0001341004-11-000975.txt : 20110425 0001341004-11-000975.hdr.sgml : 20110425 20110425172911 ACCESSION NUMBER: 0001341004-11-000975 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20110425 DATE AS OF CHANGE: 20110425 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GRUBB & ELLIS CO CENTRAL INDEX KEY: 0000216039 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE AGENTS & MANAGERS (FOR OTHERS) [6531] IRS NUMBER: 941424307 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-32339 FILM NUMBER: 11778267 BUSINESS ADDRESS: STREET 1: 500 WEST MONROE STREET STREET 2: SUITE 2800 CITY: CHICAGO STATE: IL ZIP: 60661 BUSINESS PHONE: 3126986700 MAIL ADDRESS: STREET 1: 500 WEST MONROE STREET STREET 2: SUITE 2800 CITY: CHICAGO STATE: IL ZIP: 60661 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Colony Financial, Inc. CENTRAL INDEX KEY: 0001467076 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 270419483 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O COLONY FINANCIAL, INC. STREET 2: 2450 BROADWAY, 6TH FLOOR CITY: SANTA MONICA STATE: CA ZIP: 90404 BUSINESS PHONE: 310-282-8820 MAIL ADDRESS: STREET 1: C/O COLONY FINANCIAL, INC. STREET 2: 2450 BROADWAY, 6TH FLOOR CITY: SANTA MONICA STATE: CA ZIP: 90404 SC 13D 1 sc13d.htm sc13d.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
SCHEDULE 13D
 
Under the Securities Exchange Act of 1934
 
(Amendment No.  )*
 
GRUBBS & ELLIS COMPANY
 
(Name of Issuer)
 
Common Stock
 
(Title of Class of Securities)
 
400095204
 
(CUSIP Number)
 
Ronald M. Sanders, Esq.
Colony Capital, LLC
2450 Broadway, 6th Floor
Santa Monica, CA 90404
(310) 282-8820
 
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
 
April 25, 2011
 
(Date of Event Which Requires Filing of this Statement)
 
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨
 
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.
 
* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
 
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
 
 
 

 
 
CUSIP No.                400095204
 
1
NAMES OF REPORTING PERSONS
   
 
CDCF II GNE Holding, LLC
   
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 
a)   o 
 
b)   þ 
   
3
SEC USE ONLY
   
4
SOURCE OF FUNDS (SEE INSTRUCTIONS)
   
 
OO
   
5
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
o
   
6
CITIZENSHIP OR PLACE OF ORGANIZATION
   
 
Delaware
   
  7 SOLE VOTING POWER
     
NUMBER OF
  0
SHARES
8
SHARED VOTING POWER
BENEFICIALLY
   
OWNED BY
 
6,712,000 (1)
     
EACH
9
SOLE DISPOSITIVE POWER
REPORTING
   
PERSON
  0
WITH
10
SHARED DISPOSITIVE POWER
     
   
6,712,000 (1)
   
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
   
 
6,712,000 (1)
   
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
 
o
   
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
8.76% (1)
   
14
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
   
 
OO (Limited Liability Company)
 
(1) Pursuant to (i) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011 (attached as Exhibit 99.2 hereto) and (ii) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (attached as Exhibit 99.3 hereto), which are exercisable as of the date of this Schedule 13D for, and represent beneficial ownership of, 6,712,000 shares of Common Stock by each Reporting Person.  The calculation of percentage ownership is based on 69,921,581 shares of Common Stock outstanding as of March 28, 2011, as disclosed in the Issuer’s Form 10-K filed on March 31, 2011, plus 6,712,000 shares of Common Stock that would be issued upon exercise of the Warrants of the Issuer held by the Reporting Persons.
 
 
- 2 -

 
 
CUSIP No.                400095204
 
1
NAMES OF REPORTING PERSONS
   
 
CFI GNE Warrant Investor, LLC
   
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 
a)   o 
 
b)   þ 
   
3
SEC USE ONLY
   
4
SOURCE OF FUNDS (SEE INSTRUCTIONS)
   
 
OO
   
5
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
o
   
6
CITIZENSHIP OR PLACE OF ORGANIZATION
   
 
Delaware
   
  7 SOLE VOTING POWER
     
NUMBER OF
  0
SHARES
8
SHARED VOTING POWER
BENEFICIALLY
   
OWNED BY
 
6,712,000 (1)
     
EACH
9
SOLE DISPOSITIVE POWER
REPORTING
   
PERSON
  0
WITH
10
SHARED DISPOSITIVE POWER
     
   
6,712,000 (1)
   
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
   
 
6,712,000 (1)
   
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
 
o
   
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
8.76% (1)
   
14
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
   
 
OO (Limited Liability Company)
 
(1) Pursuant to (i) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011 (attached as Exhibit 99.2 hereto) and (ii) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (attached as Exhibit 99.3 hereto), which are exercisable as of the date of this Schedule 13D for, and represent beneficial ownership of, 6,712,000 shares of Common Stock by each Reporting Person.  The calculation of percentage ownership is based on 69,921,581 shares of Common Stock outstanding as of March 28, 2011, as disclosed in the Issuer’s Form 10-K filed on March 31, 2011, plus 6,712,000 shares of Common Stock that would be issued upon exercise of the Warrants of the Issuer held by the Reporting Persons.
 
 
- 3 -

 
 
CUSIP No.                400095204
 
1
NAMES OF REPORTING PERSONS
   
 
Colony Distressed Credit Fund II, L.P.
   
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 
a)   o 
 
b)   þ 
   
3
SEC USE ONLY
   
4
SOURCE OF FUNDS (SEE INSTRUCTIONS)
   
 
OO
   
5
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
o
   
6
CITIZENSHIP OR PLACE OF ORGANIZATION
   
 
Delaware
   
  7 SOLE VOTING POWER
     
NUMBER OF
  0
SHARES
8
SHARED VOTING POWER
BENEFICIALLY
   
OWNED BY
 
6,712,000 (1)
     
EACH
9
SOLE DISPOSITIVE POWER
REPORTING
   
PERSON
  0
WITH
10
SHARED DISPOSITIVE POWER
     
   
6,712,000 (1)
   
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
   
 
6,712,000 (1)
   
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
 
o
   
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
8.76% (1)
   
14
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
   
 
PN
 
(1) Pursuant to (i) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011 (attached as Exhibit 99.2 hereto) and (ii) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (attached as Exhibit 99.3 hereto), which are exercisable as of the date of this Schedule 13D for, and represent beneficial ownership of, 6,712,000 shares of Common Stock by each Reporting Person.  The calculation of percentage ownership is based on 69,921,581 shares of Common Stock outstanding as of March 28, 2011, as disclosed in the Issuer’s Form 10-K filed on March 31, 2011, plus 6,712,000 shares of Common Stock that would be issued upon exercise of the Warrants of the Issuer held by the Reporting Persons.
 
 
- 4 -

 
 
CUSIP No.                400095204
 
1
NAMES OF REPORTING PERSONS
   
 
Colony Capital Credit II, L.P.
   
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 
a)   o 
 
b)   þ 
   
3
SEC USE ONLY
   
4
SOURCE OF FUNDS (SEE INSTRUCTIONS)
   
 
OO
   
5
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
o
   
6
CITIZENSHIP OR PLACE OF ORGANIZATION
   
 
Delaware
   
  7 SOLE VOTING POWER
     
NUMBER OF
  0
SHARES
8
SHARED VOTING POWER
BENEFICIALLY
   
OWNED BY
 
6,712,000 (1)
     
EACH
9
SOLE DISPOSITIVE POWER
REPORTING
   
PERSON
  0
WITH
10
SHARED DISPOSITIVE POWER
     
   
6,712,000 (1)
   
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
   
 
6,712,000 (1)
   
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
 
o
   
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
8.76% (1)
   
14
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
   
 
PN
 
(1) Pursuant to (i) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011 (attached as Exhibit 99.2 hereto) and (ii) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (attached as Exhibit 99.3 hereto), which are exercisable as of the date of this Schedule 13D for, and represent beneficial ownership of, 6,712,000 shares of Common Stock by each Reporting Person.  The calculation of percentage ownership is based on 69,921,581 shares of Common Stock outstanding as of March 28, 2011, as disclosed in the Issuer’s Form 10-K filed on March 31, 2011, plus 6,712,000 shares of Common Stock that would be issued upon exercise of the Warrants of the Issuer held by the Reporting Persons.
 
 
- 5 -

 
 
CUSIP No.                400095204
 
1
NAMES OF REPORTING PERSONS
   
 
ColonyGP Credit II, LLC
   
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 
a)   o 
 
b)   þ 
   
3
SEC USE ONLY
   
4
SOURCE OF FUNDS (SEE INSTRUCTIONS)
   
 
OO
   
5
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
o
   
6
CITIZENSHIP OR PLACE OF ORGANIZATION
   
 
Delaware
   
  7 SOLE VOTING POWER
     
NUMBER OF
  0
SHARES
8
SHARED VOTING POWER
BENEFICIALLY
   
OWNED BY
 
6,712,000 (1)
     
EACH
9
SOLE DISPOSITIVE POWER
REPORTING
   
PERSON
  0
WITH
10
SHARED DISPOSITIVE POWER
     
   
6,712,000 (1)
   
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
   
 
6,712,000 (1)
   
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
 
o
   
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
8.76% (1)
   
14
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
   
 
OO (Limited Liability Company)
 
(1) Pursuant to (i) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011 (attached as Exhibit 99.2 hereto) and (ii) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (attached as Exhibit 99.3 hereto), which are exercisable as of the date of this Schedule 13D for, and represent beneficial ownership of, 6,712,000 shares of Common Stock by each Reporting Person.  The calculation of percentage ownership is based on 69,921,581 shares of Common Stock outstanding as of March 28, 2011, as disclosed in the Issuer’s Form 10-K filed on March 31, 2011, plus 6,712,000 shares of Common Stock that would be issued upon exercise of the Warrants of the Issuer held by the Reporting Persons.
 
 
- 6 -

 
 
CUSIP No.                400095204
 
1
NAMES OF REPORTING PERSONS
   
 
CFI RE Holdco, LLC
   
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 
a)   o 
 
b)   þ 
   
3
SEC USE ONLY
   
4
SOURCE OF FUNDS (SEE INSTRUCTIONS)
   
 
OO
   
5
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
o
   
6
CITIZENSHIP OR PLACE OF ORGANIZATION
   
 
Delaware
   
  7 SOLE VOTING POWER
     
NUMBER OF
  0
SHARES
8
SHARED VOTING POWER
BENEFICIALLY
   
OWNED BY
 
6,712,000 (1)
     
EACH
9
SOLE DISPOSITIVE POWER
REPORTING
   
PERSON
  0
WITH
10
SHARED DISPOSITIVE POWER
     
   
6,712,000 (1)
   
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
   
 
6,712,000 (1)
   
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
 
o
   
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
8.76% (1)
   
14
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
   
 
OO (Limited Liability Company)
 
(1) Pursuant to (i) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011 (attached as Exhibit 99.2 hereto) and (ii) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (attached as Exhibit 99.3 hereto), which are exercisable as of the date of this Schedule 13D for, and represent beneficial ownership of, 6,712,000 shares of Common Stock by each Reporting Person.  The calculation of percentage ownership is based on 69,921,581 shares of Common Stock outstanding as of March 28, 2011, as disclosed in the Issuer’s Form 10-K filed on March 31, 2011, plus 6,712,000 shares of Common Stock that would be issued upon exercise of the Warrants of the Issuer held by the Reporting Persons.
 
 
- 7 -

 
 
CUSIP No.                400095204
 
1
NAMES OF REPORTING PERSONS
   
 
Colony Financial, Inc.
   
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
 
a)   o 
 
b)   þ 
   
3
SEC USE ONLY
   
4
SOURCE OF FUNDS (SEE INSTRUCTIONS)
   
 
OO
   
5
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
o
   
6
CITIZENSHIP OR PLACE OF ORGANIZATION
   
 
Delaware
   
  7 SOLE VOTING POWER
     
NUMBER OF
  0
SHARES
8
SHARED VOTING POWER
BENEFICIALLY
   
OWNED BY
 
6,712,000 (1)
     
EACH
9
SOLE DISPOSITIVE POWER
REPORTING
   
PERSON
  0
WITH
10
SHARED DISPOSITIVE POWER
     
   
6,712,000 (1)
   
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
   
 
6,712,000 (1)
   
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
 
o
   
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
8.76% (1)
   
14
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
   
 
CO
 
(1) Pursuant to (i) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011 (attached as Exhibit 99.2 hereto) and (ii) a Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (attached as Exhibit 99.3 hereto), which are exercisable as of the date of this Schedule 13D for, and represent beneficial ownership of, 6,712,000 shares of Common Stock by each Reporting Person.  The calculation of percentage ownership is based on 69,921,581 shares of Common Stock outstanding as of March 28, 2011, as disclosed in the Issuer’s Form 10-K filed on March 31, 2011, plus 6,712,000 shares of Common Stock that would be issued upon exercise of the Warrants of the Issuer held by the Reporting Persons.
 
 
- 8 -

 
 
Item 1. Security and Issuer.
 
This statement on Schedule 13D (the “Statement”) relates to shares of common stock, par value $0.01 per share (the “Shares”) of Grubb & Ellis Company, a Delaware corporation (the “Issuer”), issuable upon exercise of warrants (the “Warrants”) pursuant to the Warrant Agreements (as defined below).  The principal executive office of the Issuer is located at 1551 North Tustin Avenue, Suite 300, Santa Ana, California 92705.  The information set forth in the Exhibits attached hereto is hereby expressly incorporated herein by reference, and the responses to each item of the Schedule 13D is qualified in its entirety by the provisions of such Exhibits.

Item 2. Identity and Background.
 
This Statement is being filed jointly by CDCF II GNE Holding, LLC, a Delaware limited liability company; CFI GNE Warrant Investor, LLC, a Delaware limited liability company (collectively the “Warrant Holders”); Colony Distressed Credit Fund II, L.P., a Delaware partnership, in its capacity as managing member of CDCF II GNE Holding, LLC; Colony Capital Credit II, L.P., a Delaware partnership, in its capacity as general partner of Colony Distressed Credit Fund II, L.P.; ColonyGP Credit II, LLC, a Delaware limited liability company, in its capacity as general partner of Colony Capital Credit II, L.P.; CFI RE Holdco, LLC, a Delaware limited liability company, in its capacity as managing member of CFI GNE Warrant Investor LLC; and Colony Financial, Inc., a Delaware Corporation, in its capacity as managing member of CFI RE Holdco, LLC (and collectively with the Warrant Holders, the “Reporting Persons” and each a “Reporting Person”).
 
The Reporting Persons are making this joint filing pursuant to the agreement (the “Joint Filing Agreement”) attached hereto as Exhibit 99.1, because they may be deemed to be a “group” within the meaning of Section 13 (d)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”), although neither the fact of this filing nor anything contained herein shall be deeded an admission by the Reporting Persons that such a group exists.  Pursuant to Rule 13d-4 of the Exchange Act, the Reporting Persons expressly declare that the filing of this Statement shall not be construed as an admission that any such person is, for the purposes of Section 13(d) and/or Section 13(g) of the Exchange Act or otherwise, the beneficial owner of any securities covered by this Statement held by any other person.
 
The principal business of the Warrant Holders is their investment in the Warrants.
 
The principal business of Colony Distressed Credit Fund II, L.P., Colony Capital Credit II, L.P., Colony GP Credit II, LLC , CFI RE Holdo, LLC and Colony Financial, Inc. is to acquire, originate and manage a diversified portfolio of real estate-related debt instruments.
 
The principal business address of the Reporting Persons is c/o Colony Capital, LLC, 2450 Broadway, 6th Floor, Santa Monica, CA, 90404.
 
During the last five years, none of the Reporting Persons has been convicted in a criminal proceeding or been a party to a civil proceeding, in either case of the type specified in Items 2(d) or (e) of Schedule 13D.
 
Item 3. Source and Amount of Funds or Other Consideration.
 
On April 15, 2011, in connection with the loan to Grubb & Ellis Management Services Inc., an affiliate of the Issuer (the “Loan”), by ColFin GNE Loan Funding, LLC, pursuant to a Credit Agreement among Grubb & Ellis Management Services, Inc., as Borrower, Grubb & Ellis Company, as Parent Guarantor, the Several Lenders from time to time parties thereto, and ColFin GNE Loan Funding, LLC, as Administrative Agent, dated as of April 15, 2011. (the “Credit Agreement”), the Reporting Persons acquired the Warrants exercisable to purchase an aggregate of 6,712,000 Shares of the Issuer, at $0.01 per Share, in addition to any additional warrants received pursuant to the Credit Agreement.  The source of consideration for the Warrants was cash on hand from Colony Financial, Inc. and committed equity investments from Colony Distressed Credit Fund II, L.P.  Copies of the Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011, the Warrant to Purchase 3,3356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (collectively the “Warrant Agreements”), and the Credit Agreement are attached as Exhibit 99.2, 99.3 and 99.4 respectively, and incorporated herein by reference.
  
Item 4. Purpose of Transaction.
 
On April 15, 2011 ColFin GNE Loan Funding, LLC entered into the Credit Agreement, pursuant to which the Warrant Holders received the Warrants.  On March 30, 2011 CCA received an exclusivity period of 60 days (the “Exclusivity Period”) pursuant to an Exclusivity Agreement dated March 30, 2011 by and between Grubb & Ellis Company and Colony Capital Acquisitions, LLC (the “Exclusivity Agreement”), which requires the Issuer to work exclusively with CCA and its representatives with respect to a potential transaction to acquire the Issuer (the “Potential Transaction”) and not to, directly or indirectly, solicit or initiate or enter into any discussions or transactions with, reply to or encourage, or provide any information, written or verbal to, any individual, corporation, partnership, or other entity or group (other than CCA and its representatives) concerning the acquisition of the Company or any subsidiary or any equity interest therein or all or any substantial portion of any of their assets, whether through direct purchase, merger, consolidation or other business combination or similar transaction involving the Company or any of its subsidiaries other than assets sold in the ordinary course of business or pursuant to the sale of Daymark Realty Advisors, Inc. or any of its subsidiaries or their respective assets, provided that such sale is undertaken in a process independent from the Potential Transaction with advisors separate from those advisors involved with the Potential Transaction, or any other transaction concerning the acquisition of the Company, and that ethical barriers in respect of advisors with respect to information regarding the aforementioned processes are in place and effective; provided that the Company may notify such individuals, entities or groups that it has entered into an exclusivity arrangement concerning the Potential Transaction.  The Exclusivity Agreement is attached as Exhibit 99.5, and incorporated herein by reference. On April 22, 2011, the Issuer received a letter from C. Michael Kojaian on behalf of Kojaian Ventures, L.L.C., Kojaian Holdings LLC, Kojaian Management Corporation and C. Michael Kojaian (the “Kojaian Investors”), purporting to reserve the Kojaian Investors’ rights as shareholders with respect to restrictions contained in the Exclusivity Agreement.  CCA has informed the Issuer that CCA shall hold the Issuer responsible for any violations of the Exclusivity Agreement made by the Kojaian Investors or any of their affiliates.
 
One or more of the Reporting Persons or their affiliates intend to have further discussions and other communications with the Issuer regarding the Potential Transaction and may also have discussions and other communications with other persons or entities (including other securityholders of the Issuer) regarding the Potential Transaction or any other transaction(s) involving the Issuer. In the course of such discussions and communications one or more of the Reporting Persons or their affiliates may suggest actions that could result in, among other things: (a) the acquisition by a Reporting Person(s) and/or their affiliates of additional Shares or other securities of the Issuer, or the disposition of Shares or other securities of the Issuer; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (d) changes in the present Board or management of the Issuer; (e) a material change in the present capitalization or dividend policy of the Issuer; (f) any other material change in the Issuer's business or structure; (g) changes in the Issuer’s articles of incorporation or bylaws or other actions which may impede the acquisition of control of the Issuer by any person; (h) causing any class of the Issuer's securities to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) any action similar to those enumerated above.
 
The Reporting Persons and their affiliates also intend to review the Reporting Persons’ investment in the Issuer on a continuing basis. Depending on various factors, including, without limitation, the Issuer's financial position and strategic direction, the outcome of the discussions and actions referenced above, actions taken by the Board and management of the Issuer, changes to the composition of the Board, price levels of the Shares, other investment opportunities available to the Reporting Persons and their affiliates, conditions in the securities markets and general economic and industry conditions, the Reporting Persons and their affiliates may in the future take such actions and/or pursue such options with respect to the Reporting Persons’ investment in the Issuer as they deem appropriate under the circumstances.
 
Except to the extent that the Potential Transaction or anything else described in this Item 4 may be deemed to be a plan or proposal, none of the Reporting Persons currently has any plans or proposals that relate to or would result in any of the actions specified in clause (a) through (j) of Item 4 of Schedule 13D. The Reporting Persons and their affiliates may, at any time and from time to time, formulate other purposes, plans or proposals regarding the Issuer or the Shares beneficially owned by the Reporting Person(s), or any other actions that could involve one or more of the types of transactions or have one or more of the results described in paragraphs (a) through (j) of Item 4 of Schedule 13D. The foregoing is subject to change at any time, and there can be no assurance that any of the Reporting Persons or their affiliates will take any of the actions set forth above.
 
 
- 9 -

 
 
Item 5. Interest in Securities of the Issuer.
 
(a) The aggregate number and percentage of the class of securities identified pursuant to Item 1 beneficially owned by each Reporting Person is stated in Items 11 and 13 on the cover page(s) hereto.
 
(b) Number of shares as to which each Reporting Person has:
 
(i)  sole power to vote or to direct the vote:
 
See Item 7 on the cover page(s) hereto.
 
(ii)  shared power to vote or to direct the vote:
 
See Item 8 on the cover page(s) hereto.
 
(iii)  sole power to dispose or to direct the disposition of:
 
See Item 9 on the cover page(s) hereto.
 
(iv)  shared power to dispose or to direct the disposition of:
 
See Item 10 on the cover page(s) hereto.
 
(c) There were no transactions in the Shares that were effected during the past sixty days by the Reporting Persons.
 
(d) Not applicable.
 
(e) Not applicable.
 
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.
 
The responses to Items 3 and 4 are incorporated herein by reference.
 
Pursuant to the Warrant Agreements, the Warrant Holders entered into a Registration Rights Agreement dated as of April 15, 2011 by and between Grubb & Ellis Company and the parties named therein (the “Registration Rights Agreement”), which provides the Warrant Holders with customary demand and "piggy-back" rights.  The Registration Agreement is attached as Exhibit 99.6, and incorporated herein by reference.
 
The Credit Agreement  allows the affiliate of the Issuer to pay interest due pursuant to the Credit Agreement, in the form of additional warrants.
 
Except as otherwise described herein and in the Joint Filing Agreement attached hereto as Exhibit 99.1, the Warrant Agreements attached hereto as Exhibit 99.2 and Exhibit 99.3, the Credit Agreement attached hereto as Exhibit 99.4; the Exclusivity Agreement attached hereto as Exhibit 99.5, and the Registration Rights Agreement attached hereto as Exhibit 99.6 none of the Reporting Persons has any legal or other contract, arrangement, understanding, or relationship with any other person with respect to the Shares or any other securities of the Issuer.
 
 
- 10 -

 
 
Item 7. Material to be Filed as Exhibits.
 
The following exhibits are filed as exhibits hereto:
 
     
Exhibit
 
Description of Exhibit
 99.1
 
Joint Filing Agreement (furnished herewith)
 99.2
 
Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011 (furnished herewith)
 99.3
 
Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (furnished herewith)
 99.4
 
Credit Agreement among Grubb & Ellis Management Services, Inc., as Borrower, Grubb & Ellis Company, as Parent Guarantor, the Several Lenders from time to time parties thereto, and ColFin GNE Loan Funding, LLC, as Administrative Agent, dated as of April 15, 2011 (furnished herewith)
 99.5
 
Exclusivity Agreement dated March 30, 2011 by and between Grubb & Ellis Company and Colony Capital Acquisitions, LLC (furnished herewith)
 99.6
 
Registration Rights Agreement dated as of April 15, 2011 by and between Grubb & Ellis Company and the parties named therein (furnished herewith)

 
 
- 11 -

 
 
SIGNATURE
 
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
 
         
Dated: April 25, 2011
CDCF II GNE Holding, LLC
 
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
         
Dated: April 25, 2011
CFI GNE Warrant Investor, LLC
 
 
 
By:
CFI RE Holdco, LLC
 
 
Its:
Managing Member
 
 
By:
Colony Financial, Inc.
 
 
Its:
Managing Member
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
         
Dated: April 25, 2011
Colony Distressed Credit Fund II, L.P.
 
 
 
By:
Colony Capital Credit II, L.P.
 
 
Its:
General Partner
 
 
By:
ColonyGP Credit II, LLC
 
 
Its:
General Partner
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 
 
 
         
Dated: April 25, 2011
Colony Capital Credit II, L.P.
 
 
 
By:
ColonyGP Credit II, LLC
 
 
Its:
General Partner
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 
 
 
         
Dated: April 25, 2011
ColonyGP Credit II, LLC
 
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
         
Dated: April 25, 2011
CFI RE Holdco, LLC
 
 
 
By:
Colony Financial, Inc.
 
 
Its:
Managing Member
 
       
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
         
Dated: April 25, 2011
Colony Financial, Inc.
 
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
- 12 -

 
 
EXHIBIT INDEX
 
  Exhibit
 
Description of Exhibit
 99.1
 
Joint Filing Agreement (furnished herewith)
 99.2
 
Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CDCF II GNE Holding, LLC dated as of April 15, 2011 (furnished herewith)
 99.3
 
Warrant to Purchase 3,356,000 Shares of Common Stock by and between Grubbs & Ellis Company and CFI GNE Warrant Investor, LLC dated as of April 15, 2011 (furnished herewith)
 99.4
 
Credit Agreement among Grubb & Ellis Management Services, Inc., as Borrower, Grubb & Ellis Company, as Parent Guarantor, the Several Lenders from time to time parties thereto, and ColFin GNE Loan Funding, LLC, as Administrative Agent, dated as of April 15, 2011 (furnished herewith)
 99.5
 
Exclusivity Agreement dated March 30, 2011 by and between Grubb & Ellis Company and Colony Capital Acquisitions, LLC (furnished herewith)
 99.6
 
Registration Rights Agreement dated as of April 15, 2011 by and between Grubb & Ellis Company and the parties named therein (furnished herewith)

 
- 13 -
EX-99.1 2 ex99-1.htm ex99-1.htm
 
EXHIBIT 99.1
 
JOINT FILING AGREEMENT
 
Pursuant to and in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder, each party hereto hereby agrees to the joint filing, on behalf of each of them, of any filing required by such party under Section 13 or Section 16 of the Exchange Act or any rule or regulation thereunder (including any amendment, restatement, supplement, and/or exhibit thereto) with the Securities and Exchange Commission (and, if such security is registered on a national securities exchange, also with the exchange), and further agrees to the filing, furnishing, and/or incorporation by reference of this agreement as an exhibit thereto. This agreement shall remain in full force and effect until revoked by any party hereto in a signed writing provided to each other party hereto, and then only with respect to such revoking party.
 
IN WITNESS WHEREOF, each party hereto, being duly authorized, has caused this agreement to be executed and effective as of the date first written above.
 
         
Dated: April 25, 2011
CDCF II GNE Holding, LLC
 
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
         
Dated: April 25, 2011
CFI GNE Warrant Investor, LLC
 
 
 
By:
CFI RE Holdco, LLC
 
 
Its:
Managing Member
 
 
By:
Colony Financial, Inc.
 
 
Its:
Managing Member
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
         
Dated: April 25, 2011
Colony Distressed Credit Fund II, L.P.
 
 
 
By:
Colony Capital Credit II, L.P.
 
 
Its:
General Partner
 
 
By:
ColonyGP Credit II, LLC
 
 
Its:
General Partner
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
         
Dated: April 25, 2011
Colony Capital Credit II, L.P.
 
 
 
By:
ColonyGP Credit II, LLC
 
 
Its:
General Partner
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 
 
 
         
Dated: April 25, 2011
ColonyGP Credit II, LLC
 
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
         
Dated: April 25, 2011
CFI RE Holdco, LLC
 
 
 
By:
Colony Financial, Inc.
 
 
Its:
Managing Member
 
       
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

 
         
Dated: April 25, 2011
Colony Financial, Inc.
 
 
 
By:  
/s/ Mark M. Hedstrom
 
 
Name:  Mark M. Hedstrom
 
 
Title:  Vice President
 

EX-99.2 3 ex99-2.htm Unassociated Document
 
 
EXHIBIT 99.2

 
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND SUBJECT TO SECTION 6 BELOW, NO OFFER, SALE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION MAY BE EFFECTED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING THE SECURITIES, (2) THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT OR (3) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COMPANY IS DELIVERED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION (WHICH OPINION MAY BE RENDERED BY IN-HOUSE COUNSEL).
 
WARRANT TO PURCHASE 3,356,000 SHARES OF COMMON STOCK
 
 
 
Issue Date: April 15, 2011
 
THIS CERTIFIES THAT, for value received, CDCF II GNE Holding, LLC (together with its transferees, “Holder”), is entitled to subscribe for and purchase Three Million Three Hundred and Fifty Six Thousand (3,356,000) shares (the “Warrant Shares”) of fully paid and nonassessable $0.01 par value per share Common Stock (the “Common Stock”) of Grubbs & Ellis Company, a Delaware corporation (“Company”), at the Warrant Price (as hereinafter defined), subject to the provisions and upon the terms and conditions hereinafter set forth.  Capitalized terms used but not otherwise defined herein shall have the meanings ascribed in Section 17 hereof.
 
1.      Warrant Price.  The “Warrant Price” shall initially be one cent ($0.01) per share, subject to adjustment as provided in Section 7 below.
 
2.      Conditions to Exercise. Unless this Warrant has previously expired pursuant to the terms specified herein, the purchase right represented by this Warrant may be exercised, subject to adjustment as provided in Section 7 below, during the term commencing on the Issue Date and ending at 5:00 P.M. Pacific time on the third anniversary of the Issue Date of this Warrant (the “Expiration Date”) only in the following circumstances:
 
(a)           Exercisability Upon Satisfaction of Fundamental Change Condition.  Holder may exercise this Warrant on or before the Expiration Date upon the occurrence of a Fundamental Change in which the consideration received for each share of Common Stock has a fair market value equal to or greater than One Dollar and Ten Cents ($1.10) per share (the “Trigger Price”); provided that if an Early Termination Event occurs this Warrant shall terminate and be of no further force and effect; or
 
(b)           Exercisability Upon Satisfaction of VWAP Condition.  Holder may exercise this Warrant on or before the Expiration Date beginning from the first date on which the VWAP for any thirty (30) consecutive calendar day period following the date hereof is equal to or greater than the Trigger Price.

 
 

 

 
3.      Method of Exercise; Payment; Issuance of Shares; Issuance of New Warrant; Put Rights.  Subject to Section 2 hereof, the Warrant may be exercised, at the option of the Holder, by any one or combination of the following methods:
 
(a)           Cash Exercise.  Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised, by Holder, in whole or in part, by the surrender of the original of this Warrant (together with a duly executed Notice of Exercise in substantially the form attached hereto) at the principal office of Company (as set forth in Section 20 below) and by providing payment to Company, by wire transfer of immediately available funds, of an amount equal to the product of the Warrant Price per share multiplied by the number of Warrant Shares then being purchased.  In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased (the “Share Certificates”) shall be in the name of, and delivered to, Holder, or such other Person as such Holder may direct (subject to the terms of transfer contained herein and upon payment by such Holder of any applicable transfer taxes).  Such delivery shall be made within 3 Trading Days after the exercise of this Warrant and at Company’s expense and, unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions substantially identical to this Warrant and representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to Holder within 3 Trading Days after the exercise of this Warrant.
 
(b)           Cashless Exercise.  Subject to Section 2 hereof, if the Per Share Market Value of one share of Common Stock on the date of exercise is greater than the Warrant Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, Holder may exercise this Warrant by a cashless exercise by surrender of this Warrant at the principal office of Company together with the properly endorsed Notice of Exercise in which event Company shall issue to Holder a number of shares of Common Stock computed using the following formula:

 
X = Y - (A)(Y)
 
                 B
     
Where
X =
the number of shares of Common Stock to be issued to Holder.
     
 
Y =
the number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised.
     
 
A =
the Warrant Price.
     
 
B =
the Per Share Market Value of one share of Common Stock on the date of exercise.
 
In the event of any exercise of the rights represented by this Warrant, the Share Certificates shall be in the name of, and delivered to, Holder, or such other Person as such Holder may direct (subject to the terms of transfer contained herein and upon payment by such Holder of any applicable transfer taxes).  Such delivery shall be made within 3 Trading Days after the exercise of this Warrant and at Company’s expense and, unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions substantially identical to this Warrant and representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to Holder within 3 Trading Days after the exercise of this Warrant.

 
2

 

 
(c)           Loan Reduction Exercise.  Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised, by Holder, in whole or in part, by the surrender of the original of this Warrant (together with a duly executed Notice of Exercise in substantially the form attached hereto) at the principal office of Company and by delivering to Company an executed amendment to the Credit Agreement among Grubb & Ellis Management Services, Inc., as Borrower, Grubb & Ellis Company, as Parent Guarantor, the Several Lenders from time to time parties thereto, and ColFin GNE Loan Funding, LLC, as Administrative Agent, dated as of April 15, 2011. (the “Credit Agreement”), reducing the principal amount owed by an amount equal to the product of the Warrant Price per share multiplied by the number of Warrant Shares then being purchased.  In the event of any exercise of the rights represented by this Warrant, Share Certificates shall be in the name of, and delivered to, Holder, or such other Person as such Holder may direct (subject to the terms of transfer contained herein and upon payment by such Holder of any applicable transfer taxes).  Such delivery shall be made within 3 Trading Days after the exercise of this Warrant and at Company’s expense and, unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions substantially identical to this Warrant and representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to Holder within 3 Trading Days after the exercise of this Warrant.
 
4.      Representations and Warranties of Holder and Company.
 
(a)           Representations and Warranties by Holder.  Holder represents and warrants to Company with respect to this purchase as follows:
 
(i)      Authorization.  All company action on the part of Holder, its officers, directors, shareholders, members or partners, as applicable, necessary for the authorization, execution, delivery and performance of its obligations under this Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of Holder enforceable in accordance with its terms.
 
(ii)      Evaluation.  Holder has substantial experience in evaluating and investing in private placement transactions of securities of companies similar to Company so that Holder is capable of evaluating the merits and risks of its investment in Company and has the capacity to protect its interests.
 
(iii)     Resale.  Holder is acquiring this Warrant and the Warrant Shares issuable upon exercise of this Warrant (collectively the “Securities”) for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof.  Holder understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Act”) by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent as expressed herein and the other representations and warranties of Holder contained herein.
 
(iv)     Rule 144.  Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available.  Holder is aware of the provisions of Rule 144 promulgated under the Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions.
 
(v)      Accredited Investor.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 
3

 

 
(vi)     Opportunity To Discuss.  Holder has read, understood, and is familiar with Company’s public filings available at the Securities and Exchange Commission's website and has had an opportunity to discuss Company’s business, management and financial affairs with its management and an opportunity to review Company’s facilities.  Holder understands that such discussions, as well as the written information issued by Company, were intended to describe the aspects of Company’s business and prospects which Company believes to be material but were not necessarily a thorough or exhaustive description.
 
(b)           Representations and Warranties by Company.   Company hereby represents and warrants to Holder as follows:
 
(i)      Corporate Organization and Authority.  Company (a) is a corporation duly organized, validly existing, and in good standing in its jurisdiction of incorporation, and (b) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted. Company is qualified as a foreign corporation in all jurisdictions where such qualification is required except in each jurisdiction in which failure to so qualify would not have a material adverse effect on the business, operations, assets, liabilities, results of operations or financial condition of Company.
 
(ii)      Corporate Power .  Company has all requisite legal and corporate power and authority to execute, issue and deliver this Warrant, to issue the Warrant Shares issuable upon exercise or conversion of this Warrant, and to carry out and perform its obligations under this Warrant and any related agreements.
 
(iii)     Authorization; Enforceability.  All corporate action on the part of Company, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of its obligations under this Warrant and for the authorization, issuance and delivery of this Warrant and the Warrant Shares issuable upon exercise of this Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of Company enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, or to principles of equity.
 
(iv)     Valid Issuance of Warrant and Warrant Shares.  This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. The Warrant Shares issuable upon conversion of this Warrant, when issued, sold and delivered in accordance with the terms of this Warrant for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws.  Subject to applicable restrictions on transfer, the issuance and delivery of this Warrant and the Warrant Shares issuable upon exercise or conversion of this Warrant are not subject to any preemptive or other similar rights or any liens or encumbrances except as specifically set forth in Company’s Certificate of Incorporation or this Warrant or except as created by Holder.  Subject to the accuracy of Holder’s representations and warranties contained in Section 4(a), the offer, sale and issuance of the Warrant Shares, as contemplated by this Warrant, are exempt from the prospectus and registration requirements of applicable United States federal and state securities laws, and neither Company nor any authorized agent acting on its behalf has or will take any action hereafter that would cause the loss of such exemption.
 
(v)      No Conflict.  The execution, delivery, and performance of this Warrant will not result in (a) any violation of, conflict with, or constitute a default under, with or

 
4

 

 
without the passage of time or the giving of notice (1) any provision of Company’s Certificate of Incorporation or by-laws; (2) any provision of any material judgment, decree, or order to which Company is a party, by which it is bound, or to which any of its material assets are subject; (3) any material contract, obligation, or commitment to which Company is a party or by which it is bound; or (4) any material statute, rule, or governmental regulation applicable to Company, or (b) the creation of any lien, charge or encumbrance upon any material assets of Company.
 
(vi)     Capitalization.  The capitalization table of Company attached hereto as Annex A is complete and accurate as of March 31, 2011 and reflects (a) all outstanding capital stock of Company and (b) all outstanding warrants, options, conversion privileges, preemptive rights or other rights or agreements to purchase or otherwise acquire or issue any equity securities or convertible securities of Company.  Company has authorized the issuance of a total of 20,000,000 shares of Preferred Stock, 1,000,000 of which have been designated as Series A Preferred Stock, and 200,000,000 shares of Common Stock and no other shares of preferred stock have been designated or issued.
 
5.      Legends.
 
(a)           Legend.  Each certificate representing the Warrant Shares shall be endorsed with substantially the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING THE SECURITIES, (2) THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT OR (3) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COMPANY IS DELIVERED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION (WHICH OPINION MAY BE RENDERED BY IN-HOUSE COUNSEL).
 
Company need not enter into its stock records a transfer of Warrant Shares unless the conditions specified in the foregoing legend are satisfied.  Company may also instruct its transfer agent not to allow the transfer of any of the Warrant Shares unless the conditions specified in the foregoing legend are satisfied.
 
(b)           Removal of Legend and Transfer Restrictions.  The legend relating to the Act endorsed on a certificate pursuant to paragraph 5(a) of this Warrant shall be removed and Company shall issue a certificate without such legend to Holder if (i) the Securities are registered under the Act and a prospectus meeting the requirements of Section 10 of the Act is available, or (ii) Company has received an opinion of counsel (which may include the opinion of in-house counsel) reasonably satisfactory to Company to the effect that public sale, transfer or assignment of the Securities may be made without registration and without compliance with any restriction.
 
6.      Conditions to Transfer or Exercise of Warrant.  Subject to the further provisions of this Section 6, this Warrant and the Warrant Shares represented hereby may be sold, transferred, conveyed or assigned by Holder.  This Warrant may not be transferred to any person who is not an “accredited investor,” as such term is defined in Regulation D promulgated under the Act.  It

 
5

 

 
shall be a condition to any transfer or exercise of this Warrant that at the time of such transfer or exercise, Holder shall provide Company with a representation in writing that Holder or transferee is acquiring this Warrant and the shares of Common Stock to be issued upon exercise for investment purposes only, not as a nominee or agent, and not with a view to any sale or distribution.  As further condition to each transfer, at the request of Company, Holder shall surrender this Warrant to Company and the transferee shall receive and accept a Warrant, of like terms, tenor and date, executed by Company.
 
7.      Adjustment for Certain Events.
 
(a)           Adjustment Exceptions. The number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 7 (in each case, after taking into consideration any prior adjustments pursuant to this Section 7); provided that this Section 7 will not apply to:  (i) the issuance of any Additional Warrants (as defined in the Credit Agreement); (ii) the issuance of any Common Stock upon the exercise of any Closing Date Warrants (as defined in the Credit Agreement) or any Additional Warrants; (iii) the issuance of Common Stock upon conversion of the Company’s existing outstanding 12% cumulative participating perpetual convertible preferred stock upon the terms and subject to the conditions of the Certificate of the Powers, Designations, Preferences and Rights of the 12% Cumulative Participating Perpetual Convertible Preferred Stock as such conversion terms thereof are in effect as of April 15, 2011; (iv) the issuance of Common Stock upon conversion of the Company’s existing outstanding 7.95% convertible senior securities due 2015, upon the terms and subject to the conditions of the Indenture for the 7.95% Convertible Senior Securities due 2015 as such conversion terms thereof are in effect as of April 15, 2011; and (v)  the issuance of Common Stock as equity compensation to employees, officers, directors and independent contractor brokers (in each case including as inducements to new hires or appointees) (collectively the “Equity Compensation Grants”), provided that this exception to the adjustment provisions of this Section 7 is limited to the following Equity Compensation Grants: (A) the issuance of any shares of common stock pursuant to any outstanding (as of April 15, 2011) options, restricted stock awards, stock appreciation rights, phantom stock rights or other equity grants (the “Existing Equity Compensation”), and (B) the issuance of an additional 2,000,000 shares of Common Stock in the form of options, restricted stock awards, stock appreciation rights, phantom stock rights or other equity grants (the “Additional Equity Compensation”) and the issuance of the Common Stock underlying such Additional Equity Compensation plus any Additional Equity Compensation and any Existing Equity Compensation that is forfeited, expired or terminated provided that any amount issued in excess of the above will result in any requisite adjustment under this Section 7.
 
(b)           Adjustment to Number of Warrant Shares Upon Issuance of Common Stock. Except in the case of an event described in either Section 7(d) or Section 7(e), if Company shall, at any time or from time to time after the Issue Date, issue or sell, or in accordance with Section 7(c) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than either:  (i) the Per Share Market Value or (ii) the Trigger Price, as such amounts are proportionately adjusted for stock splits, reverse stock splits, stock combinations, stock dividends and other distributions and recapitalizations affecting the Common Stock after the Issue Date, (collectively the “Original Prices” and the greater of (i) or (ii) the “Original Adjustment Price”), then immediately upon such issuance or sale (or deemed issuance or sale), the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such issuance or sale (or deemed issuance or sale) shall be increased to a number of Warrant Shares equal to the product obtained by multiplying the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such issuance or sale (or deemed issuance or sale) by a fraction (which shall in no event be less than one):

 
6

 

 
(i)       the numerator of which shall be the number of shares of Common Stock then outstanding immediately after such issuance or sale (or deemed issuance or sale); and
 
(ii)      the denominator of which shall be the sum of (A) the number of shares of Common Stock then outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock which the aggregate amount of consideration, if any, received by Company upon such issuance or sale (or deemed issuance or sale) would purchase at the Original Adjustment Price.
 
(c)           Effect of Certain Events on Adjustment to Number of Warrant Shares. For purposes of determining the adjusted number of Warrant Shares under Section 7(b) hereof, the following shall be applicable:
 
(i)      Issuance of Options. If Company shall, at any time or from time to time after the Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 7(c)(v)) for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than either of the Original Prices in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the number of Warrant Shares under Section 7(b)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 7(b)) of (x) the total amount, if any, received or receivable by Company as consideration for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration payable to Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options.  Except as otherwise provided in Section 7(c)(iii), no further adjustment of the number of Warrant Shares shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.
 
(ii)      Issuance of Convertible Securities.  If Company shall, at any time or from time to time after the Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 7(c)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than either of the Original Prices in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the number of

 
7

 

 
Warrant Shares pursuant to Section 7(b)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 7(b)) of (x) the total amount, if any, received or receivable by Company as consideration for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 7(c)(iii), (A) no further adjustment of the number of Warrant Shares shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the number of Warrant Shares shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the number of Warrant Shares have been made pursuant to the other provisions of this Section 7(c).
 
(iii)      Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by Company as consideration for the granting or sale of any Options or Convertible Securities referred to in Section 7(c)(i) or Section 7(c)(ii) hereof, (B) the minimum aggregate amount of additional consideration, if any, payable to Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 7(c)(i) or Section 7(c)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 7(c)(i) or Section 7(c)(ii) hereof are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 7(c)(i) hereof or any Convertible Securities referred to in Section 7(c)(ii) hereof, then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the number of Warrant Shares pursuant to this Section 7) the number of Warrant Shares issuable upon exercise of this Warrant at the time of such change shall be adjusted or readjusted, as applicable, to the number of Warrant Shares which would have been in effect at such time pursuant to the provisions of this Section 7 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment, the number of Warrant Shares issuable upon exercise of this Warrant is increased.
 
(iv)      Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 7 (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by Company), the number of Warrant Shares then issuable upon exercise of this Warrant shall forthwith be changed pursuant to the provisions of this Section 7 to the number of Warrant Shares which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued, provided that this Section 7(c)(iv) will not apply to the extent the Warrant is exercised.
 
(v)      Calculation of Consideration Received. If Company shall, at any time or from time to time after the Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 7(c), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by Company therefor; (B) for consideration other than cash, the amount of the consideration

 
8

 

 
other than cash received by Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by Company shall be the Per Share Market Value for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration in connection with an issuance or sale of other securities of Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (D) to the owners of the non-surviving entity in connection with any merger in which Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration shall be the dollar amount thereof and the fair value of any consideration other than cash or marketable securities shall be determined by an Independent Appraiser.
 
(vi)      Record Date. For purposes of any adjustment to the number of Warrant Shares in accordance with this Section 7, in case Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be, provided such distribution is actually made.
 
(vii)     Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 7.
 
(viii)    Other Dividends and Distributions. Subject to the provisions of this Section 7(c), if Company shall, at any time or from time to time after the Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of outstanding shares of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date (as hereinafter defined), retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 7 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

 
9

 

 
(d)           Adjustment to Number of Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock.  If Company shall, at any time or from time to time after the Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such dividend, distribution or subdivision shall be proportionately increased.  If Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such combination shall be proportionately decreased.  Any adjustment under this Section 7(d) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.
 
(e)           Adjustment to Number of Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger.  Subject to Section 2(a), in the event of any (i) capital reorganization of Company, (ii) reclassification of the stock of Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of Company with or into another Person, (iv) sale of all or substantially all of Company's assets to another Person, (v) transaction constituting a Fundamental Change or (v) other similar transaction (other than any such transaction covered by Section 7(d)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance satisfactory to the Holder) shall be made with respect to the Holder's rights under this Warrant to insure that the provisions of this Section 7 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant.  In the event of a Fundamental Change, following which the Warrants would cease to represent the right to acquire securities, no adjustment shall be made pursuant to the terms hereof.  The provisions of this Section 7(e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, if the Warrant is exercisable in accordance with Section 2 hereof with respect to any corporate event or other transaction contemplated by the provisions of this Section 7(e), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise

 
10

 

 
rights contained in Section 3 instead of giving effect to the provisions contained in this Section 7(e) with respect to this Warrant.
 
(f)           Certain Events. If any event of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 7; provided, that no such adjustment pursuant to this Section 7(f) shall decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 7.
 
8.      Notice of Adjustments.  Whenever the kind or number of securities issuable under this Warrant shall be adjusted pursuant to Section 7 hereof, Company shall prepare a certificate signed by an officer of Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and number or kind of shares issuable upon exercise of this Warrant after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by certified or registered mail, return receipt required, postage prepaid) within thirty (30) days of such adjustment to Holder as set forth in Section 20 hereof.
 
9.      Financial and Other Reports.  From time to time up to the earlier of the Expiration Date or the complete exercise of this Warrant, Company shall furnish to Holder, if Company is a private company, (a) unaudited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements within 30 days of each fiscal month of each fiscal year, certified by Company’s president or chief financial officer, and (b) Company’s complete annual audited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements certified by an independent certified public accountant selected by Company within 120 days of the fiscal year end or, if sooner, promptly following such time as Company’s Board of Directors receives the audit.  If Company is a publicly held company, it shall deliver to Holder quarterly unaudited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements and annual audited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements, certified by a recognized firm of certified public accountants, within 5 days after the statements are required to be provided to the SEC.  All such statements are to be prepared using GAAP and, if Company is a publicly held company, are to be in compliance with SEC requirements.  At the time of Company’s delivery of quarterly financial statements in accordance with this Section 9, Company shall also deliver to Holder an updated capitalization table of Company in the form attached hereto as Annex A.  For so long as Company is a privately held company, Holder agrees to hold in confidence and trust and not to improperly use or disclose any information provided to or learned by Holder in connection with its rights under this Section 9 regarding the business as conducted by Company as of today’s date on the same terms and conditions as set forth in Section 11.8 of the Credit Agreement.
 
10.          Transferability of Warrant.  This Warrant is transferable on the books of Company at its principal office by the registered Holder upon surrender of this Warrant properly endorsed, subject to compliance with Section 6 and applicable federal and state securities laws.  Company shall issue and deliver to the transferee a new Warrant representing the Warrant so transferred.  Upon any partial transfer, Company will issue and deliver to Holder a new Warrant with respect to the Warrant not so transferred.  Holder shall not have any right to transfer any portion of this Warrant to any direct competitor of Company or to any significant shareholder or any direct or

 
11

 

 
indirect subsidiary of any such direct competitor of the Company which is known or should be known as such to the Holder.
 
11.          Registration Rights. Company grants registration rights to Holder of this Warrant for any Common Stock of Company obtained by Holder upon exercise or conversion of this Warrant, pursuant to the Registration Rights Agreement dated as of April 15, 2011 between Grubb & Ellis Company CDCF II GNE Holding, LLC and CFI GNE Warrant Investor, LLC and subject to pro rata limitations on the number of securities which can be included in a registration among other persons who have the right to register securities pursuant to “piggyback” rights afforded to such persons.
 
12.          No Fractional Shares.  No fractional share of Common Stock will be issued in connection with any exercise or conversion hereunder, but in lieu of such fractional share Company shall make a cash payment therefor upon the basis of the Warrant Price then in effect.
 
13.          Charges, Taxes and Expenses.  Issuance of certificates for shares of Common Stock upon the exercise or conversion of this Warrant shall be made without charge to Holder for any United States or state of the United States documentary stamp tax or other incidental expense with respect to the issuance of such certificate, all of which taxes and expenses shall be paid by Company, and such certificates shall be issued in the name of Holder.
 
14.          No Shareholder Rights Until Exercise; Additional Rights.  Except as expressly provided herein, this Warrant does not entitle Holder to any voting rights or other rights as a shareholder of Company prior to the exercise hereof.  Company agrees that if it shall at any time in any manner grant to or confer upon any other holder of a warrant any right or benefit that has the effect of establishing rights or otherwise benefiting the holder of any such warrant, in their capacity as holder of such warrant, in a manner more favorable than the rights and benefits established in favor of the Holder (“Additional Rights”) then, in each case, the Holder shall automatically and without further action on behalf of Holder or Company receive substantially the same rights and benefits as the Additional Rights afforded to such other holder of a warrant.
 
15.          Registry of Warrant.  Company shall maintain a registry showing the name and address of the registered Holder of this Warrant.  This Warrant may be surrendered for exchange or exercise, in accordance with its terms, at such office or agency of Company, and Company and Holder shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.
 
16.          Loss, Theft, Destruction or Mutilation of Warrant.  Upon receipt by Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to it, and, if mutilated, upon surrender and cancellation of this Warrant, Company will execute and deliver a new Warrant, having terms and conditions substantially identical to this Warrant, in lieu hereof.
 
17.          Definitions.  For purposes of this Warrant, the following terms have the following meanings:

Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.


 
12

 

Board” means the board of directors of Company.

Capital Stock” of any person means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock or other equity participations, including partnership interests, whether general or limited, of such person and any rights (other than debt securities convertible and exchangeable into an equity interest), warrants or options to acquire an equity interest in such person.

Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

Early Termination Event” means any consummation of (a) any recapitalization, reclassification or change of Common Stock (other than changes resulting from a subdivision or combination) as a result of which Common Stock would be converted into cash, or (b) any consolidation or merger involving Company pursuant to which Common Stock will be converted into cash; provided that in the case of either (a) or (b) of this definition, the applicable transaction is an all-cash transaction, and each holder of Common Stock receives an amount less than the Trigger Price.

Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 2 shall have been satisfied at or prior to 5:00 p.m., Pacific time, on a Business Day, including, without limitation, the receipt by Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

Fundamental Change” means the occurrence after the time of the Issue Date, the following:

(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, except that a person will be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 50% or more of the total voting power of Company’s Voting Stock (other than as a result of any merger, share exchange, transfer of assets or similar transaction solely for the purpose of changing Company’s jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock of the surviving entity); or

(b) consummation of (A) any recapitalization, reclassification or change of Common Stock (other than changes resulting from a subdivision or combination) as a result of which Common Stock would be converted into, or exchanged for, stock, other securities, other property or assets, or (B) any statutory share exchange, consolidation or merger involving Company pursuant to which Common Stock will be converted into cash, securities or other property, or (C) any sale, transfer, assignment, lease, conveyance or other disposition, directly or indirectly, of all or substantially all Company’s assets and the assets of Company’s Subsidiaries, considered as a whole (other than a disposition of such assets as an entirety or virtually as an entirety to a wholly-owned Subsidiary) shall have occurred, provided that the following shall not be a Fundamental Change:


 
13

 

(i) any transaction pursuant to which holders of Company’s Capital Stock immediately prior to the transaction are entitled to exercise, directly or indirectly, 50% or more of the total voting power of all shares of Capital Stock entitled to vote generally in the election of directors of the continuing or surviving Person immediately after the transaction; or

(ii) any merger, share exchange, transfer of assets or similar transaction solely for the purpose of changing Company’s jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of common stock solely into shares of common stock of the surviving entity; or

(c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose nomination, election or appointment by such board or whose nomination for election by Company’s stockholders was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election, nomination or appointment was previously so approved) cease for any reason to constitute 50% or more of the Board of Directors then in office; or

(d) Company’s stockholders shall have approved any plan of liquidation or dissolution; or

(e) the Common Stock (or other common stock into which the Securities are then convertible pursuant to the terms of this Indenture) ceases to be listed on the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the NYSE Amex (or their respective successors).

Independent Appraiser” means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of Company) that is regularly engaged in the business of appraising the Capital Stock or assets of corporations or other entities as going concerns, and which is not affiliated with either Company or the Holder of any Warrant.

Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

Per Share Market Value” means on any particular date (a) the last sale price per share of the Common Stock on such date on the NYSE Amex (or their respective successors) or another registered national stock exchange on which the Common Stock is then listed, or if there is no such price on such date, then the closing bid price or last sale price, as applicable, on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the NYSE Amex (or their respective successors). or any registered national stock exchange, the closing bid price or last sale price, as applicable, for a share of Common Stock in the over the counter market, as reported by the OTC Bulletin Board or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes for the five (5) Trading Days preceding such date of determination, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Independent Appraiser mutually agreeable to Company and the Holder; provided, that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period.

 
14

 

The determination of fair market value by an Independent Appraiser shall be based upon the fair market value of Company determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties.  In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.

Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

Trading Day” means a day on which the principal Trading Market is open for trading.

Trading Market” means any of the following markets or exchanges on which the Common Shares are listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).

Voting Stock” of any person means Capital Stock of such person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such person, whether at all times or only for so long as no senior class of securities has such voting power by reason of any contingency.

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Shares for such date (or the nearest preceding date) on the Trading Market on which the Common Shares are then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Shares for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Shares are not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Shares are then reported in the "Pink Sheets" published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per Common Share so reported, or (d) in all other cases, the fair market value of a Common Share as determined by an Independent Appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
 
18.          Miscellaneous.
 
(a)           Issue Date.  The provisions of this Warrant shall be construed and shall be given effect in all respect as if it had been issued and delivered by Company on April 15, 2011.
 
(b)           Successors.  This Warrant shall be binding upon any successors or assigns of Company.
 
(c)           Headings.  The headings used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant.

 
15

 

 
(d)           Saturdays, Sundays, Holidays.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday in the State of New York, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.
 
(e)           Attorney’s Fees.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney’s fees.
 
19.          No Impairment.  Company will not, by amendment of its Certificate of Incorporation or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of Holder against impairment.
 
20.          Addresses.  Any notice required or permitted hereunder shall be in writing and shall be mailed by overnight courier, registered or certified mail, return receipt requested, and postage prepaid, or otherwise delivered by hand or by messenger, addressed as set forth below, or at such other address as Company or Holder shall have furnished to the other party in accordance with the delivery instructions set forth in this Section 20.


 
If to Company:
Grubb & Ellis Company
   
1551 N. Tustin Ave., Suite 300
   
Santa Ana, CA 92705
   
Attn:  Chief Financial Officer
     
 
    With Copies to:
Zukerman, Gore, Brandeis & Crossman, LLP
   
875 Third Avenue
   
New York, NY 10022
   
Attn:  Clifford A. Brandeis
     
     
 
If to Holder:
CDCF II GNE Holding, LLC
   
c/o Colony Capital, LLC
   
2450 Broadway, 6th floor
   
Santa Monica, CA 90404
   
Attn:  Todd Sammann
     
 
     With Copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
   
300 South Grand Avenue, Suite 3400
   
Los Angeles, California 90071
   
Attn:  Rick Madden and Kristine Dunn

If mailed by registered or certified mail, return receipt requested, and postage prepaid, notice shall be deemed to be given five (5) days after being sent, and if sent by overnight courier, by hand or by messenger, notice shall be deemed to be given when delivered (if on a business day, and if not, on the next business day).
 

 
16

 

 
21.          WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS WARRANT OR THE WARRANT SHARES.
 
22.          GOVERNING LAW.  THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD REQUIRE THE APPLICATION OF ANOTHER STATE'S LAWS.

 
[Remainder of page intentionally left blank]
 

 
17

 

IN WITNESS WHEREOF, Company has caused this Warrant to be executed by its officer thereunto duly authorized.
 
GRUBBS & ELLIS COMPANY

By:
 /s/ Michael Rispoli
 
 
Name:
Michael Rispoli
 
 
Title:
Chief Financial Officer
 


 
Dated as of April 15, 2011.
 
 

 

 
 

 


 
Accepted and Agreed to
     
 
By:
CDCF II GNE Holding, LLC
       
       
   
By:
/s/ Mark M. Hedstrom
     
Mark M. Hedstrom
     
Vice President


 
 

 

 
NOTICE OF EXERCISE
 
To:
[Name of Company]
_____________________
_____________________
_____________________
 
2.
The undersigned Warrantholder (“Holder”) elects to acquire shares of the Common Stock (the “Common Stock”) of _____________ (the “Company”), pursuant to the terms of the Stock Purchase Warrant issued effective [Ÿ] (the “Warrant”).
 
3.
Holder exercises its rights under the Warrant as set forth below:
 
   
(           )
Holder elects to purchase _____________ shares of Common Stock as provided in Section 3(a) and tenders herewith a check in the amount of $___________ as payment of the purchase price.
       
   
(           )
Holder elects to convert the purchase rights into shares of Common Stock as provided in Section 3(b) of the Warrant.
       
   
(           )
Holder elects to convert the purchase rights into shares of Common Stock as provided in Section 3(c) of the Warrant.

 
4.
Holder surrenders the Warrant with this Notice of Exercise.
 
Holder represents that it is acquiring the aforesaid shares of Common Stock for investment and not with a view to or for resale in connection with distribution and that Holder has no present intention of distributing or reselling the shares.
 
Please issue a certificate representing the shares of the Common Stock in the name of Holder or in such other name as is specified below:
 
 
Name:
   
       
 
Address:
   
       
 
Taxpayer I.D.:
   

 

 
 

 


 



 
[NAME OF HOLDER]
       
 
By:
 
   
Name:
 
   
Title:
 
       
 
Date:   _______ ___, 20____


 
 

 

ANNEX A
 
CAPITALIZATION TABLE

(as of March 31, 2011)


Class of Stock or Equity Interest
Amount Authorized (if applicable)
Amount Outstanding
Number of Shares Outstanding (or Shares underlying such equity interest)
Common Stock; $0.01 par value
200,000,000
69,921,581 (1)
69,921,581
Preferred Stock; $0.01 par value
19,000,000
0
0
12% Cumulative Participating Perpetual Convertible Preferred Stock; $0.01 par value
1,000,000
965,700
58,527,214
Options
(2)
321,400
321,400
Unvested Restricted Stock
(2)
4,257,843
4,257,843
Phantom Stock
NA
4,058,251
4,058,251
Treasury Stock
NA
1,267,974
1,267,974
7.95% convertible senior securities due 2015; convertible at the rate of 445.583 Shares for each $1,000 principal amount
NA
$31,500,000
14,035,865
 
(1)  Includes Unvested Restricted Stock set forth on this table, but does not include Phantom Stock set forth in this table.

(2)  590,175 Shares remaining available for future issuance under previously authorized equity compensation plans.

EX-99.3 4 ex99-3.htm Unassociated Document
 
 
EXHIBIT 99.3

 
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND SUBJECT TO SECTION 6 BELOW, NO OFFER, SALE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION MAY BE EFFECTED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING THE SECURITIES, (2) THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT OR (3) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COMPANY IS DELIVERED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION (WHICH OPINION MAY BE RENDERED BY IN-HOUSE COUNSEL).
 
WARRANT TO PURCHASE 3,356,000 SHARES OF COMMON STOCK
 
 

 
 
Issue Date: April 15, 2011
 
THIS CERTIFIES THAT, for value received, CFI GNE Warrant Investor, LLC (together with its transferees, “Holder”), is entitled to subscribe for and purchase Three Million Three Hundred and Fifty Six Thousand (3,356,000) shares (the “Warrant Shares”) of fully paid and nonassessable $0.01 par value per share Common Stock (the “Common Stock”) of Grubbs & Ellis Company, a Delaware corporation (“Company”), at the Warrant Price (as hereinafter defined), subject to the provisions and upon the terms and conditions hereinafter set forth.  Capitalized terms used but not otherwise defined herein shall have the meanings ascribed in Section 17 hereof.
 
1.      Warrant Price.  The “Warrant Price” shall initially be one cent ($0.01) per share, subject to adjustment as provided in Section 7 below.
 
2.      Conditions to Exercise. Unless this Warrant has previously expired pursuant to the terms specified herein, the purchase right represented by this Warrant may be exercised, subject to adjustment as provided in Section 7 below, during the term commencing on the Issue Date and ending at 5:00 P.M. Pacific time on the third anniversary of the Issue Date of this Warrant (the “Expiration Date”) only in the following circumstances:
 
(a)           Exercisability Upon Satisfaction of Fundamental Change Condition.  Holder may exercise this Warrant on or before the Expiration Date upon the occurrence of a Fundamental Change in which the consideration received for each share of Common Stock has a fair market value equal to or greater than One Dollar and Ten Cents ($1.10) per share (the “Trigger Price”); provided that if an Early Termination Event occurs this Warrant shall terminate and be of no further force and effect; or
 
(b)           Exercisability Upon Satisfaction of VWAP Condition.  Holder may exercise this Warrant on or before the Expiration Date beginning from the first date on which the VWAP for any thirty (30) consecutive calendar day period following the date hereof is equal to or greater than the Trigger Price.

 
 

 

 
3.      Method of Exercise; Payment; Issuance of Shares; Issuance of New Warrant; Put Rights.  Subject to Section 2 hereof, the Warrant may be exercised, at the option of the Holder, by any one or combination of the following methods:
 
(a)           Cash Exercise.  Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised, by Holder, in whole or in part, by the surrender of the original of this Warrant (together with a duly executed Notice of Exercise in substantially the form attached hereto) at the principal office of Company (as set forth in Section 20 below) and by providing payment to Company, by wire transfer of immediately available funds, of an amount equal to the product of the Warrant Price per share multiplied by the number of Warrant Shares then being purchased.  In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased (the “Share Certificates”) shall be in the name of, and delivered to, Holder, or such other Person as such Holder may direct (subject to the terms of transfer contained herein and upon payment by such Holder of any applicable transfer taxes).  Such delivery shall be made within 3 Trading Days after the exercise of this Warrant and at Company’s expense and, unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions substantially identical to this Warrant and representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to Holder within 3 Trading Days after the exercise of this Warrant.
 
(b)           Cashless Exercise.  Subject to Section 2 hereof, if the Per Share Market Value of one share of Common Stock on the date of exercise is greater than the Warrant Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, Holder may exercise this Warrant by a cashless exercise by surrender of this Warrant at the principal office of Company together with the properly endorsed Notice of Exercise in which event Company shall issue to Holder a number of shares of Common Stock computed using the following formula:


 
X = Y - (A)(Y)
 
                 B
     
Where
X =
the number of shares of Common Stock to be issued to Holder.
     
 
Y =
the number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised.
     
 
A =
the Warrant Price.
     
 
B =
the Per Share Market Value of one share of Common Stock on the date of exercise.

 
In the event of any exercise of the rights represented by this Warrant, the Share Certificates shall be in the name of, and delivered to, Holder, or such other Person as such Holder may direct (subject to the terms of transfer contained herein and upon payment by such Holder of any applicable transfer taxes).  Such delivery shall be made within 3 Trading Days after the exercise of this Warrant and at Company’s expense and, unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions substantially identical to this Warrant and representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to Holder within 3 Trading Days after the exercise of this Warrant.

 
2

 

 
(c)           Loan Reduction Exercise.  Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised, by Holder, in whole or in part, by the surrender of the original of this Warrant (together with a duly executed Notice of Exercise in substantially the form attached hereto) at the principal office of Company and by delivering to Company an executed amendment to the Credit Agreement among Grubb & Ellis Management Services, Inc., as Borrower, Grubb & Ellis Company, as Parent Guarantor, the Several Lenders from time to time parties thereto, and ColFin GNE Loan Funding, LLC, as Administrative Agent, dated as of April 15, 2011. (the “Credit Agreement”), reducing the principal amount owed by an amount equal to the product of the Warrant Price per share multiplied by the number of Warrant Shares then being purchased.  In the event of any exercise of the rights represented by this Warrant, Share Certificates shall be in the name of, and delivered to, Holder, or such other Person as such Holder may direct (subject to the terms of transfer contained herein and upon payment by such Holder of any applicable transfer taxes).  Such delivery shall be made within 3 Trading Days after the exercise of this Warrant and at Company’s expense and, unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions substantially identical to this Warrant and representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to Holder within 3 Trading Days after the exercise of this Warrant.
 
4.      Representations and Warranties of Holder and Company.
 
(a)           Representations and Warranties by Holder.  Holder represents and warrants to Company with respect to this purchase as follows:
 
(i)      Authorization.  All company action on the part of Holder, its officers, directors, shareholders, members or partners, as applicable, necessary for the authorization, execution, delivery and performance of its obligations under this Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of Holder enforceable in accordance with its terms.
 
(ii)      Evaluation.  Holder has substantial experience in evaluating and investing in private placement transactions of securities of companies similar to Company so that Holder is capable of evaluating the merits and risks of its investment in Company and has the capacity to protect its interests.
 
(iii)     Resale.  Holder is acquiring this Warrant and the Warrant Shares issuable upon exercise of this Warrant (collectively the “Securities”) for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof.  Holder understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Act”) by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent as expressed herein and the other representations and warranties of Holder contained herein.
 
(iv)     Rule 144.  Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available.  Holder is aware of the provisions of Rule 144 promulgated under the Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions.
 
(v)      Accredited Investor.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 
3

 

 
(vi)     Opportunity To Discuss.  Holder has read, understood, and is familiar with Company’s public filings available at the Securities and Exchange Commission's website and has had an opportunity to discuss Company’s business, management and financial affairs with its management and an opportunity to review Company’s facilities.  Holder understands that such discussions, as well as the written information issued by Company, were intended to describe the aspects of Company’s business and prospects which Company believes to be material but were not necessarily a thorough or exhaustive description.
 
(b)           Representations and Warranties by Company.   Company hereby represents and warrants to Holder as follows:
 
(i)      Corporate Organization and Authority.  Company (a) is a corporation duly organized, validly existing, and in good standing in its jurisdiction of incorporation, and (b) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted. Company is qualified as a foreign corporation in all jurisdictions where such qualification is required except in each jurisdiction in which failure to so qualify would not have a material adverse effect on the business, operations, assets, liabilities, results of operations or financial condition of Company.
 
(ii)      Corporate Power .  Company has all requisite legal and corporate power and authority to execute, issue and deliver this Warrant, to issue the Warrant Shares issuable upon exercise or conversion of this Warrant, and to carry out and perform its obligations under this Warrant and any related agreements.
 
(iii)     Authorization; Enforceability.  All corporate action on the part of Company, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of its obligations under this Warrant and for the authorization, issuance and delivery of this Warrant and the Warrant Shares issuable upon exercise of this Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of Company enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, or to principles of equity.
 
(iv)     Valid Issuance of Warrant and Warrant Shares.  This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. The Warrant Shares issuable upon conversion of this Warrant, when issued, sold and delivered in accordance with the terms of this Warrant for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws.  Subject to applicable restrictions on transfer, the issuance and delivery of this Warrant and the Warrant Shares issuable upon exercise or conversion of this Warrant are not subject to any preemptive or other similar rights or any liens or encumbrances except as specifically set forth in Company’s Certificate of Incorporation or this Warrant or except as created by Holder.  Subject to the accuracy of Holder’s representations and warranties contained in Section 4(a), the offer, sale and issuance of the Warrant Shares, as contemplated by this Warrant, are exempt from the prospectus and registration requirements of applicable United States federal and state securities laws, and neither Company nor any authorized agent acting on its behalf has or will take any action hereafter that would cause the loss of such exemption.
 
(v)      No Conflict.  The execution, delivery, and performance of this Warrant will not result in (a) any violation of, conflict with, or constitute a default under, with or

 
4

 

 
without the passage of time or the giving of notice (1) any provision of Company’s Certificate of Incorporation or by-laws; (2) any provision of any material judgment, decree, or order to which Company is a party, by which it is bound, or to which any of its material assets are subject; (3) any material contract, obligation, or commitment to which Company is a party or by which it is bound; or (4) any material statute, rule, or governmental regulation applicable to Company, or (b) the creation of any lien, charge or encumbrance upon any material assets of Company.
 
(vi)     Capitalization.  The capitalization table of Company attached hereto as Annex A is complete and accurate as of March 31, 2011 and reflects (a) all outstanding capital stock of Company and (b) all outstanding warrants, options, conversion privileges, preemptive rights or other rights or agreements to purchase or otherwise acquire or issue any equity securities or convertible securities of Company.  Company has authorized the issuance of a total of 20,000,000 shares of Preferred Stock, 1,000,000 of which have been designated as Series A Preferred Stock, and 200,000,000 shares of Common Stock and no other shares of preferred stock have been designated or issued.
 
5.      Legends.
 
(a)           Legend.  Each certificate representing the Warrant Shares shall be endorsed with substantially the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING THE SECURITIES, (2) THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT OR (3) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COMPANY IS DELIVERED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION (WHICH OPINION MAY BE RENDERED BY IN-HOUSE COUNSEL).
 
Company need not enter into its stock records a transfer of Warrant Shares unless the conditions specified in the foregoing legend are satisfied.  Company may also instruct its transfer agent not to allow the transfer of any of the Warrant Shares unless the conditions specified in the foregoing legend are satisfied.
 
(b)           Removal of Legend and Transfer Restrictions.  The legend relating to the Act endorsed on a certificate pursuant to paragraph 5(a) of this Warrant shall be removed and Company shall issue a certificate without such legend to Holder if (i) the Securities are registered under the Act and a prospectus meeting the requirements of Section 10 of the Act is available, or (ii) Company has received an opinion of counsel (which may include the opinion of in-house counsel) reasonably satisfactory to Company to the effect that public sale, transfer or assignment of the Securities may be made without registration and without compliance with any restriction.
 
6.      Conditions to Transfer or Exercise of Warrant.  Subject to the further provisions of this Section 6, this Warrant and the Warrant Shares represented hereby may be sold, transferred, conveyed or assigned by Holder.  This Warrant may not be transferred to any person who is not an “accredited investor,” as such term is defined in Regulation D promulgated under the Act.  It

 
5

 

 
shall be a condition to any transfer or exercise of this Warrant that at the time of such transfer or exercise, Holder shall provide Company with a representation in writing that Holder or transferee is acquiring this Warrant and the shares of Common Stock to be issued upon exercise for investment purposes only, not as a nominee or agent, and not with a view to any sale or distribution.  As further condition to each transfer, at the request of Company, Holder shall surrender this Warrant to Company and the transferee shall receive and accept a Warrant, of like terms, tenor and date, executed by Company.
 
7.      Adjustment for Certain Events.
 
(a)           Adjustment Exceptions.  The number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 7 (in each case, after taking into consideration any prior adjustments pursuant to this Section 7); provided that this Section 7 will not apply to:  (i) the issuance of any Additional Warrants (as defined in the Credit Agreement); (ii) the issuance of any Common Stock upon the exercise of any Closing Date Warrants (as defined in the Credit Agreement) or any Additional Warrants; (iii) the issuance of Common Stock upon conversion of the Company’s existing outstanding 12% cumulative participating perpetual convertible preferred stock upon the terms and subject to the conditions of the Certificate of the Powers, Designations, Preferences and Rights of the 12% Cumulative Participating Perpetual Convertible Preferred Stock as such conversion terms thereof are in effect as of April 15, 2011; (iv) the issuance of Common Stock upon conversion of the Company’s existing outstanding 7.95% convertible senior securities due 2015, upon the terms and subject to the conditions of the Indenture for the 7.95% Convertible Senior Securities due 2015 as such conversion terms thereof are in effect as of April 15, 2011; and (v)  the issuance of Common Stock as equity compensation to employees, officers, directors and independent contractor brokers (in each case including as inducements to new hires or appointees) (collectively the “Equity Compensation Grants”), provided that this exception to the adjustment provisions of this Section 7 is limited to the following Equity Compensation Grants: (A) the issuance of any shares of common stock pursuant to any outstanding (as of April 15, 2011) options, restricted stock awards, stock appreciation rights, phantom stock rights or other equity grants (the “Existing Equity Compensation”), and (B) the issuance of an additional 2,000,000 shares of Common Stock in the form of options, restricted stock awards, stock appreciation rights, phantom stock rights or other equity grants (the “Additional Equity Compensation”) and the issuance of the Common Stock underlying such Additional Equity Compensation plus any Additional Equity Compensation and any Existing Equity Compensation that is forfeited, expired or terminated provided that any amount issued in excess of the above will result in any requisite adjustment under this Section 7.
 
(b)           Adjustment to Number of Warrant Shares Upon Issuance of Common Stock. Except in the case of an event described in either Section 7(d) or Section 7(e), if Company shall, at any time or from time to time after the Issue Date, issue or sell, or in accordance with Section 7(c) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than either:  (i) the Per Share Market Value or (ii) the Trigger Price, as such amounts are proportionately adjusted for stock splits, reverse stock splits, stock combinations, stock dividends and other distributions and recapitalizations affecting the Common Stock after the Issue Date, (collectively the “Original Prices” and the greater of (i) or (ii) the “Original Adjustment Price”), then immediately upon such issuance or sale (or deemed issuance or sale), the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such issuance or sale (or deemed issuance or sale) shall be increased to a number of Warrant Shares equal to the product obtained by multiplying the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such issuance or sale (or deemed issuance or sale) by a fraction (which shall in no event be less than one):

 
6

 

 
(i)      the numerator of which shall be the number of shares of Common Stock then outstanding immediately after such issuance or sale (or deemed issuance or sale); and
 
(ii)      the denominator of which shall be the sum of (A) the number of shares of Common Stock then outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock which the aggregate amount of consideration, if any, received by Company upon such issuance or sale (or deemed issuance or sale) would purchase at the Original Adjustment Price.
 
(c)           Effect of Certain Events on Adjustment to Number of Warrant Shares. For purposes of determining the adjusted number of Warrant Shares under Section 7(b) hereof, the following shall be applicable:
 
(i)      Issuance of Options. If Company shall, at any time or from time to time after the Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 7(c)(v)) for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than either of the Original Prices in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the number of Warrant Shares under Section 7(b)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 7(b)) of (x) the total amount, if any, received or receivable by Company as consideration for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration payable to Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options.  Except as otherwise provided in Section 7(c)(iii), no further adjustment of the number of Warrant Shares shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.
 
(ii)      Issuance of Convertible Securities.  If Company shall, at any time or from time to time after the Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 7(c)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than either of the Original Prices in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the number of

 
7

 

 
Warrant Shares pursuant to Section 7(b)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 7(b)) of (x) the total amount, if any, received or receivable by Company as consideration for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 7(c)(iii), (A) no further adjustment of the number of Warrant Shares shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the number of Warrant Shares shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the number of Warrant Shares have been made pursuant to the other provisions of this Section 7(c).
 
(iii)      Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by Company as consideration for the granting or sale of any Options or Convertible Securities referred to in Section 7(c)(i) or Section 7(c)(ii) hereof, (B) the minimum aggregate amount of additional consideration, if any, payable to Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 7(c)(i) or Section 7(c)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 7(c)(i) or Section 7(c)(ii) hereof are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 7(c)(i) hereof or any Convertible Securities referred to in Section 7(c)(ii) hereof, then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the number of Warrant Shares pursuant to this Section 7) the number of Warrant Shares issuable upon exercise of this Warrant at the time of such change shall be adjusted or readjusted, as applicable, to the number of Warrant Shares which would have been in effect at such time pursuant to the provisions of this Section 7 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment, the number of Warrant Shares issuable upon exercise of this Warrant is increased.
 
(iv)      Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 7 (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by Company), the number of Warrant Shares then issuable upon exercise of this Warrant shall forthwith be changed pursuant to the provisions of this Section 7 to the number of Warrant Shares which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued, provided that this Section 7(c)(iv) will not apply to the extent the Warrant is exercised.
 
(v)      Calculation of Consideration Received. If Company shall, at any time or from time to time after the Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 7(c), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by Company therefor; (B) for consideration other than cash, the amount of the consideration

 
8

 

 
other than cash received by Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by Company shall be the Per Share Market Value for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration in connection with an issuance or sale of other securities of Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (D) to the owners of the non-surviving entity in connection with any merger in which Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration shall be the dollar amount thereof and the fair value of any consideration other than cash or marketable securities shall be determined by an Independent Appraiser.
 
(vi)     Record Date. For purposes of any adjustment to the number of Warrant Shares in accordance with this Section 7, in case Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be, provided such distribution is actually made.
 
(vii)    Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 7.
 
(viii)    Other Dividends and Distributions. Subject to the provisions of this Section 7(c), if Company shall, at any time or from time to time after the Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of outstanding shares of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date (as hereinafter defined), retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 7 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

 
9

 

 
(d)           Adjustment to Number of Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock.  If Company shall, at any time or from time to time after the Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such dividend, distribution or subdivision shall be proportionately increased.  If Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such combination shall be proportionately decreased.  Any adjustment under this Section 7(d) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.
 
(e)           Adjustment to Number of Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger.  Subject to Section 2(a), in the event of any (i) capital reorganization of Company, (ii) reclassification of the stock of Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of Company with or into another Person, (iv) sale of all or substantially all of Company's assets to another Person, (v) transaction constituting a Fundamental Change or (v) other similar transaction (other than any such transaction covered by Section 7(d)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance satisfactory to the Holder) shall be made with respect to the Holder's rights under this Warrant to insure that the provisions of this Section 7 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant.  In the event of a Fundamental Change, following which the Warrants would cease to represent the right to acquire securities, no adjustment shall be made pursuant to the terms hereof.  The provisions of this Section 7(e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, if the Warrant is exercisable in accordance with Section 2 hereof with respect to any corporate event or other transaction contemplated by the provisions of this Section 7(e), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise

 
10

 

 
rights contained in Section 3 instead of giving effect to the provisions contained in this Section 7(e) with respect to this Warrant.
 
(f)           Certain Events. If any event of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 7; provided, that no such adjustment pursuant to this Section 7(f) shall decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 7.
 
8.      Notice of Adjustments.  Whenever the kind or number of securities issuable under this Warrant shall be adjusted pursuant to Section 7 hereof, Company shall prepare a certificate signed by an officer of Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and number or kind of shares issuable upon exercise of this Warrant after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by certified or registered mail, return receipt required, postage prepaid) within thirty (30) days of such adjustment to Holder as set forth in Section 20 hereof.
 
9.      Financial and Other Reports.  From time to time up to the earlier of the Expiration Date or the complete exercise of this Warrant, Company shall furnish to Holder, if Company is a private company, (a) unaudited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements within 30 days of each fiscal month of each fiscal year, certified by Company’s president or chief financial officer, and (b) Company’s complete annual audited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements certified by an independent certified public accountant selected by Company within 120 days of the fiscal year end or, if sooner, promptly following such time as Company’s Board of Directors receives the audit.  If Company is a publicly held company, it shall deliver to Holder quarterly unaudited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements and annual audited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements, certified by a recognized firm of certified public accountants, within 5 days after the statements are required to be provided to the SEC.  All such statements are to be prepared using GAAP and, if Company is a publicly held company, are to be in compliance with SEC requirements.  At the time of Company’s delivery of quarterly financial statements in accordance with this Section 9, Company shall also deliver to Holder an updated capitalization table of Company in the form attached hereto as Annex A.  For so long as Company is a privately held company, Holder agrees to hold in confidence and trust and not to improperly use or disclose any information provided to or learned by Holder in connection with its rights under this Section 9 regarding the business as conducted by Company as of today’s date on the same terms and conditions as set forth in Section 11.8 of the Credit Agreement.
 
10.          Transferability of Warrant.  This Warrant is transferable on the books of Company at its principal office by the registered Holder upon surrender of this Warrant properly endorsed, subject to compliance with Section 6 and applicable federal and state securities laws.  Company shall issue and deliver to the transferee a new Warrant representing the Warrant so transferred.  Upon any partial transfer, Company will issue and deliver to Holder a new Warrant with respect to the Warrant not so transferred.  Holder shall not have any right to transfer any portion of this Warrant to any direct competitor of Company or to any significant shareholder or any direct or

 
11

 

 
indirect subsidiary of any such direct competitor of the Company which is known or should be known as such to the Holder.
 
11.          Registration Rights. Company grants registration rights to Holder of this Warrant for any Common Stock of Company obtained by Holder upon exercise or conversion of this Warrant, pursuant to the Registration Rights Agreement dated as of April 15, 2011 between Grubb & Ellis Company CDCF II GNE Holding, LLC and CFI GNE Warrant Investor, LLC and subject to pro rata limitations on the number of securities which can be included in a registration among other persons who have the right to register securities pursuant to “piggyback” rights afforded to such persons.
 
12.          No Fractional Shares.  No fractional share of Common Stock will be issued in connection with any exercise or conversion hereunder, but in lieu of such fractional share Company shall make a cash payment therefor upon the basis of the Warrant Price then in effect.
 
13.          Charges, Taxes and Expenses.  Issuance of certificates for shares of Common Stock upon the exercise or conversion of this Warrant shall be made without charge to Holder for any United States or state of the United States documentary stamp tax or other incidental expense with respect to the issuance of such certificate, all of which taxes and expenses shall be paid by Company, and such certificates shall be issued in the name of Holder.
 
14.          No Shareholder Rights Until Exercise; Additional Rights.  Except as expressly provided herein, this Warrant does not entitle Holder to any voting rights or other rights as a shareholder of Company prior to the exercise hereof.  Company agrees that if it shall at any time in any manner grant to or confer upon any other holder of a warrant any right or benefit that has the effect of establishing rights or otherwise benefiting the holder of any such warrant, in their capacity as holder of such warrant, in a manner more favorable than the rights and benefits established in favor of the Holder (“Additional Rights”) then, in each case, the Holder shall automatically and without further action on behalf of Holder or Company receive substantially the same rights and benefits as the Additional Rights afforded to such other holder of a warrant.
 
15.          Registry of Warrant.  Company shall maintain a registry showing the name and address of the registered Holder of this Warrant.  This Warrant may be surrendered for exchange or exercise, in accordance with its terms, at such office or agency of Company, and Company and Holder shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.
 
16.          Loss, Theft, Destruction or Mutilation of Warrant.  Upon receipt by Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to it, and, if mutilated, upon surrender and cancellation of this Warrant, Company will execute and deliver a new Warrant, having terms and conditions substantially identical to this Warrant, in lieu hereof.
 
17.          Definitions.  For purposes of this Warrant, the following terms have the following meanings:

Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.


 
12

 

Board” means the board of directors of Company.

Capital Stock” of any person means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock or other equity participations, including partnership interests, whether general or limited, of such person and any rights (other than debt securities convertible and exchangeable into an equity interest), warrants or options to acquire an equity interest in such person.

Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

Early Termination Event” means any consummation of (a) any recapitalization, reclassification or change of Common Stock (other than changes resulting from a subdivision or combination) as a result of which Common Stock would be converted into cash, or (b) any consolidation or merger involving Company pursuant to which Common Stock will be converted into cash; provided that in the case of either (a) or (b) of this definition, the applicable transaction is an all-cash transaction, and each holder of Common Stock receives an amount less than the Trigger Price.

Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 2 shall have been satisfied at or prior to 5:00 p.m., Pacific time, on a Business Day, including, without limitation, the receipt by Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

Fundamental Change” means the occurrence after the time of the Issue Date, the following:

(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, except that a person will be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 50% or more of the total voting power of Company’s Voting Stock (other than as a result of any merger, share exchange, transfer of assets or similar transaction solely for the purpose of changing Company’s jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock of the surviving entity); or

(b) consummation of (A) any recapitalization, reclassification or change of Common Stock (other than changes resulting from a subdivision or combination) as a result of which Common Stock would be converted into, or exchanged for, stock, other securities, other property or assets, or (B) any statutory share exchange, consolidation or merger involving Company pursuant to which Common Stock will be converted into cash, securities or other property, or (C) any sale, transfer, assignment, lease, conveyance or other disposition, directly or indirectly, of all or substantially all Company’s assets and the assets of Company’s Subsidiaries, considered as a whole (other than a disposition of such assets as an entirety or virtually as an entirety to a wholly-owned Subsidiary) shall have occurred, provided that the following shall not be a Fundamental Change:


 
13

 

(i) any transaction pursuant to which holders of Company’s Capital Stock immediately prior to the transaction are entitled to exercise, directly or indirectly, 50% or more of the total voting power of all shares of Capital Stock entitled to vote generally in the election of directors of the continuing or surviving Person immediately after the transaction; or

(ii) any merger, share exchange, transfer of assets or similar transaction solely for the purpose of changing Company’s jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of common stock solely into shares of common stock of the surviving entity; or

(c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose nomination, election or appointment by such board or whose nomination for election by Company’s stockholders was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election, nomination or appointment was previously so approved) cease for any reason to constitute 50% or more of the Board of Directors then in office; or

(d) Company’s stockholders shall have approved any plan of liquidation or dissolution; or

(e) the Common Stock (or other common stock into which the Securities are then convertible pursuant to the terms of this Indenture) ceases to be listed on the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the NYSE Amex (or their respective successors).

Independent Appraiser” means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of Company) that is regularly engaged in the business of appraising the Capital Stock or assets of corporations or other entities as going concerns, and which is not affiliated with either Company or the Holder of any Warrant.

Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

Per Share Market Value” means on any particular date (a) the last sale price per share of the Common Stock on such date on the NYSE Amex (or their respective successors) or another registered national stock exchange on which the Common Stock is then listed, or if there is no such price on such date, then the closing bid price or last sale price, as applicable, on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the NYSE Amex (or their respective successors). or any registered national stock exchange, the closing bid price or last sale price, as applicable, for a share of Common Stock in the over the counter market, as reported by the OTC Bulletin Board or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes for the five (5) Trading Days preceding such date of determination, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Independent Appraiser mutually agreeable to Company and the Holder; provided, that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period.

 
14

 

The determination of fair market value by an Independent Appraiser shall be based upon the fair market value of Company determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties.  In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.

Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

Trading Day” means a day on which the principal Trading Market is open for trading.

Trading Market” means any of the following markets or exchanges on which the Common Shares are listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).

Voting Stock” of any person means Capital Stock of such person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such person, whether at all times or only for so long as no senior class of securities has such voting power by reason of any contingency.

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Shares for such date (or the nearest preceding date) on the Trading Market on which the Common Shares are then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Shares for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Shares are not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Shares are then reported in the "Pink Sheets" published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per Common Share so reported, or (d) in all other cases, the fair market value of a Common Share as determined by an Independent Appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
 
18.          Miscellaneous.
 
(a)           Issue Date.  The provisions of this Warrant shall be construed and shall be given effect in all respect as if it had been issued and delivered by Company on April 15, 2011.
 
(b)           Successors.  This Warrant shall be binding upon any successors or assigns of Company.
 
(c)           Headings.  The headings used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant.

 
15

 

 
(d)           Saturdays, Sundays, Holidays.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday in the State of New York, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.
 
(e)           Attorney’s Fees.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney’s fees.
 
19.          No Impairment.  Company will not, by amendment of its Certificate of Incorporation or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of Holder against impairment.
 
20.          Addresses.  Any notice required or permitted hereunder shall be in writing and shall be mailed by overnight courier, registered or certified mail, return receipt requested, and postage prepaid, or otherwise delivered by hand or by messenger, addressed as set forth below, or at such other address as Company or Holder shall have furnished to the other party in accordance with the delivery instructions set forth in this Section 20.


 
If to Company:
Grubb & Ellis Company
   
1551 N. Tustin Ave., Suite 300
   
Santa Ana, CA 92705
   
Attn:  Chief Financial Officer
     
 
    With Copies to:
Zukerman, Gore, Brandeis & Crossman, LLP
   
875 Third Avenue
   
New York, NY 10022
   
Attn:  Clifford A. Brandeis
     
     
 
If to Holder:
CFI GNE Warrant Investor, LLC
   
c/o Colony Capital, LLC
   
2450 Broadway, 6th floor
   
Santa Monica, CA 90404
   
Attn:  Todd Sammann
     
 
     With Copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
   
300 South Grand Avenue, Suite 3400
   
Los Angeles, California 90071
   
Attn:  Rick Madden and Kristine Dunn

If mailed by registered or certified mail, return receipt requested, and postage prepaid, notice shall be deemed to be given five (5) days after being sent, and if sent by overnight courier, by hand or by messenger, notice shall be deemed to be given when delivered (if on a business day, and if not, on the next business day).
 

 
16

 

 
21.          WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS WARRANT OR THE WARRANT SHARES.
 
22.          GOVERNING LAW.  THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD REQUIRE THE APPLICATION OF ANOTHER STATE'S LAWS.

 
[Remainder of page intentionally left blank]
 

 
17

 

IN WITNESS WHEREOF, Company has caused this Warrant to be executed by its officer thereunto duly authorized.
 
GRUBBS & ELLIS COMPANY

By:
 /s/ Michael Rispoli
 
 
Name:
Michael Rispoli
 
 
Title:
Chief Financial Officer
 

 
Dated as of April 15, 2011.
 

 
 

 


 
Accepted and Agreed to
     
 
By:
CFI GNE Warrant Investor, LLC
       
   
By:
CFI RE Holdco, LLC, its managing member
       
     
By:
Colony Financial, Inc., its managing member
         
       
By:
/s/ Mark M. Hedstrom
         
Mark M. Hedstrom
         
Vice President
       




 
 

 

 
NOTICE OF EXERCISE
 
To:
[Name of Company]
_____________________
_____________________
_____________________
 
2.
The undersigned Warrantholder (“Holder”) elects to acquire shares of the Common Stock (the “Common Stock”) of _____________ (the “Company”), pursuant to the terms of the Stock Purchase Warrant issued effective [Ÿ] (the “Warrant”).
 
3.
Holder exercises its rights under the Warrant as set forth below:
 
   
(           )
Holder elects to purchase _____________ shares of Common Stock as provided in Section 3(a) and tenders herewith a check in the amount of $___________ as payment of the purchase price.
       
   
(           )
Holder elects to convert the purchase rights into shares of Common Stock as provided in Section 3(b) of the Warrant.
       
   
(           )
Holder elects to convert the purchase rights into shares of Common Stock as provided in Section 3(c) of the Warrant.

 
4.
Holder surrenders the Warrant with this Notice of Exercise.
 
Holder represents that it is acquiring the aforesaid shares of Common Stock for investment and not with a view to or for resale in connection with distribution and that Holder has no present intention of distributing or reselling the shares.
 
Please issue a certificate representing the shares of the Common Stock in the name of Holder or in such other name as is specified below:
 
 
Name:
   
       
 
Address:
   
       
 
Taxpayer I.D.:
   

 

 
 

 



 
[NAME OF HOLDER]
       
 
By:
 
   
Name:
 
   
Title:
 
       
 
Date:   _______ ___, 20____



 
 

 

ANNEX A
 
CAPITALIZATION TABLE

(as of March 31, 2011)


Class of Stock or Equity Interest
Amount Authorized (if applicable)
Amount Outstanding
Number of Shares Outstanding (or Shares underlying such equity interest)
Common Stock; $0.01 par value
200,000,000
69,921,581 (1)
69,921,581
Preferred Stock; $0.01 par value
19,000,000
0
0
12% Cumulative Participating Perpetual Convertible Preferred Stock; $0.01 par value
1,000,000
965,700
58,527,214
Options
(2)
321,400
321,400
Unvested Restricted Stock
(2)
4,257,843
4,257,843
Phantom Stock
NA
4,058,251
4,058,251
Treasury Stock
NA
1,267,974
1,267,974
7.95% convertible senior securities due 2015; convertible at the rate of 445.583 Shares for each $1,000 principal amount
NA
$31,500,000
14,035,865



(1)  Includes Unvested Restricted Stock set forth on this table, but does not include Phantom Stock set forth in this table.

(2)  590,175 Shares remaining available for future issuance under previously authorized equity compensation plans.

EX-99.4 5 ex99-4.htm ex99-4.htm
 
EXHIBIT 99.4

 
EXECUTION VERSION
 





 
CREDIT AGREEMENT
 
among
 
GRUBB & ELLIS MANAGEMENT SERVICES, INC,
 
as Borrower,
 
GRUBB & ELLIS COMPANY,
 
as Parent Guarantor,
 
The Several Lenders from Time to Time Parties Hereto,
 
and
 
COLFIN GNE LOAN FUNDING, LLC,
as Administrative Agent,
 
Dated as of April 15, 2011
 
'
 




 
 

 

TABLE OF CONTENTS
 
Page
SECTION 1.
DEFINITIONS
1
     
1.1
Defined Terms
1
1.2
Other Definitional Provisions
20
     
SECTION 2.
AMOUNT AND TERMS OF COMMITMENTS AND LOANS
21
     
2.1
Commitments and Loans
21
2.2
Procedure for Borrowing
21
2.3
Repayment of Loans
21
2.4
Optional Prepayments
21
2.5
Mandatory Prepayments
21
2.6
Prepayment Premium
22
2.7
Interest Rates and Payment Dates
22
2.8
Computation of Interest and Fees
23
2.9
Pro Rata Treatment and Payments
23
2.10
Requirements of Law
24
2.11
Taxes
25
2.12
Change of Lending Office
27
2.13
Tax Treatment of Units
28
2.14
Replacement of Lenders
28
     
SECTION 3.
FEES
28
     
3.1
Closing Fee.
28
     
SECTION 4.
REPRESENTATIONS AND WARRANTIES
28
     
4.1
Financial Condition
28
4.2
No Change
29
4.3
Existence; Compliance with Law
29
4.4
Power; Authorization; Enforceable Obligations
29
4.5
No Legal Bar
29
4.6
Litigation
30
4.7
No Default
30
4.8
Ownership of Property; Liens
30
4.9
Intellectual Property
30
4.10
Taxes
30
4.11
Federal Regulations
30
4.12
Labor Matters
30
4.13
ERISA
31
4.14
Investment Company Act; Other Regulations
31
4.15
Subsidiaries
31
4.16
Use of Proceeds
31
4.17
Environmental Matters
31
4.18
Accuracy of Information, etc
32
4.19
Security Documents
33


 
 

 


4.20
Solvency
33
4.21
Regulation H
33
4.22
Accuracy of Borrowing Base
33
     
SECTION 5.
CONDITIONS PRECEDENT
33
     
5.1
Conditions to Initial Extension of Credit
33
5.2
Conditions to Each Loan (Other Than Any Additional Loan)
36
     
SECTION 6.
AFFIRMATIVE COVENANTS
36
     
6.1
Financial Statements
36
6.2
Certificates; Other Information
37
6.3
Payment of Obligations
39
6.4
Maintenance of Existence; Compliance
39
6.5
Maintenance of Property; Insurance
39
6.6
Inspection of Property; Books and Records; Discussions
39
6.7
Notices
40
6.8
Environmental Laws
40
6.9
Additional Collateral, etc
40
6.10
Cash Management.
42
6.11
Post-Closing.
42
6.12
Use of Proceeds of Additional Loans.
42
     
SECTION 7.
NEGATIVE COVENANTS
42
     
7.1
Financial Condition Covenants
42
7.2
Indebtedness
42
7.3
Liens
44
7.4
Fundamental Changes
45
7.5
Disposition of Property
45
7.6
Restricted Payments
47
7.7
Lines of Business.
47
7.8
Investments.
47
7.9
Clauses Restricting Subsidiary Distributions
49
7.10
Transactions with Affiliates
49
7.11
Sales and Leasebacks
49
7.12
Swap Agreements
50
7.13
Changes in Fiscal Periods
50
7.14
Negative Pledge Clauses
50
7.15
Capital Expenditures
50
7.16
Amendments or Waivers of Organizational Documents and other Indebtedness
50
7.17
Prepayments and Cancellations of Other Indebtedness
50
     
SECTION 8.
EVENTS OF DEFAULT
50
     
SECTION 9.
THE ADMINISTRATIVE AGENT
53
     
9.1
Appointment
53
9.2
Delegation of Duties
53


 
 

 


9.3
Exculpatory Provisions
54
9.4
Reliance by Administrative Agent
54
9.5
Notice of Default
54
9.6
Non-Reliance on Administrative Agent and Other Lenders
54
9.7
Indemnification
55
9.8
Administrative Agent in Its Individual Capacity
55
9.9
Successor Administrative Agent
55
     
SECTION 10.
MISCELLANEOUS
56
     
10.1
Amendments and Waivers
56
10.2
Notices
56
10.3
No Waiver; Cumulative Remedies
57
10.4
Survival of Representations and Warranties
58
10.5
Payment of Expenses and Taxes
58
10.6
Successors and Assigns; Participations and Assignments
59
10.7
Adjustments; Set-off
61
10.8
Counterparts
61
10.9
Severability
61
10.10
Integration
61
10.11
GOVERNING LAW
61
10.12
Submission To Jurisdiction; Waivers
62
10.13
Acknowledgements
62
10.14
Releases of Guarantees and Liens
62
10.15
Confidentiality
63
10.16
WAIVERS OF JURY TRIAL
63
10.17
USA Patriot Act
63


 
 

 

SCHEDULES:
 
1.1
Commitments
2.13
Allocations
4.4
Consents, Authorizations, Filings and Notices
4.6
Litigation
4.15
Subsidiaries
4.19
UCC Filing Jurisdictions
6.11
Post-Closing Requirements
7.2(g)
Existing Indebtedness
7.3(d)
Existing Liens
7.5(j)
Existing Joint Ventures
7.8(d)
Existing Investments

 
EXHIBITS:
 
A
Form of Guarantee and Collateral Agreement
B
Form of Compliance Certificate
C
Form of Closing Certificate
D
Form of Solvency Certificate
E
Form of Assignment and Assumption
F
Form of U.S. Tax Certificate
G
Form of Borrowing Base Certificate
H
Form of Additional Warrants




 
 

 

CREDIT AGREEMENT (this “Agreement”), dated as of April 15, 2011, among GRUBB & ELLIS MANAGEMENT SERVICES, INC., a Delaware corporation (the “Borrower”), GRUBB & ELLIS COMPANY, a Delaware corporation (the “Parent Guarantor”), the lenders from time to time parties to this Agreement (the “Lenders”), and COLFIN GNE LOAN FUNDING, LLC, as administrative agent.
 
The parties hereto hereby agree as follows:
 
SECTION 1.  DEFINITIONS
 
1.1           Defined Terms.  As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.
 
Additional Loans”:  as defined in Section 2.1.
 
Additional Warrants”:  as defined in Section 2.7(d).
 
Administrative Agent”:  ColFin GNE Loan Funding, LLC, together with its affiliates, as the administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any of its successors.
 
Affiliate”:  as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
 
Aggregate Exposure”:  with respect to any Lender at any time, an amount equal to the sum of (a) the aggregate then unpaid principal amount of such Lender’s Loans and (b) the amount of such Lender’s Commitment then in effect.
 
Aggregate Exposure Percentage”:  with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender’s Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at such time.
 
Agreement”:  as defined in the preamble hereto.
 
Asset Sale”:  any Disposition of property or series of related Dispositions of property (excluding any such Disposition permitted by clause (a), (b), (c), (e), (f), (g) or (i) of Section 7.5 or, solely to the extent the net cash proceeds of such Disposition are deposited by the applicable Group Member in a deposit account subject to a perfected Lien pursuant to a control agreement in favor of the Administrative Agent in form and substance satisfactory to Administrative Agent, clause (h) of Section 7.5) that yields gross proceeds to any Group Member (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $25,000.
 
Assignee”:  as defined in Section 10.6(b).
 
Assignment and Assumption”:  an Assignment and Assumption, substantially in the form of Exhibit E.
 

 
 

 

Attributable Indebtedness”:   on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.
 
Benefitted Lender”:  as defined in Section 10.7(a).
 
Board”:  the Board of Governors of the Federal Reserve System of the United States (or any successor).
 
Borrower”:  as defined in the preamble hereto.
 
Borrowing Base”:  at any time, the sum of (a) 100% of the Eligible Receivables at such time, minus (b) Reserves.  The Administrative Agent may, in its Permitted Discretion, reduce the advance rate set forth above, adjust Reserves or reduce one or more of the other elements used in computing the Borrowing Base.
 
Borrowing Base Certificate”:  a certificate, signed and certified as accurate and complete by the chief financial officer of the Borrower and the Parent Guarantor, in substantially the form of Exhibit G.
 
Borrowing Date”:  any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder. There shall not be more than two Borrowing Dates (excluding any such date in respect of any Additional Loans).
 
Business”:  as defined in Section 4.17(b).
 
Business Day”:  a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.
 
Capitalized Lease Obligations”: as to any Person, all obligations under Capitalized Leases of such Person or any of its Subsidiaries, in each case taken at the amount thereof accounted for as liabilities on the balance sheet (excluding the footnotes thereto) of such Person in accordance with GAAP.
 
Capitalized Leases”:  as to any Person, all leases of property that are required to be, in accordance with GAAP, recorded as capitalized leases on the balance sheet (excluding the footnotes thereto) of such Person, provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability on the balance sheet (excluding the footnotes thereto) of such Person in accordance with GAAP.
 
Capital Expenditures” shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital expenditures.
 
 “Capital Stock”:  any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.
 
Cash Management Accounts”: as defined in Section 6.10.
 

 
2

 

Cash Management Account Bank”: as defined in Section 6.10.
 
Certificate of Designations”: the Parent Guarantor’s Certificate of Powers, Designations, Preferences and Rights of the 12% Cumulative Participating Perpetual Convertible Preferred Stock, as in effect on the Closing Date.
 
Closing Date”:  the date on which the conditions precedent set forth in Section 5.1 shall have been satisfied, which date is April 15, 2011.
 
Closing Date Warrants”: those certain warrants to purchase shares of common stock of the Parent Guarantor issued to the Lenders or their designees on the Closing Date.
 
Closing Date Warrant Shares”: at any date of determination, the aggregate number of shares of common stock of the Parent Guarantor that may be purchased pursuant to the Closing Date Warrants, calculated as of such date of determination.
 
Code”:  the Internal Revenue Code of 1986, as amended.
 
Collateral”:  all property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.
 
Commitment”:  as to any Lender, the obligation of such Lender, if any, to make Loans to the Borrower in an aggregate principal amount not to exceed the amount set forth under the heading “Commitment” opposite such Lender’s name on Schedule 1.1.  The aggregate amount of the Commitments shall not exceed the Maximum Loan Amount.
 
Compliance Certificate”:  a certificate duly executed by a Responsible Officer of the Borrower substantially in the form of Exhibit B.
 
Continuing Directors”:  the directors of the Parent Guarantor on the Closing Date, after giving effect to the transactions contemplated hereby, and each other director, if, in each case, such other director’s nomination for election to the board of directors of the Parent Guarantor is recommended by at least a majority of the then Continuing Directors in his or her election by the shareholders of the Parent Guarantor.
 
Contractual Obligation”:  as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
 
Credit Party”:  the Administrative Agent or any other Lender.
 
Customer”:  the account debtor with respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right and/or any party who enters into or proposes to enter into any contract or other arrangement with any Loan Party, pursuant to which such Loan Party is to delivery any personal property or perform any services.
 
Daymark”:  Daymark Realty Advisors, Inc. and its Subsidiaries.
 
Default”:  any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
 

 
3

 

Disposition”:  with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof.  The terms “Dispose” and “Disposed of” shall have correlative meanings.
 
Dollars” and “$”:  dollars in lawful currency of the United States.
 
Domestic Subsidiary”:  any Subsidiary of the Parent Guarantor organized under the laws of any jurisdiction within the United States.
 
EBITDA”:  with respect to any Person, on a consolidated basis, for any period, the sum of (a) net income (or loss) of such Person for such period (excluding extraordinary gains and losses), plus (b) without duplication and to the extent already deducted (and not added back) in arriving at such net income (or loss), the sum of the following amounts for such period: (i) all interest expense (excluding all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing) for such period, (ii) all charges against income for such period for federal, state, local and foreign taxes actually paid, (iii) to the extent not already included in net income, any proceeds received under any business interruption insurance policy during such period, (iv) depreciation expenses for such period, (v) amortization expenses for such period, (vi) non-cash stock-based award compensation expenses for such period, and (vii) all out of pocket expenses for such period incurred by such Person in connection with this Agreement and the other Loan Documents and not capitalized, minus (c) to the extent included in arriving at such net income, non-cash gains.  For purposes of the foregoing, the net income of any Joint Venture shall be excluded; provided that net income shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash to the referent Person or a Subsidiary thereof (excluding Daymark) in respect of such period by such Joint Venture.
 
Eligible Receivables”: at any time, the Receivables of any Loan Party (excluding Daymark) that are recorded on the general ledger of any Loan Party (excluding Daymark) which the Administrative Agent determines in its Permitted Discretion are eligible as the basis for the extension of Loans hereunder.  Without limiting the Administrative Agent’s discretion provided herein, Eligible Receivables shall not include any Receivable:

(a)           which is not subject to a first priority perfected security interest (subject to the Liens described in clause (a) of the definition of Permitted Liens) in favor of the Administrative Agent;

(b)           which is subject to any Lien other than a Lien in favor of the Administrative Agent;

(c)           with respect to which is unpaid more than 60 days after the original due or more than 90 days after the original invoice date or which has been written off the books of any Loan Party or otherwise designated as uncollectible; provided that Receivables comprised of a Customer payable that is paid on an installment basis pursuant to an arrangement entered into at the point of sale (or time at which the service giving rise to the payable was performed) in the ordinary course of business, and which would otherwise constitute an Eligible Receivable but for this clause, shall be permitted to be included as an Eligible Receivable so long as such account is no more than 30 days past due (pursuant to such installment arrangement);

(d)           which is owing by a Customer for which more than 50% of the Receivables owing from such Customer and its Affiliates are not deemed Eligible Receivables hereunder;


 
4

 

(e)           which is owing by a Customer to the extent the aggregate amount of Receivables owing from such Customer and its Affiliates to the Loan Parties or any of them exceeds 25% of the aggregate Eligible Receivables;

(f)           with respect to which any covenant, representation, or warranty contained in this Agreement or in any other Loan Document has been breached or is not true in any material respect on the date when made (except that any covenant, representation or warranty that is qualified by or subject to a materiality qualifier or “Material Adverse Effect” shall be true in all respects);

(g)           which (i) does not arise from the sale of goods or performance of services in the ordinary course of business, (ii) except for accrued wage Receivables for which there are no offsetting payables, (A) is not evidenced by an invoice or other documentation satisfactory to the Administrative Agent which has been sent to the Customer, or (B) represents a progress billing, (iii) is contingent upon the completion by any Loan Party of any further performance, (iv) represents a sale on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment, cash-on-delivery or any other repurchase or return basis (other than any rights of the Customer to return goods pursuant to customary contracts or arrangements entered into by any Loan Party in the ordinary course of business consistent with past practices; provided that the Loan Parties shall have provided the Administrative Agent with written notice of such contracts or arrangements and the Administrative Agent may establish Reserves in its Permitted Discretion following good faith consultation with the Borrower), (v) relates to payments of interest, (vi) was created on cash on delivery terms, or (vii) with respect to which any check or other instrument of payment has been returned uncollected for any reason;

(h)           for which the services giving rise to such Receivable have not been performed by the applicable Loan Party;

(i)           which is owed by a Customer which has (i) applied for, suffered, or consented to the appointment of any receiver, custodian, trustee, or liquidator of its assets, (ii) has had possession of all or a material part of its property taken by any receiver, custodian, trustee or liquidator, (iii) filed, or had filed against it, any request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as bankrupt, winding-up, or voluntary or involuntary case under any state or federal bankruptcy laws (other than post-petition accounts payable of a Customer that is a debtor-in-possession under the Bankruptcy Code and reasonably acceptable to the Administrative Agent), (iv) has admitted in writing its inability, or is generally unable to, pay its debts as they become due, (v) become insolvent, or (vi) ceased operation of its business;

(j)           which is owed by any Customer which has sold all or a substantially all of its assets;

(k)           which is owed by a Customer which (i) does not maintain its chief executive office in the U.S. or (ii) is not organized under applicable law of the U.S., unless, in either case, such Receivable is backed by a letter of credit acceptable to the Administrative Agent which is in the possession of, has been assigned to and is directly drawable by the Administrative Agent;

(l)           which is owed by (i) the government (or any department, agency, public corporation, or instrumentality thereof) of any country other than the U.S., or (ii) the government of the U.S., or any department, agency, public corporation, or instrumentality thereof, unless the

 
5

 

Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), and any other steps necessary to perfect the Lien of the Administrative Agent in such Receivable have been complied with to the Administrative Agent’s satisfaction; provided that up to $2,500,000 in the aggregate of Receivables which would otherwise constitute an Eligible Receivable but for this clause, shall be permitted to be included as an Eligible Receivable;

(m)           which is owed by any Affiliate, employee, officer, director, agent or stockholder of any Loan Party; provided that any Receivable arising out of management fees or other servicing fees paid to the Loan Parties (other than Daymark) by Grubb & Ellis Healthcare REIT, Inc., Kojaian Ventures, LLC and any Related Fund of Kojaian Ventures, LLC, in each case, that would constitute an Eligible Receivable but for this clause (m), shall be permitted to be included as an Eligible Receivable;

(n)           the proceeds of which, pursuant to an arrangement with a Customer, are required to be applied to the payment of Property Expenses due and outstanding to any third party (other than any Group Member or any employee of any Group Member) as of the applicable date of determination, but only to the extent that such proceeds are to be applied to such payments; or

(o)           which is subject to any counterclaim, deduction, defense, setoff or dispute but only to the extent of any such counterclaim, deduction, defense, setoff or dispute.

In the event that a Receivable which was previously an Eligible Receivable ceases to be an Eligible Receivable hereunder, the Borrower shall notify the Administrative Agent thereof on and at the time of submission to the Administrative Agent of the next Borrowing Base Certificate.  In determining the amount of an Eligible Receivable, the face amount of a Receivable may, in the Administrative Agent’s Permitted Discretion, be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that any Loan Party may be obligated to rebate to a Customer pursuant to the terms of any agreement or understanding (written or oral)) and (ii) the aggregate amount of all cash received in respect of such Receivable but not yet applied by the applicable Loan Party to reduce the amount of such Receivable.
 
Environmental Laws”:  any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.
 
ERISA”:  the Employee Retirement Income Security Act of 1974, as amended from time to time.
 
ERISA Affiliate”:  any trade or business (whether or not incorporated) that, together with any of the Loan Parties, is treated as a single employer under Section 414 of the Code.
 
ERISA Event”:  (a) any Reportable Event with respect to any Pension Plan that is subject to Title IV of ERISA; (b) the existence of a Prohibited Transaction with respect to any Plan subject to Section 4975 of the Code or Section 406 of ERISA that could reasonably be expected to result in liability to any of the Loan Parties; (c) any failure by any Pension Plan to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such
 

 
6

 

Pension Plan, including any “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 303 of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Pension Plan or the failure by any of the Loan Parties or any ERISA Affiliate to make any required contribution to a Multiemployer Plan; (e) the incurrence by any of the Loan Parties or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Pension Plan, including but not limited to the imposition of any Lien in favor of the PBGC or any Pension Plan; (f) a determination that any Pension Plan is, or is expected to be, in “at risk” status (within the meaning of Title IV of ERISA); (g) the receipt by any Group Member or any ERISA Affiliate from the PBGC or a Plan administrator of any notice relating to an intention to terminate any Pension Plan or to appoint a trustee to administer any Pension Plan under Section 4042 of ERISA; (h) the incurrence by any of the Loan Parties or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the withdrawal or partial withdrawal from any Pension Plan or Multiemployer Plan; or (i) the receipt by any of the Loan Parties or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, Insolvent, in Reorganization or in endangered or critical status, within the meaning of Section 432 of the Code or Section 305 or Title IV of ERISA.
 
Event of Default”:  any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
 
Exchange Act”: the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.
 
Excluded Subsidiary”:  (i) any Domestic Subsidiary that is a Subsidiary of a Foreign Subsidiary, (ii) any Immaterial Subsidiary and (iii) each of Grubb & Ellis Alesco Global Advisors, LLC, NNN 200 Galleria Member, LLC and NNN Collateralized Senior Notes, LLC, for so long as becoming an obligor in respect of the Obligations violates the express terms of any agreement to which such Subsidiary is a party on the Closing Date; provided that immediately upon the lapse, termination or waiver of the applicable restrictive covenant or agreement, such Subsidiary shall cease to be an Excluded Subsidiary.
 
Excluded Taxes”: with respect to any payment made by any Loan Party under any Loan Document, any of the following Taxes imposed on or with respect to a Recipient: (a) income or franchise Taxes imposed on (or measured by) net income by the United States of America, or by the jurisdiction under the laws of which such Recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Taxes imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Non-U.S. Lender, any U.S. Federal withholding Taxes resulting from any Requirement of Law in effect on the date such Non-U.S. Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Non-U.S. Lender’s failure to comply with Section 2.11(f), except to the extent that such Non-U.S. Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Taxes pursuant to Section 2.11(a).
 
Federal Funds Effective Rate”:  for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.
 

 
7

 

Fixed Charge Coverage Ratio”:  with respect to any applicable period, the ratio of (a) EBITDA of the Parent Guarantor and its Subsidiaries on a consolidated basis (excluding Daymark) minus Unfinanced Capital Expenditures of such Persons made during such period, to (b) the sum of (i) the aggregate amount of all principal and interest payments due and/or made with regard to all Funded Debt of the Parent Guarantor and its Subsidiaries on a consolidated basis (excluding Daymark) during such period (including, without limitation, all PIK Amounts), (ii) the aggregate amount of Investments made during such period by the Parent Guarantor or any of its Subsidiaries (other than Daymark) for purposes of funding required scheduled debt payments of NNN 200 Galleria Member, LLC and its Subsidiaries under the Galleria Loan Documents or payments required to be made by NNN Sanctuary at Highland Oaks LeaseCo, LLC in respect of its obligations under the Sanctuary Master Lease, (iii) the amounts of Restricted Payments made by the Parent Guarantor during such period to the holders of its Preferred Stock and (iv) the aggregate amount of accrued and unpaid dividends pursuant to the Preferred Stock Plan during such period.  For purposes of calculating the Fixed Charge Coverage Ratio, if any Disposition of all or substantially all of the Capital Stock or assets of Daymark is consummated during the applicable test period, the Fixed Charge Coverage Ratio shall be calculated on a pro forma basis assuming that such Disposition had occurred on the first day of the applicable test period.
 
Foreign Benefit Arrangement”:  any employee benefit arrangement mandated by non-US law that is maintained or contributed to by any Group Member or any ERISA Affiliate.
 
Foreign Plan”:  each employee benefit plan (within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA) that is not subject to US law and is maintained or contributed to by any Group Member or any ERISA Affiliate.
 
Foreign Subsidiary”:  any Subsidiary of the Parent Guarantor that is not a Domestic Subsidiary.
 
Funded Debt”:  with respect to any Person, without duplication, the outstanding principal amount of (a) all Loans (including, without limitation, all PIK Amounts), (b) all other Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness that by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person’s option under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capitalized Lease Obligations, current maturities of long-term debt, revolving credit and short term debt extendible beyond one year at the option of the debtor, and (c) Indebtedness consisting of guaranties by such Person of any of the foregoing of another Person.
 
Funding Office”:  the office of the Administrative Agent specified in Section 10.2 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders.
 
GAAP”:  generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of Section 7.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 4.1.  In the event that any “Accounting Change” (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to reflect equitably such Accounting Changes with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made.  Until such time as such an amendment shall have been executed and delivered by the Borrower,
 

 
8

 

the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred.  “Accounting Changes” refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.
 
Galleria Loan Documents”:  the Amended and Restated Loan Agreement, dated as of April 11, 2007, between NNN 200 Galleria, LLC and Lehman Brothers Holding, Inc., D/B/A Lehman Capital, a division of Lehman Brothers Holdings, Inc., as in effect on the date hereof.
 
Governmental Authority”:  any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners).
 
Group Members”:  the collective reference to the Parent Guarantor, the Borrower and their respective Subsidiaries.
 
Guarantee and Collateral Agreement”:  the Guarantee and Collateral Agreement, dated as of the date hereof, executed and delivered by the Borrower and each Guarantor, substantially in the form of Exhibit A.
 
Guarantee Obligation”:  as to any Person (the “guaranteeing person”), any obligation, including a reimbursement, counterindemnity or similar obligation, of the guaranteeing Person that guarantees or in effect guarantees, or which is given to induce the creation of a separate obligation by another Person (including any bank under any letter of credit) that guarantees or in effect guarantees, any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business.  The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (x) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (y) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.
 
Guarantor”:  Parent Guarantor and each Domestic Subsidiary of Parent Guarantor other than the Borrower and any Excluded Subsidiary.
 
Immaterial Subsidiary”: any Domestic Subsidiary that, together with its consolidated Subsidiaries, provides less than 5.0% of the consolidated revenues of, or holds less than 5.0% of the
 

 
9

 

consolidated assets of, the Parent Guarantor and its Domestic Subsidiaries on a consolidated basis determined in accordance with GAAP; provided that, the aggregate revenues or assets of all Immaterial Subsidiaries, determined in accordance with GAAP, may not exceed 10.0% of consolidated revenues or consolidated assets, respectively, of the Parent Guarantor and its consolidated Domestic Subsidiaries, collectively, at any time (and the Borrower will designate in writing to the Administrative Agent from time to time the Subsidiaries which will cease to be treated as “Immaterial Subsidiaries” in order to comply with the foregoing limitation).
 
Indebtedness”:  as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
 
(a)  all indebtedness of such Person for borrowed money and all indebtedness of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
 
(b)  the maximum amount (after giving effect to any prior drawings or reductions which may have been reimbursed) of all letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;
 
(c)  all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business);
 
(d)  all indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
 
(e)  all Attributable Indebtedness;
 
(f)  the liquidation value of all mandatorily redeemable preferred Capital Stock of such Person;
 
(g)  all Guarantee Obligations of such Person in respect of any of the foregoing;
 
(h)  for the purposes of Section 8(e) only, all obligations of such Person in respect of Swap Agreements.
 
The amount of Indebtedness of any Person for purposes of clause (d) above shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith.  The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefore as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefore.
 
Indemnified Taxes”: (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by any Loan Party under any Loan Document and (b) Other Taxes.
 
Indenture Non-Payment/Acceleration Default”:  a default or event of default arising pursuant to the Parent Guarantor Indenture (other than (i) a payment default with respect to the
 

 
10

 

obligations under the Parent Guarantor Indenture and (ii) any default or event of default that results in an acceleration event under the Parent Guarantor Indenture).
 
Insolvency”:  with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.
 
Insolvent”:  pertaining to a condition of Insolvency.
 
Intellectual Property”:  the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
 
“Interest Payment Date”:  as to any Loan, the last day of each calendar month, the final maturity date of such Loan, and the date of any repayment or prepayment made in respect thereof.
 
“Interest Rate” : with respect to Loans, from time to time, the percentage per annum set forth in the following table:

 
Pricing Level
Time period
Interest Rate
 
 
1
Closing Date until 89 days following the Closing Date
11.00%
 
         
 
2
90th day following the Closing Date until the 179th day following the Closing Date
11.50%
 
         
 
3
180th day following the Closing Date until the 269th day following the Closing Date
12.00%
 
         
 
4
270th day following the Closing Date and thereafter
12.50%
 

Investments”:  as defined in Section 7.8.
 
IRS”: the United States Internal Revenue Service.
 
Joint Venture”:  any Person in which the Parent Guarantor and its Subsidiaries own, directly or indirectly, Capital Stock and which is not a Wholly Owned Subsidiary of the Parent Guarantor.
 
Lenders”:  as defined in the preamble hereto.
 
Lien”:  any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any
 

 
11

 

conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).
 
Loan”:  any loan made by any Lender pursuant to this Agreement (which shall, unless expressly provided otherwise hereunder, include all Additional Loans).
 
Loan Documents”:  this Agreement, the Security Documents, the Notes, the Warrants, the Registration Rights Agreement, any other instrument or agreement now or hereafter executed and delivered by any Loan Party in connection with any of the foregoing and any amendment, amendment and restatement, waiver, supplement or other modification to any of the foregoing.
 
Loan Parties”:  the Borrower and each Guarantor.
 
Material Adverse Effect”:  a material adverse effect on (a) the business, property, operations, or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or the Parent Guarantor and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder; provided, however, that (i) the failure of the Parent Guarantor to consummate a sale of all or any portion of Daymark, shall not, in and of itself, be deemed or constitute a “Material Adverse Effect” and (ii) solely for purposes of determining whether the conditions in Section 5.1(o) and Section 5.2(a) have been satisfied in connection with any Loans made, any reference to “Material Adverse Effect” in Section 5.1(o) and Section 4.2 shall mean, and shall be limited to: any effect, change, claim, event or circumstance that has resulted in a material adverse effect on, the business, properties, operations or financial condition of the Parent Guarantor and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries, taken as a whole, provided that such Material Adverse Effect shall not include: effects resulting from (A) changes since March 30, 2011 in general economic or political conditions or the securities, credit or financial markets worldwide (so long as such conditions do not materially adversely affect the Parent Guarantor and its Subsidiaries or the Borrower and its Subsidiaries, as applicable, in a materially disproportionate manner relative to the other participants in their industry taken as a whole), (B) changes since March 30, 2011 in conditions generally affecting the industry in which the Parent Guarantor and its Subsidiaries or the Borrower and its Subsidiaries, as applicable, operate (so long as such conditions do not materially adversely affect the Parent Guarantor and its Subsidiaries or the Borrower and its Subsidiaries, as applicable, in a materially disproportionate manner relative to the other participants in their industry taken as a whole), (C) changes since March 30, 2011 in generally accepted accounting principles or the interpretation thereof (so long as such conditions do not materially adversely affect the Parent Guarantor and its Subsidiaries or the Borrower and its Subsidiaries, as applicable, in a materially disproportionate manner relative to the other participants in their industry taken as a whole), (D) any acts of terrorism or war since March 30, 2011 (so long as such conditions do not materially adversely affect the Parent Guarantor and its Subsidiaries or the Borrower and its Subsidiaries, as applicable, in a materially disproportionate manner relative to the other participants in their industry taken as a whole), (E)  any effect, change, claim, event or circumstance related to Daymark; provided that neither the Parent Guarantor nor any of its Subsidiaries other than Daymark shall have been materially affected by any such effect, change, claim, event or circumstance, (F) any failure to meet internal projections or forecasts  provided to the Administrative Agent prior to March 30, 2011 (including any publicly announced projections or forecasts) for any period, (G) any change resulting from, or litigation relating to, the transactions contemplated by that certain commitment letter, dated March 30, 2011 (the “Commitment Letter”) between Parent Guarantor, the Borrower and Administrative Agent (including any negative impact on the price of the Parent Guarantor’s common stock as a result of the public announcement of the transactions contemplated by the Commitment Letter or the potential dilution caused or expected to be caused by the issuance of the Warrants); provided that nothing contained in the clause (G) shall modify or affect any representation, warranty or condition contained in this Agreement
 

 
12

 

and (H) receipt of any notice from the NYSE in respect of delisting of the Parent Guarantor’s common stock or failure to meet NYSE listing standards.
 
Materials of Environmental Concern”:  any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
 
Maturity Date”:  March 1, 2012.
 
Maximum Loan Amount”:  (i) on or prior to May 15, 2011, the lesser of (x) $9,000,000 and (y) the Borrowing Base and (ii) thereafter, the lesser of (x) $18,000,000 and (y) the Borrowing Base.
 
Moody’s”:  Moody’s Investors Service, Inc. or any successor.
 
Mortgaged Properties”:  any real property as to which the Administrative Agent for the benefit of the Lenders shall be granted a Lien pursuant to the Mortgages.
 
Mortgages”:  each of the mortgages and deeds of trust made by any Loan Party in favor of, or for the benefit of, the Administrative Agent for the benefit of the Lenders, in form and substance satisfactory to the Administrative Agent.
 
Multiemployer Plan”:  a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
 
Net Cash Proceeds”:  (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Permitted Investments (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received), net of (w) attorneys’ fees, accountants’ fees, investment banking fees, (x) amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document), (y) other customary fees and expenses actually incurred in connection therewith and (z) in the case of a Recovery Event, any actual and reasonable cost incurred and paid or payable in connection with restoration work to the extent required by any casualty insurance policy or as a result of a condemnation and, in each case, and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any incurrence of Indebtedness, the cash proceeds received from such incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.
 
Net Worth”: at any date, the excess of the total assets of the Borrower and its Subsidiaries over their total liabilities determined on a consolidated basis in accordance with GAAP, excluding any intercompany Receivable from the Parent Guarantor which is eliminated or set off in consolidation of the Parent Guarantor’s financial statements.
 
Non-U.S. Lender”:  a Lender that is not a U.S. Person.
 
Notes”:  the collective reference to any promissory note evidencing Loans.
 

 
13

 

Obligations”:  the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, premiums, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise.
 
Organizational Documents” means (i) with respect to any corporation or company, its certificate, memorandum or articles of incorporation, organization or association, as amended, and its by-laws, as amended, (ii) with respect to any limited partnership, its certificate or declaration of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended.  In the event any term or condition of this Agreement or any other Loan Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such “Organizational Document” shall only be to a document of a type customarily certified by such governmental official.
 
Other Connection Taxes”: with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Taxes (other than a connection arising from such Recipient having executed, delivered, enforced, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, or engaged in any other transaction pursuant to, or enforced, any Loan Document, or sold or assigned an interest in any Loan Document).
 
Other Taxes”: any present or future stamp, court, documentary, intangible, recording, filing or similar excise or property Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, or from the registration, receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.
 
Over Advance”:  as defined in Section 2.5(b).
 
Over Advance Account”:  as defined in Section 2.5(b).
 
Parent Guarantor”:  as defined in the preamble hereto.
 
Parent Guarantor Indenture”:  the Indenture, dated as of May 7, 2010, between U.S. Bank National Association, N.A. and the Parent Guarantor.
 
Participant”:  as defined in Section 10.6(c).
 
Participant Register”: as defined in Section 10.6(c).
 
Patriot Act”:  as defined in Section 10.17.
 

 
14

 

Payment Guaranty”:  the Guarantee Obligations and other agreements described in paragraph (3) of Part II of Schedule 7.2(g) and paragraph (6) of Part III of Schedule 7.2(g).
 
PBGC”:  the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).
 
Pension Plan”:  any Plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which any Loan Party or any ERISA Affiliate is (or, if such Plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in section 3(5) of ERISA.
 
Permitted Discretion”:  a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.
 
Permitted Holder”:  collectively, C. Michael Kojaian, Kojaian Holdings LLC, Kojaian Ventures, L.L.C., Kojaian Management Corporation or any Affiliate thereof.
 
Permitted Investments”:  (a) Dollars or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business; (b) securities issued or unconditionally guaranteed or insured by the United States government or any agency or instrumentality thereof, in each case having maturities of not more than 24 months from the date of acquisition thereof; (c) securities issued by any state, commonwealth or territory of the United States of America or any political subdivision or taxing authority of any such state, province, commonwealth or territory or any public instrumentality thereof or any political subdivision or taxing authority of any such state, province, commonwealth or territory or any public instrumentality thereof having maturities of not more than 24 months from the date of acquisition thereof and, at the time of acquisition, having an investment grade rating generally obtainable from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, then from another nationally recognized rating service); (d) commercial paper and variable or fixed rate notes issued by or guaranteed by any Lender or any bank holding company owning any Lender; (e) commercial paper and variable or fixed rate notes maturing no more than 12 months after the date of creation thereof and, at the time of acquisition, having a rating of at least A-2 or P-2 from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized rating service); (f) time deposits with, or domestic and Eurodollar certificates of deposit or bankers’ acceptances maturing no more than two years after the date of acquisition thereof issued by, any Lender or any other bank having combined capital and surplus of not less than $250,000,000 in the case of domestic banks and $100,000,000 (or the dollar equivalent thereof) in the case of foreign banks; (g) repurchase agreements with a term of not more than 30 days for underlying securities of the type described in clauses (b), (c) and (f) above entered into with any bank meeting the qualifications specified in clause (f) above or securities dealers of recognized national standing; (h) marketable short-term money market and similar securities having, at the time of acquisition, a rating of at least A-2 or P-2 from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized rating service); and (i) shares of investment companies that are registered under the Investment Company Act of 1940 and invest solely in one or more of the types of securities described in clauses (a) through (h) above.
 
Permitted Liens”:  (a) Liens for Taxes, assessments or other governmental charges or claims that are either (i) not yet due and payable and not subject to penalties for nonpayment or (ii) being contested in good faith by appropriate proceedings for which appropriate reserves have been established in accordance with GAAP; (b) Liens imposed by law, such as landlord’s, carriers’, warehousemen’s, repairmen’s, construction contractors’ and mechanics’ Liens and other similar Liens, arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being
 

 
15

 

contested in good faith by appropriate proceedings; (c) Liens arising from judgments or decrees for the payment of money in circumstances not constituting an Event of Default under Section 8(h); (d) ground leases or subleases, licenses or sublicenses in respect of real property on which facilities owned or leased by the Parent Guarantor or any of its Subsidiaries are located; (e) easements, rights-of-way, licenses, restrictions (including zoning restrictions), minor defects, exceptions or irregularities in title, encroachments, protrusions and other similar charges or encumbrances, in each case not interfering in any material respect with the business of the applicable Group Member and any exception on the title policies issued in connection with any Mortgaged Property; (f) any interest or title of a lessor, sublessor, licensor or sublicensor or secured by a lessor’s, sublessor’s, licensor’s or sublicensor’s interest under any lease not prohibited by this Agreement; (g) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (h) leases or subleases, licenses or sublicenses granted to others not interfering in any material respect with the business of the applicable Group Member; (i) Liens created in the ordinary course of business in favor of banks and other financial institutions over credit balances of any bank accounts held at such banks or financial institutions, as the case may be, to facilitate the operation of cash pooling and/or interest set-off arrangements in respect of such bank accounts in the ordinary course of business; (j) Liens arising from precautionary Uniform Commercial Code financing statement or similar filings made in respect of operating leases; (k) deposits or pledges to secure obligations under worker’s compensation, social security or similar laws, or under unemployment insurance; (l) deposits or pledges to secure the performance of bids, tenders, trade contracts, statutory obligations, surety and appeal bonds permitted hereunder and other obligations of like nature arising in the applicable Group Member’s ordinary course of business; and (m) Liens securing the financing of insurance premiums in the applicable Group Member’s ordinary course of business.
 
Person”:  an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
 
PIK Amounts”:  as defined in Section 2.7(d).
 
PIK Election”:  as defined in Section 2.7(d).
 
Plan”:  any employee benefit plan as defined in Section 3(3) of ERISA, including any employee welfare benefit plan (as defined in Section 3(1) of ERISA), any employee pension benefit plan (as defined in Section 3(2) of ERISA), and any plan which is both an employee welfare benefit plan and an employee pension benefit plan, and in respect of which any of the Loan Parties or any ERISA Affiliate is  an “employer” as defined in Section 3(5) of ERISA.
 
Preferred Stock”:  the preferred stock of the Parent Guarantor issued under the Preferred Stock Plan.
 
Preferred Stock Plan”: the plan for the issuance of Preferred Stock by the Parent Guarantor set out in the Certificate of Designations.
 
Prohibited Transaction”:  as defined in Section 406 of ERISA and Section 4975(f)(3) of the Code, other than any event, transaction or occurrence that is exempt from such sections pursuant to Section 408 of ERISA, Section 4975(d) of the Code or a prohibited transaction class or individual exemption issued by the US Department of Labor.
 
Properties”:  as defined in Section 4.17(a).
 

 
16

 

Property Expense”:  those operating costs and expenses incurred in connection with the Loan Parties’ management of a Customer’s (or one of a Customer’s Affiliate’s or Subsidiary’s) property.
 
Receivable”:  as defined in the Guarantee and Collateral Agreement.
 
Recipient”: as applicable, (a) the Administrative Agent and (b) any Lender.
 
Recovery Event”:  any settlement of or payment in respect of any real property insurance claim or any condemnation proceeding relating to any asset of any Group Member.
 
Register”:  as defined in Section 10.6(b).
 
Registration Rights Agreement”:  the Registration Rights Agreement, dated as of the date hereof, among the Parent Guarantor and the initial holders of the Closing Date Warrant Shares.
 
Regulation U”:  Regulation U of the Board as in effect from time to time.
 
Reinvestment Deferred Amount”:  with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by any Group Member in connection therewith that are not applied to prepay the Loans pursuant to Section 2.5(a) as a result of the delivery of a Reinvestment Notice.
 
Reinvestment Event”:  any Asset Sale or Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice.
 
Reinvestment Notice”:  a written notice executed by a Responsible Officer of the Borrower stating that no Default or Event of Default has occurred and is continuing and that a Loan Party intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to acquire or repair assets useful in its business.
 
Reinvestment Prepayment Amount”:  with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to acquire or repair assets useful in the business of applicable Loan Party.
 
Reinvestment Prepayment Date”:  with respect to any Reinvestment Event, the earlier of (a) the date occurring 270 days after such Reinvestment Event and (b) the date on which the applicable Loan Party shall have determined not to, or shall have otherwise ceased to, acquire or repair assets useful in its business with all or any portion of the relevant Reinvestment Deferred Amount.
 
Related Fund”: with respect to any Person, any fund that is administered or managed by such Person, is an Affiliate of such Person or is an entity or an Affiliate of an entity that administers or manages such Person.
 
Reorganization”:  with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.
 
Repayment Date”:  as defined in Section 2.7(d).
 
Report”:  reports prepared by the Administrative Agent or another Person showing the results of appraisals, field examinations or audits pertaining to Parent Guarantor’s and the Borrower’s assets from information furnished by or on behalf of the Parent Guarantor or the Borrower, after the Administrative Agent has exercised its rights of inspection pursuant to this Agreement, which Reports
 

 
17

 

may be distributed to the Lenders by the Administrative Agent.
 
Reportable Event”:  any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043, with respect to a Pension Plan.
 
Required Lenders”:  at any time, the holders of more than 50% of  the sum of (a) the aggregate unpaid principal amount of the Loans then outstanding and (b) the Commitments then in effect.
 
Requirement of Law”:  as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
 
Reserves”:  any and all reserves established against the Borrowing Base which the Administrative Agent deems necessary, in its Permitted Discretion, to establish from time to time (including without limitation an amount equal to all obligations that are secured by Liens on the assets of any Loan Party described in (2), (3) and (4) of Schedule 7.3(d)); provided that in no event shall Reserves be (i) duplicative of amounts paid by the Borrower in accordance with Section 2.5(b) in respect of any Over Advance or amounts deposited by the Borrower as a result of an Over Advance in accordance with Section 2.5(b), or (ii) duplicative of any other Reserve (it being understood that existing Reserves may be adjusted) or items or circumstances excluded from, independent of, or adjusted for in, the Borrowing Base.  After the Closing Date, the Administrative Agent shall provide written notice to the Borrower of its intent, in its Permitted Discretion, to increase existing Reserves or to maintain additional Reserves.
 
Responsible Officer”:  the chief executive officer, president or chief financial officer of the Borrower or Parent Guarantor, as applicable, but in any event, with respect to financial matters, the chief financial officer of the Borrower or the Parent Guarantor, as applicable.
 
Restricted Payments”:  as defined in Section 7.6.
 
S&P”:  Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., or any successor.
 
Sanctuary Master Lease”:  that certain Master Lease For the Sanctuary at Highland Parks, dated as of July 29, 2005, among NNN Sanctuary at Highland Oaks, DST and NNN Sanctuary at Highland Oaks LeaseCo, LLC, as in effect on the date hereof.
 
SEC”:  the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.
 
Security Documents”:  the collective reference to the Guarantee and Collateral Agreement, the Mortgages and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document.
 
Solvent”:  when used with respect to any Person (exclusive of any of its consolidated or unconsolidated Subsidiaries), means that, as of any date of determination, (a) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors,
 

 
18

 

(b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature.  For purposes of this definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.
 
Specified Change of Control Transaction”:  any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, except that a person will be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly with the prior written consent of the Administrative Agent, of 50% or more of the total voting power of the Parent Guarantor’s Voting Stock (other than as a result of any merger, share exchange, transfer of assets or similar transaction solely for the purpose of changing the Parent Guarantor’s jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of common stock solely into shares of common stock of the surviving entity).

Subsidiary”:  as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of Parent Guarantor.
 
Swap Agreement”:  any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Parent Borrower or any of its Subsidiaries shall be a “Swap Agreement”.
 
Taxes”: any present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
 
Transferee”:  any Assignee or Participant.
 
Unfinanced Capital Expenditures”:  all Capital Expenditures of the Parent Guarantor and its Subsidiaries (excluding Daymark) other than those made utilizing (a) financing provided by the applicable seller or third party lenders, or (b) cash that has been provided by Customers (other than any Group Member).
 

 
19

 

United States”:  the United States of America.
 
U.S. Person”: a “United States person” within the meaning of Section 7701(a)(30) of the Code.
 
U.S. Tax Certificate”: as defined in Section 2.11(f)(ii)(D).
 
Voting Stock”: with respect to any Person, Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only for so long as no senior class of securities has such voting power by reason of any contingency.
 
Warrants”:  the Closing Date Warrants and any Additional Warrants.
 
Wholly Owned Guarantor”:  any Guarantor that is a Wholly Owned Subsidiary of the Parent Guarantor.
 
Wholly Owned Subsidiary”:  as to any Person, any other Person all of the Capital Stock of which (other than directors’ qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.
 
Withdrawal Liability”: any liability of any of the Loan Parties or any ERISA Affiliate to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Title IV of ERISA.
 
Withholding Agent”: any Loan Party and the Administrative Agent.
 
1.2           Other Definitional Provisions.  (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.
 
(b)  As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Group Member not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP (provided that, notwithstanding anything to the contrary herein, all accounting or financial terms used herein shall be construed, and all financial computations pursuant hereto shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159 (or any other Financial Accounting Standard having a similar effect) to value any Indebtedness or other liabilities of any Group Member at “fair value”, as defined therein), (ii) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (iii) the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings), (iv) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time.
 
(c)  The words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this
 

 
20

 

Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.
 
(d)  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
 
SECTION 2.  AMOUNT AND TERMS OF COMMITMENTS AND LOANS
 
2.1           Commitments and Loans.  Subject to the terms and conditions hereof, each Lender severally agrees to make from time to time on any Borrowing Date a Loan to the Borrower; provided that (A) there shall be no more than two Borrowing Dates (excluding any Additional Loans), (B) the aggregate principal amount of each Lender’s Loans (excluding any Additional Loans) shall not exceed such Lender’s Commitment and (C) the aggregate principal amount of all Loans (excluding any Additional Loans) outstanding shall not exceed the Maximum Loan Amount.  Any amounts borrowed and repaid or prepaid may not be reborrowed.  If at any time after the Closing Date any demand, any claim or any request for any payment is made under or in respect of any Payment Guaranty and such demand, claim or request shall not have been satisfied in full within five Business Days after such demand, claim or request is made, the Lenders shall have the right (in their sole discretion and  in accordance with their Aggregate Exposure Percentage) to elect to cause the Borrower to borrow additional Loans hereunder (any such additional Loans, the “Additional Loans”), the proceeds of which shall be used by the Borrower (together with any other available funds) within one Business Day following receipt of such proceeds to satisfy in full such demand, claim or request.  Except as otherwise expressly set forth in this Agreement, the terms of the Additional Loans shall be identical in all respects to all other Loans made hereunder.
 
2.2           Procedure for Borrowing.  The Borrower may borrow under the Commitments on any Business Day; provided that the Borrower shall give the Administrative Agent irrevocable notice prior to 11:00 A.M., New York City time, twelve Business Days (or such shorter period of time to which the Administrative Agent may agree  in its sole discretion) prior to the requested Borrowing Date, specifying (i) the amount of Loans to be borrowed and (ii) the requested Borrowing Date.  Each borrowing under the Commitments shall be in a minimum principal amount of $4,000,000.  Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof.  Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the Funding Office no later than 12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent.  Such borrowing will then be made available to the Borrower by the Administrative Agent pursuant to written instructions provided to the Administrative Agent by the Borrower.
 
2.3           Repayment of Loans. The Borrower shall repay all outstanding Loans on the Maturity Date.
 
2.4           Optional Prepayments.  The Borrower may at any time and from time to time prepay the Loans, in whole or in part, subject to Section 2.6 hereof, upon irrevocable notice delivered to the Administrative Agent no later than 11:00 A.M., New York City time, three Business Days prior thereto, which notice shall specify the date and amount of prepayment.  Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof.  If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid.  Partial prepayments of Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof.
 
2.5           Mandatory Prepayments.  (a)  If on any date any Group Member shall receive Net Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment Notice shall be
 

 
21

 

delivered in respect thereof, such Net Cash Proceeds shall be applied on such date toward the prepayment of the Loans as set forth in Section 2.5(d); provided, that, notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of Asset Sales and Recovery Events that may be excluded from the foregoing requirement pursuant to a Reinvestment Notice shall not exceed $250,000 and (ii) on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the prepayment of the Loans as set forth in Section 2.5(d).
 
(b)  If on any date of determination the aggregate principal amount of Loans (excluding any Additional Loans) outstanding exceeds the Borrowing Base (such excess amount being referred to herein as, an “Over Advance”), the Borrower shall prepay the Loans in an aggregate amount equal to such Over Advance on such date.  Notwithstanding the foregoing, the Borrower shall not be required to make a prepayment pursuant to this Section 2.5(b) so long as (i) the aggregate amount of Over Advances on such date does not exceed $3,000,000, (ii) no Default or Event of Default has occurred and is continuing, (iii) an amount equal to (A) 110% of the aggregate principal amount of Loans (excluding any Additional Loans) outstanding on such date minus (B) the Borrowing Base is deposited by the Borrower on such date in an interest-bearing segregated account subject to the sole dominion and control of the Administrative Agent (the “Over Advance Account”), and (iv) upon the earlier of (A) the next date on which the Borrower is required to deliver to the Administrative Agent a Borrowing Base Certificate pursuant to Section 6.2 and (B) the occurrence of a Default or an Event of Default, the Borrower either (i) directs the Administrative Agent to apply the proceeds in the Over Advance Account equal to the then applicable Over Advances to the prepayment of the Loans (with the remaining balance to be paid to the Borrower in such account designated by the Borrower) or (ii) only to the extent no Over Advance exists on such date, directs the Administrative Agent to (and the Administrative Agent thereafter shall promptly, but in any event within two (2) Business Days of receiving such direction) deposit all amounts in the Over Advance Account to such account designated by the Borrower in writing at such time.
 
(c)  If any Indebtedness shall be incurred by any Group Member (excluding any Indebtedness incurred in accordance with Section 7.2), an amount equal to 100% of the Net Cash Proceeds thereof shall be applied on the date of such incurrence toward the prepayment of the Loans as set forth in Section 2.5(d).
 
(d)  Amounts to be applied in connection with prepayments made pursuant to Section 2.5 shall be applied to the prepayment of the Loans in accordance with Section 2.9.  Each prepayment of the Loans under Section 2.5 shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid and the prepayment premium pursuant to Section 2.6.
 
2.6           Prepayment Premium.  All voluntary prepayments of principal of Loans pursuant to Section 2.4, all mandatory repayments of principal of Loans required pursuant to Section 2.5 and all repayments of principal of Loans required pursuant to Section 8 as a result of the acceleration thereof will be subject to payment by the Borrower to the Administrative Agent, for the ratable account of each Lender, of a prepayment premium on the principal amount so prepaid or repaid, of 4.0%; provided that such prepayment premium shall be reduced to 2.0% in the event the Borrower makes more than one borrowing under the Commitment pursuant to Section 2.2; provided, further that no such prepayment premium shall be required to be paid by the Borrower if such prepayment or repayment was required to be made as a result of a Specified Change of Control Transaction in which the per share market value of the common stock is equal to or greater than $1.10 per share.  Such prepayment premium shall be due and payable upon the date of any voluntary prepayment or the due date of such mandatory prepayment or required repayment, as the case may be.
 
2.7           Interest Rates and Payment Dates.  (c)   Each Loan shall bear interest at a rate per annum equal to the Interest Rate.
 

 
22

 

(b)  If any Event of Default occurs and is continuing, all amounts shall bear interest at a rate per annum equal to the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2.0%.
 
(c)  Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (b) of this Section shall be payable from time to time on demand.
 
(d)  So long as no Event of Default has occurred and is continuing, the Borrower may elect to (i) pay all interest due on any Interest Payment Date in cash or (ii) pay up to 100% of the interest due on such Interest Payment Date by adding such interest to the principal amount of the outstanding Loans and the remaining portion of the interest due on such Interest Payment Date in cash (such election, a “PIK Election”; and such interest added to the principal amount of the outstanding Loans, the “PIK Amounts”).  Unless otherwise notified at least five Business Days prior to the applicable Interest Payment Date (and in the absence of an Event of Default), the Borrower will be deemed to have made a PIK Election with respect to all of the interest due on any Interest Payment Date. In the event of any PIK Election, the Parent Guarantor shall issue to the Lenders (in accordance with their Aggregate Exposure Percentage) additional warrants in the form attached hereto as Exhibit H to purchase a number of shares (not less than zero) of common stock of the Parent Guarantor equal to (x) an amount equal to the product of (i) the Closing Date Warrant Shares and (ii) a ratio equal to (A) the aggregate principal amount of Loans outstanding (including all PIK Amounts) at such date over (B) the aggregate principal amount of Loans outstanding (excluding all PIK Amounts) at such date minus (y) the aggregate amount of Closing Date Warrant Shares and any Additional Warrants issued to the Lenders since the Closing Date (such additional warrants, the “Additional Warrants”).  The Parent Guarantor shall issue any such Additional Warrants at the time of each such PIK Election. In addition, the Parent Guarantor shall issue to the Lenders (in accordance with their Aggregate Exposure Percentage) Additional Warrants on the final Interest Payment Date (whether at the stated maturity or otherwise) if the Borrower has made a PIK Election with respect to more than 50% of the aggregate amount of accrued interest payable on the Loans up to such final Interest Payment Date.  The amount of Additional Warrants issued on the final Interest Payment Date shall be calculated as set forth above in this paragraph assuming that the Borrower had made a PIK Election with respect to all interest paid on such final Interest Payment Date.
 
2.8           Computation of Interest and Fees.  Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed.
 
2.9           Pro Rata Treatment and Payments.  (d)   Each borrowing by the Borrower from the Lenders hereunder and each payment by the Borrower on account of any fee shall be made pro rata according to the respective Aggregate Exposure Percentage of the Lenders.
 
(b)  Each payment (including each prepayment) by the Borrower on account of principal of and interest and premium on the Loans shall be made pro rata according to the respective outstanding principal amounts of the Loans then held by the Lenders.  Amounts prepaid under Section 2.5(b) shall be applied to Loans other than Additional Loans.  Amounts prepaid on account of the Loans may not be reborrowed.
 
(c)  Except as otherwise expressly provided herein, all payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, premium, fees or otherwise, shall be made without setoff or counterclaim, on the due date thereof to the Administrative Agent, for the account of the Lenders, in immediately available funds.  The Administrative Agent shall distribute such payments to each relevant Lender promptly upon receipt in like funds as received, net of any amounts owing by such Lender pursuant to Section 9.7.  If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding
 

 
23

 

Business Day.  In the case of any extension of any payment of principal pursuant to the preceding sentence, interest thereon shall be payable at the then applicable rate during such extension.
 
(d)  Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon, at a rate equal to the greater of (i) the Federal Funds Effective Rate and (ii) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, for the period until such Lender makes such amount immediately available to the Administrative Agent.  A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error.  If such Lender’s share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at Interest Rate then in effect, on demand, from the Borrower.
 
(e)  Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount.  If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate.  Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower.
 
(f)  If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.9(d), 2.9(e) or 9.7, then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof, (i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender for the benefit of the Administrative Agent to satisfy such Lender’s obligations to it under such Section until all such unsatisfied obligations are fully paid, and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Lender under any such Section, in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative Agent in its discretion.
 
2.10           Requirements of Law.  (e)  If any Lender shall have reasonably determined that the adoption of or any change in any Requirement of Law (i) regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof or shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material or (ii) subjects any Lender to any Tax (other than Indemnified Taxes or Excluded Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital
 

 
24

 

attributable thereto, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.
 
(b)  Notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith shall be deemed to be a change in law, regardless of the date enacted, adopted or issued.
 
(c)  A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error.  Notwithstanding anything to the contrary in this Section, the Borrower shall not be required to compensate a Lender pursuant to this Section for any amounts incurred more than six months prior to the date that such Lender notifies the Borrower of such Lender’s intention to claim compensation therefor; provided that, if the circumstances giving rise to such claim have a retroactive effect, then such six-month period shall be extended to include the period of such retroactive effect.  The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
 
2.11           Taxes.  (a Withholding of Taxes; Gross-Up.  Each payment by any Loan Party under any Loan Document shall be made without withholding for any Taxes, unless such withholding is required by any law.  If any Withholding Agent determines, in good faith, that it is so required to withhold Taxes, then such Withholding Agent may so withhold and shall timely pay the full amount of withheld Taxes to the relevant Governmental Authority in accordance with applicable law.  If such Taxes are Indemnified Taxes, then the amount payable by such Loan Party shall be increased as necessary so that, net of such withholding (including such withholding applicable to additional amounts payable under this Section), the applicable Recipient receives the amount it would have received had no such withholding been made.
 
(b)  Payment of Other Taxes by the Borrower.  The Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
 
(c)  Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes by any Loan Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
 
(d)  Indemnification by the Borrower.  The Loan Parties shall jointly and severally indemnify each Recipient for any Indemnified Taxes that are paid or payable by such Recipient in connection with any Loan Document (including amounts paid or payable under this Section 2.11(d)) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  The indemnity under this Section 2.11(d) shall be paid within 10 days after the Recipient delivers to any Loan Party a certificate stating the amount of any Indemnified Taxes so paid or payable by such Recipient.  Such certificate shall be conclusive of the amount so paid or payable absent manifest error.  Such Recipient shall deliver a copy of such certificate to the Administrative Agent.
 
(e)  Indemnification by the Lenders.  Each Lender shall severally indemnify the Administrative Agent for any Taxes (but, in the case of any Indemnified Taxes, only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without
 

 
25

 

limiting the obligation of the Loan Parties to do so) attributable to such Lender that are paid or payable by the Administrative Agent in connection with any Loan Document and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  The indemnity under this Section 2.11(e) shall be paid within 10 days after the Administrative Agent delivers to the applicable Lender a certificate stating the amount of Taxes so paid or payable by the Administrative Agent.  Such certificate shall be conclusive of the amount so paid or payable absent manifest error. Each Lender hereby authorizes the Administrative Agent to setoff and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (e).
 
(f)  Status of Lenders.  (i)  Any Lender that is entitled to an exemption from, or reduction of, any applicable withholding Tax with respect to any payments under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without, or at a reduced rate of, withholding.  In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to any withholding (including backup withholding) or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 2.11(f)(ii)(A) through (E) below) shall not be required if in the Lender’s judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense (or, in the case of a change in a Requirement of Law, any incremental material unreimbursed cost or expense) or would materially prejudice the legal or commercial position of such Lender.  Upon the reasonable request of the Borrower or the Administrative Agent, any Lender shall update any form or certification previously delivered pursuant to this Section 2.11(f).
 
(ii)  Without limiting the generality of the foregoing, if the Borrower is a U.S. Person, any Lender shall, if it is legally eligible to do so, deliver to the Borrower and the Administrative Agent (in such number of copies reasonably requested by the Borrower and the Administrative Agent) on or prior to the date on which such Lender becomes a party hereto, duly completed and executed copies of whichever of the following is applicable:
 
(A) in the case of a Lender that is a U.S. Person, IRS Form W-9 certifying that such Lender is exempt from U.S. Federal backup withholding tax;
 
(B) in the case of a Non-U.S. Lender claiming the benefits of an income tax treaty to which the United States is a party (1) with respect to payments of interest under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “interest” article of such tax treaty and (2) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
 
(C) in the case of a Non-U.S. Lender for whom payments under any Loan Document constitute income that is effectively connected with such Lender’s conduct of a trade or business in the United States, IRS Form W-8ECI;
 

 
26

 

(D) in the case of a Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code both (1) IRS Form W-8BEN and (2) a certificate substantially in the form of Exhibit F (a “U.S. Tax Certificate”) to the effect that such Lender is not (a) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (b) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code (c) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (d) conducting a trade or business in the United States with which the relevant interest payments are effectively connected;
 
(E) in the case of a Non-U.S. Lender that is not the beneficial owner of payments made under any Loan Document (including a partnership or a participating Lender) (1) an IRS Form W-8IMY on behalf of itself and (2) the relevant forms prescribed in clauses (A), (B), (C), (D) and (F) of this paragraph (f)(ii) that would be required of each such beneficial owner or partner of such partnership if such beneficial owner or partner were a Lender; provided, however, that if the Lender is a partnership and one or more of its partners are claiming the exemption for portfolio interest under Section 881(c) of the Code, such Lender may provide a U.S. Tax Certificate on behalf of such partners; or
 
(F) any other form prescribed by law as a basis for claiming exemption from, or a reduction of, U.S. Federal withholding Tax together with such supplementary documentation necessary to enable the Borrower or the Administrative Agent to determine the amount of Tax (if any) required by law to be withheld.
 
(g)  Treatment of Certain Refunds.  If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.11 (including additional amounts paid pursuant to this Section 2.11), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including any Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).  Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid to such indemnified party pursuant to the previous sentence (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event such indemnified party is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this Section 2.11(g), in no event will any indemnified party be required to pay any amount to any indemnifying party pursuant to this Section 2.11(g) if such payment would place such indemnified party in a less favorable position (on a net after-Tax basis) than such indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid.  This Section 2.11(g) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the indemnifying party or any other Person.
 
(h)  Survival.  Each party’s obligations under this Section 2.11 shall survive any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all other obligations under any Loan Document.
 
2.12           Change of Lending Office.  Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.10 or 2.11(a) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or
 

 
27

 

regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 2.10 or 2.11(a).
 
2.13           Tax Treatment of Units.  The Parent Guarantor, the Borrower, the Administrative Agent and the Lenders hereby agree (i) to treat the Loans made on the Closing Date and the Closing Date Warrants as an investment unit consisting of Warrants and a Loan and to allocate the purchase price between the underlying Warrants and Loan in the proportions set forth on Schedule 2.13 hereto, which Schedule shall be agreed to among the Administrative Agent, the Lenders and the Borrower and completed no later than April 22, 2011, and (ii) unless required by applicable law, each of the Parent Guarantor, the Borrower, the Administrative Agent and the Lenders will not take any position on a tax return inconsistent with (i) or (ii).
 
2.14           Replacement of Lenders.  The Borrower shall be permitted to replace any Lender that (a) requests reimbursement for amounts owing pursuant to Section 2.10 or Section 2.11 or (b) defaults in its obligation to make Loans hereunder, with a replacement financial institution; provided that (i) such replacement does not conflict with any Requirement of Law, (ii) no Default or Event of Default shall have occurred and be continuing at the time of such replacement, (iii) prior to any replacement, such Lender shall have taken no action under Section 2.12 so as to eliminate the continued need for payment of amounts owing pursuant to Section 2.10 or Section 2.11, (iv) the replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement, (v)  the replacement financial institution, if not already a Lender, shall be reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.6, (vii) the Borrower shall pay all additional amounts (if any) required pursuant to Section 2.10 or Section 2.11, as the case may be, in respect of any period prior to the date on which such replacement shall be consummated, and (viii) any such replacement shall not be deemed to be a waiver of any rights that the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender.
 
SECTION 3.  FEES
3.1           Closing Fee.  The Borrower agrees to pay to the Administrative Agent for the account of each Lender (on a pro rata basis based on each such Lender’s respective Aggregate Exposure Percentage) a closing fee on the Closing Date of $180,000.
 
SECTION 4.   REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans, the Parent Guarantor and Borrower hereby jointly and severally represent and warrant to the Administrative Agent and each Lender that:
 
4.1           Financial Condition.   The audited consolidated balance sheets of the Parent Guarantor as at December 31, 2010, December 31, 2009 and December 31, 2008, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from Ernst & Young LLP, present fairly, in all material respects, the consolidated financial condition of the Parent Guarantor as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended.  The unaudited consolidated balance sheets of the Parent Guarantor as at September 30, 2010, June 30, 2010 and March 31, 2010, and the related unaudited consolidated statements of income and cash flows for the three-, six- and nine-month periods ended on such dates, present fairly, in all material respects, the
 

 
28

 

consolidated financial condition of the Parent Guarantor as at such date, and the consolidated results of its operations and its consolidated cash flows for the three-, six- and nine-month periods then ended (subject to normal year-end audit adjustments).  All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein).  As of the Closing Date, no Group Member has any Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph or previously disclosed by the Parent Guarantor in its filings and current reports with the SEC, except for any such liabilities or obligations which could not, individually or in the aggregate, have a Material Adverse Effect.  During the period from December 31, 2010 to and including the date hereof there has been no Disposition by any Group Member of any material part of its business or property.
 
4.2           No Change.  Since March 30, 2011, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.
 
4.3           Existence; Compliance with Law.  Each Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation or other organization and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except, in the case of clauses (c) and (d), to the extent that the failure to be so qualified or comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
 
4.4           Power; Authorization; Enforceable Obligations.  Each Loan Party has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to borrow the Loans hereunder.  Each Loan Party has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the borrowing of the Loans on the terms and conditions of this Agreement.  No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 4.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect, (ii) the filings referred to in Section 4.19 and (iii) immaterial consents, authorizations, filings and notices.  Each Loan Document has been duly executed and delivered on behalf of each Loan Party party thereto.  This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
 
4.5           No Legal Bar.  The execution, delivery and performance of this Agreement and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any material Requirement of Law or any material Contractual Obligation of any Group Member and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents).  No Requirement of Law or Contractual Obligation
 

 
29

 

applicable to the Parent Guarantor or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect.
 
4.6           Litigation.  Except as set forth on Schedule 4.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower or the Parent Guarantor, threatened by or against any Group Member or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect.
 
4.7           No Default.  No Group Member is in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be expected to have a Material Adverse Effect.  No Default or Event of Default has occurred and is continuing.
 
4.8           Ownership of Property; Liens.  Each Group Member has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 7.3.
 
4.9           Intellectual Property.  Each Group Member owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted.  To the best knowledge of each Group Member, no material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does the Borrower or the Parent Guarantor know of any valid basis for any such claim.  To the best knowledge of any Loan Party, the use of Intellectual Property by each Group Member does not infringe on the rights of any Person in any material respect.
 
4.10           Taxes.  Each Group Member has filed or caused to be filed all Federal, state and other material Tax returns that are required to be filed and has paid all Taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other Taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Group Member); no Tax Lien has been filed, and, to the knowledge of the Borrower or the Parent Guarantor, no claim is being asserted, with respect to any such Tax, fee or other charge.
 
4.11           Federal Regulations.  No part of the proceeds of any Loans will be used (a) for “buying” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect for any purpose that violates the provisions of the Regulations of the Board or (b) for any purpose that violates the provisions of the Regulations of the Board.  No more than 25% of the assets of the Group Members consist of “margin stock” as so defined.
 
4.12           Labor Matters.  Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:  (a) there are no strikes or other labor disputes against any Group Member pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees of each Group Member have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters; and (c) all payments due from any Group Member on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Group Member.
 

 
30

 

4.13           ERISA.  (a)  Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) each of the Loan Parties is in compliance with the applicable provisions of ERISA and the provisions of the Code relating to Plans and the regulations and published interpretations thereunder; (ii) no ERISA Event has occurred or is reasonably expected to occur; and (iii) all amounts required by applicable law with respect to, or by the terms of, any retiree welfare benefit arrangement maintained by any of the Loan Parties or to which any of the Loan Parties has an obligation to contribute have been accrued in accordance with Statement of Financial Accounting Standards No. 106.  The present value of all accumulated benefit obligations under each Pension Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than a material amount the fair market value of the assets of such Pension Plan allocable to such accrued benefits, and the present value of all accumulated benefit obligations of all underfunded Pension Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than a material amount the fair market value of the assets of all such underfunded Pension Plans.
 
(b)  Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i) all employer and employee contributions required by applicable law or by the terms of any Foreign Benefit Arrangement or Foreign Plan have been made, or, if applicable, accrued in accordance with normal accounting practices; (ii) the accrued benefit obligations of each Foreign Plan (based on those assumptions used to fund such Foreign Plan) with respect to all current and former participants do not exceed the assets of such Foreign Plan; (iii) each Foreign Plan that is required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities; and (iv) each such Foreign Benefit Arrangement and Foreign Plan is in compliance (A) with all material provisions of applicable law and all material applicable regulations and published interpretations thereunder with respect to such Foreign Benefit Arrangement or Foreign Plan and (B) with the terms of such plan or arrangement.
 
4.14           Investment Company Act; Other Regulations.  No Loan Party is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.  No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.
 
4.15     &