remove, replace or fill any
vacancy of any member of the Committee upon notice to the
Committee and the affected member. Any member of the Committee
may resign upon notice to the Board. The Committee may allocate
among one or more of its members, or may delegate to one or more
of its agents, such duties and responsibilities as it
determines. Subject to the provisions of the Plan, the Committee
is authorized to:
|
|
|
|
A.
|
Interpret the provisions of the Plan and any Award or Award
Agreement, and make all rules and determinations that it deems
necessary or advisable to the administration of the Plan;
|
|
|
B.
|
Determine which employees of the Company or an Affiliate shall
be designated as Eligible Employees and which of the Eligible
Employees shall be granted Awards;
|
C-5
|
|
|
|
C.
|
Determine the Key Non-Employees to whom Awards, other than
Incentive Options and Performance Awards for which Key
Non-Employees shall not be eligible, shall be granted;
|
|
|
|
|
D.
|
Determine whether an Option to be granted shall be an Incentive
Option or Nonstatutory Option;
|
|
|
E.
|
Determine the number of Shares for which an Option, Restricted
Stock or Other Stock-Based Award shall be granted;
|
|
|
|
|
F.
|
Determine the number of Rights, the Cash Award or the
Performance Award to be granted;
|
|
|
|
|
G.
|
Provide for the acceleration of the right to exercise any
Award; and
|
|
|
H.
|
Specify the terms, conditions, and limitations upon which Awards
may be granted;
|
provided, however, that with respect to Incentive Options, all
such interpretations, rules, determinations, terms, and
conditions shall be made and prescribed in the context of
preserving the tax status of the Incentive Options as
incentive stock options within the meaning of
Section 422 of the Code.
If permitted by applicable law, and in accordance with any such
law, the Committee may delegate to the chief executive officer
and to other senior officers of the Company or its Affiliates
its duties under the Plan pursuant to such conditions or
limitations as the Committee may establish, except that only the
Committee may select, and grant Awards to, Participants who are
subject to Section 16 of the Exchange Act. All
determinations of the Committee shall be made by a majority of
its members. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the
Plan or any Award.
The Committee shall have the authority at any time to cancel
Awards for reasonable cause
and/or
to
provide for the conditions and circumstances under which Awards
shall be forfeited.
Any determination made by the Committee pursuant to the
provisions of the Plan shall be made in its sole discretion, and
in the case of any determination relating to an Award, may be
made at the time of the grant of the Award or, unless in
contravention of any express term of the Plan or any Agreement,
at any time thereafter. All decisions made by the Committee
pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and the
Participants. No determination shall be subject to de novo
review if challenged in court.
|
|
V.
|
Eligibility for
Participation
|
Awards may be granted under this Plan only to Eligible Employees
and Key Non-Employees of the Company or its Affiliates. The
foregoing notwithstanding, each Participant receiving an
Incentive Option must be an Eligible Employee of the Company or
of an Affiliate at the time the Incentive Option is granted.
The Committee may, at any time and from time to time, grant one
or more Awards to one or more Eligible Employees or Key
Non-Employees and may designate the number of Shares, if
applicable, to be subject to each Award so granted, provided,
however that no Incentive Option shall be granted after the
expiration of ten (10) years from the earlier of the date
of the adoption of the Plan by the Company or the approval of
the Plan by the stockholders of the Company, and provided
further, that the Fair Market Value of the Shares (determined at
the time the Option is granted) as to which Incentive Options
are exercisable for the first time by any Eligible
C-6
Employee during any single calendar year (under the Plan and
under any other incentive stock option plan of the Company or an
Affiliate) shall not exceed One Hundred Thousand Dollars
($100,000). To the extent that the Fair Market Value of such
Shares exceeds One Hundred Thousand Dollars ($100,000), the
Shares subject to Option in excess of One Hundred Thousand
Dollars ($100,000) shall, without further action by the
Committee, automatically be converted to Nonstatutory Options.
Notwithstanding any of the foregoing provisions, (i) the
Committee may authorize the grant of an Award to a person not
then in the employ of, or engaged by, the Company or of an
Affiliate, conditioned upon such person becoming eligible to be
granted an Award at or prior to the execution of the Award
Agreement evidencing the actual grant of such Award; and
(ii) if the Company is not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act,
then the Committee may not authorize the grant of an Award under
this Plan to a person who resides in the State of California.
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VI.
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Awards Under This
Plan
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As the Committee may determine, the following types of Awards
may be granted under the Plan on a stand-alone, combination or
tandem basis:
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A.
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Incentive Option.
An Award in the form of an
Option that shall comply with the requirements of
Section 422 of the Code. Subject to adjustments in
accordance with the provisions of Article XX, the aggregate
number of Shares that may be subject to Incentive Options under
the Plan shall not exceed 3,000,000.
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B.
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Nonstatutory Option.
An Award in the form of
an Option that shall not be intended to, or has otherwise failed
to, comply with the requirements of Section 422 of the Code.
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C.
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Formula Restricted Stock.
An annual Award made
to a Non-Affiliated Board Member in Common Stock, subject to
such restrictions and conditions as set forth herein.
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D.
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Restricted Stock.
An Award made to a
Participant in Common Stock or denominated in units of Common
Stock, subject to future service
and/or
such
other restrictions and conditions as may be established by the
Committee, and as set forth in the Award Agreement, including
but not limited to continuous service with the Company or its
Affiliates, achievement of specific business objectives,
increases in specified indices, attainment of growth rates,
and/or
other
measurements of Company or Affiliate performance.
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E.
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Stock Appreciation Right.
An Award in the form
of a Right to receive the excess of the Fair Market Value of a
Share on the date the Right is exercised over the Fair Market
Value of a Share on the date the Right was granted.
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F.
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Dividend Equivalents.
An Award in the form of,
and based upon the value of, dividends of Shares.
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G.
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Other Stock-Based Awards.
An Award made to a
Participant in the form of Shares that are valued in whole or in
part by reference to, or are otherwise based upon, the Fair
Market Value of Shares.
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H.
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Performance Awards.
An Award made to a
Participant that is subject to performance conditions specified
by the Committee, including, but not limited to,
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continuous service with the Company
and/or
its
Affiliates, achievement of specific business objectives,
increases in specified indices, attainment of growth rates,
and/or
other
measurements of Company or Affiliate performance.
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I.
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Cash Awards.
An Award made to a Participant
and denominated in cash, with the eventual payment subject to
future service
and/or
such
other restrictions and conditions as may be established by the
Committee, and as set forth in the Award Agreement.
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Each Award under the Plan shall be evidenced by an Award
Agreement. Delivery of an Award Agreement to each Participant
shall constitute an agreement between the Company and the
Participant as to the terms and conditions of the Award.
VII. Terms
and Conditions of Incentive Options and Nonstatutory
Options
Each Option shall be set forth in an Award Agreement, duly
executed on behalf of the Company in favor of the Participant to
whom such Option is granted. Except for the setting of the
Option price under Paragraph A, no Option shall be granted
and no purported grant of any Option shall be effective until
such Award Agreement shall have been duly executed on behalf of
the Company. Each such Award Agreement shall be subject to at
least the following terms and conditions:
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A.
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Option Price.
The purchase price of the Shares
covered by each Option granted under the Plan shall be
determined by the Committee. The Option price per share of the
Shares covered by each Nonstatutory Option shall be at such
amount as may be determined by the Committee in its sole
discretion on the date of the grant of the Option. In the case
of an Incentive Option, if the Participant owns directly or by
reason of the applicable attribution rules ten percent (10%) or
less of the total combined voting power of all classes of stock
of the Company, the Option price per share of the Shares covered
by each Incentive Option shall be not less than the Fair Market
Value of the Shares on the date of the grant of the Incentive
Option. In all other cases of Incentive Options, the Option
price shall be not less than one hundred ten percent (110%) of
the Fair Market Value of the Shares on the date of grant.
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B.
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Number of Shares.
Each Option shall state the
number of Shares to which it pertains.
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C.
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Term of Option.
Each Incentive Option shall
terminate not more than ten (10) years from the date of the
grant thereof, or at such earlier time as the Award Agreement
may provide, and shall be subject to earlier termination as
herein provided, except that if the Option price is required
under Paragraph A of this Article VII to be at least
one hundred ten percent (110%) of Fair Market Value, each such
Incentive Option shall terminate not more than five
(5) years from the date of the grant thereof, and shall be
subject to earlier termination as herein provided. The Committee
shall determine the time at which a Nonstatutory Option shall
terminate.
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D.
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Date of Exercise.
Unless otherwise determined
by the Committee at the time of the grant of an Option, Options
granted hereunder shall become exercisable in substantially
equal annual installments over a period of three (3) years.
The foregoing notwithstanding, upon the authorization of the
grant of an Option, or at any time thereafter, the Committee
may, subject to the provisions of Paragraph C of
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this Article VII, prescribe such other date or dates on
which the Option becomes exercisable, and may provide that the
Option becomes exercisable in installments over a period of
years,
and/or
upon
the attainment of stated goals. Unless the Committee otherwise
provides in writing, the date or dates on which the Option
becomes exercisable shall be tolled during any unpaid leave of
absence. It is expressly understood that Options hereunder
shall, unless otherwise provided for in writing by the
Committee, be granted in contemplation of, and earned by the
Participant through the completion of, future employment or
service with the Company.
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E.
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Medium of Payment.
The Option price shall be
payable upon the exercise of the Option, as set forth in
Paragraph I. It shall be payable in such form (permitted by
Section 422 of the Code in the case of Incentive Options)
as the Committee shall, either by rules promulgated pursuant to
the provisions of Article IV of the Plan, or in the
particular Award Agreement, provide.
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F.
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Termination of Employment.
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1.
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A Participant who ceases to be an employee or Key Non-Employee
of the Company or of an Affiliate for any reason other than
death, Disability, or termination for Cause, as
defined in subparagraph (2) below, may exercise any Option
granted to such Participant, to the extent that the right to
purchase Shares thereunder has become exercisable by the date of
such termination, but only within three (3) (or such other
period of time as the Committee may determine, with such
determination in the case of an Incentive Option being made at
the time of the grant of the Option and not exceeding three
(3) months) months after such date of termination, or, if
earlier, within the originally prescribed term of the Option,
and subject to the conditions that (i) no Option shall be
exercisable after the expiration of the term of the Option and
(ii) unless the Committee otherwise provides, no Option
that has not become exercisable by the date of such termination
shall at any time thereafter be or become exercisable. A
Participants employment shall not be deemed terminated by
reason of a transfer to another employer that is the Company or
an Affiliate.
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2.
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A Participant who ceases to be an employee or Key Non-Employee
of the Company or of an Affiliate for Cause shall,
upon such termination, cease to have any right to exercise any
Option. For purposes of this Plan, Cause shall be as
defined in any employment or other agreement between the
Participant and the Company (or an Affiliate) or, if there is no
such agreement or definition therein, Cause shall be
defined to include (i) a Participants theft or
embezzlement, or attempted theft or embezzlement, of money or
property of the Company or of an Affiliate, a Participants
perpetration or attempted perpetration of fraud, or a
Participants participation in a fraud or attempted fraud,
on the Company or an Affiliate or a Participants
unauthorized appropriation of, or a Participants attempt
to misappropriate, any tangible or intangible assets or property
of the Company or an Affiliate; (ii) any act or acts by a
Participant of disloyalty, dishonesty, misconduct, moral
turpitude, or any other act or acts by a Participant injurious
to the interest, property, operations, business or reputation of
the Company or an Affiliate; (iii) a Participants
commission of a felony or any other crime the commission of
which results in injury to the Company or an Affiliate;
(iv) any violation of any restriction on the disclosure or
use of
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confidential information of the Company or an Affiliate, or
client, prospect, or merger or acquisition target, or on
competition with the Company or an Affiliate or any of its
businesses as then conducted; or (v) any other action that
the Board or the Committee, in their sole discretion, may deem
to be sufficiently injurious to the interests of the Company or
an Affiliate to constitute substantial cause for termination.
The determination of the Committee as to the existence of
Cause shall be conclusive and binding upon the
Participant and the Company.
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3.
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Except as the Committee may otherwise expressly provide or
determine (consistent with Section 422 of the Code, if
applicable), a Participant who is absent from work with the
Company or an Affiliate because of temporary disability (any
disability other than a Disability), or who is on leave of
absence for any purpose permitted by the Company or by any
authoritative interpretation (i.e., regulation, ruling, case
law, etc.) of Section 422 of the Code, shall not, during
the period of any such absence, be deemed, by virtue of such
absence alone, to have terminated his or her employment or
relationship with the Company or with an Affiliate. For purposes
of Incentive Options, no leave of absence may exceed ninety
(90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract (or the Committee
approves such longer leave of absence, in which event the
Incentive Option held by the Participant shall be treated as a
Nonstatutory Option following the ninetieth (90th) day of such
leave).
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4.
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Paragraph F(1) shall control and fix the rights of a
Participant who ceases to be an employee or Key Non-Employee of
the Company or of an Affiliate for any reason other than
Disability, death, or termination for Cause, and who
subsequently becomes Disabled or dies. Nothing in
Paragraphs G and H of this Article VII shall be
applicable in any such case except that, in the event of such a
subsequent Disability or death within the three (3) month
period after the termination of employment or, if earlier,
within the originally prescribed term of the Option, the
Participant or the Participants estate or personal
representative may exercise the Option permitted by this
Paragraph F, in the event of Disability, within twelve
(12) months after the date that the Participant ceased to
be an employee or Key Non-Employee of the Company or an
Affiliate, or, in the event of death, within twelve
(12) months after the date of death of such Participant.
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G.
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Total and Permanent Disability.
A Participant
who ceases to be an employee or Key Non-Employee of the Company
or of an Affiliate by reason of Disability may exercise any
Option granted to such Participant to the extent that the right
to purchase Shares thereunder has become exercisable on or
before the date such Participant becomes Disabled as determined
by the Committee.
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A Disabled Participant, or his estate or personal
representative, shall exercise such rights, if at all, only
within a period of not more than twelve (12) months after
the date that the Participant became Disabled as determined by
the Committee (notwithstanding that the Participant might have
been able to exercise the Option as to some or all of the Shares
on a later date if the Participant had not become Disabled) or,
if earlier, within the originally prescribed term of the Option.
C-10
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H.
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Death.
In the event that a Participant to whom
an Option has been granted ceases to be an employee or Key
Non-Employee of the Company or of an Affiliate by reason of such
Participants death, such Option, to the extent that the
right is exercisable but not exercised on the date of death, may
be exercised by the Participants estate or personal
representative within twelve (12) months after the date of
death of such Participant or, if earlier, within the originally
prescribed term of the Option, notwithstanding that the decedent
might have been able to exercise the Option as to some or all of
the Shares on a later date if the Participant were alive and had
continued to be an employee or Key Non-Employee of the Company
or of an Affiliate.
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I.
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Exercise of Option and Issuance of
Stock.
Options shall be exercised by giving
written notice to the Company. Such written notice shall:
(i) be signed by the person exercising the Option,
(ii) state the number of Shares with respect to which the
Option is being exercised, (iii) contain the warranty
required by Paragraph M of this Article VII, if
applicable, and (iv) specify a date (other than a Saturday,
Sunday or legal holiday) not more than ten (10) days after
the date of such written notice, as the date on which the Shares
will be purchased. Such tender and conveyance shall take place
at the principal office of the Company during ordinary business
hours, or at such other hour and place agreed upon by the
Company and the person or persons exercising the Option. On the
date specified in such written notice (which date may be
extended by the Company in order to comply with any law or
regulation that requires the Company to take any action with
respect to the Option Shares prior to the issuance thereof), the
Company shall accept payment for the Option Shares in cash, by
bank or certified check, by wire transfer, or by such other
means as may be approved by the Committee, and shall deliver to
the person or persons exercising the Option in exchange therefor
an appropriate certificate or certificates for fully paid
nonassessable Shares or undertake to deliver an appropriate
certificate or certificates within a reasonable period of time.
In the event of any failure to pay for the number of Shares
specified in such written notice on the date set forth therein
(or on the extended date as above provided), the right to
exercise the Option shall terminate with respect to such number
of Shares, but shall continue with respect to the remaining
Shares covered by the Option and not yet acquired pursuant
thereto.
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If approved in advance by the Committee, and subject to
compliance with the Sarbanes-Oxley Act of 2002, payment in full
or in part also may be made (i) by delivering Shares, or by
attestation of Shares, already owned for at least six
(6) months by the Participant and which have a total Fair
Market Value on the date of such delivery equal to the Option
price; (ii) by the execution and delivery of a note or
other evidence of indebtedness (and any security agreement
thereunder) satisfactory to the Committee; (iii) by
authorizing the Company to retain Shares that otherwise would be
issuable upon exercise of the Option having a total Fair Market
Value on the date of delivery equal to the Option price;
(iv) by the delivery of cash or the extension of credit by
a broker-dealer to whom the Participant has submitted a notice
of exercise or otherwise indicated an intent to exercise an
Option (in accordance with part 220, Chapter II,
Title 12 of the Code of Federal Regulations, a so-called
cashless exercise); or (v) by any combination
of the foregoing.
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J.
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Rights as a Stockholder.
No Participant to
whom an Option has been granted shall have rights as a
stockholder with respect to any Shares covered by such Option
except as to such Shares as have been registered in the
Companys share
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C-11
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register in the name of such Participant upon the due exercise
of the Option and tender of the full Option price.
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K.
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Assignability and Transferability of
Option.
Unless otherwise permitted by the Code
and by
Rule 16b-3
of the Exchange Act, if applicable, and approved in advance by
the Committee, an Option granted to a Participant shall not be
transferable by the Participant and shall be exercisable, during
the Participants lifetime, only by such Participant or, in
the event of the Participants incapacity, his guardian or
legal representative. Except as otherwise permitted herein, such
Option shall not be assigned, pledged, or hypothecated in any
way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment, or similar process and any
attempted transfer, assignment, pledge, hypothecation or other
disposition of any Option or of any rights granted thereunder
contrary to the provisions of this Paragraph K, or the levy
of any attachment or similar process upon an Option or such
rights, shall be null and void.
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L.
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Other Provisions.
The Award Agreement for an
Incentive Option shall contain such limitations and restrictions
upon the exercise of the Option as shall be necessary in order
that such Option qualifies as an incentive stock
option within the meaning of Section 422 of the Code.
Further, the Award Agreements authorized under the Plan shall be
subject to such other terms and conditions including, without
limitation, restrictions upon the exercise of the Option, as the
Committee shall deem advisable and which, in the case of
Incentive Options, are not inconsistent with the requirements of
Section 422 of the Code.
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M.
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Purchase for Investment.
If Shares to be
issued upon the particular exercise of an Option shall not have
been effectively registered under the Securities Act of 1933, as
now in force or hereafter amended, the Company shall be under no
obligation to issue the Shares covered by such exercise unless
and until the following conditions have been fulfilled. The
person who exercises such Option shall warrant to the Company
that, at the time of such exercise, such person is acquiring his
or her Option Shares for investment and not with a view to, or
for sale in connection with, the distribution of any such
Shares, and shall make such other representations, warranties,
acknowledgments,
and/or
affirmations, if any, as the Committee may require. In such
event, the person acquiring such Shares shall be bound by the
provisions of the following legend (or similar legend) which
shall be endorsed upon the certificate(s) evidencing his or her
Option Shares issued pursuant to such exercise.
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The shares represented by this certificate have been
acquired for investment and they may not be sold or otherwise
transferred by any person, including a pledgee, in the absence
of an effective registration statement for the shares under the
Securities Act of 1933 or an opinion of counsel satisfactory to
the Company that an exemption from registration is then
available.
Without limiting the generality of the foregoing, the Company
may delay issuance of the Shares until completion of any action
or obtaining any consent that the Company deems necessary under
any applicable law (including without limitation state
securities or blue sky laws).
C-12
VIII. Formula
Restricted Stock
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A.
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Each Non-Affiliated Board Member shall be granted on the date of
the first Board meeting in which he or she participates
following his or her initial election as a Non-Affiliated Board
Member an Award in Shares of Common Stock having a Fair Market
Value on the date of such Board meeting equal to $50,000. In
addition, on such date as the Board may determine, the Board has
the right to institute a program whereby each Non-Affiliated
Board Member may be granted an annual Award in Shares of Common
Stock for so long as he or she continues to serve as a
Non-Affiliated Board Member. Each such annual Award may be for a
number of Shares having a Fair Market Value on the date of grant
equal up to $50,000.
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B.
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The purchase price of the Shares of Formula Restricted Stock
shall be zero.
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C.
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The restrictions with respect to each Award of Formula
Restricted Stock granted hereunder shall lapse in substantially
equal annual installments over a period of three (3) years.
If a Non-Affiliated Board Member ceases to be a director (other
than as the result of his or her removal for Cause),
any Awards granted prior to the date he or she ceases to be a
member of the Board shall continue to vest over the remainder of
the applicable three year vesting schedule. If a Non-Affiliated
Board Member is removed as a director for Cause (as
such term is defined in Article VII), any Awards on which
the restrictions have not lapsed shall be forfeited in their
entirety. The foregoing schedule notwithstanding, upon a Change
in Control, the restrictions with respect to any outstanding
Awards shall lapse and such Awards shall be fully vested.
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D.
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Awards of Formula Restricted Stock acquired by Non-Employee
Board members may be used to satisfy any equity accumulation
program established by the Company for such directors.
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E.
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Formula Restricted Stock Grants shall be evidenced by an Award
Agreement which shall conform to the requirements of the Plan,
and may contain such other provisions not inconsistent
therewith, as the Committee shall deem advisable.
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IX.
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Terms and
Conditions of Restricted Stock
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A.
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The Committee may from time to time grant an Award in Shares of
Common Stock or grant an Award denominated in units of Common
Stock, for such consideration as the Committee deems appropriate
(which amount may be less than the Fair Market Value of the
Common Stock on the date of the Award), and subject to such
restrictions and conditions and other terms as the Committee may
determine at the time of the Award (including, but not limited
to, continuous service with the Company or its Affiliates,
achievement of specific business objectives, increases in
specified indices, attainment of growth rates,
and/or
other
measurements of Company or Affiliate performance), and subject
further to the general provisions of the Plan, the applicable
Award Agreement, and the following specific rules.
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B.
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If Shares of Restricted Stock are awarded, such Shares cannot be
assigned, sold, transferred, pledged, or hypothecated prior to
the lapse of the restrictions applicable thereto, and, in no
event, absent Committee approval, prior to six (6) months
from the date of the Award. Unless otherwise determined by the
Committee at the time an Award of Restricted Stock is made under
this Article IX, restrictions shall
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C-13
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lapse in substantially equal installments over a period of three
(3) years. The Company shall issue, in the name of the
Participant, stock certificates representing the total number of
Shares of Restricted Stock awarded to the Participant at such
time as the Company deems appropriate, which certificates shall
be held by the Secretary of the Company as provided in
Paragraph G.
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C.
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Restricted Stock issued to a Participant under the Plan shall be
governed by an Award Agreement that shall specify whether Shares
of Common Stock are awarded to the Participant, or whether the
Award shall be one not of Shares of Common Stock but one
denominated in units of Common Stock, any consideration required
thereto, and such other provisions as the Committee shall
determine.
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D.
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Subject to the provisions of Paragraphs B and E hereof and
the restrictions set forth in the related Award Agreement, the
Participant receiving an Award of Shares of Restricted Stock
shall thereupon be a stockholder with respect to all of the
Shares represented by such certificate or certificates and shall
have the rights of a stockholder with respect to such Shares,
including the right to vote such Shares and to receive dividends
and other distributions made with respect to such Shares. All
Common Stock received by a Participant as the result of any
dividend on the Shares of Restricted Stock, or as the result of
any stock split, stock distribution, or combination of the
Shares affecting Restricted Stock, shall be subject to the
restrictions set forth in the related Award Agreement.
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E.
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Restricted Stock or units of Restricted Stock awarded to a
Participant pursuant to the Plan will be forfeited, and any
Shares of Restricted Stock or units of Restricted Stock sold to
a Participant pursuant to the Plan may, at the Companys
option, be resold to the Company for an amount equal to the
price paid therefor, and in either case, such Restricted Stock
or units of Restricted Stock shall revert to the Company, if the
Company so determines in accordance with Article XVI or any
other condition set forth in the Award Agreement, or,
alternatively, if the Participants employment with the
Company or its Affiliates terminates, other than for reasons set
forth in Article XV, prior to the expiration of the forfeiture
or restriction provisions set forth in the Award Agreement.
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F.
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The Committee, in its discretion, shall have the power to
accelerate the date on which the restrictions contained in the
Award Agreement shall lapse with respect to any or all
Restricted Stock awarded under the Plan.
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G.
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The Secretary of the Company shall hold the certificate or
certificates representing Shares of Restricted Stock issued
under the Plan, properly endorsed for transfer, on behalf of
each Participant who holds such Shares, until such time as the
Shares of Restricted Stock are forfeited, resold to the Company,
or the restrictions lapse. Any Restricted Stock denominated in
units of Common Stock, if not previously forfeited, shall be
payable in accordance with Article XVII as soon as
practicable after the restrictions lapse.
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H.
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The Committee may prescribe such other restrictions, conditions,
and terms applicable to Restricted Stock issued to a Participant
under the Plan that are neither inconsistent with nor prohibited
by the Plan or the Award Agreement, including, without
limitation, terms providing for a lapse of the restrictions of
this Article or any Award Agreement in installments.
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C-14
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X.
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Terms and
Conditions of Stock Appreciation Rights
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If deemed by the Committee to be in the best interests of the
Company, a Participant may be granted a Right. Each Right shall
be granted subject to such restrictions and conditions and other
terms as the Committee may specify in the Award Agreement at the
time the Right is granted, subject to the general provisions of
the Plan, and the following specific rules.
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A.
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Rights may be granted, if at all, either singly, in combination
with or in tandem with another Award. At the time of grant of a
Right, the Committee shall specify the base price of Common
Stock to be used in connection with the calculation described in
Paragraph B below, provided that the base price shall not
be less than one hundred percent (100%) of the Fair Market Value
of a Share of Common Stock on the date of grant, unless approved
by the Board.
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B.
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Upon exercise of a Right, which shall be not less than six
(6) months from the date of the grant, the Participant
shall be entitled to receive in accordance with
Article XVII, and as soon as practicable after exercise,
the excess of the Fair Market Value of one Share of Common Stock
on the date of exercise over the base price specified in such
Right, multiplied by the number of Shares of Common Stock then
subject to the Right, or the portion thereof being exercised.
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C.
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Notwithstanding anything herein to the contrary, if the Award
granted to a Participant allows him or her to elect to cancel
all or any portion of an unexercised Option by exercising an
additional or tandem Right, then the Option price per Share of
Common Stock shall be used as the base price specified in
Paragraph A to determine the value of the Right upon such
exercise and, in the event of the exercise of such Right, the
Companys obligation with respect to such Option or portion
thereof shall be discharged by payment of the Right so
exercised. In the event of such a cancellation, the number of
Shares as to which such Option was canceled shall become
available for use under the Plan, less the number of Shares, if
any, received by the Participant upon such cancellation in
accordance with Article XVII.
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D.
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A Right may be exercised only by the Participant (or, if
applicable under Article XV, by a legatee or legatees of
such Right, or by the Participants executors, personal
representatives, or distributees).
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XI.
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Terms and
Conditions of Dividend Equivalents
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A Participant may be granted an Award in the form of Dividend
Equivalents. Such an Award shall entitle the Participant to
receive cash, Shares, other Awards or other property equal in
value to dividends paid with respect to a specified number of
Shares. Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Committee may
provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in
additional Shares, Awards or other investment vehicles, and
subject to such restrictions on transferability and risks of
forfeiture, as the Committee may specify.
XII. Terms
and Conditions of Other Stock-Based Awards
The Committee, in its sole discretion, may grant Awards of
Shares
and/or
Awards that are valued in whole or in part by reference to, or
are otherwise based on, Shares or on the Fair Market Value
thereof (Other Stock-Based Awards). Such Other
Stock-Based Awards shall be
C-15
in such form, and dependent on such conditions, as the Committee
shall determine, including, without limitation, the right to
receive, or vest with respect to, one or more Shares (or the
equivalent cash value of such Shares) upon the completion of a
specified period of service, the occurrence of an event
and/or
the
attainment of performance objectives. Other Stock-Based Awards
may be granted alone or in addition to any other Awards granted
under the Plan. Subject to the provisions of the Plan, the
Committee shall determine the number of Shares to be awarded to
a Participant under (or otherwise related to) such Other
Stock-Based Awards and all other terms and conditions of such
Awards (including, without limitation, the vesting provisions
thereof and provisions ensuring that all Shares so awarded and
issued shall be fully paid and non-assessable).
XIII. Terms
and Conditions of Performance Awards
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A.
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A Participant may be granted an Award that is subject to
performance conditions specified by the Committee. The Committee
may use business criteria
and/or
other
measures of performance as it deems appropriate in establishing
any performance conditions (including, but not limited to,
continuous service with the Company or its Affiliates,
achievement of specific business objectives, increases in
specified indices, attainment of growth rates,
and/or
other
measurements of Company or Affiliate performance), and may
exercise its discretion to reduce or increase the amounts
payable under any Award subject to performance conditions,
except as otherwise limited under Paragraphs C and D,
below, in the case of a Performance Award intended to qualify
under Code Section 162(m).
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B.
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Any Performance Award will be forfeited if the Company so
determines in accordance with Article XVI or any other
condition set forth in the Award Agreement, or, alternatively,
if the Participants employment with the Company or its
Affiliates terminates, other than for reasons set forth in
Article XV, prior to the expiration of the time period over
which the performance conditions are to be measured.
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C.
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If the Committee determines that a Performance Award to be
granted to an Eligible Employee should qualify as
performance-based compensation for purposes of Code
Section 162(m), the grant
and/or
settlement of such Performance Award shall be contingent upon
achievement of pre-established performance goals and other terms
set forth in this Paragraph C.
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1.
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Performance Goals Generally. The performance goals
for such Performance Awards shall consist of one or more
business criteria and a targeted level or levels of performance
with respect to such criteria, as specified by the Committee
consistent with this Paragraph C. Performance goals shall
be objective and shall otherwise meet the requirements of Code
Section 162(m), including the requirement that the level or
levels of performance targeted by the Committee result in the
performance goals being substantially uncertain. The
Committee may determine that more than one performance goal must
be achieved as a condition to settlement of such Performance
Awards. Performance goals may differ for Performance Awards
granted to any one Participant or to different Participants.
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2.
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Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis,
and/or
for
specified Affiliates or business units of the Company (except
with respect to the total stockholder return and
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C-16
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earnings per share criteria), shall be used exclusively by the
Committee in establishing performance goals for such Performance
Awards: (a) total stockholder return; (b) such total
stockholder return as compared to the total return (on a
comparable basis) of industry peers (such as, CB Richard Ellis,
Jones Lang LaSalle or Trammell Crow) or a publicly available
index such as, but not limited to, the Standard &
Poors 500 or the Nasdaq-U.S. Index; (c) net
income or net operating income; (d) pre-tax earnings or
profits; (e) EBIT or EBITDA; (f) pre-tax operating
earnings after interest expense and before bonuses, service
fees, and extraordinary or special items; (g) operating
margin; (h) earnings per share or growth in earnings per
share; (i) return on equity; (j) return on assets or
capital; (k) return on investment; (l) operating
income, excluding the effect of charges for acquired in-process
technology and before payment of executive bonuses;
(m) earnings per share, excluding the effect of charges for
acquired in-process technology and before payment of executive
bonuses; (n) working capital; (o) sales;
(p) gross or net revenues or changes in gross or net
revenues; (q) market share or market penetration with
respect to designated products
and/or
geographic areas; (r) reduction of losses, loss ratios or
expense ratios; (s) cost of capital; (t) debt
reduction; (u) satisfaction of business expansion goals or
goals relating to acquisitions or divestitures;
(v) employee turnover; (w) gross margin;
(x) recruiting objectives; (y) production or revenue
per broker; (z) client retention or satisfaction;
and/or
(aa)
diversity objectives. The foregoing business criteria also may
be used in establishing performance goals for Cash Awards
granted under Article XIV hereof.
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3.
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Compensation Limitation. No Eligible Employee may
receive a Performance Award in excess of $2,000,000 during any
three (3) year period.
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D.
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Achievement of performance goals in respect of such Performance
Awards shall be measured over such periods as may be specified
by the Committee. Performance goals shall be established on or
before the dates that are required or permitted for
performance-based compensation under Code
Section 162(m).
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E.
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Settlement of Performance Awards may be in cash or Shares, or
other property, in the discretion of the Committee. The
Committee may, in its discretion, reduce the amount of a
settlement otherwise to be made in connection with such
Performance Awards, but may not exercise discretion to increase
any such amount payable in respect of a Performance Award that
is subject to Code Section 162(m).
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XIV. Terms
and Conditions of Cash Awards
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A.
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The Committee may from time to time authorize the award of cash
payments under the Plan to Participants, subject to such
restrictions and conditions and other terms as the Committee may
determine at the time of authorization (including, but not
limited to, continuous service with the Company or its
Affiliates, achievement of specific business objectives,
increases in specified indices, attainment of growth rates,
and/or
other
measurements of Company or Affiliate performance), and subject
to the general provisions of the Plan, the applicable Award
Agreement, and the following specific rules.
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C-17
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B.
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Any Cash Award will be forfeited if the Company so determines in
accordance with Article XVI or any other condition set
forth in the Award Agreement, or, alternatively, if the
Participants employment or engagement with the Company or
its Affiliates terminates, other than for reasons set forth in
Article XV, prior to the attainment of any goals set forth
in the Award Agreement or prior to the expiration of the
forfeiture or restriction provisions set forth in the Award
Agreement, whichever is applicable.
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C.
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The Committee, in its discretion, shall have the power to change
the date on which the restrictions contained in the Award
Agreement shall lapse, or the date on which goals are to be
measured, with respect to any Cash Award.
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D.
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Any Cash Award, if not previously forfeited, shall be payable in
accordance with Article XVII as soon as practicable after
the restrictions lapse or the goals are attained.
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E.
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The Committee may prescribe such other restrictions, conditions,
and terms applicable to the Cash Awards issued to a Participant
under the Plan that are neither inconsistent with nor prohibited
by the Plan or the Award Agreement, including, without
limitation, terms providing for a lapse of the restrictions, or
a measurement of the goals, in installments.
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XV.
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Termination of
Employment or Service
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Except as may otherwise be (i) provided in Article VII
for Options or under Article VIII for Formula Restricted
Stock, (ii) provided for under the Award Agreement, or
(iii) permitted pursuant to Paragraphs A through C of
this Article XV (subject to the limitations under the Code
for Incentive Options), if the employment or service of a
Participant terminates, all unexpired, unpaid, unexercised, or
deferred Awards shall be canceled immediately.
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A.
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Retirement under a Company or Affiliate Retirement
Plan.
When a Participants employment or
service terminates as a result of retirement as defined under a
Company or Affiliate retirement plan, the Committee may permit
Awards to continue in effect beyond the date of retirement in
accordance with the applicable Award Agreement,
and/or
the
exercisability and vesting of any Award may be accelerated.
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B.
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Termination in the Best Interests of the Company or an
Affiliate.
When a Participants employment
or service with the Company or an Affiliate terminates and, in
the judgment of the Committee or the chief executive officer or
other senior officer designated by the Committee, the
acceleration
and/or
continuation of outstanding Awards would be in the best
interests of the Company, the Committee may (i) authorize,
where appropriate, the acceleration
and/or
continuation of all or any part of Awards granted prior to such
termination
and/or
(ii) permit the exercise, vesting, and payment of such
Awards for such period as may be set forth in the applicable
Award Agreement, subject to earlier cancellation pursuant to
Article XVI or at such time as the Committee shall deem the
continuation of all or any part of the Participants Awards
are not in the Companys or its Affiliates best
interests.
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C.
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Death or Disability of a Participant.
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1.
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In the event of a Participants death, the
Participants estate or beneficiaries shall have a period
up to the earlier of (i) the expiration date specified in
the Award Agreement, or (ii) the expiration date specified
in Paragraph H of
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C-18
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Article VII, within which to receive or exercise any
outstanding Awards held by the Participant under such terms as
may be specified in the applicable Award Agreement. Rights to
any such outstanding Awards shall pass by will or the laws of
descent and distribution in the following order: (a) to
beneficiaries so designated by the Participant; (b) to a
legal representative of the Participant; or (c) to the
persons entitled thereto as determined by a court of competent
jurisdiction. Awards so passing shall be paid
and/or
may
be exercised at such times and in such manner as if the
Participant were living.
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2.
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In the event a Participant is determined by the Company to be
Disabled, and subject to the limitations of Paragraph G of
Article VII, Awards may be paid to, or exercised by, the
Participant, if legally competent, or by a legally designated
guardian or other representative if the Participant is legally
incompetent by virtue of such Disability.
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3.
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After the death or Disability of a Participant, the Committee
may in its sole discretion at any time (i) terminate
restrictions in Award Agreements; (ii) accelerate any or
all installments and rights;
and/or
(iii) instruct the Company to pay the total of any
accelerated payments in a lump sum to the Participant, the
Participants estate, beneficiaries or representative,
notwithstanding that, in the absence of such termination of
restrictions or acceleration of payments, any or all of the
payments due under the Awards ultimately might have become
payable to other beneficiaries.
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XVI. Cancellation
and Rescission of Awards
Unless the Award Agreement specifies otherwise, the Committee
may cancel any unexpired, unpaid, unexercised, or deferred
Awards at any time if the Participant is not in compliance with
the applicable provisions of the Award Agreement or the Plan.
Upon exercise, payment, or delivery pursuant to an Award, the
Participant shall certify on a form acceptable to the Committee
that he or she is in compliance with the terms and conditions of
the Plan and the Award Agreement.
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XVII.
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Payment of
Restricted Stock, Rights, Other Stock-Based Awards, Performance
Awards and Cash Awards
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Payment of Restricted Stock, Rights, Other Stock-Based Awards,
Performance Awards and Cash Awards may be made, as the Committee
shall specify, in the form of cash, Shares of Common Stock, or
combinations thereof; provided, however, that a fractional Share
of Common Stock shall be paid in cash equal to the Fair Market
Value of the fractional Share of Common Stock at the time of
payment.
XVIII. Withholding
Except as otherwise provided by the Committee,
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A.
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the Company shall have the power and right to deduct or
withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy the minimum federal, state, and
local taxes required by law to be withheld with respect to any
grant, exercise, or payment made under or as a result of this
Plan; and
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C-19
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B.
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in the case of payments of Awards, or upon any other taxable
event hereunder, a Participant may elect, subject to the
approval in advance by the Committee, to satisfy the withholding
requirement, if any, in whole or in part, by having the Company
withhold Shares of Common Stock that would otherwise be
transferred to the Participant having a Fair Market Value, on
the date the tax is to be determined, equal to the minimum
marginal tax that could be imposed on the transaction. All
elections shall be made in writing and signed by the Participant.
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XIX. Savings
Clause
This Plan is intended to comply in all respects with applicable
law and regulations, including, (i) with respect to those
Participants who are officers or directors for purposes of
Section 16 of the Exchange Act,
Rule 16b-3
of the Securities and Exchange Commission, if applicable,
(ii) Section 402 of the Sarbanes-Oxley Act, and
(iii) with respect to executive officers, Code
Section 162(m). In case any one or more provisions of this
Plan shall be held invalid, illegal, or unenforceable in any
respect under applicable law and regulation (including
Rule 16b-3
and Code Section 162(m)), the validity, legality, and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby and the invalid, illegal, or
unenforceable provision shall be deemed null and void; however,
to the extent permitted by law, any provision that could be
deemed null and void shall first be construed, interpreted, or
revised retroactively to permit this Plan to be construed in
compliance with all applicable law (including
Rule 16b-3
and Code Section 162(m)) so as to foster the intent of this
Plan. Notwithstanding anything herein to the contrary, with
respect to Participants who are officers and directors for
purposes of Section 16 of the Exchange Act, if applicable,
and if required to comply with rules promulgated thereunder, no
grant of, or Option to purchase, Shares shall permit
unrestricted ownership of Shares by the Participant for at least
six (6) months from the date of grant or Option, unless the
Board determines that the grant of, or Option to purchase,
Shares otherwise satisfies the then current
Rule 16b-3
requirements.
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XX.
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Adjustments Upon
Changes in Capitalization; Corporate Transactions
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If the outstanding Shares of the Company are changed into or
exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of
any reorganization, merger, or consolidation, or if a change is
made to the Common Stock of the Company by reason of any
recapitalization, reclassification, change in par value, stock
split, reverse stock split, combination of shares or dividends
payable in capital stock, or the like, the Company shall make
adjustments to such Awards (including, by way of example and not
by way of limitation, the grant of substitute Awards under the
Plan or under the plan of such other corporation) as it may
determine to be appropriate under the circumstances, and, in
addition, appropriate adjustments shall be made in the number
and kind of shares and in the option price per share subject to
outstanding Awards under the Plan or under the plan of such
successor corporation. The foregoing notwithstanding, unless the
Committee otherwise determines, no such adjustment shall be made
to an Incentive Option which shall, within the meaning of
Section 424 of the Code, constitute such a modification,
extension, or renewal of an option as to cause it to be
considered as the grant of a new option.
Notwithstanding anything herein to the contrary, unless
otherwise determined by the Committee at the time an individual
Award is granted hereunder, an Award shall be one hundred
percent (100%) vested, and become one hundred percent (100%)
exercisable, upon a Change in Control. The foregoing
notwithstanding, the Company may, in its sole discretion, cancel
any
C-20
or all Awards upon a Change in Control and provide for the
payment to Participants in cash of an amount equal to the value
or appreciated value, whichever is applicable, of the Award, as
determined in good faith by the Committee, at the close of
business on the date of such event.
Upon a business combination by the Company or any of its
Affiliates with any corporation or other entity through the
adoption of a plan of merger or consolidation or a share
exchange or through the purchase of all or substantially all of
the capital stock or assets of such other corporation or entity,
the Board or the Committee may, in its sole discretion, grant
Options pursuant hereto to all or any persons who, on the
effective date of such transaction, hold outstanding options to
purchase securities of such other corporation or entity and who,
on and after the effective date of such transaction, will become
employees or directors of, or independent contractors,
consultants or advisors to, the Company or its Affiliates. The
number of Shares subject to such substitute Options shall be
determined in accordance with the terms of the transaction by
which the business combination is effected. Notwithstanding the
other provisions of this Plan, the other terms of such
substitute Options shall be substantially the same as or
economically equivalent to the terms of the options for which
such Options are substituted, all as determined by the Board or
by the Committee, as the case may be. Upon the grant of
substitute Options pursuant hereto, the options to purchase
securities of such other corporation or entity for which such
Options are substituted shall be canceled immediately.
XXI. Dissolution
or Liquidation of the Company
Upon the dissolution or liquidation of the Company, the
Participant may immediately prior to such dissolution or
liquidation exercise any Award granted hereunder to the extent
that the right thereunder has become exercisable as of the date
of such dissolution or liquidation.
XXII. Termination
of the Plan
The Plan shall terminate ten (10) years from the earlier of
the date of its adoption by the Board or the date of its
approval by the stockholders. The Plan may be terminated at an
earlier date by vote of the stockholders or the Board; provided,
however, that any such earlier termination shall not affect any
Award Agreements executed prior to the effective date of such
termination. Notwithstanding anything in this Plan to the
contrary, any Options granted prior to the effective date of the
Plans termination may be exercised until the earlier of
(i) the date set forth in the Award Agreement, or
(ii) in the case of an Incentive Option, ten
(10) years from the date the Option is granted; and the
provisions of the Plan with respect to the full and final
authority of the Committee under the Plan shall continue to
control.
XXIII. Amendment
of the Plan
The Plan may be amended by the Board and such amendment shall
become effective upon adoption by the Board; provided, however,
that any amendment shall be subject to the approval of the
stockholders of the Company at or before the next annual meeting
of the stockholders of the Company if such stockholder approval
is required by the Code, any federal or state law or regulation,
the rules of any stock exchange or automated quotation system on
which the Shares may be listed or quoted, or if the Board, in
its discretion, determines to submit such changes to the Plan to
its stockholders for approval.
C-21
XXIV. Employment
Relationship
Nothing herein contained shall be deemed to prevent the Company
or an Affiliate from terminating the employment of a
Participant, nor to prevent a Participant from terminating the
Participants employment with the Company or an Affiliate,
unless otherwise limited by an agreement between the Company (or
an Affiliate) and the Participant.
XXV. Indemnification
of Committee
In addition to such other rights of indemnification as they may
have as directors or as members of the Committee, the members of
the Committee shall be indemnified by the Company against all
reasonable expenses, including attorneys fees, actually
and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason
of any action taken by them as directors or members of the
Committee and against all amounts paid by them in settlement
thereof (provided such settlement is approved by the Board) or
paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that the
director or Committee member is liable for gross negligence or
willful misconduct in the performance of his or her duties. To
receive such indemnification, a director or Committee member
must first offer in writing to the Company the opportunity, at
its own expense, to defend any such action, suit or proceeding.
XXVI. Unfunded
Plan
Insofar as it provides for payments in cash in accordance with
Article XVII, or otherwise, the Plan shall be unfunded.
Although bookkeeping accounts may be established with respect to
Participants who are entitled to cash, Common Stock, or rights
thereto under the Plan, any such accounts shall be used merely
as a bookkeeping convenience. The Company shall not be required
to segregate any assets that may at any time be represented by
cash, Common Stock, or rights thereto, nor shall the Plan be
construed as providing for such segregation, nor shall the
Company, the Board, or the Committee be deemed to be a trustee
of any cash, Common Stock, or rights thereto to be granted under
the Plan. Any liability of the Company to any Participant with
respect to a grant of cash, Common Stock, or rights thereto
under the Plan shall be based solely upon any contractual
obligations that may be created by the Plan and any Award
Agreement; no such obligation of the Company shall be deemed to
be secured by any pledge or other encumbrance on any property of
the Company. Neither the Company nor the Board nor the Committee
shall be required to give any security or bond for the
performance of any obligation that may be created by the Plan.
XXVII. Mitigation
of Excise Tax
Unless otherwise provided for in the Award Agreement or in any
other agreement between the Company (or an Affiliate) and the
Participant, if any payment or right accruing to a Participant
under this Plan (without the application of this
Article XXVII), either alone or together with other
payments or rights accruing to the Participant from the Company
or an Affiliate, would constitute a parachute
payment (as defined in Section 280G of the Code and
regulations thereunder), such payment or right shall be reduced
to the largest amount or greatest right that will result in no
portion of the amount payable or right accruing under the Plan
being subject to an excise tax under Section 4999 of the
Code or being disallowed as a deduction under Section 280G
of the Code. The determination of whether any reduction in the
rights or payments under this Plan is necessary shall be made by
the Company. The Participant shall
C-22
cooperate in good faith with the Company in making such
determination and providing any necessary information for this
purpose.
XXVIII. Effective
Date
This Plan shall become effective upon adoption by the Board,
provided that the adoption of the Plan shall be subject to the
approval of the stockholders of the Company if such stockholder
approval is required by the Code, any federal or state law or
regulations, the rules of any stock exchange or automated
quotation system on which the Shares may be listed or quoted, or
if the Board, in its discretion, desires to submit the Plan to
its stockholders for approval.
XXIX. Foreign
Jurisdictions
To the extent the Committee determines that the restrictions
imposed by the Plan preclude the achievement of the material
purposes of the Plan in jurisdictions outside the United States
of America, the Committee in its discretion may modify those
restrictions as it determines to be necessary or appropriate to
conform to applicable requirements or practices of jurisdictions
outside of the United States of America.
XXX. Governing
Law
This Plan shall be governed by the laws of the State of Delaware
and construed in accordance therewith.
Adopted effective as of
the
day
of 2007.
C-23
TRADEMARK LICENSE
AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT
(the
Agreement) has an effective date of June 18,
2007 (the Effective Date), and is made by and
between Grubb & Ellis Company, its subsidiaries,
successors and assigns, a Delaware Corporation (the
Licensor) and Grubb & Ellis Realty
Advisors, Inc., its subsidiaries, successors and assigns, a
Delaware Corporation (the Licensee).
WITNESSETH:
WHEREAS,
Licensor is the owner of certain trademarks,
trade names, emblems
and/or
logos
identified in Exhibit A to this Agreement (collectively,
the Licensed Marks);
WHEREAS,
Licensee has been using the Licensed Marks, with
Licensors express knowledge and consent, in such a manner
in which Licensor fully approves (the Prior Use);
WHEREAS,
each of Licensor and Licensee wish to formally
set forth the terms and conditions on which Licensee shall
continue to use the Licensed Marks; and
WHEREAS,
Licensor is willing to grant to Licensee the
nonexclusive right to use the Licensed Marks subject to the
terms and conditions of this Agreement, and Licensee is willing
to accept such rights and obligations.
NOW, THEREFORE,
in consideration of the mutual covenants
and conditions contained herein and intending to be legally
bound, the parties hereby agree as follows.
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1.
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Grant of License.
Subject to the terms and
conditions of this Agreement, Licensor grants to Licensee for
the Term of this agreement, as defined in
Paragraph 11 below, the nonexclusive, nontransferable right
and license to use the Licensed Marks in a manner and form
consistent with the Prior Use and only in connection with the
providing, distribution, promotion, advertising or sale of those
services identified in Exhibit B (the Licensed
Services), throughout the world (the
Territory).
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2.
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Limitations on Grant of License; Acknowledgment of Prior
Use
.
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a.
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All rights in the Licensed Marks other than those specifically
granted herein are hereby expressly reserved to Licensor for its
benefit and use. Licensee acknowledges that it will not acquire
any rights in the Licensed Marks as a result of Licensees
use thereof.
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b.
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Licensee shall at no time use or authorize the use of any
trademark, logo, service mark, trade name or other designation
identical with, or confusingly or colorably similar to, the
Licensed Marks.
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c.
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The license herein granted is personal and may not be
sublicensed, assigned, transferred, pledged, mortgaged or
otherwise encumbered in whole or in part by Licensee without the
prior express written consent of Licensor.
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d.
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As between Licensor and Licensee, Licensor shall be deemed to be
the Licensor of all materials created for the Licensed Services
hereunder, including but not limited to artwork. For copyright
purposes, Licensee shall be
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D-1
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considered the owner of all designs, artwork, tools or dies
manufactured or created in association with the Licensed
Services;
provided, however
, that Licensee claims no
right, title or interest in and is granted no ownership or
control of the Licensed Marks (or any modification thereto, or
derivative work thereof)) other than as expressly provided
herein, and
provided further
that Licensees
ownership of copyrights related to designs and artwork extends
only to those portions of designs and artwork that are separate
and distinct from the Licensed Marks.
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e.
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The parties hereto acknowledge and agree that Licensees
Prior Use of the Licensed Marks has been in a manner consistent
with the terms and conditions hereof and that this Agreement
shall be deemed to ratify such Prior Use, and retroactively
grant to Licensee prior to the Effective Date, Licensees
right to the Licensed Marks in accordance with the terms hereof.
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a.
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Licensee shall provide, advertise, distribute and sell the
Licensed Services in an ethical manner and in accordance with
the provisions and intent of this Agreement throughout the Term
of this Agreement.
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b.
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Licensee shall not encumber or cause to be encumbered in any
manner, the Licensed Marks, or cause or permit any expenses to
be charged to Licensor without Licensors prior written
approval in each instance.
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a.
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Licensee shall use the Licensed Marks in accordance with the
requirements of all applicable laws and regulations and in the
manner and form consistent with the Prior Use.
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b.
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Licensor shall have the right, at its sole cost and expense, and
upon reasonable notice to Licensee to audit for quality control
purposes Licensees (i) facilities,
(ii) inventory of materials bearing the Licensed Marks, and
(iii) books and records relating to the provision,
distribution, sale, advertising and promotion of the Licensed
Services
and/or
the
use of the Licensed Marks in connection therewith. Licensor
shall conduct no more than one (1) such quality control
audits in any given calendar year, unless additional audits are
agreed to in advance in writing by Licensee. In the event
Licensor determines that the quality control of Licensee falls
below Licensors standards and specifications, Licensor
promptly shall give Licensee written notice setting forth all
such deficiencies, and shall further provide Licensee a
reasonable period of not less than thirty (30) days in
which Licensee shall have the right to cure such deficiencies.
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5.
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Trademark Notice.
Licensee shall cause to be
imprinted irremovably and legibly on or adjacent to (as
practicable) any use of the Licensed Mark the
designation
®
or
tm
,
as the Licensor deems appropriate to protect such trademark (and
as is in compliance with relevant trademark law). Licensor
agrees that, in instances where the Licensee cannot imprint the
designation
®
or
tm
directly adjacent to the use of the Licensed Marks, Licensee may
include a trademark notice in form and substance approved in
advance by Licensor.
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D-2
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a.
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For ten dollars ($10) and other good and valuable consideration,
the receipt of which is hereby acknowledged, Licensee shall be
entitled to use the Licensed Marks in its business on a
royalty-free basis.
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7.
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Licensor Warranties and
Representations.
Licensor warrants and represents
that:
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a.
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Each Licensed Mark is valid and enforceable;
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b.
|
Use of any Licensed Marks does not infringe any rights of third
parties; and
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|
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c.
|
It has the right and authority to enter into this Agreement.
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8.
|
Licensee Warranties and
Representations.
Licensee warrants and represents
that:
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a.
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It shall use the Licensed Marks only as set forth in
Paragraph 1 above, and for the purposes and set forth in
Paragraph 1 above;
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b.
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It shall cooperate and comply with Licensors instructions
in preparing and filing Trademark registrations, if needed, as
required by law and in obtaining any necessary government
approvals; and shall execute any documents deemed necessary by
Licensor to obtain protection for the Licensed Marks or to
maintain their continued validity and enforceability;
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c.
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It shall not engage in any action or practice that disparages or
devalues the Licensed Marks or Licensor; and
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d.
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It has the right and authority to enter into this Agreement.
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9.
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Ownership.
Licensee acknowledges
Licensors right, title, and interest in and to all
Licensed Marks. Licensee shall not at any time do or cause to be
done, or fail to do or cause not to be done, any act or thing,
directly or indirectly, contesting or in any way impairing
Licensors right, title, or interest in any of the Licensed
Marks. Each and every use of any of the Licensed Marks by
Licensee shall inure to the benefit of Licensor.
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a.
|
Subject to the terms and conditions of this paragraph, Licensor
shall, at its own cost and expense, defend (with counsel of
Licensors choice), indemnify and hold harmless Licensee,
and/or
its
officers, directors, employees and agents (collectively, the
Licensee Entities) from and against any and all
losses, liability, claims, suits, actions, proceedings,
judgments, awards, damages and expenses (including reasonable
attorneys fees) that they, or any of them, may incur or
suffer by reason of any claim for trademark infringement on
account of Licensees use of the Licensed Marks, but only
to the extent the Licensed Marks have been used in accordance
with the terms and conditions of this Agreement. The Licensee
Entities shall notify Licensor of any claim or notice of claim
for indemnification which would be subject to this paragraph as
soon as practicable after the date upon which the claim for
which indemnification is sought is first asserted against
Licensee, provided, however, Licensees failure timely to
provide such notice shall not negate Licensors obligations
under this
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D-3
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sub-paragraph. The Licensee Entities may seek counsel of their
own choice to represent them in such matter at their cost and
expense. If Licensor fails to defend the Licensee Entities, the
Licensee Entities may (but are not obligated to) assume the
conduct of the defense or settle the claim with Licensors
consent, which consent shall not be unreasonably withheld,
delayed or conditioned, and in such event Licensor shall also be
fully responsible for the costs and expenses of the defense
and/or
settlement, including, without limitation, counsel fees and
expense (including expert fees) and any judgments, settlements
and awards incurred against the Licensee Entities.
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b.
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Subject to the terms and conditions of this paragraph, Licensee
shall, at its own cost and expense, defend (with counsel of
Licensees choice), indemnify and hold harmless Licensor,
and/or
its
officers, directors, employees and agents (collectively, the
Licensor Entities) from and against any and all
losses, liability, claims, suits, actions, proceedings,
judgments, awards, damages and expenses (including reasonable
attorneys fees) that they, or any of them, may incur or
suffer by reason of any claim or action involving any
liabilities arising out of Licensees breach of this
Agreement. The Licensor Entities shall notify Licensee of any
claim or notice of claim for indemnification which would be
subject to this paragraph as soon as practicable, after the date
upon which the claim for which indemnification is sought is
first asserted against Licensor, provided, however,
Licensors failure timely to provide such notice shall not
negate Licensees obligations under this sub-paragraph. The
Licensor Entities may seek counsel of their own choice to
represent them in such matter at their cost and expense. If
Licensee fails to defend the Licensor Entities, the Licensor
Entities may (but are not obligated to) assume the conduct of
the defense or settle the claim with Licensees consent,
which consent shall not be unreasonably withheld, delayed or
conditioned, and in such event Licensee shall thereupon be fully
responsible for the costs and expenses of the defense
and/or
settlement, including, without limitation, counsel fees and
expense (including expert fees) and any judgments, settlements
and awards incurred against the Licensor Entities.
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11.
|
Term.
The Term of this Agreement
shall be perpetual unless this Agreement is terminated according
to its terms or by operation of law.
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12.
|
Termination.
This Agreement may be terminated
prior to the expiration of the term as follows:
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|
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a.
|
By mutual written agreement of the parties;
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b.
|
By either party on thirty (30) days written notice with
opportunity for cure in the event the non-terminating party has
failed or neglected to perform any of its obligations under this
agreement;
|
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13.
|
Rights and Duties Upon Termination or
Expiration.
Upon termination or expiration of
this Agreement:
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|
|
a.
|
Licensee shall immediately cease all provision, distribution,
sale, offering for sale, advertising and promotion of services
using the Licensed Marks.
|
D-4
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|
a.
|
Notices. Any and all notices, elections, offers, acceptances, or
demands permitted or required to be made under this Agreement
shall be in writing, signed by the person giving such notice,
election, offer, acceptance, or demand and shall be delivered
personally, or sent by registered or certified mail, postage
prepaid, by facsimile transmission (only if a machine
confirmation of receipt is obtained and a copy of the notice is
sent by mail), or any professional delivery service that
requires a signed, written receipt confirming delivery of the
envelope or package containing the notice, at the addresses
listed below or at such other address as may be supplied in
writing:
|
Licensee:
Licensor:
|
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|
|
The effective date of such notice, election, offer, acceptance,
or demand shall be: (i) the date delivered or transmitted,
if delivery is by hand or facsimile, or (ii) three
(3) days after the date of mailing, for all other forms of
delivery.
|
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b.
|
Successors and Assigns. This Agreement shall be
binding on and shall inure to the benefit of the parties, their
respective permitted (a) successors, (b) successors in
title, and (c) assigns; and each party agrees, on behalf of
it, its successors, successors in title, and assigns, to execute
any instruments that may be necessary or appropriate to carry
out and execute the purpose and intentions of this Agreement.
|
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|
c.
|
Amendment. No change, modification, or amendment of
this Agreement shall be valid or binding on the parties unless
such change or modification shall be in writing signed by both
parties to this Agreement.
|
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|
d.
|
Relationship of the Parties. This Agreement does not
constitute and shall not be construed as constituting a
partnership or joint venture between Licensor and Licensee.
Neither party shall have any right to obligate or bind the other
party in any manner whatsoever by virtue of this Agreement, and
nothing herein contained shall give, or is intended to give, any
rights of any kind to any third persons.
|
|
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e.
|
No Waiver. The failure of any party to insist on
strict performance of a covenant hereunder or of any obligation
hereunder shall not be a waiver of such partys right to
demand strict compliance therewith in the future, nor shall the
same be construed as a novation of this Agreement.
|
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f.
|
Integration. This Agreement constitutes the full and
complete agreement of the parties with respect to the subject
matter hereof, and supersedes any and all prior agreements
between the parties.
|
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g.
|
Captions. Titles or captions of articles and
paragraphs contained in this Agreement are inserted only as a
matter of convenience and for reference, and in no way define,
limit, extend, or describe the scope of this Agreement or the
intent of any provision hereof.
|
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|
h.
|
Counterparts. This Agreement may be executed one or
more original, facsimile or electronic counterparts, each of
which shall for all purposes constitute
|
D-5
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|
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|
|
the original Agreement, binding on the parties, and each party
hereby covenants and agrees to execute all duplicates or
replacement counterparts of this Agreement as may be required.
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|
i.
|
Choice of Law and Forum. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York without regard to its conflict of law
principles. Any action or any proceeding of any kind or nature,
with respect to or arising out this Agreement shall be
instituted and tried exclusively in the state or federal courts
located in New York County, New York, and courts with appellate
jurisdiction therefrom, and the parties hereby agree that venue
in New York County, New York is proper and convenient.
|
|
|
j.
|
Severability. In the event any provision, clause,
sentence, phrase, or word hereof, or the application thereof in
any circumstances, is held to be invalid or unenforceable, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder hereof, or of the application of
any such provision, sentence, clause, phrase, or word in any
other circumstances.
|
Remainder of page intentionally
blank.
Signature page
follows.
D-6
IN WITNESS WHEREOF
, the parties hereto have caused this
Agreement to be executed on the Effective Date by their duly
authorized officers.
Grubb & Ellis Company
(Licensor)
|
|
Its:
|
Chief Executive Officer
|
Grubb & Ellis Realty Advisors, Inc.
(Licensee)
|
|
Its:
|
Chief Financial Officer
|
Signature Page to
Trademark License
Agreement
D-7
EXHIBIT A
Licensed Marks
The marks identified on the following pages shall be considered
Licensed Marks.
D-8
EXHIBIT B
Licensed Services
Licensor authorizes the following Licensed Services to be
provided by Licensee bearing the Licensed Marks:
Real Estate related activities.
D-9
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520 Madison Avenue
New York, New York 10022
tel:
212.508.1600
fax:
212.508.1633
info@pjsolomon.com
|
|
June 4, 2007
Special Committee of the Independent Directors of the Board of
Directors
Grubb & Ellis Realty Advisors, Inc.
500 West Monroe Street, Suite 2800
Chicago, IL 60661
Gentlemen:
You have asked us to advise you with respect to the fairness
from a financial point of view to Grubb & Ellis Realty
Advisors, Inc., a Delaware corporation (the
Company), of the consideration proposed to be paid
by the Company pursuant to the terms of that certain Membership
Interest Purchase Agreement (the Membership Interest
Purchase Agreement), to be entered into, by and among the
Company, Grubb & Ellis Company (GBE) and
GERA Property Acquisition, LLC (Property
Acquisition). The transaction contemplated by the
Membership Interest Purchase Agreement is sometimes referred to
herein as the Transaction. We understand that upon
the consummation of the Transaction, the Company shall acquire
all of the issued and outstanding membership interests of
Property Acquisition, thereby indirectly acquiring all of the
issued and outstanding membership interests in three limited
liability companies that are (or, prior to the closing of the
Transaction, will be) wholly-owned by Property Acquisition and
whose principal assets consist of (or, prior to the closing of
the Transaction, will consist of) three separate parcels of real
property located at (i) 9330 LBJ Freeway, Dallas, Texas
75243 (the Abrams Property), (ii) 6400 Shafer
Court, Rosemont, Illinois 60018 (the Shafer
Property) and (iii) 39 Old Ridgebury Road, Danbury,
Connecticut 06810 (the Danbury Property and,
together with the Abrams Property and the Shafer Property, the
Properties). Capitalized terms used herein and not
otherwise defined herein shall have the definitions given to
them in the Membership Interest Purchase Agreement.
For purposes of our opinion, we have:
(i) reviewed certain financial and other information
regarding the Properties that was provided to us by or on behalf
of the Company and GBE, including (x) projections for the
Properties that were prepared by or on behalf of GBE,
(y) the offering memorandum in respect of the Abrams
Property and (z) the offering memorandum in respect of the
Danbury Property;
(ii) reviewed the (x) appraisal of the Abrams
Property, dated April 11, 2007, (y) appraisal of the
Shafer Property, dated April 13, 2007 and
(z) appraisal of the Danbury Property, dated April 13,
2007 (collectively, the Appraisals), each in the
form provided to us by the Company, and, in connection with the
review of the foregoing Appraisals, we have also reviewed the
supporting analytics and methodology of the appraiser set forth
therein;
(iii) reviewed the terms and conditions of the
Wachovia Commitment Letters;
(iv) reviewed publicly available information
regarding the financial terms of certain transactions that we
have deemed comparable, in whole or in part, to the Transaction;
E-1
(v) reviewed the Membership Interest Purchase
Agreement, as well as the purchase and sale agreement, including
any amendments thereto, relating to each Property that was
executed by Property Acquisition or a subsidiary
thereof; and
(vi) performed such other analyses and reviewed such
other material and information as we have deemed appropriate.
We have assumed and relied upon the accuracy and completeness of
the information provided to us for the purposes of our opinion
and we have not assumed any responsibility for independent
verification of such information, including, without limitation,
the information set forth in the Appraisals. We have assumed
that the financial projections regarding the Properties that
were provided to us (including any such projections that were
included in the offering memoranda referred to above) were
reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the future financial
performance of the Properties. We have not conducted a physical
inspection of the Properties. Without limiting the foregoing, we
have not conducted or assumed any responsibility for any
independent valuation or appraisal of the assets or liabilities
of the Target Companies or the Properties, nor have we been
furnished with any such valuation or appraisal (other than the
Appraisals). Furthermore, we have not considered any tax,
accounting or legal effects of the consummation of the
Transaction (including the indirect purchase of the Properties)
or the transaction structure on any Person.
We have further assumed that (i) the Transaction will be
consummated in full in accordance with the terms set forth in
the Membership Interest Purchase Agreement, (ii) the
transactions contemplated by the CT Contract will be consummated
in full in accordance with the terms set forth therein and
(iii) the financing contemplated by the Wachovia Commitment
Letters will be consummated in full in accordance with the terms
set forth therein, in each case, without waiver, modification or
amendment of any material term, condition or agreement, or, that
in the course of obtaining any regulatory or third party
approvals or consents, if required, no delay, limitation,
restriction or condition will be imposed that would have an
adverse effect on the Properties.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and information made available to us
as of, June 1, 2007. Furthermore, our opinion does not
address the Companys underlying business decision to
undertake the Transaction. In addition, our opinion does not
address any other aspect or implication of the consummation of
the Transaction or any other agreement, arrangement or
understanding entered into in connection with the consummation
of the Transaction or otherwise, except as expressly identified
herein.
We have acted as financial advisor to the Special Committee of
the Independent Directors of the Board of Directors of the
Company (the Committee) in connection with the
Transaction and have received a retainer fee for our services
and will receive a flat fee for our services (less any amounts
we have previously received) upon the delivery of our opinion.
We hereby consent to the inclusion of this letter in the proxy
statement delivered to the stockholders of the Company in
connection with the Transaction.
Based on, and subject to, the foregoing, we are of the opinion
that, as of the date hereof, the aggregate consideration to be
paid by the Company pursuant to the terms of the Membership
Interest Purchase Agreement is fair from a financial point of
view to the Company.
Very truly yours,
PETER J. SOLOMON COMPANY L.P.
E-2
Grubb & Ellis Realty Advisors, (AMEX:GAV)
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