Document:

EX-10.2

 

Exhibit 10.2

Stock Subscription Agreement

This Stock Subscription Agreement (this “Agreement”) is entered into by and between
James C. Mastandrea (“Investor”) and Paragon Real Estate Equity and Investment Trust, a Maryland
trust (the “Company”), as of September 29, 2006.

     1. Sale and Purchase of Shares. Subject to the terms and conditions set forth in this
Agreement, the Company hereby sells to Investor, and Investor hereby purchases from the Company for
investment, 44,444 shares of the Company’s Class C convertible preferred shares of beneficial
interest, $0.01 par value per share (“Stock”), issuable upon the Company’s receipt of the signed
Agreement. As consideration for the purchase of Stock, Investor hereby agrees to pay to the
Company the sum of $200,000 (the “Purchase Price”) in the form of services as an officer for the
two-year period beginning September 29, 2006 and ending September 29, 2008. The shares of Stock
being purchased by Investor are referred to as the “Subscription Shares.” The Subscription Shares
will be subject to forfeiture and restricted from being sold by Investor until the later to occur
of:

(i) a public offering by the Company sufficient to liquidate the Subscription Shares,

(ii) an exchange of the Company’s existing shares for new shares, and

(iii) September 29, 2008.

     2. Representation and Warranty of the Company. The Company represents and warrants to
Investor that the Subscription Shares, when issued, will be duly authorized and validly issued by
the Company, but not fully paid and nonassessable until the Company receives the Purchase Price
from Investor in the form of services as an officer for the two-year period.

     3. Representations and Warranties of Investor. Investor understands that the sale of
Subscription Shares is intended to be exempt from registration under the Securities Act of 1933, as
amended (the “Securities Act”), by virtue of Sections 3(b) and 4(2) of the Securities Act, and
Investor represents and warrants that:

          (a) Investor has been advised that the Subscription Shares have not been registered under the
Securities Act and, therefore, cannot be resold unless they are registered under the Securities Act
or unless an exemption from registration is available and the certificates representing the
subscription shares will be legended accordingly. Investor is aware that there is a limited market
for the resale of the Subscription Shares, and that he may be required to hold the Subscription
Shares indefinitely. Investor is purchasing the Subscription Shares for his own account for
investment and not with a view to, or for resale in connection with, the distribution thereof, and
Investor has no present intention of distributing or reselling the Subscription Shares. Investor
represents and warrants that he has such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of such investment and is able to bear the
economic risk of such investment.

 

 

          (b) In addition to any other legends required by any agreement or otherwise, the certificates
representing Subscription Shares shall be conspicuously endorsed in substantially the following
form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE
PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”). NO TRANSFER OF SUCH SECURITIES MAY BE MADE ON THE BOOKS OF THE
ISSUER, UNLESS ACCOMPANIED BY AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER, THAT SUCH TRANSFER MAY PROPERLY BE MADE WITHOUT REGISTRATION UNDER
THE ACT OR THAT SUCH SECURITIES HAVE BEEN SO REGISTERED UNDER A REGISTRATION
STATEMENT WHICH IS IN EFFECT AT THE DATE OF SUCH TRANSFER. IN ADDITION, THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER PURSUANT TO A SUBSCRIPTION AGREEMENT DATED

SEPTEMBER 29, 2006.

          (c) Investor is an “accredited investor” as such term is defined in Rule 501(a) of
Regulation D of the Securities Act.

          (d) This Stock Subscription Agreement has been duly executed and delivered by Investor and
constitutes Investor’s legal, valid and binding obligation, enforceable in accordance with its
terms. If Investor is terminated prior to August 31, 2008, Investor will return a proportionate
number of Subscription Shares. If Investor dies prior to August 31, 2008, the Investor’s estate
will not be required to return any Subscription Shares and the restrictions will no longer apply.

          (e) Investor is a member of the board of trustees of the Company, has made a complete and
thorough investigation of the affairs and prospects of the Company and has had a reasonable
opportunity to ask questions of and receive answers from a person or persons acting on behalf of
the Company concerning this investment, and all such questions have been answered to the full
satisfaction of Investor.

          (f) Investor acknowledges that the Company is entering into this Agreement in reliance upon
Investor’s representations and warranties in this Agreement.

     4. Covenants and Representations to Survive Delivery; Assignment. All covenants, agreements,
representations and warranties made in this Agreement will survive the delivery to Investor of the
Subscription Shares and payment therefore and, notwithstanding any investigation previously or in
the future made by Investor or on Investor’s behalf, shall continue in full force and effect.
Investor may not assign any of his rights hereunder. Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the heirs, successors and
permitted assigns of such party, and all covenants, promises and agreements in this Agreement by or
on behalf of the Company, or by or on behalf of Investor, shall bind and inure to the benefit of
the heirs, successors and permitted assigns of such party hereto.

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     5. Governing Law; Amendments. This Stock Subscription Agreement shall be construed and
enforced in accordance with the domestic substantive laws of the State of Ohio without
giving effect to any choice or conflict of laws provision or rule that would cause the application
of the domestic substantive laws of any other state. This Agreement cannot be changed orally, and
can be changed only by an instrument in writing signed by the party against whom enforcement of
such change is sought.

In Witness Whereof, the parties have executed this Agreement as of the
date written above.

Paragon Real Estate Equity and Investment Trust

	 	 	 	 	 
	Signed:

	 	           /s/ Daryl J. Carter
 

By Daryl J. Carter, Chairman of Management,
	 	 
	 

	 	           Organization and Compensation Committee	 	 
	 
	 	 	 	 
	Signed:

	 	           /s/ James C. Mastandrea	 	 
	 

	 	 	 	 
	 

	 	By James C. Mastandrea	 	 

3EX-10.3

 

Exhibit 10.3

RESTRICTED SHARE AGREEMENT

The parties, PARAGON REAL ESTATE EQUITY AND INVESTMENT TRUST, a Maryland real estate investment
trust (the “Trust”), and
                     (“Trustee”) agree to enter into this restricted share
agreement (“Agreement”), made at Cleveland, Ohio, this 29th day of September, 2006.

WITNESSETH:

     WHEREAS: The Trust is a publicly traded real estate company;

     WHEREAS: The Trust desires to substantially grow the asset base, net operating income, funds
from operations, net value, and share value of the Trust;

     WHEREAS: The Trust seeks to retain the leadership experience, talent, and relationship of the
Trustee;

     WHEREAS: The Trustee is a trustee of the Trust and intends to remain as a trustee until not
re-elected;

     WHEREAS: The Trust and the Trustee desire to enter into this Agreement;

     NOW, THEREFORE, the Trust and the Trustee have agreed to be bound by the terms and conditions
of this Agreement:

1) GRANTING OF RESTRICTED SHARES. The Trust will issue to the Trustee a total of 12,500 restricted
shares of the Trust’s Class C Convertible Preferred Shares (“Restricted Shares”) for his services
as a trustee of the Trust for the period beginning as of the date of this Agreement through
September 29, 2008.

2) RESTRICTIONS ON THE SHARES. In accordance with the terms of the certificate of designation of
the Restricted Shares, the holder of any Restricted Shares will at all times be entitled to vote
the Restricted Shares and to receive any dividends declared on the Trust’s Class C Convertible
Preferred Shares. In addition, the holder of any Restricted Shares may transfer the shares to any
affiliate of the Trustee subject to the forfeiture and other provisions of this Agreement.
However, the holder of any Restricted Shares may not otherwise transfer, sell, assign or dispose of
any of the Restricted Shares until they have vested as provided for in this Agreement; provided
further, that notwithstanding whether or not some or all of the Restricted Shares have vested as
provided for in this Agreement, the holder of any Restricted Shares may not transfer or sell any of
the Restricted Shares until the second anniversary of the date of this Agreement. The term
“affiliate” shall have the meaning ascribed to it in Rule 12b-2 promulgated by the Securities and
Exchange Commission.

 

 

3) VESTING OF RESTRICTED SHARES. The Restricted Shares will vest upon the latest to occur of:

     (a) a public offering by the Company sufficient to liquidate the Restricted Shares,

     (b) an exchange of the Company’s existing shares for new shares, and

     (c) September 29, 2008.

The vesting schedule shall not be affected if the Trustee dies. The holder of the Restricted
Shares will automatically and without notice be forfeited and cease to have any right, title or
interest to any of the Restricted Shares that remain subject to forfeiture immediately if the
Trustee resigns from being a member of the Board of Trustees of the Trust prior to

September 29, 2008.

4) TAXES. Under the general rule of Section 83 of the Internal Revenue Code (the “Code”), the
Trustee will not be treated as receiving the Restricted Shares until such time as he becomes
substantially vested in the Restricted Shares. The Trustee will become substantially vested in the
Restricted Shares upon the occurrence of the latest event described in Section 3 above. At that
time, he will be taxed on the value of the Restricted Shares as ordinary compensation income. As
an exception to this rule, Section 83 of the Code permits the Trustee to elect to be taxed on the
value of the Restricted Shares as of the date of the grant of the Restricted Shares. The §83(b)
election must be filed by the Trustee within 30 days of the grant of the Restricted Shares. The
filing must be made with the Internal Revenue Service Center with which the Trustee files his
federal income tax returns and a copy of the election must be submitted with his income tax return
for the taxable year in which he receives the Restricted Shares and to the Trust.

5) REPRESENTATIONS OF THE TRUSTEE. The Trustee understands that the issuance of the Restricted
Shares is intended to be exempt from registration under the Securities Act by virtue of §4(2) and
represents and warrants that: (i) he is aware that the Restricted Shares are not registered under
the Securities Act or the securities or “blue sky” laws of any state or jurisdiction; (ii) he
understands that the Restricted Shares cannot be resold unless they are registered under the
Securities Act or unless an exemption from registration is available and represents that he is
acquiring the Restricted Shares for investment and not for immediate resale; and (iii) he
acknowledges that the Restricted Shares will be treated as taxable income to him under the Code.

7) MISCELLANEOUS. This Agreement may only be modified, waived, or discharged if approved by the
Board and agreed to in writing and signed by the Trustee and the Trust. This Agreement shall inure
to the benefit of the Trustee and his heirs and legal representatives. No waiver by any party
hereto at any time of any breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or at any prior or subsequent time. No
agreement or representation, oral or otherwise, expressed or implied,

2

 

 with respect to the subject
matter hereof, has been made by any of the parties which is not set forth expressly in this
Agreement. This Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio. In the event legal action is instituted to enforce any provision of this Agreement,
each party shall pay its own cost and expense thereof. This Agreement constitutes the entire
agreement between the parties with the subject matter hereof
and all prior negotiations, discussions, and agreements on that subject matter are hereby
superseded. This Agreement may be executed in one or more counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts taken together, when
executed and delivered, will constitute one and the same instrument.

8) NO PERSONAL LIABILITY. Notwithstanding anything herein to the contrary, this Agreement is made
and executed on behalf of the Trust, a real estate investment trust organized under the laws of the
State of Maryland, by its officers thereof on behalf of the trustees thereof, and none of the
trustees or any additional or successor trustees hereinafter appointed, nor any beneficiary,
officer, employee or agent of the Trust will have any liability hereunder in his personal or
individual capacity, but, instead, all parties will look solely to the property and assets of the
Trust for satisfaction of claims of any nature arising under or in connection with this Agreement.

IN WITNESS WHEREOF, this Agreement has been signed by the Trust and the Trustee as of the date
first above written.

PARAGON REAL ESTATE EQUITY AND INVESTMENT TRUST

	 	 	 	 	 
	By:

	 	/s/ James C. Mastandrea
 

James C. Mastandrea, Chairman of
	 	 
	 

	 	The Board of Trustees	 	 

	 	 	 	 	 
	 	 	 
	Name:
	 	 	 	 
	 	 	 	 	 
	Title:

	 	Trustee	 	 

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