EXHIBIT XI
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT (this "Agreement"), dated as of December 5,
1997, by and between PRIME GROUP VI, L.P., an Illinois limited partnership (the
"Company"), and OCH-ZIFF CAPITAL MANAGEMENT, L.P., a Delaware limited
partnership (the "Purchaser").
WHEREAS: The Company wishes to sell and the Purchaser wishes to buy,
subject to the terms and conditions set forth in this Agreement, a note of the
Company in the form of Exhibit A hereto and having an initial principal amount
of $20,000,000 (the "Note"), which Note is exchangeable for shares of Common
Stock of BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation ("BLCI"),
on the terms and conditions set forth herein, in reliance on the exemption
from securities registration afforded by the provisions of Section 4(2) under
the Securities Act of 1933, as amended.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
As used herein, in addition to capitalized terms defined in the
recitals hereof and in the Note, the following capitalized terms shall have the
following meanings:
(a) "Cash Equivalents" has the meaning ascribed thereto in the
Security Agreement.
(b) "Closing" and "Closing Date" have the meaning ascribed thereto
in Section 2.2.
(c) "Collateral" has the meaning ascribed thereto in the Security
Agreement.
(d) "Commission" means the Securities and Exchange Commission.
(e) "Equity Security" has the meaning ascribed thereto in the Security
Agreement.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(g) "Guaranty" means any or each guaranty to be issued on the date
hereof by The Prime Group, Inc., Prime Group II, LP, Prime International, Inc.,
PGLP, Inc., and
Prime Group Limited Partnership guaranteeing the obligations of the Company
under the Note and this Agreement.
(h) "Indemnified Party", "Indemnifying Party", "Company Indemnified
Party" and "Purchaser Indemnified Party" have the meanings ascribed thereto in
Sections 8(a), 8(b) and 7(c).
(i) "Investment Grade Securities" has the meaning ascribed thereto
in the Security Agreement.
(j) "Minimum Required Amount" has the meaning ascribed thereto in the
Security Agreement.
(k) "Pledged Shares" has the meaning ascribed thereto in the Security
Agreement.
(l) "Purchase Price" has the meaning ascribed thereto in Section 2.1.
(m) "Registration Deadline" means November 15, 1998.
(n) "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May 7, 1997, among BLCI, The Prime Group, Inc., Prime
Group Limited Partnership and the Company, as amended by Amendment No. 1, dated
as of the date hereof (the "Registration Rights Agreement Amendment").
(o) "Reorganization" has the meaning ascribed thereto in Section
3.5.
(p) "Security Agreement" means the Pledge and Security Agreement,
dated the date hereof, between the Company and the Purchaser.
(q) "Securities Act" means the Securities Act of 1933, as amended.
(r) "Standstill Period" has the meaning ascribed thereto in Section
6.4.
(s) "Target Amount" has the meaning ascribed thereto in the Security
Agreement.
(t) "Transaction Documents" means this Agreement, the Note, the
Security Agreement, the Guaranty given by each guarantor, the Registration
Rights Agreement Amendment and all other agreements, documents, certificates or
other instruments delivered by the Company at the Closing.
(u) "Value" means, as of any date: (i) with respect to BLCI Stock,
Cash Equivalents or Equity Securities (x) the Closing Bid Price thereof on the
Trading Day
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immediately prior to such date, multiplied by (y) the quantity thereof then held
as collateral by the Purchaser in which the Purchaser has a valid and perfected
first priority security interest, subject to no other liens or security
interests, pursuant to the Security Agreement; (ii) with respect to Investment
Grade Securities, (x) the lower of (I) the Closing Bid Price thereof on the
Trading Day immediately prior to such date, and (II) the par value thereof,
multiplied by (y) the quantity thereof then held as collateral by the Purchaser
in which the Purchaser has a valid and perfected first priority security
interest, subject to no other liens or security interests, pursuant to the
Security Agreement; (iii) with respect to cash, the dollar amount thereof; and
(iv) with respect to the Collateral, the aggregate of the Values of each item
constituting the Collateral.
The following non-capitalized terms shall have the respective
following meanings: (i) an "affiliate" of a party shall mean any person or
entity controlling, controlled by or under common control with that party; and
(ii) a "business day" means any day, other than a Saturday, Sunday or any other
day on which the New York Stock Exchange or commercial banks in the cities of
Chicago and New York are authorized to close for business.
2. PURCHASE AND SALE OF NOTE.
2.1 Agreement to Purchase and Sell. On the terms and subject to the
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conditions set forth herein, the Company agrees to sell at the Closing (as
defined below), and the Purchaser agrees to purchase, a promissory note of the
Company in the form of the Note attached hereto as Exhibit A, in the principal
amount of TWENTY MILLION DOLLARS ($20,000,000), at a purchase price equal to
such principal amount (the "Purchase Price").
2.2 Closing. The closing of the purchase and sale of the Note (the
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"Closing") shall be held at the offices of Winston & ▇▇▇▇▇▇, counsel to the
Company, in New York, New York, or at such other time and place as is mutually
agreed to by the parties. Subject to the satisfaction of the conditions set
forth herein, the Closing will be deemed to occur when this Agreement and the
other Transaction Documents have been executed and delivered by the Company,
the Purchaser and each other party thereto, and full payment of the amount of
the Purchase Price (net of the expenses referred to in Section 9.l) has been
made by the Purchaser by wire transfer of immediately available funds to an
account designated by the Company against delivery by the Company of a duly
executed Note to the Purchaser. The date on which the Closing is deemed to
occur is referred to herein as the "Closing Date".
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company makes the following representations and warranties to the
Purchaser as of the day hereof (which shall be true as of the Closing, and which
shall be deemed to be repeated as of the date of any additional pledge and
delivery of shares of BLCI Stock or other Collateral to the Purchaser as
provided in the Security Agreement):
3.1 Organization: Power and Authority. It is a limited partnership
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duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified as a foreign limited
partnership and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on its
business or financial condition. It has the partnership power and authority to
own or hold under lease the properties it purports to own or hold under lease,
to transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party and to perform its obligations hereunder and thereunder.
3.2 Authorization, etc. This Agreement and the other Transaction
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Documents to which it is a party and the Note have been duly authorized by all
necessary partnership action on the part of the Company. This Agreement and the
other Transaction Documents to which it is a party each constitutes, and upon
execution and delivery thereof the Note will constitute, a legal, valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.3 Disclosure. This Agreement and the other Transaction Documents,
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and the financial statements listed or described on Schedule 3.5 (copies of
which have been previously delivered to the Purchaser), taken as a whole, do
not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading in
any material respect in light of the circumstances under which they were made.
3.4 Ownership of Shares of BLCI. Schedule 3.4 shows the number of
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shares of BLCI Stock owned by the Company and each affiliate of the Company as
of the date hereof, and the percentage of shares of each class of BLCI's capital
stock outstanding owned by the Company as of the date hereof. All of the
outstanding shares of BLCI Stock shown on Schedule 3.4 as being owned by the
Company have been validly issued, are fully paid and nonassessable and are owned
by the Company free and clear of any liens or encumbrances of any nature, except
as otherwise disclosed in Schedule 3.4.
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3.5 Financial Statements. There have been delivered to the Purchaser
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copies of the pro forma fair market value balance sheet (where applicable,
consolidated and combined) of The Prime Group, Inc. ("PGI") and its affiliates
(including the Company) listed on Schedule 3.5, prepared to reflect the proposed
reorganization (the "Reorganization") of the office and industrial division of
PGI and its affiliates into Prime Group Realty Trust as contemplated by the
S-11 registration statement of such entity filed with the Commission August 13,
1997, as amended by Amendment No. 1 thereto filed with the Commission on
September 12, 1997, and as may be further modified or amended by subsequent
amendments thereto. Such financial statements (including in each case the
related schedules and notes) fairly present in all material respects the pro
forma consolidated financial position of the Company as of the respective dates
specified in such financial statements on a fair market value basis.
3.6 Compliance with Laws, Other Instruments, etc. The execution,
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delivery and performance by the Company of this Agreement and the Note will not
(i) contravene, result in any breach of, or constitute a default under, or
result in the creation of any lien or other encumbrance in respect of any
property of the Company under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, certificate of limited partnership,
agreement of limited partnership, or any other material agreement or
instrument to which the Company is bound or by which the Company or any of
its properties is bound or affected, (ii) conflict with or result in a breach of
any of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or governmental authority applicable to the
Company or (iii) violate any provision of any statute or other rule or
regulation of any governmental authority applicable to the Company.
3.7 Governmental Authorizations, etc. No consent, approval or
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authorization of, or, except as contemplated by the Registration Rights
Agreement, registration, filing or declaration with, any governmental
authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Note.
3.8 Litigation: Observance of Statutes and Orders. (a) Except
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as disclosed in Schedule 3.8, there are no actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any property of the Company in any court or before any arbitrator
or before or by any governmental authority that, individually or in the
aggregate, would reasonably be expected to have a material adverse effect on
its business or financial condition.
(b) The Company is not in default under any order, judgment, decree
or ruling of any court, arbitrator or governmental authority or in violation
of any applicable law, ordinance, rule or regulation (including without
limitation environmental laws) of any governmental authority, which default
or violation, individually or in the aggregate, would reasonably be expected to
have a material adverse effect on its business or financial condition.
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3.9 Taxes. The Company has filed all income tax returns that are
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required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments
payable by it, to the extent such taxes and assessments have become due and
payable and before they have become delinquent, except for any taxes and
assessments (i) the amount of which is not individually or in the aggregate
material or (ii) the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which the Company has established adequate reserves therefor.
3.10 Title to Property. The Company has good and sufficient title to
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its properties, including all such properties reflected in the pro forma balance
sheet described in Section 3.5 as owned by the Company, in each case free and
clear of liens or encumbrances prohibited by this Agreement, except for those
defects in title and liens that, individually or in the aggregate, would not
have a material adverse effect on the Company's business or financial condition.
3.11 Private Offering by the Company. Neither the Company nor anyone
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acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Note to the registration requirements of Section 5 of
the Securities Act.
3.12 Use of Proceeds; Margin Regulations. The Company will apply the
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proceeds of the sale of the Note only for purposes of working capital for the
Company, PGI and its affiliates. No part of the proceeds from the sale of the
Note hereunder will be used, directly or indirectly, for the "purpose of buying
or carrying" any "margin stock" within the meaning of Regulation G of the Board
of Governors of the Federal Reserve System (12 CFR 207) under such circumstances
as to involve the Company in a violation of Regulation G, T, or X of said Board
(12 CFR 207; 12 CFR 224; 12 CFR 220).
3.13 Existing Indebtedness. Neither the Company nor, to the best of
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the Company's knowledge, BLCI is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any
indebtedness of the Company and no event or condition exists with respect to any
indebtedness of the Company the outstanding principal amount of which exceeds
$10,000,000 that would permit (or that with notice or the lapse of time, or
both, would permit) one or more persons to cause such indebtedness to become due
and payable before its stated maturity or before its regularly scheduled dates
of payment.
3.14 Other Fees. It is not obligated to pay any compensation or other
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fee, cost or related expenditure to any underwriter, broker, agent or other
representative in connection with the transactions contemplated hereby.
3.15 Not Investment Company. The Company is not subject to regulation
----------------------
under the Investment Company Act of 1940, as amended.
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4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby makes the following representations and
warranties to the Company:
4.1 Authorization; Enforceability. Purchaser is duly and validly
-----------------------------
organized, validly existing and in good standing as a limited partnership under
the laws of the state of its organization with full power and authority to
purchase the Note and the Exchange Shares and to execute and deliver this
Agreement and the other Transaction Documents. This Agreement and the other
Transaction Documents each constitutes the Purchaser's valid and legally binding
obligation, enforceable in accordance with its terms, except as such enforcement
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.2 Accredited Investor; Investment Intent. The Purchaser is (i) an
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accredited investor, as defined in Rule 501 of Regulation D under the Securities
Act, (ii) an institution and (iii) a "qualified institutional buyer" as
defined in Rule 144A under the Securities Act. The Purchaser is acquiring the
Note, and will be purchasing any Exchange Shares exchangeable therefor, solely
for the Purchaser's own account for investment purposes as a principal and not
with a view to the public resale or distribution of all or any part thereof;
provided, that in making such representation, the Purchaser does not agree to
hold the Note or the Exchange Shares for any minimum or specific term and
reserves the right to sell, transfer or otherwise dispose of the Note or the
Exchange Shares at any time in accordance with the provisions of this Agreement
and the Registration Rights Agreement and with Federal and state securities laws
applicable to any such sale, transfer or disposition.
4.3 Information. The Company has provided the Purchaser with certain
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written information regarding the Company and has granted to the Purchaser the
opportunity to ask questions of and receive answers from representatives of
the Company, its officers, directors, employees and agents concerning the terms
and conditions of the purchase and sale of the Note, the Company and its
business and prospects.
4.4 Limitations on Disposition. The Purchaser acknowledges that the
--------------------------
Note has not been registered under the Securities Act or any state securities
laws and applicable rules and regulations, and may not be transferred unless and
until:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) an exception from the registration requirements of the Securities
Act is then available with respect to such proposed disposition and such
disposition is made in
7
accordance with such exemption. The Purchaser agrees that no such disposition
shall be made pursuant to this Section 4.4(b) unless (i) the Purchaser shall
have notified the Company in advance of the proposed disposition, and (ii) if
reasonably requested by the Company, the Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration under the Securities Act.
It is agreed that no opinion of counsel will be required for the transfer of the
Note or any interest therein to an affiliate of the Purchaser or with respect to
a sale thereof made pursuant to Rule 144 under the Securities Act (or any
successor provision); provided, that prior to any sale made pursuant to Rule
144, the Purchaser will furnish to the Company, upon its request, a certificate
setting forth such representations as are customarily given by a selling
shareholder to the issuer in a Rule 144 transaction.
4.5 Legend. The Purchaser understands that the Note shall bear at
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issuance a restrictive legend in substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS A REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE
EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN
CONNECTION WITH SUCH OFFER, SALE, TRANSFER OR DISPOSITION."
5. COVENANTS OF THE COMPANY.
The Company covenants that so long as the Purchaser or any affiliate
thereof beneficially owns the Note (or any interest therein) or any Exchange
Shares:
5.1 Compliance with Law. The Company will comply with all laws,
-------------------
ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, environmental laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to
the extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations would not reasonably be expected, individually or in the
aggregate, to have a materially adverse effect on its business or financial
condition.
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5.2 Existence. The Company shall maintain its limited partnership
---------
existence and shall pay all its taxes when due except for taxes which it
reasonably disputes or which could not reasonably be expected to have a
materially adverse change on its consolidated business or financial condition.
5.3 Provision of Information. The Company shall provide the
------------------------
Purchaser, or shall cause the Purchaser to be provided, with copies of BLCI's
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and proxy statements, in each such case promptly after filing thereof
with the Commission, until the exchange or redemption of the Note.
5.4 Maintenance of Minimum Collateral. (a) As long as the Purchaser
---------------------------------
or any affiliate of Purchaser beneficially owns the Note (or any interest
therein), the Company shall at all times maintain pledged with the Purchaser, in
accordance with the provisions of the Security Agreement, such number of shares
of BLCI Stock or other Collateral as are required so that the aggregate Value
of the Collateral (as determined pursuant to the Security Agreement) is not less
than the Minimum Required Amount at any time.
(b) On any day on which the Value of the Collateral pledged to the
Purchaser (as calculated pursuant to the Security Agreement) is less than the
Minimum Required Amount, the Company shall, within five (5) business days after
the Company's receipt of notice from the Purchaser to such effect, deliver and
pledge such additional shares of BLCI Stock or other Collateral with the
Purchaser as is necessary so that the Value of the Collateral pledged to or
otherwise under the control of Secured Party is not less than the Target Amount,
as computed on the date of, and after giving effect to, such delivery and
pledge.
5.5 Use of Purchaser's Name. The Company shall not use, directly or
-----------------------
indirectly, the Purchaser's name in any advertisement, announcement, press
release or other similar communication unless it has received the prior written
consent of the Purchaser for the specific use contemplated. The Company will
consult with the Purchaser, and permit Purchaser's review, prior to making any
governmental or other filings describing the Purchaser.
5.6 Company's Instructions to BLCI Transfer Agent. The Company shall
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at the Closing instruct the transfer agent for BLCI Stock (i) to issue
certificates representing the number of shares of BLCI Stock specified in each
duly issued Exchange Notice in the name of the Purchaser or its nominee as
provided in the terms of the Note, and (ii) to deliver such certificates to the
Purchaser no later than the close of business on the third (3rd) business day
following the Delivery Date (as defined in the Note); provided, that the Company
has not given written notice to such transfer agent of its objection to the
calculations in such Exchange Notice as provided in the terms of the Note. The
Company will provide the Purchaser with a written acknowledgment of such
transfer agent to act according to such instruction as promptly following the
Closing as practicable, and in any
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case within 45 days thereof. The Company shall not give any instruction to such
transfer agent that will conflict with the foregoing instruction, or otherwise
restrict the Purchaser's right to exchange the Note or receive Exchange Shares
in accordance with the terms of the Note and the other Transaction Documents. In
the event BLCI's relationship with its transfer agent is terminated for any
reason, the Company shall give to the new transfer agent for BLCI Stock the same
instructions as provided above, and shall provide the Purchaser with such
transfer agent's written confirmation to so act.
6. REGISTRATION OF BLCI STOCK
6.1 Filing of Registration Statement. The Company shall use its best
--------------------------------
efforts to cause BLCI to prepare and file with the Commission, with sufficient
time to permit effectiveness thereof on or before the Registration Deadline, a
Registration Statement on such Form as is then available to effect a
registration of the Exchange Shares as a "shelf" registration statement under
Rule 415 covering the resale on a continuous basis of the Exchange Shares which
the Purchaser becomes entitled to receive pursuant to the Note (including upon
enforcement of its rights under the Security Agreement) in accordance with the
terms and conditions thereof.
6.2 Obligation to Supply Information. In connection with the
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registration of shares BLCI Stock pursuant to a Registration Statement, the
Purchaser agrees to furnish to BLCI or the Company such information regarding
itself and the intended method of disposition of the shares of BLCI Stock to be
registered on its behalf as BLCI or the Company shall reasonably request in
order to effect the registration thereof or as needed for any post-effective
amendment to the Registration Statement or for any supplement to the prospectus
including therein.
6.3 Stop Orders. Upon receipt of any notice from BLCI of the
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happening of the issuance of any stop order or other order suspending the
effectiveness of the Registration Statement, the Purchaser shall discontinue
disposition of Registrable Shares (as defined in the Registration Rights
Agreement) pursuant to the Registration Statement until withdrawal of such stop
order.
6.4 Standstill Periods. If so requested by BLCI, and provided a
------------------
Registration Statement covering the sale of all of the Registrable Shares is
then effective, the Purchaser shall not sell or otherwise transfer pursuant to
any such Registration Statement (i) any Exchange Shares during the period from
the second (2nd) business day prior to the effective date of a registration
statement filed by BLCI under the Securities Act (other than a Registration
Statement hereunder) in connection with a public offering of BLCI Stock until
the thirtieth (30th) calendar day following such effective date, and (ii) any
Exchange Shares during the period from the date specified in a notice delivered
by BLCI, to the effect that because an event has occurred, as a result of which
the prospectus included in such Registration Statement then in effect contains
an untrue statement of a material fact (or omits
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to state a material fact required to be stated therein or which is necessary to
make the statements therein not misleading in light of the circumstances then
existing), BLCI will delay the preparation and filing of an amendment or
supplement to the prospectus included in the Registration Statement until the
expiration date specified in such notice (each of the periods described in
clauses (i) and (ii) hereof, a "Standstill Period"). The Company agrees that,
upon the exchange of principal of or interest on the Note where the Exchange
Date therefor occurs after the expiration of a Standstill Period, then until
(and including) the tenth (10th) business day following the date of such
expiration, the Exchange Price therefor shall be the lesser of (A) the lowest
applicable Exchange Price in effect during the Standstill Period, and (B) the
applicable Exchange Price in effect on such Exchange Date.
7. CONDITIONS TO CLOSING.
7.1 Conditions to Purchaser's Obligations at Closing. The
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Purchaser's obligations hereunder to purchase and pay for the Note are subject
to the satisfaction or waiver by the Purchaser of each of the following
conditions:
(a) the representations and warranties of the Company in this
Agreement shall be true and correct in all material respects as of the Closing
Date as if made on such date;
(b) the Company shall have complied with or performed, in all
material respects, all agreements, obligations and conditions set forth in this
Agreement required to be complied with or performed by it on or before the
Closing;
(c) each of the Transaction Documents shall have been executed by
each party thereto other than the Purchaser, and the Company shall have met all
required conditions precedent to the effectiveness thereof;
(d) the Company shall have delivered and pledged to the Purchaser the
number of shares of BLCI Stock required hereby and under the Security
Agreement, in the form required thereunder, having a Value of not less than one
hundred and twenty-five percent (125%) of the original principal amount of the
Note;
(e) the Company shall have delivered to the Purchaser a certificate,
signed by an officer of the Company, certifying that the conditions specified in
paragraphs (a), (b), (c) and (d) above have been fulfilled;
(f) the Company shall have delivered to the Purchaser opinions of
counsel for the Company, dated the Closing Date, covering the matters set forth
in Exhibit 7.1 in form reasonably satisfactory to Purchaser;
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(g) the Company shall have delivered to the Purchaser (i) executed
copies of Financing Statements (Form UCC-1), in form suitable for filing under
the Uniform Commercial Code in such jurisdictions as may be necessary or
advisable to perfect the security interests created by the Security Agreement,
(ii) a lien search, dated as of recent date prior to the Closing, listing all
financing statements which name the Company as debtor and which are filed in the
jurisdictions referred to in (i) above, and (iii) executed copies of such
documentation as may be customarily required by an agent of the Purchaser
engaged to hold all or any of the Collateral;
(h) the Company shall have delivered to the Purchaser (i) an
assignment of registration rights under the Registration Rights Agreement from
the Company to the Purchaser, consented to by BLCI, and (ii) the written
confirmation of BLCI to a written request for demand registration rights by the
Purchaser pursuant to the Registration Rights Agreement; and
(i) there shall have been no material adverse changes in the
consolidated business or financial condition of PGI and its affiliates on a
combined basis since June 30, 1997 which have not been disclosed in writing to
the Purchaser.
7.2 Conditions to Company's Obligations at Closing. The Company's
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obligations hereunder to execute and deliver the Note against payment therefor
are subject to the satisfaction or waiver by the Company of each of the
following conditions:
(a) the representations and warranties of the Purchaser shall be true
and correct in all material respects as of the Closing Date as if made on such
date; and
(b) the Purchaser shall have complied with or performed all of the
agreements, obligations and conditions set forth in this Agreement that are
required to be complied with or performed by the Purchaser on or before the
Closing.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Purchaser
and its officers, directors, employees and agents, and each person who controls
the Purchaser within the meaning of the Securities Act or the Exchange Act
(each, a "Purchaser Indemnified Party") against any losses, claims, damages,
liabilities or reasonable out-of-pocket expenses (including the reasonable fees
and disbursements of counsel) as an incurred, joint or several, to which it,
they or any of them, may become subject and not otherwise reimbursed, arising
out of or in connection with the breach by the Company of any of its
representations, warranties or covenants made herein.
(b) The Purchaser agrees to indemnify and hold harmless the Company
and its officers, directors, employees and agents, and each person who controls
the Company
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within the meaning of the Securities Act or the Exchange Act (each, a "Company
Indemnified Party") (the Purchaser Indemnified Party and a Company Indemnified
Party are each hereinafter referred to as an "Indemnified Party") against any
losses, claims, damages, liabilities or expenses (including the fees and
disbursements of counsel) as incurred, joint or several, to which it, they or
any of them, may become subject and not otherwise reimbursed, arising out of or
in connection with the breach by the Purchaser of any of its representations,
warranties or covenants made herein.
(c) Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought
hereunder, such Indemnified Party will, if a claim in respect thereof is to be
made against the other party (the "Indemnifying Party"), deliver to the
Indemnifying Party a written notice of the commencement thereof and the
Indemnifying Party shall have the right to participate in and to assume the
defense thereof with counsel reasonably selected by the Indemnifying Party that
is reasonably acceptable to the Indemnified Party; provided, that an Indemnified
Party shall have the right to retain its own counsel, with the reasonably
incurred fees and expenses of such counsel to be paid by the Indemnifying Party,
if representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential conflicts
of interest under applicable standards of professional conduct between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the Indemnifying Party
within a reasonable time of the commencement of any such action will not relieve
the Indemnifying Party of any of its obligations hereunder with respect to such
action except to the extent such failure is prejudicial to the Indemnifying
Party's ability to defend any such action.
(d) No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of pending or threatened action in
respect of which an Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on any claims that are the subject matter of such action. An
Indemnifying Party will not be liable for any settlement of any action or claim
effected without its written consent.
9. MISCELLANEOUS
9.1 Expenses. Each of the Company and the Purchaser shall pay all
--------
costs and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement; provided, that the Company shall
reimburse the Purchaser, on a periodic basis for Purchaser's costs of
maintaining the Collateral.
9.2 Notices. Any notice, demand or request required or permitted to
-------
be given by the Company, or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile
13
transmission (with a hard copy to follow) on or before 5:00 p.m., New York time,
on a business day or, if such day is not a business day, on the next succeeding
business day, (ii) on the next business day after timely delivery to a
nationally recognized overnight courier guarantying next day delivery, delivery
charges prepaid, and (iii) on the third business day after deposit in the U.S.
mail (certified or registered mail, return receipt requested, postage prepaid),
addressed to the parties as follows:
If to the Company:
The Prime Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
The Prime Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Purchaser:
Och-Ziff Capital Management, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as shall be designated by a party writing to the
others.
9.3 Survival; Severability. The representations, warranties,
----------------------
covenants and indemnities made by the parties herein shall survive the Closing
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force
14
and effect without said provision; provided, that in such case the parties shall
negotiate in good faith to replace such provision with a new provision which is
not illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the parties.
9.4 Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties; provided, that the Company shall not
assign its right or obligations hereunder without the prior written consent of
Purchaser. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement. Purchaser may
assign its rights hereunder, in connection with any private sale or transfer of
the Note, so long as, as a condition precedent to such transfer, the transferee
executes an acknowledgment agreeing to be bound by the applicable provisions of
this Agreement, in which case the term "Purchaser" shall be deemed to refer to
such transferee as though such transferee were an original signatory hereto.
9.5 Injunctive Relief. The Company acknowledges that a breach by
-----------------
it of its obligations hereunder may cause irreparable harm to the Purchaser and
that the remedy or remedies at law for any such breach may be inadequate and
agrees, in the event of any such breach, in addition to all other available
remedies, the Purchaser shall have the right to obtain equitable relief to
enforce this Agreement to the extent such relief is available.
9.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
9.7 Failure to Exercise Rights Not Waiver. No failure or delay on
-------------------------------------
the part of the Purchaser in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude any other or further
exercise thereof. All rights and remedies of the Purchaser hereunder are
cumulative and not exclusive of any rights or remedies otherwise available.
9.8 Entire Agreement; Amendments. This Agreement, the Note and the
----------------------------
other Transaction Documents constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written oral, between the parties. Except
as expressly provided herein, neither this Agreement nor any term hereof may be
amended except pursuant to a written instrument executed by the Company and
the Purchaser, and no provision hereof may be waived other than by a written
instrument signed by the party against whom enforcement of any such waiver is
sought.
15
9.9 Governing Law; Consent to Jurisdiction. (a) This Agreement shall
--------------------------------------
be governed by and construed in accordance with the substantive laws of the
State of New York, without giving effect to the choice of law provisions
thereof, except to the extent that the validity or perfection of the security
interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the State of
New York.
(b) The Company hereby irrevocably agrees that, subject to
Purchaser's sole and absolute election, all actions or proceedings which in any
manner arise out of or in connection with or are in any way related to this
Agreement or the other Transaction Documents shall be litigated in courts
having situs within the County of New York, State of New York, and the Company
hereby consents to the jurisdiction of any state or federal court located with
the County of New York, State of New York. The Company hereby waives any right
it may have to transfer or change the venue of any litigation between grantor
and purchaser in accordance with this paragraph.
9.10 Waiver of Jury Trial. EACH OF THE COMPANY AND PURCHASER HEREBY
--------------------
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY in
any action or proceeding which in any manner arises out of or in connection with
or is in any way related to this Agreement or any of the transactions
contemplated herein. The provisions of this Section 9.10 are a material
inducement for Purchaser entering into this Agreement and the transactions
contemplated herein. The Company hereby acknowledges that it has reviewed the
provisions of this Section 9.10 with its independent counsel.
IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement as of the date first written above.
PRIME GROUP VI, L.P.
By: PGLP, Inc.
its Managing General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
Title: Vice President
---------------------------
OCH-ZIFF CAPITAL MANAGEMENT, L.P.
By: OCH-ZIFF ASSOCIATES, L.L.C.
its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. Och
---------------------------
Name: ▇▇▇▇▇▇ ▇. Och
Title: Managing Member
16
Exhibit A
FORM OF NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE, TRANSFER OR DISPOSITION. THIS
NOTE IS ISSUED SUBJECT TO THE TERMS OF A NOTE PURCHASE AGREEMENT, DATED AS OF
______________________, 1997 BY AND BETWEEN PRIME GROUP VI, L.P., AND THE
PURCHASER NAMED THEREIN.
PRIME GROUP VI, L.P.
EXCHANGEABLE NOTE
New York, New York $20,000,000
____________, 1997
FOR VALUE RECEIVED, PRIME GROUP VI, L.P., an Illinois limited
partnership (the "Company"), HEREBY PROMISES TO PAY to the order of OCH-ZIFF
CAPITAL MANAGEMENT, L.P., a Delaware limited partnership (the "Purchaser"), or
its assigns, the sum of TWENTY MILLION DOLLARS ($20,000,000), in immediately
available funds, on or before___________, 2002 (the "Maturity Date"), and to pay
interest thereon from the date hereof (the "Issue Date"), as provided herein.
1. DEFINITIONS.
As used herein, in addition to the capitalized terms defined above,
capitalized terms not otherwise defined shall have the following meanings:
(a) "Applicable Percentage" has the meaning ascribed thereto in
Section 3.3.
(b) "BLCI" means Brookdale Living Communities, Inc., a Delaware
corporation.
(c) "BLCI Stock" means the Common Stock, par value $0.01 per share,
of BLCI.
(d) "Closing Bid Price" means, with respect to a security, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported (i) if the
NASDAQ National Market is the principal market on which
the BLCI Stock is then traded, by NASDAQ, (ii) if the New York Stock Exchange or
American Stock Exchange is the principal market on which the BLCI Stock is
then traded, by such respective exchange, (iii) if none of the NASDAQ National
Market or such exchanges is the principal market, by Bloomberg Financial
Markets, (iv) if Bloomberg Financial Markets is not then reporting closing bid
prices of such security, a comparable reporting service of national reputation
selected by the Company and reasonably acceptable to the Holder, (v) if the
foregoing does not apply, the last reported sale price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by such reporting service, (vi) if no sale price is reported for such
security, the average of the bid prices of all market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., or
(vii) with respect to any security that does not constitute a security of the
type specified in the foregoing clauses, or otherwise for which no closing price
is published, the value of such security determined by the valuation method
agreed upon in writing by the Holder and the Company for such security prior to
such date. If the Closing Bid Price cannot be calculated for such security on
such date on any of the foregoing bases, the Closing Bid Price of such security
on such date shall be the fair market value as reasonably determined by an
investment banking firm selected by the Holder and acceptable to the Company
with the reasonable costs of such appraisal to be borne by the Company.
(e) "Collateral" has the meaning ascribed thereto in the Security
Agreement.
(f) "Default Rate" has the meaning ascribed thereto in Section 2.2.
(g) "Delivery Date" has the meaning ascribed thereto in Section 3.4.
(h) "Exchange" has the meaning ascribed thereto in Section 3.1.
(i) "Exchange Conditions" has the meaning ascribed thereto in Section
3.4.
(j) "Exchange Date" has the meaning ascribed thereto in Section 3.2.
(k) "Exchange Default" has the meaning ascribed thereto in Section
3.5.
(l) "Exchange Notice" has the meaning ascribed thereto in Section 3.2.
(m) "Exchange Price" has the meaning ascribed thereto in Section 3.3.
(n) "Exchange Shares" has the meaning ascribed thereto in Section 3.1.
(o) "Floor Exchange Price" has the meaning ascribed thereto in Section
3.3.
(p) "Holder" means the holder of this Note and its permitted assigns.
(q) "Initial Exchange Date" has the meaning ascribed thereto in
Section 3.1.
2
(r) "Mandatory Redemption" has the meaning ascribed thereto in Section
5.1.
(s) "Mandatory Redemption Date" has the meaning ascribed thereto in
Section 5.1.
(t) "Mandatory Redemption Event" has the meaning ascribed thereto in
Section 5.4.
(u) "Mandatory Redemption Price" has the meaning ascribed thereto in
Section 5.2.
(v) "Optional Redemption" has the meaning ascribed thereto in Section
4.1.
(w) "Optional Redemption Date" has the meaning ascribed thereto in
Section 4.1
(x) "Optional Redemption Price" has the meaning ascribed thereto in
Section 4.2.
(y) "Purchase Agreement" means the Note Purchase Agreement, dated the
date hereof, by and between the Company and the Purchaser.
(z) "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May 7, 1997, among BLCI, The Prime Group, Inc., Prime
Group Limited Partnership and the Company, as amended by Amendment No. 1, dated
as of the date hereof (the "Registration Rights Agreement Amendment").
(aa) "Registration Statement" means a registration statement or
statements in compliance with the Securities Act of 1933, as amended, and
pursuant to Rule 415 under the Securities Act or any successor rule providing
for the offering of securities on a continuous basis, covering the resale of the
Exchange Shares exchangeable hereunder, filed in accordance with the
Registration Rights Agreement.
(ab) "Security Agreement" means the Pledge and Security Agreement,
dated the date hereof, by and between the Company and the Purchaser.
(ac) "Standstill Period" has the meaning ascribed thereto in the
Purchase Agreement.
(ad) "Trading Day" means any day on which the BLCI Stock is traded for
any period on the NASDAQ National Market System or on the principal securities
exchange or market on which the BLCI Stock is then traded.
(ae) "Transfer Agent" means the transfer agent for BLCI Stock at any
time.
3
(af) "Value" has the meaning ascribed thereto in the Purchase
Agreement.
The following non-capitalized terms shall have the respective
following meanings: (i) an "affiliate" of a party shall mean any person or
entity controlling, controlled by or under common control with that party; and
(ii) a "business day" means any day other than a Saturday, Sunday or other day
on which the New York Stock Exchange and commercial banks in the cities of
Chicago and New York are authorized to close for business.
2. INTEREST.
2.1 Interest Rate. (a) This Note shall bear interest on the unpaid
-------------
principal amount hereof, from the date hereof until such principal shall be paid
in full, at a rate of four percent (4%) per annum, computed on the basis of a
360-day year of twelve 30-day months, for the actual number of days elapsed.
Subject to Section 2.1(b), interest accrued hereunder shall be due and payable
quarterly in arrears commencing on December 31, 1997 and, thereafter, on the
last day of March, June, September and December, on an Optional Redemption Date,
on a Mandatory Redemption Date and on the Maturity Date, until the principal
hereof shall have been paid or redeemed in full. If any payment becomes due and
payable on a day other than a business day, the maturity thereof shall be
automatically extended to the next business day.
(b) Any regular quarterly interest payable under Section 2.1(a) above
may, pursuant to election by the Company in its sole discretion, not be paid in
cash on the payable date therefor, in which event the unpaid interest shall be
compounded and added to the principal amount hereof on such date, and regular
interest on the principal amount of this Note, as so compounded, shall continue
to accrue thereafter in accordance with Section 2.1(a).
2.2 Default Rate. This Note shall bear interest, to the extent
------------
permitted by law, on any overdue payment of principal, payment of interest
(other than compoundings of interest under Section 2.1(b)), or other amount
payable hereunder, payable quarterly on each regular interest payable date, or
at the option of the Holder, on demand, at a rate per annum (the "Default Rate")
from time to time equal to the greater of (i) fourteen percent (14%) or (ii) two
percent (2%) over the "prime" rate (as published in the Wall Street Journal)
on the relevant date of determination, but in any case not higher than the
highest rate permitted by applicable law, from the date of default until payment
in full.
3. EXCHANGE.
3.1 Right to Exchange. (a) Subject to the limitation contained in
-----------------
Section 3.6 below, the Holder shall have the right to exchange the outstanding
unpaid principal of, and accrued interest on, this Note from time to time, as
specified herein, on and after __________, 1998 (the "Initial Exchange Date")
into fully paid and non-assessable shares of BLCI Stock ("Exchange Shares"),
free and clear of any liens, claims, encumbrances or restrictions on
4
transfer (other than with respect to applicable state and federal securities
laws) on transfer, in accordance with the terms hereof (an "Exchange").
(b) On and following the Initial Exchange Date, the Holder shall be
entitled to exchange up to twenty-five percent (25%) of the original principal
amount hereof, together with compoundings of interest pursuant to Section 2.1(b)
and accrued but unpaid interest on such aggregate principal amount. Thereafter,
the Holder shall be entitled to exchange up to a further twenty-five percent
(25%) of the original principal amount hereof, together with compoundings of
interest pursuant to Section 2.1(b) and accrued but unpaid interest thereon, on
each second-month anniversary of the Initial Exchange Date until May 15, 1999.
Subject to the limitation in Section 3.6, the Holder shall be entitled to
cumulate the amount of the principal outstanding under this Note, and accrued
but unpaid interest thereon, which the Holder becomes entitled to exchange, but
does not exchange, pursuant to this Section 3.1(b).
3.2 Exchange Notice. (a) In order to exchange any portion of the
---------------
principal of, and accrued interest on, this Note, the Holder shall send by
facsimile transmission, at any time prior to 8 p.m., New York time, on the date
on which the Holder wishes to effect such Exchange (the "Exchange Date"), a
notice of exchange in the form of Exhibit B hereto (an "Exchange Notice") to the
Company and to the Transfer Agent, stating (i) the principal amount of the Note
to be exchanged, including compoundings of interest pursuant to Section 2.1(b),
which amount shall not be less than $100,000 (or such lesser amount remaining
unpaid on the final Exchange Date), (ii) the amount of interest accrued on the
then unpaid principal balance of the Note, up to and including the Exchange
Date, (iii) the applicable Exchange Price, and (iv) a calculation of the number
of shares of BLCI Stock to be delivered on such Exchange. The Holder shall not
be required physically to surrender this Note to the Company or to the Transfer
Agent in order to effect an Exchange; provided, however, that the amounts
outstanding under this Note shall automatically be reduced by the amounts of any
such portion of the principal and accrued interest exchanged for Exchange Shares
pursuant to this Section 3.
(b) The Company shall maintain a record showing, at any given time,
the unpaid principal amount of this Note, the accrued but unpaid interest
thereon, and the date of each Exchange or other payment of principal hereof. The
Holder shall amend Exhibit A hereto on any such Exchange or payment of principal
to reflect the unpaid principal amount hereof; provided, that the failure to do
so shall not affect the Company's obligations hereunder.
3.3 Number of Exchange Shares; Exchange Price. The number of Exchange
-----------------------------------------
Shares exchangeable by the Holder pursuant to an Exchange shall be equal to (x)
the aggregate amount of principal of this Note specified for exchange in the
Exchange Notice, together with accrued but unpaid interest thereon, divided (y)
by the Exchange Price in effect on the Exchange Date. The "Exchange Price" as
of an Exchange Date shall be the product of (m) the Applicable Percentage times
(n) the average of the Closing Bid Prices for BLCI Stock on the seven (7)
Trading Days occurring immediately prior to (but not including) such Exchange
Date; provided, that if the Exchange Price as so determined is less than $17.60
(as adjusted for stock splits, stock dividends, etc., the "Floor Exchange
Price"), the Company shall be entitled to effect an
5
Optional Redemption pursuant to Section 4.1. The "Applicable Percentage" for
purposes of calculation of the Exchange Price shall mean eighty-eight percent
(88%).
3.4 Delivery of Exchange Shares. (a) Provided that the Company does
---------------------------
not make written objection to an Exchange Notice by 8:00 p.m., New York time, on
the business day following the delivery thereof, and provided that the Exchange
Conditions are satisfied at such time, the Holder shall send for re-registration
to the Transfer Agent on or following the Exchange Date set forth in such
Exchange Notice (the "Delivery Date") certificate(s) for BLCI Stock sufficient
to permit the issuance to the Purchaser or its nominee of the number of Exchange
Shares specified in the Exchange Notice. The "Exchange Conditions" to be met on
each Delivery Date are as follows: (i) the Company shall not have given notice
to the Holder that the Registration Statement is not effective and available for
resales of the Exchange Shares at such time; (ii) the BLCI Stock is then
designated for quotation on the NASDAQ National Market System or listed on the
New York Stock Exchange or the American Stock Exchange; and (iii) the Holder
holds Collateral, after delivery of the Exchange Shares identified by the
Exchange Notice, with a Value greater than the Minimum Required Amount (as
defined in the Security Agreement).
(b) If any Exchange would create a fractional Exchange Share, such
fractional Exchange Share shall be disregarded and the number of Exchange Shares
to be delivered on such Exchange, in the aggregate, shall be the next higher
number of Exchange Shares; provided, that in any such case of fractional
Exchange Share adjustment, the principal outstanding under this Note shall be
further automatically reduced, at the Exchange Price, to reflect delivery of the
balance of the fractional Exchange Share.
(c) In the case of a dispute as to the calculation of the Exchange
Price or the number of Exchange Shares to be delivered on an Exchange, the
Transfer Agent shall re-register into the name of the Purchaser or its nominee
the number of Exchange Shares that are not disputed, and the Company shall
submit the disputed calculations to Ernst & Young, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, within two (2) business days of receipt of
the Holder's Exchange Notice. Such accountants shall calculate the Exchange
Price as provided herein, and notify the Company and the Holder of the results
in writing no later than two (2) business days following the day on which the
Company received the disputed calculations. Such accountants' calculation shall
be deemed conclusive in the absence of manifest error. The fees of any such
accountants shall be borne by the Company, unless such accountants' calculation
agrees with the calculation(s) asserted by the Company in such dispute to be
true, in which case such fees shall be borne by the Purchaser.
3.5 Failure to Deliver Exchange Shares. The failure of the Holder to
----------------------------------
deliver certificates for re-registration due to failure of an Exchange
Condition, or the failure of the Transfer Agent to deliver to the Holder the
number of Exchange Shares specified in the applicable Exchange Notice within
three (3) business days of the Delivery Date therefor shall constitute an
"Exchange Default".
6
3.6 Limitation on Right to Exchange. In no event shall the Holder be
-------------------------------
permitted to exchange the outstanding principal of this Note, or accrued but
unpaid interest thereon, in excess of an amount which, on Exchange for shares of
BLCI Stock, and aggregation with other shares of BLCI Stock then beneficially
owned by the Holder (other than shares which deemed beneficially owned but for
the limitation of this Section 3.6), would equal or exceed 5.0% of the total
number of shares of BLCI Stock then issued and outstanding. The determination of
whether the limitation of this Section 3.6 applies, and whether principal of,
and accrued interest on, this Note is exchangeable (in relation to other
securities owned by the Holder) shall be in the reasonable discretion of the
Holder, and the submission of an Exchange Notice shall be deemed to constitute
the Holder's determination that such limitation does not apply. In the event
that the limitation contained in this Section 3.6 applies to all or a portion of
the unpaid principal amount of this Note, nothing contained herein shall be
deemed to restrict the right of the Holder to exchange such principal amount at
any later time when such Exchange will no longer violate such limitation.
3.7 Required Exchange. If any principal amount of the Note remains
-----------------
outstanding and unpaid on the third anniversary of the Issue Date, the Company
may require the Exchange thereof (but only if the Registration Statement is then
effective covering all Exchange Shares receivable in such Exchange), together
with accrued but unpaid interest thereon, into shares of BLCI Stock by delivery
of a notice to such effect to the Holder, substantially in the form of Exhibit B
hereto with appropriate modifications to indicate that the Company is exercising
its rights to require Exchange of the Note pursuant to this Section 3.7. The
Exchange Price for Exchange Shares in such a required Exchange shall be
determined in accordance with Section 3.3, without provision for an Optional
Redemption in case the Closing Bid Price falls below the Floor Exchange Price.
4. OPTIONAL REDEMPTION BY THE COMPANY.
4.1 Optional Redemption. The Company shall have the right, in its
-------------------
sole discretion, to redeem (an "Optional Redemption") all or a portion of the
aggregate amount of principal of this Note, together with accrued but unpaid
interest thereon, as follows:
(i) If on the date of delivery of any Exchange Notice the
Exchange Price for BLCI Stock is less than the Floor Exchange Price,
the Company shall have the right to effect an Optional Redemption of
the principal amount, and accrued interest thereon, sought to be
exchanged by the Holder as of such Exchange Date, at the Optional
Redemption Price therefor on the date ten (10) days after the proposed
Exchange Date, or first business day thereafter (an "Optional
Redemption Date" with respect to an Exchange Date). The Company must
exercise its right to effect such Optional Redemption by written
notice thereof given to the Holder, on or before 8:00 p.m., New York
time, on the next business day following the date of delivery of such
Exchange Notice. Notice of
7
such Optional Redemption, once given, shall obligate the Company to
make the Optional Redemption specified therein.
(ii) If a Standstill Period continues for more than ninety (90)
days, the Company shall have the right to effect an Optional
Redemption of the unpaid principal amount of this Note at the Optional
Redemption Price therefor on the date ten (10) days after the delivery
of written notice to such effect, or first business day thereafter (an
"Optional Redemption Date" with respect to a Standstill Period);
provided, that the Purchaser shall be entitled to receive as Exchange
Shares, calculated at the Exchange Price therefor, as Purchaser may be
eligible to purchase on such date, with a pro tanto reduction in the
Optional Redemption Price payable on such date. The Company must
exercise its right to effect such Optional Redemption by written
notice thereof given to the Holder, on or before 8:00 p.m., New York
time, within ten (10) business days following the termination of such
90 day period. Notice of such Optional Redemption, once given, shall
obligate the Company to make the Optional Redemption specified
therein.
4.2 Optional Redemption Price. (a) The "Optional Redemption Price"
-------------------------
payable with respect to any Optional Redemption shall be (x) (i) in the case of
an Exchange Date Optional Redemption, the portion of the original principal
amount of this Note sought to be exchanged in such Exchange Notice (i.e.,
excluding compoundings of interest pursuant to Section 2.1(b)), or (ii) in the
case of a Standstill Period Optional Redemption, the unpaid principal amount of
this Note, as reduced to permit the Exchange of Shares provided by Section
4.1 (ii), multiplied by (y) fourteen percent (14%) per year, in either case from
and including the Issue Date to but excluding the date of payment of the
Optional Redemption Price, compounded annually, for the actual number of days
elapsed.
(b) The Company shall pay the Optional Redemption Price to the
Holder, in immediately available funds, on the Optional Redemption Date for such
Optional Redemption. If the Company fails to pay the Optional Redemption Price
to the Holder on the Optional Redemption Date, then the Holder shall be entitled
to interest on the unpaid portion of such redemption payment at the Default Rate
from the Optional Redemption Date until the Optional Redemption Price and all
accrued interest thereon is paid in full. In the event the Company redeems the
entire remaining unpaid principal amount of this Note, together with all
interest accrued thereon and all other amounts due in connection therewith, the
Holder shall return this Note to the Company for cancellation.
5. MANDATORY REDEMPTION BY THE COMPANY.
5.1 Mandatory Redemption. In the event that a Mandatory Redemption
--------------------
Event occurs, the Holder shall have the right, on written notice to the Company,
to have all or any portion of the unpaid principal amount of this Note redeemed
by the Company (a "Mandatory
8
Redemption") at the Mandatory Redemption Price, in immediately available funds.
Such notice shall specify the effective date of such Mandatory Redemption, which
shall be a business day, not less than ten (10) days following the date such
notice is given (the "Mandatory Redemption Date"), and the amount of principal
to be redeemed.
5.2 Mandatory Redemption Price. The "Mandatory Redemption Price"
--------------------------
shall be (x) the original principal amount of this Note (i.e., excluding
compoundings of interest pursuant to Section 2.1(b)) then remaining unpaid and
outstanding (unless a lesser amount is specified) multiplied by (y) fourteen
percent (14%) per year, compounded annually, from and including the Issue Date
to but excluding the date of payment of the Mandatory Redemption Price, without
deduction or offset of any kind.
5.3 Payment of Mandatory Redemption Price. The Company shall pay the
-------------------------------------
Mandatory Redemption Price to the Holder on the Mandatory Redemption Date. In
the event that the Company redeems the entire remaining unpaid principal amount
of this Note, and pays to the Holder all interest accrued thereon and all other
amounts due in connection therewith, the Holder shall return this Note to the
Company for cancellation. If Company fails to pay the Mandatory Redemption Price
to the Holder on the Mandatory Redemption Date, the Holder shall be entitled to
interest on the unpaid portion at the Default Rate from such date until the
Mandatory Redemption Price, and all accrued interest thereon, is paid in full.
5.4 Mandatory Redemption Event. Each of the following events shall be
--------------------------
deemed a "Mandatory Redemption Event":
(a) an Exchange Default occurs and continues for five (5) business
days, during which time the Company has not elected to make an Optional
Redemption of the principal amount and accrued interest subject to the Exchange
Notice;
(b) the Company fails to pay an Optional Redemption Price within five
(5) business days of the date required;
(c) the Company fails to deposit with the Holder any additional
shares of BLCI Stock or other Collateral required pursuant to the Purchase
Agreement or the Security Agreement, within five (5) business days of the date
required;
(d) the Company breaches, in a material respect, any covenant or
other material term or condition of this Note, the Purchase Agreement, the
Security Agreement, or any other agreement, certificate or instrument
delivered by the Company in connection therewith, other than as elsewhere
specified in this Section 5.4, and such breach continues for a period of ten
(10) business days after the earlier of (i) an executive officer of the Company
obtaining actual knowledge of such default, and (ii) the Company receiving
written notice of such default from the Holder;
9
(e) the Registration Statement is not declared effective on or prior
to the Registration Deadline (as defined in the Purchase Agreement) or if the
Registration Statement has been declared effective by such date, and the
effectiveness of the Registration Statement lapses for any reason (including
without limitation, the issuance of a stop order) or is unavailable to cover
the resale of Exchange Shares in accordance with the terms of the Registration
Rights Agreement, and such lapse or unavailability continues for a period of
five (5) business days; provided, that the cause of such lapse or
unavailability is not due to factors solely within the control of the Holder;
and provided, further, that the Registration Statement shall not be deemed to
have lapsed or to be unavailable, for purposes of this Section 5.4 only, during
any Standstill Period (as defined in the Purchase Agreement with a duration of
less than thirty (30) days);
(f) any representation or warranty made in writing by or on behalf of
the Company or by any officer of the Company furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect in any
material respect on the date as of which made;
(g) (i) the Company is in default (as principal or as guarantor or
other surety) in the payment of any principal of or interest on any indebtedness
that is outstanding in an aggregate principal amount of at least $1,000,000
beyond any period of grace provided with respect thereto, or (ii) the Company is
in default in the performance of or compliance with any term of any evidence of
any indebtedness in an aggregate outstanding principal amount of at least
$1,000,000 or of any mortgage, indenture or other agreement relating thereto, or
any other condition exists, and as a consequence of such default or condition
such indebtedness has become, or has been declared due and payable before its
stated maturity or before its regularly scheduled dates of payment; or
(h) (i) BLCI Stock is delisted at any time from trading on the NASDAQ
National Market System, the New York Stock Exchange or the American Stock
Exchange, or (ii) Closing Bid Prices for BLCI Stock are unavailable for five
consecutive Trading Days on the NASDAQ National Market System or either such
exchange; or
(i) the sale, conveyance or disposition of all or substantially all of
the assets of the Company, the effectuation of a transaction or series of
transactions, in which more than fifty percent (50%) of the voting power of the
Company is disposed of, or the consolidation, merger or other business
combination of the Company with or into any other entity, immediately following
which the prior stockholders of the Company fail to own, directly or indirectly,
at least fifty percent (50%) of the surviving entity; or
(j) the Company (i) is generally not paying, or admits in writing its
inability to pay, its debts as they become due, (ii) files, or consents by
answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer
10
with similar powers with respect to it or with respect to any substantial part
of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi)
takes corporate action for the purpose of any of the foregoing; or
(k) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company, a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, or constituting an order
for relief or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or ordering the dissolution, winding-up
or liquidation of the Company or any such petition shall be filed against the
Company and such petition shall not be dismissed within 60 days; or
(l) a final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 are rendered against the Company which
judgment is not, within 60 days after entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within 60 days after the
expiration of such stay.
5.5 Failure to Pay Redemption Amounts. If the Company fails to pay
---------------------------------
the Mandatory Redemption Price on the Mandatory Redemption Date, then the Holder
shall have the right (but not the obligation) at any time, so long as the
Company remains in default, to require the Transfer Agent, on written notice,
promptly to register in the name of the Holder (or its designee), and deliver to
the Holder, the number of shares of BLCI Stock equal to (x) the outstanding
principal amount of this Note subject to Mandatory Redemption, together with
compoundings of interest at the rate and as provided pursuant to Section 2.1(b),
divided by (y) (i) eighty-three percent (83%) times (ii) the average of the
Closing Bid Prices for BLCI Stock on the seven (7) Trading Days occurring
immediately prior to (but not including) the Mandatory Redemption Date;
provided, that if the Registration Statement is not in effect on the date of
such notice, or ceases to be in effect at any time during the thirty (30) day
period thereafter, the Holder may require the Transfer Agent, on written notice,
promptly to register in the name of the Holder (or its designee), and deliver to
the Holder, such additional number of shares of BLCI Stock as shall be required
to permit the aggregate number of shares delivered to the Holder under this
Section 5.5 to equal (x) the outstanding principal amount of this Note subject
to Mandatory Redemption, together with compoundings of interest at the rate
and as provided pursuant to Section 2.l(b), divided by (y) (i) seventy percent
(70%) times (ii) the average of the Closing Bid Prices for BLCI Stock on the
seven (7) Trading Days occurring immediately prior to (but not including) the
Mandatory Redemption Date. Upon the expiry of such 30 day period, the delivery
of the shares of BLCI Stock required pursuant to this Section 5.5 shall
discharge the Company's obligation to pay the Mandatory Redemption Price
otherwise due on the Mandatory Redemption Date.
11
6. MISCELLANEOUS.
6.1 Lost or Stolen Note. On receipt by the Company of evidence of the
-------------------
loss, theft, destruction or mutilation of this Note, and (in the case of loss,
theft or destruction) of indemnity or security reasonably satisfactory to the
Company, and on surrender and cancellation of the Note, if mutilated, the
Company shall execute and deliver to the Holder a new note identical in all
respects to this Note. On the issuance of any new Note hereunder, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge and any expenses (including reasonable fees and expenses of
counsel) in connection therewith.
6.2 Notices. Any notice, demand or request required or permitted to be
-------
given by the Company or the Holder pursuant to the terms of this Note shall be
in writing and shall be deemed given when delivered personally or by verifiable
facsimile transmission (with a hard copy to follow by nationally recognized air
courier) or on the next business day after timely delivery to a nationally
recognized overnight courier, guarantying next day delivery, delivery charges
prepaid, or sent by registered or certified mail, return receipt requested,
postage prepaid, to the following addresses:
If to the Company:
Prime Group VI, L.P.
c/o The Prime Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Prime Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Winston & ▇▇▇▇▇▇
12
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to the Holder:
Och-Ziff Capital Management, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address or facsimile number as the Holder shall have furnished
to the Company in accordance with this Section 6.2.
6.3 Successors and Assigns. Holder may assign its rights hereunder,
----------------------
in connection with any private sale or transfer of the Note, so long as, as a
condition precedent to such transfer, the transferee executes an acknowledgment
agreeing to be bound by the applicable provisions of this Note, in which case
the term "Holder" shall be deemed to refer to such transferee; provided, that
the Company's consent shall in any case not be required (but the Company shall
nonetheless be entitled to receive written notice thereof) in the event of a
sale, transfer or disposition of this Note to an affiliate of the Holder. From
and after the date of such sale, transfer or disposition, the transferee hereof
shall be deemed to be the Holder. On any such sale, transfer or disposition, the
Company shall, promptly following the return of this Note by the transferee
hereof, issue and deliver to such transferee a new Note identical in all
respects to this Note, in the name of such transferee, except that the principal
amount of such new Note may reflect the unpaid principal amount of this
Note at the time of such sale, transfer or disposition.
6.4 Injunctive Relief. The Company acknowledges that a breach by it
-----------------
of its obligations hereunder may cause irreparable harm to the Holder and that
the remedy or remedies at law for any such breach may be inadequate and agrees,
in the event of any such breach, in addition to all other available remedies,
the Holder shall have the right to obtain equitable relief to enforce this Note.
6.5 Failure to Exercise Rights Not Waiver. No failure or delay on the
-------------------------------------
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude
13
any other or further exercise thereof. All rights and remedies of the Holder
hereunder are cumulative and not exclusive of any rights or remedies otherwise
available.
6.6 Amendments. Except as expressly provided herein, neither this
----------
Note nor any term hereof may be amended except pursuant to a written instrument
executed by the Company and the Holder, and no provision hereof may be waived
other than by a written instrument signed by the party against whom enforcement
of any such waiver is sought.
6.7 Governing Law; Consent to Jurisdiction. (a) This Note shall be
--------------------------------------
governed by and construed in accordance with the substantive laws of the State
of New York, without giving effect to the choice of law provisions thereof,
except to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of New York.
(b) The Company hereby irrevocably agrees that, subject to Holder's
sole and absolute election, all actions or proceedings which in any manner arise
out of or in connection with or are in any way related to this Note or other
related agreements shall be litigated in courts having situs within the County
of New York, State of New York, and the Company hereby consents to the
jurisdiction of any state or federal court located with the County of New York,
State of New York. The Company hereby waives any right it may have to transfer
or change the venue of any litigation between grantor and purchaser in
accordance with this paragraph.
6.8 Waiver of Jury Trial. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY
--------------------
AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY in any action or proceeding
which in any manner arises out of or in connection with or is in any way related
to this Note or any of the transactions contemplated herein.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in
its name by its duly authorized officer on the date first above written.
PRIME GROUP VI, L.P.
By: PGLP, Inc.
its Managing General Partner
By:
---------------------------
Name:
-------------------------
Title:
------------------------
14
Exhibit A
Schedule of Principal
Payments, Interest Compoundings and Exchanges
Amount Paid,
Principal Compounded interest Date of Payment, Compounding
Balance or Amount Exchanged or Exchange
$20,000,000 ___________________ ___________________
A-1
NOTE PURCHASE AGREEMENT
-----------------------
SCHEDULE 3.4
OWNERSHIP OF SHARES OF BLCI
---------------------------
APPROXIMATE
NUMBER OF SHARES PERCENTAGE OF
ENTITY OF STOCK OF BLCI CLASS SHARES OUTSTANDING
------ ---------------- ------ ------------------
Prime Group VI, L.P. 2,500,000 Common 34.84%
The Prime Group, Inc. 1,382,410/1/ Common 19.27%
Prime Group Limited 320,633 Common 4.47%
Partnership
-----------------------
/1/ 112,500 Shares are subject to options and 25,000 shares are subject to a
purchase right.
NOTE PURCHASE AGREEMENT
-----------------------
SCHEDULE 3.5
FINANCIAL STATEMENTS PREVIOUSLY DELIVERED
-----------------------------------------
1. The Prime Group, Inc. & Consolidated Affiliates Fair Market Value Balance
Sheets, as of September 5, 1997 (Unaudited).
2. The Prime Group, Inc. & Affiliates Fair Market Value Balance Sheet
(Proforma Post Office REIT), as of September 24, 1997 (Unaudited).
3. The Prime Group, Inc. and Subsidiaries Consolidated Balance Sheet, as of
June 30, 1997, Consolidated Statement of Operations for the three months
ended June 30, 1997 and for the six months ended June 30, 1997,
Consolidated Statement of Changes in Stockholder's Deficit for the six
months ended June 30, 1997, and Consolidated Statement of Cash Flows, for
the three months ended June 30, 1997 and for the six months ended June 30,
1997 (Unaudited).
4. Prime Group Limited Partnership and Subsidiary Consolidated Balance Sheet,
as of June 30, 1997, Consolidated Statement of Operations for the three
months ended June 30, 1997 and for the six months ended June 30, 1997,
Consolidated Statement of Partners' Deficit for the six months ended June
30, 1997, and Consolidated Statement of Cash Flows, for the three months
ended June 30, 1997 and for the six months ended June 30, 1997 (Unaudited).
5. PGLP, Inc. Balance Sheet, as of June 30, 1997, Statements of Operations,
for the three months ended June 30, 1997 and for the six months ended June
30, 1997, Statement of Changes in Stockholder's Deficit for the six months
ended June 30, 1997, and Statements of Cash Flow, for the three months
ended June 30, 1997 and for the six months ended June 30, 1997 (Unaudited).
6. Prime Group II, L.P. Consolidated Balance Sheet, as of June 30, 1997,
Consolidated Statement of Operations for the three months ended June 30,
1997 and for the six months ended June 30, 1997, Consolidated Statement of
Changes in Stockholder's Deficit for the six months ended June 30,
1997, and Statements of Cash Flow, for the three months ended June 30, 1997
and for the six months ended June 30, 1997 (Unaudited).
7. Prime International, Inc. And Subsidiaries Consolidated Balance Sheet, as
of December 31, 1996 and December 31, 1995, Consolidated Statement of
Operations for the years ended December 31, 1996 and December 31, 1995,
Consolidated Statement of Changes in Stockholder's Deficit for the years
ended December 31, 1996 and December 31, 1995, and Consolidated Statement
of Cash Flows, for the years ended December 31, 1996 and December 31, 1995
(Unaudited).
8. Consolidated Financial Statements, The Prime Group, Inc. and Subsidiaries,
Years ended
December 31, 1996 and 1995 with Report of Independent Auditors (Preliminary
and unaudited).
9. Consolidated Financial Statements, Prime Group Limited Partnership and
Subsidiaries, Years ended December 31, 1996 and 1995 with Report of
Independent Auditors (Preliminary and unaudited).
10. Financial Statements, PGLP, Inc., Years ended December 31, 1996 and 1995
with Report of Independent Auditors (Preliminary and unaudited).
11. Financial Statements, Prime Group II, L.P., Years ended December 31, 1996
and 1995 with Report of Independent Auditors (Preliminary and unaudited).
NOTE PURCHASE AGREEMENT
-----------------------
SCHEDULE 3.8
LITIGATION, ETC.
NONE
Exhibit B
FORM OF EXCHANGE NOTICE
[date]
Prime Group VI, L.P.
c/o The Prime Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[address of Transfer Agent]
Re: Exchange of Note
----------------
Gentlemen:
This is with reference to the Exchangeable Note, dated September 30,
1997, made by Prime Group VI, L.P. and payable to Och-Ziff Capital Management,
L.P. in the original principal amount of $20,000,000 (the "Note"), which
provides for the exchange of principal of, and accrued interest on, the Note by
exchange of shares of Common Stock of Brookdale Living Communities, Inc. ("BLCI
Stock") on the terms specified in the Note.
Pursuant to Section 3.2 of the Note, the undersigned hereby gives
notice of its intention to convert [not less than $100,000] principal amount,
----------------------
[including _________________ ($________) of interest compounded through the most
recent [compounding date], and _________________ ($ ________________) of accrued
interest thereon.
The Exchange Price as determined pursuant to Section 3.3 of the Note
is $______ on the date hereof, and the number of shares of BLCI Stock to be
delivered pursuant to this Exchange Notice is ___________________.
The Transfer Agent is hereby instructed to deliver the Exchange Shares
(as defined in the Note) to the undersigned at the address above, upon receipt
by the Transfer Agent of a share certificate for BLCI Stock, with appropriate
stock powers for reregistration.
Very truly yours,
for Och-Ziff Capital
Management, L.P.
cc: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq (The Prime Group, Inc.)
B-1
Exhibit 7.1
FORM OF OPINION OF COUNSEL
TO THE COMPANY
[Matters To Be Covered In
Opinions of Counsel To the Company]
----------------------------------
1. Each of the Company and BLCI is duly incorporated, validly
existing and in good standing, and the Company has requisite corporate power and
authority to issue and sell the Note, to exchange the Exchange Shares and to
execute and deliver the other Transaction Documents. The outstanding shares of
BLCI Stock shown on Schedule 3.4 as being owned by the Company have been validly
issued, are fully paid and nonassessable and are owned by the Company free and
clear of any liens or encumbrances of any nature, except as otherwise disclosed
in Schedule 3.4.
2. The Purchase Agreement, the Note and the other Transaction
Documents have been duly authorized by all necessary corporate action on the
part of the Company and BLCI, and each constitutes, on execution and delivery
thereof, a legal, valid and binding obligation of the Company or BLCI, as
applicable, enforceable against it in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3. The execution, delivery and performance by the Company of the
Purchase Agreement and the Note will not (i) contravene, result in any breach
of, or constitute a default under, or result in the creation of any lien in
respect of any property of the Company or BLCI under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other Material agreement or instrument to which the Company or
BLCI is bound or by which the Company or BLCI or any of their respective
properties may be bound or affected, (ii) conflict with or result in a breach of
any of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or governmental authority applicable to the
Company or BLCI or (iii) violate any provision of any statute or other rule or
regulation of any governmental authority applicable to the Company or BLCI.
4. No consent, approval or authorization of, or registration, filing
or declaration with, any governmental authority is required in connection with
the execution, delivery or performance by the Company of the Purchase Agreement
or the Note.
5. There are no actions, suits or proceedings pending or, to the
best of such counsel's knowledge, threatened against or affecting the Company or
BLCI or any property of the Company or BLCI which could reasonably be expected
to affect the validity or enforceability of the Purchase Agreement, the Note and
the other Transaction Documents.
6. The offer and sale of the Note, and the exchange of the Exchange
Shares in exchange thereof, will not require registration under the Securities
Act of 1933, as amended, except that to the extent the Company would be
considered an "affiliate" of BLCI deliveries of the Exchange Shares would be
required to be made pursuant to an effective registration statement. Such
registration statement could be filed on Form S-3 within the time limits
specified therefor in the Registration Rights Agreement.
7. The sale and issuance of the Note will not result in a violation
of Regulations G, T or X of the Federal Reserve Board.
8. Neither the Company or BLCI is an "investment company", or a
company "controlled" by an "investment company", under the Investment Company
Act of 1940, as amended.
9. The Security Agreement creates a valid and perfected security
interest enforceable against the Company with respect to the Collateral, as
security for the payment of the Obligations (as defined therein).