Item 1.01. Entry into a Material Definitive Agreement.
City Office REIT, Inc. (the "Company") previously disclosed entry by the Company
and a subsidiary ("Buyer Sub") into a Stock Purchase Agreement ("Stock Purchase
Agreement"), dated as of November 2, 2015, with certain stockholders of City
Office Real Estate Management Inc. (the "Advisor"), the external advisor to the
Company under an Advisory Agreement dated April 21, 2014 among the Advisor, the
Company and City Office REIT Operating Partnership, L.P., the Company's
operating partnership (the "Advisory Agreement"), and two personal holding
companies that owned stock of the Advisor. Simultaneously with the closing under
the Stock Purchase Agreement on February 1, 2016, Buyer Sub entered into an
Administrative Services Agreement (the "Administrative Services Agreement") with
entities that manage real estate investment funds affiliated with Second City
Capital II Corporation and Second City Real Estate II Corporation (the "Second
City funds"), affiliates of which were sellers under the Stock Purchase
Agreement. The transactions contemplated by the Stock Purchase Agreement, which
were consummated on February 1, 2016, are referred to collectively herein as the
"Internalization."
James Farrar, the Company's Chief Executive Officer, Gregory Tylee, the
Company's President and Chief Operating Officer, and one of the Company's
directors, Samuel Belzberg, are officers of the general partners of the Second
City funds and own equity interests in the Second City funds. The Administrative
Services Agreement has a three year term and pursuant to the agreement, Buyer
Sub will provide various administrative services and support to the entities
managing the Second City funds as set forth in the Administrative Services
Agreement. Second City will make annual payments to Buyer Sub for these services
under the Administrative Services Agreement as follows: first 12
months-$1.5 million, second 12 months-$1.125 million and third 12 months-$
0.625 million, for a total of $3.25 million over the three-year term. In
addition, following the expiration of the three year term of the Administrative
Services Agreement, the Company agreed to make Messrs. Farrar and Tylee
available to assist the Second City funds with respect to certain matters. The
foregoing description of the Administrative Services Agreement is not complete.
Reference is made to the Administrative Services Agreement filed as Exhibit 10.1
to this Form 8-K.
In connection with the Internalization, on February 1, 2016, the Company, its
operating partnership and the Advisor entered into an amendment to the Advisory
Agreement in order to terminate certain provisions thereof. The foregoing
description of the amendment to the Advisory Agreement is not complete.
Reference is made to the amendment to the Advisory Agreement filed as Exhibit
10.2 to this Form 8-K.
Item 1.02. Termination of a Material Definitive Agreement.
Also in connection with the Internalization, on February 1, 2016, the Advisor
and an affiliate of one of the Second City Funds entered into a Termination and
Mutual Release Agreement with respect to that certain Administration Agreement,
dated as of April 21, 2014, entered into by the Advisor and such affiliate of
one of the Second City Funds (the "Termination") at the time of the Company's
initial public offering in April 2014. There were no termination penalties
incurred by the Company as a result of the termination. The foregoing
descriptions of the Termination is not complete. Reference is made to the
Termination filed as Exhibit 10.3 to this Form 8-K.
Item 3.02 Unregistered Sales of Equity Securities.
As consideration for the Company's direct and indirect acquisition of the all of
the outstanding capital stock of the Advisor in the Internalization, pursuant to
the terms of the Stock Purchase Agreement upon closing of the Internalization,
the Company issued 297,321 shares of the Company's common stock, par value $0.01
per share ("Common Stock"), to the sellers identified in the Stock Purchase
Agreement-the Company's three executive officers and Samuel Belzberg, a director
of the Company. The Common Stock was issued pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon Section 4(a)(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder.
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Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers, Compensatory Arrangements of Certain
Officers.
Pursuant to the completion of the Internalization, on February 1, 2016 the
Company, through a wholly-owned subsidiary, entered into an employment agreement
(collectively, the "Employment Agreements") with each of James Farrar, the
Company's Chief Executive Officer, Greg Tylee, the Company's President and Chief
Operating Officer, and Anthony Maretic, the Company's Chief Financial Officer,
Secretary and Treasurer.
The Compensation Committee of the Company's board of directors (the
"Compensation Committee") approved the terms of the Employment Agreements. The
Employment Agreements are effective as of February 1, 2016 and are effective
until terminated. Pursuant to the terms of the employment agreements, Messrs.
Farrar and Tylee each will be paid an initial annual base salary of $295,000 and
Mr. Maretic will be paid an initial annual base salary of $160,000. In addition,
each of Messrs. Farrar, Tylee and Maretic will be eligible to receive an annual
bonus based on the achievement of performance goals that are established by the
Company's board of directors or the Compensation Committee. The executives will
also continue to be eligible to participate in the Company's equity incentive
plan pursuant to which they may be entitled to receive restricted stock units,
options or other equity awards as determined by the Compensation Committee. The
foregoing description of the Employment Agreements is not complete. Reference is
made to the respective Employment Agreements filed as Exhibits 10.4, 10.5 and
10.6 to this Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number Description
10.1 Administrative Services Agreement, dated February 1, 2016, by and
among City Office Management Ltd., Second City Capital II Corporation
and Second City Real Estate II Corporation
10.2 Third Amendment to Advisory Agreement, dated February 1, 2016, by and
among City Office REIT, Inc., City Office REIT Operating Partnership,
L.P. and City Office Real Estate Management, Inc.
10.3 Termination and Mutual Release Agreement, dated February 1, 2016, by
and between City Office Real Estate Management Inc. and Second City
Capital II Corporation
10.4 Executive Employment Agreement, dated February 1, 2016, by and between
City Office Management Ltd. and Anthony Maretic
10.5 Executive Employment Agreement, dated February 1, 2016, by and between
City Office Management Ltd. and Gregory Tylee
10.6 Executive Employment Agreement, dated February 1, 2016, by and between
City Office Management Ltd. and James Farrar
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