UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
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|
(Mark
One)
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|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
|
|
For
the quarterly period ended March 31, 2009
|
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|
OR
|
|
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
For
the transition period from ____________ to ____________
Commission
file number 000-50256
WHITESTONE
REIT
(Exact
Name of Registrant as Specified in Its Charter)
|
|
|
Maryland
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|
76-0594970
|
(State
or Other Jurisdiction of
|
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(I.R.S.
Employer
|
Incorporation
or Organization)
|
|
Identification
No.)
|
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2600
South Gessner, Suite 500
|
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|
Houston,
Texas
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77063
|
(Address
of Principal Executive Offices)
|
|
(Zip
Code)
|
(713)
827-9595
(Registrant’s
Telephone Number, Including Area Code)
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
x
Yes
o
No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
o
Yes
o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
Large
accelerated filer
o
|
|
Accelerated
filer
o
|
Non-accelerated
filer (Do not check if a smaller reporting company)
x
|
|
Smaller
reporting company
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
o
Yes
x
No
As of May
12, 2009, the registrant had outstanding 10,337,307 Common Shares of Beneficial
Interest, $0.001 par value per share.
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Page
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PART
I
—
FINANCIAL
INFORMATION
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|
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|
Item
1.
|
|
Financial
Statements
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|
2
|
|
|
Condensed
Consolidated Balance Sheets as of March 31, 2009 (Unaudited) and December
31, 2008 (Revised)
|
|
2
|
|
|
Condensed
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
for the Three Months Ended March 31, 2009 and 2008
(Revised)
|
|
3
|
|
|
Condensed
Consolidated Statement of Changes in Equity (Unaudited) for the Three
Months Ended March 31, 2009 (Revised)
|
|
5
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited) for the Three Months
Ended March 31, 2009 and 2008 (Revised)
|
|
6
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|
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
|
7
|
Item
2.
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
20
|
Item
3.
|
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
30
|
Item
4T.
|
|
Controls
and Procedures
|
|
30
|
|
|
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PART
II—OTHER INFORMATION
|
|
|
|
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|
Item
1.
|
|
Legal
Proceedings
|
|
31
|
Item
1A.
|
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Risk
Factors
|
|
31
|
Item
2.
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
31
|
Item
3.
|
|
Defaults
Upon Senior Securities
|
|
31
|
Item
4.
|
|
Submission
of Matters to a Vote of Security Holders
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31
|
Item
5.
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Other
Information
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|
31
|
Item
6.
|
|
Exhibits
|
|
32
|
|
|
Signatures
|
|
33
|
|
|
Exhibit
Index
|
|
34
|
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
WHITESTONE
REIT AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
(in
thousands, except share data)
|
|
March
31,
2009
|
|
|
December
31,
2008
|
|
|
|
(unaudited)
|
|
|
(revised)
|
|
ASSETS
|
|
|
|
|
|
|
Real
estate assets, at cost:
|
|
|
|
|
|
|
Property
|
|
$
|
190,757
|
|
|
$
|
180,397
|
|
Accumulated
depreciation
|
|
|
(30,411
|
)
|
|
|
(29,550
|
)
|
Total
real estate assets
|
|
|
160,346
|
|
|
|
150,847
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
14,782
|
|
|
|
12,989
|
|
Escrows
and acquisition deposits
|
|
|
1,818
|
|
|
|
4,076
|
|
Accrued
rent and accounts receivable, net of allowance for doubtful
accounts
|
|
|
5,026
|
|
|
|
4,880
|
|
Unamortized
lease commissions and loan costs
|
|
|
4,400
|
|
|
|
4,338
|
|
Prepaid
expenses and other assets
|
|
|
1,298
|
|
|
|
815
|
|
Total
assets
|
|
$
|
187,670
|
|
|
$
|
177,945
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
$
|
109,994
|
|
|
$
|
100,003
|
|
Accounts
payable and accrued expenses
|
|
|
5,010
|
|
|
|
7,422
|
|
Tenants’
security deposits
|
|
|
1,662
|
|
|
|
1,629
|
|
Dividends
and distributions payable
|
|
|
1,696
|
|
|
|
1,719
|
|
Total
liabilities
|
|
|
118,362
|
|
|
|
110,773
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Preferred
shares, $0.001 par value per share; 50,000,000 shares authorized; none
issued and outstanding at March 31, 2009 and December 31,
2008
|
|
|
—
|
|
|
|
—
|
|
Common
shares, $0.001 par value per share; 400,000,000 shares authorized;
10,337,307 and 9,707,307 issued and outstanding as of March 31, 2009 and
December 31, 2008, respectively
|
|
|
10
|
|
|
|
10
|
|
Additional
paid-in capital
|
|
|
69,372
|
|
|
|
69,188
|
|
Accumulated
deficit
|
|
|
(24,436
|
)
|
|
|
(23,307
|
)
|
Total
Whitestone REIT shareholders’ equity
|
|
|
44,946
|
|
|
|
45,891
|
|
Noncontrolling
interest in subsidiary
|
|
|
24,362
|
|
|
|
21,281
|
|
Total
equity
|
|
|
69,308
|
|
|
|
67,172
|
|
Total
liabilities and equity
|
|
$
|
187,670
|
|
|
$
|
177,945
|
|
See notes
to Condensed Consolidated Financial Statements
WHITESTONE
REIT AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
|
|
|
|
|
|
|
|
|
Three
Months ended March 31,
|
|
(in
thousands, except per share data)
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(revised)
|
|
Property
Revenues
|
|
|
|
|
|
|
Rental
revenues
|
|
$
|
6,505
|
|
|
$
|
6,228
|
|
Tenants’
reimbursements and other property revenues
|
|
|
1,539
|
|
|
|
1,529
|
|
Total
property revenues
|
|
|
8,044
|
|
|
|
7,757
|
|
|
|
|
|
|
|
|
|
|
Property
expenses
|
|
|
|
|
|
|
|
|
Property
operation and maintenance
|
|
|
2,378
|
|
|
|
2,129
|
|
Real
estate taxes
|
|
|
1,049
|
|
|
|
1,008
|
|
Total
property expenses
|
|
|
3,427
|
|
|
|
3,137
|
|
|
|
|
|
|
|
|
|
|
Other
expenses (income)
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
1,429
|
|
|
|
1,963
|
|
Depreciation
and amortization
|
|
|
1,708
|
|
|
|
1,556
|
|
Interest
expense
|
|
|
1,428
|
|
|
|
1,402
|
|
Interest
income
|
|
|
(11
|
)
|
|
|
(85
|
)
|
Total
other expenses
|
|
|
4,554
|
|
|
|
4,836
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before loss on disposal of assets and
income taxes
|
|
|
63
|
|
|
|
(216
|
)
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
(54
|
)
|
|
|
(54
|
)
|
Loss
on disposal of assets
|
|
|
(41
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
|
(32
|
)
|
|
|
(301
|
)
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
|
—
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(32
|
)
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
Less:
Net loss attributable to noncontrolling interests
|
|
|
(11
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to Whitestone REIT
|
|
$
|
(21
|
)
|
|
$
|
(69
|
)
|
See notes
to Condensed Consolidated Financial Statements
WHITESTONE
REIT AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
|
|
|
|
|
|
|
|
|
Three
Months ended March 31,
|
|
(in
thousands, except per share data)
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(revised)
|
|
Earnings
per share - basic
|
|
|
|
|
|
|
Loss
from continuing operations attributable to Whitestone REIT excluding
amounts attributable to unvested restricted shares
|
|
$
|
(0.00
|
)
|
|
$
|
(0.03
|
)
|
Income
from discontinued operations attributable to Whitestone
REIT
|
|
|
—
|
|
|
|
0.02
|
|
Net
loss attributable to common shareholders excluding amounts attributable to
unvested restricted shares
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Earnings
per share - diluted
|
|
|
|
|
|
|
|
|
Loss
from continuing operations attributable to Whitestone REIT excluding
amounts attributable to unvested restricted shares
|
|
$
|
(0.00
|
)
|
|
$
|
(0.03
|
)
|
Income
from discontinued operations attributable to Whitestone
REIT
|
|
|
—
|
|
|
|
0.02
|
|
Net
loss attributable to common shareholders excluding amounts attributable to
unvested restricted shares
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
9,707
|
|
|
|
10,001
|
|
Diluted
|
|
|
9,707
|
|
|
|
10,001
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per common share
|
|
$
|
0.1125
|
|
|
$
|
0.1500
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Comprehensive Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(32
|
)
|
|
$
|
(111
|
)
|
Other
comprehensive loss
|
|
|
|
|
|
|
|
|
Unrealized
loss on cash flow hedging activities
|
|
|
—
|
|
|
|
(593
|
)
|
Comprehensive
loss
|
|
|
(32
|
)
|
|
|
(704
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss attributable to noncontrolling interests
|
|
|
(11
|
)
|
|
|
(265
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss attributable to Whitestone REIT
|
|
$
|
(21
|
)
|
|
$
|
(439
|
)
|
See notes
to Condensed Consolidated Financial Statements
WHITESTONE
REIT AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in
Capital
|
|
|
|
|
|
Total
Shareholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
Accumulated
Deficit
|
|
|
Noncontrolling
Interests
|
|
|
Total
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Units
|
|
|
Dollars
|
|
Balance,
December 31, 2008 (revised)
|
|
|
9,707
|
|
|
$
|
10
|
|
|
$
|
69,188
|
|
|
$
|
(23,307
|
)
|
|
$
|
—
|
|
|
$
|
45,891
|
|
|
|
4,740
|
|
|
$
|
21,281
|
|
|
$
|
67,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OP
units issued at $5.15 per unit in connection with property
acquisition
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
704
|
|
|
|
3,625
|
|
|
|
3,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
630
|
|
|
|
—
|
|
|
|
184
|
|
|
|
—
|
|
|
|
—
|
|
|
|
184
|
|
|
|
—
|
|
|
|
—
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
and distributions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,108
|
)
|
|
|
—
|
|
|
|
(1,108
|
)
|
|
|
—
|
|
|
|
(533
|
)
|
|
|
(1,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(21
|
)
|
|
|
—
|
|
|
|
(21
|
)
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2009 (unaudited)
|
|
|
10,337
|
|
|
$
|
10
|
|
|
$
|
69,372
|
|
|
$
|
(24,436
|
)
|
|
$
|
—
|
|
|
$
|
44,946
|
|
|
|
5,444
|
|
|
$
|
24,362
|
|
|
$
|
69,308
|
|
See notes
to Condensed Consolidated Financial Statements
WHITESTONE
REIT AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
Three
Months ended March 31,
|
|
(in
thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(revised)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss from continuing operations
|
|
$
|
(21
|
)
|
|
$
|
(259
|
)
|
Net
income from discontinued operations
|
|
|
—
|
|
|
|
190
|
|
Net
loss
|
|
|
(21
|
)
|
|
|
(69
|
)
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,708
|
|
|
|
1,556
|
|
Net
loss attributable to noncontrolling interest
|
|
|
(11
|
)
|
|
|
(42
|
)
|
Loss
on sale or disposal of assets
|
|
|
41
|
|
|
|
31
|
|
Bad
debt expense
|
|
|
218
|
|
|
|
191
|
|
Share-based
compensation
|
|
|
241
|
|
|
|
—
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Escrows
and acquisition deposits
|
|
|
2,404
|
|
|
|
334
|
|
Accrued
rent and accounts receivable
|
|
|
(364
|
)
|
|
|
221
|
|
Unamortized
lease commissions and loan costs
|
|
|
(88
|
)
|
|
|
(267
|
)
|
Prepaid
expenses and other assets
|
|
|
(55
|
)
|
|
|
(415
|
)
|
Accounts
payable and accrued expenses
|
|
|
(2,838
|
)
|
|
|
(2,479
|
)
|
Tenants’
security deposits
|
|
|
33
|
|
|
|
35
|
|
Net
cash provided by (used in) operating activities
|
|
|
1,268
|
|
|
|
(1,094
|
)
|
Net
cash provided by operating activities of discontinued
operations
|
|
|
—
|
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisitions
of real estate
|
|
|
(5,619
|
)
|
|
|
—
|
|
Additions
to real estate
|
|
|
(1,249
|
)
|
|
|
(1,122
|
)
|
Net
cash used in investing activities
|
|
|
(6,868
|
)
|
|
|
(1,122
|
)
|
Net
cash used in investing activities of discontinued
operations
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Dividends
paid on common shares
|
|
|
(1,156
|
)
|
|
|
(1,500
|
)
|
Distributions
paid to OP unit holders
|
|
|
(531
|
)
|
|
|
(871
|
)
|
Proceeds
from notes payable
|
|
|
9,791
|
|
|
|
11,404
|
|
Repayments
of notes payable
|
|
|
(423
|
)
|
|
|
(6,333
|
)
|
Payments
of loan origination costs
|
|
|
(288
|
)
|
|
|
(916
|
)
|
Net
cash provided by financing activities
|
|
|
7,393
|
|
|
|
1,784
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
1,793
|
|
|
|
(300
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
12,989
|
|
|
|
10,811
|
|
Cash
and cash equivalents at end of period
|
|
$
|
14,782
|
|
|
$
|
10,511
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
1,200
|
|
|
$
|
1,445
|
|
Non
cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Disposal
of fully depreciated real estate
|
|
$
|
456
|
|
|
$
|
571
|
|
Financed
insurance premiums
|
|
$
|
579
|
|
|
$
|
391
|
|
Acquisition
of real estate asset in exchange for OP Units
|
|
$
|
3,625
|
|
|
$
|
—
|
|
See notes
to Condensed Consolidated Financial Statements
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The
use of the words “we,” “us,” “our” or “Whitestone” refers to Whitestone REIT and
our consolidated subsidiaries, except where the context otherwise
requires.
1.
Interim Financial Statements
The
condensed consolidated financial statements included in this report are
unaudited; however, amounts presented in the condensed consolidated balance
sheet as of December 31, 2008 are derived from our audited consolidated
financial statements at that date. The unaudited financial statements at March
31, 2009 have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information on a basis consistent
with the annual audited consolidated financial statements and with the
instructions to Form 10-Q, except for the adoptions in the first quarter of 2009
of Statement of Financial Accounting Standards (“SFAS”) No. 160, “
Noncontrolling Interests in
Consolidated Financial Statements
” (“SFAS No. 160”); Financial Accounting
Standards Board (“FASB”) Staff Position EITF No. 03-6-1, “
Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating Securities
”
(“FSP EITF No. 03-6-1”); SFAS No. 141(R), “
Business Combinations
”(“SFAS
No. 141(R)”), which is applied prospectively to business combinations with
acquisition dates on or after January 1, 2009; and SFAS No. 157, “
Fair Value Measurements
”
(“SFAS No. 157”), for all nonfinancial assets and nonfinancial liabilities not
recognized or disclosed at fair value in the condensed consolidated financial
statement on a recurring basis. Accordingly, they do not include all of the
information and notes required by U.S. generally accepted accounting principles
for complete financial statements.
The
impact of SFAS No. 160 is discussed in more detail in Note 2, Summary of
Significant Accounting Policies. The impact of FSP EITF No. 03-6-1, is discussed
in more detail in Note 8, Earnings Per Share.
The
condensed consolidated financial statements presented herein reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the financial position of Whitestone, and our subsidiaries as of
March 31, 2009 and the results of operations for the three month period ended
March 31, 2009 and 2008, the condensed consolidated statement of changes in
equity for the three month period ended March 31, 2009 and cash flows for the
three month period ended March 31, 2009 and 2008. All of these adjustments are
of a normal recurring nature. The results of operations for the interim period
are not necessarily indicative of the results expected for a full year. The
statements should be read in conjunction with the audited consolidated financial
statements and the notes which are included in our Annual Report on Form 10-K
for the year ended December 31, 2008.
Business.
Whitestone was formed as a real estate investment trust, pursuant to the Texas
Real Estate Investment Trust Act on August 20, 1998. In July 2004, Whitestone
changed its state of organization from Texas to Maryland pursuant to a merger of
Whitestone directly with and into a Maryland real estate investment trust formed
for the sole purpose effectuating of the reorganization and the conversion of
each outstanding common share of beneficial interest of the Texas entity into
1.42857 common shares of beneficial interest of the Maryland entity (the “Common
Shares”). Whitestone serves as the general partner of Whitestone REIT Operating
Partnership, L.P. (the “Operating Partnership”), which was formed on December
31, 1998 as a Delaware limited partnership. Whitestone currently conducts
substantially all of its operations and activities through the Operating
Partnership. As the general partner of the Operating Partnership, Whitestone has
the exclusive power to manage and conduct the business of the Operating
Partnership, subject to certain customary exceptions. As of March 31, 2009 and
December 31, 2008, we owned and operated 36 and 35 retail, warehouse and office
properties, respectively, in and around Houston, Dallas, San Antonio, Chicago
and Phoenix.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
2.
Summary of Significant Accounting Policies
Basis
of Consolidation.
We are the sole general partner of the Operating
Partnership and possess full legal control and authority over the operations of
the Operating Partnership. As of March 31, 2009 and December 31, 2008, we owned
a majority of the partnership interests in the Operating Partnership.
Consequently, the accompanying condensed consolidated financial statements
include the accounts of the Operating Partnership. All significant inter-company
balances have been eliminated. Noncontrolling interest in the accompanying
condensed consolidated financial statements represents the share of equity and
earnings of the Operating Partnership allocable to holders of partnership
interests other than us. Net income or loss is allocated to noncontrolling
interests based on the weighted-average percentage ownership of the Operating
Partnership during the year. Issuance of additional Common Shares and units of
limited partnership interest in the Operating Partnership that are convertible
into Common Shares on a one-for-one basis (“OP Units”) changes the ownership
interests of both the noncontrolling interests and Whitestone.
Basis
of Accounting.
Our financial records are maintained on the accrual basis
of accounting whereby revenues are recognized when earned and expenses are
recorded when incurred.
Use
of Estimates.
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates that we use include the
estimated useful lives for depreciable and amortizable assets and costs, the
estimated allowance for doubtful accounts, estimates supporting our impairment
analysis for the carrying values of our real estate assets and the estimated
fair value of interest rate swaps. Actual results could differ from those
estimates.
Reclassifications.
We have reclassified certain prior fiscal year amounts in the
accompanying condensed consolidated financial statements in order to be
consistent with the current fiscal year presentation, including changes
resulting from the adoption of SFAS No. 160 on January 1, 2009, as discussed
later in this Note 2. Other than the changes resulting from the implementation
of SFAS No. 160, these reclassifications had no effect on net loss or
equity.
Share-Based
Compensation.
From time to time the Company awards nonvested Common
Shares or Common Share Units to trustees, executive officers and employees which
may be converted into Common Shares under the 2008 Long-Term Equity Incentive
Ownership Plan (the “Plan”). The vast majority of the awarded shares and units
vest when certain performance conditions are met. We recognize compensation
expense when achievement of the performance conditions is probable using the
fair market value of the shares as of the grant date, in accordance with SFAS
No. 123R, “
Share-Based
Payments
,” as revised (“SFAS No. 123R”). For the three months ended March
31, 2009, the Company recognized $0.2 million in share-based compensation
expense. No share-based compensation expense was recognized prior to 2009 as no
awards had been granted.
Noncontrolling
Interests.
In December 2007, the FASB issued SFAS No. 160 which is
effective for fiscal years beginning on or after December 15, 2008. We adopted
SFAS No. 160 effective January, 2009. Noncontrolling interests is the portion of
equity in a subsidiary not attributable to a parent. The ownership interests not
held by the parent are considered noncontrolling interests. Accordingly, we have
reported noncontrolling interests in equity on the condensed consolidated
balance sheets but separate from Whitestone’s equity as prescribed by SFAS No.
160. On the consolidated statements of operations and comprehensive loss,
subsidiaries are reported at the consolidated amount, including both the amount
attributable to Whitestone and noncontrolling interests. Consolidated statements
of changes in equity are included for both quarterly and annual financial
statements, including beginning balances, activity for the period and ending
balances for shareholders’ equity, noncontrolling interests and total
equity.
See
Whitestone’s Annual Report on Form 10-K for the year ended December 31, 2008 for
further discussion on significant accounting policies.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
Recent
Accounting Pronouncements.
In September 2006, the FASB issued SFAS No.
157. SFAS No. 157 defines fair value, establishes a framework for measuring fair
value in accordance with U.S. generally accepted accounting principles and
expands disclosures about fair value measurements. The statement does not
require new fair value measurements but is applied to the extent other
accounting pronouncements require or permit fair value measurements. The
statement emphasizes fair value as a market-based measurement which should be
determined based upon assumptions market participants would use in pricing an
asset or a liability. In February 2008, FASB issued FSP 157-2, “
Effective Date of FASB Statement
157
” (“FSP 157-2”) which deferred the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities except for those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis to fiscal years beginning after November 15, 2008. Adoption of SFAS No.
157 on January 1, 2009 did not have a material effect on the
Company.
In
February 2007, FASB issued SFAS No. 159, “
The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115
” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure
many financial instruments and certain other items at fair value. The objective
of the statement is to improve financial reporting by providing entities with
the opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. SFAS No. 159 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. We adopted SFAS No. 159 effective January 1, 2008 and
elected not to measure any of our current eligible financial assets or
liabilities at fair value.
In
December 2007, FASB issued SFAS No. 141(R)
which replaces SFAS No.
141, “
Business
Combinations
”
which, among other
things, establishes principles and requirements for how an acquiring entity
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed (including intangibles) and any noncontrolling
interests in the acquired entity. SFAS No. 141(R) applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. Adoption of SFAS No. 141(R) on January 1, 2009 impacts our accounting
for acquisitions and related transaction costs.
In
December 2007, FASB issued SFAS No. 160.
SFAS No. 160 amends ARB
51 to establish accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. It also
amends certain of ARB 51’s consolidation procedures for consistency with the
requirements of SFAS No. 141(R). SFAS No. 160 is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008. We adopted SFAS No. 160 on January 1, 2009.
In
March 2008, FASB issued SFAS No. 161, “
Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133
” (“SFAS No. 161”). SFAS No. 161 changes the disclosure requirements
for derivative instruments and hedging activities. Entities are required to
provide enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS No. 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. SFAS No. 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. Currently, we do not have any derivative instrument or
hedging activities.
In
June 2008, the FASB issued FSP EITF No. 03-6-1, “
Determining Whether Instruments
Granted in Share-based Payment Transactions are Participating Securities
”
(“FSP EITF No. 03-6-1”). FSP EITF No. 03-6-1 affects entities which accrue
non-returnable cash dividends on share-based payment awards during the awards’
service period. FASB concluded unvested share-based payment awards which are
entitled to cash dividends, whether paid or unpaid, are participating securities
any time the common shareholders receive dividends. Because the awards are
considered participating securities, the issuing entity is required to apply the
two-class method of computing basic and diluted earnings per share, as
prescribed by EITF No. 03-6, “
Participating Securities and the
Two-Class Method under FASB Statement No. 128.
”. FSP EITF No. 03-6-1 is
effective for fiscal years beginning after December 15, 2008, and early adoption
is not permitted. Adoption on January 1, 2009 impacts our earnings per share
(“EPS”) calculation, as specified in Note 8.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
3.
Derivatives and Hedging
On
September 28, 2007, we entered into an interest rate swap transaction which we
have designated as a cash flow hedge. The effective date of the swap transaction
was October 1, 2007, had a total notional amount of $70 million, and fixed the
swap rate at 4.77% plus the LIBOR margin through October 1, 2008. The purpose of
this swap was to mitigate the risk of future fluctuations in interest rates on
our variable rate debt. We determined that this swap was highly effective in
offsetting future variable interest cash flows on variable rate debt. This
interest rate swap matured on October 1, 2008 and was not renewed by
us.
Whitestone
elected to implement SFAS No. 157 with the one-year deferral permitted by FASB
Staff Position No. FAS 157-2
.
FSP No. 157-2
,
which was issued February 2008, defers the effective date of SFAS No. 157 for
one year for certain nonfinancial assets and nonfinancial liabilities measured
at fair value, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis.
SFAS
No. 157 establishes a three-level valuation hierarchy for disclosure of fair
value measurements. The valuation hierarchy categorizes assets and liabilities
measured at fair value into one of three different levels depending on the
observability of the inputs employed in the measurement. The three levels are
defined as follows:
|
|
|
|
●
|
Level
1 – Observable inputs such as quoted prices in active markets at the
measurement date for identical, unrestricted assets or
liabilities.
|
|
|
|
|
●
|
Level
2 – Other inputs that are observable directly or indirectly, such as
quoted prices in markets that are not active, or inputs which are
observable, either directly or indirectly, for substantially the full term
of the asset or liability.
|
|
|
|
|
●
|
Level
3 – Unobservable inputs for which there is little or no market data and
which the Company makes its own assumptions about how market participants
would price the assets and
liabilities.
|
All
of our derivative instruments which fall under the fair value requirements fall
under the Level 2 criteria. Interest rate swaps are valued by a third-party
consultant using modeling techniques that include market inputs such as interest
rate yield curves.
4. Real Estate
As
of March 31, 2009, we owned 36 commercial properties in the Houston, Dallas, San
Antonio, Phoenix and Chicago areas comprising approximately 3.0 million square
feet of total area.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
5.
Accrued Rent and Accounts Receivable, net
Accrued
rent and accounts receivable, net, consists of amounts accrued, billed and due
from tenants, amounts due from insurance claims, allowance for doubtful accounts
and other receivables as follows (in thousands):
|
|
|
|
|
|
|
|
|
March
31,
2009
|
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Tenant
receivables
|
|
$
|
2,852
|
|
|
$
|
2,733
|
|
Accrued
rent
|
|
|
3,711
|
|
|
|
3,644
|
|
Allowance
for doubtful accounts
|
|
|
(1,542
|
)
|
|
|
(1,497
|
)
|
Other
receivables
|
|
|
5
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
5,026
|
|
|
$
|
4,880
|
|
6.
Unamortized Leasing Commissions and Loan Costs
Costs
which have been deferred consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
March
31,
2009
|
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Leasing
commissions
|
|
$
|
4,400
|
|
|
$
|
4,412
|
|
Deferred
financing costs
|
|
|
2,212
|
|
|
|
1,921
|
|
Total
cost
|
|
|
6,612
|
|
|
|
6,333
|
|
Less:
accumulated amortization leasing commissions
|
|
|
(1,947
|
)
|
|
|
(1,842
|
)
|
Less:
accumulated amortization deferred financing costs
|
|
|
(265
|
)
|
|
|
(153
|
)
|
Total
cost, net of accumulated amortization
|
|
$
|
4,400
|
|
|
$
|
4,338
|
|
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
7.
Debt
Mortgages
and other notes payable consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
Description
|
|
March
31,
2009
|
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate notes
|
|
|
|
|
|
|
|
$10.0
million 6.04% Note, due 2014
|
|
$
|
9,749
|
|
|
$
|
9,782
|
|
|
$11.2
million 6.52% Note, due 2015
|
|
|
11,139
|
|
|
|
11,159
|
|
|
$21.4
million 6.53% Note, due 2013
|
|
|
21,131
|
|
|
|
21,263
|
|
|
$24.5
million 6.56% Note, due 2013
|
|
|
24,500
|
|
|
|
24,500
|
|
|
$9.9
million 6.63% Note, due 2014
|
|
|
9,941
|
|
|
|
—
|
|
|
$0.5
million 5.05% Note, due 2009
|
|
|
448
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate notes
|
|
|
|
|
|
|
|
|
|
$6.4
million LIBOR + 2.00% Note, due 2009
|
|
|
6,400
|
|
|
|
6,400
|
|
|
$26.9
million LIBOR + 2.60% Note, due 2013
|
|
|
26,686
|
|
|
|
26,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
109,994
|
|
|
$
|
100,003
|
|
Fixed
Rate Notes
. On February 3, 2009, Whitestone, operating through its
subsidiary, Whitestone Centers LLC, executed four promissory notes (the “Sun
Life Promissory Notes II”), totaling $9.9 million payable to Sun Life Assurance
Company of Canada with an applicable interest rate of 6.63% per annum and a
maturity date of March 1, 2014. The Sun Life Promissory Notes II are
non-recourse loans secured by the Whitestone Centers LLC’s properties and a
limited guarantee by Whitestone.
Floating
Rate Notes.
On January 25, 2008, we entered into a $6.4 million term loan
agreement with KeyBank. The term loan is secured by a pledge of the partnership
interests in WROP III, and Whitestone Pima Norte LLC (“WPN”), a wholly owned
subsidiary of the Operating Partnership that was formed to hold title to our
Pima Norte property purchased in October 2007. At March 31, 2009 and December
31, 2008, WROP III owned 13 and 17 properties, respectively, and WPN owned 1
property.
Outstanding
amounts under the note accrue interest computed at the LIBOR rate on the basis
of a 360-day year, plus 2%. Only interest is payable monthly under the loan with
the total amount of principal coming due at maturity in July 2009. The covenants
of this agreement mirror those in our $75 million revolving credit agreement
with KeyBank which was paid in full on October 3, 2008. The covenants are as
follows:
● We
will not permit our total indebtedness to exceed 60% of the fair market value of
our real estate assets at the end of any quarter. “Total indebtedness” is
defined as all of our liabilities, including the term loan and all other secured
and unsecured debt, including letters of credit and guarantees. “Fair market
value of real estate assets” is defined as aggregate net operating income for
the preceding four quarters, less a $0.15 per square foot per annum capital
expenditure reserve, divided by a 9.25% capitalization rate.
● The
ratio of consolidated rolling four-quarter earnings before interest, income tax,
depreciation and amortization expenses to total interest expense, including
capitalized interest, shall not be less than 2.0 to 1.0.
● The
ratio of consolidated earnings before interest, income tax, depreciation and
amortization expenses to total interest expense, including capitalized interest,
principal amortization, capital expenditures and preferred stock dividends shall
not be less than 1.5 to 1.0. Capital expenditures shall be deemed to be $0.15
per square foot per annum.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
● The
ratio of secured debt to fair market value of real estate assets shall not be
greater than 40%.
● We
must maintain a consolidated tangible net worth of not less than $30 million
plus 75% of the value of stock and OP units issued in conjunction with an
offering or with the acquisition of an asset or stock. Consolidated tangible net
worth is defined as shareholders’ equity less intangible assets.
In
order to pay off our $75 million revolving credit facility in 2008, we entered
into non-recourse mortgages secured by various properties and a limited
guarantee by us. As a result of these secured mortgages, we are not in
compliance with our secured debt to fair market value ratio and our total
indebtedness to fair market value ratio covenants of our $6.4 million term loan
with KeyBank as of March 31, 2009. As this non-compliance constitutes an event
of default, the lender has the right to accelerate payment. We are in
discussions with KeyBank regarding an extension of this loan, which matures in
July 2009, and have requested a waiver from KeyBank. As of the date of this
filing, we have not received the waiver. Should we not receive a waiver, we will
attempt to obtain other financing or pay off the loan from cash
reserves.
Our
loans are subject to customary financial covenants. As of March 31, 2009, we are
in compliance with all loan covenants other than the non compliance described in
the preceding paragraph.
Annual
maturities of notes payable as of March 31, 2009, are due as set forth below (in
thousands):
|
|
|
|
|
Year
|
|
Principal
|
|
|
|
|
|
|
2009
|
|
$
|
8,256
|
|
2010
|
|
|
2,276
|
|
2011
|
|
|
2,402
|
|
2012
|
|
|
2,534
|
|
2013
|
|
|
66,457
|
|
2014
and thereafter
|
|
|
28,069
|
|
Total
|
|
$
|
109,994
|
|
8.
Earnings Per Share
Basic
earnings per share for Whitestone’s common shareholders is calculated by
dividing loss from continuing operations excluding amounts attributable to
unvested restricted shares, income from discontinued operations, and the net
loss attributable to non-controlling interests by Whitestone’s weighted-average
common shares outstanding during the period. Diluted earnings per share is
computed by dividing the net loss attributable to common shareholders excluding
amounts attributable to unvested restricted shares, income from discontinued
operations, and the net loss attributable to non-controlling interests by the
weighted-average number of common shares including any unvested restricted
shares.
On
January 1, 2009, Whitestone adopted FSP EITF No. 03-6-1, “
Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating
Securities
,” (“FSP EITF No. 03-6-1”), which addresses whether share-based
payment transaction instruments are considered participating securities prior to
vesting, and in which all unvested stock awards which contain non-forfeitable
rights to dividends, whether paid or unpaid, are to be included in the number of
shares outstanding in Whitestone’s basic and diluted earnings per share (“EPS”)
calculations.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
Certain
of Whitestone’s performance restricted common shares are considered
participating securities which require the use of the two-class method for the
computation of basic and diluted earnings per share. For the quarter ended March
31, 2009, basic EPS was not impacted by the two-class method because the
Company’s participating securities are not obligated to participate in net
operating losses, and diluted EPS was not impacted because the inclusion of
these securities would have had an anti-dilutive effect on diluted EPS. During
the three months ended March 31, 2009 and 2008, 5,443,797 and 5,808,337 OP Units
and 175,020 and 0 restricted common shares, respectively, were excluded from the
calculation of diluted earnings per share because their effect would be
anti-dilutive.
For
the three months ended March 31, 2009, distributions of $64,000 were made to the
holders of certain restricted share units, $57,000 of which was charged against
earnings. No distributions were made on the performance restricted shares prior
to 2009. See Note 14 for information related to restricted shares under the
incentive share plan.
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31,
|
|
(in
thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$
|
(32
|
)
|
|
$
|
(301
|
)
|
Less:
Net loss attributable to noncontrolling interests
|
|
|
11
|
|
|
|
42
|
|
Dividends
paid on unvested restricted shares
|
|
|
(7
|
)
|
|
|
—
|
|
Undistributed
earnings attributable to unvested restricted shares
|
|
|
—
|
|
|
|
—
|
|
Loss
from continuing operations attributable to Whitestone REIT excluding
amounts attributable to unvested restricted shares
|
|
|
(28
|
)
|
|
|
(259
|
)
|
Income
from discontinued operations attributable to Whitestone
REIT
|
|
|
—
|
|
|
|
190
|
|
Net
loss attributable to common shareholders excluding amounts attributable to
unvested restricted shares
|
|
$
|
(28
|
)
|
|
$
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares - basic
|
|
|
9,707
|
|
|
|
10,001
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
Unvested
restricted shares
|
|
|
—
|
|
|
|
—
|
|
Weighted
average number of common shares - dilutive
|
|
|
9,707
|
|
|
|
10,001
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share:
|
|
|
|
|
|
|
|
|
Loss
from continuing operations attributable to Whitestone REIT excluding
amounts attributable to unvested restricted shares
|
|
$
|
(0.00
|
)
|
|
$
|
(0.03
|
)
|
Income
from discontinued operations attributable to Whitestone
REIT
|
|
|
—
|
|
|
|
0.02
|
|
Net
loss attributable to common shareholders excluding amounts attributable to
unvested restricted shares
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share:
|
|
|
|
|
|
|
|
|
Loss
from continuing operations attributable to Whitestone REIT excluding
amounts attributable to unvested restricted shares
|
|
$
|
(0.00
|
)
|
|
$
|
(0.03
|
)
|
Income
from discontinued operations attributable to Whitestone
REIT
|
|
|
—
|
|
|
|
0.02
|
|
Net
loss attributable to common shareholders excluding amounts attributable to
unvested restricted shares
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
9.
Income Taxes
Federal
income taxes are not assessed against us because we intend to and believe we
qualify as a real estate investment trust (“REIT”) under the provisions of the
Internal Revenue Code of 1986, as amended. Our shareholders include their
proportionate taxable income in their individual tax returns. As a REIT, we must
distribute at least 90% of our ordinary taxable income to our shareholders and
meet certain income sources and investment restriction requirements. In
addition, REITs are subject to a number of organizational and operational
requirements. If we fail to qualify as a REIT in any taxable year, we will be
subject to federal income tax (including any applicable alternative minimum tax)
on our taxable income at regular corporate tax rates.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
Taxable
income differs from net income for financial reporting purposes principally due
to differences in the timing of recognition of interest, real estate taxes,
depreciation, share-based compensation and rental revenue.
In
May 2006, the State of Texas adopted the Texas Margin Tax effective with
franchise tax reports filed on or after January 1, 2008. The Texas Margin Tax is
computed by applying the applicable tax rate (1% for us) to the profit margin,
which generally will be determined for us as total revenue less a 30% standard
deduction. Although House Bill 3 states that the Texas Margin Tax is not an
income tax, SFAS No. 109, “
Accounting for Income Taxes
”
(“SFAS No. 109”) applies to the Texas Margin Tax. We have recorded a margin tax
provision of approximately $54,000 for the three months ended March 31, 2009 and
2008.
10.
Equity
Dividends
and distributions.
The following tables summarize the cash
dividends/distributions paid to holders of Common Shares and holders of OP Units
for the four quarters of 2008 and the first quarter of 2009.
|
|
|
|
|
|
|
|
|
Whitestone
Shareholders
|
|
Dividend
per
Common Share
|
|
Quarter
Dividend
Paid
|
|
Total
Amount
Paid
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
$
|
0.1500
|
|
|
Qtr.
ended 03/31/08
|
|
$
|
1,500
|
|
|
0.1500
|
|
|
Qtr.
ended 06/30/08
|
|
|
1,529
|
|
|
0.1500
|
|
|
Qtr.
ended 09/30/08
|
|
|
1,456
|
|
|
0.1125
|
|
|
Qtr.
ended 12/31/08
|
|
|
1,093
|
|
|
0.1125
|
|
|
Qtr.
ended 03/31/09
|
|
|
1,156
|
|
OP
Unit Holders Including Noncontrolling Unit Holders
|
|
Distribution
per
OP Unit
|
|
Quarter
Distribution
Paid
|
|
Total
Amount
Paid
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
$
|
0.1500
|
|
|
Qtr.
ended 03/31/08
|
|
$
|
2,317
|
|
|
0.1500
|
|
|
Qtr.
ended 06/30/08
|
|
|
2,423
|
|
|
0.1500
|
|
|
Qtr.
ended 09/30/08
|
|
|
2,113
|
|
|
0.1125
|
|
|
Qtr.
ended 12/31/08
|
|
|
1,585
|
|
|
0.1125
|
|
|
Qtr.
ended 03/31/09
|
|
|
1,687
|
|
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
11.
Commitments and Contingencies
We
are subject to various legal proceedings and claims that arise in the ordinary
course of business. These matters are generally covered by insurance. While the
resolution of these matters cannot be predicted with certainty, management
believes the final outcome of such matters will not have a material adverse
effect on our condensed consolidated financial statements.
Hurricane Ike.
Our 31
properties in Houston had minor to moderate harm, ranging from broken signage to
uprooted landscaping; other properties had more significant issues, such as
damaged roofing and exterior siding. We maintain casualty and business
interruption insurance at levels that we believe are adequate. The detailed
analysis of the total cost of Hurricane Ike, after the insurance deductible, to
be borne by us is still being conducted.
12.
Property Dispositions
On
May 30, 2008, as part of our settlement with Hartman Management L.P. and Allen
R. Hartman (“Hartman”), we exchanged two retail properties, Garden Oaks, a
95,046 square foot retail property located in Houston, Texas and Northeast
Square, a 40,525 square foot retail property located in Houston, Texas, for
$11.4 million. The $11.4 million purchase price was paid by Hartman in the form
of 293,961.54 Common Shares and 1,068,451.271 OP Units.
The
following is a summary of income (loss) from discontinued operations for the
three months ended March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
Three
Months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Property
Revenues
|
|
|
|
|
|
|
Rental
revenues
|
|
$
|
—
|
|
|
$
|
275
|
|
Other
revenues
|
|
|
—
|
|
|
|
93
|
|
Total
property revenues
|
|
|
—
|
|
|
|
368
|
|
|
|
|
|
|
|
|
|
|
Property
Expenses
|
|
|
|
|
|
|
|
|
Property
opertation and maintenance
|
|
|
—
|
|
|
|
61
|
|
Real
estate taxes
|
|
|
—
|
|
|
|
46
|
|
Total
property expenses
|
|
|
—
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
Other
expense
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
—
|
|
|
|
67
|
|
Total
other expense
|
|
|
—
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
Income
before loss on disposal of assets and income taxes
|
|
|
—
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
Loss
on disposal of assets
|
|
|
—
|
|
|
|
(1
|
)
|
Provision
for income taxes
|
|
|
—
|
|
|
|
(3
|
)
|
Income
from discontinued operations
|
|
$
|
—
|
|
|
$
|
190
|
|
13.
Acquisitions
On
January 16, 2009, we acquired a 41,396 square foot garden style mixed use
property in Buffalo Grove, Illinois for approximately $9.4 million, including
cash of $5.5 million, issuance of 703,912 OP Units worth $3.6 million and credit
for net prorations of $0.3 million. The property, Spoerlein Commons, is a two
story complex of retail, medical and professional office tenants. James C.
Mastandrea, our Chairman, President and Chief Executive Officer, was the
controlling limited partner of Midwest Development Venture IV, the seller of
Spoerlein Commons, and had an ownership interest in the property and was
entitled to a portion of the proceeds from the sale of the property to the
Operating Partnership. Because of Mr. Mastandrea’s relationship with the seller,
a special committee of the independent members of the Board of Trustees,
including Donald F. Keating, Jack L. Mahaffey, and Chris A. Minton, negotiated
the terms of the transaction, which included the use of an independent appraiser
to value the property. This purchase was accounted for using the acquisition
method as prescribed under SFAS No. 141(R). The assets acquired and liabilities
accrued in this transaction were recorded at their estimated fair value at the
time of purchase.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
14.
Incentive Share Plan
On
July 29, 2008, our shareholders approved the 2008 Long-Term Equity Incentive
Ownership Plan (the “Plan”). The Plan provides that awards may be made with
respect to Common Shares or OP Units, which may be converted into Common Shares
of Whitestone. The Plan authorizes awards in respect of an aggregate of
2,063,885 Common Shares. The maximum aggregate number of Common Shares that may
be issued under the Plan will be increased upon each issuance of Common Shares
by Whitestone (including issuances pursuant to the Plan) so that at any time the
maximum number of shares that may be issued under the Plan shall equal 12.5% of
the aggregate number of Common Shares of Whitestone and OP Units issued and
outstanding (other than treasury shares and/or units issued to or held by
Whitestone).
The
Compensation Committee of Whitestone’s Board of Trustees administers the Plan,
except with respect to awards to non-employee trustees, for which the Plan is
administered by Whitestone’s Board of Trustees. The Committee is authorized to
grant stock options, including both incentive stock options and non-qualified
stock options, as well as stock appreciation rights, either with or without a
related option. The Committee is also authorized to grant restricted common
shares, restricted common share units, performance awards and other share-based
awards. No single participant may receive options or stock appreciation rights
in any calendar year that, taken together, relate to more than 500,000 common
shares, subject to adjustment in certain circumstances.
On
January 6, 2009, the Compensation Committee, pursuant to the Plan, granted to
certain of its officers restricted common share awards (the “Restricted Shares”)
and restricted common share unit awards (the “Restricted Units”) subject to
certain restrictions. The Restricted Shares and Restricted Units will vest based
on certain performance goals (as specified in the award agreement). The grantee
is the record owner of the Restricted Shares and has all rights of a shareholder
with respect to the Restricted Shares, including the right to vote the
Restricted Shares and to receive dividends and distributions with respect to the
Restricted Shares. The grantee has no rights of a shareholder with respect to
the Restricted Units, including no right to vote the Restricted Units and no
right to receive current dividends and distributions with respect to the
Restricted Units until the units are fully vested and convertible to Common
Shares of Whitestone.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
A
summary of the stock-based incentive plan activity as of and for the three
months ended March 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weight-Average
Grant
Date
Fair Value
|
|
|
|
|
|
|
|
|
Non-vested
at January 1, 2009
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
|
1,784,187
|
|
|
|
4.13
|
|
Vested
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
Non-vested
at March 31, 2009
|
|
|
1,784,187
|
|
|
$
|
4.13
|
|
Total
compensation recognized in earnings for share-based payments for the three
months ended March 31, 2009 and 2008, was $0.2 and $0.0 million, respectively.
As of March 31, 2009, there was $0.6 million of total unrecognized compensation
cost related to outstanding nonvested shares issued under the Plan, which is
expected to be recognized over a weighted-average period of nine months. The
fair value of the shares granted during the three months ended March 31, 2009
was determined based on observable market transactions occurring near the date
of the grants.
15.
Grants to Trustees
On
March 25, 2009, each of our five independent trustees was granted 5,000
restricted common shares which vest in equal installments in 2010, 2011, and
2012. These shares were granted pursuant to individual grant agreements and were
not pursuant to our 2008 Long-Term Equity Incentive Ownership Plan. The 25,000
shares had a weighted average grant date fair value of $4.94 per share,
resulting in total unrecognized compensation cost of $0.1 million, which is
expected to be recognized over a weighted-average period of approximately three
years. The fair value of the shares granted during the three months ended March
31, 2009 was determined based on observable market transactions occurring near
the date of the grants.
16.
Segment Information
Historically,
our management has not differentiated results of operations by property type or
location and therefore does not present segment information.
17.
Related Party Transactions
Spoerlein
Commons Acquisition
On
January 16, 2009, Whitestone, operating through the Operating Partnership,
acquired Spoerlein Commons, a mixed use-garden style complex of retail, medical,
and professional office tenants located in Buffalo Grove, Illinois. The
Operating Partnership acquired Spoerlein Commons pursuant to the terms and
conditions of the purchase, sale and contribution agreement dated December 18,
2008 (the “Agreement”) between the Operating Partnership and Bank One, Chicago,
NA, as trustee under the Trust Agreement dated January 29, 1986 and known as
Trust Number TWB-0454 (“Seller”). Midwest Development Venture IV, an Illinois
limited partnership (“Midwest”), is the sole beneficiary of the Seller under the
Trust Agreement.
Spoerlein
Commons represents an acquisition for Whitestone, and a substantial equity
investment on behalf of the Seller. In exchange for Spoerlein Commons, the
Operating Partnership paid the Seller $5,500,000, received credit for net
prorations of $275,854 and issued 703,912 OP Units, valued at $5.15 per Unit,
for a total purchase price of $9,401,000.
WHITESTONE
REIT AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
(Unaudited)
Midwest,
the sole beneficiary of the Seller, is entitled to all earnings and proceeds
from the sale of Spoerlein Commons. James C. Mastandrea, our Chairman, President
and Chief Executive Officer, is the controlling limited partner in Midwest and
as such, had an ownership interest in Spoerlein Commons and is entitled to a
portion of the proceeds from the sale of Spoerlein Commons to the Operating
Partnership. Because of Mr. Mastandrea’s relationship with the Seller, a special
committee of the independent members of the Board of Trustees including Donald
F. Keating, Jack L. Mahaffey, and Chris A. Minton determined the terms of the
transaction, which included the use of an independent appraiser to value
Spoerlein Commons.
No
brokerage commission was paid by Whitestone for this acquisition, and in
relation to Mr. Mastandrea’s investment, there was no front end load, meaning
that 100% of the amount paid is working for the benefit of Whitestone’s
shareholders.
In
connection with the closing of Spoerlein Commons and the investment on behalf of
the Seller, the Operating Partnership issued 703,912 OP Units to Midwest for its
contribution of Spoerlein Commons to the Operating Partnership. The OP Units
were issued in reliance on the exemption from registration provided by Section
4(2) under the Securities Act of 1933, as amended. The issuance was not effected
using any form of general advertising or general solicitation and the issuance
was made to a qualified investor.
The
OP Units are convertible on a one-for-one basis into Common Shares at any time
after July 1, 2009 in accordance with the terms of the Operating Partnership’s
Limited Partnership Agreement, as amended (the “Limited Partnership Agreement”).
The Seller will not be entitled to any dividends or distributions with respect
to the OP Units prior to June 30, 2009.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
You
should read the following discussion of our financial condition and results of
operations in conjunction with our condensed consolidated financial statements
and the notes thereto included in this quarterly report on Form 10-Q (the
“Report”). For more detailed information regarding the basis of presentation for
the following information, you should read the notes to the condensed
consolidated financial statements included in this Report.
This
Report contains forward-looking statements, including discussion and analysis of
our financial condition, anticipated capital expenditures required to complete
projects, amounts of anticipated cash distributions to our shareholders in the
future and other matters. These forward-looking statements are not historical
facts but are the intent, belief or current expectations of our management based
on its knowledge and understanding of our business and industry. Forward-looking
statements are typically identified by the use of terms such as “may,” “will,”
“should,” “potential,” “predicts,” “anticipates,” “expects,” “intends,” “plans,”
“believes,” “seeks,” “estimates” or the negative of such terms and variations of
these words and similar expressions. These statements are not guarantees of
future performance and are subject to risks, uncertainties and other factors,
some of which are beyond our control, are difficult to predict and could cause
actual results to differ materially from those expressed or forecasted in the
forward-looking statements.
Forward-looking
statements that were true at the time made may ultimately prove to be incorrect
or false. You are cautioned to not place undue reliance on forward-looking
statements, which reflect our management’s view only as of the date of this
Report. We undertake no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes to future operating results. Factors that could cause actual
results to differ materially from any forward-looking statements made in this
Report include:
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●
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the
imposition of federal taxes if we fail to qualify as a REIT in any taxable
year or foregone opportunity to ensure REIT status;
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●
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uncertainties
related to the national economy, the real estate industry in general and
in our specific markets;
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●
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legislative
or regulatory changes, including changes to laws governing REIT;
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●
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construction
costs that may exceed estimates or construction delays;
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●
|
increases
in interest rates;
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●
|
availability
of credit equity or significant disruption in the credit or equity
markets;
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●
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litigation
risks;
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●
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lease-up
risks;
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●
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inability
to obtain new tenants upon the expiration of existing
leases;
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●
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inability
to generate sufficient cash flows due to market conditions, competition,
uninsured losses, changes in tax or other applicable laws;
and
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●
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the
potential need to fund tenant improvements or other capital expenditures
out of operating cash
flow.
|
The
forward-looking statements should be read in light of these factors and the
factors identified in the “Risk Factors” sections of our Annual Report on Form
10-K for the year ended December 31, 2008, as previously filed with the
Securities and Exchange Commission (the “SEC”).
Executive
Overview
We
are a self-administered real estate investment trust (“REIT”) engaged in owning
and operating income-producing real properties. Our investments include retail,
office and warehouse properties located in the Houston, Dallas, San Antonio,
Chicago and Phoenix metropolitan areas. Whitestone serves as the general partner
of Whitestone REIT Operating Partnership, L.P. (the “Operating Partnership,” or
“WROP” or “OP”), which was formed on December 31, 1998 as a Delaware limited
partnership. Whitestone currently conducts substantially all of its operations
and activities through the Operating Partnership. As the general partner of the
Operating Partnership, Whitestone has the exclusive power to manage and conduct
the business of the Operating Partnership, subject to certain customary
exceptions. As of March 31, 2009, we owned and operated 36 commercial properties
consisting of:
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●
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Seventeen
retail properties containing approximately 1.1 million square feet of
leasable space and having a total carrying amount (net of accumulated
depreciation) of $61.3 million.
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●
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Eight
office properties containing approximately 0.7 million square feet of
leasable space and having a total carrying amount (net of accumulated
depreciation) of $55.9 million.
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●
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Eleven
office/warehouse properties containing approximately 1.2 million square
feet of leasable space and having a total carrying amount (net of
accumulated depreciation) of $43.2
million.
|
Our
primary source of income and cash is rents associated with commercial leases.
Our business objective is to increase shareholder value by employing a
value-added investment strategy. This strategy is focused on owning and
renovating commercial real estate assets in markets with positive demographic
trends, achieving diversification by property type and location, and acquiring
properties within our targeted returns.
As
of March 31, 2009, we had 702 total tenants. We have a diversified tenant base
with our largest tenant comprising only 2.7% of our total revenues for the three
months ended March 31, 2009. Lease terms for our properties range from less than
one year for smaller tenants to over 15 years for larger tenants. Our leases
generally include minimum monthly lease payments and tenant reimbursements for
payment of taxes, insurance and maintenance.
We
employ 55 full-time employees as of March 31, 2009. As a self-managed REIT, we
bear our own expenses of operations, including the salaries, benefits and other
compensation of our employees, office expenses, legal, accounting and investor
relations expenses and other overhead.
We
believe that one of the key measures of our performance is property occupancy.
Occupancy for the total portfolio was 82% at March 31, 2009, compared to 86% at
March 31, 2008. We executed 63 new and renewal leases during the three months
ended March 31, 2009, totaling approximately 180,000 square feet and $8.5
million in total lease value.
In
the fourth quarter of 2006, our Board approved our five-year business plan. The
key elements of the plan are as follows:
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●
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Maximize
value in current properties through operational focus and
redevelopment;
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●
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Grow
through strategic acquisitions of commercial properties in high potential
markets, including properties outside of Texas;
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●
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Dispose
of non-core properties and reinvest the capital in redevelopment of
existing properties or acquisition of core properties in high potential
markets;
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●
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Raise
capital using a combination of the private and public equity and debt
markets, as well as joint ventures; and
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●
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Bring
liquidity to our stock by listing on a national stock
exchange.
|
A
summary of our progress on the execution of this five year plan is described in
the following sections on redevelopment, acquisitions and
dispositions.
Redevelopment
We
completed the redevelopment of the Westchase Plaza Retail and Office Center
located in Houston, Texas during the three months ended March 31, 2009. The
total redevelopment of this center cost approximately $1.7 million, and it added
approximately 6,600 square feet of leasable office space.
Acquisitions
On
January 16, 2009, we acquired a 41,396 square foot garden style mixed use
property in Buffalo Grove, Illinois for approximately $9.4 million. The
property, Spoerlein Commons, is a two story complex of retail, medical and
professional office tenants. James C. Mastandrea, our Chairman, President and
Chief Executive Officer, was the controlling limited partner of Midwest
Development Venture IV, the seller of Spoerlein Commons, and had an ownership
interest in the property and was entitled to a portion of the proceeds from the
sale of the property to the Operating Partnership. Because of Mr. Mastandrea’s
relationship with the seller, a special committee of the independent members of
the Board of Trustees, including Donald F. Keating, Jack L. Mahaffey, and Chris
A. Minton, negotiated the terms of the transaction, which included the use of an
independent appraiser to value the property.
Dispositions
(discontinued operations)
On
May 30, 2008, as part of our settlement with Hartman Management L.P. and Allen
R. Hartman (“Hartman”), we exchanged two retail properties, Garden Oaks, a
95,046 square foot retail property located in Houston, Texas and Northeast
Square, a 40,525 square foot retail property located in Houston, Texas, for
$11.4 million. The $11.4 million purchase price was paid by Hartman in the form
of 293,961.54 Whitestone Common Shares (the “Common Shares”) and 1,068,451.271
units of ownership interest in Whitestone REIT Operating Partnership, L.P (the
“OP Units”).
Critical Accounting
Policies
In
preparing the condensed consolidated financial statements, we have made
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reported periods. Actual results may differ from these estimates. A
summary of our critical accounting policies is included in our Form 10-K, as
amended, for the year ended December 31, 2008, under Item 7.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
There have been no
significant changes to these policies during the first three months of 2009
except for the adoptions in the first quarter of 2009 of Statement of Financial
Accounting Standards (“SFAS”) No. 160, “
Noncontrolling Interests in
Consolidated Financial Statements
” (“SFAS No. 160”); Financial Accounting
Standards Board (“FASB”) Staff Position EITF No. 03-6-1, “
Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating Securities
”
(“FSP EITF No. 03-6-1”); SFAS 141(R), “
Business Combinations
”, which
is applied prospectively to business combinations with acquisition dates on or
after January 1, 2009; and SFAS No. 157, “
Fair Value Measurements
”
(SFAS No. 157), for all nonfinancial assets and nonfinancial liabilities. For
disclosure regarding recent accounting pronouncements and the anticipated impact
they will have on our operations, please refer to Note 2 of the condensed
consolidated financial statements.
Results
of Operations
Comparison of the Three Month Periods
Ended March 31, 2009 and 2008
The
following tables provide a general comparison of our results of operations for
the three months ended March 31, 2009 and 2008 (in thousands, except for
aggregate gross leasable area):
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|
|
|
|
|
|
|
|
March
31, 2009
|
|
|
March
31, 2008
|
|
Number
of properties owned and operated
|
|
|
36
|
|
|
|
37
|
|
Aggregate
gross leasable area (sq. ft.)
|
|
|
3,039,300
|
|
|
|
3,093,063
|
|
Ending
occupancy rate
|
|
|
82
|
%
|
|
|
86
|
%
|
|
|
|
|
|
|
|
|
|
Total
property revenues
|
|
$
|
8,044
|
|
|
$
|
7,757
|
|
Total
property expenses
|
|
|
3,427
|
|
|
|
3,137
|
|
Total
other expenses
|
|
|
4,554
|
|
|
|
4,836
|
|
Provision
for income taxes
|
|
|
54
|
|
|
|
54
|
|
Loss
on disposal of assets
|
|
|
41
|
|
|
|
31
|
|
Loss
from continuing operations
|
|
|
(32
|
)
|
|
|
(301
|
)
|
Income
from discontinued operations
|
|
|
—
|
|
|
|
190
|
|
Net
loss
|
|
|
(32
|
)
|
|
|
(111
|
)
|
Less:
Net loss attributable to noncontrolling interests
|
|
|
(11
|
)
|
|
|
(42
|
)
|
Net
loss attributable to Whitestone REIT
|
|
$
|
(21
|
)
|
|
$
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
Funds
from operations
(1)
|
|
$
|
1,556
|
|
|
$
|
1,372
|
|
Dividends
and distributions paid on common shares and OP Units
|
|
|
1,687
|
|
|
|
2,371
|
|
Per
common share and OP unit
|
|
$
|
0.11
|
|
|
$
|
0.15
|
|
Dividends
paid as a % of funds from operations
|
|
|
108
|
%
|
|
|
173
|
%
|
(1)
For a
reconciliation of funds from operations to net income, see Funds From Operations
below.
Property
revenues
. Substantially all of our revenue is derived from rents received
from the use of our properties
.
We had rental income and
tenant reimbursements of approximately $8.0 million for the three months ended
March 31, 2009 as compared to $7.8 million for the three months ended March 31,
2008, an increase of $0.2 million, or 3%. The increase is primarily attributable
to increased rent per square foot, offset by decreased occupancy.
Property
expenses
.
Our total property
expenses were $3.4 million for the three months ended March 31, 2009, as
compared to $3.1 million for the three months ended March 31, 2008, an increase
of $0.3 million, or 10%. The primary components of operating expense are
detailed in the table below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate taxes
|
|
$
|
1,049
|
|
|
$
|
1,008
|
|
|
Utilities
|
|
|
618
|
|
|
|
686
|
|
|
Contract
services
|
|
|
543
|
|
|
|
524
|
|
|
Repairs
and maintenance
|
|
|
263
|
|
|
|
291
|
|
|
Bad
debt
|
|
|
218
|
|
|
|
191
|
|
|
Repairs
related to Hurricane Ike
|
|
|
241
|
|
|
|
—
|
|
|
Labor
and other
|
|
|
495
|
|
|
|
437
|
|
|
Total
property expenses
|
|
$
|
3,427
|
|
|
$
|
3,137
|
|
The
increase in property expenses is primarily attributed to ongoing repairs related
to Hurricane Ike. During the three months ended March 31, 2009, we expensed
$241,000 in Hurricane Ike-related repairs, as compared to $0 during the three
months ended March 31, 2008. We maintain casualty and business interruption
insurance at levels that we believe are adequate. The detailed analysis of the
total cost of Hurricane Ike, after the insurance deductible, to be borne by us
is still being conducted.
Other
expense.
Our other expenses were $4.6 million for the three months ended
March 31, 2009, as compared to $4.8 million for the three months ended March 31,
2008, a decrease of $0.2 million, or 4%. The primary components of other
expense, net are detailed in the table below (in thousands):
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|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
1,429
|
|
|
$
|
1,963
|
|
|
Depreciation
and amortization
|
|
|
1,708
|
|
|
|
1,556
|
|
|
Interest
expense
|
|
|
1,428
|
|
|
|
1,402
|
|
|
Interest
income
|
|
|
(11
|
)
|
|
|
(85
|
)
|
|
Total
other expenses
|
|
$
|
4,554
|
|
|
$
|
4,836
|
|
General
and administrative.
The decrease of $0.5 million in general and
administrative expense is primarily due to decreased legal fees as a result of
the settlement of the litigation with Mr. Hartman and Hartman Management, L.P.
in May 2008. Legal fees were $64,000 for the three months ended March 31, 2009,
as compared to $663,000 for the same period in 2008. General and administrative
expense includes $241,000 and $0 in share-based compensation for the three
months ended March 31, 2009 and 2008, respectively. The share-based compensation
is tied to performance measures, and we expect quarterly share-based
compensation expense to remain at current levels for the rest of
2009.
Depreciation and amortization.
Depreciation and amortization increased $152,000 for the three months
ended March 31, 2009, as compared to the three months ended March 31, 2008. Two
acquired properties (Pima Norte and Spoerlein Commons) were added subsequent to
March 31, 2008 and have added additional depreciation expense.
Interest
expense, net.
Interest expense for the three months ended March 31, 2009
was $1,428,000, an increase of $26,000 over the same period in 2008. An increase
in the average outstanding note payable balance of $19.0 million accounted for
approximately $310,000 in increased interest expense during 2009, while a lower
effective interest rate of 1.1% per annum (excluding amortized loan fees)
accounted for approximately $284,000 in decreased interest expense during 2009.
The decrease in interest income of approximately $74,000 is primarily due to
lower interest rates of return on our deposits.
Discontinued
Operations.
Discontinued operations are comprised of the two properties
known as Garden Oaks and Northeast Square. The two properties were transferred
to Mr. Hartman and Hartman Management, L.P. as part of a legal settlement on May
30, 2008. Below is a recap of income from discontinued operations (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Three
Months ended March 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Property
Revenues
|
|
|
|
|
|
|
|
Rental
revenues
|
|
$
|
—
|
|
|
$
|
275
|
|
|
Other
revenues
|
|
|
—
|
|
|
|
93
|
|
|
Total
property revenues
|
|
|
—
|
|
|
|
368
|
|
|
Property
Expenses
|
|
|
|
|
|
|
|
|
|
Property
opertation and maintenance
|
|
|
—
|
|
|
|
61
|
|
|
Real
estate taxes
|
|
|
—
|
|
|
|
46
|
|
|
Total
property expenses
|
|
|
—
|
|
|
|
107
|
|
|
Other
expense
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
—
|
|
|
|
67
|
|
|
Total
other expense
|
|
|
—
|
|
|
|
67
|
|
|
Income
before loss on disposal of assets and income taxes
|
|
|
—
|
|
|
|
194
|
|
|
Loss
on disposal of assets
|
|
|
—
|
|
|
|
(1
|
)
|
|
Provision
for income taxes
|
|
|
—
|
|
|
|
(3
|
)
|
|
Income
from discontinued operations
|
|
$
|
—
|
|
|
$
|
190
|
|
Funds
From Operations
The
National Association of Real Estate Investment Trusts (“NAREIT”) defines funds
from operations (“FFO”) as net income (loss) available to common shareholders
computed in accordance with U.S. generally accepted accounting principles
(“GAAP”), excluding gains or losses from sales of operating real estate assets
and extraordinary items, plus depreciation and amortization of operating
properties, including our share of unconsolidated real estate joint ventures and
partnerships. We calculate FFO in a manner consistent with the NAREIT
definition.
Management
uses FFO as a supplemental measure to conduct and evaluate our business because
there are certain limitations associated with using GAAP net income by itself as
the primary measure of our operating performance. Historical cost accounting for
real estate assets in accordance with GAAP implicitly assumes that the value of
real estate assets diminishes predictably over time. Because real estate values
instead have historically risen or fallen with market conditions, management
believes that the presentation of operating results for real estate companies
that use historical cost accounting is insufficient by itself. There can be no
assurance that FFO presented by us is comparable to similarly titled measures of
other REITs.
FFO
should not be considered as an alternative to net income or other measurements
under GAAP as an indicator of our operating performance or to cash flows from
operating, investing or financing activities as a measure of liquidity. FFO does
not reflect working capital changes, cash expenditures for capital improvements
or principal payments on indebtedness.
Below
is the calculation of FFO and the reconciliation to net income (loss), which we
believe is the most comparable GAAP financial measure (in
thousands):
Reconciliation
of Non-GAAP Financial Measures
|
|
|
|
|
|
|
|
|
Three Months Ended March
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to Whitestone REIT
|
|
$
|
(21
|
)
|
|
$
|
(69
|
)
|
Depreciation
and amortization of real estate assets
(1)
|
|
|
1,547
|
|
|
|
1,452
|
|
Loss
on sale of assets
(1)
|
|
|
41
|
|
|
|
31
|
|
Net
loss attributable to noncontrolling interests
|
|
|
(11
|
)
|
|
|
(42
|
)
|
FFO
|
|
$
|
1,556
|
|
|
$
|
1,372
|
|
|
(1)
Including amounts for discontinued
operations
|
Liquidity
and Capital Resources
Overview
Our
primary liquidity demands are distributions to the holders of our Common Shares
and holders of OP Units, capital improvements and repairs and maintenance for
our properties, acquisition of additional properties, tenant improvements and
debt repayments.
Primary
sources of capital for funding our acquisitions and redevelopment programs are
cash flows generated from operating activities, issuances of notes payable,
sales of Common Shares, sales of OP units and sales of underperforming
properties.
Our
capital structure includes recourse and non-recourse secured debt that we
assumed or originated on certain properties. We may hedge the future cash flows
of certain debt transactions principally through interest rate swaps with major
financial institutions.
During
the three months ended March 31, 2009, our cash provided from operating
activities was $1.3 million and our total distributions were $1.7 million.
Therefore, we had distributions in excess of cash flow from operations of
approximately $0.4 million.
We
anticipate that cash flows from operating activities and our borrowing capacity
will provide adequate capital for our working capital requirements, anticipated
capital expenditures and scheduled debt payments during the next 12 months. We
also believe that cash flows from operating activities and our borrowing
capacity will allow us to make all distributions required for us to continue to
qualify to be taxed as a REIT.
Cash and Cash
Equivalents
We
had cash and cash equivalents of $14.8 million at March 31, 2009, as compared to
$13.0 million on December 31, 2008. The increase of $1.8 million was primarily
the result of the following:
|
|
|
|
|
Sources
of Cash
|
|
|
|
|
●
|
Proceeds
of $9.5 million from issuance of notes payable net of origination
costs.
|
|
|
|
|
●
|
Cash
provided from operations of $1.3 million.
|
|
|
|
|
|
Uses
of Cash
|
|
|
|
|
●
|
Payment
of dividends and distributions of $1.7 million to holders of Common Shares
and OP Units.
|
|
|
|
|
●
|
Payment
of loans of $0.4 million.
|
|
|
|
|
●
|
Additions
to real estate of $6.9
million.
|
We
place all cash in short-term, highly liquid investments that we believe provide
appropriate safety of principal.
Mortgages
and other notes payable consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
Description
|
|
March
31,
2009
|
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate notes
|
|
|
|
|
|
|
|
$10.0
million 6.04% Note, due 2014
|
|
$
|
9,749
|
|
|
$
|
9,782
|
|
|
$11.2
million 6.52% Note, due 2015
|
|
|
11,139
|
|
|
|
11,159
|
|
|
$21.4
million 6.53% Note, due 2013
|
|
|
21,131
|
|
|
|
21,263
|
|
|
$24.5
million 6.56% Note, due 2013
|
|
|
24,500
|
|
|
|
24,500
|
|
|
$9.9
million 6.63% Note, due 2014
|
|
|
9,941
|
|
|
|
—
|
|
|
$0.5
million 5.05% Note, due 2009
|
|
|
448
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate notes
|
|
|
|
|
|
|
|
|
|
$6.4
million LIBOR + 2.00% Note, due 2009
|
|
|
6,400
|
|
|
|
6,400
|
|
|
$26.9
million LIBOR + 2.60% Note, due 2013
|
|
|
26,686
|
|
|
|
26,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
109,994
|
|
|
$
|
100,003
|
|
Fixed
Rate Notes
. On February 3, 2009, Whitestone, operating through its
subsidiary, Whitestone Centers LLC, executed four promissory notes (the “Sun
Life Promissory Notes II”), totaling $9.9 million payable to Sun Life Assurance
Company of Canada with an applicable interest rate of 6.63% per annum and a
maturity date of March 1, 2014. The Sun Life Promissory Notes II are
non-recourse loans secured by the Whitestone Centers LLC’s properties and a
limited guarantee by Whitestone.
Floating
Rate Notes.
On January 25, 2008, we entered into a $6.4 million term loan
agreement with KeyBank. The term loan is secured by a pledge of the partnership
interests in WROP III, and Whitestone Pima Norte LLC (“WPN”), a wholly owned
subsidiary of the Operating Partnership that was formed to hold title to our
Pima Norte property purchased in October 2007. At March 31, 2009 and December
31, 2008, WROP III owned 13 and 17 properties, respectively, and WPN owned 1
property.
Outstanding
amounts under the note accrue interest computed at LIBOR on the basis of a
360-day year, plus 2%. Only interest is payable monthly under the loan with the
total amount of principal coming due at maturity in July 2009. The covenants of
this agreement mirror those in our $75 million revolving credit agreement with
KeyBank which was paid in full on October 3, 2008. The covenants are as
follows:
|
|
● We
will not permit our total indebtedness to exceed 60% of the fair market
value of our real estate assets at the end of
any
quarter. “Total indebtedness” is defined as all of our liabilities,
including the term loan and all other secured and unsecured debt,
including letters of credit and guarantees. “Fair market value of real
estate assets” is defined as aggregate net operating income for the
preceding four quarters, less a $0.15 per square foot per annum capital
expenditure reserve, divided by a 9.25% capitalization rate.
|
|
|
|
● The
ratio of consolidated rolling four-quarter earnings before interest,
income tax, depreciation and amortization
expenses
to total interest expense, including capitalized interest, shall not be
less than 2.0 to 1.0.
|
|
|
|
● The
ratio of consolidated earnings before interest, income tax, depreciation
and amortization expenses to total interest
expense,
including capitalized interest, principal amortization, capital
expenditures and preferred stock dividends shall not be less than 1.5 to
1.0. Capital expenditures shall be deemed to be $0.15 per square foot per
annum.
|
|
|
|
● The
ratio of secured debt to fair market value of real estate assets shall not
be greater than 40%.
|
|
|
● We
must maintain a consolidated tangible net worth of not less than $30
million plus 75% of the value of stock and OP
units
issued in conjunction with an offering or with the acquisition of an asset
or stock. Consolidated tangible net worth is defined as shareholders’
equity less intangible
assets.
|
In
order to pay off our $75 million revolving credit facility in 2008, we entered
into non-recourse mortgages secured by various properties and a limited
guarantee by us. As a result of these secured mortgages, we are not in
compliance with our secured debt to fair market value ratio and our total
indebtedness to fair market value ratio covenants of our $6.4 million term loan
with KeyBank as of March 31, 2009. As this non-compliance constitutes an event
of default, the lender has the right to accelerate payment. We are in
discussions with KeyBank regarding an extension of this loan, which matures in
July 2009, and have requested a waiver from KeyBank. As of the date of this
filing, we have not received the waiver. Should we not receive a waiver, we will
attempt to obtain other financing or pay off the loan from cash
reserves.
Our
loans are subject to customary financial covenants. As of March 31, 2009, we are
in compliance with all loan covenants other than the non compliance described in
the preceeding paragraph.
Annual
maturities of notes payable as of March 31, 2009, are due as set forth below (in
thousands):
|
|
|
|
|
Year
|
|
Principal
|
|
|
|
2009
|
|
$
|
8,256
|
|
2010
|
|
|
2,276
|
|
2011
|
|
|
2,402
|
|
2012
|
|
|
2,534
|
|
2013
|
|
|
66,457
|
|
2014
and thereafter
|
|
|
28,069
|
|
Total
|
|
$
|
109,994
|
|
Capital
Expenditures
We
continually evaluate our properties’ performance and value. We may determine it
is in our shareholders’ best interest to invest capital in properties we believe
have potential for increasing value. We also may have unexpected capital
expenditures or improvements for our existing assets. Additionally, we intend to
invest in similar properties outside of Texas in cities with exceptional
demographics to diversify market risk, and we may incur significant capital
expenditures or make improvements in connection with any properties we may
acquire.
Distributions
The
following distributions for Common Shares and OP Units were paid or declared
payable during the three months ended March 31, 2009 and the year ended December
31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
2009
Status
|
|
2009
Amount
|
|
|
Per
Share
/OP
Unit
|
|
|
2008
Amount
|
|
|
Per
Share
/OP
Unit
|
|
|
January
-March
|
|
Paid
|
|
$
|
1,687
|
|
|
$
|
0.1125
|
|
|
$
|
2,371
|
|
|
$
|
0.1500
|
|
|
April
- June
|
|
Payable
|
|
$
|
1,696
|
|
|
$
|
0.1125
|
|
|
$
|
2,507
|
|
|
$
|
0.1500
|
|
|
July
- September
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,168
|
|
|
$
|
0.1500
|
|
|
October
- December
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,626
|
|
|
$
|
0.1125
|
|
Taxes
We
elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended (the “Code”), beginning with our taxable year ended December 31, 1999.
As a REIT, we generally are not subject to federal income tax on income that we
distribute to our shareholders. If we fail to qualify as a REIT in any taxable
year, we will be subject to federal income tax on our taxable income at regular
corporate rates. We believe that we are organized and operate in such a manner
as to qualify to be taxed as a REIT, and we intend to operate so as to remain
qualified as a REIT for federal income tax purposes.
Inflation
We
anticipate that our leases will continue to be triple-net leases or otherwise
provide that tenants pay for increases in operating expenses and will contain
provisions that we believe will mitigate the effect of inflation. In addition,
many of our leases are for terms of less than five years, which allows us to
adjust rental rates to reflect inflation and other changing market conditions
when the leases expire. Consequently, increases due to inflation, as well as ad
valorem tax rate increases, generally do not have a significant adverse effect
upon our operating results.
Environmental
Matters
Our
properties are subject to environmental laws and regulations adopted by various
governmental authorities in the jurisdictions in which our operations are
conducted. From our inception, we have incurred no significant environmental
costs, accrued liabilities or expenditures to mitigate or eliminate future
environmental contamination.
Off-Balance
Sheet Arrangements
We
have no significant off-balance sheet arrangements as of March 31, 2009 and
December 31, 2008.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
Our
future income, cash flows and fair value relevant to our financial instruments
depend upon prevailing market interest rates. Market risk is the risk of loss
arising from adverse changes in market rates and prices. The principal market
risk to which we are exposed is the risk related to interest rate fluctuations.
Based upon the nature of our operations, we are not subject to foreign exchange
or commodity risk. We will be exposed to changes in interest rates as a result
of our financial instruments consist of loans that have floating interest rates.
As of March 31, 2009, we had $33.1 million of loans with floating interest
rates. All of our financial instruments were entered into for other than trading
purposes. As of March 31, 2009, we did not have a fixed rate hedge in place,
leaving $33.1 million subject to interest rate fluctuations. The impact of a 1%
increase or decrease in interest rates on our debt would result in a decrease or
increase of net income of approximately $0.3 million, respectively.
Item
4T. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
The
management of Whitestone REIT, under the supervision and with the participation
of our principal executive and financial officers, has evaluated the
effectiveness of our disclosure controls and procedures in ensuring that the
information required to be disclosed in our filings under Rule 13a-15(e) of the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, including ensuring that such information is
accumulated and communicated to Whitestone REIT’s management as appropriate to
allow timely decisions regarding required disclosure. Based on such evaluation,
our principal executive and financial officers have concluded that such
disclosure controls and procedures were effective as of March 31, 2009 (the end
of the period covered by this Quarterly Report on Form 10-Q).
Changes
in Internal Control Over Financial Reporting
During
the three months ended March 31, 2009, there has been no changes in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings
We
are subject to various legal proceedings and claims that arise in the ordinary
course of business. These matters are generally covered by insurance. While the
resolution of these matters cannot be predicted with certainty, management
believes the final outcome of such matters will not have a material adverse
effect on our condensed consolidated financial statements.
Item 1A. Risk
Factors
There
have been no material changes from the risk factors disclosed in the “Risk
Factors” section of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item
3. Defaults Upon Senior Securities
None.
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item
5. Other Information
None.
Item
6. Exhibits
The
list of exhibits filed as part of this Quarterly Report on Form 10-Q in response
to Item 601 of Regulation S-K is submitted on the Exhibit Index attached
hereto.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
|
Whitestone
REIT
|
|
|
|
|
Date:
May 15, 2009
|
/s/
James C. Mastandrea
|
|
|
James
C. Mastandrea
|
|
|
Chief
Executive Officer
|
|
|
(Chief
Executive Officer)
|
|
|
|
|
Date:
May 15, 2009
|
/s/
David K. Holeman
|
|
|
David
K. Holeman
|
|
|
Chief
Financial Officer
|
|
|
(Chief
Financial and Chief Accounting Officer)
|
|
EXHIBIT
INDEX
|
|
|
|
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
3.1
|
|
|
Articles
of Amendment and Restatement of Declaration of Trust of Whitestone REIT
(previously filed as and incorporated by reference to Exhibit 3.1 to the
Registrant’s Current Report on Form 8-K, filed on July 31,
2008)
|
|
|
|
|
3.2
|
|
|
Articles
Supplementary (previously filed as and incorporated by reference to
Exhibit 3(i).1 to the Registrant’s Current Report on Form 8-K, filed on
December 6, 2006)
|
|
|
|
|
3.3
|
|
|
Amended
and Restated Bylaws (previously filed as and incorporated by reference to
Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on
October 9, 2008)
|
|
|
|
|
4.1
|
|
|
Specimen
certificate for common shares of beneficial interest, par value $.001
(previously filed as and incorporated by reference to Exhibit 4.2 to the
Registrant’s Registration Statement on Form S-11, Commission File No.
333-111674, filed on December 31, 2003)
|
|
|
|
|
10.1
|
+
|
|
Form
of Restricted Common Share Award Agreement (Performance Vested)
(previously filed and incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K, filed January 7,
2009)
|
|
|
|
|
10.2
|
+
|
|
Form
of Restricted Common Share Award Agreement (Time Vested) (previously filed
and incorporated by reference to Exhibit 10.2 to the Registrant’s Current
Report on Form 8-K, filed January 7, 2009)
|
|
|
|
|
10.3
|
+
|
|
Form
of Restricted Unit Award Agreement (previously filed and incorporated by
reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K,
filed January 7, 2009)
|
|
|
|
|
10.4
|
|
|
Promissory
Note among Whitestone Centers LLC and Sun Life Assurance Company of Canada
dated February 3, 2009 (previously filed and incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed
February 10, 2009)
|
|
|
|
|
10.5
|
|
|
Promissory
Note among Whitestone Centers LLC and Sun Life Assurance Company of Canada
dated February 3, 2009 (previously filed and incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed
February 10, 2009)
|
|
|
|
|
10.6
|
|
|
Promissory
Note among Whitestone Centers LLC and Sun Life Assurance Company of Canada
dated February 3, 2009 (previously filed and incorporated by reference to
Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed
February 10, 2009)
|
|
|
|
|
10.7
|
|
|
Promissory
Note among Whitestone Centers LLC and Sun Life Assurance Company of Canada
dated February 3, 2009 (previously filed and incorporated by reference to
Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed
February 10, 2009)
|
|
|
|
|
10.8
|
*
|
|
Purchase,
Sale and Contribution Agreement between Whitestone REIT Operating
Partnership, L.P. and Bank One, Chicago, NA, as trustee for Midwest
Development Venture IV dated December 18,
2008
|
10.9
|
*+
|
|
Grant
Agreement for Restricted Shares between Whitestone REIT and Daryl J.
Carter
|
|
|
|
|
10.10
|
*+
|
|
Grant
Agreement for Restricted Shares between Whitestone REIT and Daniel G.
DeVos
|
|
|
|
|
10.11
|
*+
|
|
Grant
Agreement for Restricted Shares between Whitestone REIT and Donald F.
Keating
|
|
|
|
|
10.12
|
*+
|
|
Grant
Agreement for Restricted Shares between Whitestone REIT and Jack L.
Mahaffey
|
|
|
|
|
10.13
|
*+
|
|
Grant
Agreement for Restricted Shares between Whitestone REIT and Chris A.
Minton
|
|
|
|
|
31.1
|
*
|
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
31.2
|
*
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
32.1
|
**
|
|
Certificate
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
32.2
|
**
|
|
Certificate
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
* Filed
herewith.
**
Furnished herewith.
+ Denotes
management contract or compensatory plan or arrangement.
35
Exhibit
10.8
AGREEMENT
OF PURCHASE AND SALE
THIS
AGREEMENT (“
Agreement
”)
is made as of the 18
th
day of
December, 2008 (the “
Effective
Date
”), between Bank One, Chicago, NA, as successor by merger with Bank
One, Wilmette, f/k/a, First Illinois Bank of Wilmette, as Trustee under Trust
Agreement dated January 29, 1986 and known as Trust Number TWB-0454 (the “
Seller
”)
and Whitestone REIT Operating Partnership, L.P., a Delaware limited partnership,
or its designee (the “
Purchaser
”).
WHEREAS,
Seller has agreed to sell and Purchaser has agreed to purchase the Property (as
hereinafter defined);
NOW,
THEREFORE, in consideration of the agreements contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1.
Property
.
Seller hereby agrees to sell and Purchaser, or his designee, hereby agrees to
purchase from Seller certain real property in the City of Buffalo Grove, Lake
County, Illinois, municipally known as Spoerlein Commons, 1151 McHenry Road,
Buffalo Grove, Illinois 60084, generally comprising approximately 3.6595 acres
of land and more particularly described on
Exhibit
A
hereto and hereby incorporated by reference herein, together with an
approximately 50,000 square foot retail/office building
and
all other improvements located thereon and all rights, easements, hereditaments
and appurtenances thereto belonging, together with all telephone numbers for the
Property and all tangible and intangible personal property of Seller located on
and used in connection with the operation of the Property (collectively, the
“
Property
”).
2.
Earnest
Money
. Within three (3) business days after the Effective Date, Purchaser
shall deposit with Chicago Title Insurance Company (the “
Escrow
Agent
”) Fifty Thousand and 00/100 Dollars ($50,000.00) in cash or
certified or cashier’s check as earnest money (the “
Earnest
Money
”). Said Earnest Money shall be refundable to Purchaser in
accordance with
Section
4
hereof. The parties hereto covenant and agree that in performing any of
its duties under this Agreement, Escrow Agent shall not be liable for any loss,
costs or damage which it may incur in the capacity of Escrow Agent, except for
any loss, costs or damage arising out if its default or gross
negligence.
Purchaser
and Seller shall indemnify the Escrow Agent and hold the Escrow Agent harmless
from all damage, costs, claims and expenses arising from performance of its
duties as Escrow Agent including reasonable attorney’s fees, except for those
damages, costs, claims and expenses resulting from the gross negligence of
willful misconduct of the Escrow Agent.
Accordingly,
Escrow Agent shall not incur any liability with respect to (i) any action taken
or omitted to be taken in good faith upon advice of counsel given with respect
to any questions relating to duties and responsibilities, or (ii) to any action
taken or omitted to be taken in reliance upon any documents, including any
written notice of instruction provided for in this Agreement, not only as to its
execution and the validity and effectiveness of its provisions, but also to the
truth and accuracy of any information contained therein, which Escrow Agent
shall in good faith believe to be genuine, to be signed or presented by a proper
person or persons and to conform with the provisions of this Agreement. The
Seller and/or Purchaser are aware the Federal Deposit Insurance Corporation
(FDIC) coverages apply to a maximum amount of $250,000.00 per depositor (as may
be modified by the FDIC from time to time). Further, the Seller and/or Purchaser
do not and will not hold Escrow Agent liable for any loss occurring which arises
from bank failure or error, insolvency or suspension, or a situation or event
which falls under the FDIC coverages.
In
the event any party to the transaction underlying this Agreement shall tender
any performance after the time when such performance was due, Escrow Agent may
proceed under this Agreement unless one of the parties to this Agreement shall
give to the Escrow Agent written direction to stop further performance of the
Escrow Agent’s functions hereunder. In the event written notice of default or
dispute is given to the Escrow Agent by any party, or if Escrow Agent receives
contrary written instructions from any party, then Escrow Agent will promptly
notify all other parties of such notice. Thereafter, Escrow Agent will decline
to disburse funds or to deliver any instrument or otherwise continue to perform
its escrow functions, except upon receipt of a mutual written agreement of the
parties or upon an appropriate order of court. In the event of a dispute, the
Escrow Agent is authorized to deposit the escrow into a court of competent
jurisdiction for a determination as to the proper disposition of said funds. In
the event that the funds are deposited in court, the Escrow Agent shall be
entitled to file a claim in the proceeding for its costs and counsel fees, if
any.
3.
Purchase
Price
. The purchase price (the “
Purchase
Price
”) of the Property shall be an amount equal to Nine Million Four
Hundred One Thousand and 00/100 Dollars ($9,401,000.00). At the Closing, all
Earnest Money shall be applied to the Purchase Price, and the balance of the
Purchase Price shall be paid in part in cash and in part in Units of limited
partnership of Purchaser (“Units”) or shares of stock in Purchaser’s general
partner, Whitestone REIT, a Maryland real estate investment trust (“Shares”) as
follows: (i) Five Million Four Hundred Fifty Thousand and 00/100 Dollars
($5,450,000.00) in cash at Closing by wire transfer of immediately available
funds and (ii) the balance of the Purchase Price, subject to the adjustments and
prorations required by this Agreement, (“Unit Dollar Value”) by Purchaser’s
delivery to Seller of that number of Units or Shares (to be determined by
Seller) obtained by dividing the Unit Dollar Value by $5.15. In any event, the
Units shall be freely convertible to Shares at any time after July 1, 2009,
pursuant to the Purchaser’s limited partnership agreement, as may be amended
from time to time.
4.
Inspection
Period; Refund of Earnest Money; Due Diligence Materials
. Purchaser shall
have until December 22, 2008 (“
Inspection
Period
”) to make such determinations with respect to the Property as
Purchaser deems appropriate and to elect to either continue or terminate this
Agreement. Purchaser may terminate this Agreement, and receive a full refund of
the Earnest Money, less $10.00 to be retained by Seller as consideration for
entering into this Agreement, by delivering written termination notice to Seller
at any time prior to expiration of the Inspection Period. In the event of such
termination, Purchaser agrees to reimburse Seller the cost of obtaining the
Survey. If Purchaser does not so terminate this Agreement, the Earnest Money
shall thereafter be nonrefundable (except as expressly otherwise set forth in
this Agreement) and this Agreement shall remain in effect.
Within
five (5)
days
after the Effective Date, Seller shall deliver to Purchaser at Seller’s sole
expense the information more particularly described on
Schedule
4
hereto (the “
Due
Diligence Materials
”). For each day of Seller’s delay in delivering all
of the Due Diligence Materials beyond five (5)
days
after the Effective Date, the Inspection Period and Closing Date shall (at
Purchaser’s option) be extended by one (1) day.
5.
Costs
and Prorations
.
(a)
Purchaser shall pay for all recording costs applicable to the deed of transfer,
the premium for extended or additional coverage or endorsements to the Title
Policy to be delivered at Closing pursuant to
Section
6(c)
hereof and the premium for any lender’s title policy, the costs of
any Phase I environmental report, property condition assessment, appraisal, and
other third party reports obtained by Purchaser for its due diligence. Seller
shall pay for preparation of the deed of transfer, all transfer taxes applicable
to the deed of transfer, the costs of production of the title search or
abstract, the premium for the Title Policy to be delivered at Closing pursuant
to
Section
6(c)
hereof and the Survey required pursuant to
Section
8
hereof. Each party shall pay its own attorney’s fees. Purchaser shall
pay all expenses incident to any financing obtained for the purchase of the
Property.
(b)
The following shall be prorated between the parties as of the Closing Date as
defined in
Section
7
: (i) ad valorem property taxes constituting a lien against the Property
for the year in which the Closing occurs and all other unpaid assessments with
respect thereto, and (ii) rents and other tenant charges, utilities, and
operating expenses for the Property for the calendar month in which Closing
occurs, subject to
subsections
6(c)
and
6(d)
below. If applicable, percentage rent attributable to sales at the Property for
the year in which Closing occurs shall be prorated on a straight line basis for
the year in which Closing occurs based on the number of days Seller and
Purchaser each own the Property in the year in which the Closing occurs. In the
event such proration is based upon a previous year’s taxes or assessment, after
Closing, at such time as any of the taxes or assessments are capable of exact
determination, the party having the information permitting the exact
determination shall send to the other party a detailed report of the exact
determination so made. Within thirty (30) days after both Seller and Purchaser
shall have received such report, Seller and Purchaser shall adjust the amounts
apportioned pursuant to the estimates made at Closing to reflect the exact
determinations contained in the report, and Seller or Purchaser, as the case may
be, shall pay to the other whatever amount shall be necessary to compensate for
the difference. Purchaser shall receive a credit against the Purchase Price in
the amount of all security deposits (together with interest required to be paid
thereon) held or required to be held by Seller under the Leases. Purchaser shall
have no rights to any of Seller’s utility deposits for the Property, and Seller
shall be entitled to seek a refund of the same.
(c)
Nondelinquent rent collected by Seller after Closing attributable to periods
from and after Closing shall be promptly remitted to Purchaser. Delinquent rent
collected by Seller and Purchaser after the date of Closing shall be delivered
by the recipient as follows: Within fifteen (15) days after the receipt thereof,
Seller and Purchaser agree that all rent received by Seller or Purchaser shall
be applied first to then current rents, and then to delinquent rents for periods
after Closing and then to delinquent rents for periods prior to Closing. Seller
retains the right to pursue tenants for payment of delinquent rent but may not
seek to dispossess a tenant, terminate a lease or enforce a landlord
lien.
(d)
Seller, as landlord under the Leases, is currently collecting from tenants
additional rent to cover taxes, insurance, utilities, maintenance and other
operating costs and expenses incurred by Seller in connection with the
ownership, operation, maintenance and management of the Property (such expenses,
collectively “Expenses” and such collections, collectively “Collections”). Non
delinquent Collections for the month in which Closing occurs shall be prorated
in the same manner as other rents as set forth above. Subsequent to Closing
Purchaser shall calculate adjustments for Expenses incurred and Collections
received for the year of Closing and shall prepare and present to Seller a
calculation of the Collections received and Expenses incurred by each of Seller
and Purchaser attributable to each party’s period of ownership. The parties
shall make the appropriate adjusting payment between them within 30 days after
presentment to Seller of Purchaser’s calculation. Either party may inspect the
other’s books and records related to the Property to confirm the
calculation.
6.
Conditions
Precedent To Purchaser’s Obligations
. Seller acknowledges that as a
condition precedent to Purchaser’s obligations hereunder, the following shall
occur on or before the Closing Date, any of which conditions may be waived by
Purchaser in its sole discretion:
(a)
Purchaser shall have received a current Phase I environmental assessment
satisfactory to Purchaser prepared by a competent licensed environmental
engineer satisfactory to Purchaser that does not recommend a Phase II
environmental assessment and reflecting that there are no hazardous wastes or
hazardous materials located on or below the surface of the Property, and that
the Property is in compliance with all applicable environmental laws,
ordinances, rules and regulations.
(b)
Prior to the expiration of the Inspection Period, Seller shall have delivered to
Purchaser (i) Qualifying Tenant Estoppels (defined below) executed by tenants
occupying at least 90% of the
rentable
square
footage
of
the Property, and (ii) any subordination, non-disturbance and attornment
agreements (“
SNDA’s
”)
reasonably required by Purchaser or Purchaser’s lender from tenants at the
Property. Seller agrees to use reasonable efforts to obtain the required tenant
estoppels and SNDA’s. For purposes hereof, a “Qualifying Tenant Estoppel” is a
tenant estoppel substantially in the form of
Exhibit
B
(or in any other form reasonably required by or acceptable to Purchaser
and Purchaser’s lender) that does not include any information that is materially
inconsistent with Seller’s representations and warranties in this
Agreement.
(c)
Chicago Title Insurance Company (the “
Title
Company
”) shall be irrevocably committed to issue upon Closing a 2006
ALTA Owner’s Policy of Title Insurance (the “
Title
Policy
”), insuring Purchaser as owner of fee simple title to the
Property, subject only to Permitted Exceptions (defined below), in the amount of
the Purchase Price, and containing such endorsements as Purchaser shall have
requested.
(d)
Each and every representation and warranty of Seller set forth in
Section
10
shall be true and correct, and Seller shall not be in default under
any of its obligations under this Agreement, as of Closing.
7.
Closing
.
Subject to all preconditions set forth herein, the closing or settlement (“
Closing
”)
of the transaction contemplated hereby, unless terminated in accordance with
this Agreement or as otherwise agreed upon by Purchaser and Seller, shall be
held via the mails, through the Title Company, or at the offices of Whitestone
REIT, 2600 S. Gessner Road, Suite 500, Houston, Texas 77063 at 10:00 a.m. on
January 15, 2009 or such earlier date as Seller may determine or such other
place and time as the parties may agree (such date
shall
be referred to herein as the “
Closing
Date
”).
At
Closing, Seller shall convey to Purchaser good, marketable and insurable title
to the Property by special warranty deed acceptable to Purchaser and the Title
Company (the “
Deed
”),
subject to (i) standard exceptions for real property taxes not yet due and
payable, and (ii) any other matters which are waived by, or acceptable to,
Purchaser pursuant to
Section
9
(the “
Permitted
Exceptions
”).
8.
Survey
.
Seller
at
its
expense,
has ordered an ALTA survey of the Property from a reputable registered local
surveyor selected by Purchaser (“
Survey
”)
and delivered a copy of the Survey to the Purchaser. The Survey must indicate,
among other things, the exact location and square footage of improvements
located
on the Property and shall indicate the exact metes and bounds and aggregate
acreage of the Property, together with the metes and bounds and acreage of any
and all portions of the Property located within (a) any public right of way
(including any proposed right of way or any proposed widening of any existing
right of way), (b) any body of water, (c) any 100-year flood plain, (d) any
marshlands or wetlands and (e) any easement areas, buffer zones or natural
preserves in which the construction of buildings is prohibited by any law,
ordinance, regulation or private covenant including PUD conditions governing the
Property
of
the Property. After the Survey shall have been completed, the description of the
Property shall automatically be amended to conform to the legal description
based on the Survey, and thereafter, the new legal description shall be the
legal description of the Property for all purposes relating to this
Agreement.
9.
Title
.
Within five (5)
days
after the Effective Date, Seller shall deliver to Purchaser a title insurance
commitment in the amount of the Purchase Price covering the Property issued by
the Title Company (the “
Title
Commitment
”). Purchaser shall have until December 31, 2008 to object to
any matters shown on the Title Commitment or Survey by written notice to Seller
(“
Title
Objection Notice
”). Purchaser may also object to any new matters
thereafter revealed by a title update or survey update by subsequent Title
Objection Notice to Seller. Within five (5) days after receipt of Purchaser’s
Title Objection Notice, Seller shall either (i) deliver written notice to
Purchaser of any title or Survey objections which Seller elects not to cure, or
(ii) cure or satisfy such objections (or commence to cure or satisfy such
objections as long as Seller reasonably believes such objections may be cured or
satisfied at least five (5) business days prior to Closing). Within five (5)
days after receipt of Seller’s written notification that Seller elects not to
cure a title or Survey objection, Purchaser may terminate this Agreement and
receive a full refund of the Earnest Money by delivering written notice thereof
to Seller. If Purchaser does not so terminate this Agreement, then any such
title or Survey objection which Seller elects not to cure shall be deemed waived
by Purchaser and shall be an additional Permitted Exception. If any objection
which Seller elects to cure is not satisfied by Seller at least five (5)
business days before the scheduled date of Closing, Purchaser shall have the
right to terminate this Agreement, in which case the Earnest Money shall be
returned to Purchaser and neither party shall have any further rights,
obligations or duties under this Agreement. If Seller does cure or satisfy the
objections at least five (5) business days prior to Closing, then this Agreement
shall continue in effect. Any exception to or defect in title which Purchaser
shall elect to waive, or which is otherwise acceptable to Purchaser, shall be
deemed an additional Permitted Exception to title at Closing. Seller covenants
and agrees not to alter or encumber in any way Seller’s title to the Property
after the date hereof.
Notwithstanding
anything in this Agreement to the contrary, Seller shall cause any deed of
trust, mortgage, deed to secure debt, judgment or other lien for a liquidated
sum encumbering the Property to be released at or before Closing.
10.
Seller’s
Representations and Warranties
. As of the date hereof and as of the
Closing Date (as evidenced by Seller’s downdate certificate to be provided at
Closing), Seller represents, warrants and covenants to Purchaser
that:
(a)
There are and there will be no parties in possession of any portion of the
Property as lessees, and no other party has been granted an oral or written
license, lease, option, purchase agreement or other right pertaining to the use,
purchase or possession of any portion of the Property, other than tenants in
possession under the Leases (defined hereafter). True, complete and correct
copies of all leases affecting the Property and any amendments thereto
(collectively, the “
Leases
”)
have been or will be furnished to Purchaser within seven (7) days after the
Effective Date as part of the Due Diligence Materials, together with true,
correct and complete copies of any service, maintenance or other contracts or
agreements with third parties relating to or affecting the Property (the “
Contracts
”).
A schedule and rent roll of all Leases and amendments is attached hereto as
Exhibit
C
(“
Lease
Schedule
”) and incorporated herein by reference. Such Leases and
Contracts are valid and binding in accordance with their respective terms and
conditions, are in full force and effect, and, to Seller’s knowledge, have no
uncured breach or default by any party except as disclosed on
Exhibit
C
. To Seller’s knowledge, no off-sets or defenses are available to any
party under the Leases or Contracts. All Contracts are cancellable upon not more
than thirty (30) days prior written notice. No rents have been collected more
than thirty (30) days in advance and no tenant is entitled to any allowance for
decoration, redecoration or other improvements under any of the Leases (a “
TI
Allowance
”), except as specifically set forth on
Exhibit
C
. There are no leasing brokerage agreements, leasing commission
agreements or other agreements providing for the payment of any amounts, and no
commissions due, for leasing activities with respect to the Property except as
set forth in the Leases or on
Exhibit
C
. Purchaser shall have no liability for (and Seller hereby indemnifies
Purchaser against any claim for) any such leasing commissions and any TI
Allowance with respect to the Leases except to the extent (i) expressly
allocated to Purchaser on
Exhibit
C
, or (ii) expressly provided for in any current Lease or any Lease
entered into after the Effective Date that is approved by Purchaser pursuant to
Section
16
below.
(b)
The Seller has not received written notice of any default (nor does Seller have
any knowledge of any default) under any note or deed of trust related to or
secured by the Property. The execution and delivery of this Agreement, the
consummation of the transaction herein contemplated and the compliance with the
terms and provisions hereof will not conflict with or (with or without notice or
the passage of time or both) result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, loan
agreement or instrument to which the Seller is a party or by which the Seller or
the Property is bound, any applicable regulation or any judgment, order or
decree of any court having jurisdiction over the Seller or the
Property.
(c)
The Seller has not received any written notice, nor is the Seller aware, of any
violation of any ordinance, regulation, law, statute, rule or restriction
relating to the Property.
(d)
There are no attachments, executions, assignments for the benefit of creditors,
or voluntary or involuntary proceedings in bankruptcy or under any applicable
debtor relief laws or any other litigation contemplated by or pending or
threatened against the Seller or the Property.
(e)
Seller has been duly organized and is validly existing under the laws of the
State of Illinois. Seller has the full right and authority to enter into this
Agreement and to transfer all of the Property to be conveyed by Seller pursuant
hereto and to consummate or cause to be consummated the transactions
contemplated herein to be made by Seller. The person signing this Agreement on
behalf of Seller is authorized to do so. This Agreement constitutes, and all
agreements and documents contemplated hereby (when executed and delivered
pursuant hereto) will constitute, the valid and legally binding obligations of
Seller, enforceable in accordance with their respective terms. No other
signatures or approvals are required to make this Agreement fully enforceable by
the Purchaser with respect to the Seller or the Property. This Agreement
constitutes, and all agreements and documents contemplated hereby (when executed
and delivered pursuant hereto) will constitute, the valid and legally binding
obligations of Seller, enforceable in accordance with their respective
terms.
(f)
The Seller has and will convey to the Purchaser good, marketable and
indefeasible title in fee simple to the Property, subject only to the Permitted
Exceptions.
(g)
There is no pending or threatened condemnation or similar proceeding or
assessment affecting the Property or any part thereof, nor to the knowledge of
the Seller is any such proceeding or assessment contemplated by any governmental
authority. There will be no claim against the Property or Purchaser for or on
account of work done, materials furnished, and utilities supplied to the
Property prior to the Closing Date. To Seller’s knowledge, there are no public
plans or proposals for changes in road grade, access, or other municipal
improvements which would adversely affect the Property or result in any
assessment; and, to Seller’s knowledge, no ordinance authorizing improvements,
the cost of which might be assessed against Purchaser or the Property, is
pending.
(h)
No portion of the Property is within the area determined to be within any flood
hazard areas, including the 100-year flood plain on the Flood Insurance Rate Map
published by the Federal Emergency Management Agency and/or by the United States
Army Corps of Engineers and/or Lake County and/or the State of Illinois, except
as may be shown on the Survey.
(i)
Seller has not entered into any agreement to dispose of its interest in the
Property or any part thereof, except for this Agreement.
(j)
Seller is not a party to any litigation which is still pending, and knows of no
threatened litigation, affecting or relating to the Property.
(k)
Neither the Seller, nor to Seller’s knowledge, any other party has ever caused
or permitted any “hazardous material” (as hereinafter defined) to be placed,
held, located, or disposed of on, under, or at the Property or any part thereof
in forms or concentrations which violate applicable laws and regulations, and,
to Seller’s knowledge, neither the Property nor any part thereof has ever been
used as a dump or storage site (whether permanent or temporary) for any
hazardous material. As used herein, “hazardous material” means and includes any
hazardous, toxic, or dangerous waste, substance, or material defined as such in,
or for purposes of, the Comprehensive Environmental Response, Compensation
Liability Act (42 U.S.C. Section 9601, et seq., as amended) or any other “super
fund” or “super lien” law or any other Federal, State, or local statute, or law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability for standards of conduct concerning any substance or
material, as presently in effect. The Property does not currently contain any
underground storage tanks.
Seller
hereby indemnifies and holds harmless Purchaser from and against any and all
loss, expense (including without limitation reasonable attorney fees),
liability, cost, claim, demand, action, cause of action and suit arising out of
or in any way related to any breach of any representation, warranty, covenant or
agreement of Seller in this Agreement.
11.
Broker
and Broker’s Commission
.
Purchaser
and Seller each represent and warrant to the other that such party has not
incurred an obligation to any other broker or agent in connection with the
transaction contemplated hereby. Each party hereby covenants and agrees to
defend, indemnify and hold harmless the other party against and from any and all
loss, expense, liability, cost, claim, demand, damage, action, cause of action
and suit arising out of or in any manner relating to the alleged employment or
use by such party of any real estate broker or agent in connection with this
transaction. The provisions of this
Section
11
shall survive the Closing of this transaction.
Purchaser
represents and warrants that it has not and shall not incur any broker-dealer,
underwriting or placement agent fee and/or discount related to the issuance of
the Units or Shares set forth in Section 3 hereof.
12.
Survey
and Inspection
. Purchaser and Purchaser’s agents, employees and
independent contractors shall have the right and privilege to enter upon the
Property during the Inspection Period to survey and inspect the Property and to
conduct soil borings, environmental assessment and toxic waste studies and other
geological, engineering or landscaping tests or studies, all at Purchaser’s sole
cost and expense. Purchaser hereby covenants and agrees to indemnify and hold
harmless Seller from any and all loss, liability, cost, claim, demand, damage,
action, cause of action and suit arising out of or in any manner related to the
exercise by Purchaser of Purchaser’s rights under this section (but not the
existence of any condition discovered in the course of Purchaser’s inspections
and testing).
13.
Eminent
Domain
. If, after the Effective Date and prior to Closing, Seller shall
receive notice of the commencement or threatened commencement of eminent domain
or other like proceedings against the Property or any portion thereof, Seller
shall immediately notify Purchaser in writing, and Purchaser shall elect within
thirty (30) days from and after such notice, by written notice to Seller, one of
the following: (a) not to close the transaction contemplated hereby, in which
event all Earnest Money shall be refunded to Purchaser and this Agreement shall
be void and of no further force and effect; or (b) to close the purchase of the
Property contemplated hereby in accordance with its terms but subject to such
proceedings, in which event the Purchase Price shall remain the same and Seller
shall transfer and assign to Purchaser at Closing all condemnation proceeds and
rights to additional condemnation proceeds, if any. If Purchaser elects to
purchase after receipt of such a notice, all actions taken by Seller with regard
to such eminent domain proceedings, including but not limited to, negotiations,
litigation, settlement, appraisals and appeals, shall be subject to the approval
of Purchaser, which approval shall not be unreasonably withheld. If Purchaser
does not make such election within the aforesaid time period, Purchaser shall be
deemed to have elected to close the transactions contemplated hereby in
accordance with clause (b) above.
14.
Property
Damage
. If, after the Effective Date and prior to Closing, the Property
shall suffer significant damage as the result of fire or other casualty, Seller
shall immediately notify Purchaser in writing. In the event said damage results
in damage of the improvements situated on the Property in the amount of Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00)
or
greater, Purchaser shall have the right to elect within fifteen (15) days from
and after such notice, by written notice, one of the following: (a) not to close
the transaction contemplated hereby, in which event all Earnest Money shall be
refunded to Purchaser and this Agreement shall be void and of no further force
and effect; or (b) to close the purchase of the Property contemplated hereby in
accordance with its terms but subject to such damage, in which event the
Purchase Price shall remain the same and Seller shall transfer and assign to
Purchaser at Closing all insurance proceeds received or to be received as a
result of such damage, and Purchaser shall receive a credit against the Purchase
Price for any insurance deductible or uninsured loss. If Purchaser does not make
such election within the aforesaid time period, Purchaser shall be deemed to
have elected to close the transactions contemplated hereby in accordance with
clause (b) above.
In
the event less than Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00)
of
damage to the improvements situated on the Property exists, this Agreement shall
remain in full force and effect, but, at Closing, Seller shall transfer and
assign to Purchaser all insurance proceeds received or to be received as a
result of such damage, and Purchaser shall receive a credit against the Purchase
Price for any insurance deductible or uninsured loss.
15.
Condition
of Property
. Subsequent to the Effective Date and prior to Closing,
Seller shall maintain the Property in accordance with its past practices and
ordinary maintenance, but shall not be required to provide any extraordinary
maintenance.
16.
Operations
.
After the Effective Date and prior to the Closing Date, Seller shall neither
enter into any new, nor terminate, modify, extend, amend or renew any existing,
lease or service, management, maintenance, repair, employment, union,
construction, leasing or other contract or agreement affecting the Property
(each, a “
New
Agreement
”) without providing at least five (5) business days prior
notice (and opportunity to review and approve the New Agreement) to Purchaser.
Purchaser shall have five (5) business days after Purchaser’s actual receipt
(notwithstanding the notice provisions in
Section
17
below) of a true, correct and complete copy of a New Agreement to
approve the same. If Purchaser does not approve any such New Agreement that
Seller will enter into prior to expiration of the Inspection Period, then
Purchaser’s sole and exclusive remedy will be to terminate this Agreement by
delivering written notice to Seller no later than five (5) business days after
receiving the New Agreement, and in such event Purchaser shall receive a full
refund of the Earnest Money. If Purchaser fails to terminate this Agreement as
set forth in the preceding sentence, it shall be deemed to have approved the New
Agreement that Seller will enter into prior to expiration of the Inspection
Period in the form provided. Seller may not enter into New Agreement after
expiration of the Inspection Period unless Purchaser has approved the same in
writing. If Purchaser approves (or is deemed to have approved) any New Agreement
and thereafter consummates the Closing under this Agreement, then it will be
responsible for any leasing commissions and TI Allowance payments expressly set
forth in the approved form of the New Agreement (whether payable before or after
the Closing Date), and Seller shall receive a credit at Closing for any such
leasing commissions and TI Allowance payments which Seller pays prior to
Closing. Seller shall cause any Contracts which Purchaser elects in its
discretion not to assume to be cancelled at or before Closing. Seller shall
promptly notify Purchaser in writing of any default by any party under any Lease
that occurs after the Effective Date, and if any such default occurs Purchaser
may terminate this Agreement and receive a full refund of the Earnest
Money.
17.
Notice
.
Each notice required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given (i) two (2) business days after deposit
in registered or certified U.S. mail, postage fully prepaid, (ii) one (1)
business day after deposit with a recognized overnight delivery service such as
Federal Express or (iii) immediately upon facsimile or e-mail transmission
provided confirmation of facsimile or e-mail is received and further provided
any such facsimile or e-mail notice shall be sent by one of the other methods of
providing notice on or before the next succeeding business day. Rejection or
other refusal by the addressee to accept shall be deemed to be receipt of the
notice sent. The addresses of the parties to which notices are to be sent shall
be those set forth on the signature page of this Agreement, provided that a copy
of any notice to the Purchaser shall also be sent to T. Gaillard Uhlhorn, V,
Bass, Berry & Sims PLC, 100 Peabody Place, Suite 900, Memphis, Tennessee
38103, Fax No. 901-543-5999, email: guhlhorn@bassberry.com and provided that a
copy of any notice to the Seller shall also be sent to Richard A. Merel,
Garfield & Merel, Ltd., 223 W Jackson Blvd Ste 1010, Chicago, IL 60606, Fax
No. (312) 288-0120; email: rmerel@garfield-merel.com.
18.
Remedies
.
If this transaction fails to close by reason of Purchaser’s wrongful failure to
perform its obligations under this Agreement, the Earnest Money shall be
retained by Seller as liquidated damages the parties hereby acknowledging that
Seller’s actual damages in such circumstances would be difficult, if not
impossible, to determine. Seller expressly acknowledges and agrees that
retention of the Earnest Money as provided for herein shall be Seller’s sole and
exclusive remedy in the event of Purchaser’s failure to perform its obligations
hereunder. If this transaction fails to close for any reason other than
Purchaser’s wrongful failure to perform his obligations hereunder, the Earnest
Money shall promptly be refunded to Purchaser. In the event Seller fails or
refuses to convey the Property in accordance with the terms hereof or otherwise
fails to perform its obligations hereunder, Purchaser shall have the right to a
refund of all Earnest Money, specific performance and all other rights and
remedies available at law or in equity for Seller’s breach, all of which are
reserved, cumulative, and nonexclusive. Seller waives the right to assert the
defense of the lack of mutuality in any suit for specific performance instituted
by Purchaser.
19.
Time
of Essence
. Time is of the essence of this Agreement.
20.
Closing
Documents
. At or prior to Closing, each party shall deliver to the other
party appropriate evidence to establish the authority of such party to enter
into and close the transaction contemplated hereby. Seller also shall execute
and deliver to the Title Company at Closing, for it to hold in escrow pending
Purchaser’s payment of the Purchase Price, (i) the Deed; (ii) a certificate with
respect to Section 1445 of the Internal Revenue Code stating, among other
things, that Seller is not a foreign corporation as defined in the Internal
Revenue Code and I.R.S. Regulations; (iii) the Assignment and Assumption
Agreement substantially in the form attached hereto as
Exhibit
D
; (iv) a letter to each tenant under the Leases in the form reasonably
requested by Purchaser; (v) Seller’s representation and warranty downdate
certificate under
Section
10
; and (vi) such other documents reasonably necessary or appropriate to
complete and evidence the transaction contemplated hereby, including without
limitation a standard title company owner’s affidavit and a warranty bill of
sale in form reasonably acceptable to Purchaser as to any personal property
included in the Property. Additionally at Closing, the parties shall enter into
an agreement that provides that in the event James C. Mastandrea is not
re-elected as a trustee of Purchaser’s general partner, Whitestone REIT, in 2009
for a three-year term and appointed Chairmen, President and CEO for any reason,
Purchaser shall repurchase the Shares or Units (as the case may be) in cash for
$5.15 for each Unit or Share transferred pursuant to Section 3
hereof.
21.
Entire
Agreement
. This Agreement constitutes the entire agreement of the parties
and may not be amended except by written instrument executed by Purchaser and
Seller. All prior understandings and agreements between the parties are deemed
merged herein.
22.
Headings
.
The section headings are inserted for convenience only and are in no way
intended to describe, interpret, define or limit the scope or content of this
Agreement or any provision hereof.
23.
Possession
.
Seller shall deliver actual possession of the Property at Closing.
24.
Applicable
Law
. This Agreement shall be construed and interpreted in accordance with
the laws of the State of Illinois.
25.
Successors
and Assigns
. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns as the case may be, and Purchaser shall not have the right to
assign its rights hereunder without Seller’s prior written consent.
26.
Surviving
Clauses
. The provisions of this Agreement relating to tax prorations
after Closing, Purchaser’s indemnification with respect to its entering upon the
Property prior to Closing, Seller’s representations, covenants, warranties and
indemnity agreement in
Section
10
, Seller’s covenant not to encumber the Property subsequent to the date
hereof, the mutual covenants of Seller and Purchaser to indemnify each other, as
the case may be, as set forth in
Section
11
, shall survive any Closing pursuant to this Agreement. Except as set
forth in the preceding sentence or as otherwise expressly set forth herein, no
other provision of this Agreement shall survive the Closing of this
transaction.
27.
Confidentiality
.
Neither Purchaser nor Seller shall make any public announcement or disclosure of
any information related to this Agreement to outside brokers or third parties,
before the Closing, without the prior written specific consent of the other
party; provided, however, that Purchaser may make disclosure of this Agreement
to its certain outside parties as necessary to perform its inspections of the
Property and as may be required under laws or regulations applicable to
Purchaser.
IN
WITNESS WHEREOF, this Agreement has been duly executed on the day and year first
above written.
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ADDRESSES:
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PURCHASER:
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2600
S. Gessner Road
Suite
500
Houston,
Texas 77063
Attention:
John J. Dee
Fax:
(713) 465-8847
Email:
jdee@whitestonereit.com
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Whitestone
REIT Operating Partnership, L.P.,
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A
Delaware limited partnership
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By:
Whitestone REIT, a Maryland real estate
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investment
trust, its general partner
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By:
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/s/ John J. Dee
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Name:
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John
J. Dee
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Title:
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Chief Operating Officer
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SELLER:
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Bank
One, Chicago, NA, as successor by merger with Bank One, Wilmette, f/k/a,
First Illinois Bank of Wilmette, as Trustee under Trust Agreement dated
January 29, 1986 and known as Trust Number
TWB-0454
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Attention:
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Fax:
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Email:
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By:
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/s/ Christine C. Young
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Name:
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Christine
C. Young
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Title:
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Trust Officer
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SCHEDULE
4
DUE
DILIGENCE MATERIALS
(a)
Plans, drawings, specifications and engineering and architectural studies and
work (including “as built” plans and drawings, if any) with regard to the
Property that are in Seller’s possession;
(b)
Any appraisals of the Property in Seller’s possession obtained during the period
during which Seller has owned the Property;
(c)
Income and expense statements for the two (2) most recent complete calendar
years and the current year-to-date;
(d)
Copies of all current Leases and any amendments or proposed amendments
thereto;
(e)
A current rent roll for the Property setting forth, for each Lease and tenant,
(i) the portion of the Property occupied and the square footage of the space
occupied, (ii) the rent payable under such Lease, (iii) the date on which rent
is due under each Lease, (iv) all receipts for rent and the rental period for
which rent has been paid, (v) the expiration date of such Lease and any renewal
or extension options, and (vii) information regarding the status of security
deposits;
(f)
Copies of all correspondence in Seller’s possession relating to the current
Leases;
(g)
Copies of insurance certificates with respect to the Property;
(h)
Copies of all of the Contracts and any amendments or proposed amendments
thereto;
(i)
Copies of any soil boring or other similar engineering reports with respect to
the Property obtained during the period during which Seller has owned the
Property; and
(j)
Any environmental assessment report or study with respect to the Property in
Seller’s possession.
EXHIBIT
A
PROPERTY
DESCRIPTION
Parcel 1:
Lot 4 in McHenry Road Homesites, being a subdivision of part of the Northwest ¼
of the Southwest ¼ of Section 29, Township 43 North, Range 11, East of the Third
Principal Meridian, according to the Plat thereof recorded November 24, 1956 as
Document 931656, in Book 1501 of Records, Page 154, in Lake County,
Illinois.
Parcel 2:
Lot 4 in Spoerlein Farm Commercial Phase 1C, being a subdivision of part of the
Northwest ¼ of the Southwest ¼ of Section 29, Township 43 North, Range 11, East
of the Third Principal Meridian, according to the Plat thereof recorded May 28,
1985 as Document 2357829, (except that part taken for road purposes by Case No.
93ED5), in Lake County, Illinois.
EXHIBIT
B
TENANT
ESTOPPEL CERTIFICATE
THIS TENANT ESTOPPEL CERTIFICATE (this
“Estoppel”
),
is executed this ________ day of _______________, 2008, by
_________________________ (
“Tenant”
),
to and in favor of
Whitestone
REIT
, a Maryland real estate investment trust, its successors and assigns
(
“Purchaser”
),
having its principal place of business at Woodlake Plaza, 2600 S. Gessner,
Houston, Texas 77063.
R E C I T
A L S:
A.
Tenant is the lessee under that certain lease executed between Tenant and
Chicago Land Trust Company, as Successor Trustee to LASALLE BANK NATIONAL
ASSOCIATION, Under Trust No. TWB-0454 (
“Landlord”
),
dated ______________, __200____ (the lease and all amendments thereto are
hereinafter referred to as the
“Lease”
),
covering all or a portion of property legally described in
Schedule
I
attached hereto and made a part hereof (the
“Property”
).
B.
Purchaser is performing its due diligence as it relates to the potential
purchase of the Property from Landlord which is secured, in part, by an
assignment of leases and rents from the Property.
C.
As a condition to of any said purchase of the Property, Purchaser requires that
Tenant enter into this Estoppel and Tenant acknowledges that Purchaser is
relying upon this Estoppel.
NOW,
THEREFORE, Tenant does hereby certify to Purchaser as follows:
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A.
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Tenant
hereby represents, acknowledges and agrees as follows:
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1.
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The
Lease is in full force and effect and has not been amended, modified or
extended.
Yes
o
No
o
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If
No, Please state most recent amendment.
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2.
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The
Lease does not contain any options to purchase and/or lease additional
space, rights of set off, rights of first refusal to purchase and/or lease
additional space or any similar provisions regarding acquisition of
ownership interests or additional leased space in the building except as
follows:
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3.
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Lease
commencement date ______________
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4.
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Lease
termination date __________________.
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5.
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Current
monthly rent $____________.
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6.
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CAM
$__________
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7.
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Insurance
$__________
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8.
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Real
Estate Taxes $_______
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9.
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Current
amount due $_______
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10.
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Rent
has been paid through ________, 200_ and Tenant has not paid any rentals
in advance.
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11.
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The
improvements described in the Lease have been completed and accepted by
Tenant. There is no further obligation of improvements by the
Landlord.
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12.
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The
security deposit under the Lease is currently
$___________________.
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13.
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Has
Tenant sublet any portion of the leased premises or assigned any of its
rights under the Lease.
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o
Yes
o
No
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If
Yes, sublessee
____________________________________________
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14.
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Tenant
is in full and complete possession of the premises demised under the
Lease, such possession having been delivered by the Landlord pursuant to
the Lease and having been accepted by the Tenant.
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15.
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Tenant
has no existing claims, defenses or offsets under the Lease against
Landlord, no uncured default exists under the Lease, and no event has
occurred that would, except for the lapse of time, the giving of notice or
both, constitute a default.
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16.
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Upon
Purchaser succeeding to Landlord’s interest under the Lease, Tenant
covenants and agrees to attorn to Purchaser, to recognize such successor
landlord as Tenant’s landlord under the Lease, and to be bound by and
perform all of the obligations and conditions imposed upon Tenant by the
Lease. If requested by Purchaser or any subsequent owner, Tenant shall
execute a new lease with Purchaser, for a term equal to the remaining term
of the Lease and otherwise containing the same provisions and covenants of
the Lease.
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17.
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Tenant
will not look to Purchaser for the return of the security deposit, if any,
under the Lease, except to the extent that such funds are delivered to
Purchaser.
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18.
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The
guaranty of the Lease, if any, is in full force and
effect.
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19.
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There
are no actions, whether voluntary or involuntary or otherwise pending
against Tenant under the bankruptcy laws of the United States or any
portion of its interest in the Property or the Lease.
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B.
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Tenant
shall deliver to Purchaser a copy of all notices Tenant delivers to or
receives from Landlord in accordance with the notice provisions set forth
herein. Prior to terminating the Lease due to a default by Landlord
thereunder, Tenant agrees to notify Purchaser of such default and give
Purchaser the opportunity to cure such default within the later of (i)
thirty (30) days after the expiration of any notice and cure period or
(ii) thirty (30) days of Purchaser’s receipt of such notice (or, if such
default cannot reasonably be cured within such thirty (30) day period,
Purchaser shall have such longer time as may be necessary to cure the
default; provided that Purchaser commences the cure within such period and
diligently pursues the cure thereafter).
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C.
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This
Estoppel may be executed in any number of counterparts, each of which
shall be deemed to be an original but all of which when taken together
shall constitute one agreement. This Estoppel shall inure to the benefit
of Purchaser, its successors and assigns and shall be binding upon Tenant
and its successors and assigns.
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
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IN
WITNESS WHEREOF, the Tenant has executed this Estoppel the day and year first
above written.
[notary
seal]
EXHIBIT
C
SCHEDULE
OF LEASES AND RENT ROLL
EXHIBIT
D
ASSIGNMENT
AND ASSUMPTION AGREEMENT
THIS
ASSIGNMENT AND ASSUMPTION AGREEMENT (this “
Assignment
”)
is entered into as of the ____ of ____________, 20___, between
_______________________ (“Assignor”), whose address is
___________________________, and ________________________ (“
Assignee
”),
a _________________________ whose address is
______________________________________________________.
1.
Property
.
The “
Property
”
means the real property located in the County of ___________, State of
____________ and the County of ____________, State of __________ legally
described in
Exhibit
A
attached to this Assignment, together with the building, structures and
other improvements located thereon.
2.
Leases
.
The “
Leases
”
means those leases and occupancy agreements (and guarantees thereof) affecting
the Property which are described in
Exhibit
B
attached to this Assignment. The “
Contracts”
mean those contracts which are described on
Exhibit
C
attached to this Assignment.
3.
Security
Deposits
. “
Security
Deposits
” means those security deposits set forth on
Exhibit
B
.
4.
Assignment
.
For good and valuable consideration received by Assignor, the receipt and
sufficiency of which are hereby acknowledged, Assignor hereby grants, transfers
and assigns to Assignee the entire right, title and interest of Assignor in and
to the Contracts, Leases and the Security Deposits.
5.
Assumption
.
Assignee hereby assumes the obligations of Assignor under the Contracts
and
as
lessor under the Leases first arising from and after the date hereof. Assignor
shall promptly notify Assignee in writing if any claim is made against Assignor
with respect to any matter which Assignee has agreed to assume in this
Assignment, specifying the nature and details of such claim. Assignor shall
cooperate fully with Assignee and its counsel and attorneys in the defense
against such claim in accordance with their judgment and discretion, and
Assignor shall not pay or settle any such claim without Assignee’s prior written
consent. No person or entity, other than Assignor, shall be deemed a beneficiary
of the provisions of this
Section
5
.
6.
Indemnity
.
Assignee agrees to indemnify, defend and hold Assignor harmless from and against
any and all claims, damages, demands, causes of action, liabilities, judgments,
losses, costs and expenses (including but not limited to reasonable attorneys’
fees) asserted against or incurred by Assignor caused by the failure of Assignee
to perform any obligation under the Contracts, and
Leases
which obligation was assumed by Assignee hereunder. Assignor agrees to
indemnify, defend and hold Assignee harmless from and against any and all
claims, damages, demands, causes of action, liabilities, judgments, losses,
costs and expenses (including but not limited to reasonable attorneys’ fees)
asserted against or incurred by Assignee caused by the failure of Assignor to
perform any obligation under any of the Contracts, or
the
Leases first arising prior to the date hereof.
7.
Power
and Authority
. Assignor represents and warrants to Assignee that it is
fully empowered and authorized to execute and deliver this Assignment, and the
individual signing this Assignment on behalf of Assignor represents and warrants
to Assignee that he or she is fully empowered and authorized to do
so.
8.
Attorneys’
Fees
. If either Assignee or Assignor or their respective successors or
assigns file suit to enforce the obligations of the other party under this
Assignment, the prevailing party shall be entitled to recover the reasonable
fees and expenses of its attorneys.
9.
Successors
and Assigns
. This Assignment shall be binding upon and inure to the
benefit of Assignor and Assignee and their respective successors and
assigns.
10.
Counterparts
.
This Agreement may be executed in any number of identical counterparts, any or
all of which may contain the signatures of fewer than all of the parties but all
of which shall be taken together as a single instrument.
11.
Governing
Law
. This Agreement shall be governed and interpreted in accordance with
the laws of the State of ___________________.
IN
WITNESS WHEREOF, Assignor and Assignee have executed and delivered this
Assignment the day and year first above written.
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ASSIGNOR
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By:
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Title:
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ASSIGNEE
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21
Exhibit
10.9
TRUSTEE
RESTRICTED COMMON SHARE GRANT AGREEMENT
(TIME
VESTED)
THIS
RESTRICTED COMMON SHARE GRANT AGREEMENT (TIME VESTED) (this “
Agreement
”)
is entered into as of
March
25, 2009
(the “
Effective
Date
”), by and between Whitestone REIT, a Maryland real estate investment
trust (the “
Company
”),
and
Daryl
J. Carter
(the “
Trustee
”).
WHEREAS,
the Trustee serves on the Board of Trustees of the Company and in connection
therewith has rendered or will render services for and on behalf of the Company
and/or its subsidiaries or affiliates;
WHEREAS,
the Company believes the Trustee should have interests that are aligned with the
interests of the Company’s shareholders; and
WHEREAS,
the Company desires to compensate to grant the Trustee common shares of
beneficial interest, par value $0.001 per share, of the Company (the “
Common
Shares
”).
NOW,
THEREFORE, IT IS AGREED, by and between the Company and the Trustee, as
follows:
1.
Restricted
Common Share Grant
. The Trustee is hereby granted
5,000
Common
Shares (the “
Shares
”)
subject to the restrictions and on the terms and conditions set forth in this
Agreement (the “
Grant
”).
2.
Restriction
on the Shares
.
(a)
Period
of Restriction
. Except as otherwise set forth herein, all the Shares
issued to the Trustee pursuant to this Agreement shall be subject to a period of
restriction (the “
Period
of Restriction
”) during which the Trustee’s rights in and to such Shares
shall be subject to the limitations and obligations set forth in this Section
2.
(b)
Lapse
of Period of Restriction
. The Period of Restriction shall lapse in
accordance with the provisions of
Exhibit
A
, which is attached hereto and forms part of this Agreement. During the
period that the Shares are subject to the Period of Restriction, such Shares are
referred to herein as “
Restricted
Common Shares
.”
(c)
Termination
of Trustee.
Notwithstanding any other provision of this Agreement to the
contrary, if the Trustee’s position as trustee of the Company terminates for any
reason (or no reason), other than the Trustee’s death or Disability (defined as
a disability that would qualify as a total and permanent disability under the
Company’s then current long-term disability plan), any Restricted Common Shares
that are subject to the Period of Restriction on the date of the Trustee’s
termination shall be immediately forfeited by the Trustee and shall be
automatically transferred to and reacquired by the Company at no cost to the
Company, and neither the Trustee nor his or her heirs, executors, administrators
or successors shall have any right or interest in such Restricted Common Shares.
In the event of the Trustee’s death or Disability, any Restricted Common Shares
that are subject to the Period of Restriction on the date of death or Disability
shall immediately vest and the Trustee or his or her heirs, executors,
administrators or successors shall have the right and interest in such
Restricted Common Shares.
(d)
Escrow
.
Upon the Trustee’s execution and delivery of this Agreement, the Trustee agrees
to concurrently deliver one or more executed stock powers as requested by the
Company, duly endorsed in blank for transfer, in the form attached hereto as
Exhibit
B
, which shall be deposited with the Company during the Period of
Restriction. Each certificate representing Restricted Common Shares shall bear
the following legend until the lapse of the Period of Restriction with respect
to the shares represented by such certificate:
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Transfer
of this certificate and the shares represented hereby is restricted
pursuant to the terms of the Restricted Common Share Grant Agreement
pertaining to the shares represented hereby, dated as of _________ ,
200[_], (the “Agreement”). Copies of the Agreement are on file at the
offices of Whitestone
REIT.
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The
certificates representing the Restricted Common Shares along with the stock
power(s) shall be held in escrow by the Company until such time as either (i)
the Period of Restriction with respect to all of such Restricted Common Shares
lapses in accordance with this Agreement, in which case the shares shall be
delivered to the Trustee, or (ii) any such Restricted Common Shares are
forfeited pursuant to this Agreement, in which case such shares shall be
transferred to and reacquired by the Company in accordance with Section 2(c) of
this Agreement.
(e)
Distributions
.
All cash distributions on the Restricted Common Shares shall be paid directly to
the Trustee and shall not be held in escrow. Any new, substituted or additional
securities or other property issued in respect of Restricted Common Shares shall
be held in escrow, together, where applicable, with appropriate stock powers,
assignments or other transfer documents which the Trustee hereby agrees to
execute as a condition to receipt of such securities or other property. If the
Restricted Common Shares in respect of which such securities or other property
was issued are forfeited to the Company pursuant to Section 2(c) of this
Agreement, then such securities or other property shall be immediately forfeited
to the Company and automatically transferred to and reacquired by the Company at
no cost to the Company, to the same extent and in accordance with Section 2(c)
of this Agreement as if such securities or other property were Restricted Common
Shares hereunder.
3.
Rights
as a Shareholder
. Upon the Trustee’s execution and delivery of this
Agreement and until such time as the Restricted Common Shares are forfeited to
the Company as set forth herein, the Trustee shall be the record owner of the
Restricted Common Shares and, subject to the terms of this Agreement, shall have
all rights of a shareholder with respect to the Restricted Common Shares,
including the right to vote the Restricted Common Shares and subject to the
terms of Section 2 hereof, to receive dividends and distributions with respect
to the Restricted Common Shares.
4.
Change
in Control
. Notwithstanding Section 2 of this Agreement, if the Trustee
holds Restricted Common Shares at the time a Change in Control (as defined
below) occurs, the Period of Restriction with respect to such Restricted Common
Shares granted in Section 1 shall automatically lapse immediately prior to the
consummation of such Change in Control.
A Change
of Control is defined as any of the following events:
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(i)
any person or entity, including a “group” as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, other than the Company or a
wholly-owned subsidiary thereof or any employee benefit plan of the
Company or any of its subsidiaries, becomes the beneficial owner of the
Company’s securities having 35% or more of the combined voting power of
the then outstanding securities of the Company that may be cast for the
election of trustees of the Company (other than as a result of an issuance
of securities initiated by the Company in the ordinary course of
business);
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(ii)
as the result of, or in connection with, any cash tender or exchange
offer, merger or other business combination or contested election, or any
combination of the foregoing transactions, less than a majority of the
combined voting power of the then outstanding securities of the Company or
any successor company or entity entitled to vote generally in the election
of the trustees of the Company or such other corporation or entity after
such transaction are held in the aggregate by the holders of the Company’s
securities entitled to vote generally in the election of trustees of the
Company immediately prior to such transaction;
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(iii)
during any period of two (2) consecutive years, individuals who at the
beginning of any such period constitute the Board of Trustees of the
Company cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the Company’s
shareholders, of each trustee of the Company first elected during such
period was approved by a vote of at least two-thirds (2/3rds) of the
trustees of the Company then still in office who were (a) trustees of the
Company at the beginning of any such period, and (b) not initially (1)
appointed or elected to office as result of either an actual or threatened
election and/or proxy contest by or on behalf of a person other than the
Board of Trustees of the Company, or (2) designated by a person who has
entered into an agreement with the Company to effect a transaction
described in (i) or (ii) above or (iv) or (v) below;
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(iv)
a complete liquidation or dissolution of the Company; or
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(v)
the sale or other disposition of all or substantially all of the assets of
the Company to any Person (other than a transfer to a
subsidiary)).
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5.
Withholding
.
If the Trustee makes an election under Section 83(b) of the Internal Revenue
Code of 1986 (the “
Code
”)
with respect to the Restricted Common Shares, the grant made pursuant to this
Grant shall be conditioned upon the prompt payment to the Company of any
applicable withholding obligations or withholding taxes by the Trustee (“
Withholding
Taxes
”). Failure by the Trustee to pay such Withholding Taxes will render
this Grant null and void
ab
initio
and the Restricted Common Shares granted hereunder will
immediately be canceled. If the Trustee does not make an election under Section
83(b) of the Code with respect to the Restricted Common Shares, upon the lapse
of the Period of Restriction with respect to any portion of the Restricted
Common Shares (or property distributed with respect thereto), the Company shall
satisfy the required Withholding Taxes as set forth in the Internal Revenue
Service guidelines for the employer’s minimum statutory withholding with respect
to Trustee and issue vested shares to the Trustee without restriction. In the
sole discretion of the Company, the Company may satisfy the required Withholding
Taxes by withholding from the Restricted Common Shares included in the Grant
that number of whole shares necessary to satisfy such taxes as of the date the
restriction lapse with respect to such Restricted Common Shares based on the
Fair Market Value of the Shares (defined for purposes of this Grant, as of any
date (i) the average of the closing sales prices of the Common Shares on all
national securities exchanges on which the Common Shares may at the time be
listed, or any other such exchange on which the Common Shares are traded, on
such date, or in the absence of reported sales on such date, the average closing
sales prices on the immediately preceding date on which sales were reported,
(ii) if on any day the Common Shares shall not be quoted on a national
securities exchange, the average of the high and low bid and asked prices on
such day in the over-the-counter market as reported by National Quotation Bureau
Incorporated, or any similar successor organization, or (iii) in the event there
is no public market or over-the-counter market for the Common Shares on such
date, the fair market value as determined, in good faith, by the Board of
Trustees of the Company in its sole discretion).
6.
Restrictions
on Transfer
. During the Period of Restriction, the Trustee shall not
sell, transfer, pledge, hypothecate, assign, exchange or otherwise dispose of
the Restricted Common Shares. Any attempted sale, transfer, pledge,
hypothecation, assignment, exchange or other disposition shall be null and void
and of no force or effect and the Company shall have the right to disregard the
same on its books and records and to issue “stop transfer” instructions to its
transfer agent.
7.
Consent
to Electronic Delivery
. The Company may choose to deliver certain
statutory materials relating to the Grant in electronic form. By accepting this
Agreement, the Trustee agrees that the Company may deliver any documents
required by the Securities and Exchange Commission and the Company’s annual
report to the Trustee in an electronic format. If at any time the Trustee would
prefer to receive paper copies of these documents, please contact Chief
Financial Officer of the Company to request paper copies of these
documents.
8.
No
Rights Conferred
. Nothing in this Agreement shall give the Trustee any
right to continue in the employ or service of the Company, any affiliate or any
subsidiary and/or as a member of the Company’s Board of Trustees or in any other
capacity, or interfere in any way with the right of the Company, any affiliate
or any subsidiary to terminate the employment or services of the
Trustee.
9.
Adjustments
.
All references to the number and class of shares covered by this Agreement and
other terms in this Agreement may be appropriately adjusted, by a vote of the
majority of the members of the Board of Trustees of the Company, in the event of
certain unusual or non-recurring transactions, including an unusual or
non-recurring dividend or other distribution (whether in the form of an
extraordinary cash dividend, dividend of Common Shares, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Shares or other securities of the Company,
issuance of warrants or other rights to purchase Common Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Common Shares. In such an event, the Board of Trustees of the
Company may in an equitable and proportionate manner (and, as applicable, in
such equitable and proportionate manner as is consistent with Sections 422 and
409A of the Internal Revenue Code of 1986, as amended from time to time (the
“Code”) and the regulations thereunder and with Section 162(m) of the Code)
either: (i) adjust the number of Shares, provided that the number of Shares
shall always be a whole number; (ii) provide for an equivalent award in respect
of securities of the surviving entity of any merger, consolidation or other
transaction or event having a similar effect; or (iii) make provision for a cash
payment to the Trustee for the Shares.
10.
Compliance
with Section 409A of the Code
. The Trustee hereby consents (without
further consideration) to any change to this Agreement or the Grant so the
Trustee can avoid paying penalties under Section 409A of the Code, even if those
changes affect the terms and conditions of this Agreement of the Grant and
reduce its value or potential value.
11.
Binding
Effect
. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement may not be
assigned or transferred in whole or in part by the Trustee, nor may the Trustee
delegate any duty or obligation under this Agreement, and any attempt to so
assign, transfer or delegate shall be null and void and of no force or
effect.
12.
Interpretation
of this Agreement
. All determinations and interpretations made by the
Board of Trustees of the Company with regard to any questions arising under this
Agreement shall be final, binding and conclusive as to all persons, including
without limitation the Trustee and any person claiming rights from or through
the Trustee.
13.
Venue
.
Each party to this Agreement hereby irrevocably (i) consents and submits to the
exclusive jurisdiction of the state and federal courts in Harris County, Texas
in connection with any disputes arising out of this Agreement, and (ii) waives
any objection based on venue or inconvenient forum with respect to any action
instituted therein arising under this Agreement or the transactions contemplated
hereby, and agrees that any dispute with respect to such matters shall be heard
only in the courts described above.
14.
Governing
Law; Entire Agreement; Amendment
. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without regard
to such state’s conflict of laws principles. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof. This Agreement may be
amended by a majority of the members of the Board of Trustees, subject to the
Trustee’s consent if such amendment materially and adversely affects the rights
of the Trustee, except that the consent of the Trustee shall not be required for
any amendment made pursuant to Section 10 of this Agreement.
15.
Tax
Elections
. THE TRUSTEE UNDERSTANDS THAT HE OR SHE (AND NOT THE COMPANY)
SHALL BE RESPONSIBLE FOR THE TRUSTEE’S OWN TAX LIABILITY THAT MAY ARISE AS A
RESULT OF THE ACQUISITION OF THE SHARES HEREUNDER. THE TRUSTEE ACKNOWLEDGES AND
AGREES THAT HE OR SHE HAS CONSIDERED THE ADVISABILITY OF ALL TAX ELECTIONS IN
CONNECTION WITH THE ISSUANCE OF THE SHARES, INCLUDING THE MAKING OF AN ELECTION
UNDER SECTION 83(b) OF THE CODE. THE TRUSTEE FURTHER ACKNOWLEDGES AND AGREES
THAT, IF THE TRUSTEE DETERMINES TO MAKE AN ELECTION UNDER SECTION 83(b) OF THE
CODE, (i) THE TRUSTEE (AND NOT THE COMPANY) IS SOLELY RESPONSIBLE FOR PROPERLY
AND TIMELY COMPLETING AND FILING ANY SUCH SECTION 83(b) ELECTION, AND (ii) THE
TRUSTEE AGREES TO TIMELY PROVIDE A COPY OF THE ELECTION TO THE COMPANY AS
REQUIRED UNDER THE CODE.
16.
Notices
.
Any notice, demand or request required or permitted to be given under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally, or (ii) three days after being deposited in the United States mail,
by certified or registered mail, postage prepaid, or (iii) the next business day
after sent by nationally recognized overnight delivery service, and addressed,
if to the Company, at its principal place of business, Attention: Chief
Financial Officer, and if to the Trustee, at his or her most recent address as
shown in the employment or stock records of the Company.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
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Whitestone
REIT
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By:
|
/s/
James C. Mastandrea
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Name:
|
James C. Mastandrea
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Title:
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Chairman of the Board of Trustees
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Trustee: /s/
Daryl S. Carter
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Date:
|
March
25, 2009
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Exhibit
A
LAPSE
OF PERIOD OF RESTRICTION
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Number
of Shares
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Vesting
Date
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Percentage
of
Shares
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5,000
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March
25, 2010
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34%
|
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March
25, 2011
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33%
|
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|
March
25, 2012
|
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33%
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Exhibit
B
STOCK
POWER
For value
received, I hereby sell, assign and transfer unto ___________________________
Common Shares of Whitestone REIT standing in my name on the books of said
Company represented by Certificate(s) Number(s) ________ herewith, and do
hereby irrevocably constitute and appoint ________ attorney to transfer the
said stock on the books of said Company with full power of substitution in the
premises.
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Date:
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Printed
Name:
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Signature:
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Witness
Signature:
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8
Exhibit
10.10
TRUSTEE
RESTRICTED COMMON SHARE GRANT AGREEMENT
(TIME
VESTED)
THIS
RESTRICTED COMMON SHARE GRANT AGREEMENT (TIME VESTED) (this “
Agreement
”)
is entered into as of
March
25, 2009
(the “
Effective
Date
”), by and between Whitestone REIT, a Maryland real estate investment
trust (the “
Company
”),
and
Daniel
G. DeVos
(the “
Trustee
”).
WHEREAS,
the Trustee serves on the Board of Trustees of the Company and in connection
therewith has rendered or will render services for and on behalf of the Company
and/or its subsidiaries or affiliates;
WHEREAS,
the Company believes the Trustee should have interests that are aligned with the
interests of the Company’s shareholders; and
WHEREAS,
the Company desires to compensate to grant the Trustee common shares of
beneficial interest, par value $0.001 per share, of the Company (the “
Common
Shares
”).
NOW,
THEREFORE, IT IS AGREED, by and between the Company and the Trustee, as
follows:
1.
Restricted
Common Share Grant
. The Trustee is hereby granted
5,000
Common
Shares (the “
Shares
”)
subject to the restrictions and on the terms and conditions set forth in this
Agreement (the “
Grant
”).
2.
Restriction
on the Shares
.
(a)
Period
of Restriction
. Except as otherwise set forth herein, all the Shares
issued to the Trustee pursuant to this Agreement shall be subject to a period of
restriction (the “
Period
of Restriction
”) during which the Trustee’s rights in and to such Shares
shall be subject to the limitations and obligations set forth in this Section
2.
(b)
Lapse
of Period of Restriction
. The Period of Restriction shall lapse in
accordance with the provisions of
Exhibit
A
, which is attached hereto and forms part of this Agreement. During the
period that the Shares are subject to the Period of Restriction, such Shares are
referred to herein as “
Restricted
Common Shares
.”
(c)
Termination
of Trustee.
Notwithstanding any other provision of this Agreement to the
contrary, if the Trustee’s position as trustee of the Company terminates for any
reason (or no reason), other than the Trustee’s death or Disability (defined as
a disability that would qualify as a total and permanent disability under the
Company’s then current long-term disability plan), any Restricted Common Shares
that are subject to the Period of Restriction on the date of the Trustee’s
termination shall be immediately forfeited by the Trustee and shall be
automatically transferred to and reacquired by the Company at no cost to the
Company, and neither the Trustee nor his or her heirs, executors, administrators
or successors shall have any right or interest in such Restricted Common Shares.
In the event of the Trustee’s death or Disability, any Restricted Common Shares
that are subject to the Period of Restriction on the date of death or Disability
shall immediately vest and the Trustee or his or her heirs, executors,
administrators or successors shall have the right and interest in such
Restricted Common Shares.
(d)
Escrow
.
Upon the Trustee’s execution and delivery of this Agreement, the Trustee agrees
to concurrently deliver one or more executed stock powers as requested by the
Company, duly endorsed in blank for transfer, in the form attached hereto as
Exhibit
B
, which shall be deposited with the Company during the Period of
Restriction. Each certificate representing Restricted Common Shares shall bear
the following legend until the lapse of the Period of Restriction with respect
to the shares represented by such certificate:
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Transfer
of this certificate and the shares represented hereby is restricted
pursuant to the terms of the Restricted Common Share Grant Agreement
pertaining to the shares represented hereby, dated as of _________ ,
200[_], (the “Agreement”). Copies of the Agreement are on file at the
offices of Whitestone
REIT.
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The
certificates representing the Restricted Common Shares along with the stock
power(s) shall be held in escrow by the Company until such time as either (i)
the Period of Restriction with respect to all of such Restricted Common Shares
lapses in accordance with this Agreement, in which case the shares shall be
delivered to the Trustee, or (ii) any such Restricted Common Shares are
forfeited pursuant to this Agreement, in which case such shares shall be
transferred to and reacquired by the Company in accordance with Section 2(c) of
this Agreement.
(e)
Distributions
.
All cash distributions on the Restricted Common Shares shall be paid directly to
the Trustee and shall not be held in escrow. Any new, substituted or additional
securities or other property issued in respect of Restricted Common Shares shall
be held in escrow, together, where applicable, with appropriate stock powers,
assignments or other transfer documents which the Trustee hereby agrees to
execute as a condition to receipt of such securities or other property. If the
Restricted Common Shares in respect of which such securities or other property
was issued are forfeited to the Company pursuant to Section 2(c) of this
Agreement, then such securities or other property shall be immediately forfeited
to the Company and automatically transferred to and reacquired by the Company at
no cost to the Company, to the same extent and in accordance with Section 2(c)
of this Agreement as if such securities or other property were Restricted Common
Shares hereunder.
3.
Rights
as a Shareholder
. Upon the Trustee’s execution and delivery of this
Agreement and until such time as the Restricted Common Shares are forfeited to
the Company as set forth herein, the Trustee shall be the record owner of the
Restricted Common Shares and, subject to the terms of this Agreement, shall have
all rights of a shareholder with respect to the Restricted Common Shares,
including the right to vote the Restricted Common Shares and subject to the
terms of Section 2 hereof, to receive dividends and distributions with respect
to the Restricted Common Shares.
4.
Change
in Control
. Notwithstanding Section 2 of this Agreement, if the Trustee
holds Restricted Common Shares at the time a Change in Control (as defined
below) occurs, the Period of Restriction with respect to such Restricted Common
Shares granted in Section 1 shall automatically lapse immediately prior to the
consummation of such Change in Control.
A Change
of Control is defined as any of the following events:
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(i)
any person or entity, including a “group” as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, other than the Company or a
wholly-owned subsidiary thereof or any employee benefit plan of the
Company or any of its subsidiaries, becomes the beneficial owner of the
Company’s securities having 35% or more of the combined voting power of
the then outstanding securities of the Company that may be cast for the
election of trustees of the Company (other than as a result of an issuance
of securities initiated by the Company in the ordinary course of
business);
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(ii)
as the result of, or in connection with, any cash tender or exchange
offer, merger or other business combination or contested election, or any
combination of the foregoing transactions, less than a majority of the
combined voting power of the then outstanding securities of the Company or
any successor company or entity entitled to vote generally in the election
of the trustees of the Company or such other corporation or entity after
such transaction are held in the aggregate by the holders of the Company’s
securities entitled to vote generally in the election of trustees of the
Company immediately prior to such transaction;
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(iii)
during any period of two (2) consecutive years, individuals who at the
beginning of any such period constitute the Board of Trustees of the
Company cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the Company’s
shareholders, of each trustee of the Company first elected during such
period was approved by a vote of at least two-thirds (2/3rds) of the
trustees of the Company then still in office who were (a) trustees of the
Company at the beginning of any such period, and (b) not initially (1)
appointed or elected to office as result of either an actual or threatened
election and/or proxy contest by or on behalf of a person other than the
Board of Trustees of the Company, or (2) designated by a person who has
entered into an agreement with the Company to effect a transaction
described in (i) or (ii) above or (iv) or (v) below;
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(iv)
a complete liquidation or dissolution of the Company; or
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(v)
the sale or other disposition of all or substantially all of the assets of
the Company to any Person (other than a transfer to a
subsidiary)).
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5.
Withholding
.
If the Trustee makes an election under Section 83(b) of the Internal Revenue
Code of 1986 (the “
Code
”)
with respect to the Restricted Common Shares, the grant made pursuant to this
Grant shall be conditioned upon the prompt payment to the Company of any
applicable withholding obligations or withholding taxes by the Trustee (“
Withholding
Taxes
”). Failure by the Trustee to pay such Withholding Taxes will render
this Grant null and void
ab
initio
and the Restricted Common Shares granted hereunder will
immediately be canceled. If the Trustee does not make an election under Section
83(b) of the Code with respect to the Restricted Common Shares, upon the lapse
of the Period of Restriction with respect to any portion of the Restricted
Common Shares (or property distributed with respect thereto), the Company shall
satisfy the required Withholding Taxes as set forth in the Internal Revenue
Service guidelines for the employer’s minimum statutory withholding with respect
to Trustee and issue vested shares to the Trustee without restriction. In the
sole discretion of the Company, the Company may satisfy the required Withholding
Taxes by withholding from the Restricted Common Shares included in the Grant
that number of whole shares necessary to satisfy such taxes as of the date the
restriction lapse with respect to such Restricted Common Shares based on the
Fair Market Value of the Shares (defined for purposes of this Grant, as of any
date (i) the average of the closing sales prices of the Common Shares on all
national securities exchanges on which the Common Shares may at the time be
listed, or any other such exchange on which the Common Shares are traded, on
such date, or in the absence of reported sales on such date, the average closing
sales prices on the immediately preceding date on which sales were reported,
(ii) if on any day the Common Shares shall not be quoted on a national
securities exchange, the average of the high and low bid and asked prices on
such day in the over-the-counter market as reported by National Quotation Bureau
Incorporated, or any similar successor organization, or (iii) in the event there
is no public market or over-the-counter market for the Common Shares on such
date, the fair market value as determined, in good faith, by the Board of
Trustees of the Company in its sole discretion).
6.
Restrictions
on Transfer
. During the Period of Restriction, the Trustee shall not
sell, transfer, pledge, hypothecate, assign, exchange or otherwise dispose of
the Restricted Common Shares. Any attempted sale, transfer, pledge,
hypothecation, assignment, exchange or other disposition shall be null and void
and of no force or effect and the Company shall have the right to disregard the
same on its books and records and to issue “stop transfer” instructions to its
transfer agent.
7.
Consent
to Electronic Delivery
. The Company may choose to deliver certain
statutory materials relating to the Grant in electronic form. By accepting this
Agreement, the Trustee agrees that the Company may deliver any documents
required by the Securities and Exchange Commission and the Company’s annual
report to the Trustee in an electronic format. If at any time the Trustee would
prefer to receive paper copies of these documents, please contact Chief
Financial Officer of the Company to request paper copies of these
documents.
8.
No
Rights Conferred
. Nothing in this Agreement shall give the Trustee any
right to continue in the employ or service of the Company, any affiliate or any
subsidiary and/or as a member of the Company’s Board of Trustees or in any other
capacity, or interfere in any way with the right of the Company, any affiliate
or any subsidiary to terminate the employment or services of the
Trustee.
9.
Adjustments
.
All references to the number and class of shares covered by this Agreement and
other terms in this Agreement may be appropriately adjusted, by a vote of the
majority of the members of the Board of Trustees of the Company, in the event of
certain unusual or non-recurring transactions, including an unusual or
non-recurring dividend or other distribution (whether in the form of an
extraordinary cash dividend, dividend of Common Shares, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Shares or other securities of the Company,
issuance of warrants or other rights to purchase Common Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Common Shares. In such an event, the Board of Trustees of the
Company may in an equitable and proportionate manner (and, as applicable, in
such equitable and proportionate manner as is consistent with Sections 422 and
409A of the Internal Revenue Code of 1986, as amended from time to time (the
“Code”) and the regulations thereunder and with Section 162(m) of the Code)
either: (i) adjust the number of Shares, provided that the number of Shares
shall always be a whole number; (ii) provide for an equivalent award in respect
of securities of the surviving entity of any merger, consolidation or other
transaction or event having a similar effect; or (iii) make provision for a cash
payment to the Trustee for the Shares.
10.
Compliance
with Section 409A of the Code
. The Trustee hereby consents (without
further consideration) to any change to this Agreement or the Grant so the
Trustee can avoid paying penalties under Section 409A of the Code, even if those
changes affect the terms and conditions of this Agreement of the Grant and
reduce its value or potential value.
11.
Binding
Effect
. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement may not be
assigned or transferred in whole or in part by the Trustee, nor may the Trustee
delegate any duty or obligation under this Agreement, and any attempt to so
assign, transfer or delegate shall be null and void and of no force or
effect.
12.
Interpretation
of this Agreement
. All determinations and interpretations made by the
Board of Trustees of the Company with regard to any questions arising under this
Agreement shall be final, binding and conclusive as to all persons, including
without limitation the Trustee and any person claiming rights from or through
the Trustee.
13.
Venue
.
Each party to this Agreement hereby irrevocably (i) consents and submits to the
exclusive jurisdiction of the state and federal courts in Harris County, Texas
in connection with any disputes arising out of this Agreement, and (ii) waives
any objection based on venue or inconvenient forum with respect to any action
instituted therein arising under this Agreement or the transactions contemplated
hereby, and agrees that any dispute with respect to such matters shall be heard
only in the courts described above.
14.
Governing
Law; Entire Agreement; Amendment
. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without regard
to such state’s conflict of laws principles. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof. This Agreement may be
amended by a majority of the members of the Board of Trustees, subject to the
Trustee’s consent if such amendment materially and adversely affects the rights
of the Trustee, except that the consent of the Trustee shall not be required for
any amendment made pursuant to Section 10 of this Agreement.
15.
Tax
Elections
. THE TRUSTEE UNDERSTANDS THAT HE OR SHE (AND NOT THE COMPANY)
SHALL BE RESPONSIBLE FOR THE TRUSTEE’S OWN TAX LIABILITY THAT MAY ARISE AS A
RESULT OF THE ACQUISITION OF THE SHARES HEREUNDER. THE TRUSTEE ACKNOWLEDGES AND
AGREES THAT HE OR SHE HAS CONSIDERED THE ADVISABILITY OF ALL TAX ELECTIONS IN
CONNECTION WITH THE ISSUANCE OF THE SHARES, INCLUDING THE MAKING OF AN ELECTION
UNDER SECTION 83(b) OF THE CODE. THE TRUSTEE FURTHER ACKNOWLEDGES AND AGREES
THAT, IF THE TRUSTEE DETERMINES TO MAKE AN ELECTION UNDER SECTION 83(b) OF THE
CODE, (i) THE TRUSTEE (AND NOT THE COMPANY) IS SOLELY RESPONSIBLE FOR PROPERLY
AND TIMELY COMPLETING AND FILING ANY SUCH SECTION 83(b) ELECTION, AND (ii) THE
TRUSTEE AGREES TO TIMELY PROVIDE A COPY OF THE ELECTION TO THE COMPANY AS
REQUIRED UNDER THE CODE.
16.
Notices
.
Any notice, demand or request required or permitted to be given under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally, or (ii) three days after being deposited in the United States mail,
by certified or registered mail, postage prepaid, or (iii) the next business day
after sent by nationally recognized overnight delivery service, and addressed,
if to the Company, at its principal place of business, Attention: Chief
Financial Officer, and if to the Trustee, at his or her most recent address as
shown in the employment or stock records of the Company.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
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Whitestone
REIT
|
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By:
|
/s/
James C. Mastandrea
|
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Name:
|
James C. Mastandrea
|
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|
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Title:
|
Chairman of the Board of Trustees
|
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|
|
Trustee: /s/
Daniel G. DeVos
|
|
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Date:
|
March
25, 2009
|
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Exhibit
A
LAPSE
OF PERIOD OF RESTRICTION
|
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|
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Number
of Shares
|
|
Vesting
Date
|
|
Percentage
of
Shares
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
March
25, 2010
|
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34%
|
|
|
March
25, 2011
|
|
33%
|
|
|
March
25, 2012
|
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33%
|
Exhibit
B
STOCK
POWER
For value
received, I hereby sell, assign and transfer unto ___________________________
Common Shares of Whitestone REIT standing in my name on the books of said
Company represented by Certificate(s) Number(s) ______ herewith, and do hereby
irrevocably constitute and appoint ______ attorney to transfer the said stock on
the books of said Company with full power of substitution in the
premises.
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Date:
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Printed
Name:
|
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Signature:
|
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Witness
Signature:
|
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8
Exhibit
10.11
TRUSTEE
RESTRICTED COMMON SHARE GRANT AGREEMENT
(TIME
VESTED)
THIS
RESTRICTED COMMON SHARE GRANT AGREEMENT (TIME VESTED) (this “
Agreement
”)
is entered into as of
March
25, 2009
(the “
Effective
Date
”), by and between Whitestone REIT, a Maryland real estate investment
trust (the “
Company
”),
and
Donald F.
Keating
(the “
Trustee
”).
WHEREAS,
the Trustee serves on the Board of Trustees of the Company and in connection
therewith has rendered or will render services for and on behalf of the Company
and/or its subsidiaries or affiliates;
WHEREAS,
the Company believes the Trustee should have interests that are aligned with the
interests of the Company’s shareholders; and
WHEREAS,
the Company desires to compensate to grant the Trustee common shares of
beneficial interest, par value $0.001 per share, of the Company (the “
Common
Shares
”).
NOW,
THEREFORE, IT IS AGREED, by and between the Company and the Trustee, as
follows:
1.
Restricted
Common Share Grant
. The Trustee is hereby granted
5,000
Common
Shares (the “
Shares
”)
subject to the restrictions and on the terms and conditions set forth in this
Agreement (the “
Grant
”).
2.
Restriction
on the Shares
.
(a)
Period
of Restriction
. Except as otherwise set forth herein, all the Shares
issued to the Trustee pursuant to this Agreement shall be subject to a period of
restriction (the “
Period
of Restriction
”) during which the Trustee’s rights in and to such Shares
shall be subject to the limitations and obligations set forth in this Section
2.
(b)
Lapse
of Period of Restriction
. The Period of Restriction shall lapse in
accordance with the provisions of
Exhibit
A
, which is attached hereto and forms part of this Agreement. During the
period that the Shares are subject to the Period of Restriction, such Shares are
referred to herein as “
Restricted
Common Shares
.”
(c)
Termination
of Trustee.
Notwithstanding any other provision of this Agreement to the
contrary, if the Trustee’s position as trustee of the Company terminates for any
reason (or no reason), other than the Trustee’s death or Disability (defined as
a disability that would qualify as a total and permanent disability under the
Company’s then current long-term disability plan), any Restricted Common Shares
that are subject to the Period of Restriction on the date of the Trustee’s
termination shall be immediately forfeited by the Trustee and shall be
automatically transferred to and reacquired by the Company at no cost to the
Company, and neither the Trustee nor his or her heirs, executors, administrators
or successors shall have any right or interest in such Restricted Common Shares.
In the event of the Trustee’s death or Disability, any Restricted Common Shares
that are subject to the Period of Restriction on the date of death or Disability
shall immediately vest and the Trustee or his or her heirs, executors,
administrators or successors shall have the right and interest in such
Restricted Common Shares.
(d)
Escrow
.
Upon the Trustee’s execution and delivery of this Agreement, the Trustee agrees
to concurrently deliver one or more executed stock powers as requested by the
Company, duly endorsed in blank for transfer, in the form attached hereto as
Exhibit
B
, which shall be deposited with the Company during the Period of
Restriction. Each certificate representing Restricted Common Shares shall bear
the following legend until the lapse of the Period of Restriction with respect
to the shares represented by such certificate:
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Transfer
of this certificate and the shares represented hereby is restricted
pursuant to the terms of the Restricted Common Share Grant Agreement
pertaining to the shares represented hereby, dated as of _________ ,
200[_], (the “Agreement”). Copies of the Agreement are on file at the
offices of Whitestone
REIT.
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The
certificates representing the Restricted Common Shares along with the stock
power(s) shall be held in escrow by the Company until such time as either (i)
the Period of Restriction with respect to all of such Restricted Common Shares
lapses in accordance with this Agreement, in which case the shares shall be
delivered to the Trustee, or (ii) any such Restricted Common Shares are
forfeited pursuant to this Agreement, in which case such shares shall be
transferred to and reacquired by the Company in accordance with Section 2(c) of
this Agreement.
(e)
Distributions
.
All cash distributions on the Restricted Common Shares shall be paid directly to
the Trustee and shall not be held in escrow. Any new, substituted or additional
securities or other property issued in respect of Restricted Common Shares shall
be held in escrow, together, where applicable, with appropriate stock powers,
assignments or other transfer documents which the Trustee hereby agrees to
execute as a condition to receipt of such securities or other property. If the
Restricted Common Shares in respect of which such securities or other property
was issued are forfeited to the Company pursuant to Section 2(c) of this
Agreement, then such securities or other property shall be immediately forfeited
to the Company and automatically transferred to and reacquired by the Company at
no cost to the Company, to the same extent and in accordance with Section 2(c)
of this Agreement as if such securities or other property were Restricted Common
Shares hereunder.
3.
Rights
as a Shareholder
. Upon the Trustee’s execution and delivery of this
Agreement and until such time as the Restricted Common Shares are forfeited to
the Company as set forth herein, the Trustee shall be the record owner of the
Restricted Common Shares and, subject to the terms of this Agreement, shall have
all rights of a shareholder with respect to the Restricted Common Shares,
including the right to vote the Restricted Common Shares and subject to the
terms of Section 2 hereof, to receive dividends and distributions with respect
to the Restricted Common Shares.
4.
Change
in Control
. Notwithstanding Section 2 of this Agreement, if the Trustee
holds Restricted Common Shares at the time a Change in Control (as defined
below) occurs, the Period of Restriction with respect to such Restricted Common
Shares granted in Section 1 shall automatically lapse immediately prior to the
consummation of such Change in Control.
A Change
of Control is defined as any of the following events:
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(i)
any person or entity, including a “group” as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, other than the Company or a
wholly-owned subsidiary thereof or any employee benefit plan of the
Company or any of its subsidiaries, becomes the beneficial owner of the
Company’s securities having 35% or more of the combined voting power of
the then outstanding securities of the Company that may be cast for the
election of trustees of the Company (other than as a result of an issuance
of securities initiated by the Company in the ordinary course of
business);
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(ii)
as the result of, or in connection with, any cash tender or exchange
offer, merger or other business combination or contested election, or any
combination of the foregoing transactions, less than a majority of the
combined voting power of the then outstanding securities of the Company or
any successor company or entity entitled to vote generally in the election
of the trustees of the Company or such other corporation or entity after
such transaction are held in the aggregate by the holders of the Company’s
securities entitled to vote generally in the election of trustees of the
Company immediately prior to such transaction;
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(iii)
during any period of two (2) consecutive years, individuals who at the
beginning of any such period constitute the Board of Trustees of the
Company cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the Company’s
shareholders, of each trustee of the Company first elected during such
period was approved by a vote of at least two-thirds (2/3rds) of the
trustees of the Company then still in office who were (a) trustees of the
Company at the beginning of any such period, and (b) not initially (1)
appointed or elected to office as result of either an actual or threatened
election and/or proxy contest by or on behalf of a person other than the
Board of Trustees of the Company, or (2) designated by a person who has
entered into an agreement with the Company to effect a transaction
described in (i) or (ii) above or (iv) or (v) below;
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(iv)
a complete liquidation or dissolution of the Company; or
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(v)
the sale or other disposition of all or substantially all of the assets of
the Company to any Person (other than a transfer to a
subsidiary)).
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5.
Withholding
.
If the Trustee makes an election under Section 83(b) of the Internal Revenue
Code of 1986 (the “
Code
”)
with respect to the Restricted Common Shares, the grant made pursuant to this
Grant shall be conditioned upon the prompt payment to the Company of any
applicable withholding obligations or withholding taxes by the Trustee (“
Withholding
Taxes
”). Failure by the Trustee to pay such Withholding Taxes will render
this Grant null and void
ab
initio
and the Restricted Common Shares granted hereunder will
immediately be canceled. If the Trustee does not make an election under Section
83(b) of the Code with respect to the Restricted Common Shares, upon the lapse
of the Period of Restriction with respect to any portion of the Restricted
Common Shares (or property distributed with respect thereto), the Company shall
satisfy the required Withholding Taxes as set forth in the Internal Revenue
Service guidelines for the employer’s minimum statutory withholding with respect
to Trustee and issue vested shares to the Trustee without restriction. In the
sole discretion of the Company, the Company may satisfy the required Withholding
Taxes by withholding from the Restricted Common Shares included in the Grant
that number of whole shares necessary to satisfy such taxes as of the date the
restriction lapse with respect to such Restricted Common Shares based on the
Fair Market Value of the Shares (defined for purposes of this Grant, as of any
date (i) the average of the closing sales prices of the Common Shares on all
national securities exchanges on which the Common Shares may at the time be
listed, or any other such exchange on which the Common Shares are traded, on
such date, or in the absence of reported sales on such date, the average closing
sales prices on the immediately preceding date on which sales were reported,
(ii) if on any day the Common Shares shall not be quoted on a national
securities exchange, the average of the high and low bid and asked prices on
such day in the over-the-counter market as reported by National Quotation Bureau
Incorporated, or any similar successor organization, or (iii) in the event there
is no public market or over-the-counter market for the Common Shares on such
date, the fair market value as determined, in good faith, by the Board of
Trustees of the Company in its sole discretion).
6.
Restrictions
on Transfer
. During the Period of Restriction, the Trustee shall not
sell, transfer, pledge, hypothecate, assign, exchange or otherwise dispose of
the Restricted Common Shares. Any attempted sale, transfer, pledge,
hypothecation, assignment, exchange or other disposition shall be null and void
and of no force or effect and the Company shall have the right to disregard the
same on its books and records and to issue “stop transfer” instructions to its
transfer agent.
7.
Consent
to Electronic Delivery
. The Company may choose to deliver certain
statutory materials relating to the Grant in electronic form. By accepting this
Agreement, the Trustee agrees that the Company may deliver any documents
required by the Securities and Exchange Commission and the Company’s annual
report to the Trustee in an electronic format. If at any time the Trustee would
prefer to receive paper copies of these documents, please contact Chief
Financial Officer of the Company to request paper copies of these
documents.
8.
No
Rights Conferred
. Nothing in this Agreement shall give the Trustee any
right to continue in the employ or service of the Company, any affiliate or any
subsidiary and/or as a member of the Company’s Board of Trustees or in any other
capacity, or interfere in any way with the right of the Company, any affiliate
or any subsidiary to terminate the employment or services of the
Trustee.
9.
Adjustments
.
All references to the number and class of shares covered by this Agreement and
other terms in this Agreement may be appropriately adjusted, by a vote of the
majority of the members of the Board of Trustees of the Company, in the event of
certain unusual or non-recurring transactions, including an unusual or
non-recurring dividend or other distribution (whether in the form of an
extraordinary cash dividend, dividend of Common Shares, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Shares or other securities of the Company,
issuance of warrants or other rights to purchase Common Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Common Shares. In such an event, the Board of Trustees of the
Company may in an equitable and proportionate manner (and, as applicable, in
such equitable and proportionate manner as is consistent with Sections 422 and
409A of the Internal Revenue Code of 1986, as amended from time to time (the
“Code”) and the regulations thereunder and with Section 162(m) of the Code)
either: (i) adjust the number of Shares, provided that the number of Shares
shall always be a whole number; (ii) provide for an equivalent award in respect
of securities of the surviving entity of any merger, consolidation or other
transaction or event having a similar effect; or (iii) make provision for a cash
payment to the Trustee for the Shares.
10.
Compliance
with Section 409A of the Code
. The Trustee hereby consents (without
further consideration) to any change to this Agreement or the Grant so the
Trustee can avoid paying penalties under Section 409A of the Code, even if those
changes affect the terms and conditions of this Agreement of the Grant and
reduce its value or potential value.
11.
Binding
Effect
. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement may not be
assigned or transferred in whole or in part by the Trustee, nor may the Trustee
delegate any duty or obligation under this Agreement, and any attempt to so
assign, transfer or delegate shall be null and void and of no force or
effect.
12.
Interpretation
of this Agreement
. All determinations and interpretations made by the
Board of Trustees of the Company with regard to any questions arising under this
Agreement shall be final, binding and conclusive as to all persons, including
without limitation the Trustee and any person claiming rights from or through
the Trustee.
13.
Venue
.
Each party to this Agreement hereby irrevocably (i) consents and submits to the
exclusive jurisdiction of the state and federal courts in Harris County, Texas
in connection with any disputes arising out of this Agreement, and (ii) waives
any objection based on venue or inconvenient forum with respect to any action
instituted therein arising under this Agreement or the transactions contemplated
hereby, and agrees that any dispute with respect to such matters shall be heard
only in the courts described above.
14.
Governing
Law; Entire Agreement; Amendment
. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without regard
to such state’s conflict of laws principles. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof. This Agreement may be
amended by a majority of the members of the Board of Trustees, subject to the
Trustee’s consent if such amendment materially and adversely affects the rights
of the Trustee, except that the consent of the Trustee shall not be required for
any amendment made pursuant to Section 10 of this Agreement.
15.
Tax
Elections
. THE TRUSTEE UNDERSTANDS THAT HE OR SHE (AND NOT THE COMPANY)
SHALL BE RESPONSIBLE FOR THE TRUSTEE’S OWN TAX LIABILITY THAT MAY ARISE AS A
RESULT OF THE ACQUISITION OF THE SHARES HEREUNDER. THE TRUSTEE ACKNOWLEDGES AND
AGREES THAT HE OR SHE HAS CONSIDERED THE ADVISABILITY OF ALL TAX ELECTIONS IN
CONNECTION WITH THE ISSUANCE OF THE SHARES, INCLUDING THE MAKING OF AN ELECTION
UNDER SECTION 83(b) OF THE CODE. THE TRUSTEE FURTHER ACKNOWLEDGES AND AGREES
THAT, IF THE TRUSTEE DETERMINES TO MAKE AN ELECTION UNDER SECTION 83(b) OF THE
CODE, (i) THE TRUSTEE (AND NOT THE COMPANY) IS SOLELY RESPONSIBLE FOR PROPERLY
AND TIMELY COMPLETING AND FILING ANY SUCH SECTION 83(b) ELECTION, AND (ii) THE
TRUSTEE AGREES TO TIMELY PROVIDE A COPY OF THE ELECTION TO THE COMPANY AS
REQUIRED UNDER THE CODE.
16.
Notices
.
Any notice, demand or request required or permitted to be given under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally, or (ii) three days after being deposited in the United States mail,
by certified or registered mail, postage prepaid, or (iii) the next business day
after sent by nationally recognized overnight delivery service, and addressed,
if to the Company, at its principal place of business, Attention: Chief
Financial Officer, and if to the Trustee, at his or her most recent address as
shown in the employment or stock records of the Company.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
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Whitestone
REIT
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By:
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/s/
James C. Mastandrea
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Name:
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James C. Mastandrea
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Title:
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Chairman of the Board of Trustees
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Trustee: /s/
Donald F. Keating
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Date:
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March 25, 2009
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Exhibit
A
LAPSE
OF PERIOD OF RESTRICTION
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Number
of Shares
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Vesting
Date
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Percentage
of
Shares
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5,000
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March
25, 2010
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34%
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March
25, 2011
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33%
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March
25, 2012
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33%
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Exhibit
B
STOCK
POWER
For value
received, I hereby sell, assign and transfer unto ___________________________
Common Shares of Whitestone REIT standing in my name on the books of said
Company represented by Certificate(s) Number(s) ______ herewith, and do hereby
irrevocably constitute and appoint ______ attorney to transfer the said stock on
the books of said Company with full power of substitution in the
premises.
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Date:
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Printed
Name:
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Signature:
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Witness
Signature:
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8
Exhibit
10.12
TRUSTEE
RESTRICTED COMMON SHARE GRANT AGREEMENT
(TIME
VESTED)
THIS
RESTRICTED COMMON SHARE GRANT AGREEMENT (TIME VESTED) (this “
Agreement
”)
is entered into as of
March
25, 2009
(the “
Effective
Date
”), by and between Whitestone REIT, a Maryland real estate investment
trust (the “
Company
”),
and
Jack L. Mahaffey
(the
“
Trustee
”).
WHEREAS,
the Trustee serves on the Board of Trustees of the Company and in connection
therewith has rendered or will render services for and on behalf of the Company
and/or its subsidiaries or affiliates;
WHEREAS,
the Company believes the Trustee should have interests that are aligned with the
interests of the Company’s shareholders; and
WHEREAS,
the Company desires to compensate to grant the Trustee common shares of
beneficial interest, par value $0.001 per share, of the Company (the “
Common
Shares
”).
NOW,
THEREFORE, IT IS AGREED, by and between the Company and the Trustee, as
follows:
1.
Restricted
Common Share Grant
. The Trustee is hereby granted
5,000
Common
Shares (the “
Shares
”)
subject to the restrictions and on the terms and conditions set forth in this
Agreement (the “
Grant
”).
2.
Restriction
on the Shares
.
(a)
Period
of Restriction
. Except as otherwise set forth herein, all the Shares
issued to the Trustee pursuant to this Agreement shall be subject to a period of
restriction (the “
Period
of Restriction
”) during which the Trustee’s rights in and to such Shares
shall be subject to the limitations and obligations set forth in this Section
2.
(b)
Lapse
of Period of Restriction
. The Period of Restriction shall lapse in
accordance with the provisions of
Exhibit
A
, which is attached hereto and forms part of this Agreement. During the
period that the Shares are subject to the Period of Restriction, such Shares are
referred to herein as “
Restricted
Common Shares
.”
(c)
Termination
of Trustee.
Notwithstanding any other provision of this Agreement to the
contrary, if the Trustee’s position as trustee of the Company terminates for any
reason (or no reason), other than the Trustee’s death or Disability (defined as
a disability that would qualify as a total and permanent disability under the
Company’s then current long-term disability plan), any Restricted Common Shares
that are subject to the Period of Restriction on the date of the Trustee’s
termination shall be immediately forfeited by the Trustee and shall be
automatically transferred to and reacquired by the Company at no cost to the
Company, and neither the Trustee nor his or her heirs, executors, administrators
or successors shall have any right or interest in such Restricted Common Shares.
In the event of the Trustee’s death or Disability, any Restricted Common Shares
that are subject to the Period of Restriction on the date of death or Disability
shall immediately vest and the Trustee or his or her heirs, executors,
administrators or successors shall have the right and interest in such
Restricted Common Shares.
(d)
Escrow
.
Upon the Trustee’s execution and delivery of this Agreement, the Trustee agrees
to concurrently deliver one or more executed stock powers as requested by the
Company, duly endorsed in blank for transfer, in the form attached hereto as
Exhibit
B
, which shall be deposited with the Company during the Period of
Restriction. Each certificate representing Restricted Common Shares shall bear
the following legend until the lapse of the Period of Restriction with respect
to the shares represented by such certificate:
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Transfer
of this certificate and the shares represented hereby is restricted
pursuant to the terms of the Restricted Common Share Grant Agreement
pertaining to the shares represented hereby, dated as of _________ ,
200[_], (the “Agreement”). Copies of the Agreement are on file at the
offices of Whitestone
REIT.
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The
certificates representing the Restricted Common Shares along with the stock
power(s) shall be held in escrow by the Company until such time as either (i)
the Period of Restriction with respect to all of such Restricted Common Shares
lapses in accordance with this Agreement, in which case the shares shall be
delivered to the Trustee, or (ii) any such Restricted Common Shares are
forfeited pursuant to this Agreement, in which case such shares shall be
transferred to and reacquired by the Company in accordance with Section 2(c) of
this Agreement.
(e)
Distributions
.
All cash distributions on the Restricted Common Shares shall be paid directly to
the Trustee and shall not be held in escrow. Any new, substituted or additional
securities or other property issued in respect of Restricted Common Shares shall
be held in escrow, together, where applicable, with appropriate stock powers,
assignments or other transfer documents which the Trustee hereby agrees to
execute as a condition to receipt of such securities or other property. If the
Restricted Common Shares in respect of which such securities or other property
was issued are forfeited to the Company pursuant to Section 2(c) of this
Agreement, then such securities or other property shall be immediately forfeited
to the Company and automatically transferred to and reacquired by the Company at
no cost to the Company, to the same extent and in accordance with Section 2(c)
of this Agreement as if such securities or other property were Restricted Common
Shares hereunder.
3.
Rights
as a Shareholder
. Upon the Trustee’s execution and delivery of this
Agreement and until such time as the Restricted Common Shares are forfeited to
the Company as set forth herein, the Trustee shall be the record owner of the
Restricted Common Shares and, subject to the terms of this Agreement, shall have
all rights of a shareholder with respect to the Restricted Common Shares,
including the right to vote the Restricted Common Shares and subject to the
terms of Section 2 hereof, to receive dividends and distributions with respect
to the Restricted Common Shares.
4.
Change
in Control
. Notwithstanding Section 2 of this Agreement, if the Trustee
holds Restricted Common Shares at the time a Change in Control (as defined
below) occurs, the Period of Restriction with respect to such Restricted Common
Shares granted in Section 1 shall automatically lapse immediately prior to the
consummation of such Change in Control.
A Change
of Control is defined as any of the following events:
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(i)
any person or entity, including a “group” as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, other than the Company or a
wholly-owned subsidiary thereof or any employee benefit plan of the
Company or any of its subsidiaries, becomes the beneficial owner of the
Company’s securities having 35% or more of the combined voting power of
the then outstanding securities of the Company that may be cast for the
election of trustees of the Company (other than as a result of an issuance
of securities initiated by the Company in the ordinary course of
business);
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(ii)
as the result of, or in connection with, any cash tender or exchange
offer, merger or other business combination or contested election, or any
combination of the foregoing transactions, less than a majority of the
combined voting power of the then outstanding securities of the Company or
any successor company or entity entitled to vote generally in the election
of the trustees of the Company or such other corporation or entity after
such transaction are held in the aggregate by the holders of the Company’s
securities entitled to vote generally in the election of trustees of the
Company immediately prior to such transaction;
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(iii)
during any period of two (2) consecutive years, individuals who at the
beginning of any such period constitute the Board of Trustees of the
Company cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the Company’s
shareholders, of each trustee of the Company first elected during such
period was approved by a vote of at least two-thirds (2/3rds) of the
trustees of the Company then still in office who were (a) trustees of the
Company at the beginning of any such period, and (b) not initially (1)
appointed or elected to office as result of either an actual or threatened
election and/or proxy contest by or on behalf of a person other than the
Board of Trustees of the Company, or (2) designated by a person who has
entered into an agreement with the Company to effect a transaction
described in (i) or (ii) above or (iv) or (v) below;
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(iv)
a complete liquidation or dissolution of the Company; or
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(v)
the sale or other disposition of all or substantially all of the assets of
the Company to any Person (other than a transfer to a
subsidiary)).
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5.
Withholding
.
If the Trustee makes an election under Section 83(b) of the Internal Revenue
Code of 1986 (the “
Code
”)
with respect to the Restricted Common Shares, the grant made pursuant to this
Grant shall be conditioned upon the prompt payment to the Company of any
applicable withholding obligations or withholding taxes by the Trustee (“
Withholding
Taxes
”). Failure by the Trustee to pay such Withholding Taxes will render
this Grant null and void
ab
initio
and the Restricted Common Shares granted hereunder will
immediately be canceled. If the Trustee does not make an election under Section
83(b) of the Code with respect to the Restricted Common Shares, upon the lapse
of the Period of Restriction with respect to any portion of the Restricted
Common Shares (or property distributed with respect thereto), the Company shall
satisfy the required Withholding Taxes as set forth in the Internal Revenue
Service guidelines for the employer’s minimum statutory withholding with respect
to Trustee and issue vested shares to the Trustee without restriction. In the
sole discretion of the Company, the Company may satisfy the required Withholding
Taxes by withholding from the Restricted Common Shares included in the Grant
that number of whole shares necessary to satisfy such taxes as of the date the
restriction lapse with respect to such Restricted Common Shares based on the
Fair Market Value of the Shares (defined for purposes of this Grant, as of any
date (i) the average of the closing sales prices of the Common Shares on all
national securities exchanges on which the Common Shares may at the time be
listed, or any other such exchange on which the Common Shares are traded, on
such date, or in the absence of reported sales on such date, the average closing
sales prices on the immediately preceding date on which sales were reported,
(ii) if on any day the Common Shares shall not be quoted on a national
securities exchange, the average of the high and low bid and asked prices on
such day in the over-the-counter market as reported by National Quotation Bureau
Incorporated, or any similar successor organization, or (iii) in the event there
is no public market or over-the-counter market for the Common Shares on such
date, the fair market value as determined, in good faith, by the Board of
Trustees of the Company in its sole discretion).
6.
Restrictions
on Transfer
. During the Period of Restriction, the Trustee shall not
sell, transfer, pledge, hypothecate, assign, exchange or otherwise dispose of
the Restricted Common Shares. Any attempted sale, transfer, pledge,
hypothecation, assignment, exchange or other disposition shall be null and void
and of no force or effect and the Company shall have the right to disregard the
same on its books and records and to issue “stop transfer” instructions to its
transfer agent.
7.
Consent
to Electronic Delivery
. The Company may choose to deliver certain
statutory materials relating to the Grant in electronic form. By accepting this
Agreement, the Trustee agrees that the Company may deliver any documents
required by the Securities and Exchange Commission and the Company’s annual
report to the Trustee in an electronic format. If at any time the Trustee would
prefer to receive paper copies of these documents, please contact Chief
Financial Officer of the Company to request paper copies of these
documents.
8.
No
Rights Conferred
. Nothing in this Agreement shall give the Trustee any
right to continue in the employ or service of the Company, any affiliate or any
subsidiary and/or as a member of the Company’s Board of Trustees or in any other
capacity, or interfere in any way with the right of the Company, any affiliate
or any subsidiary to terminate the employment or services of the
Trustee.
9.
Adjustments
.
All references to the number and class of shares covered by this Agreement and
other terms in this Agreement may be appropriately adjusted, by a vote of the
majority of the members of the Board of Trustees of the Company, in the event of
certain unusual or non-recurring transactions, including an unusual or
non-recurring dividend or other distribution (whether in the form of an
extraordinary cash dividend, dividend of Common Shares, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Shares or other securities of the Company,
issuance of warrants or other rights to purchase Common Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Common Shares. In such an event, the Board of Trustees of the
Company may in an equitable and proportionate manner (and, as applicable, in
such equitable and proportionate manner as is consistent with Sections 422 and
409A of the Internal Revenue Code of 1986, as amended from time to time (the
“Code”) and the regulations thereunder and with Section 162(m) of the Code)
either: (i) adjust the number of Shares, provided that the number of Shares
shall always be a whole number; (ii) provide for an equivalent award in respect
of securities of the surviving entity of any merger, consolidation or other
transaction or event having a similar effect; or (iii) make provision for a cash
payment to the Trustee for the Shares.
10.
Compliance
with Section 409A of the Code
. The Trustee hereby consents (without
further consideration) to any change to this Agreement or the Grant so the
Trustee can avoid paying penalties under Section 409A of the Code, even if those
changes affect the terms and conditions of this Agreement of the Grant and
reduce its value or potential value.
11.
Binding
Effect
. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement may not be
assigned or transferred in whole or in part by the Trustee, nor may the Trustee
delegate any duty or obligation under this Agreement, and any attempt to so
assign, transfer or delegate shall be null and void and of no force or
effect.
12.
Interpretation
of this Agreement
. All determinations and interpretations made by the
Board of Trustees of the Company with regard to any questions arising under this
Agreement shall be final, binding and conclusive as to all persons, including
without limitation the Trustee and any person claiming rights from or through
the Trustee.
13.
Venue
.
Each party to this Agreement hereby irrevocably (i) consents and submits to the
exclusive jurisdiction of the state and federal courts in Harris County, Texas
in connection with any disputes arising out of this Agreement, and (ii) waives
any objection based on venue or inconvenient forum with respect to any action
instituted therein arising under this Agreement or the transactions contemplated
hereby, and agrees that any dispute with respect to such matters shall be heard
only in the courts described above.
14.
Governing
Law; Entire Agreement; Amendment
. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without regard
to such state’s conflict of laws principles. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof. This Agreement may be
amended by a majority of the members of the Board of Trustees, subject to the
Trustee’s consent if such amendment materially and adversely affects the rights
of the Trustee, except that the consent of the Trustee shall not be required for
any amendment made pursuant to Section 10 of this Agreement.
15.
Tax
Elections
. THE TRUSTEE UNDERSTANDS THAT HE OR SHE (AND NOT THE COMPANY)
SHALL BE RESPONSIBLE FOR THE TRUSTEE’S OWN TAX LIABILITY THAT MAY ARISE AS A
RESULT OF THE ACQUISITION OF THE SHARES HEREUNDER. THE TRUSTEE ACKNOWLEDGES AND
AGREES THAT HE OR SHE HAS CONSIDERED THE ADVISABILITY OF ALL TAX ELECTIONS IN
CONNECTION WITH THE ISSUANCE OF THE SHARES, INCLUDING THE MAKING OF AN ELECTION
UNDER SECTION 83(b) OF THE CODE. THE TRUSTEE FURTHER ACKNOWLEDGES AND AGREES
THAT, IF THE TRUSTEE DETERMINES TO MAKE AN ELECTION UNDER SECTION 83(b) OF THE
CODE, (i) THE TRUSTEE (AND NOT THE COMPANY) IS SOLELY RESPONSIBLE FOR PROPERLY
AND TIMELY COMPLETING AND FILING ANY SUCH SECTION 83(b) ELECTION, AND (ii) THE
TRUSTEE AGREES TO TIMELY PROVIDE A COPY OF THE ELECTION TO THE COMPANY AS
REQUIRED UNDER THE CODE.
16.
Notices
.
Any notice, demand or request required or permitted to be given under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally, or (ii) three days after being deposited in the United States mail,
by certified or registered mail, postage prepaid, or (iii) the next business day
after sent by nationally recognized overnight delivery service, and addressed,
if to the Company, at its principal place of business, Attention: Chief
Financial Officer, and if to the Trustee, at his or her most recent address as
shown in the employment or stock records of the Company.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
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Whitestone
REIT
|
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|
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By:
|
/s/
James C. Mastandrea
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Name:
|
James C. Mastandrea
|
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|
|
Title:
|
Chairman of the Board of Trustees
|
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|
|
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Trustee:
/s/ Jack L. Mahaffey
|
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Date:
|
March
25, 2009
|
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Exhibit
A
LAPSE
OF PERIOD OF RESTRICTION
|
|
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|
|
Number
of Shares
|
|
Vesting
Date
|
|
Percentage
of
Shares
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
March
25, 2010
|
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34%
|
|
|
March
25, 2011
|
|
33%
|
|
|
March
25, 2012
|
|
33%
|
Exhibit
B
STOCK
POWER
For value
received, I hereby sell, assign and transfer unto ___________________________
Common Shares of Whitestone REIT standing in my name on the books of said
Company represented by Certificate(s) Number(s) ______ herewith, and do hereby
irrevocably constitute and appoint ______ attorney to transfer the said stock on
the books of said Company with full power of substitution in the
premises.
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Date:
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Printed
Name:
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Signature:
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Witness
Signature:
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8
Exhibit
10.13
TRUSTEE
RESTRICTED COMMON SHARE GRANT AGREEMENT
(TIME
VESTED)
THIS
RESTRICTED COMMON SHARE GRANT AGREEMENT (TIME VESTED) (this “
Agreement
”)
is entered into as of
March
25, 2009
(the “
Effective
Date
”), by and between Whitestone REIT, a Maryland real estate investment
trust (the “
Company
”),
and
Chris
A. Minton
(the “
Trustee
”).
WHEREAS,
the Trustee serves on the Board of Trustees of the Company and in connection
therewith has rendered or will render services for and on behalf of the Company
and/or its subsidiaries or affiliates;
WHEREAS,
the Company believes the Trustee should have interests that are aligned with the
interests of the Company’s shareholders; and
WHEREAS,
the Company desires to compensate to grant the Trustee common shares of
beneficial interest, par value $0.001 per share, of the Company (the “
Common
Shares
”).
NOW,
THEREFORE, IT IS AGREED, by and between the Company and the Trustee, as
follows:
1.
Restricted
Common Share Grant
. The Trustee is hereby granted
5,000
Common
Shares (the “
Shares
”)
subject to the restrictions and on the terms and conditions set forth in this
Agreement (the “
Grant
”).
2.
Restriction
on the Shares
.
(a)
Period
of Restriction
. Except as otherwise set forth herein, all the Shares
issued to the Trustee pursuant to this Agreement shall be subject to a period of
restriction (the “
Period
of Restriction
”) during which the Trustee’s rights in and to such Shares
shall be subject to the limitations and obligations set forth in this
Section 2.
(b)
Lapse
of Period of Restriction
. The Period of Restriction shall lapse in
accordance with the provisions of
Exhibit
A
, which is attached hereto and forms part of this Agreement. During the
period that the Shares are subject to the Period of Restriction, such Shares are
referred to herein as “
Restricted
Common Shares
.”
(c)
Termination
of Trustee.
Notwithstanding any other provision of this Agreement to the
contrary, if the Trustee’s position as trustee of the Company terminates for any
reason (or no reason), other than the Trustee’s death or Disability (defined as
a disability that would qualify as a total and permanent disability under the
Company’s then current long-term disability plan), any Restricted Common Shares
that are subject to the Period of Restriction on the date of the Trustee’s
termination shall be immediately forfeited by the Trustee and shall be
automatically transferred to and reacquired by the Company at no cost to the
Company, and neither the Trustee nor his or her heirs, executors, administrators
or successors shall have any right or interest in such Restricted Common Shares.
In the event of the Trustee’s death or Disability, any Restricted Common Shares
that are subject to the Period of Restriction on the date of death or Disability
shall immediately vest and the Trustee or his or her heirs, executors,
administrators or successors shall have the right and interest in such
Restricted Common Shares.
(d)
Escrow
.
Upon the Trustee’s execution and delivery of this Agreement, the Trustee agrees
to concurrently deliver one or more executed stock powers as requested by the
Company, duly endorsed in blank for transfer, in the form attached hereto as
Exhibit B
,
which shall be deposited with the Company during the Period of Restriction. Each
certificate representing Restricted Common Shares shall bear the following
legend until the lapse of the Period of Restriction with respect to the shares
represented by such certificate:
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Transfer
of this certificate and the shares represented hereby is restricted
pursuant to the terms of the Restricted Common Share Grant Agreement
pertaining to the shares represented hereby, dated as of ____________,
200[_], (the “Agreement”). Copies of the Agreement are on file at the
offices of Whitestone
REIT.
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The
certificates representing the Restricted Common Shares along with the stock
power(s) shall be held in escrow by the Company until such time as either
(i) the Period of Restriction with respect to all of such Restricted Common
Shares lapses in accordance with this Agreement, in which case the shares shall
be delivered to the Trustee, or (ii) any such Restricted Common Shares are
forfeited pursuant to this Agreement, in which case such shares shall be
transferred to and reacquired by the Company in accordance with
Section 2(c) of this Agreement.
(e)
Distributions
.
All cash distributions on the Restricted Common Shares shall be paid directly to
the Trustee and shall not be held in escrow. Any new, substituted or additional
securities or other property issued in respect of Restricted Common Shares shall
be held in escrow, together, where applicable, with appropriate stock powers,
assignments or other transfer documents which the Trustee hereby agrees to
execute as a condition to receipt of such securities or other property. If the
Restricted Common Shares in respect of which such securities or other property
was issued are forfeited to the Company pursuant to Section 2(c) of this
Agreement, then such securities or other property shall be immediately forfeited
to the Company and automatically transferred to and reacquired by the Company at
no cost to the Company, to the same extent and in accordance with
Section 2(c) of this Agreement as if such securities or other property were
Restricted Common Shares hereunder.
3.
Rights
as a Shareholder
. Upon the Trustee’s execution and delivery of this
Agreement and until such time as the Restricted Common Shares are forfeited to
the Company as set forth herein, the Trustee shall be the record owner of the
Restricted Common Shares and, subject to the terms of this Agreement, shall have
all rights of a shareholder with respect to the Restricted Common Shares,
including the right to vote the Restricted Common Shares and subject to the
terms of Section 2 hereof, to receive dividends and distributions with
respect to the Restricted Common Shares.
4.
Change
in Control
. Notwithstanding Section 2 of this Agreement, if the
Trustee holds Restricted Common Shares at the time a Change in Control (as
defined below) occurs, the Period of Restriction with respect to such Restricted
Common Shares granted in Section 1 shall automatically lapse immediately prior
to the consummation of such Change in Control.
A Change
of Control is defined as any of the following events:
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(i)
any person or entity, including a “group” as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, other than the Company or a
wholly-owned subsidiary thereof or any employee benefit plan of the
Company or any of its subsidiaries, becomes the beneficial owner of the
Company’s securities having 35% or more of the combined voting power of
the then outstanding securities of the Company that may be cast for the
election of trustees of the Company (other than as a result of an issuance
of securities initiated by the Company in the ordinary course of
business);
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(ii)
as the result of, or in connection with, any cash tender or exchange
offer, merger or other business combination or contested election, or any
combination of the foregoing transactions, less than a majority of the
combined voting power of the then outstanding securities of the Company or
any successor company or entity entitled to vote generally in the election
of the trustees of the Company or such other corporation or entity after
such transaction are held in the aggregate by the holders of the Company’s
securities entitled to vote generally in the election of trustees of the
Company immediately prior to such transaction;
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(iii)
during any period of two (2) consecutive years, individuals who at the
beginning of any such period constitute the Board of Trustees of the
Company cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the Company’s
shareholders, of each trustee of the Company first elected during such
period was approved by a vote of at least two-thirds (2/3rds) of the
trustees of the Company then still in office who were (a) trustees of the
Company at the beginning of any such period, and (b) not initially (1)
appointed or elected to office as result of either an actual or threatened
election and/or proxy contest by or on behalf of a person other than the
Board of Trustees of the Company, or (2) designated by a person who has
entered into an agreement with the Company to effect a transaction
described in (i) or (ii) above or (iv) or (v) below;
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(iv)
a complete liquidation or dissolution of the Company;
or
|
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(v)
the sale or other disposition of all or substantially all of the assets of
the Company to any Person (other than a transfer to a
subsidiary)).
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5.
Withholding
.
If the Trustee makes an election under Section 83(b) of the Internal Revenue
Code of 1986 (the “
Code
”)
with respect to the Restricted Common Shares, the grant made pursuant to this
Grant shall be conditioned upon the prompt payment to the Company of any
applicable withholding obligations or withholding taxes by the Trustee (“
Withholding
Taxes
”). Failure by the Trustee to pay such Withholding Taxes will render
this Grant null and void
ab
initio
and the Restricted Common Shares granted hereunder will
immediately be canceled. If the Trustee does not make an election under Section
83(b) of the Code with respect to the Restricted Common Shares, upon the lapse
of the Period of Restriction with respect to any portion of the Restricted
Common Shares (or property distributed with respect thereto), the Company shall
satisfy the required Withholding Taxes as set forth in the Internal Revenue
Service guidelines for the employer’s minimum statutory withholding with respect
to Trustee and issue vested shares to the Trustee without restriction. In the
sole discretion of the Company, the Company may satisfy the required Withholding
Taxes by withholding from the Restricted Common Shares included in the Grant
that number of whole shares necessary to satisfy such taxes as of the date the
restriction lapse with respect to such Restricted Common Shares based on the
Fair Market Value of the Shares (defined for purposes of this Grant, as of any
date (i) the average of the closing sales prices of the Common Shares on
all national securities exchanges on which the Common Shares may at the time be
listed, or any other such exchange on which the Common Shares are traded, on
such date, or in the absence of reported sales on such date, the average closing
sales prices on the immediately preceding date on which sales were reported,
(ii) if on any day the Common Shares shall not be quoted on a national
securities exchange, the average of the high and low bid and asked prices on
such day in the over-the-counter market as reported by National Quotation Bureau
Incorporated, or any similar successor organization, or (iii) in the event
there is no public market or over-the-counter market for the Common Shares on
such date, the fair market value as determined, in good faith, by the Board of
Trustees of the Company in its sole discretion).
6.
Restrictions
on Transfer
. During the Period of Restriction, the Trustee shall not
sell, transfer, pledge, hypothecate, assign, exchange or otherwise dispose of
the Restricted Common Shares. Any attempted sale, transfer, pledge,
hypothecation, assignment, exchange or other disposition shall be null and void
and of no force or effect and the Company shall have the right to disregard the
same on its books and records and to issue “stop transfer” instructions to its
transfer agent.
7.
Consent
to Electronic Delivery
. The Company may choose to deliver certain
statutory materials relating to the Grant in electronic form. By accepting this
Agreement, the Trustee agrees that the Company may deliver any documents
required by the Securities and Exchange Commission and the Company’s annual
report to the Trustee in an electronic format. If at any time the Trustee would
prefer to receive paper copies of these documents, please contact Chief
Financial Officer of the Company to request paper copies of these
documents.
8.
No
Rights Conferred
. Nothing in this Agreement shall give the Trustee any
right to continue in the employ or service of the Company, any affiliate or any
subsidiary and/or as a member of the Company’s Board of Trustees or in any other
capacity, or interfere in any way with the right of the Company, any affiliate
or any subsidiary to terminate the employment or services of the
Trustee.
9.
Adjustments
.
All references to the number and class of shares covered by this Agreement and
other terms in this Agreement may be appropriately adjusted, by a vote of the
majority of the members of the Board of Trustees of the Company, in the event of
certain unusual or non-recurring transactions, including an unusual or
non-recurring dividend or other distribution (whether in the form of an
extraordinary cash dividend, dividend of Common Shares, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Shares or other securities of the Company,
issuance of warrants or other rights to purchase Common Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Common Shares. In such an event, the Board of Trustees of the
Company may in an equitable and proportionate manner (and, as applicable, in
such equitable and proportionate manner as is consistent with Sections 422 and
409A of the Internal Revenue Code of 1986, as amended from time to time (the
“Code”) and the regulations thereunder and with Section 162(m) of the Code)
either: (i) adjust the number of Shares, provided that the number of Shares
shall always be a whole number; (ii) provide for an equivalent award in respect
of securities of the surviving entity of any merger, consolidation or other
transaction or event having a similar effect; or (iii) make provision for a cash
payment to the Trustee for the Shares.
10.
Compliance
with Section 409A of the Code
. The Trustee hereby consents (without
further consideration) to any change to this Agreement or the Grant so the
Trustee can avoid paying penalties under Section 409A of the Code, even if
those changes affect the terms and conditions of this Agreement of the Grant and
reduce its value or potential value.
11.
Binding
Effect
. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement may not be
assigned or transferred in whole or in part by the Trustee, nor may the Trustee
delegate any duty or obligation under this Agreement, and any attempt to so
assign, transfer or delegate shall be null and void and of no force or
effect.
12.
Interpretation
of this Agreement
. All determinations and interpretations made by the
Board of Trustees of the Company with regard to any questions arising under this
Agreement shall be final, binding and conclusive as to all persons, including
without limitation the Trustee and any person claiming rights from or through
the Trustee.
13.
Venue
.
Each party to this Agreement hereby irrevocably (i) consents and submits to
the exclusive jurisdiction of the state and federal courts in Harris County,
Texas in connection with any disputes arising out of this Agreement, and
(ii) waives any objection based on venue or inconvenient forum with respect
to any action instituted therein arising under this Agreement or the
transactions contemplated hereby, and agrees that any dispute with respect to
such matters shall be heard only in the courts described above.
14.
Governing
Law; Entire Agreement; Amendment
. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without regard
to such state’s conflict of laws principles. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof. This Agreement may be
amended by a majority of the members of the Board of Trustees, subject to the
Trustee’s consent if such amendment materially and adversely affects the rights
of the Trustee, except that the consent of the Trustee shall not be required for
any amendment made pursuant to Section 10 of this Agreement.
15.
Tax
Elections
. THE TRUSTEE UNDERSTANDS THAT HE OR SHE (AND NOT THE COMPANY)
SHALL BE RESPONSIBLE FOR THE TRUSTEE’S OWN TAX LIABILITY THAT MAY ARISE AS A
RESULT OF THE ACQUISITION OF THE SHARES HEREUNDER. THE TRUSTEE ACKNOWLEDGES AND
AGREES THAT HE OR SHE HAS CONSIDERED THE ADVISABILITY OF ALL TAX ELECTIONS IN
CONNECTION WITH THE ISSUANCE OF THE SHARES, INCLUDING THE MAKING OF AN ELECTION
UNDER SECTION 83(b) OF THE CODE. THE TRUSTEE FURTHER ACKNOWLEDGES AND
AGREES THAT, IF THE TRUSTEE DETERMINES TO MAKE AN ELECTION UNDER SECTION 83(b)
OF THE CODE, (i) THE TRUSTEE (AND NOT THE COMPANY) IS SOLELY RESPONSIBLE
FOR PROPERLY AND TIMELY COMPLETING AND FILING ANY SUCH SECTION 83(b)
ELECTION, AND (ii) THE TRUSTEE AGREES TO TIMELY PROVIDE A COPY OF THE
ELECTION TO THE COMPANY AS REQUIRED UNDER THE CODE.
16.
Notices
.
Any notice, demand or request required or permitted to be given under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally, or (ii) three days after being deposited in the United States
mail, by certified or registered mail, postage prepaid, or (iii) the next
business day after sent by nationally recognized overnight delivery service, and
addressed, if to the Company, at its principal place of business, Attention:
Chief Financial Officer, and if to the Trustee, at his or her most recent
address as shown in the employment or stock records of the Company.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
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Whitestone
REIT
|
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By:
|
/s/
James C. Mastandrea
|
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Name:
|
James C. Mastandrea
|
|
|
|
|
Title:
|
Chairman of the Board of Trustees
|
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|
|
|
Trustee: /s/
Chris A. Minton
|
|
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|
Date:
|
March
25, 2009
|
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|
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Exhibit
A
LAPSE
OF PERIOD OF RESTRICTION
|
|
|
|
|
|
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Number
of Shares
|
|
|
Vesting
Date
|
|
Percentage
of
Shares
|
|
|
|
|
|
|
|
5,000
|
|
March
25, 2010
|
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34%
|
|
|
|
|
|
|
|
|
|
March
25, 2011
|
|
33%
|
|
|
|
|
|
|
|
|
|
March
25, 2012
|
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33%
|
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Exhibit
B
STOCK
POWER
For value
received, I hereby sell, assign and transfer unto____________________ Common
Shares of Whitestone REIT standing in my name on the books of said Company
represented by Certificate(s) Number(s) ______ herewith, and do hereby
irrevocably constitute and appoint ______ attorney to transfer the said stock on
the books of said Company with full power of substitution in the
premises.
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Date:
|
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Printed
Name:
|
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Signature:
|
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Witness
Signature:
|
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8
Exhibit
31.1
CHIEF
EXECUTIVE OFFICER
CERTIFICATION
I, James
C. Mastandrea, certify that:
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1.
I have reviewed this Quarterly Report on Form 10-Q, for the period ended
March 31, 2009, of Whitestone REIT;
|
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2.
Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
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3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this
report;
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4.
The registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
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a. Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being
prepared;
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b. Designed such
internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles;
|
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c. Evaluated the
effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
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d. Disclosed in this
report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
and
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5.
The registrant’s other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent
functions):
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a. All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
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b. Any fraud,
whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over
financial reporting.
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Date:
May 15, 2009
|
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/s/
James C. Mastandrea
|
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James
C. Mastandrea, Chief Executive Officer
|
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CHIEF
FINANCIAL OFFICER
CERTIFICATION
I, David
K. Holeman, certify that:
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1.
I have reviewed this Quarterly Report on Form 10-Q, for the period ended
March 31, 2009, of Whitestone REIT;
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2.
Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
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3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this
report;
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4.
The registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
|
a. Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being
prepared;
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b. Designed such
internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles;
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c.
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation;
and
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d.
Disclosed in this report any change in the registrant’s internal control
over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
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5.
The registrant’s other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent
functions):
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a.
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
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b.
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
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Date:
May 15, 2009
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/s/
David K. Holeman
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David
K. Holeman, Chief Financial Officer
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CERTIFICATION
PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
(18
U.S.C. SECTION 1350)
In
connection with the Quarterly Report of Whitestone REIT, a Maryland real estate
investment trust (the “Company”) on Form 10-Q for the period ended March 31,
2009, as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), I, James C. Mastandrea, Chief Executive Officer of the Company,
certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that:
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(1)
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The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
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(2)
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The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
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Dated:
May 15, 2009
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/s/
James C. Mastandrea
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James
C. Mastandrea
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Chief
Executive
Officer
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CERTIFICATION
PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
(18
U.S.C. SECTION 1350)
In
connection with the Quarterly Report of Whitestone REIT, a Maryland real estate
investment trust (the “Company”) on Form 10-Q for the period ended March 31,
2009, as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), I, David K. Holeman, Chief Financial Officer of the Company,
certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that:
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|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
|
|
|
|
|
(2)
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The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
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Dated:
May 15, 2009
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/s/
David K. Holeman
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David
K. Holeman
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Chief
Financial
Officer
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