|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the year ended December 31, 1996
OR
|_| 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 1-12928
Agree Realty Corporation
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(Exact name of registrant as specified in its charter)
Maryland 38-3148187
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
31850 Northwestern Highway, Farmington Hills, Michigan 48334
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, included area code: (810) 737-4190
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Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, $.0001 par value New York Stock Exchange
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Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
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. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. __X__
Shares of common stock outstanding as of March 14, 1997: 2,678,430. The aggregate market value of the Registrant's shares of common stock held by non-affiliates on such date was approximately $55,577,422.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incoroprated into Form 10-K
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Portions of the Registrant's Proxy Statement Part III
for its Annual Meeting of Shareholders Items 10-13
to be held on May 12, 1997
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TABLE OF CONTENTS
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Part I
Page
Numbers
-------
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 15
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 17
Item 8. Financial Statements and Supplementary Data 22
Item 9. Changes and Disagreements With Accountants
on Accounting and Financial Disclosure 22
Part III
Item 10. Directors and Executive Officers of the
Registrant 22
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial
Owners and Management 22
Item 13. Certain Relationships and Related Transactions 22
Part IV
Item 14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 23
Signatures 25
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PART 1
Item 1. BUSINESS
General
The Company is a self-administered, self-managed real estate investment trust (a "REIT") which develops, acquires, owns and operates properties which are primarily leased to major national and regional retail companies under net leases. As of December 31, 1996, the Company owned, either directly or through interests in joint ventures, a portfolio of 32 properties located in 12 states and containing an aggregate of approximately 3.1 million square feet of gross leasable area ("GLA"). The Properties consist of 13 neighborhood and community shopping centers and 19 free standing properties. As of December 31, 1996, 98% of GLA in the Portfolio was leased, and approximately 92% of the Company's base rental income was attributable to national and regional retailers. Such retailers include Kmart Corporation ("Kmart"), Borders, Inc., Roundy's Inc. ("Roundy's") and Fashion Bug (Charming Shoppes, Inc.) which, as of December 31, 1996, collectively represented approximately 70% of current base rental income. The Company was the developer of all 13 of the shopping centers and 14 of the 19 free-standing properties. As of December 31, 1996, the average age of the Properties was 5.5 years.
The Company was formed in December 1993, to continue and expand the retail property business founded in 1971 by its current Chairman of the Board of Directors and President, Richard Agree. Since 1971, the Company and its predecessors have specialized in building properties to suit for national and regional retailers who have signed long-term net leases prior to commencement of construction. The Company believes that this strategy provides it with a predictable source of income from primarily national and regional retail tenants in its existing properties and also provides opportunities for development of additional properties at attractive returns on investment, without the lease-up risks inherent in speculative development.
Upon completion of its initial public offering (the "IPO") in April 1994, the Company succeeded to the ownership of 17 properties which contained an aggregate of 2,376,000 square feet of space. Since the IPO, the Company has:
o Completed the development or acquisition of 14 properties leased to Borders, Inc. and other subsidiaries (collectively, "Borders") of Borders Group, Inc. ("BGI") which contain over 650,000 square feet. These properties include Borders' corporate headquarters and central administrative building in Ann Arbor, Michigan. BGI has guaranteed the leases on all 14 of these properties. Seven of these properties are owned directly by the Company and seven of these properties (the "Joint Venture Properties") are owned by entities formed with affiliates of Borders wherein the Company's economic interest ranges from 8% to 20% (the "Joint Ventures").
o Developed a Circuit City store in Boynton Beach, Florida, consisting of approximately 32,500 square feet, pursuant to a twenty-year net lease.
o Continued to operate both its initial portfolio and its new properties at leased rates of over 95% and without any tenant
defaults. Kmart, the Company's largest tenant, reported to the Company that the aggregate same-store sales at the stores leased from the Company increased over 6% from 1995 to 1996. Since the IPO, the only anchor tenant to vacate any of the Company's Properties was J. Byrons, which vacated its 51,868 square foot location in Lakeland, Florida. The Company has leased such location to Best Buy Company, at an increased rental rate for a term which expires in January 2013.
o Announced results for the fourth quarter and year ended December 31, 1996, which included Funds from Operations (as hereafter defined) of $1,951,000 and $7,076,000 for the quarter and the year, respectively, or an increase of 18% and 10% respectively, from the same periods in 1995; and net income for the quarter and the year of $1,382,000 and $3,734,000 respectively, or an increase of 65% and 15%, respectively, over the same periods in 1995.
The Company is operated under the direction of Richard Agree, Chairman of the Board and President, and Kenneth R. Howe, Vice President, Finance. Messrs. Agree and Howe have an combined 35 years experience in the construction, management, leasing and disposition of shopping center properties.
Objectives and Strategies
Objectives
The Company's primary objectives are (i) to realize steady and predictable cash flows through the ownership of high quality properties leased primarily to national and regional retailers, and (ii) to increase Funds from Operations per share through the development or acquisition of additional properties. The Company presently intends to achieve these objectives by implementing the growth, operating and financial strategies outlined below.
Growth and Operating Strategies
In seeking to attain these objectives, the Company has applied and intends to continue to apply the same strategies that have guided its principals during the past twenty-six years. These strategies include the following:
o Developing or acquiring each property with the objective of holding it for long-term investment value.
o Developing or acquiring properties in what the Company considers to be attractive long term locations. Such locations typically have (i) convenient access to transportation arteries with traffic count that is higher than average for the local market; (ii) concentrations of other retail proprieties and (iii) demographic characteristics which are attractive to the retail tenant which will lease the property upon completion.
o Generally, purchasing land and beginning development of a property only upon the execution of a lease with a national or regional retailer on terms which provide a return on estimated cost which is attractive relative to the Company's cost of capital.
o Directing all aspects of development, including construction, design, leasing and management. Property management and the majority of its leasing activities are handled directly by Company personnel. The Company believes that this approach to development and management enhances the ability of the Company to develop and maintain assets of high construction quality which are designed, leased and maintained to maximize long-term value and enables it to operate efficiently.
The Company believes that the relationships established by its principals with national and regional retailers as well as the financing relationships its principals have developed with lenders provide it with an advantage in achieving its objectives.
Financing Strategy
As of December 31, 1996, the Company's ratio of indebtedness to market capitalization was 54%. The Company intends to maintain a ratio of total debt (including construction and acquisition financing) to market capitalization of 65% or less. The Company plans to begin construction of additional pre-leased developments and may acquire additional properties which will initially be financed by its Credit Facility and Line of Credit. Management intends to periodically refinance short term construction and acquisition financing with long-term debt and /or equity. Upon completion of refinancing, the Company intends to lower the ratio of total debt to market capitalization to 50% or less. Nevertheless, the Company may operate with debt levels or ratios which are in excess of 50% for extended periods of time prior to such refinancing.
The Company may from time to time re-evaluate its borrowing policies in light of then current economic conditions, relative costs of debt and equity capital, market value of properties, growth and acquisition opportunities and other factors. However, there is no contractual limit on the Company's ratio of debt to total market capitalization and, accordingly, the Company may modify its borrowing policy and may increase or decrease its ratio of debt to market capitalization.
Tax Status
The Company has operated and intends to operate in a manner to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. In order to maintain qualification as a REIT, the Company must distribute at least 95% of its real estate investment trust income and meet certain other asset and income tests. Additionally, ownership of the Company, directly or constructively, by any single person is limited to 9.8% of the total number of outstanding shares, subject to certain exceptions. As a REIT, the Company is not subject to federal income tax with respect to that portion of its income which meets certain criteria and is distributed annually to the stockholders.
Competition
The Company faces competition in seeking properties for acquisition and tenants who will lease space in these properties from insurance companies, credit companies, pension funds, private individuals, investment companies and other REITs, many of which have greater financial and other resources than the Company. There can be no
assurance that the Company will be able to successfully compete with such entities in its development, acquisition and leasing activities in the future.
Potential Environmental Risks
Investments in real property create a potential for environmental
liability on the part of the owner or operator of such real property. If
hazardous substances are discovered on or emanating from any of the
Properties, the owner or operator of the property (including the Company) may
be held strictly liable for all costs and liabilities relating to such
hazardous substances. The Company has had a Phase I environmental study
(which involves inspection without soil sampling or ground water analysis)
conducted on each Property by independent environmental consultants.
Furthermore, the Company has adopted a policy of conducting a Phase I
environmental study on each property it acquires.
The Phase I environmental studies conducted by the Company have not revealed the existence of any hazardous substance or environmental liability on the Properties. In addition, the management of the Company has no reason to believe that any hazardous substances exist on such Properties in violation of any applicable laws; however, no assurance can be given that such substances are not located on any of the Properties. The Company presently carries no insurance coverage for the types of environmental risks described above.
The Company believes that it is in compliance in all material respects with all Federal, state and local ordinances and regulations regarding hazardous or toxic substances. The Company has not been notified by any governmental authority of any noncompliance, liability or other claim in connection with any of the Properties.
Employees
As of March 15, 1997, the Company employed eight persons. Employee responsibilities include accounting, construction, leasing, property coordination and administrative functions for the Properties. The Company's employees are not covered by a collective bargaining agreement and the Company considers its employee relations to be satisfactory. The Company's headquarters are located at 31850 Northwestern Highway, Farmington Hills, MI 48334 and its telephone number is (810) 737-4190.
Recent Developments
On January 24, 1997 the Company repaid $4,221,283 of construction loans. Such funds were paid from the Company's Credit Facility (defined below).
On February 26, 1997 the Company repaid $8,518,615 of construction loans. Such funds were paid from the Company's Credit Facility (defined below).
Item 2. PROPERTIES
The Properties consist of 13 neighborhood and community shopping centers and 19 free standing properties. As of December 31, 1996, 98% of GLA in the Portfolio was leased, and approximately 92% of the Company's base rental income was attributable to, national and regional retailers. Such retailers include Kmart, Borders, Roundy's and Fashion Bug which, at December 31, 1996, collectively represented approximately 70% of current base rental income.
A substantial portion of the Company's income consists of rent received under net leases. Most of the leases provide for the payment of fixed base rentals monthly in advance and for the payment by tenants of a pro rata share of the real estate taxes, insurance, utilities and common area maintenance of the shopping center as well as payment to the Company of a percentage of such tenant's sales. However the payments of percentage rents to the Company historically have not been material and the Company does not anticipate that they will become material in the future. Although a majority of the leases require the Company to make roof and structural repairs as needed, a number of leases place that responsibility on the tenant. The Company's management places a strong emphasis on sound construction and maintenance on its properties.
Location of Properties in the Portfolio
Total Gross Percent of
Number of Leasable Area GLA Leased on
State Properties (Sq. feet) December 31, 1996
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California 1 38,015 100%
Florida 5 (1) 486,657 96
Indiana 1 (1) 15,844 100
Illinois 1 20,000 85
Kansas 1 25,000 100
Kentucky 1 135,009 100
Michigan 11 (1) 1,549,758 99
Nebraska 2 (1) 55,000 100
Ohio 2 108,543 100
Oklahoma 3 (1) 74,282 100
Pennsylvania 1 37,004 100
Wisconsin 3 523,036 97
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Total/Average 32 3,068,148 98%
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(1) Includes Joint Venture Properties
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Annualized Base Rent of the Company's Properties
The following is a breakdown of Base Rents in place at December 31, 1996 for each property type of retail tenant:
Annualized Percent of
Type of Tenant Base Rent (1) Total Base Rent
---------------------------------------------------------------
National (2) $13,802,774 81%
Regional (3) 1,882,863 11
Local 1,341,566 8
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Total $17,027,203 100%
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(1) Includes the Company's share of annualized base rent for each of the
Joint Venture Properties.
(2) Includes the following national tenants: Kmart, Borders, Fashion Bug, Winn
Dixie, Rite Aid, JC Penney, Avco Financial, GNC Group, Radio Shack, On Cue,
Super Value, Maurices, Petrie Stores, Walgreens, Payless Shoes, Food Lion,
Blockbuster Video, Sears, A&P, TGI Fridays and Circuit City.
(3) Includes the following regional tenants: Roundy's, Dunhams Sports, Brauns
Fashion and Hollywood Video.
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As of December 31, 1996, 98% of the Portfolio was leased and approximately 92% of the Company's base rental income was attributable to national and regional retailers under long-term leases. On December 31, 1996 the average annualized base rent per square foot of the Portfolio was $6.39.
Four of the Company's largest tenants of are Kmart, Borders, Inc., Roundys, Inc. and Fashion Bug (Charming Shoppes). The annualized base rental income for these tenants, (including the Company's proportionate share of the annual base rent for the Joint Venture properties) as of December 31, 1996, is as follows:
Percent
Amount of Total
------ --------
Kmart $ 5,305,601 31%
Borders, Inc. 4,393,545 26%
Roundys, Inc. 1,730,063 10%
Fashion Bug 573,200 3%
----------- ---
$12,002,409 70%
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Community Shopping Centers
Thirteen of the Company's properties are Community Shopping Centers ranging in size from 20,000 to 228,476 square feet of GLA. The centers are located in 5 states as follows: Florida (2), Illinois (1), Kentucky (1), Michigan (6) and Wisconsin (3). The location, general character and primary occupancy information with respect to the community shopping centers at December 31, 1996 are set forth below:
Summary of Community Shopping Centers at December 31, 1996
(2) (3)
Total (1) Average Percent Percent
Year Land Leasable Annualized Base Leased at Occupied Anchor Tenants
Completed/ Area Area Base Rent per at Dec 31, at Dec 31, (Lease expiration/
Property Location Expanded (acres) (Sq. Ft.) Rent Sq. Ft. 1996 1996 Option expiration)
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Capital Plaza 1978/ 11.58 135,009 $ 405,268 $ 3.00 100% 100% Kmart (2003/2053)
Frankfort, KY 1991 Winn Dixie (2010/2035)
Fashion Bug (2004/2024)
Charleviox Commons 1991 14.79 137,375 633,395 4.61 96% 70% Kmart (2015/2065)
Charlevoix, MI Roundy's, Inc. (2011/2031)
Chippewa Commons 1991 16.37 168,311 845,833 5.03 96% 96% Kmart (2014/2064)
Chippewa Falls, WI Roundy's, Inc. (2011/2031)
Fashion Bug (2001/2021)
Iron Mountain Plaza 1991 21.20 176,352 835,713 4.74 97% 77% Kmart (2015/2065)
Iron Mountain, MI Roundy's, Inc. (2011/2031)
Fashion Bug (2002/2022)
Ironwood Commons 1991 23.92 185,535 940,679 5.07 100% 100% Kmart (2015/2065)
Ironwood, MI Super Value (2011/2036)
J.C. Penney Co (2006/2026)
Fashion Bug (2002/2022)
Marshall Plaza 1990 10.74 119,279 627,536 5.26 100% 100% Kmart (2015/2065)
Marshall, MI Fashion Bug (2002/2022)
North Lakeland Plaza 1987 16.67 171,334 1,336,611 7.80 100% 100% Kmart (2011/2061)
Lakeland, FL Best Buy (2013/2028)
-9-
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Summary of Community Shopping Centers at December 31, 1996 (continued)
(2) (3)
Total (1) Average Percent Percent
Year Land Leasable Annualized Base Leased at Occupied Anchor Tenants
Completed/ Area Area Base Rent per at Dec 31, at Dec 31, (Lease expiration/
Property Location Expanded (acres) (Sq. Ft.) Rent Sq. Ft. 1996 1996 Option expiration)
- -------------------------------------------------------------------------------------------------------------------------------
Petoskey Town Center 1990 22.08 174,870 934,248 5.34 94% 94% Kmart (2015/2065)
Petoskey, MI Roundy's, Inc. (2010/2030)
Fashion Bug (2002/2022)
Plymouth Commons 1990 16.30 162,031 807,131 4.98 95% 95% Kmart (2015/2065)
Plymouth, WI Roundy's, Inc. (2010/2030)
Fashion Bug (2001/2021)
Rapids Associates 1990 16.84 173,557 978,119 5.64 100% 100% Kmart (2015/2065)
Big Rapids, MI Roundy's, Inc. (2010/2030)
Fashion Bug (2001/2021)
Shawano Plaza 1990 17.91 192,694 985,324 5.11 100% 100% Kmart (2014/2064)
Shawano, WI Roundy's, Inc. (2010/2030)
J.C. Penney Co (2005/2025)
Fashion Bug (2001/2021)
West Frankfort Plaza 1982 1.45 20,000 89,250 4.46 85% 85% Fashion Bug (1997/2007)
West Frankfort, IL
Winter Garden Plaza 1988 22.34 228,476 1,210,801 5.30 91% 69% Kmart (2013/2063)
Winter Garden, FL Food Lion (2009/2029)
Sears Roebuck (2000/2010)
------ --------- ----------- ----- -- --
Total/Average 212.19 2,044,823 $10,629,908 $5.20 97% 91%
====== ========= =========== ===== == ==
(1) Total annualized base rents of the Company as of December 31, 1996
(2) Calculated as total annualized base rents, divided by GLA actually
leased as of December 31, 1996
(3) Roundy's does not currently occupy the space it leases at the Iron
Mountain Plaza (35,285 square feet, rented at a rate of $5.87 per square
foot) and the Charlevoix Commons Property (35,896 square feet, rented at a
rate of $5.97 per square foot). Both of these leases expire in 2011 (assuming
they are not extended by Roundy's Inc.). Sears, Roebuck & Co. leases but does
not currently occupy, the 50,000 square feet it leases at the Winter Garden
Plaza Property. This lease expires in 2000 (assuming that it is not extended
by Sears) and is rented at a rate of $5.00 per square foot.
(4) All community shopping centers except Capital Plaza (which is subject
to a long-term ground lease expiring in 2053 from a third party are
wholly-owned by the Company.
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Free-Standing Properties
Nineteen of the Properties are free-standing properties net leased to either A&P (1), Borders (14), Circuit City Stores (1), or Kmart (3), which in the aggregate comprise approximately 1,000,000 square feet. The free-standing properties range in size from 15,844 to 226,000 square feet of GLA and are located in the following states: California (1), Florida (3), Indiana (1), Kansas (1), Michigan (5), Nebraska, (2), Ohio (2), Oklahoma (3) and Pennsylvania (1). Included in the Company's 19 retail properties are seven Joint Venture Properties in which the Company owns interests ranging from 8% to 20% and 12 wholly owned properties. The Company's twelve (12) wholly owned free-standing properties provide $5,720,378 of annualized base rent at an average base rent per square foot of $10.00. The location, general character and primary occupancy information with respect to the wholly-owned free-standing properties are set forth in the following table:
Wholly Owned Free Standing Properties
Year Lease expiration
Tenant/Location Completed Total GLA (Option expiration)
- --------------- --------- --------- -------------------
A&P, Roseville, MI 1977 104,000 May 21, 2002 (2022)
Borders, (1)
Aventura, FL 1996 30,000 April 11, 2116 (2036)
Borders, Columbus, OH 1996 21,000 Jan 23, 2016 (2036)
Borders,
Monroeville, PA 1996 37,004 Nov 8, 2016 (2036)
Borders, Norman, OK 1996 24,641 Sep 20, 2016 (2036)
Borders, Omaha, NE 1995 30,000 Nov 3, 2015 (2035)
Borders,
Santa Barbara, CA 1995 38,015 Nov 17, 2015 (2035)
Borders, Wichita, KS 1995 25,000 Nov 10, 2015 (2035)
Circuit City Stores
Boynton Beach, FL 1996 32,459 Dec 15, 2016 (2036)
Kmart, Grayling, MI 1984 52,320 Sep 30, 2009 (2059)
Kmart, Oscoda, MI 1984 90,470 Sep 30, 2009 (2059)
Kmart, (1)
Perysburg, OH 1983 87,543 Oct 31, 2008 (2058)
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Total 572,452
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(1)These properties are subject to long-term ground leases where a third
party owns the underlying land and has leased the land to the Company
to construct or operate two free-standing properties. The Company pays
rent for the use of the land and generally is responsible for all costs
and expenses associated with the building and improvements. At the end
of the lease terms, as extended (2035 and 2027), the land together with
all improvements revert to the land owner. The Company has an option to
purchase the Perrysburg property during its lease term.
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Joint Venture Properties
During 1996, the Company developed or acquired seven free-standing Properties which are leased to Borders, including Borders' corporate headquarters, its central administrative building and Properties operated as Borders Books and Music. Each of these Properties is owned by a separate limited liability company or a limited partnership which is owned jointly by the Company and an affiliate of Borders. The Company's economic interest in the Joint Ventures ranges from 8% to 20%. The financing for the development of the Joint Venture Properties was provided through a financing facility established by Borders and its affiliates (the "Borders Financing Facility").
The lease between Borders and each of the Joint Ventures has a term expiring November 21, 2000, unless the Borders Financing Facility is extended or earlier terminated. At any time during the term of the lease, Borders has the right to refinance the Property or to purchase the Property for various percentages of total project costs, provided that, prior to such refinancing or purchase, the Company may elect to provide alternative financing for the Property or purchase the Property and purchase the interest of the Borders' affiliate in the Joint Venture. In the event the Company elects to provide financing or to purchase the Property, and is subsequently unable to obtain the requisite financing or in the event that the Company defaults in its development obligations to the Joint Venture, Borders may purchase the Property. If the Company provides refinancing or purchases the Property, the Company will be required to acquire the interest of the Borders' affiliate in the Joint Venture, and Borders and the Joint Venture will enter into a new lease providing for a term of 20 years, with four five-year extension options.
Under certain circumstances, the Company may elect to allow Borders to place long-term financing on such Properties, in which case, the Company will maintain its current interest in the Joint Venture and become the sole equity member of the entity which owns such Property. In such a circumstance, the Company will own the Property subject to a first mortgage loan which could exceed 90% of the property's estimated value, and lease payments received by the Company would be adjusted to reflect Borders' financing.
Prior to one of the financing transactions discussed above, the Company's investment in the seven Joint Venture properties is expected to provide in excess of $600,000 annualized base rent. Of this amount, the Company estimates that approximately $116,000 is variable based on short-term financing. Under certain circumstances relating to refinancing of such assets, the rents paid pursuant to such leases are subject to adjustment. The following table provides additional information on the Joint Venture Properties.
Joint Venture Properties
The Company's
Tenant / Location Interest Total GLA Lease Expirations
- ----------------- ------------- --------- -----------------
Borders, Inc.
Ann Arbor, MI 11% 110,000 November 21, 2000
Borders, Inc.
Ann Arbor, MI 8% 226,000 November 21, 2000
Borders, Inc.
Boynton Beach, FL 12% 20,000 November 21, 2000
Borders, Inc.
Indianapolis, IN 8% 15,844 November 21, 2000
Borders, Inc.
Oklahoma City, OK 20% 24,641 November 21, 2000
Borders, Inc./Omaha, NE 18% 25,000 November 21, 2000
Borders, Inc./Tulsa, OK 15% 25,000 November 21, 2000
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Total 446,485
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Major Tenants
The following table sets forth certain information with respect to the Company's major tenants:
Annual Base Percent of Total
Number Rent as of Annual Base Rent as
of Leases December 31, 1996 of December 31, 1996
--------- ----------------- --------------------
Kmart 15 $ 5,305,601 31%
Borders 14 4,393,545 (1) 26%
Roundy's 7 1,730,063 10%
Fashion Bug
(Charming Shoppes) 10 573,200 3%
-- ----------- --
Total/Average 46 $12,002,409 70%
-- ----------- --
- --------------
(1) Includes the Company's share of annual base rent for each of the
Joint Venture Properties
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Fifteen of the Properties are anchored by Kmart, a publicly traded international retailer with over 2,100 stores. Kmart's principal business is general merchandise retailing through a chain of department stores and it is one of the world's largest retailers based on sales volume. The Company derived approximately 31% of its annual base rental income for the year ended December 31, 1997 from, and approximately 39% of the Company's future minimum rentals are attributable to, Kmart.
BGI, a publicly-traded company, is the country's second largest retailers of books, music and other informational, educational and entertainment products. Two of BGI's subsidiaries, Borders, Inc. and Walden Books, Co., Inc. together operate in over 1,000 locations, serving all 50 states. The Company derived approximately 26% of its total average annual base rental income for the year ended December 31, 1996 from, and approximately 31% of the Company's future minimum rentals are attributable to, Borders.
Roundy's and its subsidiaries are engaged principally in the wholesale distribution of food and non-food products to supermarkets and warehouse food stores. The Company derived approximately 10% of its
annual base rental income from, and approximately 11% of the Company's future minimum rentals are attributable to, Roundy's.
Charming Shoppes, Inc. operates, through its subsidiaries, a chain of women's specialty clothing stores in over 40 states. Its retail properties operate under the names Fashion Bug and Fashion Bug Plus. The Company derived approximately 3% of its annual base rental income for the year ended December 31, 1996 from, and approximately 1% of the Company's future minimum rental are attributable to, Charming Shoppes, Inc.
Lease Expirations
The following table shows lease expirations for the next 10 years for the Company's community shopping centers and wholly owned free-standing properties, assuming that none of the tenants exercise renewal options.
December 31, 1996
Gross Lesable Area Annualized Base Rent
------------------ --------------------
Number
Expiration of Leases Square Percent Per cent
Year Expiring Footage of Total Amount of Total
- ---------- --------- ------- -------- ------ --------
1997 9 35,240 1.35% $ 289,574 1.77%
1998 22 79,410 3.03 567,242 3.47
1999 4 19,800 0.76 121,620 0.74
2000 13 114,050 4.36 731,530 4.47
2001 26 105,434 4.03 873,346 5.34
2002 10 166,570 6.37 830,969 5.08
2003 7 113,992 4.36 502,732 3.07
2004 -- -- -- -- --
2005 2 34,204 1.31 131,714 0.81
2006 2 31,204 1.18 157,065 0.97
-- ------- ----- ---------- -----
Total/Average 95 699,904 26.75 $4,205,792 25.72%
-- ------- ----- ---------- -----
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Leases on the seven Joint Venture Properties are typically for an initial term through November 2000. In the event a refinancing is consummated, Borders is required to enter into a twenty year net lease with a fixed lease rate.
Item 3. LEGAL PROCEEDINGS
The Company is not presently involved in any litigation nor, to management's knowledge, is any litigation threatened against the Company, except for routine litigation arising in the ordinary course of business which is expected to be covered by the Company's liability insurance.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter of 1996.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the New York Stock Exchange under the symbol ADC. The following table sets forth the high and low sales prices of the Common Stock, as reported on the New York Stock Exchange Composite Tape, and the dividends declared per share of Common Stock by the Company for each calendar quarter in the last two fiscal years. Dividends were paid in the periods immediately subsequent to the periods in which such dividends were declared.
Market Information Dividends Per
High Low Common Share
---- --- -------------
Quarter Ended
March 31, 1995 $16.250 $15.375 $0.45
June 30, 1995 $17.000 $14.500 $0.45
September 30, 1995 $17.375 $15.500 $0.45
December 31, 1995 $17.000 $13.500 $0.45
March 31, 1996 $18.250 $14.500 $0.45
June 30, 1996 $18.875 $16.500 $0.45
September 30, 1996 $19.750 $17.500 $0.45
December 31, 1996 $21.500 $18.750 $0.45
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At December 31, 1996, there were 2,649,475 shares of Common Stock issued and outstanding which were held by approximately 216 stockholders of record. The stockholders of record do not reflect persons or entities who held their shares in nominee or "street" name.
The Company intends to continue to declare quarterly dividends to its stockholders. However, distributions by the Company are determined by the Board of Directors and will depend on a number of factors, including the amount of Funds from Operations, the financial and other condition of its properties, its capital requirements, the annual distribution requirements under the provisions of the code applicable to REIT"s and such other factors as the Board of Directors deems relevant.
During the year ended December 31, 1996, there were no sales of unregistered securities by the Company, except the grant under the Company's 1994 Stock Incentive Plan of 11,290 shares of restricted stock to certain employees of the Company. Such shares vest in equal annual installments over a five-year period from the date of the grant, but entitle the holder thereof to receive dividends from the date of the grant.
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information for the Company and the Agree Predecessors on a historical basis and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and all of the financial statements and notes thereto included elsewhere in the Report. The balance sheet data for December 31, 1992 through December 31, 1996 and operating data for each of the periods presented were derived from audited financial statements of the Company and the Agree Predecessors.
(In thousands, except per share information)
Agree Realty Corporation The Agree Predecessors
------------------------------------- -------------------------------------
Year Year April 22, January 1, Year Year
Ended Ended Through Through Ended Ended
Dec 31, Dec 31, Dec 31, April 21, Dec 31, Dec 31,
Operating Data 1996 1995 1994 1994 1993 1992
- -------------------------------------------------------------------------------- ------------------------------------
Total Revenue $ 16,291 $ 13,699 $ 9,280 $4,080 $ 13,156 $ 12,606
-------- -------- -------- ------ -------- --------
Expenses
Property expense (1) 2,485 2,049 1,245 681 1,872 1,856
General and administrative 1,105 966 668 159 660 639
Interest 6,101 4,335 2,972 2,584 8,803 9,167
Depreciation and amortization 2,620 2,317 1,627 680 2,292 2,260
-------- -------- -------- ------ -------- --------
Total Expenses 12,311 9,667 6,512 4,104 13,627 13,922
-------- -------- -------- ------ -------- --------
Other Income (Expense) (2) 653 -- (375) 85 448 680
-------- -------- -------- ------ -------- --------
Income (loss) before extraordinary
item and minority interest 4,633 4,032 2,393 61 (23) (636)
Extraordinary Item - Early
Extinguishment of Debt -- -- (2,139) -- -- --
-------- -------- -------- ------ -------- --------
Income (loss) before Minority Interest 4,633 4,032 254 61 (23) (636)
Minority Interest 899 785 49 -- -- --
-------- -------- -------- ------ -------- --------
Net Income (Loss) $ 3,734 $ 3,247 $ 205 $ 61 $ (23) $ (636)
======== ======== ======== ====== ======== ========
Funds from Operations $ 7,076 $ 6,389 $ 4,544 -- -- --
======== ======== ======== ====== ======== ========
Number of Properties 32 20 17 17 17 17
======== ======== ======== ====== ======== ========
Number of Square Feet 3,068 2,470 2,377 2,377 2,377 2,377
======== ======== ======== ====== ======== ========
Per share data
- --------------
Net income (3) $ 1.41 $ 1.23 $ 0.08 -- -- --
======== ======== ======== ====== ======== ========
Cash dividends $ 1.80 $ 1.80 $ 1.25 -- -- --
======== ======== ======== ====== ======== ========
Weighted average of common
shares outstanding 2,649 2,638 2,638 -- -- --
======== ======== ======== ====== ======== ========
Balance Sheet Data
Real Estate
(before accumulated depreciation) $132,474 $118,360 $ 96,852 $ 96,548 $ 95,870
Total Assets $121,382 $108,928 $ 89,653 $ 89,835 $ 91,859
Total debt, including accrued interest $ 88,252 $ 73,741 $ 54,431 $ 94,334 $ 95,939
- ---------
(1) Property expense includes real estate taxes, property maintenance,
insurance, utilities and land lease expense.
(2) Other income (expense) is composed of development fee income, gain
on land sales, equity in net income of unconsolidated entities and
reorganization costs
(3) Net income per share has been computed by dividing the net income
by the weighted average number of Common Stock.
|
ITEM 7. MANAGEMENT'S DISCUSSION AND ANYALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company was established to continue to operate and expand the retail property business of its predecessors. The Company commenced its operations on April 22, 1994 with the sale of 2,500,000 shares of common stock. The net cash proceeds to the Company from the completion of this IPO were approximately $45.4 million which were used primarily to reduce outstanding indebtedness, pay stock issuance costs and establish a working capital reserve.
The assets of the Company are held by, and all operations conducted through Agree Limited Partnership, (the "Operating Partnership") of which the Company is the sole general partner which held an 80.59% interest as of December 31, 1996. The Company is operating so as to qualify as a real estate investment trust ("REIT") for federal income tax purposes.
The following should be read in conjunction with the Consolidated Financial Statements of Agree Realty Corporation and the Combined Financial Statements of the Agree Predecessors, including the respective notes thereto, which are included elsewhere in this Form 10-K.
Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995
Rental income increased $2,514,000, or 21%, to $14,450,000 in 1996, compared to $11,936,000 in 1995. The increase was the result of the development and acquisition of five properties in 1996 and the development of three properties in the fourth quarter of 1995.
Operating cost reimbursements, which represent additional rent required by substantially all of the Company's leases to cover the tenants' proportionate share of property operating expenses, increased $90,000, or 5%, to $1,761,000 in 1996, compared to $1,671,000 in 1995. Operating cost reimbursements increased due to the increase in real estate taxes and property operating expenses from 1995 to 1996 as explained below.
Management fees and other income remained relatively constant at $81,000 in 1996 versus $92,000 in 1995.
Real estate taxes increased $49,000, or 4%, to $1,169,000 in 1996 versus $1,120,000 in 1995. The increase is the result of general assessment increases relating to the shopping center properties and the addition of new properties.
Property operating expenses (shopping center maintenance, insurance and utilities) increased $109,000, or 12%, to $980,000 in 1996 versus $871,000 in 1995. The increase was the result of increased snow removal costs of $26,000; an increase in shopping center maintenance costs of $95,000; an increase in utility costs of $8,000 and a decrease in insurance costs of $20,000 in 1996 versus 1995.
Land lease payments increased $280,000 to $336,000 in 1996 versus $56,000 in 1995 as a result of the acquisition of a ground lease of a free standing property in Aventura, Florida.
General and administrative expenses increased by $139,000, or 14%, to $1,105,000 in 1996 versus $966,000 in 1995. The increase was primarily the result of an increase in compensation related expenses of $24,000; increases in state franchise and income taxes of $40,000; additional administrative expenses in connection with its secured line of credit of $25,000 and increased expenses in connection with the management of the Company's properties of $50,000. General and administrative expenses as a percentage of rental income decreased from 8.1% for 1995 to 7.6% for 1996.
Depreciation and amortization increased $303,000, or 13%, to $2,620,000 in 1996 versus $2,317,000 in 1995. The increase was the result of the completion of eight new properties in late 1995 and 1996.
Interest expense increased $1,766,000, or 41%, to $6,101,000 in 1996, from $4,335,000 in 1995. The increase in interest expense was the result of the Company financing the development and acquisition of eight new properties in late 1995 and 1996.
The Company received $510,000 of development fee income in 1996 in connection with the development of four Joint Venture Properties. There was no development fee income in 1995. The above amount was not included in the Company's calculation of Funds from Operations, due to the non-recurring nature of this type of income.
The Company recognized income of $85,000 on the sale of a parcel of land in 1996. There was no land sale gains in 1995.
Equity in net income of unconsolidated entities represents the Company's share of the net income of $59,000, from the seven Joint Ventures formed for the purpose of acquiring and developing the single tenant properties for Borders. These entities were not in existence during the year ended December 31, 1995.
The Company's income before minority interest increased $601,000 as a result of the foregoing factors.
Comparison of Year ended December 31, 1995 to Year ended December 31, 1994
Rental income increased $221,000, or 2%, to $11,936,000 in 1995, compared to $11,715,000 in 1994. The increase was the result of $237,000 from the addition of three new properties in 1995, $49,000 from periodic rental increases that came into effect during 1995 and a decrease of $65,000 due primarily to the releasing of tenant space in one of the Company's Florida shopping centers.
Operating cost reimbursements increased $83,000, or 5%, to $1,671,000 in 1995, compared to $1,588,000 in 1994. The increase in operating cost reimbursements resulted from the increase in real estate taxes and property operating expenses from 1994 to 1995 as explained below.
Management fees and other income increased $35,000 to $91,000 in 1995 versus $56,000 in 1994.
Real estate taxes increased $15,000, or 1%, to $1,121,000 in 1995 versus $1,106,000 in 1995. The increase is the result of general assessment increases.
Property operating expense increased $107,000, or 14%, to $871,000 in 1995 versus $764,000 in 1994. The increase was the result of an increase in snow removal costs of $96,000 as a result of heavy snowfalls in Michigan and Wisconsin during the fourth quarter of 1995; an increase in property repairs of $13,000; an increase in utility costs of $3,000 and a decrease in insurance expense of $5,000.
Land lease payments remained the same at $56,000 for 1995 and 1994.
General and administrative expenses increased $139,000, or 16%, to $1,022,000 in 1995 versus $883,000 in 1994. This increase is primarily the result of costs associated with being a public company for a full year. General and administrative expenses as a percentage of rental income increased from 7.1% in 1994 to 8.1% in 1995.
Depreciation and amortization increased $10,000, to $2,317,000 in 1995 from $2,307,000 in 1994. The increase reflects depreciation and amortization on properties developed in 1995.
Interest expense decreased $1,221,000, or 22%, to $4,335,000 in 1995, from $5,556,000 in 1994. The decrease in interest expense results primarily from the prepayment and refinancing of the Company's debt in connection with the IPO.
Other income (excluding reorganization costs) decreased $205,000 as a result of a decrease in development fee income of $85,000 and a decrease in gain on land sale of $120,000.
Reorganization costs of $494,000 were incurred during 1994 in connection with certain property and related mortgage transfers. These costs were associated with the transfer of the properties from the Agree Predecessors to the Company in connection with the IPO. There were no reorganization costs in 1995.
There was an extraordinary item in 1994 of $2,139,000 attributable to prepayment penalties and the write-off of deferred finance charges on the indebtedness which was repaid with the proceeds of the IPO. There were no extraordinary items in 1995.
The Company's income before minority interest increased $3,717,000 as a result of the foregoing factors.
Funds From Operations
Management considers Funds from Operations ("FFO") to be a supplemental measure of the Company's operating performance. FFO is defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") to mean net income computed in accordance with Generally Accepted Accounting Principals ("GAAP"), excluding gains (or loses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as the primary indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity.
The following table illustrates the calculation of FFO for the years ended December 31, 1996 and 1995:
Year ended December 31, 1996 1995
- ----------------------- ---------- ----------
Net income before minority interest $4,633,295 $4,032,381
Depreciation of real estate assets 2,556,603 2,248,720
Amortization of leasing costs 52,033 58,867
Amortization of stock awards 82,873 48,750
Depreciation of real estate assets
held in unconsolidated entities 345,972 --
Gain on sale of assets (84,688) --
Development fee income (509,673) --
---------- ----------
Funds from Operations $7,076,415 $6,388,718
---------- ----------
Funds from Operations per share $ 2.15 $ 1.95
---------- ----------
Weighted average shares and
OP Units outstanding 3,287,434 3,276,144
---------- ----------
|
FFO increased $688,000, or 11%, for the year ended December 31, 1996, to $7,076,000. The increase in FFO is primarily the result of the development and acquisition of five properties in 1996 and the development of three properties in the fourth quarter of 1995.
Liquidity and Capital Resources
The Company's principal demands for liquidity are distributions to its stockholders, debt repayment, development of new properties and future property acquisitions.
During the quarter ended December 31, 1996, the Company declared a quarterly dividend of $.45 per share. The dividend was paid on January 6, 1997 to holders of record on December 23, 1996.
As of December 31, 1996, the Company had total mortgage indebtedness of $53,663,999 with a weighted average interest rate of 7.61%. Future scheduled annual maturates of mortgages payable for the years ending December 31 are as follows: 1997 - $357,946; 1998 - $421,123; 1999 - $10,679,397; 2000 - $969,964; 2001 - $1,046,875. This mortgage debt is all fixed rate debt with the exception of $2,375,000 which bears interest at one half percent over the prime rate.
In addition, the Operating Partnership has in place a $50 million line of credit facility (the "Credit Facility") which is guaranteed by the Company. The loan matures in November, 1998 and can be extended by the Company for an additional three years. Advances under the Credit Facility bear interest within a range of one-month to six-month LIBOR plus 200 basis points to 263 basis points or the Bank's prime rate plus 37 basis points to 75 basis points, at the option of the Company, based on certain factors such as debt to property value and debt service coverage. The Credit Facility is used to fund property acquisitions and development activities and is secured by all of the Company's existing properties which are not otherwise encumbered and properties to be acquired or developed. As of December 31, 1996, $20,746,937 was outstanding under the Credit Facility.
The Company also has in place a $5 million line of credit (the "Line of Credit," which matures in September 1997, and which the Company expects to renew for an additional 12 month period). The line bears interest at the bank's prime rate or 225 basis points in excess of the one month LIBOR rate at the option of the Company. The purpose of the line is to provide working capital to the Company and fund land options and start-up costs associated with new projects. As of December 31, 1996, $2,869,445 was outstanding under this Line of Credit.
The Company has received funding from an unaffiliated third party for the construction of certain of its Properties. Advances under this arrangement bear no interest and are required to be repaid within sixty (60) days after the date construction has been completed. The advances are secured by the specific land and buildings being developed. As of December 31, 1996 $10,616,936 was outstanding under this arrangement.
In November 1996, the Company completed development of two properties which added 61,061 square feet to the Company's portfolio. The properties are located in Monroeville, Pennsylvania and Boynton Beach, Florida. The development of these retail projects is expected to have a positive effect on cash generated by operating activities and Funds from Operations.
The Company intends to meet its short-term liquidity requirements, including capital expenditures related to the leasing and improvement of the Properties, through its cash flow provided by operations and the Line of Credit. Management believes that adequate cash flow will be available to fund the Company's operations and pay dividends in accordance with REIT requirements. The Company may obtain additional funds for future development or acquisitions through other borrowings or the issuance of additional shares of Capital Stock. The Company intends to incur additional debt in a manner consistent with its policy of maintaining a ratio of total debt (including construction and acquisition financing) to total market capitalization of 65% or less.
The Company plans to begin construction of additional pre-leased developments and may acquire additional properties, which will initially be financed by its Credit Facility and Line of Credit. Management intends to periodically refinance short-term construction and acquisition financing, with long-term debt and or equity. Upon completion of refinancing the Company intends to lower the ratio of total debt to market capitalization to 50% or less. Nevertheless, the Company may operate with debt levels or ratios which are in excess of 50% for extended periods of time prior to such refinancing.
Inflation
The Company's leases generally contain provisions designed to mitigate the adverse impact of inflation on net income. These provisions include clauses enabling the Company to pass through to tenants certain operating costs, including real estate taxes, common area maintenance, utilities and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. Certain of the Company's leases contain clauses enabling the Company to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. In addition, expiring tenant leases permit the Company to seek increased rents upon re-lease at market rates if rents are below the then existing market rates.
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed in the Index to Financial Statements and Financial Statement Schedules appearing on Page F-1 of this Form 10-K.
Item 9 CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL DISCLOSURE
During the Company's last two fiscal years, there have been no changes in the independent accountants nor disagreements with such accountants as to accounting and financial disclosures of the type required to be disclosed in this Item 9.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference to the Company's definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to its Annual Meeting of Stockholders to be held on May 12, 1997.
Item 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the Company's definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to its Annual Meeting of Stockholders to be held on May 12, 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the Company's definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to its Annual Meeting of Stockholders to be held on May 12, 1997.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the Company's definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to its Annual Meeting of Stockholders to be held on May 12, 1997.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this Report
(1)(2) The financial statements indicated by Part II,
Item 8, Financial Statements and Supplementary
Schedule.
(3) Exhibits
3.1 Articles of Incorporation and Articles of Amendment of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-11 (Registration
Statement No. 33-73858, as amended ("Agree S-11"))
3.2 Bylaws of the Company (incorporated by reference to Exhibit
3.3 to Agree S-11)
10.1 * Loan Modification Agreement, dated April 22, 1994, by and
among Shawano Plaza, Plymouth Commons, Chippewa Commons and
Nationwide Life Insurance Company
10.2 * Loan Modification Agreement, dated April 22, 1994, by and
among Rapids Associates, Marshall Plaza Phase Two, Petoskey
Town Center, Charlevoix Commons and Nationwide Life
Insurance Company
10.3 Modification Agreement, dated as of March 28, 1994, by and
between North Lakeland Plaza and the Travelers Indemnity
Company (incorporated by reference to Exhibit 4.2 to Agree
S-11)
10.4 Loan Agreement, dated August 19, 1992, by and among Richard
Agree, Edward Rosenberg and Michigan National Bank
(incorporated by reference to Exhibit 4.3 to Agree S-11)
10.5 Loan Agreement dated March 7, 1990, and Modification of
Mortgage and Security Agreement, dated July 10, 1990, by and
between Winter Garden Plaza and American United Life Insurance
Company (incorporated by reference to Exhibit 4.4 to Agree
S-11)
10.6 * First Amended and Restated Agreement of Limited Partnership
of Agree Limited Partnership, dated as of April 22, 1994, by
and among the Company, Richard Agree, Edward Rosenberg and
Joel Weiner
10.7 Amended and Restated Registration Rights Agreement, dated July
8, 1994 by and among the Company, Richard Agree, Edward
Rosenberg and Joel Weiner (incorporated by reference to
Exhibit 10.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 (the "1994 Form 10-K"))
10.8 * 1994 Stock Incentive Plan of the Company
10.9 * Management Agreement, dated April 22, 1994, by and among Mt
Pleasant Shopping Center, Angola Plaza, Shiloh Plaza and the
Company
10.10 * Contribution Agreement, dated as of April 21, 1994, by and
among the Company, Richard Agree, Edward Rosenberg and the
co-partnerships named therein
10.11 * Employment Agreement, dated April 22, 1994, by and between
the Company and Richard Agree
|
10.12 * Employment Agreement, dated April 22, 1994, by and between
the Company and Edward Rosenberg
10.13 * Agree Realty Corporation Profit Sharing Plan
10.14 Business Loan Agreement by and between Agree Limited
Partnership and Michigan National Bank (incorporated by
reference to Exhibit 10.8 to the 1994 10-K)
10.15 Business Loan Agreement, dated as of September 21, 1995, by
and between Agree Limited Partnership and Michigan National
Bank (incorporated by reference to Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (the "1995 10-K"))
10.16 Line of Credit Agreement by and among Agree Limited
Partnership, the Company, the lenders parties thereto, and
Michigan National Bank as Agent (incorporated by reference to
Exhibit 10.10 to the 1995 10-K)
27.1 * Financial Data Schedule
|
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the quarter ending December 31, 1996.
SIGNATURES
PURSUANT to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.
AGREE REALTY CORPORATION
By: /s/ Richard Agree
-----------------------------
Name: Richard Agree
President and Chairman of the
Board of Directors
Date: March 28, 1997
|
PURSUANT to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 28th day of March, 1997.
By: /s/Richard Agree By: /s/ Farris G. Kalil
----------------------------- ---------------------------
Richard Agree Farris G. Kalil
President and Chairman of the Director
Board of Directors
(Principal Executive Officer)
By: /s/ Michael Rotchford
---------------------------
Michael Rotchford
Director
By: /s/Kenneth R. Howe
-----------------------------
Kenneth R. Howe
Vice President, Finance By: /s/ Ellis G. Wachs
and Secretary ---------------------------
(Principal Financial and Ellis G. Wachs
Accounting Officer) Director
By: /s/ Gene Silverman
---------------------------
Gene Silverman
By: /s/Edward Rosenberg Director
-----------------------------
Edward Rosenberg
Director and Senior Vice
President
|
Agree Realty Corporation and the Agree Predecessors
Index
Page
----
Report of Independent Certified Public Accountants F-2
Financial Statements
Consolidated Balance Sheets of the Company F-3
Consolidated Statements of Operations of the Company
and Combined Statements of Operations of the
Agree Predecessors F-5
Consolidated Statements of Stockholders' Equity of
the Company and Combined Statements of Partners'
Deficit of the Agree Predecessors F-6
Consolidated Statements of Cash Flows of the Company
and Combined Statements of Cash Flows of the
Agree Predecessors F-7
Notes to Financial Statements F-9
Schedule III - Real Estate and Accumulated Depreciation F-20
|
Report of Independent Certified Public Accountants
To the Board of Directors and Owners of
Agree Realty Corporation
Farmington Hills, Michigan
We have audited the accompanying consolidated balance sheets of Agree Realty Corporation (the "Company") as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 1996 and 1995 and for the period from April 22, 1994 to December 31, 1994. We have also audited the accompanying combined statements of operations, partners' deficit and cash flows for the period from January 1, 1994 to April 21, 1994 of Agree Realty Group (the "Agree Predecessors"). We have also audited the schedule listed in the accompanying index. These financial statements and the schedule are the responsibility of the Company's and Agree Predecessors' management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and the schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and the schedule. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Agree Realty Corporation at December 31, 1996 and 1995 and the results of its operations and its cash flows for the years ended December 31, 1996 and 1995 and for the period from April 22, 1994 to December 31, 1994, and the results of the Agree Predecessors operations and its cash flows for the period from January 1, 1994 to April 21, 1994 in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein.
BDO SEIDMAN, LLP
Troy, Michigan
February 14, 1997
Agree Realty Corporation
Consolidated Balance Sheets
December 31, December 31,
1996 1995
- -----------------------------------------------------------------------------------------
Assets
Real Estate Investments (Note 3)
Land $ 25,183,667 $ 23,224,377
Buildings 107,204,583 94,955,086
Property under development 85,993 180,805
------------- -------------
132,474,243 118,360,268
Less accumulated depreciation (17,339,353) (14,792,193)
------------- -------------
Net Real Estate Investments 115,134,890 103,568,075
Cash and Cash Equivalents 294,389 1,283,672
Accounts Receivable - Tenants 638,735 626,280
Restricted Asset - Cash Held in Escrow 266,771 259,204
Investments In and Advances To Unconsolidated Entities 1,820,605 --
Unamortized Deferred Expenses
Financing costs 2,398,377 2,513,665
Leasing costs 141,757 140,026
Other Assets 686,346 537,487
------------- -------------
$ 121,381,870 $ 108,928,409
============= =============
See accompanying notes to financial statements.
|
Agree Realty Corporation
Consolidated Balance Sheets
December 31, December 31,
1996 1995
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Mortgages Payable (Note 3) $ 53,663,999 $ 53,970,525
Construction Loans (Note 3) 10,616,936 17,603,785
Note Payable (Note 3) 23,616,382 1,977,808
Dividends and Distributions Payable (Note 4) 1,479,345 1,474,265
Accrued Interest Payable 354,988 189,256
Accounts Payable
Operating 691,981 596,913
Capital expenditures 596,794 1,637,861
Tenant Deposits 50,394 53,477
------------- -------------
Total Liabilities 91,070,819 77,503,890
------------- -------------
Minority Interest (Note 5) 5,869,014 6,118,017
------------- -------------
Stockholders' Equity (Note 4)
Common stock, $.0001 par value, 20,000,000
shares authorized, 2,649,475 and 2,638,185
shares issued and outstanding 265 264
Additional paid-in capital 30,060,908 29,890,292
Deficit (5,619,136) (4,584,054)
------------- -------------
Total Stockholders' Equity 24,442,037 25,306,502
------------- -------------
$ 121,381,870 $ 108,928,409
------------- -------------
See accompanying notes to financial statements.
|
Agree Realty Corporation and the Agree Predecessors
Consolidated Statements of Operations of the Company and Combined Statements of Operations of the Agree Predecessors
Agree Realty Agree Realty Agree Realty Agree
Corporation Corporation Corporation Predecessors
January 1, to January 1, to April 22, to January 1, to
December 31, 1996 December 31, 1995 December 31, 1994 April 21, 1994
- ----------------------------------------------------------------------------------------------------------------------------
Revenues
Rental income $ 14,450,035 $ 11,935,523 $ 8,139,566 $ 3,575,128
Operating cost reimbursement 1,760,681 1,671,359 1,093,463 494,909
Management fees and other (Note 7) 80,752 91,714 46,487 9,858
------------ ------------ ----------- -----------
Total Revenues 16,291,468 13,698,596 9,279,516 4,079,895
------------ ------------ ----------- -----------
Operating Expenses
Real estate taxes 1,169,308 1,120,515 737,628 368,124
Property operating expenses 979,606 871,167 464,007 299,623
Land lease payments 336,083 56,000 43,400 12,600
General and administrative 1,104,861 966,464 667,800 159,393
Depreciation and amortization 2,620,274 2,316,862 1,626,604 680,458
------------ ------------ ----------- -----------
Total Operating Expenses 6,210,132 5,331,008 3,539,439 1,520,198
------------ ------------ ----------- -----------
Income From Operations 10,081,336 8,367,588 5,740,077 2,559,697
------------ ------------ ----------- -----------
Other Income (Expense)
Interest expense, net (6,101,106) (4,335,207) (2,972,237) (2,584,002)
Development fee income 509,673 -- -- 85,273
Gain on land sales 84,688 -- 119,635 --
Equity in net income of unconsolidated entities 58,704 -- -- --
Reorganization costs (Note 6) -- -- (494,317) --
------------ ------------ ----------- -----------
Total Other Expense (5,448,041) (4,335,207) (3,346,919) (2,498,729)
------------ ------------ ----------- -----------
Income Before Extraordinary Item and Minority Interest 4,633,295 4,032,381 2,393,158 60,968
Extraordinary Item - Loss on Extinguishment
of Debt (Note 8) -- -- (2,139,114) --
------------ ------------ ----------- -----------
Income Before Minority Interest 4,633,295 4,032,381 254,044 60,968
Minority Interest 899,323 785,105 49,462 --
------------ ------------ ----------- -----------
Net Income $ 3,733,972 $ 3,247,276 $ 204,582 $ 60,968
============ ============ =========== ===========
Earnings Per Share
Income before extraordinary item $ 1.41 $ 1.23 $ .73
Extraordinary item -- -- (.65)
------------ ------------ ----------- -----------
Earnings Per Share $ 1.41 $ 1.23 $ .08
============ ============ =========== ===========
Weighted Average Number of Common Shares
Outstanding 2,649,475 2,638,185 2,638,185
============ ============ =========== ===========
See accompanying notes to financial statements.
|
Agree Realty Corporation and the Agree Predecessors
Consolidated Statements of Stockholders' Equity of the Company and Combined Statements of Partners' Deficit of the Agree Predecessors
Agree
Common Stock Additional Predecessors
----------------- Paid-In Partners'
Shares Amount Capital Deficit Deficit
- ------------------------------------------------------------------------------------------------------------
Balance, January 1, 1994 -- $ -- $ -- $ -- $(5,436,893)
Contributions -- -- -- -- 3,000
Distributions -- -- -- -- (3,350,741)
Net income -- -- -- -- 60,968
--------- ---- ------------ ----------- -----------
Balance, April 21, 1994 -- -- -- -- (8,723,666)
Reclassification of Agree
Predecessors partners'
deficit in connection with
formation of the Company -- -- (8,723,666) 8,723,666
Proceeds from issuance of common stock,
net of underwriting fees 2,625,685 263 47,800,594 -- --
Payment of stock issuance costs -- -- (2,203,712) -- --
Issuance of shares under the Stock
Incentive Plan 12,500 1 243,749 -- --
Minority interest equity
immediately following the
April 22, 1994 initial
public offering -- -- (7,226,673) -- --
Dividends declared for the
period April 22, 1994
to December 31, 1994,
$1.246 per share -- -- -- (3,287,179) --
Net income for the period
April 22, 1994
to December 31, 1994 -- -- -- 204,582 --
--------- ---- ------------ ----------- -----------
Balance, December 31, 1994 2,638,185 264 29,890,292 (3,082,597) --
Dividends declared for the year ended
December 31, 1995, $1.80 per share -- -- -- (4,748,733) --
Net income for the year
ended December 31, 1995 -- -- -- 3,247,276 --
--------- ---- ------------ ----------- -----------
Balance, December 31, 1995 2,638,185 264 29,890,292 (4,584,054) --
Issuance of shares under the
Stock Incentive Plan 11,290 1 170,616 -- --
Dividends declared for the year
ended December 31, 1996,
$1.80 per share -- -- -- (4,769,054) --
Net income for the year
ended December 31, 1996 -- -- -- 3,733,972 --
--------- ---- ------------ ----------- -----------
Balance, December 31, 1996 2,649,475 $265 $ 30,060,908 $(5,619,136) $ --
========= ==== ============ =========== ===========
See accompanying notes to financial statements.
|
Agree Realty Corporation and the Agree Predecessors
Consolidated Statements of Cash Flows of the Company and Combined Statements of Cash Flows of the Agree Predecessors
Agree Realty Agree Realty Agree Realty Agree
Corporation Corporation Corporation Predecessors
January 1, to January 1, to April 22, to January 1, to
December 31, December 31, December 31, April 21,
1996 1995 1994 1994
- ---------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net income $ 3,733,972 $ 3,247,276 $ 204,582 $ 60,968
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 2,523,621 2,252,642 1,551,570 636,561
Amortization 505,089 311,415 249,971 74,598
Equity in net income of unconsolidated
entities (58,704) -- -- --
Write-off of deferred financing costs -- -- 189,231 --
Minority interests 899,323 785,105 49,462 --
Gain on land sales (84,688) -- (119,635) --
Decrease (increase) in accounts receivable (12,455) (64,629) (561,651) 449,504
Increase in deferred costs (53,764) (27,524) (14,640) --
Decrease (increase) in other assets 677 (133,728) (112,531) 522,163
Increase (decrease) in accounts payable 95,068 197,406 327,885 (760,349)
Increase (decrease) in accrued interest 165,732 9,592 (967,640) (536,099)
Increase (decrease) in tenant deposits (3,083) (5,484) 58,961 (60,461)
------------ ------------ ----------- ---------
Net Cash Provided By Operating Activities 7,710,788 6,572,071 855,565 386,885
------------ ------------ ----------- ---------
Cash Flows From Investing Activities
Acquisition of real estate investments
(including capitalized interest of
$78,703 in 1996 and $59,752 in 1995) (13,577,181) (19,870,270) (117,102) (228,810)
Investments in and advances to
unconsolidated entities (1,761,901) -- -- --
Proceeds from sale of land 144,688 -- 161,635 --
Proceeds from sale of marketable
securities -- 300,188 -- --
Purchase of marketable securities -- -- (300,188) --
------------ ------------ ----------- ---------
Net Cash Used In Investing Activities (15,194,394) (19,570,082) (255,655) (228,810)
------------ ------------ ----------- ---------
See accompanying notes to financial statements.
|
Agree Realty Corporation and the Agree Predecessors
Consolidated Statements of Cash Flows of the Company and Combined Statements of Cash Flows of the Agree Predecessors
Agree Realty Agree Realty Agree Realty Agree
Corporation Corporation Corporation Predecessors
January 1, to January 1, to April 22, to January 1, to
December 31, December 31, December 31, April 21,
1996 1995 1994 1994
- ------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Line-of-credit proceeds 21,638,574 1,977,808 -- 1,589,774
Payment of construction loans (11,861,006) -- (11,407,600) --
Dividends and limited partners'
distributions paid (5,912,300) (5,897,059) (2,607,811) --
Proceeds from construction loans 4,874,157 17,603,785 -- --
Payments of payables for capital
expenditures (1,637,861) -- -- (45,688)
Payments of mortgages payable (306,526) (280,522) (14,394,680) (1,388,265)
Payments for financing costs (293,148) (765,535) (961,339) (425,424)
Decrease (increase) in escrow and
bond fund deposits (7,567) (16,200) 7,314 380,378
Net proceeds from the issuance of
common stock -- -- 45,597,145 --
Payment of line-of-credit -- -- (7,003,977) --
Payments on related party notes -- -- (4,414,556) --
Payment of bonds -- -- (3,755,000) --
Partners' distributions -- -- -- (3,350,741)
Mortgage proceeds -- -- -- 2,375,000
Partners' contributions -- -- -- 3,000
------------ ------------ ------------ -----------
Net Cash Provided By (Used In)
Financing Activities 6,494,323 12,622,277 1,059,496 (861,966)
------------ ------------ ------------ -----------
Net Increase (Decrease) In Cash
and Cash Equivalents (989,283) (375,734) 1,659,406 (703,891)
Cash and Cash Equivalents,
beginning of period 1,283,672 1,659,406 -- 703,891
------------ ------------ ------------ -----------
Cash and Cash Equivalents,
end of period $ 294,389 $ 1,283,672 $ 1,659,406 $ --
============ ============ ============ ===========
Supplemental Disclosure of
Cash Flow Information
Cash paid for interest $ 5,630,000 $ 4,177,000 $ 2,677,000 $ 4,318,000
============ ============ ============ ===========
Supplemental Disclosure of
Non-Cash Transactions
Dividends and limited
partners' distributions
declared and unpaid $ 1,479,345 $ 1,474,265 $ 1,474,265 $ --
Real estate investments
financed with accounts
payable $ 596,794 $ 1,637,861 $ -- $ --
Shares issued under Stock
Incentive Plan $ 170,617 $ -- $ 243,750 $ --
============ ============ ============ ===========
See accompanying notes to financial statements.
|
Agree Realty Corporation and the Agree Predecessors
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Organization and Business
Agree Realty Corporation (the "Company") was formed as a Maryland real estate investment trust in December 1993, and commenced operations effective with the completion of its initial public offering on April 22, 1994. The Company is the successor to the operations of Agree Realty Group (the "Agree Predecessors"), which was comprised of seventeen real estate property partnerships and a management and development company. All of the Company's assets are held by, and all of its operations are conducted through, Agree Limited Partnership (the "Operating Partnership"). The Company will, at all times, be the sole general partner of the Operating Partnership. Minority interest in the Operating Partnership represents partnership units of the Operating Partnership (OP Units).
The Company operates, manages, acquires and develops retail properties. At December 31, 1996, the Company's properties are comprised of thirteen shopping centers and twelve single tenant retail facilities located in eleven states. During the year ended December 31, 1996, approximately 90% of the Company's base rental revenues were received from national or regional tenants under long-term leases, including approximately 32% from Kmart Corporation and 23% from Borders, Inc.
Principles of Consolidation
The consolidated financial statements of Agree Realty Corporation include the accounts of the Company and its majority owned partnership, the Operating Partnership. The Agree Predecessors' financial statements were prepared on a combined basis because of common ownership and management. All significant intercompany accounts and transactions have been eliminated in the accompanying consolidated and combined financial statements.
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Values of Financial Instruments
The carrying amounts of the Company's financial instruments, which consist of cash, cash equivalents, receivables, notes payable, accounts payable and long-term debt, approximate their fair values.
Real Estate Investments
Real estate assets are stated at cost less accumulated depreciation. All costs related to planning, development and construction of buildings prior to the date they become operational, including interest and real estate taxes during the construction period, are capitalized for financial reporting purposes.
Subsequent to completion of construction, expenditures for property maintenance are charged to operations as incurred, while significant renovations are capitalized. Depreciation of the buildings is recorded on the straight-line method using an estimated useful life of forty years.
Cash and Cash Equivalents
Cash and cash equivalents include cash and highly liquid tax anticipation notes with original maturities of three months or less.
Accounts Receivable - Tenants
Accounts receivable from tenants reflect primarily reimbursement of specified common area maintenance costs. No allowance for uncollectible accounts has been provided based on past collection results.
Restricted Assets
These amounts represent funds on deposit restricted by certain lenders pursuant to agreements entered into by the Company. The funds held in escrow are used to pay capital-related costs and are released to the Company upon inspection and leasing of related property to tenants and are used to pay real estate taxes for one shopping center in Florida.
Investments in Unconsolidated Entities
The Company uses the equity method of accounting for investments in non- majority owned entities where the Company has the ability to exercise significant influence over operating and financial policies.
The Company's initial investment is recorded at cost, and the carrying amount of the investment is (a) increased by the Company's share of the investees' earnings (as defined in the limited liability company agreements), and (b) reduced by distributions paid from the investees to the Company.
Unamortized Deferred Expenses
Deferred expenses are stated net of total accumulated amortization. The nature and treatment of these capitalized costs are as follows: (1) financing costs, consisting of expenditures incurred to obtain long-term financing, are being amortized using the interest method over the term of the related loan, and (2) leasing costs, which are amortized on a straight-line basis over the term of the related lease.
Accounts Payable - Capital Expenditures
Included in accounts payable are amounts related to the construction of buildings. Due to the nature of these expenditures, they are reflected in the statements of cash flows as a financing activity.
Minority Interest
This amount represents the limited partners' interest of 19.41% and 19.47% in the Operating Partnership as of December 31, 1996 and 1995, respectively, which is convertible into 637,959 shares of the Company's common stock.
Revenue Recognition
Base rental income attributable to leases is recorded when due from tenants. Certain leases provide for additional rents based on tenants' sales volume. These percentage rents are reflected based on the tenants' fiscal year; however, such amounts earned by the Company have historically not been material. In addition, leases for certain tenants contain rent escalations and/or free rent during the first several months of the lease term; however, such amounts are not material.
The Company acts as the construction developer on certain properties. Related development fee income is recognized upon completion of construction.
Operating Cost Reimbursement
Substantially all of the Company's leases contain provisions requiring tenants to pay as additional rent a proportionate share of operating expenses such as real estate taxes, repairs and maintenance, insurance, etc. The related revenue from tenant billings is recognized in the same period the expense is recorded.
Income Taxes
The Company has elected to be taxed as a real estate investment trust ("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. A REIT will generally not be subject to federal income taxation on that portion of its income that qualifies as REIT taxable income to the extent that it distributes at least 95 percent of its taxable income to its stockholders and complies with certain other requirements. Accordingly, no
provision has been made for federal income taxes for the Company in the accompanying consolidated financial statements.
The aggregate federal income tax basis of Real Estate Investments is approximately $10.5 million less than the financial statement basis.
Per Share Data
Earnings per share has been computed by dividing the income by the weighted average number of common shares and dilutive common equivalent shares outstanding.
Reclassifications
Certain insignificant amounts in the prior year financial statements have been reclassified to conform with the 1996 presentation.
2. Formation of the Company, Initial Public Offering and Basis of Presentation
The Company was established to continue the business of the Agree Predecessors. The Company commenced its operations on April 22, 1994 with the sale of 2,500,000 shares of common stock. The cash proceeds (net of underwriting fees) to the Company from the completion of this initial public offering were approximately $45.4 million, which were used primarily to reduce outstanding indebtedness, pay stock issuance costs and establish a working capital reserve. Also in connection with the formation of the Company, 125,685 shares of common stock were purchased by two principals of the Agree Predecessors in a private transaction at the initial public offering price of $19.50 per share.
The assets of the Company are held by and all operations conducted through the Operating Partnership. The Company controls, as the sole general partner, 80.59% and 80.53% of the Operating Partnership as of December 31, 1996 and 1995, respectively.
3. Mortgages, Construction Loans and Note Payable
Mortgages payable consisted of the following:
December 31, 1996 1995
- ----------------------------------------------------------------------------------------------------------
Note payable in monthly installments of interest only at 6.875% per annum
until May 1999, at which time the Company can elect to either pay the
amount in full or accept the then prevailing interest rate and continue
making principal and interest payments based on a 22-year amortization
schedule, with the remaining unpaid principal and accrued unpaid
interest then due November 2005, collateralized by related
real estate and tenants' leases $33,600,000 $33,600,000
Note payable in monthly installments of $98,477 including interest at 9.75%
per annum, collateralized by related real estate and tenants' leases,
final balloon installment due July 2010 9,698,073 9,874,834
Note payable in monthly installments of $62,881 including interest at 7.75%
per annum, collateralized by related real estate and tenants' leases,
final balloon installment due March 1999 7,990,926 8,120,691
Note payable in monthly installments of interest only at the prime rate
(which was 8.25% at December 31, 1996) plus .5%, beginning April 1997,
payable in monthly installments of principal and interest based on a
20-year amortization, collateralized by related real estate and tenants'
leases, final balloon installment due March 1999 2,375,000 2,375,000
----------- -----------
Mortgages Payable $53,663,999 $53,970,525
=========== ===========
|
Future scheduled annual maturities of mortgages payable for years ending December 31, are as follows: 1997 - $357,946; 1998 - $421,123; 1999 - $10,679,397; 2000 - $969,964; 2001 - $1,046,875 and $40,188,694 thereafter. (These maturities assume that the $33,600,000 mortgage will be extended beyond May 1999.)
In November 1995, the Operating Partnership entered into a $50 million line-of-credit agreement which is guaranteed by the Company. The agreement has an initial term of three years and can be extended, at the option of the Company, for an additional three years. Advances under this credit facility bear interest within a range of LIBOR plus 200 basis points to 263 basis points, or the bank's prime rate plus 37 basis points to 75 basis points, at the option of the Company, based on certain factors such as debt to property value and debt service coverage. The credit facility will be used to fund property acquisitions and development activities, and is secured by specific properties. As of December 31, 1996, $20,746,937 was outstanding under this facility and there were no amounts outstanding under this credit facility as of December 31, 1995.
In addition, the Company maintains a $5,000,000 line-of-credit agreement with a bank which expires on September 21, 1997. Payments of interest only, at the bank's prime rate, or 225 basis points in excess of the one month LIBOR rate, at the option of the Company, are required monthly. At December 31, 1996 and 1995, $2,869,445 and $1,977,808 were outstanding under this agreement, respectively.
The Company has received funding from an unaffiliated third party for certain of its single tenant retail properties. Borrowings under this arrangement bear no interest and are required to be repaid within sixty (60) days after the date the construction has been completed. The advances are secured by the specific land and buildings being developed. As of December 31, 1996 and 1995, $10,616,936 and $17,603,785 was outstanding under this agreement, respectively.
4. Dividends and Distributions Payable
On December 9, 1996, the Company declared a dividend of $.45 per share for the quarter ended December 31, 1996; approximately 30 percent of the dividend represented a return of capital. The holders of OP Units were entitled to an equal distribution per OP Unit held as of December 31, 1996. The dividends and distributions payable are recorded as liabilities in the Company's balance sheet at December 31, 1996. The dividend has been reflected as a reduction of stockholders' equity and the distribution has been
reflected as a reduction of the limited partners' minority interest. These amounts were paid on January 6, 1997.
5. Minority Interest
The following summarizes the changes in the limited partners' minority interest since January 1, 1995:
Minority interest at January 1, 1995 $ 6,481,238
Minority interests' share of income for
the year ended December 31, 1995 785,105
Distributions for the year ended December 31, 1995 (1,148,326)
-----------
Minority Interest at December 31, 1995 6,118,017
Minority interests' share of income for the year
ended December 31, 1996 899,323
Distributions for the year ended December 31, 1996 (1,148,326)
-----------
Minority Interest at December 31, 1996 $ 5,869,014
===========
|
6. Reorganization Costs
Costs incurred by the Company related to title insurance costs, revenue stamps and transfer fees associated with the transfer of properties and certain related mortgages from the Agree Predecessors to the Company were charged to operations and reflected as "Reorganization Costs" in the 1994 consolidated statement of operations.
7. Related Party Transactions
The Company currently manages certain additional properties which are owned by certain officers and directors of the Company, but are not included in these consolidated or combined financial statements. Income related to these activities are reflected as "Management fees and other" in the accompanying consolidated statements of operations.
8. Extraordinary Item
As a result of the early extinguishment of indebtedness with a portion of the net proceeds from the issuance of its common stock, the Company recognized an extraordinary loss in 1994 related to loan prepayment penalties and the write-off of deferred financing costs on debt that was retired.
9. Stock Incentive Plan
The Company has established a stock incentive plan (the "Plan") under which 29,400 options were granted in April 1994. The options, which have an exercise price equal to the initial public offering price ($19.50/share), can be exercised in increments of 25% on each anniversary of the date of the grant. A total of 14,700 and 7,350 of the options were exercisable at December 31, 1996 and 1995, respectively. No options were exercised during either 1996 or 1995.
The Company has adopted the disclosure-only provisions of SFAS No. 123 "Accounting for Stock-Based Compensation." However, since no compensation cost would have been recognized pursuant to SFAS No. 123 under the Plan in either 1996 or 1995, there is no effect on the Company's net income or earnings per share for these years.
10. Restricted Stock
As part of the Company's stock incentive plan, 12,500 restricted common shares were granted to certain employees in April 1994; an additional 11,290 shares were granted during the first quarter of 1996. The restricted shares vest in increments of 20% per year for five years. The Company recorded related compensation expense of $82,873, $48,750 and $34,530 in 1996, 1995 and 1994, respectively. Plan participants are entitled to receive the quarterly dividends on their respective restricted shares.
11. Profit-Sharing Plan
The Company has a discretionary profit-sharing plan whereby it contributes to the plan such amounts as the Board of Directors of the Company determines. The participants in the plan cannot make any contributions to the plan. Contributions to the plan are allocated to the employees based on their percentage of compensation to the total compensation of all employees for the plan year. Participants in the plan become fully vested after six years of service. No contributions were made to the plan in 1996, 1995 or 1994.
12. Rental Income
The Company leases premises in its properties to tenants pursuant to lease agreements which provide for terms ranging generally from 5 to 25 years. The majority of leases provide for additional rents based on tenants' sales volume; however, such amounts earned by Agree have historically not been material.
As of December 31, 1996, the future minimum revenues for the next five years from rental property under the terms of all noncancellable tenant leases, assuming no new or renegotiated leases are executed for such premises, are as follows (in thousands):
1997 $ 16,078
1998 15,654
1999 15,350
2000 14,982
2001 13,950
Thereafter 149,949
--------
Total $225,963
========
|
Of the future minimum rentals, approximately 39% of the above total is attributable to Kmart Corporation and approximately 31% is attributable to Borders, Inc. Kmart's principal business is general merchandise retailing through a chain of discount department stores, and Borders is a major operator of book superstores in the United States.
13. Lease Commitments
The Company has entered into certain land lease agreements for three of its properties. As of December 31, 1996, approximate future annual lease commitments under these agreements are as follows:
Year Ended December 31,
- ---------------------------------
1997 $ 446,000
1998 446,000
1999 446,000
2000 482,000
2001 485,000
Thereafter 6,606,000
=========
|
14. Interim Results
(Unaudited)
The following summary represents the unaudited results of operations of the Company, expressed in thousands except per share amounts, for the periods from January 1, 1995 through December 31, 1996:
Three Months Ended
- --------------------------------------------------------------------------------------
1996 March 31, June 30, September 30, December 31,
- --------------------------------------------------------------------------------------
Revenues $3,866 $4,026 $4,017 $4,382
====== ====== ====== ======
Income before
minority interest $1,010 $1,064 $ 845 $1,714
Minority interest 196 207 164 332
------ ------ ------ ------
Net Income $ 814 $ 857 $ 681 $1,382
====== ====== ====== ======
Net Income Per
Share $ .31 $ .32 $ .26 $ .52
====== ====== ====== ======
Three Months Ended
- --------------------------------------------------------------------------------------
1995 March 31, June 30, September 30, December 31,
- --------------------------------------------------------------------------------------
Revenues $3,413 $3,337 $3,364 $3,614
====== ====== ====== ======
Income before
minority interest $ 987 $1,003 $1,004 $1,038
Minority interest 192 196 195 202
------ ------ ------ ------
Net Income $ 795 $ 807 $ 809 $ 836
====== ====== ====== ======
Net Income Per
Share $ .30 $ .30 $ .31 $ .32
====== ====== ====== ======
|
AGREE REALTY CORPORATION
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
- ---------------------------------------------------------------------------------------------------
Column A Column B Column C Column D
- -------- ----------- ---------------------------- -------------
Costs
Capitalized
Subsequent to
Initial Cost Acquisition
---------------------------- -------------
Building and Building
Description Encumbrance Land Improvements Improvements
- ---------------------------------------------------------------------------------------------------
Completed Retail Facilities
Borman Center, MI $ -- $ 550,000 $ 562,404 $ 1,066,115
Capital Plaza, KY -- 7,379 2,240,607 514,580
Charlevoix Commons, MI 3,981,600 305,000 5,152,992 --
Chippewa Commons, WI 5,103,840 1,197,150 6,367,560 35,539
Grayling Plaza, MI -- 200,000 1,778,657 --
Iron Mountain Plaza, MI -- 677,820 7,014,996 372,627
Ironwood Commons, MI -- 212,500 8,181,306 230,953
Marshall Plaza Two, MI 3,407,040 -- 4,662,230 10,764
North Lakeland Plaza, FL 7,990,926 1,641,879 6,364,379 337,905
Oscoda Plaza, MI -- 183,295 1,872,854 --
Perrysburg Plaza, OH 2,375,000 21,835 2,291,651 --
Petoskey Town Center, MI 5,577,600 875,000 8,895,289 5,985
Plymouth Commons, WI 4,811,520 535,460 5,667,504 138,260
Rapids Associates, MI 5,120,640 705,000 6,854,790 13,000
Shawano Plaza, WI 5,597,760 190,000 9,133,934 --
West Frankfort Plaza, IL -- 8,002 784,077 --
Winter Garden Plaza, FL 9,698,073 1,631,448 8,459,024 --
Omaha Store, NE 3,596,937 1,705,619 2,053,615 2,152
Wichita Store, KS 2,910,064 1,039,195 1,690,644 24,666
Santa Barbara Store, CA 5,795,333 2,355,423 3,240,557 2,650
Monroeville, PA 6,773,314 6,332,158 2,168,892 --
Norman, OK 2,274,622 879,562 1,595,379 --
Columbus, OH 3,131,427 826,000 2,321,134 --
Aventura, FL 3,130,000 -- 3,141,821 --
Boyton Beach, FL 2,183,176 3,103,942 1,953,091 --
----------- ----------- ------------ -----------
Sub Total 83,458,872 25,183,667 104,449,387 2,755,196
----------- ----------- ------------ -----------
Retail Facilities
Under Development
Lawrence, KS -- -- 85,993 --
----------- ----------- ------------ -----------
Total $83,458,872 $25,183,667 $104,535,380 $ 2,755,196
=========== =========== ============ ===========
F-20
|
Column A Column E Column F Column G Column H
- -------- --------------------------------------------- ------------- ----------- -------------
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period in Latest
--------------------------------------------- Income
Building and Accumulated Date of Statement
Description Land Improvements Total Depreciation Construction is Computed
- ------------------------------------------------------------------------------------------------------------------------------
Completed Retail Facilities
Borman Center, MI $ 550,000 $ 1,628,519 $ 2,178,519 $ 878,263 1977 40 Years
Capital Plaza, KY 7,379 2,755,187 2,762,566 1,065,945 1978 40 Years
Charlevoix Commons, MI 305,000 5,152,992 5,457,992 801,471 1991 40 Years
Chippewa Commons, WI 1,197,150 6,403,099 7,600,249 1,056,930 1990 40 Years
Grayling Plaza, MI 200,000 1,778,657 1,978,657 584,444 1984 40 Years
Iron Mountain Plaza, MI 677,820 7,387,623 8,065,443 981,711 1991 40 Years
Ironwood Commons, MI 212,500 8,412,259 8,624,759 1,156,330 1991 40 Years
Marshall Plaza Two, MI -- 4,672,994 4,672,994 677,963 1990 40 Years
North Lakeland Plaza, FL 1,641,879 6,702,284 8,344,163 1,674,282 1987 40 Years
Oscoda Plaza, MI 183,295 1,872,854 2,056,149 608,363 1984 40 Years
Perrysburg Plaza, OH 21,835 2,291,651 2,313,486 759,110 1983 40 Years
Petoskey Town Center, MI 875,000 8,901,274 9,776,274 1,327,675 1990 40 Years
Plymouth Commons, WI 535,460 5,805,764 6,341,224 897,413 1990 40 Years
Rapids Associates, MI 705,000 6,867,790 7,572,790 1,067,320 1990 40 Years
Shawano Plaza, WI 190,000 9,133,934 9,323,934 1,512,238 1990 40 Years
West Frankfort Plaza, IL 8,002 784,077 792,079 290,838 1982 40 Years
Winter Garden Plaza, FL 1,631,448 8,459,024 10,090,472 1,672,227 1988 40 Years
Omaha Store, NE 1,705,619 2,055,767 3,761,386 57,812 1995 40 Years
Wichita Store, KS 1,039,195 1,715,310 2,754,505 48,166 1995 40 years
Santa Barbara Store, CA 2,355,423 3,243,207 5,598,630 91,207 1995 40 years
Monroeville, PA 6,332,158 2,168,892 8,501,050 6,778 1996 40 years
Norman, OK 879,562 1,595,379 2,474,941 9,971 1996 40 years
Columbus, OH 826,000 2,321,134 3,147,134 53,191 1996 40 years
Aventura, FL -- 3,141,821 3,141,821 55,636 1996 40 years
Boyton Beach, FL 3,103,942 1,953,091 5,057,033 4,069 1996 40 years
----------- ------------ ------------ ------------
Sub Total 25,183,667 107,204,583 132,388,250 17,339,353
----------- ------------ ------------ ------------
Retail Facilities
Under Development
Lawrence, KS -- 85,993 85,993 -- N/A N/A
----------- ------------ ------------ ------------
Total $25,183,667 $107,290,576 $132,474,243 $ 17,339,353
=========== ============ ============ ============
|
AGREE REALTY CORPORATION
NOTES TO SCHEDULE III
DECEMBER 31, 1996
1) Reconciliation of Real Estate Properties
The following table reconciles the Real Estate Properties from January 1, 1994 to December 31, 1996:
1996 1995 1994
- ------------------------------------------------------------------------
Balance at January 1 $ 118,360,268 $ 96,852,137 $ 96,548,225
Construction costs 14,173,975 21,508,131 345,912
Sales (60,000) -- (42,000)
------------- ------------ ------------
Balance at December 31 $ 132,474,243 $118,360,268 $ 96,852,137
============= ============ ============
|
2) Reconciliation of Accumulated Depreciation
The following table reconciles the accumulated depreciation from January 1, 1994 to December 31, 1996:
1996 1995 1994
- ------------------------------------------------------------------------------
Balance at January 1 $14,792,193 $12,548,826 $10,325,699
Current year depreciation expense 2,547,160 2,243,367 2,223,127
----------- ----------- -----------
Balance at December 31 $17,339,353 $14,792,193 $12,548,826
=========== =========== ===========
|
3) Tax Basis of Buildings and Improvements
The aggregate cost of Building and Improvements for federal income tax purposes is equal to the cost basis used for financial statement purposes.
Exhibit 10.1
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is made as of the 22nd day of April, 1994 by and between AGREE LIMITED PARTNERSHIP, a Delaware limited partnership, whose address is 31850 Northwestern Highway, Farmington Hills, Michigan 48334 (hereinafter collectively referred to as "Borrower") and NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, whose address is One Nationwide Plaza, Columbus, Ohio 43216, Attention: Real Estate Investments (hereinafter referred to as "Lender").
W I T N E S S E T H:
The following is a recital of facts underlying this Agreement:
A. Shawano Plaza, Plymouth Commons and Chippewa Commons, Michigan co-partnerships (collectively, the "Original Borrower") heretofore borrowed the sum of Twenty-One Million Dollars ($21,000,000) (the "Loan") from Lender, as evidenced by a promissory note ("Original Note") dated November 12, 1990 in the original principal amount of the Loan.
B. To secure repayment of the Loan together with all interest and charges of whatever nature to become due thereunder, the Original Borrower executed and delivered to Lender a Mortgage and Security Agreement (the "Mortgage") and an Assignment of Leases, Rents and Profits (the "Assignment"), each dated November 12, 1990 and recorded in the Offices of the Registers of Deeds of Shawano, Sheboygan and Chippewa Counties, Wisconsin, and various other documents were executed by the Original Borrower, the Lender or Richard Agree and Edward Rosenberg ("Agree and Rosenberg") including, without limitation, certain guaranties. The Mortgage, the Assignment and such other documents (excluding any Mortgage Note) are hereinafter collectively referred to as the "Loan Documents".
C. On or about February 18, 1991, the Lender made another loan (the "Michigan Loan") to Rapids Associates, Marshall Plaza Phase Two, Petoskey Town Center and Charlevoix Commons, Michigan co-partnerships (collectively, the "Michigan Original Borrower"), which Michigan Loan was cross- collateralized and cross-defaulted with the Loan. Certain amendments were made to the Original Note and the Loan Documents in connection with such cross-collateralization.
D. The Property (as that term is defined in the Mortgage) has been conveyed by the Original Borrower to the Borrower.
E. Lender has agreed to accept partial prepayment of the Loan and the Michigan Loan and to restructure the Loan and the Michigan Loan as set forth in the letters to Lender from Agree and Rosenberg on behalf of the Original Borrower and the Michigan Original Borrower dated March 2, 1994 and April 19, 1994, copies of which are attached hereto as Exhibit A-1, and in the letter from the Lender to Agree and Rosenberg dated March 17, 1994, a copy of which is attached hereto as Exhibit A-2. The parties hereto are entering into this Agreement for the purpose of stating certain terms and conditions of the restructured Loan.
NOW THEREFORE, in consideration of the mutual covenants and conditions stated herein and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Borrower, Lender, Agree and Rosenberg agree as follows:
1. Concurrently herewith, Borrower has partially prepaid the Loan such that the principal balance thereof has been reduced to Fourteen Million Four Hundred Fifty Thousand and 00/100 Dollars ($14,450,000.00) and, to evidence the reduced Loan, has executed and delivered to Lender a Mortgage Note (the "New Note") in such amount in substitution and complete replacement for the Original Note. The Lender and Borrower have executed amendments to the Mortgage and Assignment which reflect the replacement of the Original Note by the New Note. The parties hereto agree that all references in the other Loan Documents to the Original Note shall hereafter be deemed to refer to the New Note. Agree and Rosenberg specifically agree and confirm that the Indemnity dated November 12, 1990 executed by them for the benefit of the Lender remains in full force and effect with respect to the restructured Loan as evidenced by the New Note and that any Guaranty executed by them for the benefit of the Lender and not released by the Lender prior hereto remains in full force and effect with respect to the restructured Loan as evidenced by the New Note.
2. Lender hereby consents to the conveyance of the Property (as that term is defined in the Mortgage) to the Borrower, an entity whose owners are those persons described in Exhibit A-1 hereto and who hold the respective interests described in Exhibit A-1. The conveyance is subject to the Mortgage, Assignment and other Loan Documents and nothing herein shall be deemed to be a release, discharge or modification of any liability of Agree and Rosenberg thereunder. Nothing herein shall be deemed to be a consent by Lender to any other or further transfer or conveyance of the Property.
3. Borrower assumes and agrees to pay, perform and fulfill all of the obligations of the Original Borrower under the Loan Documents and to be bound by all of the terms and provisions thereof as fully and completely as though Borrower had originally executed the Loan Documents.
4. This Agreement shall be governed by the laws of the State of Wisconsin and shall be binding upon the parties hereto and their respective heirs, successors and assigns. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all such counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Loan Modification Agreement has been executed by the parties hereto as of the date above.
AGREE LIMITED PARTNERSHIP, a
Delaware limited partnership
By: AGREE REALTY CORPORATION, a
Maryland Corporation
Its: General Partner
By: /s/ Richard Agree
------------------------
Name:
Title:
/s/ Richard Agree
----------------------------------
RICHARD AGREE
/s/ Edward Rosenberg
----------------------------------
EDWARD ROSENBERG
|
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ James W. Prude
-----------------------------
Its: Vice President
Attest: /s/ Dennis W. Celick
------------------------
Its: Assistant Secretary
|
EXHIBIT A-1
March 2, 1994
Mr. Jerry Spangler
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
RE: AGREE K-MART LOANS
LOAN A -- WISCONSIN -- No. 030301843
LOAN B -- MICHIGAN -- No. 030301852
Gentlemen:
On November 13, 1990 and February 19, 1991, the above referenced Loan A and Loan B, respectively, closed with Nationwide Life Insurance Company (hereinafter "Nationwide").
In order to refinance and consolidate these loans, the Borrower hereby makes Application to Nationwide subject, but not limited to the following conditions:
Borrower: Seven individual partnerships, which interests will be
assigned to Agree Realty Limited Partnership, a Delaware
Limited Partnership, the owners of which are as follows:
General Partner:
Agree Realty Corporation, a Maryland Corporation 76.01%*
Limited Partners:
Richard Agree 12.40%*
Edward Rosenberg 9.03%*
Joel Weiner 2.56%*
-----
Total 100.0%
*Approximate Interests
Loan Amount: $33,600,000
It is understood and agreed that the balances on the two
existing loans will be paid down by a total of approximately
$11,000,000. Nationwide is to receive a prepayment premium
of $1,820,000 at the time of closing. This penalty
|
Mr. Jerry Spangler
March 2, 1994
assumes a closing in the month of April 1994. Should closing occur later, Nationwide shall be paid a prepayment premium as follows:
May 1994: $1,730,000
June 1994: $1,640,000
July 1994: $1,550,000
Interest Rate: 6.875%.
Commitment
Fee: At closing, Nationwide is to receive a fee of $700,000.
Maturity Date: November 15, 2005
Monthly
Payments: Years 1-5: $192,500/month (interest only)
Thereafter: Based upon a rate as determined below and a
22 year amortization.
Rate Reset: At the end of the 5th year the rate will be reset for the
remaining loan term as provided for in the existing loan
documents.
Closing Date: No later than July 15, 1994
Documentation: It is understood and agreed that all other terms and
conditions of the existing loan documents shall remain the
same.
Nationwide will attempt to use the existing loan documents
subject to the changes required by the refinancing and
subject to changes necessary to perfect Nationwide's first
lien on the property.
Expenses: Borrower will be responsible for all expenses relating to
the refinancing of the existing loans, whether the
refinancing closes or not.
Good Faith
Deposit: Borrower herewith deposits $50,000 as a good faith deposit.
This good faith deposit will be refunded, less Nationwide's
out of pocket expenses, if any, upon closing and receipt by
Nationwide of all closing items. If the loan fails to close
as herein contemplated, Nationwide shall retain this
deposit.
|
By execution of this agreement, Borrower authorizes Nationwide (or its correspondent) to perform any necessary credit and financial inquiries. Borrower agrees to provide any information requested by Nationwide.
The undersigned hereby apply for this refinancing and consolidation for Shawano Plaza, Plymouth Commons, and Chippewa Commons (Loan A) and Rapids Associates, Charlevoix Commons, Marshall Plaza Phase Two and Petoskey Town Center (Loan B), each a Michigan Co-Partnership.
Mr. Jerry Spangler
March 2, 1994
By: /s/ Richard Agree
Richard Agree, Its Co-Partner
And: /s/ Edward Rosenberg
Edward Rosenberg, Its Co-Partner
Nationwide Hereby Accepts The Above Application. *
|
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Robert H. McNaghten Date: March 17, 1994
--------------------------- ---------------------
Name:
Vice President
---------------------------
|
Title:
* Subject to Nationwide's March 17, 1994, letter of modification and clarification.
April 19, 1994
Mr. Jerry Spangler
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
RE: Agree Kmart Loans
Loan A -- Wisconsin No. 03-0301843
Loan B -- Michigan No. 03-0301852
Gentlemen:
The purpose of this letter is to confirm our agreement to modify the March 17, 1994, letter amendment to our March 2, 1994, Agreement.
Numbered Paragraph 5 of the March 17, 1994, letter amendment is hereby deleted in its entirety and replaced with the following:
5. In the "Rate Reset" section of the Agreement delete "as provided for in the existing loan documents" and replace with "to Nationwide's then-prevailing Interest rate for a loan with a seven-year term."
The balance of the Agreement, as modified by letter dated March 17, 1994, is hereby ratified and affirmed.
Please acknowledge your acceptance by signing below:
Very truly yours,
Shawano Plaza Plymouth Commons Chippewa Commons Rapids Associates Charlevoix Commons Marshall Plaza Phase Two Petoskey Town Center
By: /s/ Richard Agree
----------------------
Richard Agree, Partner
|
ACKNOWLEDGED AND ACCEPTED:
Nationwide Life Insurance Company
April 20, 1994
By: /s/
-------------------------
Its: Vice President
-------------------------
|
EXHIBIT A-2
[ LOGO - NATIONWIDE INSURANCE ]
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE ONE NATIONWIDE PLAZA - COLUMBUS, OH 43215-2220
March 17, 1994
Messrs. Richard Agree and Edward Rosenberg
C/o Mr. David J. Sibbold
Proctor & Associates
3883 Telegraph Road, Suite 104
P.O. Box 769
Bloomfield Hills, MI 48303
Re: Agree K-Mart Loans
Loan A -- Wisconsin No. 03-0301843
Loan B -- Michigan No. 03-0301852
Gentlemen:
Nationwide Life Insurance Company hereby approves the March 2, 1994, Letter Agreement ("Agreement") to refinance the above-captioned loans subject to the following modifications and clarifications:
1. It is understood and agreed that instead of consolidating the two loans into one loan as contemplated in the Agreement, two separate loans shall be maintained: $14,450,000 for Loan A (Wisconsin) and $19,150,000 for Loan B (Michigan).
2. It is further understood and agreed that the prepayment premiums outlined in the Agreement shall be divided between Loan A and Loan B, 43 percent and 57 percent, respectively.
3. The Commitment Fee of $700,000 outlined in the "Commitment Fee" section of the Agreement shall be apportioned $301,000 to Loan A and $399,000 to Loan B.
4. The monthly payment outlined under the "Monthly Payments" section of the Agreement shall be changed to "$82,786.46" for Loan A and "$109,713.54" for Loan B.
5. In the "Rate Reset" section of the Agreement delete "as provided for in the existing loan documents" and replace with "to Nationwide's then-prevailing interest rate for a loan with a six-year term".
6. In the "Documentation" section of the Agreement add the following new paragraph:
"The conditions for release of Property from the security for the loan set out in Section 30 of the Mortgage for each of the loans shall be amended as follows:
a. The "eighty percent (80%)" loan-to-value requirement and "1.1" times debt service requirement in the last paragraph of section 30 shall be changed to "sixty-two percent (62%)" and "1.75", respectively.
Messrs. Richard Agree and Edward Rosenberg
March 17, 1994
b. The "Project Value" of each property in this same paragraph shall be changed to the following:
Shawano $5,650,000 Plymouth 4,350,000 Chippewa Falls 4,450,000 Big Rapids 5,790,000 Charlevoix 3,690,000 Marshall 3,660,000 Petoskey 6,010,000 |
These modifications constitute the only changes made to the Agreement. Please signify your acceptance of these changes by signing and returning the original of this amendment letter to Jerry P. Spangler at the letterhead address no later than March 25, 1994.
Very truly yours,
NATIONWIDE LIFE INSURANCE COMPANY
/s/ Robert H. McNaghten - ----------------------- Robert H. McNaghten Vice President |
JPS/RHM/sac
Accepted by Borrowers the 22nd day of March, 1994
Shawano Plaza
Plymouth Commons
Chippewa Commons
Rapids Associates
Charlevoix Commons
Marshall Plaza Phase Two
Petoskey Town Center
By: /s/ Richard Agree
-----------------------------
Richard Agree, Its Co-Partner
By: /s/ Edward Rosenberg
--------------------------------
Edward Rosenberg, Its Co-Partner
|
Exhibit 10.2
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is made as of the 22nd day of April, 1994 by and between AGREE LIMITED PARTNERSHIP, a Delaware limited partnership, whose address is 31850 Northwestern Highway, Farmington Hills, Michigan 48334 (hereinafter referred to as "Borrower") and NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, whose address is One Nationwide Plaza, Columbus, Ohio 43216, Attention: Real Estate Investments (hereinafter referred to as "Lender").
W I T N E S S E T H:
The following is a recital of facts underlying this Agreement:
A. Rapids Associates, Marshall Plaza Phase Two, Petoskey Town Center and Charlevoix Commons, Michigan co-partnerships (collectively, the "Original Borrower") heretofore borrowed the sum of Twenty-Four Million Four Hundred Eighty Thousand Dollars ($24,480,000) (the "Loan") from Lender, as evidenced by a promissory note ("Original Note") dated February 18, 1991 in the original principal amount of the Loan.
B. To secure repayment of the Loan together with all interest and charges of whatever nature to become due thereunder, the Original Borrower executed and delivered to Lender a Mortgage and Security Agreement (the "Mortgage") and an Assignment of Leases, Rents and Profits (the "Assignment"), each dated February 18, 1991 and recorded in the Offices of the Registers of Deeds of Calhoun, Mecosta, Charlevoix and Emmet Counties, Michigan, and various other documents were executed by the Original Borrower, the Lender or Richard Agree and Edward Rosenberg ("Agree and Rosenberg") including, without limitation, certain guaranties. The Mortgage, the Assignment and such other documents (excluding any Mortgage Note) are hereinafter collectively referred to as the "Loan Documents".
C. On or about November 12, 1990, the Lender made a loan (the "Wisconsin Loan") to Shawano Plaza, Plymouth Commons and Chippewa Commons, Michigan co-partnerships (collectively, the "Wisconsin Original Borrower"), which Wisconsin Loan was cross-collateralized and cross-defaulted with the Loan.
D. The Property (as that term is defined in the Mortgage) has been conveyed by the Original Borrower to the Borrower.
E. Lender has agreed to accept partial prepayment of the Loan and the Wisconsin Loan and to restructure the Loan and the Wisconsin Loan as set forth in the letters to Lender from Agree and Rosenberg on behalf of the Original Borrower and the Wisconsin Original Borrower dated March 2, 1994 and April 19, 1994, copies of which are attached hereto as Exhibit A-1, and in the letter from the Lender to Agree and Rosenberg dated March 17, 1994, a copy of which is attached hereto as Exhibit A-2. The parties hereto are entering into this Agreement for the purpose of stating certain terms and conditions of the restructured Loan.
NOW THEREFORE, in consideration of the mutual covenants and conditions stated herein and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Borrower, Lender, Agree and Rosenberg agree as follows:
1. Concurrently herewith, Borrower has partially prepaid the Loan such that the principal balance thereof has been reduced to Nineteen Million One Hundred Fifty Thousand and 00/100 Dollars ($19,150,000.00) and, to evidence the reduced Loan, has executed and delivered to Lender a Mortgage Note (the "New Note") in such amount in substitution and complete replacement for the Original Note. The Lender and Borrower have executed amendments to the Mortgage and Assignment which reflect the replacement of the Original Note by the New Note. The parties hereto agree that all references in the other Loan Documents to the Original Note shall hereafter be deemed to refer to the New Note. Agree and Rosenberg specifically agree and confirm that the Indemnity dated February 18, 1991, executed by them for the benefit of the Lender remains in full force and effect with respect to the restructured Loan as evidenced by the New Note and that any Guaranty executed by them for the benefit of the Lender and not released by the Lender prior hereto remains in full force and effect with respect to the restructured Loan as evidenced by the New Note.
2. Lender hereby consents to the conveyance of the Property (as that term is defined in the Mortgage) to the Borrower, an entity whose owners are those persons described in Exhibit A-1 hereto and who hold the respective interests described in Exhibit A-1. The conveyance is subject to the Mortgage, Assignment and other Loan Documents and nothing herein shall be deemed to be a release, discharge or modification of any liability of Agree and Rosenberg thereunder. Nothing herein shall be deemed to be a consent by Lender to any other or further transfer or conveyance of the Property.
3. Borrower assumes and agrees to pay, perform and fulfill all of the obligations of the Original Borrower under the Loan Documents and to be bound by all of the terms and provisions thereof as fully and completely as though Borrower had originally executed the Loan Documents.
4. This Agreement shall be governed by the laws of the State of Michigan and shall be binding upon the parties hereto and their respective heirs, successors and assigns. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all such counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Loan Modification Agreement has been executed by the parties hereto as of the date above.
AGREE LIMITED PARTNERSHIP, a
Delaware limited partnership
By: AGREE REALTY CORPORATION, a
Maryland Corporation
Its: General Partner
By: /s/ Richard Agree
------------------------------
Name:
Title:
/s/ Richard Agree
-----------------------------------------
RICHARD AGREE
/s/ Edward Rosenberg
-----------------------------------------
EDWARD ROSENBERG
|
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ James W. Prude
------------------------------------
Its: Vice President
Attest: /s/ Dennis W. Celick
-------------------------------
Its: Assistant Secretary
|
EXHIBIT A-1
March 2, 1994
Mr. Jerry Spangler
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
RE: AGREE K-MART LOANS
LOAN A -- WISCONSIN -- No. 030301843
LOAN B -- MICHIGAN -- No. 030301852
Gentlemen:
On November 13, 1990 and February 19, 1991, the above referenced Loan A and Loan B, respectively, closed with Nationwide Life Insurance Company (hereinafter "Nationwide").
In order to refinance and consolidate these loans, the Borrower hereby makes Application to Nationwide subject, but not limited to the following conditions:
Borrower: Seven individual partnerships, which interests will be
assigned to Agree Realty Limited Partnership, a Delaware
Limited Partnership, the owners of which are as follows:
General Partner:
Agree Realty Corporation, a Maryland Corporation 76.01%*
Limited Partners:
Richard Agree 12.40%*
Edward Rosenberg 9.03%*
Joel Weiner 2.56%*
-----
Total 100.0%
*Approximate Interests
Loan Amount: $33,600,000
It is understood and agreed that the balances on the two
existing loans will be paid down by a total of approximately
$11,000,000. Nationwide is to receive a prepayment premium
of $1,820,000 at the time of closing. This penalty
|
Mr. Jerry Spangler
March 2, 1994
assumes a closing in the month of April 1994. Should closing occur later, Nationwide shall be paid a prepayment premium as follows:
May 1994: $1,730,000
June 1994: $1,640,000
July 1994: $1,550,000
Interest Rate: 6.875%.
Commitment
Fee: At closing, Nationwide is to receive a fee of $700,000.
Maturity Date: November 15, 2005
Monthly
Payments: Years 1-5: $192,500/month (interest only)
Thereafter: Based upon a rate as determined below and a
22 year amortization.
Rate Reset: At the end of the 5th year the rate will be reset for the
remaining loan term as provided for in the existing loan
documents.
Closing Date: No later than July 15, 1994
Documentation: It is understood and agreed that all other terms and
conditions of the existing loan documents shall remain the
same.
Nationwide will attempt to use the existing loan documents
subject to the changes required by the refinancing and
subject to changes necessary to perfect Nationwide's first
lien on the property.
Expenses: Borrower will be responsible for all expenses relating to
the refinancing of the existing loans, whether the
refinancing closes or not.
Good Faith
Deposit: Borrower herewith deposits $50,000 as a good faith deposit.
This good faith deposit will be refunded, less Nationwide's
out of pocket expenses, if any, upon closing and receipt by
Nationwide of all closing items. If the loan fails to close
as herein contemplated, Nationwide shall retain this
deposit.
|
By execution of this agreement, Borrower authorizes Nationwide (or its correspondent) to perform any necessary credit and financial inquiries. Borrower agrees to provide any information requested by Nationwide.
The undersigned hereby apply for this refinancing and consolidation for Shawano Plaza, Plymouth Commons, and Chippewa Commons (Loan A) and Rapids Associates, Charlevoix Commons, Marshall Plaza Phase Two and Petoskey Town Center (Loan B), each a Michigan Co-Partnership.
Mr. Jerry Spangler
March 2, 1994
By: /s/ Richard Agree
Richard Agree, Its Co-Partner
And: /s/ Edward Rosenberg
Edward Rosenberg, Its Co-Partner
Nationwide Hereby Accepts The Above Application. *
|
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Robert H. McNaghten Date: March 17, 1994
--------------------------- ---------------------
Name:
Vice President
---------------------------
|
Title:
* Subject to Nationwide's March 17, 1994, letter of modification and clarification.
April 19, 1994
Mr. Jerry Spangler
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
RE: Agree Kmart Loans
Loan A -- Wisconsin No. 03-0301843
Loan B -- Michigan No. 03-0301852
Gentlemen:
The purpose of this letter is to confirm our agreement to modify the March 17, 1994, letter amendment to our March 2, 1994, Agreement.
Numbered Paragraph 5 of the March 17, 1994, letter amendment is hereby deleted in its entirety and replaced with the following:
5. In the "Rate Reset" section of the Agreement delete "as provided for in the existing loan documents" and replace with "to Nationwide's then-prevailing Interest rate for a loan with a seven-year term."
The balance of the Agreement, as modified by letter dated March 17, 1994, is hereby ratified and affirmed.
Please acknowledge your acceptance by signing below:
Very truly yours,
Shawano Plaza Plymouth Commons Chippewa Commons Rapids Associates Charlevoix Commons Marshall Plaza Phase Two Petoskey Town Center
By: /s/ Richard Agree
----------------------
Richard Agree, Partner
|
ACKNOWLEDGED AND ACCEPTED:
Nationwide Life Insurance Company
April 20, 1994
By: /s/
-------------------------
Its: Vice President
-------------------------
|
EXHIBIT A-2
[ LOGO - NATIONWIDE INSURANCE ]
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE ONE NATIONWIDE PLAZA - COLUMBUS, OH 43215-2220
March 17, 1994
Messrs. Richard Agree and Edward Rosenberg
C/o Mr. David J. Sibbold
Proctor & Associates
3883 Telegraph Road, Suite 104
P.O. Box 769
Bloomfield Hills, MI 48303
Re: Agree K-Mart Loans
Loan A -- Wisconsin No. 03-0301843
Loan B -- Michigan No. 03-0301852
Gentlemen:
Nationwide Life Insurance Company hereby approves the March 2, 1994, Letter Agreement ("Agreement") to refinance the above-captioned loans subject to the following modifications and clarifications:
1. It is understood and agreed that instead of consolidating the two loans into one loan as contemplated in the Agreement, two separate loans shall be maintained: $14,450,000 for Loan A (Wisconsin) and $19,150,000 for Loan B (Michigan).
2. It is further understood and agreed that the prepayment premiums outlined in the Agreement shall be divided between Loan A and Loan B, 43 percent and 57 percent, respectively.
3. The Commitment Fee of $700,000 outlined in the "Commitment Fee" section of the Agreement shall be apportioned $301,000 to Loan A and $399,000 to Loan B.
4. The monthly payment outlined under the "Monthly Payments" section of the Agreement shall be changed to "$82,786.46" for Loan A and "$109,713.54" for Loan B.
5. In the "Rate Reset" section of the Agreement delete "as provided for in the existing loan documents" and replace with "to Nationwide's then-prevailing interest rate for a loan with a six-year term".
6. In the "Documentation" section of the Agreement add the following new paragraph:
"The conditions for release of Property from the security for the loan set out in Section 30 of the Mortgage for each of the loans shall be amended as follows:
a. The "eighty percent (80%)" loan-to-value requirement and "1.1" times debt service requirement in the last paragraph of section 30 shall be changed to "sixty-two percent (62%)" and "1.75", respectively.
Messrs. Richard Agree and Edward Rosenberg
March 17, 1994
b. The "Project Value" of each property in this same paragraph shall be changed to the following:
Shawano $5,650,000 Plymouth 4,350,000 Chippewa Falls 4,450,000 Big Rapids 5,790,000 Charlevoix 3,690,000 Marshall 3,660,000 Petoskey 6,010,000 |
These modifications constitute the only changes made to the Agreement. Please signify your acceptance of these changes by signing and returning the original of this amendment letter to Jerry P. Spangler at the letterhead address no later than March 25, 1994.
Very truly yours,
NATIONWIDE LIFE INSURANCE COMPANY
/s/ Robert H. McNaghten - ----------------------- Robert H. McNaghten Vice President |
JPS/RHM/sac
Accepted by Borrowers the 22nd day of March, 1994
Shawano Plaza
Plymouth Commons
Chippewa Commons
Rapids Associates
Charlevoix Commons
Marshall Plaza Phase Two
Petoskey Town Center
By: /s/ Richard Agree
-----------------------------
Richard Agree, Its Co-Partner
By: /s/ Edward Rosenberg
--------------------------------
Edward Rosenberg, Its Co-Partner
|
EXHIBIT 10.6
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
AGREE LIMITED PARTNERSHIP
Dated as of April 22, 1994
Table of Contents
Page
----
ARTICLE I - DEFINED TERMS 1
ARTICLE II - ORGANIZATIONAL MATTERS 14
Section 2.1. Continuation of Partnership 14
Section 2.2. Name 14
Section 2.3. Principal Office and Registered Agent 15
Section 2.4. Power of Attorney 15
Section 2.5 Term 16
ARTICLE III - PURPOSE 16
Section 3.1. Purpose and Business 16
Section 3.2. Powers 17
ARTICLE IV - CAPITAL CONTRIBUTIONS 17
Section 4.1. Capital Contribution of the Partners 17
Section 4.2. Issuance of Additional Partnership
Interests 19
Section 4.3. No Preemptive Rights 22
Section 4.4. Capital Accounts 22
Section 4.5 Return of Capital Account; Interest 25
ARTICLE V - DISTRIBUTIONS 26
Section 5.1. Initial Partnership Distributions 26
Section 5.2. Requirement and Characterization of
Distributions 26
Section 5.3 Amounts Withheld 26
Section 5.4. Distributions Upon Liquidation 26
ARTICLE VI - ALLOCATIONS 27
Section 6.1 Allocations For Capital Account Purposes 27
Section 6.2 Allocation of Nonrecourse Debt 27
Section 6.3 Reserved 27
Section 6.4 Special Allocation Rules 27
Section 6.5 Allocations for Tax Purposes 30
ARTICLE VII - MANAGEMENT AND OPERATIONS OF BUSINESS 31
Section 7.1 Management 31
Section 7.2 Certificate of Limited Partnership 32
Section 7.3 Restrictions on General Partner's
Authority 32
Section 7.4. Reimbursement of the General Partner 33
Section 7.5. Outside Activities of the General Partner 34
Section 7.6. Transactions with Affiliates 34
Section 7.7. Indemnification 35
Section 7.8. Liability of the General Partner 36
Section 7.9. Title to Partnership Assets 37
Section 7.10. Reliance by Third Parties 37
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ARTICLE VIII - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS 38
Section 8.1. Limitation of Liability 38
Section 8.2. Outside Activities of Limited Partners 38
Section 8.3. Rights of Limited Partners Relating to
the Partnership 38
Section 8.4. Conversion Right 39
Section 8.5. General Partner Covenants Relating to the
Rights 41
Section 8.6. Other Matters Relating to the Conversion
Rights 41
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ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS 42
Section 9.1. Records and Accounting 42
Section 9.2. Fiscal Year 43
Section 9.3. Reports 43
ARTICLE X - TAX MATTERS 43
Section 10.1. Preparation of Tax Returns 43
Section 10.2. Tax Elections 43
Section 10.3. Tax Matters Partner 44
Section 10.4. Organizational Expenses 45
Section 10.5. Withholding 45
ARTICLE XI - TRANSFERS AND WITHDRAWALS 46
Section 11.1. Transfer 46
Section 11.2. Transfer of General Partner's
Partnership Interest 46
Section 11.3. Limited Partners' Rights to Transfer 48
Section 11.4. Substituted Limited Partners 52
Section 11.5. General Provisions 52
ARTICLE XII - DISSOLUTION AND LIQUIDATION 53
Section 12.1. Dissolution 53
Section 12.2. Winding Up 54
Section 12.3. Compliance with Timing Requirements of
Regulations 56
Section 12.4. Deemed Distribution and Recontribution 56
Section 12.5. Documentation of Liquidation 57
Section 12.6. Reasonable Time for Winding Up 57
Section 12.7. Indemnification of the Liquidator 57
Section 12.8. Waiver of Partition 57
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ARTICLE XIII - AMENDMENT OF PARTNERSHIP AGREEMENT 58
Section 13.1. Amendments 58
ARTICLE XIV - ARBITRATION OF DISPUTES 59
Section 14.1. Arbitration 59
Section 14.2. Procedures 59
Section 14.3. Binding Character 60
Section 14.4 Exclusivity 60
Section 14.5. No Alteration of Agreement 61
ARTICLE XV - CONDITIONS/CONCURRENT TRANSACTIONS 61
Section 15.1. General Partner Conditions 61
Section 15.2. Limited Partner Conditions 61
ARTICLE XVI - GENERAL PROVISIONS 62
Section 16.1. Addresses and Notice 62
Section 16.2. Titles and Captions 62
Section 16.3. Pronouns and Plurals 62
Section 16.4. Further Action 62
Section 16.5. Binding Effect 63
Section 16.6. No Third Party Beneficiaries 63
Section 16.7. Waiver 63
Section 16.8. No Agency 63
Section 16.9. Entire Understanding 63
Section 16.10. Counterparts 63
Section 16.11. Applicable Law 63
Section 16.12. Invalidity of Provisions 63
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
AGREE LIMITED PARTNERSHIP
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of April 22, 1994, is entered into by and among the undersigned parties.
W I T N E S S E T H:
WHEREAS, Agree Realty Corporation, as general partner, and Richard Agree, as limited partner, formed Agree Limited Partnership (the "Partnership") as a Delaware limited partnership pursuant to that certain Certificate of Limited Partnership dated April 4, 1994 and filed on April 4, 1994 among the partnership records of the Secretary of State of the State of Delaware, and that certain Agreement of Limited Partnership dated as of April 4, 1994; and
WHEREAS, the original partners of the Partnership desire to amend the aforesaid Agreement of Limited Partnership to (i) admit additional limited partners to the Partnership, and (ii) amend and restate in its entirety the agreement among the partners.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto, intending legally to be bound, hereby agree as follows:
ARTICLE I - DEFINED TERMS
Except as otherwise herein expressly provided, the following terms and phrases shall have the meanings et forth below:
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" has the meaning set forth in Section 4.2 hereof.
"Additional REIT Securities" has the meaning set forth in Section 4.2.C hereof.
"Adjusted Capital Account" means the Capital Account maintained for each Partner as of the end of each fiscal year (i) increased by any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed
to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account as of the end of the relevant fiscal year.
"Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Section 4.4.D hereof. Once an Adjusted Property is deemed distributed by, and recontributed to, the Partnership for federal income tax purposes upon a termination thereof pursuant to Section 708 of the Code, such property shall thereafter constitute a Contributed Property until the Carrying Value of such property is further adjusted pursuant to Section 4.4.D hereof.
"Affiliate" means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling fifty percent (50%) or more of the outstanding voting interests of such Person, (iii) any Person of which such Person owns or controls fifty percent (50%) or more of the voting interests, (iv) any officer, director, general partner or trustee of such Person or of any Person referred to in clauses (i), (ii), and (iii) above, or (v) any member of the Immediate Family of such Person.
"Agreement" means this First Amended and Restated Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time.
"Articles of Incorporation" means the Articles of Incorporation of the General Partner, as the same may be amended or restated and in effect from time to time.
"Available Cash" means, with respect to any period for which such calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss, as the
case may be, for such period (without regard to adjustments
resulting from allocations described in Section 6.4.A through
Section 6.4.E),
(b) Depreciation and all other noncash charges deducted in determining Net Income or Net Loss for such period,
(c) the amount of any reduction in reserves of the Partnership referred to in clause (ii)(f) below (including, without limitation, reductions resulting because the General Partner determines such amounts are no longer necessary),
(d) the excess of proceeds from the sale, exchange, disposition or refinancing of Partnership property during such period over the gain (or loss, as the case may be) recognized from such sale, exchange, disposition or refinancing during such period (excluding Terminating Capital Transactions), except such proceeds as are distributed pursuant to Section 5.1, and
(e) all other cash received by the Partnership during such period that was not included in determining Net Income or Net Loss for such period;
(ii) less the sum of:
(a) all principal debt payments made during such period by the Partnership,
(b) capital expenditures made by the Partnership during such period,
(c) investments in any entity (including loans made thereto) to the extent that such investments are not otherwise described in clauses (ii)(a) or (b),
(d) all other expenditures and payments not deducted in determining Net Income or Net Loss for such period,
(e) any amount included in determining Net Income or Net Loss of such period that was not received by the Partnership during such period, and
(f) the amount of any increase in reserves established during such period which the General Partner determines are necessary or appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash received or reductions in reserves, or take into account any disbursements made or reserves established, after commencement of the dissolution and liquidation of the Partnership.
"Bankruptcy" of a Person shall be deemed to have occurred when
(a) the Person commences a voluntary proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other
similar law now or hereafter in
effect, (b) the Person is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Person, (c) the Person executes and delivers a general assignment for the benefit of the Person's creditors, (d) the Person files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Person in any proceeding of the nature described in clause (b) above, (e) the Person seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Person or for all or any substantial part of the Person's properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (g) the appointment without the Person's consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within ninety (90) days after such appointment, or (h) an appointment referred to in clause (g) is not vacated within ninety (90) days after the expiration of any such stay.
"Beneficial Owner" means an owner of shares of stock of the
General Partner under Code Section 542(a)(2), either directly or
constructively through application of Code Section 544, as modified by Code
Section 856(h)(1)(B).
"Business Day" means any day except a Saturday, Sunday or other day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
"Capital Account" means the Capital Account maintained for a Partner pursuant to Section 4.4 hereof.
"Capital Contribution" means, with respect to any Partner, the total amount of any cash, cash equivalents and the Net Asset Value of Contributed Property which such Partner contributes or is deemed to contribute to the Partnership pursuant to the terms of this Agreement, including the Capital Contribution made by a predecessor holder of the Interest of such Partner.
"Capital Stock" means REIT Shares and any other shares of stock (including, without limitation, preferred stock) of the General Partner.
"Carrying Value" means (i) with respect to a Contributed Property, the Gross Asset Value of such property reduced (but not below zero) by all Depreciation with respect to such property charged to the Partners' Capital Accounts, (ii) with respect to an Adjusted Property, the Carrying Value as last adjusted pursuant to Section 4.4 reduced (but not below zero) by all Depreciation with respect to such property charged to the Partners' Capital Accounts since the date of the last adjustment pursuant
to Section 4.4, and (iii) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Section 4.4 hereof and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner.
"Certificate" means the Certificate of Limited Partnership of the Partnership filed in the office of the Secretary of State of the State of Delaware, as amended from time to time in accordance with the terms hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.
"Consent of the Limited Partners" means the written consent of a majority-in-interest of the Limited Partners (i.e., Limited Partners holding in the aggregate more than fifty percent (50%) of the total Partnership Interests held by the Limited Partners), which consent shall be obtained prior to the taking of any action for which it is required by this Agreement and may be given or withheld by each Limited Partner in its sole and absolute discretion.
"Contributed Property" means each property or other asset (but excluding cash), in such form as may be permitted by the Act, contributed to the Partnership or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code. Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 4.4.D hereof, such property shall no longer constitute a Contributed Property for purposes of Section 4.4 hereof, but shall be deemed an Adjusted Property for such purposes.
"Contribution Agreements" means the Contribution Agreements, dated April 22, 1994, pursuant to which the Property Partnerships agreed to contribute to the Partnership the Properties and other assets owned by such Property Partnerships in consideration for the issuance of Partnership Units to the partners of such Property Partnerships.
"Contribution Date" has the meaning set forth in
Section 4.2 hereof.
"Conversion Factor" means 1.0, provided that in the event that the General Partner (i) pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares,or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares that would be issued and outstanding on the record date for such event if such dividend, distribution, subdivision or combination had occurred as of such date, and the denominator of which shall be the actual number of REIT Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination. Any adjustment of the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date for such event; provided, however, that if a Specified Conversion Date, Specified Exchange Date or Required Exchange Date, as the case may be, occurs after the record date, but prior to the effective date, of any such event, the Conversion Factor shall be determined as if the Specified Conversion Date, Specified Exchange Date or Required Exchange Date, as the case may be, had occurred immediately prior to the record date for such event.
"Conversion Right" has the meaning set forth in Section 8.4 hereof.
"Converting Partner" has the meaning set forth in
Section 8.4 hereof.
"Deemed Partnership Interest Value" as of any date shall mean, with respect to a Partner, the product of (i) the Deemed Value of the Partnership as of such date, multiplied by (ii) such Partner's Partnership Interest as of such date.
"Deemed Value of the Partnership" as of any date shall mean the quotient of the following amounts:
(i) the product of (a) the Value of a REIT Share as of such date, multiplied by (b) the total number of REIT Shares issued and outstanding as of the close of business on such date (excluding treasury shares), increased by any liabilities and decreased by any assets of the General Partner other than its interest in the Partnership, divided by
(ii) the Partnership Interest of the General Partner as of such date.
"Demand Notice" has the meaning set forth in Section 14.2 hereof.
"Depreciation" means, for each fiscal year, an amount equal to the federal income tax depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year, except that if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carry-
ing Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner.
"ERISA" means the Employee Retirement Income and Security Act of 1974, as the same may be amended from time to time, or any successor statute.
"Exchange Act" means the Securities Exchange Act of 1934, as the same may be amended from time to time, or any successor statute.
"Exchange Right" means the Optional Exchange Right and the Required Exchange Right set forth in Sections 11.3.C(1) and (2), respectively.
"General Partner" means Agree Realty Corporation, a Maryland corporation, its duly admitted successors and assigns and any other Person who is a General Partner at the time of reference thereto.
"General Partnership Interest" means the Partnership Interest held by the General Partner.
"Gross Asset Value" of any Contributed Property contributed to the Partnership in connection with the execution of this Agreement means the fair market value of such Contributed Property as established pursuant to the relevant Contribution Agreement. The Gross Asset Value of any other Contributed Property means the fair market value of such Contributed Property at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may, in its sole and absolute discretion, adopt; provided, however, that the Gross Asset Value of any property deemed contributed to the Partnership for federal income tax purposes upon termination and reconstitution thereof pursuant to Section 708 of the Code shall be determined in accordance with Section 4.4 hereof. The "Gross Asset Value" of any property distributed to a Partner means the fair market value of such distributed property at the time of distribution as determined by the General Partner using such reasonable method of valuation as it may, in its sole and absolute discretion, adopt.
"Immediate Family" means, with respect to any natural Person, such natural Person's spouse, ancestors, lineal descendants and brothers and sisters (whether by the whole or half blood). This definition is intended to conform to the definition of "family" contained in Code Section 544(a)(2). In the event that the definition of family contained in Code Section 544(a)(2)
is revised, the definition of "Immediate Family" shall be revised accordingly.
"Incapacity" or "Incapacitated" means, (i) as to any
individual Partner, death, total physical disability or entry of an order by
a court of competent jurisdiction adjudicating him incompetent to manage his
Person or his estate; (ii) as to any corporation which is a Partner, the
filing a certificate of dissolution, or its equivalent, for the corporation
or the revocation of its charter; (iii) as to any partnership which is a
Partner, the dissolution and commencement of winding up of the partnership;
(iv) as to any estate which is a Partner, the distribution by the fiduciary
of the estate's entire interest in the Partnership; (v) as to any trustee of
a trust which is a Partner, the termination of the trust (but not the
substitution of a new trustee); or (vi) as to any Partner, the Bankruptcy of
such Partner.
"Indemnitee" means (i) any Person made a party to a proceeding by reason of his status as (A) the General Partner, or (B) a director or officer of the Partnership or the General Partner, (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time, in its sole and absolute discretion, and (iii) any Person who, at any time prior to the consummation of the transactions contemplated by the Contribution Agreement, was a general partner (or a director or officer of a general partner) of, or a director or officer of, a Property Partnership.
"Independent Directors of the General Partner" means the independent directors as defined in Article V, Section 3 of the Articles of Incorporation.
"IRS" means the Internal Revenue Service.
"Lien" means any liens, security interests, mortgages, deeds of trust, charges, claims, encumbrances, pledges, options, rights of first offer or first refusal and any other rights or interests of any kind or nature, actual or contingent, or other similar encumbrances of any nature whatsoever.
"Limited Partner" means any Person named as a Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended from time to time, or any Substituted Limited Partner or Additional Limited Partner, in such Person's capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a Limited Partner in the Partnership and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.
"Liquidator" has the meaning set forth in Section 12.2 hereof.
"Net Asset Value" means: (i) in the case of any Contributed Property contributed, or deemed contributed, by a Partner to the Partnership, the Gross Asset Value of such property as of the time of its contribution to the Partnership, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed (including, with respect to the Properties, any prepayment penalties or other fees and expenses payable on or about the Contribution Date in connection with the prepayment or modification of the liabilities to which such Properties are subject), and (ii) in the case of any property distributed to a Partner by the Partnership, the Gross Asset Value of such property at the time of its distribution by the Partnership reduced by any liabilities either assumed by the distributee Partner upon such distribution or to which such property is subject when distributed.
"Net Income" means, for any taxable period, the excess, if any, of the Partnership's items of income and gain for such taxable period over the Partnership's items of loss and deduction for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Section 4.4 hereof. Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to the special allocation rules in Sections 6.4 and 6.5, Net Income or the resulting Net Loss, whichever the case may be, shall be recomputed without regard to such item.
"Net Loss" means, for any taxable period, the excess, if any, of the Partnership's items of loss and deduction for such taxable period over the Partnership's items of income and gain for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Section 4.4 hereof. Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to the special allocation rules in Sections 6.4 and 6.5, Net Loss or the resulting Net Income whichever the case may be, shall be recomputed without regard to such items.
"Nonrecourse Built-in Gain" means, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Section 6.5.B if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a fiscal year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section 1.752-1(a)(2).
"Notice of Conversion" means the Notice of Conversion substantially in the form of Exhibit B to this Agreement.
"Notice of Exchange" means the Notice of Exchange substantially in the form of Exhibit C to this Agreement.
"Offering" means the sale of REIT Shares pursuant to the Registration Statement.
"Offering Date" means the date of closing of the Offering without regard to any subsequent closing with respect to REIT Shares constituting the Underwriters' overallotment option.
"Optional Exchange Right" has the meaning set forth in
Section 11.3.C(1) hereof.
"Original Limited Partner" means each of Richard Agree, Edward Rosenberg and Joel Weiner.
"Partner" means a General Partner or a Limited Partner, and "Partners" means the General Partner and the Limited Partners as a collective group.
"Partner Minimum Gain" means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the Delaware limited partnership formed under the Act and continued pursuant to this Agreement, as such partnership may from time to time be constituted.
"Partnership Interest" means an ownership interest in the Partnership representing a Capital Contribution by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. The Partnership Interest of each Partner shall be expressed as a percentage of the total Partnership Interests owned by all of the Partners, as specified in
Exhibit A attached hereto, as such Exhibit may be amended from time to time. A Partnership Interest may be expressed as a number of Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, for a fiscal year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).
"Partnership Record Date" means the record date established by
the General Partner for the distribution of Available Cash pursuant to
Section 5.2 hereof, which record date shall be the same as the record date
established for a distribution to the holders of REIT Shares of some or all
of the General Partner's portion of such distribution.
"Partnership Unit" means a unit of Partnership Interest issued to a Limited Partner pursuant to the terms of this Agreement, which unit may be converted into REIT Shares through the exercise of the Rights set forth in Sections 8.4 and 11.3.C. The number of Partnership Units of each Limited Partner shall be as specified in Exhibit A attached hereto, as such Exhibit may be amended from time to time. The Partnership Units shall be evidenced by certificates as set forth in Section 4.1.E hereof.
"Person" means an individual or a corporation, partnership, trust, unincorporated organization, association or other entity.
"Properties" means the community shopping centers previously owned by the Property Partnerships and contributed to the Partnership pursuant to the Contribution Agreement.
"Property Partnerships" means the partnerships which owned the Properties prior to their contribution to the Partnership.
"Qualified Individual" has the meaning set forth in
Section 14.2 hereof.
"Recapture Income" means any gain recognized by the Partnership (computed without regard to any adjustment required by Section 734 or Section 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset.
"Registration Statement" means the Registration Statement on Form S-11 (including the prospectus contained therein) filed by the General Partner with the SEC, and any amendments thereto, pursuant to which the General Partner proposes to offer and sell certain of the REIT Shares.
"Regulations" means the income tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Sections 856 through 860 of the Code.
"REIT Expenses" has the meaning set forth in Section 7.4.B hereof.
"REIT Share" means a share of common stock, par value $.01 per share, of the General Partner.
"REIT Shares Conversion Amount" means a number of REIT Shares
equal to the product of (i) the number of Partnership Units offered for
conversion by a Converting Partner pursuant to Section 8.4, multiplied by
(ii) the Conversion Factor; provided that in the event the General Partner
issues to all holders of REIT Shares any Additional REIT Securities or any
other securities or property (collectively, the "rights"), then the REIT
Shares Conversion Amount shall also include such rights that a holder of that
number of REIT Shares would be entitled to receive.
"REIT Shares Exchange Amount" means a number of REIT Shares equal to the product of (i) the number of Partnership Units to be exchanged by a Limited Partner pursuant to Section 11.3.C(1) or (2), as the case may be, multiplied by (ii) the Conversion Factor; provided that in the event the General Partner issues to all holders of REIT Shares any Additional REIT Securities or any other securities or property (collectively the "rights") then the REIT Shares Exchange Amount shall also include such rights that a holder of that number of REIT Shares would be entitled to receive.
"Requesting Party" has the meaning set forth in Section 14.2 hereof.
"Required Exchange Date" has the meaning set forth in
Section 11.3.C(2) hereof.
"Required Exchange Right" has the meaning set forth in
Section 11.3.C(2) hereof.
"Responding Party has the meaning set forth Section 14.2 hereof.
"Rights" means the Conversion Rights and the Exchange Rights.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as the same may be amended from time to time, or any successor statute.
"Specified Conversion Date" means the tenth Business Day after receipt by the General Partner of a Notice of Conversion, unless applicable law requires a later date.
"Specified Exchange Date" means the tenth Business Day after receipt by the General Partner of a Notice of Exchange, unless applicable law requires a later date.
"Substituted Limited Partner" means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership.
"Trading Day" means a day on which the principal national securities exchange on which the REIT Shares are listed or admitted to trading is open for the transaction of business, or, if the REIT Shares are not listed or admitted to trading, means a Business Day.
"Underwriters" means the various underwriters who purchase REIT Shares in connection with the Offering.
"Unrealized Gain" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the fair market value of such property (as determined under Section 4.4 hereof) as of such date, over (ii) the Carrying Value of such property (prior to any adjustment to be made pursuant to Section 4.4 hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the Carrying Value of such property (prior to any adjustment to be made pursuant to Section 4.4 hereof) as of such date, over (ii) the fair market value of such property (as determined under Section 4.4 hereof) as of such date.
"Value" means, with respect to a REIT Share as of any date, the average of the "closing price" for the ten (10) consecutive Trading Days immediately preceding such date. The "closing price" for each such Trading Day means the last sale price, regular way on such day, or, if no such sale takes place on that day, the average of the closing bid and asked prices, regular way, in either case as reported on the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, or if the
REIT Shares are not so listed or admitted to trading, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange (including the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation System) on which the REIT Shares are listed or admitted to trading or, if the REIT Shares are not so listed or admitted to trading, the last quoted price or, if not quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal automated quotation system then in use or, if the REIT Shares are not so quoted by any such system, the average of the closing bid and asked prices are furnished by a professional market maker selected by the board of directors of the General Partner making a market in the REIT Shares, or, if there is not such market maker or such closing prices otherwise are not available, the fair market value of the REIT Shares as of such day, as determined by the board of directors of the General Partner in its sole discretion. In the event the General Partner issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the shareholders to subscribe for or purchase REIT Shares or any other securities or property (collectively, the "rights"), then the Value of a REIT Share shall include the value of such rights, as determined by the board of directors of the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.
ARTICLE II - ORGANIZATIONAL MATTERS
Section 2.1. Continuation of Partnership
The Partners hereby continue the Partnership as a limited partnership pursuant to the provisions of the Act and upon the terms and conditions set forth in this Agreement. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes.
Section 2.2. Name
The name of the Partnership is Agree Limited Partnership. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the regular communication to the Limited Partners next succeeding the effectiveness of the change of name.
Section 2.3. Principal Office and Registered Agent
The principal office of the Partnership is 31850 Northwestern Highway, Farmington Hills, Michigan 48334, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The registered agent of the Partnership is The Prentice-Hall Corporation Systems, Inc., 229 South State Street, Kent County, Dover, Delaware 19901, or such other Person as the General Partner may from time to time designate. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.
Section 2.4. Power of Attorney
A. Each Limited Partner irrevocably constitutes and appoints the General Partner, the Liquidator, and the authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, the Certificate and all amendments or restatements of this Agree- ment or the Certificate) that the General Partner or the Liquidator deems appropriate or necessary to qualify or continue the existence or qualifica- tion of the Partnership as a limited partnership (or a partnership in which the limited partners have a limited liability) in the State of Delaware and in all other jurisdictions in which the Part- nership may conduct business or own property; (b) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agree- ment or the Certificate made in accordance with the terms of this Agreement; (c) all conveyances and other instruments or documents that the Gener- al Partner or the Liquidator, as the case may be, deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, includ- ing, without limitation, a certificate of cancel- lation; and (d) all instruments relating to the Capital Contribution of any Partner or the admis- sion, withdrawal, removal or substitution of any Partner made pursuant to the terms of this Agree- ment; and
(2) execute, swear to, acknowledge and file all bal- lots, consents, approvals, waivers, certificates
and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole and absolute discretion of the General Partner, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XIII hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable and a special power coupled with an interest, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or the transfer of all or any portion of such Limited Partner's Partnership Interest and shall extend to such Limited Partner's heirs, successors, assigns and personal representatives. Each Limited Partner hereby agrees to be bound by any representation made by the General Partner, acting in good faith pursuant to such power of attorney; and each Limited Partner hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner, taken in good faith under such power of attorney. Each Limited Partner shall execute and deliver to the General Partner or the Liquidator, within fifteen (15) days after receipt of the General Partner's or Liquidator's request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.
Section 2.5. Term
The term of the Partnership commenced on April 4, 1994, and shall continue until December 31, 2094, unless it is dissolved sooner pursuant to the provisions of Article XII or as otherwise provided by law.
ARTICLE III - PURPOSE
Section 3.1. Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to acquire, hold, own, develop, construct, improve,
maintain, operate, sell, lease, transfer, encumber, convey, exchange, and
otherwise dispose of or deal with real and personal property of all kinds;
(ii) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing; to own interests in any entity
engaged in any of the foregoing; and to exercise all of the powers of an
owner
in any such entity or interest; (iii) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act; and (iv) to do anything necessary, appropriate, proper, advisable, desirable, convenient or incidental to the foregoing; provided, however, that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to qualify as a REIT, unless the General Partner voluntarily terminates its REIT status pursuant to its Articles of Incorporation.
Section 3.2. Powers
Subject to all of the terms, covenants, conditions and limitations contained in this Agreement and any other agreement entered into by the Partnership, the Partnership shall have full power and authority to do any and all acts and things necessary, appropriate, proper, advisable, desirable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, including, without limitation, full power and authority, directly or through its ownership interest in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed or trust, pledge or other lien, and acquire and develop real property; provided, however, that the Partnership shall not take, or refrain from taking, any action which, in the judgment of General Partner, in its sole and absolute discretion, (i) could adversely affect the ability of the General Partner to achieve or maintain qualification as a REIT, (ii) could subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code, or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction of the General Partner or its securities, unless such action (or inaction) shall have been specifically consented to by the General Partner in writing.
ARTICLE IV - CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 4.1. Capital Contribution of the Partners
A. Concurrently herewith, the General Partner shall contribute to the capital of the Partnership in cash the dollar amount set forth on Exhibit A in exchange for the Partnership Interest set forth on Exhibit A.
B. Concurrently herewith, each Property Partnership shall cause the Property owned by such Property Partnership, along with the other assets owned by such Property Partnership, to be contributed to the Partnership in accordance with the terms of the Contribution Agreements. Upon the Partnership's acquisition of any Property, whether by reason of the merger of any Property Partnership into the Partnership or the conveyance of such Property by any Property Partnership to the Partnership, Persons receiving Partnership Units in exchange for their inter-
ests in the Property Partnership merging into the Partnership or the Property Partnership conveying its Property to the Partnership shall become Limited Partners in the Partnership and shall be deemed to have made a Capital Contribution as determined by application of the provisions of the Contribution Agreements in the amount set forth on Exhibit A opposite such Persons' names and shall own the Partnership Units and Partnership Interests set forth on Exhibit A opposite such Persons' names.
C. In the event that the Underwriters exercise their overallotment option in connection with the Offering, the General Partner shall contribute any additional funds received by it from the exercise of the overallotment option to the Partnership in exchange for an additional Partnership Interest. Upon such contribution, the Partnership Interests of the Partners shall be adjusted as set forth in Section 4.2.A (with the Deemed Value of the Partnership calculated for this purpose using the public offering price as the Value of a REIT Share). The number of Partnership Units owned by the Limited Partners shall not be decreased in connection with any additional contribution of funds to the Partnership by the General Partner pursuant to this Section 4.1.C.
D. The Partners shall own Partnership Units in the amounts set forth on Exhibit A and shall have Partnership Interests in the Partnership as set forth on Exhibit A, which Partnership Units and Partnership Interests shall be adjusted on Exhibit A from time to time by the General Partner to the extent necessary to reflect accurately redemptions, exercises of Rights, Capital Contributions, transfers of Partnership Interests, admissions of Additional Limited Partners or similar events. The General Partner is authorized on behalf of each of the Partners to amend this Agreement to reflect each such adjustment, and the General Partner shall promptly deliver a copy of each such amendment to each Limited Partner. The Limited Partners shall have no obligation to make any additional Capital Contributions or loans to the Partnership.
E. The interest of each Limited Partner in Partnership Units shall be evidenced by one or more certificates in such form as the General Partner may from time to time prescribe. Upon surrender to the General Partner of a certificate evidencing the ownership of Partnership Units accompanied by proper evidence of authority to transfer, the General Partner shall cancel the old certificate, issue a new certificate to the Person entitled thereto and record the transaction upon its books. The transfer of Partnership Units may be effectuated only in connection with a transfer of a Limited Partnership Interest pursuant to the terms of Section 8.6 or Article 11 hereof. The General Partner may issue a new certificate or certificates in place of any certificate or certificates previously issued, which previously-issued certificate or certificates are alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the owner claiming the certificate or certificates to be lost, stolen
or destroyed. When issuing such new certificate or certificates, the General Partner may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or its legal representative, to give the Partnership a bond in such a sum as the General Partner may reasonably direct as indemnity against any claim that may be made against the Partnership with respect to the certificate or certificates alleged to have been lost, stolen or destroyed.
Section 4.2. Issuance of Additional Partnership Interests
A. At any time after the date hereof, without the consent of any Partner, the General Partner may, upon its determination that the issuance of additional Partnership Interests is in the best interests of the Partnership and upon no less than fifteen (15) days prior written notice to the Limited Partners, cause the Partnership to issue Partnership Interests to, and admit as a limited partner in the Partnership, any Person (an "Additional Limited Partner") in exchange for the contribution by such Person of cash and/or property in such amounts as is determined appropriate by the General Partner to further the purposes of the Partnership under Section 3.1 hereof. In the event that an Additional Limited Partner is admitted to the Partnership pursuant to this Section 4.2, the Partnership Interest issued to such Additional Limited Partner shall be in an amount such that:
(1) the Partnership Interest of such Additional Limit- ed Partner is equal to a fraction, the numerator of which is equal to the total dollar amount of the cash contributed and/or the Net Asset Value of the property contributed by the Additional Limited Partner as of the date of contribution to the Partnership (the "Contribution Date") and the denominator of which is equal to the sum of (i) the Deemed Value of the Partnership (computed as of the Business Day immediately preceding the Contribution Date) and (ii) the total dollar amount of the cash contributed and/or the Net Asset Value of the property contributed by the Additional Partner as of the Contribution Date; and
(2) the Partnership Interests of each Partner other
than the Additional Limited Partner shall be re-
duced, as of the Contribution Date, such that the
Partnership Interest of each such Partner shall be
equal to a fraction, the numerator of which is
equal to the Deemed Partnership Interest Value of
such Partner (computed as of the Business Day
immediately preceding the Contribution Date) and
the denominator of which is equal to the sum of
(i) the Deemed Value of the Partnership (computed
as of the Business Day immediately preceding the
Contribution Date) and (ii) the total dollar amount of the cash contributed and/or Net Asset Value of the property contributed by the Additional Limited Partner as of the Contribution Date.
The General Partner shall be authorized on behalf of each of the Partners to amend this Agreement to reflect the admission of any Additional Limited Partner and any reduction of the Partnership Interests of the other Partners in accordance with the provisions of this Section 4.2, and the General Partner shall promptly deliver a copy of such amendment to each Limited Partner.
The number of Partnership Units owned by the Limited Partners shall not be decreased in connection with any admission of an Additional Limited Partner pursuant to this Section 4.2. An Additional Limited Partner that acquires a Partnership Interest pursuant to this Section 4.2 shall not acquire any Partnership Units, and shall not acquire any interest in, and may not exercise or otherwise participate in, any Rights pursuant to Sections 8.4 or 11.3.C. Notwithstanding anything to the contrary contained in the immediately preceding sentence, the General Partner may (but is not required to) grant to an Additional Limited Partner the right to dispose of its Partnership Interest, and may create in the General Partner the right to acquire such Partnership Interest, including, in either case, by exchange for REIT Shares, upon such terms and conditions as are deemed appropriate by the General Partner.
B. The Partnership shall from time to time issue to the
General Partner additional Partnership Interests or securities, rights,
options or warrants of the Partnership in such classes and having such
designations, preferences and other rights (including preferences and rights
senior to the existing Partnership Interests) as shall be determined by the
General Partner in accordance with the Act and this Agreement. Any such
issuance of Partnership Interests, securities, rights, options or warrants to
the General Partner shall be conditioned upon (i) the undertaking by the
General Partner of a related issuance of REIT Shares or other securities
having designations, rights and preferences such that the economic rights of
the holders of such REIT Shares or other securities are substantially similar
to the rights of the additional Partnership Interests, securities, rights,
options or warrants issued to the General Partner, and the General Partner
making a Capital Contribution in an amount equal to the net proceeds raised
in the issuance of such REIT Shares or other securities, (ii) the issuance by
the General Partner of REIT Shares pursuant to Section 8.4 or 11.3.C, or
(iii) the issuance by the General Partner of REIT Shares under any stock
option or bonus plan, and the General Partner making a Capital Contribution
in an amount equal to the exercise price of the option exercised by any
employee pursuant to such stock option or other bonus plan.
C. The General Partner shall not issue (i) any additional
REIT Shares, or (ii) any preferred stock or rights, options or warrants
containing the right to subscribe for or purchase REIT Shares or securities
convertible or exchangeable into REIT Shares (collectively, "Additional REIT
Securities"), other than to all holders of REIT Shares, pro rata, unless (x)
the Partnership issues to the General Partner (i) Partnership Interests, or
(ii) securities, rights, options or warrants of the Partnership having
designations, preferences and other rights, including, if applicable, the
right to subscribe for or purchase Partnership Interests or securities
convertible or exchangeable into Partnership Interests, such that the General
Partner receives an economic interest in the Partnership substantially
similar to the economic interest in the General Partner represented by the
Additional REIT Securities, and (y) except with respect to an issuance of
REIT Shares pursuant to Section 8.4 or 11.3.C, the General Partner
contributes the net proceeds from the issuance of such additional REIT Shares
or Additional REIT Securities, as the case may be, and from the exercise of
any rights contained in any Additional REIT Securities to the Partnership.
D. If the General Partner establishes a stock option plan and stock options granted in connection with such plan are exercised, or if the General Partner issues Additional REIT Securities and any such Additional REIT Securities are exercised, converted or exchanged for REIT Shares:
(1) the General Partner shall, as soon as practicable after such exercise, conversion or exchange, contribute to the capital of the Partnership an amount equal to the price paid to the General Partner by the exercising party; and
(2) the General Partner shall, as of the date on which the acquisition of the REIT Shares is consummated by such exercising party, be deemed to have con- tributed to the Partnership an amount equal to the Value (computed as of the Business Day immediately preceding the date on which such acquisition of REIT Shares is consummated by such exercising party) of the REIT Shares delivered by the General Partner to such exercising party.
E. Except as provided in Section 8.6 or 11.3.C., effective upon the General Partner making, or being deemed to have made, a Capital Contribution to the Partnership pursuant to clause B, C or D of this Section 4.2 other than with respect to the issuance by the General Partner of any Additional REIT Securities, and effective upon the General Partner making, or being deemed to have made, a Capital Contribution to the Partnership upon the exercise, conversion or exchange of any Additional REIT Securities, the General Partner shall receive an additional Partnership Interest such that:
(1) the Partnership Interest of each Limited Partner shall be equal to a fraction, the numerator of which is equal to the Deemed Partnership Interest Value of such Limited Partner (computed as of the Business Day immediately preceding the date of such contribution) and the denominator of which is equal to the sum of (i) the Deemed Value of the Partnership (computed as of the Business Day imme- diately preceding the date of such contribution) and (ii) the amount contributed, or deemed con- tributed, by the General Partner on such date; and
(2) the Partnership Interest of the General Partner shall be equal to a fraction, the numerator of which is equal to the sum of (i) the Deemed Part- nership Interest Value of the General Partner (computed as of the Business Day immediately pre- ceding the date of such contribution) and (ii) the amount contributed, or deemed contributed, by the General Partner on such date and the denominator of which is equal to the sum of (x) the Deemed Value of the Partnership (computed as of the Busi- ness Day immediately preceding the date of such contribution) and (y) the amount contributed, or deemed contributed, by the General Partner.
The number of Partnership Units owned by the Limited Partners shall not be decreased in connection with any additional contribution to the Partnership by the General Partner pursuant to this Section 4.2.
Section 4.3. No Preemptive Rights
No Person shall have any preemptive, preferential or other similar right with respect to the making of additional Capital Contributions or loans to the Partnership.
Section 4.4. Capital Accounts.
A. The Partnership shall maintain for each Partner a separate Capital Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made, or deemed to have been made, by such Partner to the Partnership pursuant to this Agreement and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with clause B hereof and allocated to such Partner pursuant to Sections 6.1.A and 6.4 of this Agreement, and decreased by (x) the amount of cash and the Net Asset Value of other property distributed to such Partner pursuant to this Agreement (including, in the case of the General Partner, payments of REIT Expenses by the Partnership) and (y) all items of Partnership deduction and loss computed in accordance with clause
B hereof and allocated to such Partner pursuant to Sections 6.1.B and 6.4 of this Agreement.
B. For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners' Capital Accounts, unless otherwise specified in this Agreement, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes determined in accordance with Section 703(a) of the Code (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:
(1) Except as otherwise provided in Regulations Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership.
(2) The computation of all items of income, gain, loss and deduction shall be made without regard to the fact that items described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership's Carrying Value with respect to such property as of such date.
(4) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership Assets are adjusted pursuant to clause D hereof, Capital Accounts shall be adjusted to reflect the aggregate net adjustments as if the Partnership sold all of its properties for their fair market values and recognized gain or loss for Federal income tax purposes equal to the amounts of such aggregate net adjustment.
(6) Any items specially allocated under Section 6.5 hereof shall not be taken into account.
C. Generally, a transferee of a Partnership Interest shall succeed to a pro rata portion of the Capital Account of the transferor; provided, however, that, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's properties shall be deemed to have been distributed in liquidation of the Partnership to the Partners (including the transferee of a Partnership Interest) and recontributed by such Partners in reconstitution of the Partnership. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution pursuant to clause D(2) hereof. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Section 4.4.
D. (1) Consistent with the provisions of Regulations
Section 1.704-(b)(2)(iv)(f), and as provided in
clause D(2), the Carrying Values of all Partner-
ship assets shall be adjusted upward or downward
to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of
the times of the adjustments provided in clause
D(2) hereof, as if such Unrealized Gain or Unreal-
ized Loss had been recognized on an actual sale of
each such property and allocated pursuant to Sec-
tion 6.1 of this Agreement.
(2) Such adjustments shall be made as of the following times: (a) immediately prior to the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) imme- diately prior to the distribution by the Partner- ship to a Partner of more than a de minimis amount of property as consideration for an interest in the Partnership; and (c) immediately prior to the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g).
(3) In accordance with Regulations Section 1.704- 1(b)(2)(iv)(e) the Carrying Value of Partnership assets distributed in kind shall be adjusted up- ward and downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partner- ship property, as of the time any such asset is distributed.
(4) In determining such Unrealized Gain or Unrealized Loss the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) shall be determined by the Gen- eral Partner using such reasonable method of valu- ation as it may adopt, or in the case of a liqui- dating distribution pursuant to Article XIII of this Agreement, be determined and allocated by the
Liquidator using such reasonable methods of valuation as it may adopt. The General Partner, or the Liquidator, as the case may be, shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its sole and absolute discretion to arrive at a fair market value for individual properties).
E. The provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b) and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the General Partner shall
determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed in
order to comply with such Regulations, the General Partner may make such
modification, provided that it is not likely to have a material effect on the
amounts distributable to any Person pursuant to Article XIII of this
Agreement upon the dissolution of the Partnership. The General Partner also
shall (i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Partners and the amount of
Partnership Capital reflected on the Partnership's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704-1(b)(iv)(q),
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
Section 4.5. Return of Capital Account; Interest.
Except as otherwise specifically provided in this Agreement, (i) no Partner shall have any right to withdraw or reduce its Capital Contributions or Capital Account or to demand and receive property other than cash from the Partnership in return for its Capital Contributions or Capital Account; (ii) no Partner shall have any priority over any other Partner as to the return of its Capital Contributions or Capital Account; (iii) any return of Capital Contributions or Capital Accounts to the Partners shall be solely from the assets of the Partnership, and no Partner shall be personally liable for any such return; and (iv) no interest shall be paid by the Partnership on Capital Contributions or on balances in Partners' Capital Accounts.
ARTICLE V - DISTRIBUTIONS
Section 5.1. Initial Partnership Distributions
As soon as practicable after the execution of this Agreement, the Partnership shall return to the General Partner and Richard Agree the initial capital contributions of Ten Dollars ($10) and Nine Hundred Ninety Dollars ($990), respectively, previously made by such Partners to the Partnership.
Section 5.2. Requirement and Characterization of Distributions
The General Partner shall cause the Partnership to distribute quarterly all, or such portion deemed appropriate by the General Partner, of Available Cash generated by the Partnership during such quarter to the Partners who are Partners on the Partnership Record Date with respect to such quarter in accordance with their respective Partnership Interests on such Partnership Record Date. The General Partner shall take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with its qualification as a REIT, to distribute Available Cash to the Limited Partners so as to preclude any such distribution or portion thereof from being treated as part of a sale of property to the Partnership by a Limited Partner under Section 707 of the Code or the Regulations thereunder. Notwithstanding the foregoing, the General Partner shall use its best efforts to cause the Partnership to distribute sufficient amounts to enable the General Partner to pay shareholder dividends that will (i) allow the General Partner to achieve and maintain qualification as a REIT, and (ii) avoid the imposition of any additional taxes under Section 857 or Section 4981 of the Code.
Section 5.3. Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.5 hereof with respect to any allocation, payment or distribution to a Partner shall be treated as amounts distributed to such Partner pursuant to Section 5.2 for all purposes of this Agreement.
Section 5.4. Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction shall be distributed to the Partners in accordance with Section 12.2.
ARTICLE VI - ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership's items of income, gain, loss and deduction (computed in accordance with Section 4.4 hereof) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below.
A. Net Income. After giving effect to the special allocations set forth in Section 6.4 hereof, Net Income shall be allocated (i) first, to the General Partner to the extent that Net Losses previously allocated to the General Partner pursuant to the last sentence of Section 6.1.B exceed Net Income previous- ly allocated to the General Partner pursuant to this clause (i)
of Section 6.1.A, and (ii) thereafter, Net Income shall be allocated to the Partners in accordance with their respective Partnership Interests.
B. Net Losses. After giving effect to the special
allocations set forth in Section 6.4 hereof, Net Losses shall be allocated to
the Partners in accordance with their respective Partnership Interests,
provided that Net Losses shall not be allocated to any Limited Partner
pursuant to this Section 6.1.B to the extent that such allocation would cause
such Limited Partner to have an Adjusted Capital Account Deficit at the end
of such taxable year (or increase any existing Adjusted Capital Account
Deficit). All Net Losses in excess of the limitations set forth in this
Section 6.1.B shall be allocated to the General Partner.
Section 6.2 Allocation of Nonrecourse Debt
For purposes of Regulations Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Partnership Interests.
Section 6.3 Reserved.
Section 6.4 Special Allocation Rules.
Notwithstanding any other provision of this Agreement, the following special allocations shall be made:
A. Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement (including Section 6.1 above), if there is a net
decrease in Partnership Minimum Gain during any fiscal year (except to the
extent attributable to certain conversions and refinancings of Partnership
indebtedness, certain capital contributions or certain revaluations of the
Partnership property as further described in Regulations Sections 1.704-
2(d)(4), 1.704-2(f)(2) or 1.704-2(f)(3)), each Partner shall be specifically
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of
the net decrease in Partnership Minimum Gain, as determined under Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 6.4.A is intended to comply with the minimum gain chargeback
requirements in Regulations Section 1.704-2(f).
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision of this Agreement (including Section 6.1
above but excluding Section 6.4.A, which shall be applied before this Section
6.4.B), if there is a net decrease in Partner Minimum Gain attributable to a
Partner Nonrecourse Debt during any fiscal year (except to the extent
attributable to certain conversions and refinancings of Partnership
indebtedness, certain capital contributions or certain revaluations of the
Partnership property as further described in Regulations Sections 1.704-
2(i)(3) and 1.704-2(i)(4)), each Partner who has a share of the Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), shall be specifically
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of
the net decrease in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This
Section 6.4.B is intended to comply with the minimum gain chargeback
requirement in such Section of the Regulations and shall be interpreted
consistently therewith.
C. Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations required under Sections 6.4.A and 6.4.B hereof, such Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain shall be specifi- cally allocated to such Partner in an amount and manner suffi- cient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as
possible. This Section 6.4.C is intended to constitute a "qualified income offset" under Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
D. Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Partners in accordance with their respective Partnership Interests. If the General Partner determines, in its good faith discretion, that the Partnership's Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio to the numerically closest ratio which does satisfy such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any fiscal year shall be specifically allocated to the Partner(s) who bear(s) the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(b)(4) and 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant to
Section 734(b) or 743(b) of the Code is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of asset)
or loss (if the adjustment decreases such basis), and such item of gain or
loss shall be specially allocated to the Partners in a manner consistent with
the manner in which their Capital Accounts are required to be adjusted
pursuant to such Section of the Regulations.
G. Sections 1245/1250 Recapture. If any portion of gain from the sale of property is treated as Recapture Income, then (A) such Recapture Income shall be allocated among the Partners in the same proportion that the depreciation and amortization deductions giving rise to the Recapture Income were allocated, and (B) other tax items of gain of the same character that would have been recognized, but for the application of Code Sections 1245 and/or 1250, shall be allocated away from those Partners who are allocated Recapture Income pursuant to clause (A) so that, to the extent possible, the other Partners are allocated the same amount, and type, of gain that would have been allocated to them had Code Sections 1245 and/or 1250 not applied. For purposes hereof, in order to determine the proportionate allocations of depreciation and amortization deductions for each fiscal year or other applicable period, such deductions shall be deemed allocated on the same basis as Net Income and Net Loss for such respective period.
H. Distributions of Proceeds of Nonrecourse Liabilities. To the extent permitted by Regulations Sections 1.704-2(h)(3) and 1.704-2(i)(6), the General Partner shall treat a distribution made from the proceeds of a nonrecourse liability as not allocable to an increase in Partnership (or Partner) Minimum Gain to the extent the distribution does not cause or increase a deficit balance in any Partner's Capital Account that exceeds the amount such Partner is obligated to restore (within the meaning of Regulations Section 1.704-1(b)(2)(ii)(c)) as of the end of the Partnership's taxable year in which the distribution occurs.
I. REIT Expenses. The General Partner shall be allocated an amount of gross income equal to the REIT Expenses.
Section 6.5 Allocations for Tax Purposes
A. Except as otherwise provided in this Section 6.5, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to Sections 6.1 and 6.4 of this Agreement.
B. Notwithstanding any other provision in this Agreement, items of income, gain, loss, and deduction attributable to a Contributed Property or an Adjusted Property, shall, in accordance with Sections 704(b) and 704(c), be allocated solely for federal income tax purposes (and not for "book" purposes) among the Partners as follows:
(1) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners in a manner prescribed by Section 704(c) of the Code and the Regulations thereunder so as to take into account the variation between the Gross Asset Value of such property and its adjust- ed basis at the time of contribution;
(2) In the case of an Adjusted Property, such items shall be allocated among the Partners in a manner prescribed by Sections 704(b) and 704(c) of the Code and the Regulations thereunder so as to take into account any variation between the adjusted basis of such asset for federal income tax purpos- es and the Carrying Value of such asset as of the time of the last adjustment under Section 4.4.B.(5) hereof;
(3) In furtherance of the foregoing, the Partnership shall employ the method prescribed in Regulation Section 1.704-3(b) (the "traditional method") or the equivalent successor provision(s) of proposed, temporary or final Regulations; and
(4) Any deductions attributable to prepayment penal- ties or other fees and expenses taken into account in determining the Net Asset Value of any Contrib- uted Property shall be allocated to the Partners who (directly or indirectly) contributed the Con- tributed Property in accordance with the manner in which they bear the economic cost of the amounts giving rise to such deductions.
C. Except as provided in Regulations Section 1.704-1(b)(2)(iv)(m), the adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code shall affect the amount of income, gain, deduction or loss of the Partnership only for federal (and, if applicable, state or local) income tax purposes, and, with respect to an adjustment under section 743(b), shall be allocated entirely to the transferee of the Partnership units so transferred.
D. If any Partner sells or otherwise disposes of any property, directly or indirectly, to the Partnership, and, as a result thereof, gain on a subsequent disposition of such property by the Partnership is reduced pursuant to Section 267(d) of the Code, then, to the extent permitted by applicable law, gain for federal income tax purposes attributable to such subsequent disposition shall first be allocated among the Partners other than the original selling Partner in an amount equal to such Partner's allocations of "book" gain on the property pursuant to Sections 6.1 and 6.4 hereof and only the remaining gain, if any, for federal income tax purposes shall be allocated to the selling Partner.
ARTICLE VII - MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Limited Partners with or without cause. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.3 hereof, shall have full power and authority to do all things and perform all acts specified in this Agreement or otherwise deemed necessary or desirable by it to conduct the business of the Partnership, to exercise all Partnership powers set forth in Section 3.2 hereof and to effectuate the Partnership purposes set forth in Section 3.1 hereof.
B. No Limited Partner (other than any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in his, her or its capacity as such) shall take part in the operation, management or control (within the meaning of the Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners under this Agreement.
C. The Limited Partners acknowledge that the taking of certain actions hereunder by the General Partner will require the approval of a majority of the Independent Directors of the General Partner.
Section 7.2 Certificate of Limited Partnership
To the extent that such action is determined by the General Partner
to be necessary or appropriate, the General Partner shall file amendments to
and restatements of the Certificate and do all things necessary or
appropriate to maintain the Partnership as a limited partnership under the
laws of the State of Delaware and each other jurisdiction in which the
Partnership may elect to do business or own property. Subject to the terms of
Section 8.3.A(3) hereof, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner. The General Partner shall use all reasonable
efforts to cause to be filed such other certificates or documents as may be
reasonable and necessary or appropriate for the continuation, qualification
and operation of a limited partnership in the State of Delaware and any other
jurisdiction in which the Partnership may elect to do business or own
property.
Section 7.3 Restrictions on General Partner's Authority
A. The General Partner may not, without the written Consent of the Limited Partners, take any of the following actions:
(1) amend, modify or terminate this Agreement other than in accordance with Article 4, 12, 13 or 14 hereof;
(2) admit a Person as a Partner, except as otherwise provided in this Agreement;
(3) make a general assignment for the benefit of cred- itors or appoint or acquiesce in the appointment
of a custodian, receiver or trustee for all or any part of the assets of the Partnership;
(4) institute any proceeding for Bankruptcy on behalf of the Partnership;
(5) sell, exchange, transfer or otherwise dispose of all or substantially all of the Partnership's assets in a single transaction or a series of related transactions (including by way of merger, consolidation or other combination with any other Person); or
(6) dissolve the Partnership.
Notwithstanding the foregoing, the Consent of the Limited Partners shall not be required for any action listed above in this Section 7.3.A if, at the time that the General Partner desires to take such action, the Limited Partners own, in the aggregate, less than a ten percent (10%) Partnership Interest.
B. The General Partner shall not have the authority to:
(1) take any action in contravention of this Agreement or which would make it impossible to carry on the ordinary business of the Partnership;
(2) possess Partnership property, or assign any rights in specific Partnership property, for other than a Partnership purpose;
(3) do any act in contravention of applicable law; or
(4) perform any act that would subject a Limited Partner to liability as a general partner in any jurisdiction or any other liability except as provided herein or under the Act.
Section 7.4. Reimbursement of the General Partner
A. Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles V and VI regarding distributions, payments and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.
B. The General Partner shall be reimbursed for all of the General Partner's operating expenses, including, without limitation, costs and expenses relating to the formation and continuity of existence of the Partnership and the General Partner, the Offering and the issuance of any additional Partnership Interests or REIT Shares, costs and expenses associated with compliance with the periodic reporting requirements and all other
rules and regulations of the SEC or any other federal, state or local regulatory body, salaries payable to officers and employees of the General Partner, fees and expenses payable to directors of the General Partner, and all other operating or administrative costs of the General Partner. To the extent any reimbursements to the General Partner do not constitute payment of expenses of the Partnership, such amounts shall constitute "REIT Expenses".
Section 7.5. Outside Activities of the General Partner
A. The General Partner shall not directly or indirectly own any assets or enter into or conduct any business, other than in connection with the ownership, acquisition and disposition of Partnership Interests as a General Partner and the management of the business of the Partnership, and such activities as are incidental thereto; provided, however, that the General Partner may own such bank accounts or similar instruments as it deems necessary to carry out its responsibilities contemplated under this Agreement and its responsibilities to the holders of REIT Shares.
B. In the event the General Partner purchases or otherwise acquires REIT Shares, then the General Partner shall cause the Partnership to purchase from it a portion of its Partnership Interest on the same terms that the General Partner purchased or acquired such REIT Shares.
Section 7.6. Transactions with Affiliates
A. The Partnership may contribute assets and loan funds to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as the General Partner, in its sole and absolute discretion, believes are desirable, consistent with this Agreement and applicable law.
B. After the Offering is completed, except as expressly permitted by this Agreement, no Partner or Affiliate of a Partner shall sell, transfer or convey any property to, purchase any property from, lend funds to or borrow funds from, provide services to, or enter into any other transaction with, the Partnership, directly or indirectly, except pursuant to transactions that are on terms that are no less favorable to the Partnership than could be obtained from an unaffiliated third party. Any such transaction with an Original Limited Partner or with an Affiliate of any such Original Limited Partner is subject to review and approval by a majority of the Independent Directors of the General Partner.
Section 7.7. Indemnification
A. The Partnership shall indemnify each Indemnitee who is
made a party to, or otherwise is involved or is threatened to be involved in,
a proceeding that relates to the operations of the Partnership pursuant to
the terms of this Agreement or to the operations of a Property Partnership
prior to the consummation of the transactions contemplated by the
Contribution Agreements, and shall hold each such Indemnitee harmless against
all judgments, penalties, fines, settlements and expenses (including, without
limitation, attorneys' fees, ERISA excise taxes or penalties) reasonably
incurred by such Indemnitee in connection therewith, to the fullest extent
permitted under the Act, unless it is established that (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed (or omitted) in bad faith or was the
result of active or deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or
(iii) in the case of any criminal proceeding, the Indemnitee had reasonable
cause to believe that the act or omission was unlawful. The termination of
any proceeding by judgment, order or settlement does not create a presumption
that the Indemnitee did not meet the requisite standard of conduct for
indemnification set forth in this Section 7.7.A. The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent,
or the entry of an order of probation prior to judgment, creates a rebuttable
presumption that the Indemnitee failed to meet the standard of conduct for
indemnification set forth in this Section 7.7.A.
B. The right to indemnification conferred in this Section 7.7 shall be a contract right and shall include the right of each Indemnitee to be paid by the Partnership the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that the payment of such expenses in advance of the final disposition of a proceeding shall be made only upon delivery to the Partnership of (i) a written affirmation of the Indemnitee of his or her good faith belief that the standard of conduct necessary for indemnification by the Partnership pursuant to this Section 7.7 has been met, and (ii) a written undertaking by the Indemnitee to repay all amounts so advanced if it shall ultimately be determined that the standard of conduct has not been met.
C. The indemnification provided pursuant to this Section
7.7 shall continue as to a Person who has ceased to have the status of an
Indemnitee pursuant to clause (i) or clause (iii) of the definition of
"Indemnitee" set forth in Article I hereof and shall inure to the benefit of
the heirs, successors, assigns, executors and administrators of any such
Person, and to a Person whose status as an Indemnitee was originally
established pursuant to clause (ii) of such definition and was later
terminated for any reason; provided, however, that except as provided in
Section 7.7.D with respect to proceedings seeking to enforce
rights to indemnification, the Partnership shall indemnify any such Person seeking indemnification in connection with a proceeding initiated by such Person only if such proceeding was authorized by the General Partner.
D. If a claim under Sections 7.7.A, 7.7.B or 7.7.C is not paid in full by the Partnership within thirty (30) calendar days after a written claim has been received by the Partnership, the Indemnitee making such claim may at any time thereafter (but prior to payment of the claim) bring suit against the Partnership to recover the unpaid amount of the claim and, if successful, in whole or in part, such Indemnitee shall be entitled to be paid also the expense of prosecuting such claim.
E. Following any "change in control" of the General Partner of the type required to be reported under Item 1 of Form 8-K promulgated under the Exchange Act, any determination as to entitlement to indemnification shall be made by independent legal counsel selected by the Indemnitee, which independent legal counsel shall be retained by the General Partner on behalf of the Partnership and at the expense of the Partnership.
F. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section 7.7 shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute or agreement, or pursuant to any vote of the Partners, or otherwise.
G. The Partnership may purchase and maintain insurance, at its expense, on its own behalf and on behalf of any Indemnitee and of such other Persons as the General Partner shall determine, against any liability (including expenses) that may be asserted against and incurred by such Person in connection with the Partnership's activities pursuant to this Agreement, whether or not the Partnership would have the power to indemnify such Person against such liability under the terms of this Agreement.
H. Any indemnification pursuant to this Section 7.7 shall be made only out of assets of the Partnership. In no event may an Indemnitee subject any Limited Partner to personal liability by reason of the indemnification provisions set forth in this Agreement.
I. The provisions of this Section 7.7 are for the benefit of the Indemnities, their heirs, successors, assigns, executors and administrators, and shall not be deemed to create any rights for the benefit of any other Person.
Section 7.8. Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this Agreement, the General Partner shall not be liable for monetary damages to the Partnership or any Partners for losses
sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the General Partner acted in good faith and in a manner reasonably believed to be (i) within the scope of the authority granted by this Agreement and (ii) in the best interests of the Partnership.
B. Subject to its obligations and duties as General Partner set forth in Section 7.1.A hereof, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.
Section 7.9. Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner.
Section 7.10. Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership's sole party in interest, both legally and beneficially. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming there- under that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership, and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.
ARTICLE VIII - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1. Limitation of Liability
The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement, including Section 10.5 hereof, or under the Act.
Section 8.2. Outside Activities of Limited Partners
Subject to any agreements entered into by a Limited Partner or its Affiliates with the Partnership, any Limited Partner and any officer, director, employee, agent, trustee, Affiliate or shareholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership. Neither the Partnership nor any of the Partners shall have any rights by virtue of this Agreement or the Partnership relationship established hereby in any business ventures of any Limited Partner, and no Limited Partner shall have any obligation pursuant to this Agreement to offer any interest in any such business ventures to the Partnership or any other Limited Partner, even if such opportunity is of a character which, if presented to the Partnership or any other Limited Partner, could be taken by such Person.
Section 8.3. Rights of Limited Partners Relating to the Partnership
A. In addition to other rights provided by this Agreement or by the Act, and except as limited by clause C hereof, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner's own expense:
(1) to obtain a copy of the Partnership's federal, state and local income tax returns for each fiscal year;
(2) to obtain a current list of the name and last known business, residence or mailing address of each Partner; provided, however, that the General Partner may require, as a condition of providing such list to a Limited Partner, that the Limited Partner confirm in writing to the General Partner that the names of the Partners and other informa- tion provided by the list will be held in strict- est confidence and no distribution of the list will be made;
(3) to obtain a copy of this Agreement and the Certif- icate, and all amendments to the Agreement and the Certificate; and
(4) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner.
B. The Partnership shall notify each Limited Partner in writing of any change made to the Conversion Factor within ten (10) Business Days after the date such change becomes effective.
C. Notwithstanding any other provision of this Section 8.3, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership, or (ii) the Partnership is required by law or by agreements with unaffiliated third parties to keep confidential.
Section 8.4. Conversion Right
A. Subject to the limitations of clause B below, each Limited Partner who is an Original Limited Partner or an Affiliate of an Original Limited Partner (other than by virtue of clause (iv) of the definition of Affiliate) shall have the right (the "Conversion Right") to require the General Partner to convert on any Specified Conversion Date all or any portion of the Partnership Units held by such Limited Partner into REIT Shares or, at the option of the General Partner, to purchase (or to cause the Partnership to repurchase) all or any portion of the Partnership Units held by such Limited Partner for cash. The Conversion Right shall be exercised pursuant to a Notice of Conversion delivered to the General Partner by the Limited Partner who is exercising the conversion right (the "Converting Partner"), accompanied by the certificate or certificates evidencing the Partnership Units to be converted. The General Partner shall inform the Converting Partner of its election with respect to the manner in which the exercise of the Conversion Right will be satisfied as provided in clause C below. The number of REIT Shares to be issued to a Limited Partner upon exercise of the Conversion Right shall be equal to the REIT Shares Conversion Amount. The amount of cash to be paid to a Limited Partner, at the option of the General Partner, upon exercise of the Conversion Right shall be equal to the Value of the REIT Shares Conversion Amount as of the Business Day on which the Conversion Right is duly exercised.
B. Notwithstanding anything to the contrary contained in clause A above, no REIT Shares shall be issued to a Limited Partner pursuant to clause A above to the extent that the issuance of such REIT Shares would either:
(1) cause the aggregate value of the Capital Stock owned by the following Persons (either as direct owners or Beneficial Owners):
(i) the Original Limited Partners and their Affiliates (excluding any Affiliate who is such by virtue of clause (iv) of the definition of Affiliate), and
(ii) any Person who has obtained REIT Shares di- rectly from an Original Limited Partner or an Affiliate of an Original Limited Partner (excluding any Affiliate who is such by vir- tue of clause (iv) of the definition of Af- filiate) or pursuant to Section 11.3.C here- of, or any transferee of such Person (but only to the extent that the value of the Capital Stock owned by such Person or trans- feree (as a direct owner or a Beneficial Owner) exceeds five percent (5%) of the ag- gregate value of the total Capital Stock issued and outstanding)
to exceed twenty-four and 9/10 percent (24.9%) of the aggregate value of the total Capital Stock issued and outstanding as of the Specified Conversion Date; or
(2) cause the General Partner to be considered to be closely held within the meaning of Section 856(a)(6) of the Code as of the Specified Conversion Date.
C. Within twenty (20) Business Days after the Business Day
on which the Conversion Right is duly exercised, the General Partner shall
inform the Converting Partner, in writing, (i) whether it elects to purchase
(or to cause the Partnership to repurchase) all or any portion of the
Partnership Units to which the Notice of Conversion relates for cash, and
(ii) whether the Converting Partner is not entitled to exercise the
Conversion Right with respect to a specified number of Partnership Units by
virtue of clause B above and, if so, stating either that the General Partner
will purchase (or will cause the Partnership to repurchase) such number of
Partnership Units or that the Board of Directors of the General Partner,
acting by a majority of its Independent Directors, has made the good faith
determination that both the General Partner and the Partnership lack
available funds, consistent with Section 5.2 hereof, to make such pur-
chase/repurchase. The General Partner may elect the option set
forth in the foregoing clause (i) only to the extent it and/or the Partnership have available funds to make such purchase/repurchase. If the General Partner informs the Converting Partner pursuant to the foregoing clause (ii) that both it and the Partnership lack available funds to make such purchase/repurchase in full, it shall also inform the Converting Partner of the portion, if any, of the Partnership Units which it and/or the Partnership have available funds to purchase/repurchase. In the event the General Partner informs a Converting Partner that such Converting Partner is not entitled to convert any portion of the Partnership Units held by such Converting Partner into REIT Shares pursuant to clause B above, and in the further event that the General Partner informs such Converting Partner that it lacks available funds to purchase (or that the Partnership lacks available funds to repurchase) any portion of such Partnership Units which the Converting Partner is not entitled to convert into REIT Shares, such Converting Partner shall be deemed to have withdrawn his Notice of Conversion with respect to that portion of his Partnership Units as to which he is not entitled to exercise the Conversion Right by virtue of clause B above and which the General Partner and the Partnership lack adequate funds to purchase/repurchase.
Section 8.5. General Partner Covenants Relating to the Rights
A. The General Partner shall at all times reserve for issuance such number of REIT Shares as may be necessary to enable the General Partner to issue such REIT Shares in full payment of the Rights with respect to all Partnership Units which are from time to time outstanding.
B. As long as the General Partner shall be obligated to file periodic reports under the Exchange Act, the General Partner shall timely file such reports in such manner as shall enable any recipient of REIT Shares issued pursuant to Section 8.4 or 11.3.C in reliance upon an exemption from registration under the Securities Act to be eligible to utilize Rule 144 promulgated by the SEC pursuant to the Securities Act, or any successor rule or regulation thereunder, for the resale hereof.
Section 8.6. Other Matters Relating to the Conversion Rights
A. Any Partnership Units transferred to the General Partner or the Partnership in connection with the exercise of the Conversion Rights shall be canceled.
B. Upon any transfer of Partnership Units to the General Partner or the Partnership by a Limited Partner pursuant to Section 8.4 above, the Partnership Interest of such Converting Partner shall be decreased, and the Partnership Interest of the
General Partner shall be correspondingly increased, as provided in this
Section 8.6.B. The Partnership Interest of such Converting Partner subsequent
to the conversion event shall be equal to the product of the following: (i)
the Partnership Interest of such Limited Partner immediately prior to the
conversion event, multiplied by (ii) a fraction, the numerator of which is
the total Partnership Units owned by such Limited Partner immediately after
the conversion event, and the denominator of which is the total number of
Partnership Units owned by such Limited Partner immediately prior to the
conversion event. The Partnership Interest of the General Partner subsequent
to the conversion event shall be equal to the sum of the following: (i) the
Partnership Interest of the General Partner immediately prior to the
conversion event, plus (ii) the amount by which the Partnership Interest of
the Converting Partner was decreased pursuant to the immediately preceding
sentence. Notwithstanding the foregoing, if a Limited Partner owns
Partnership Units and also owns Partnership Interests issued pursuant to
Section 4.2 above (which Partnership Interests did not receive any
Partnership Units), the portion of the Partnership Interest of such Limited
Partner that represents Partnership Interests issued pursuant to Section 4.2
shall not be subject to reduction pursuant to the provisions of this Section
8.6.B. The General Partner shall be deemed to have contributed to the
Partnership an amount equal to the Value (computed as of the Business Day on
which the Notice of Conversion is delivered to the General Partner) of the
REIT Shares delivered, or the cash paid, by the General Partner to the
Converting Partner.
C. The General Partner shall use its best efforts to cause
any delivery of REIT Shares to a Converting Partner pursuant to Section 8.4
to be made on the twentieth (20th) Business Day after the Business Day on
which the Conversion Right is duly exercised. Any payment of cash to a
Converting Partner pursuant to Section 8.4 shall be made on the twentieth
(20th) Business Day after the Business Day on which the Conversion Right is
duly exercised.
D. Any state or local transfer tax that may be
payable as the result of a conversion of Partnership Units pursuant to
Section 8.4 shall be payable by the Converting Partner.
ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1. Records and Accounting
The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership's business. Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the records so main-
tained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles.
Section 9.2. Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3. Reports
As soon as practicable after the close of each fiscal year, the General Partner shall cause to be mailed to each Limited Partner (i) an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such fiscal year, presented in accordance with generally accepted accounting principles, and (ii) IRS Form 1065 and Schedule K-1, or similar forms as may be required by the IRS, with respect to such fiscal year. The statements required pursuant to clause (i) shall be audited by a nationally recognized firm of independent public accountants selected by the General Partner.
ARTICLE X - TAX MATTERS
Section 10.1. Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal, state and local income tax purposes, and the delivery to the Limited Partners of all tax information reasonably required by the Limited Partners for federal, state and local income tax reporting purposes.
Section 10.2. Tax Elections
Except as otherwise provided herein, the General Partner shall, in
its sole and absolute discretion, determine whether to make any available
election or choose any available reporting method pursuant to the Code or
state or local tax law; provided, however, that the General Partner shall
make the election under Section 754 of the Code in accordance with applicable
regulations thereunder. The General Partner shall have the right to seek to
revoke any such election (including, without limitation, the election under
Section 754 of the Code) or change any reporting method upon the General
Partner's determination, in its sole and absolute discretion, that such
revocation is in the best interests of all of the Partners. Each Partner
hereby agrees to provide the Partnership with all information necessary to
evaluate or give effect to such election.
Section 10.3. Tax Matters Partner
A. The General Partner shall be the "tax matters partner" of the Partnership for federal income tax matters pursuant to Section 6223(c)(3) of the Code. As such, the General Partner is authorized to represent the Partnership in connection with all examinations of the affairs of the Partnership by any federal, state or local tax authorities.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with
respect to any administrative or judicial proceed-
ings for the adjustment of Partnership items re-
quired to be taken into account by a Partner for
income tax purposes (such administrative proceed-
ings being referred to as a "tax audit" and such
judicial proceedings being referred to as "judi-
cial review"), and in the settlement agreement the
tax matters partner may expressly state that such
agreement shall bind all Partners, except that
such settlement agreement shall not bind any Part-
ner (i) who (within the time prescribed pursuant
to the Code and Regulations) files a statement
with the IRS providing that the tax matters part-
ner shall not have the authority to enter into a
settlement agreement on behalf of such Partner or
(ii) who is a "notice partner" (as defined in
Section 6231 of the Code) or a member of a "notice
group" (as defined in Section 6223(b)(2) of the
Code);
(2) in the event that a notice of a final administra- tive adjustment at the Partnership level of any item required to be taken into account by a Part- ner for tax purposes ( a "final adjustment") is mailed to the tax matters partner, to seek judi- cial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the United States Claims Court, or the filing of a complaint for refund with the District Court of the United States for the dis- trict in which the Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;
(5) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners of the Partnership in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax matters partner in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 of this Agreement shall be fully applicable to the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its services. All third party costs and expenses incurred by the tax matters partner in performing its duties as such (including legal and accounting fees) shall be borne by the Partnership. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm to assist the tax matters partner in discharging its duties hereunder.
Section 10.4. Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership ratably over a sixty (60)-month period as provided in Section 709 of the Code.
Section 10.5. Withholding
Each Limited Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Limited Partner any amount of federal, state, local or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any amount paid on behalf of or with respect to a Limited Partner shall constitute a loan by the Partnership to such Limited Partner, which loan shall be repaid by such Limited Partner within fifteen (15) days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Limited Partner, or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Limited Partner. Any amounts withheld pursuant to the
foregoing clauses (i) or (ii) shall be treated as having been distributed to
such Limited Partner. Each Limited Partner hereby unconditionally and
irrevocably grants to the Partnership a security interest in such Limited
Partner's Partnership Interest to secure such Limited Partner's obligation to
pay to the Partnership any amounts required to be paid pursuant to this
Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its sole and absolute discretion, elect to make the payment
to the Partnership on behalf of such defaulting Limited Partner, and in such
event shall be deemed to have loaned such amount to such defaulting Limited
Partner and, until repayment of such loan, shall succeed to all rights and
remedies of the Partnership as against such defaulting Limited Partner
(including, without limitation, the right to receive distributions). Any
amounts payable by a Limited Partner hereunder shall bear interest at the
base rate on corporate loans at large United States money center commercial
banks, as published from time to time in the Wall Street Journal, plus two
(2) percentage points (but not higher than the maximum lawful rate) from the
date such amount is due (i.e., fifteen (15) days after demand) until such
amount is paid in full. Each Limited Partner shall take such actions as the
Partnership or the General Partner shall reasonably request in order to
perfect or enforce the security interest created hereunder.
ARTICLE XI - TRANSFERS AND WITHDRAWALS
Section 11.1. Transfer
A. The term "transfer," when used in this Article XI with respect to a Partnership Interest, shall be deemed to refer to a transaction by which the General Partner purports to assign its General Partnership Interest to another Person or by which a Limited Partner purports to assign its Limited Partnership Interest to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. The term "transfer" when used in this Article XI does not include any conversion of Partnership Units by a Limited Partner pursuant to Section 8.4.
B. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article XI. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article XI shall be null and void.
Section 11.2. Transfer of General Partner's Partnership Interest
A. The General Partner shall not withdraw from the Partnership or transfer all or any portion of its interest in the Partnership without the Consent of the Limited Partners. Upon any transfer of a Partnership Interest in accordance with the
provisions of this Section 11.2.A, the transferee General Partner shall become a substituted General Partner, effective simultaneously with such transfer, vested with the powers and rights of the transferor General Partner, and shall be liable for all obligations and responsible for all duties of the General Partner, once such transferee has executed such instrument as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Partnership Interest so acquired. It is a condition to any transfer otherwise permitted hereunder that the transferee assumes by operation of law or express agreement all of the obligations of the transferor General Partner under this Agreement with respect to such transferred Partnership Interest and no such transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor General Partner are assumed by a successor by operation of law) shall relieve the transferor General Partner of its obligations under this Agreement without the Consent of the Limited Partners.
B. The General Partner may transfer General Partner- ship Interests held by it to the Partnership in accordance with Section 7.5.B hereof.
C. The General Partner shall not engage in any merger, consolidation or other combination with or into another Person or any sale of all or substantially all of its assets, or any reclassification, recapitalization or change of outstanding REIT Shares (other than a reincorporation, a change in par value or from par value to no par value, or as a result of a subdivision or combination as described in the definition of "Conversion Factor") ("Transaction"), unless either:
(1) the Transaction also includes a merger of the Partnership or sale of substantially all of the assets of the Partnership, as a result of which all Limited Partners will receive for each Part- nership Unit an amount of cash, securities or other property equal to the product of the Conver- sion Factor and the greatest amount of cash, secu- rities or other property paid to a holder of one REIT Share in consideration of one REIT Share at any time during the period from and after the date on which the Transaction is consummated, provided that if, in connection with the Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than fifty (50%) percent of the outstanding REIT Shares, the holders of Partnership Units shall receive the greatest amount of cash, securities or other property which a Limited Partner would have received had it exercised the Conversion Right or the Exchange Right, as the case may be, and re- ceived REIT Shares in exchange for all of its
Partnership Units immediately prior to the expira- tion of such purchase, tender or exchange offer; or
(2) the Transaction provides that the Partnership shall continue as a separate entity and grants to the Limited Partners conversion and exchange rights with respect to the ownership interests in the new entity that are substantially equivalent to the Rights provided for in Sections 8.4 and 11.3.C.
The Limited Partners shall make the election as to whether option (1) or (2) above shall apply with respect to a Transaction. Such election shall be made by Limited Partners owning a majority-in-interest of the total Partnership Interests owned by the Limited Partners.
Section 11.3. Limited Partners' Rights to Transfer
A. No Limited Partner shall transfer all or any portion of
its Partnership Interest without the consent of the General Partner, which
consent may be withheld in its sole and absolute discretion; provided,
however, that, notwithstanding the foregoing, each Limited Partner which is
an Original Limited Partner or an Affiliate of an Original Limited Partner
(excluding any Affiliate who is such by virtue of clause (iv) of the
definition of Affiliate) may, subject to the provisions of this Section 11.3,
at any time, without the consent of the General Partner, (i) exercise its
Conversion Rights, if any, in accordance with the terms of Section 8.4; (ii)
transfer all or a portion of its Partnership Interest to an Original Limited
Partner or an Affiliate of an Original Limited Partner (excluding any
Affiliate who is such by virtue of clause (iv) of the definition of
Affiliate); or (iii) pledge or otherwise encumber all or any portion of its
Partnership Interest to any Person in a bona fide transaction and grant the
secured party the right to acquire such Partnership Interest upon default. In
addition, notwithstanding the foregoing, any Person who is not an Original
Limited Partner or an Affiliate of an Original Limited Partner (excluding any
Affiliate who is such by virtue of clause (iv) of the definition of
Affiliate) and acquires a Limited Partnership Interest pursuant to clause
(iii) of the preceding sentence may, without the consent of the General
Partner, (x) exercise its Exchange Rights in accordance with the terms of
Section 11.3.C, and (y) subject to the provisions of Section 11.3.C hereof,
transfer all or a portion of such Limited Partnership Interest to an Original
Limited Partner or an Affiliate of an Original Limited Partner (excluding any
Affiliate who is such by virtue of clause (iv) of the definition of
Affiliate). Subject to the provisions of Section 11.3.C hereof, upon any
transfer of a Limited Partnership Interest in accordance with the provisions
of this Section 11.3.A, the transferee shall be admitted as a Substituted
Limited Partner as provided in Section 11.4 hereof.
B. If a Person who is an Original Limited Partner or an
Affiliate of an Original Limited Partner (excluding any Affiliate who is such
by virtue of clause (iv) of the definition of Affiliate) becomes the owner of
a Limited Partnership Interest in accordance with the provisions of clause
(ii) or (iii) of the first sentence of Section 11.3.A or clause (y) of the
second sentence of Section 11.3.A, such Person shall also become the owner of
the Partnership Units allocable to such Partnership Interest and shall be
entitled to exercise the Conversion Rights with respect to such Partnership
Units in accordance with the terms and conditions set forth in Section 8.4
above.
C. If a Person who is not an Original Limited Partner or an
Affiliate of an Original Limited Partner (excluding any Affiliate who is such
by virtue of clause (iv) of the definition of Affiliate) becomes the owner of
a Limited Partnership Interest in accordance with the provisions of clause
(iii) of the first sentence of Section 11.3.A hereof, such Person shall also
become the owner of the Partnership Units allocable to such Partnership
Interest; provided, however, that, in lieu of Conversion Rights, such
Partnership Units shall have the following rights and shall be subject to the
following restrictions:
(1) For a period of one (1) year after the date on which such Person acquires the Partnership Units, such Person shall have the right (the "Optional Exchange Right") to require the General Partner to exchange for REIT Shares on any Specified Exchange Date all or any portion of the Partnership Units held by such Limited Partner or, at the option of the General Partner, to purchase (or to cause the Partnership to repurchase) for cash on any Speci- fied Exchange Date all or any portion of the Part- nership Units held by such Limited Partner. The Optional Exchange Right shall be exercised pursu- ant to a Notice of Exchange delivered to the Gen- eral Partner by the Limited Partner who is exer- cising the exchange right, accompanied by the certificate or certificates evidencing the Part- nership Units to be exchanged. The General Part- ner shall notify such Limited Partner of its elec- tion with respect to the manner in which the exer- cise of the Exchange Right will be satisfied with- in twenty (20) Business Days after the Business Day on which the Exchange Right is duly exercised. The number of REIT Shares to be issued to the Limited Partner upon exercise of the Optional Exchange Right shall be equal to the REIT Shares Exchange Amount. The amount of cash to be paid to a Limited Partner, at the option of the General Partner, upon exercise of the Optional Exchange Right shall be equal to the Value of the REIT Shares Exchange Amount as of the Business Day on
which the Optional Exchange Right is duly exer- cised.
(2) Any of the Partnership Units so acquired by such Person that have not been exchanged for REIT Shares or cash pursuant to the provisions of Sec- tion 11.3.C(1) above on or prior to the date which is one (1) year after the date of such acquisition (the "Required Exchange Date") shall be exchanged (the "Required Exchange Right") for a number of REIT Shares equal to the REIT Shares Exchange Amount as of the Required Exchange Date or, at the option of the General Partner, an amount of cash equal to the Value of the REIT Shares Exchange Amount as of the Required Exchange Date.
(3) Any state or local transfer tax that may be payable as the result of an exchange of Partnership Units pursuant to this Section 11.3.C shall be payable by the exchanging Limited Partner.
(4) Upon any transfer of Partnership Units to the
General Partner or the Partnership by a Limited
Partner pursuant to this Section 11.3.C, the Part-
nership Interest of such Limited Partner shall be
decreased, and the Partnership Interest of the
General Partner shall be correspondingly in-
creased, as provided in this Section 11.3.C(4).
The Partnership Interest of such Limited Partner
subsequent to the exchange event shall be equal to
the product of the following: (i) the Partnership
Interest of such Limited Partner immediately prior
to the exchange event, multiplied by (ii) a frac-
tion, the numerator of which is the total Partner-
ship Units owned by such Limited Partner immedi-
ately after the exchange event, and the denomina-
tor of which is the total number of Partnership
Units owned by such Limited Partner immediately
prior to the exchange event. The Partnership
Interest of the General Partner subsequent to the
exchange event shall be equal to the sum of the
following: (i) the Partnership Interest of the
General Partner immediately prior to the exchange
event, plus (ii) the amount by which the Partner-
ship Interest of the exchanging Limited Partner
was decreased pursuant to the immediately preced-
ing sentence. Notwithstanding the foregoing, if a
Limited Partner owns Partnership Units and also
owns Partnership Interests issued pursuant to
Section 4.2 above (which Partnership Interests did
not receive any Partnership Units), the portion of
the Partnership Interest of such Limited Partner
that represents the Partnership Interests issued
pursuant to Section 4.2 shall not be subject to
reduction pursuant to the provisions of this Section 11.3.C(4). The General Partner shall be deemed to have contributed to the Partnership an amount equal to the Value (computed as of the Business Day which is or proximately follows the first to occur of (x) the day on which the notice of Exchange is delivered to the General Partner or (y) the Required Exchange Date) of the REIT Shares delivered, or the cash paid, by the General Partner to the exchanging Limited Partner.
(5) Any Partnership Units transferred to the General Partner or the Partnership pursuant to the provisions of this Section 11.3.C shall be canceled.
(6) Notwithstanding anything to the contrary contained
in this Section 11.3.C, if all or any portion of
the Partnership Interest owned by a Person who is
not an Original Limited Partner or an Affiliate of
an Original Limited Partner (excluding any Affili-
ate who is such by virtue of clause (iv) of the
definition of Affiliate) is transferred to an
Original Limited Partner or an Affiliate of an
Original Limited Partner (excluding any Affiliate
who is such by virtue of clause (iv) of the defi-
nition of Affiliate) prior to the Required Ex-
change Date, the Partnership Units allocable to
such Partnership Interest (or portion thereof)
shall not be subject to the required exchange of
Partnership Units for REIT Shares set forth in
Section 11.3.C(2) above.
D. If a Limited Partner is Incapacitated, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partner's estate shall have all the rights of a Limited Partner, for the purpose of settling or managing the estate and such power as the Incapacitated Limited Partner possessed to transfer all or any part of his, her or its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.
E. The General Partner may prohibit any transfer by a Limited Partner otherwise permitted under this Section 11.3 if, in the opinion of legal counsel to the Partnership, such transfer would require filing of a registration statement under the Securities Act or would otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Interest.
F. No transfer by a Limited Partner of its Partner- ship Interest may be made to any Person if (i) in the opinion of legal counsel for the Partnership, it would result in the Part- nership being treated as an association taxable as a corporation
for federal income tax purposes, (ii) in the opinion of legal counsel for the Partnership, it would adversely affect the ability of the General Partner to continue to qualify as a REIT or subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code, or (iii) such transfer is effectuated through an "established securities market" or a "secondary market (or the substantial equivalent thereof)" within the meaning of Section 7704 of the Code.
G. No transfer by a Limited Partner of its Partnership Interest may be made (i) to any Person who lacks the legal right, power or capacity to own a Partnership Interest, (ii) in violation of any provision of any mortgage or trust deed (or the note or bond secured thereby) constituting a Lien against an asset of the Partnership, or other instrument, document or agreement to which the Partnership is a party or otherwise bound, (iii) in violation of applicable law, or (iv) if such transfer would, in the opinion of legal counsel for the Partnership, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor regulations section 2510.2-101.
Section 11.4. Substituted Limited Partners
A. Unless otherwise agreed by the transferor and transferee, a transferee of a Limited Partnership Interest shall be admitted as a Substituted Limited Partner in accordance with this Article XI and shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. It shall be a condition precedent to the admission of any Person as a Substituted Limited Partner that such Person execute and deliver to the Partnership (i) evidence of acceptance, in form reasonably satisfactory to the General Partner, of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, and (ii) such other documents or instruments as may be reasonably required in the discretion of the General Partner in order to effect such Person's admission as a Substituted Limited Partner.
B. Upon the admission of a Substituted Limited Partner, the General Partner shall amend Exhibit A to reflect the name, address, number of Partnership Units, if any, and Partnership Interest of such Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address and interest of the predecessor of such Substituted Limited Partner. The admission of any Person as a Substituted Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership.
Section 11.5. General Provisions
A. No Limited Partner may withdraw from the Partner- ship other than as a result of a permitted transfer or exchange
of all of such Limited Partner's Partnership Interest in accordance with this Article XI or pursuant to a conversion of all of its Partnership Interest under Section 8.4.
B. Any Limited Partner who shall transfer all of its Partnership Interest in a permitted transfer or exchange pursuant to this Article XI or pursuant to a conversion of all of its Partnership Interest under Section 8.4 shall cease to be a Limited Partner.
C. If any Partnership Interest is transferred or exchanged in compliance with the provisions of this Article XI, or converted pursuant to Section 8.4, during any quarterly segment of the Partnership's fiscal year, Net Income, Net Losses, each item thereof and all other items attributable to such interest for such fiscal year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the fiscal year in accordance with Section 706(d) of the Code, using the interim closing of the books method. Solely for purposes of making such allocations, each of such items for the calendar month in which the transfer or conversion occurs shall be allocated to the Person who is a Partner as of midnight on the last day of said month. All distributions of Available Cash with respect to which the Partnership Record Date is before the date of such transfer or conversion shall be made to the transferor Partner, and all distributions of Available Cash thereafter shall be made to the transferee Partner.
ARTICLE XII - DISSOLUTION AND LIQUIDATION
Section 12.1. Dissolution
The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a substituted General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any substituted General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each, a "Liquidating Event"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the General Partner, as
defined in the Act (including an event of Bankruptcy), unless within ninety
(90) days after the withdrawal remaining Partners owning a
majority-in-interest of the total Partnership Interests of the remaining
Partners agree in writing to continue the business of the Partnership and to
the appointment, effective immediately prior to the date of withdrawal, of a
substitute General Partner;
C. an election to dissolve the Partnership made in writing by the General Partner with the Consent of the Limited Partners; provided, however, that the General Partner may elect to dissolve the Partnership without the Consent of the Limited Partners at any time that the Limited Partners own, in the aggregate, less than a ten percent (10%) Partnership Interest;
D. entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act; or
E. the sale of all or substantially all of the assets of the Partnership, unless the General Partner, with the Consent of the Limited Partners, elects to continue the Partnership business for the purpose of the receipt and the collection of indebtedness or the collection of other consideration to be received in exchange for the assets of the Partnership (which activities shall be deemed to be part of the winding up of the Partnership); provided that the General Partner may elect to continue the Partnership in accordance with the provisions of this Section 12.1.E without the Consent of the Limited Partners if at the time of such sale the Limited Partners own, in the aggregate, less than a ten percent (10%) Partnership Interest.
Section 12.2. Winding Up
A. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purpose of winding up its affairs
in an orderly manner, liquidating its assets (subject to the provisions of
Section 12.2.B below), and satisfying the claims of its creditors and
Partners. No Partner shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Partnership's business
and affairs. The General Partner (or, in the event there is no remaining
General Partner, any Person elected by Limited Partners owning a
majority-in-interest of the total Partnership Interests of the Limited
Partners (the General Partner or such other Person overseeing the winding up
of the Partnership, the "Liquidator")) shall be responsible for overseeing
the winding up of the Partnership. The assets of the Partnership shall be
liquidated as promptly as is consistent with obtaining the fair market value
thereof, and the proceeds therefrom (which may include shares of stock in the
General Partner) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the Partnership's debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's debts and liabilities to the Part- ners; and
(3) The balance, if any, to the General Partner and Limited Partners in accordance with their positive
Capital Account balances, after giving effect to all contributions, distributions and allocations for all periods.
The General Partner shall not receive any additional compensation for any services performed pursuant to this Article XII.
B. Notwithstanding the provisions of Section 12.2.A hereof which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership, the Liquidator determines that an immediate sale of part or all of the Partnership's assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 12.2.A hereof, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.
C. As part of the liquidation and winding up of the Partnership, a proper accounting shall be made of the Capital Account of each Partner, including an analysis of changes to the Capital Account from the date of the last previous accounting. Financial statements presenting such accounting shall include a report of an independent certified public accountant selected by the Liquidator.
D. As part of the liquidation and winding up of the Partnership, the Liquidator may sell Partnership assets (or assets owned by any partnership in which the Partnership is a partner) solely on an "arm's-length" basis, at the best price and on the best terms and conditions as the Liquidator in good faith believes are reasonably available at the time.
Section 12.3. Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article XII to the General Partner and Limited Partners who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever. In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article XII may be:
A. distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership. The assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the Liquidator, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement; or
B. withheld to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided that such withheld amounts shall be distributed to the General Partner and Limited Partners as soon as practicable.
Section 12.4. Deemed Distribution and Recontribution
Notwithstanding any other provisions of this Article XII, in the event the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(q) but no Liquidating Event has occurred, the Partnership's property shall not be liquidated, the Partnership's liabilities shall not be paid or discharged, and the Partnership's affairs shall not be wound up. Instead, the Partnership shall be deemed to have distributed the Partnership property in kind to the General Partner and Limited Partners, who shall be deemed to have assumed and taken such property subject to all Partnership liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the General Partner and Limited Partners shall be deemed to have
recontributed the Partnership property in kind to the Partnership, which shall be deemed to have assumed and taken such property subject to all such liabilities.
Section 12.5. Documentation of Liquidation
Upon the completion of the liquidation of the Partnership as provided in Section 12.2 hereof, the Partnership shall be terminated and the Certificate and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled, and such other actions as may be necessary to terminate the Partnership shall be taken. The Liquidator shall have the authority to execute and record any and all documents or instruments required to effect the dissolution, liquidation and termination of the Partnership.
Section 12.6. Reasonable Time for Winding Up
A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 12.2 hereof, in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect during the period of liquidation.
Section 12.7. Indemnification of the Liquidator
The Liquidator shall be indemnified and held harmless by the Partnership from and against any and all claims, demands, liabilities, costs, damages and causes of action of any nature whatsoever arising out of or incidental to the Liquidator's taking of any action authorized under or within the scope of this Agreement; provided, however, that the Liquidator shall not be entitled to indemnification, and shall not be held harmless, where the claim, demand, liability, cost, damage or cause of action at issue arises out of:
(1) a matter entirely unrelated to the Liquidator's action or conduct pursuant to the provisions of this Agreement; or
(2) the proven willful misconduct or gross negligence of the Liquidator.
Section 12.8. Waiver of Partition
Each Partner hereby waives may right to partition of the Partnership property.
ARTICLE XIII - AMENDMENT OF PARTNERSHIP AGREEMENT
Section 13.1. Amendments
A. Amendments to this Agreement may be proposed by the General Partner or by any Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests. Except as provided in Section 13.1.B or 13.1.C, a proposed amendment shall be adopted and be effective as an amendment hereto if it is approved by the General Partner and it receives the Consent of the Limited Partners (provided that, the Consent of the Limited Partners shall not be required for any amendment if the Limited Partners own, in the aggregate, less than a ten percent (10%) Partnership Interest).
B. Notwithstanding Section 13.1.A, the General Partner shall have the power, without the Consent of the Limited Partners, to amend this Agreement as may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termina- tion or withdrawal of Partners in accordance with this Agreement;
(3) to amend Schedule A to this Agreement in accordance with Section 4.2, 8.4 or 11.3.C of this Agreement; and
(4) to reflect a change that is of an inconsequential nature and does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions, or make other changes with re- spect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement.
The General Partner will provide notice to the Limited Partners when any action under this Section 13.1.B is taken.
C. Notwithstanding anything to the contrary contained in
Section 13.1.A hereof, this Agreement shall not be amended without the prior
written consent of each Partner adversely affected if such amendment would
(i) convert a Limited Partner's interest in the Partnership into a general
partner's interest, (ii) modify the limited liability of a Limited Partner,
(iii) alter rights of the Partner to receive distributions pursuant to
Article V, or the allocations specified in Article VI
(except as permitted pursuant to Section 4.2 and Section 13.1.B(3) hereof),
(iv) alter or modify the Rights set forth in Sections 8.4 and 11.3.C, (v)
cause the termination of the Partnership prior to the time set forth in
Section 2.5 or 12.1, or (vi) amend this Section 13.1.C. Further, no amendment
may alter the restrictions on the General Partner's authority set forth in
Section 7.3 without the consent of all Limited Partners.
ARTICLE XIV - ARBITRATION OF DISPUTES
Section 14.1. Arbitration
Notwithstanding anything to the contrary contained in this Agreement, all claims, disputes and controversies between the parties hereto (including, without limitation, any claims, disputes and controversies between the Partnership and any one or more of the Partners and any claims, disputes and controversies between any one or more Partners) arising out of or in connection with this Agreement or the Partnership created hereby, relating to the validity, construction, performance, breach, enforcement or termination thereof, or otherwise, shall be resolved by binding arbitration in the State of Michigan, in accordance with this Article XIV and, to the extent not inconsistent herewith, the Expedited Procedures and Commercial Arbitration Rules of the American Arbitration Association.
Section 14.2. Procedures
Any arbitration called for by this Article XIV shall be conducted in accordance with the following procedures:
(1) The Partnership or any Partner (the "Requesting Party") may demand arbitration pursuant to Section 14.1 hereof at any time by giving written notice of such demand (the "Demand Notice") to all other Partners against whom a claim is made or with respect to which a dispute has arisen and (if the Requesting Party is not the Partnership) to the Partnership (all such other Partners and, if ap- plicable, the Partnership, collectively, the "Re- sponding Party"), which Demand Notice shall de- scribe in reasonable detail the nature of the claim, dispute or controversy.
(2) Within fifteen (15) days after the giving of a Demand Notice, the Requesting Party, on the one hand, and the Responding Party, on the other hand, shall select and designate in writing to the other party one reputable, disinterested individual deemed competent to arbitrate the claim, dispute or controversy and who is willing to act as an arbitrator of the claim, dispute or controversy (a "Qualified Individual"). Within fifteen (15) days after the foregoing selections have been made, the
arbitrators so selected shall jointly select a third Qualified Individual. In the event that the two arbitrators initially selected are unable to agree on a third arbitrator within the second fifteen (15) day period referred to above, then, on the application of either party, the American Arbitration Association shall promptly select and appoint a Qualified Individual to act as the third arbitrator. The three arbitrators selected pursuant to this Section 14.2(2) shall constitute the arbitration panel for the arbitration in question
(3) The presentations of the parties in the arbitra- tion proceeding shall be commenced and completed within sixty (60) days after the selection of the arbitration panel pursuant to Section 14.2(2) above, and the arbitration panel shall render its decision in writing within thirty (30) days after the completion of such presentations. Any deci- sion concurred in by any two (2) of the arbitra- tors shall constitute the decision of the arbitra- tion panel; unanimity shall not be required.
(4) The arbitration panel shall have the discretion to include in its decision a direction that all or part of the attorneys' fees and costs of any party or parties and/or the costs of such arbitration be paid by any one or more of the parties.
(5) Notwithstanding anything to the contrary contained
above in this Section 14.2, if either party fails
to select a Qualified Individual to act as an
arbitrator for such party with the fifteen (15)
day time period set forth in the first sentence of
Section 14.2(2), the Qualified Individual selected
by the other party shall serve as sole arbitrator
under this Section 14.2 in lieu of the arbitration
panel. Such sole arbitrator shall have all of the
rights and duties of the arbitration panel set
forth above in this Section 14.2.
Section 14.3. Binding Character
Any decision rendered pursuant to this Article XIV shall be final and binding on the parties hereto, and judgment thereon may be entered by any state or federal court of competent jurisdiction.
Section 14.4. Exclusivity
Arbitration shall be the exclusive method available for resolution of claims, disputes and controversies described in Section 14.1 hereof, and the Partnership and its Partners stipulate that the provisions hereof shall be a complete defense to
any suit, action or proceeding in any court or before any administrative or arbitration tribunal with respect to any such claim, controversy or dispute. The provisions of this Article XIV shall survive the dissolution of the Partnership.
Section 14.5. No Alteration of Agreement
Nothing contained herein shall be deemed to give the arbitrators any authority, power or right to alter, change, amend, modify, add to or subtract from any of the provisions of this Agreement.
ARTICLE XV - CONDITIONS/CONCURRENT TRANSACTIONS
Section 15.1. General Partner Conditions
The obligation of the General Partner to consummate the transactions contemplated herein is subject to fulfillment of all of the following conditions on or prior to the date hereof:
(1) The transactions contemplated by the Contribution Agreement shall have been consummated in accordance with the terms and conditions of the Contribution Agreement;
(2) All consents, waivers, approvals and authorizations required for the consummation of the transactions contemplated hereby shall have been obtained; and
(3) The Registration Statement shall have become effective under the provisions of the Securities Act, and no order or other administrative proceeding shall have been entered or instituted with respect thereto, and be pending, as of the date hereof.
Section 15.2. Limited Partner Conditions
The obligation of the Limited Partners to consummate the transactions contemplated herein is subject to fulfillment of all of the following conditions on or prior to the date hereof:
(1) The General Partner shall have contributed to the Partnership the amount of its Capital Contribution set forth in Exhibit A;
(2) The transactions contemplated by the Contribution Agreement shall have been consummated in accordance with the terms and conditions of the Contribution Agreement;
(3) All consents, waivers, approvals and authoriza- tions required for the consummation of the trans-
actions contemplated hereby shall have been ob- tained; and
(4) The Registration Statement shall have become effective under the provisions of the Securities Act, and no stop order or other administrative proceeding shall have been entered or instituted with respect thereto, and be pending, as of the date hereof.
ARTICLE XVI - GENERAL PROVISIONS
Section 16.1. Addresses and Notice
All notices, requests, demands and other communications hereunder to a Partner shall be in writing and shall be deemed to have been duly given and received (i) on the day delivered by hand, or (ii) on the third Business Day after sent by certified mail, return receipt requested, properly addressed and postage prepaid, or (iii) on the first Business Day after transmitted by commercial overnight courier to the Partner at the address set forth in Exhibit A or at such other address as the Partner shall notify the General Partner in writing.
Section 16.2. Titles and Captions
All article or section titles or captions in this Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Each Exhibit attached hereto and referred to herein is hereby incorporated by reference.
Section 16.3. Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. Any reference in this Agreement to "including" shall be deemed to mean "including without limitation."
Section 16.4. Further Action
The Partners shall execute and deliver all such further documents, provide all information and take or refrain from taking such further action as may be necessary or appropriate to carry out the transactions contemplated by this Agreement.
Section 16.5. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 16.6. No Third Party Beneficiaries
None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership or any other Person to whom any debts, liabilities or obligations may be owed by (or who otherwise has any claim against) the Partnership or any of the Partners.
Section 16.7. Waiver
No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.
Section 16.8. No Agency
Except as specifically provided herein, nothing contained herein shall be construed to constitute any Partner the agent of another Partner or in any manner to limit the Partners in carrying on their own respective businesses and activities.
Section 16.9. Entire Understanding
This Agreement constitutes the entire agreement and understanding among the Partners and supersedes any prior understanding and/or written or oral agreements among them respecting the subject matter herein.
Section 16.10. Counterparts
This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.
Section 16.11. Applicable Law
This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflict of laws.
Section 16.12. Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
GENERAL PARTNER:
AGREE REALTY CORPORATION
By: /s/ Kenneth Howe
------------------------------
Name: Kenneth Howe
Title: Secretary
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LIMITED PARTNERS:
/s/ Richard Agree
-----------------------------------
Richard Agree
/s/ Edward Rosenberg
-----------------------------------
Edward Rosenberg
/s/ Joel Weiner
-----------------------------------
Joel Weiner
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EXHIBIT A
EXHIBIT A
---------
Name and Address Partnership Partnership
of Partner Contribution Interest Units
- ---------------- ------------ ----------- -----------
General Partner:
- ----------------
Agree Realty Corporation $45.1 million 80.53% 2,638,185
3180 Northwestern Highway
Farmington Hills Michi-
gan 48334
Limited Partners:
- -----------------
Richard Agree
- ---------------- interest in certain 10.09% 329,825
- ---------------- real property
Edward Rosenberg
- ---------------- interest in certain 7.30% 240,000
- ---------------- real property
Joel Weiner
- ---------------- interest in certain 2.08% 68,134
- ---------------- real property
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EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably (i) converts ____________________ _____________ Partnership Units in Agree Realty Limited Partnership in accordance with the terms of the First Amended and Restated Agreement of Limited Partnership Agreement of Agree Realty Limited Partnership and the Conversion Right referred to in Section 8.4 therein, (ii) surrenders such Partnership Units and all right, title and interest therein, and (iii) directs that the REIT Shares deliverable upon exercise of the Conversion Right be delivered to the address specified below, and registered or placed in the name(s) and at the address(es) specified below.
The undersigned hereby represents and warrants that (i) it has full power and authority to transfer all of its right, title and interest in such Partnership Units, (ii) such Partnership Units are free and clear of all Liens, and (iii) it will pay any state or local transfer tax that may be payable as a result of the conversion of such Partnership Units and the issuance of such REIT Shares.
Dated: _________________
Name of Limited Partner: _______________________________
Signature of Limited Partner: _______________________________
By:____________________________
Title:_________________________
Address: _______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
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Signature [Attested]
[Witnessed] by:
Issue REIT Shares to:
Please insert social security or identifying number;
Name:
Address:
Deliver the REIT Shares to the following address:
EXHIBIT C
NOTICE OF EXCHANGE
The undersigned hereby irrevocably (i) exchanges ___________________ _______________ Partnership Units in Agree Realty Limited Partnership in accordance with the terms of the First Amended and Restated Agreement of Limited Partnership Agreement of Agree Reality Limited Partnership and the Optional Exchange Right referred to in Section 11.3.C therein, (ii) surrenders such Partnership Units and all right, title and interest therein, and (iii) directs that the REIT Shares deliverable upon exercise of the Optional Exchange Right be delivered to the address specified below, and registered or placed in the name(s) and at the address(e) specified below.
The undersigned hereby represents and warrants that (i) it has full power and authority to transfer all of its right, title and interest in such Partnership Units, (ii) such Partnership Units are free and clear of all Liens, and (iii) it will pay any state or local transfer tax that may be payable as a result of the exchange of such Partnership Units and the issuance of such REIT Shares.
Dated: ___________________
Name of Limited Partner: _____________________________
Signature of Limited Partners: _____________________________
By:__________________________
Title:_______________________
_____________________________
(Street Address)
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Signature [Attested]
[Witnessed] by:
EXHIBIT 10.8
AGREE REALTY CORPORATION
1994 STOCK INCENTIVE PLAN
GENERAL
1.1 Purpose......................................................... 1 1.2 Administration.................................................. 1 1.3 Persons Eligible for Awards..................................... 3 1.4 Types of Awards Under Plan...................................... 3 1.5 Shares Available for Awards..................................... 4 1.6 Definitions of Certain Terms.................................... 6 |
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards.................................... 8
2.2 Grant of Stock Options, Stock Appreciation
Rights and Dividend Equivalent Rights......................... 9
2.3 Exercise of Options and Stock Appreciation
Rights........................................................ 13
2.4 Termination of Employment; Death................................ 16
2.5 Grant of Restricted Stock....................................... 17
2.6 Grant of Unrestricted Stock..................................... 19
2.7 Grant of Performance Shares..................................... 20
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ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification
of Awards..................................................... 21
3.2 Restrictions.................................................... 23
3.3 Nonassignability................................................ 24
3.4 Requirement of Notification of Election
Under Section 83(b) of the Code............................... 24
3.5 Requirement of Notification Upon
Disqualifying Disposition Under
Section 421(b) of the Code.................................... 24
3.6 Withholding Taxes............................................... 25
3.7 Change in Control............................................... 26
3.8 Right of Discharge Reserved..................................... 28
3.9 Nature of Payments.............................................. 28
3.10 Non-Uniform Determinations...................................... 28
3.11 Other Payments or Awards........................................ 29
3.12 Section Headings................................................ 29
3.13 Effective Date and Term of Plan................................. 29
3.14 Governing Law................................................... 30
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ARTICLE I
GENERAL
1.1 Purpose
The purpose of the 1994 Agree Realty Corporation Stock Incentive Plan (the "Plan") is to provide for officers and other employees (including directors who are employees) of Agree Realty Corporation (the "Company"), employees of joint ventures in which the Company participates, and consultants to the Company, an incentive (a) to become and remain associated with the Company, (b) to enhance the long-term performance of the Company, and (c) to acquire a proprietary interest in the success of the Company. 1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered by the Executive Compensation Committee (the "Committee") of the board of directors of the Company (the "Board"), which shall consist of not less than two directors and to which the Board shall grant power to authorize the issuance of the Company's capital stock pursuant to awards granted under the Plan. The members of the Committee shall be appointed by, and serve at the pleasure of, the Board. To the extent necessary for transactions under the Plan to qualify for the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934 (the "1934 Act"), no person may serve on the Committee if, during the year preceding such ser-
vice, he was granted or awarded equity securities of the Company (including options on such securities) under the Plan or any other plan of the Company or any affiliate thereof. To the extent necessary for compliance with section 162(m)(4)(C) of the Internal Revenue Code of 1986, members of the Committee shall be "outside directors" within the meaning thereof.
1.2.2 The Committee shall have the authority (a) to exercise all of the powers granted to it under the Plan, (b) to construe, interpret and implement the Plan and any Plan Agreements executed pursuant to Section 2.1, (c) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing its own operations, (d) to make all determinations necessary or advisable in administering the Plan, (e) to correct any defect, supply any omission and reconcile any inconsistency in the Plan, and (f) to amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a majority of its members. Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken shall be fully as effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters relating to the Plan or any Plan Agreement shall be final, binding and conclusive.
1.2.5 No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any award thereunder.
1.2.6 Notwithstanding anything to the contrary contained herein: (a) until the Board shall appoint the members of the Committee, the Plan shall be administered by the Board; and (b) the Board may, in its sole discretion, at any time and from time to time, resolve to administer the Plan. In either of the foregoing events, the term "Committee" as used herein shall be deemed to mean the Board.
1.3 Persons Eligible for Awards
Awards under the Plan may be made to such officers and executive, managerial, professional or administrative employees of the Company or any subsidiary (including employees who are directors), and to such consultants to the Company and employees of joint ventures in which the Company participates (collectively, "key persons") as the Committee shall in its sole discretion select.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive
stock options, (b) nonqualified stock options, (c) stock appreciation rights,
(d) dividend equivalent rights, (e) restricted stock, (f) unrestricted stock,
and (g) performance
shares, all as more fully set forth in Article II. The term "award" means any of the foregoing. No incentive stock option may be granted to a person who is not an employee of the Company on the date of grant.
1.5 Shares Available for Awards
1.5.1 The total number of shares of common stock of the Company, par value $0.0001 per share ("Common Stock"), with respect to which awards may be granted pursuant to the Plan shall not exceed 200,000 shares plus additional shares determined as follows. As of January 1, 1995 and each January 1 thereafter, the Board in its discretion may increase the number of shares authorized under this Section 1.5.1 by an amount not in excess of one percent (1%) of the total number of shares of Common Stock then issued and outstanding. The increments authorized pursuant to the preceding sentence shall be cumulative, so that any amount of permitted increase in shares not implemented in one year may in the Board's discretion be implemented in a subsequent year. Notwithstanding the foregoing, no more than 200,000 shares of Common Stock shall be available for issuance upon the exercise of incentive stock options. Shares issued pursuant to the Plan may be authorized but unissued Common Stock or authorized and issued Common Stock held in the Company's treasury or acquired by the Company for the purposes of the Plan. The Committee may direct that any stock certificate evidencing shares issued pursuant to
the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan.
1.5.2 The maximum number of shares of Common Stock that may be subject to awards of stock options or stock appreciation rights made to any one individual pursuant to this Plan in any three-year period shall be 100,000 shares.
1.5.3 If there is any change in the outstanding shares of Common Stock by reason of a stock dividend or distribution, stock split-up, recapitalization, combination or exchange of shares, or by reason of any merger, consolidation, spinoff or other corporate reorganization in which the Company is the surviving corporation, the number of shares available for issuance both in the aggregate and with respect to each outstanding award, the maximum number of shares set forth in Section 1.5.2, and the purchase price per share under outstanding option awards, shall be equitably adjusted by the Committee, whose determination shall be final, binding and conclusive. After any adjustment made pursuant to this Section 1.5.3, the number of shares subject to each outstanding award shall be rounded to the nearest whole number.
1.5.4 The following shares of Common Stock shall again become available for awards under the Plan: any shares subject to an award under the Plan that remain unissued upon the cancellation or termination of such award for any reason whatsoever;
any shares of restricted stock forfeited pursuant to Section 2.5.5, provided that any dividends paid on such shares are also forfeited pursuant to Section 2.5.5; and any shares in respect of which a stock appreciation right is settled for cash. Except as provided in this Section 1.5 and in Section 2.2.7, there shall be no limit on the number or the value of the shares of Common Stock issuable to any individual under the Plan.
1.6 Definitions of Certain Terms
1.6.1 The "Fair Market Value" of a share of Common Stock on any day shall be determined as follows.
(a) If the principal market for the Common Stock (the "Market") is a national securities exchange or the National Association of Securities Dealers Automated Quotation System ("NASDAQ") National Market, the last sale price or, if no reported sales take place on the applicable date, the average of the high bid and low asked price of Common Stock as reported for such Market on such date or, if no such quotation is made on such date, on the next preceding day on which there were quotations, provided that such quotations shall have been made within the ten (10) business days preceding the applicable date;
(b) If the Market is the NASDAQ National List, the NASDAQ Supplemental List or another market, the average of the high bid and low asked price for Common Stock on the applicable date, or, if no such quotations shall have been made on such
date, on the next preceding day on which there were quotations, provided that such quotations shall have been made within the ten (10) business days preceding the applicable date; or,
(c) In the event that neither paragraph (a) nor
(b) shall apply, the Fair Market Value of a share of Common Stock on any day
shall be determined by the Committee.
1.6.2 The term "incentive stock option" means an option that is intended to qualify for special federal income tax treatment pursuant to sections 421 and 422 of the Internal Revenue Code of 1986 (the "Code"), as now constituted or subsequently amended, or pursuant to a successor provision of the Code, and which is so designated in the applicable Plan Agreement. Any option that is not specifically designated as an incentive stock option shall under no circumstances be considered an incentive stock option. Any option that is not an incentive stock option is referred to herein as a "nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of an award under the Plan who is not an employee of the Company, the grantee's association with the Company as a consultant, as an employee of a joint venture or otherwise.
1.6.4 A grantee shall be deemed to have a "termination of employment" upon ceasing to be employed by the Company and all of its subsidiaries. The Committee may in its discretion deter-
mine (a) whether any leave of absence constitutes a termination of employment for purposes of the Plan, (b) the impact, if any, of any such leave of absence on awards theretofore made under the Plan, and (c) when a change in a non-employee's association with the Company constitutes a termination of employment for purposes of the Plan. The Committee shall have the right to determine whether the termination of a grantee's employment is a dismissal for cause and the date of termination in such case, which date the Committee may retroactively deem to be the date of the action that is cause for dismissal. Such determinations of the Committee shall be final, binding and conclusive.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan (except an award of unrestricted stock) shall be evidenced by a written agreement ("Plan Agreement") which shall contain such provisions as the Committee may in its sole discretion deem necessary or desirable. By accepting an award pursuant to the Plan, a grantee thereby agrees that the award shall be subject to all of the terms and provisions of the Plan and the applicable Plan Agreement.
2.2 Grant of Stock Options, Stock Appreciation Rights and Dividend Equivalent Rights
2.2.1 The Committee may grant incentive stock options and nonqualified stock options (collectively, "options") to purchase shares of Common Stock from the Company, to such key persons, and in such amounts and subject to such terms and conditions, as the Committee shall determine in its sole discretion, subject to the provisions of the Plan.
2.2.2 The Committee may grant stock appreciation rights to such key persons, and in such amounts and subject to such terms and conditions, as the Committee shall determine in its sole discretion, subject to the provisions of the Plan. The terms of a stock appreciation right may provide that it shall be automatically exercised for a cash payment upon the happening of a specified event that is outside the control of the grantee, and that it shall not be exercisable otherwise. Stock appreciation rights may be granted in connection with all or any part of, or independently of, any option granted under the Plan. A stock appreciation right granted in connection with a nonqualified stock option may be granted at or after the time of grant of such option. A stock appreciation right granted in connection with an incentive stock option may be granted only at the time of grant of such option.
2.2.3 The grantee of a stock appreciation right shall have the right, subject to the terms of the Plan and the applica-
ble Plan Agreement, to receive from the Company an amount equal to (a) the excess of the Fair Market Value of a share of Common Stock on the date of exercise of the stock appreciation right over (b) the Fair Market Value of a share of Common Stock on the date of grant (or over the option exercise price if the stock appreciation right is granted in connection with an option), multiplied by (c) the number of shares with respect to which the stock appreciation right is exercised. Payment upon exercise of a stock appreciation right shall be in cash or in shares of Common Stock (valued at their Fair Market Value on the date of exercise of the stock appreciation right) or both, all as the Committee shall determine in its sole discretion. Upon the exercise of a stock appreciation right granted in connection with an option, the number of shares subject to the option shall be reduced by the number of shares with respect to which the stock appreciation right is exercised. Upon the exercise of an option in connection with which a stock appreciation right has been granted, the number of shares subject to the stock appreciation right shall be reduced by the number of shares with respect to which the option is exercised.
2.2.4 Each Plan Agreement with respect to an option shall set forth the amount (the "option exercise price") payable by the grantee to the Company upon exercise of the option evidenced thereby. The option exercise price per share shall be determined by the Committee in its sole discretion; provided,
however, that the option exercise price of an incentive stock option shall be at least 100% of the Fair Market Value of a share of Common Stock on the date the option is granted, and provided further that in no event shall the option exercise price be less than the par value of a share of Common Stock.
2.2.5 Each Plan Agreement with respect to an option or stock appreciation right shall set forth the periods during which the award evidenced thereby shall be exercisable, whether in whole or in part. Such periods shall be determined by the Committee in its sole discretion; provided, however, that no incentive stock option (or a stock appreciation right granted in connection with an incentive stock option) shall be exercisable more than 10 years after the date of grant.
2.2.6 The Committee may in its sole discretion include in any Plan Agreement with respect to an option, stock appreciation right or performance shares a dividend equivalent right entitling the grantee to receive amounts equal to the ordinary dividends that would be paid, during the time such award is outstanding and unexercised, on the shares of Common Stock covered by such award if such shares were then outstanding. In the event such a provision is included in a Plan Agreement, the Committee shall determine whether such payments shall be made in cash or in shares of Common Stock, whether they shall be conditioned upon the exercise of the award to which they relate, the time or times
at which they shall be made, and such other terms and conditions as the Committee shall deem appropriate.
2.2.7 To the extent that the aggregate Fair Market Value (determined as of the time the option is granted) of the stock with respect to which incentive stock options are first exercisable by any employee during any calendar year shall exceed $100,000, or such higher amount as may be permitted from time to time under section 422 of the Code, such options shall be treated as nonqualified stock options.
2.2.8 Notwithstanding the provisions of Sections 2.2.4 and 2.2.5, an incentive stock option may not be granted under the Plan to an individual who, at the time the option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of his employer corporation or of its parent or subsidiary corporations (as such ownership may be determined for purposes of section 422(b)(6) of the Code) unless (a) at the time such incentive stock option is granted the option exercise price is at least 110% of the Fair Market Value of the shares subject thereto and (b) the incentive stock option by its terms is not exercisable after the expiration of 5 years from the date it is granted.
2.3 Exercise of Options and Stock Appreciation Rights
Subject to the provisions of this Article II, each option or stock appreciation right granted under the Plan shall be exercisable as follows:
2.3.1 Unless the applicable Plan Agreement otherwise provides, an option or stock appreciation right shall become exercisable in four substantially equal installments, the first of which shall become exercisable on the first anniversary of the date of grant and the remaining three of which shall become exercisable, respectively, on the second, third and fourth anniversaries of the date of grant.
2.3.2 Unless the applicable Plan Agreement otherwise provides, once an installment becomes exercisable, it shall remain exercisable until expiration, cancellation or termination of the award.
2.3.3 Unless the applicable Plan Agreement otherwise provides, an option or stock appreciation right may be exercised from time to time as to all or part of the shares as to which such award is then exercisable. A stock appreciation right granted in connection with an option may be exercised at any time when, and to the same extent that, the related option may be exercised.
2.3.4 An option or stock appreciation right shall be exercised by the filing of a written notice with the Company, on such form and in such manner as the Committee shall in its sole discretion prescribe. In the case of a grantee of a stock appreciation right whose transactions in Common Stock are subject to Section 16(b) of the 1934 Act, an election to exercise a stock appreciation right in whole or in part shall, to the extent required to conform to applicable interpretations of Rule 16b-3, occur no sooner than six months after the grant thereof, and shall be made irrevocably at least six months prior to such exercise unless both the election and the exercise are made in a single "window period" of 10 business days beginning on the third day following release of the Company's quarterly or annual summary statement of sales and earnings.
2.3.5 Any written notice of exercise of an option shall be accompanied by payment for the shares being purchased. Such payment shall be made: (a) by certified or official bank check (or the equivalent thereof acceptable to the Company) for the full option exercise price; or (b) with the consent of the Committee, by delivery of shares of Common Stock acquired at least six months prior to the option exercise date and having a Fair Market Value (determined as of the exercise date) equal to all or part of the option exercise price and a certified or official bank check (or the equivalent thereof acceptable to the Company) for any remaining portion of the full option exercise
price; or (c) at the discretion of the Committee and to the extent permitted by law, by such other provision, consistent with the terms of the Plan, as the Committee may from time to time prescribe.
2.3.6 Promptly after receiving payment of the full option exercise price, or after receiving notice of the exercise of a stock appreciation right for which payment will be made partly or entirely in shares, the Company shall, subject to the provisions of Section 3.2, deliver to the grantee or to such other person as may then have the right to exercise the award, a certificate or certificates for the shares of Common Stock for which the award has been exercised. If the method of payment employed upon option exercise so requires, and if applicable law permits, an optionee may direct the Company to deliver the certificate(s) to the optionee's stockbroker.
2.3.7 No grantee of an option or stock appreciation right (or other person having the right to exercise such award) shall have any of the rights of a stockholder of the Company with respect to shares subject to such award until the issuance of a stock certificate to such person for such shares. Except as otherwise provided in Section 1.5.2, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate is issued.
2.4 Termination of Employment; Death
2.4.1 Except to the extent otherwise provided in Section 2.4.2 or 2.4.3 or in the applicable Plan Agreement, all options and stock appreciation rights not theretofore exercised shall terminate upon termination of the grantee's employment for any reason (including death).
2.4.2 If a grantee's employment terminates for any reason other than death or dismissal for cause, the grantee may exercise any outstanding option or stock appreciation right on the following terms and conditions: (a) exercise may be made only to the extent that the grantee was entitled to exercise the award on the date of employment termination; and (b) exercise must occur within three months after employment terminates, except that the three-month period shall be increased to one year if the termination is by reason of disability, but in no event after the expiration date of the award as set forth in the Plan Agreement. In the case of an incentive stock option, the term "disability" for purposes of the preceding sentence shall have the meaning given to it by section 422(c)(7) of the Code.
2.4.3 If a grantee dies while employed by the Company or any subsidiary, or after employment termination but during the period in which the grantee's awards are exercisable pursuant to Section 2.4.2, any outstanding option or stock appreciation right shall be exercisable on the following terms and conditions:
(a) exercise may be made only to the extent that the grantee was entitled to exercise the award on the date of death; and (b) exercise must occur by the earlier of the first anniversary of the grantee's death or the expiration date of the award. Any such exercise of an award following a grantee's death shall be made only by the grantee's executor or administrator, unless the grantee's will specifically disposes of such award, in which case such exercise shall be made only by the recipient of such specific disposition. If a grantee's personal representative or the recipient of a specific disposition under the grantee's will shall be entitled to exercise any award pursuant to the preceding sentence, such representative or recipient shall be bound by all the terms and conditions of the Plan and the applicable Plan Agreement which would have applied to the grantee including, without limitation, the provisions of Sections 3.2 and 3.7 hereof.
2.5 Grant of Restricted Stock
2.5.1 The Committee may grant restricted shares of Common Stock to such key persons, in such amounts, and subject to such terms and conditions as the Committee shall determine in its sole discretion, subject to the provisions of the Plan. Restricted stock awards may be made independently of or in connection with any other award under the Plan. A grantee of a restricted stock award shall have no rights with respect to such award unless such grantee accepts the award within such period as
the Committee shall specify by executing a Plan Agreement in such form as the Committee shall determine and, if the Committee shall so require, makes payment to the Company by certified or official bank check (or the equivalent thereof acceptable to the Company) in such amount as the Committee may determine.
2.5.2 Promptly after a grantee accepts a restricted stock award, the Company shall issue to the grantee a certificate or certificates for the shares of Common Stock covered by the award. Upon the issuance of such certificate(s), the grantee shall have the rights of a stockholder with respect to the restricted stock, subject also to the nontransferability restrictions and Company repurchase rights described in Sections 2.5.4 and 2.5.5, subject also in the Committee's discretion to a requirement that any dividends paid on such shares shall be held in escrow until all restrictions on such shares have lapsed, and subject also to any other restrictions and conditions contained in the applicable Plan Agreement.
2.5.3 Unless the Committee shall otherwise determine, any certificate issued evidencing shares of restricted stock shall remain in the possession of the Company until such shares are free of any restrictions specified in the applicable Plan Agreement.
2.5.4 Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or dis-
posed of except as specifically provided in this Plan or the applicable Plan Agreement. The Committee at the time of grant shall specify the date or dates (which may depend upon or be related to the attainment of performance goals and other conditions) on which the nontransferability of the restricted stock shall lapse.
2.5.5 During the 90 days following termination of the grantee's employment for any reason, the Company shall have the right to require the return of any shares to which restrictions on transferability apply, in exchange for which the Company shall repay to the grantee (or the grantee's estate) any amount paid by the grantee for such shares. In the event that the Company requires such a return of shares, it shall also have the right to require the return of all dividends paid on such shares, whether by termination of any escrow arrangement under which such dividends are held, or otherwise.
2.6 Grant of Unrestricted Stock
The Committee may grant (or sell at a purchase price at least equal to par value) shares of Common Stock free of restrictions under the Plan, to such key persons and in such amounts as the Committee shall determine in its sole discretion. Shares may be thus granted or sold in respect of past services or other valid consideration.
2.7 Grant of Performance Shares
2.7.1 The Committee may grant performance share awards to such key persons, and in such amounts and subject to such terms and conditions, as the Committee shall in its sole discretion determine, subject to the provisions of the Plan. Such an award shall entitle the grantee to acquire shares of Common Stock, or to be paid the value thereof in cash, as the Committee shall determine, if specified performance goals are met. Performance shares may be awarded independently of or in connection with any other award under the Plan. A grantee shall have no rights with respect to a performance share award unless such grantee accepts the award by executing a Plan Agreement at such time and in such form as the Committee shall determine.
2.7.2 The grantee of a performance share award will have the rights of a shareholder only as to shares for which a certificate has been issued pursuant to the award and not with respect to any other shares subject to the award.
2.7.3 Except as may otherwise be provided by the Committee at any time prior to termination of employment, the rights of a grantee of a performance share award shall automatically terminate upon the grantee's termination of employment for any reason.
2.7.4 At the discretion of the Committee, the applica- ble Plan Agreement may set out the procedures to be followed in
exercising a performance share award or it may provide that such exercise shall be made automatically after satisfaction of the applicable performance goals.
2.7.5 Except as otherwise specified by the Committee, (a) a performance share award granted in tandem with an option may be exercised only while the option is exercisable, (b) the exercise of a performance share award granted in tandem with any other award shall reduce the number of shares subject to such other award in the manner specified in the applicable Plan Agreement, and (c) the exercise of any award granted in tandem with a performance share award shall reduce the number of shares subject to the latter in the manner specified in the applicable Plan Agreement.
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 Except as otherwise provided herein, the Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations under any award theretofore made under the Plan without the consent of the grantee (or, after the grantee's death, the person having the right to exercise the award). For purposes of this Section 3.1, any action of the Board or the
Committee that alters or affects the tax treatment of any award shall not be considered to materially impair any rights of any grantee.
3.1.2 Shareholder approval shall be required with respect to any amendment which: (a) increases the aggregate number of shares which may be issued pursuant to incentive stock options or changes the class of employees eligible to receive such options; or (b) materially increases the benefits under the Plan to persons whose transactions in Common Stock are subject to Section 16(b) of the 1934 Act, materially increases the number of shares which may be issued to such persons, or materially modifies the eligibility requirements affecting such persons.
3.1.3 The Committee may amend any outstanding Plan Agreement,
including, without limitation, by amendment which would (a) accelerate the
time or times at which the award becomes unrestricted or may be exercised, or
(b) waive or amend any goals, restrictions or conditions set forth in the
Agreement, or (c) extend the scheduled expiration date of the award. However,
any such cancellation or amendment (other than an amendment pursuant to
Section 3.7.2) that materially impairs the rights or materially increases the
obligations of a grantee under an outstanding award shall be made only with
the consent of the grantee (or, upon the grantee's death, the person having
the right to exercise the award).
3.2 Restrictions
3.2.1 If the Committee shall at any time determine that any Consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of any award under the Plan, the issuance or purchase of shares or other rights thereunder, or the taking of any other action thereunder (each such action being hereinafter referred to as a "Plan Action"), then such Plan Action shall not be taken, in whole or in part, unless and until such Consent shall have been effected or obtained to the full satisfaction of the Committee.
3.2.2 The term "Consent" as used herein with respect to any Plan Action means (a) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (b) any and all written agreements and representations by the grantee with respect to the disposition of shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made and (c) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies.
3.3 Nonassignability
No award or right granted to any person under the Plan or under any Plan Agreement shall be assignable or transferable other than by will or by the laws of descent and distribution. All rights granted under the Plan or any Plan Agreement shall be exercisable during the life of the grantee only by the grantee or the grantee's legal representative.
3.4 Requirement of Notification of Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisition of shares of Common Stock under the Plan, make the election permitted under section 83(b) of the Code (i.e., an election to include in gross income in the year of transfer the amounts specified in section 83(b)), such grantee shall notify the Company of such election within 10 days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under the authority of Code section 83(b).
3.5 Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code
Each Plan Agreement with respect to an incentive stock option shall require the grantee to notify the Company of any disposition of shares of Common Stock issued pursuant to the exercise of such option under the circumstances described in
section 421(b) of the Code (relating to certain disqualifying dispositions), within 10 days of such disposition.
3.6 Withholding Taxes
3.6.1 Whenever cash is to be paid pursuant to an award under the Plan, the Company shall be entitled to deduct therefrom an amount sufficient in its opinion to satisfy all federal, state and other governmental tax withholding requirements related to such payment.
3.6.2 Whenever shares of Common Stock are to be delivered pursuant to an award under the Plan, the Company shall be entitled to require as a condition of delivery that the grantee remit to the Company an amount sufficient in the opinion of the Company to satisfy all federal, state and other governmental tax withholding requirements related thereto. With the approval of the Committee, which it shall have sole discretion to grant, the grantee may satisfy the foregoing condition by electing to have the Company withhold from delivery shares having a value equal to the amount of tax to be withheld. Such shares shall be valued at their Fair Market Value on the date as of which the amount of tax to be withheld is determined (the "Tax Date"). Fractional share amounts shall be settled in cash. Such a withholding election may be made with respect to all or any portion of the shares to be delivered pursuant to an award. To the extent required for such a withholding of stock to qualify for the exemption avail-
able under Rule 16b-3, such an election by a grantee whose transactions in Common Stock are subject to Section 16(b) of the 1934 Act shall be: (a) subject to the approval of the Committee in its sole discretion; (b) irrevocable; (c) made no sooner than six months after the grant of the award with respect to which the election is made; and (d) made at least six months prior to the Tax Date unless such withholding election is in connection with exercise of an option and both the election and the exercise occur prior to the Tax Date in a "window period" of 10 business days beginning on the third day following release of the Company's quarterly or annual summary statement of sales and earnings.
3.7 Change in Control
3.7.1 For purposes of this Section 3.7, a "Change In Control" shall be deemed to have occurred upon the happening of any of the following events: (a) any "person," including a "group," as such terms are defined in Sections 13(d) and 14(d) of the 1934 Act and the rules promulgated thereunder, becomes the beneficial owner, directly or indirectly, whether by purchase or acquisition or agreement to act in concert or otherwise, of 15% or more of the outstanding shares of Common Stock of the Company; (b) a cash tender or exchange offer for 50% or more of the outstanding shares of Common Stock of the Company is commenced; (c) the shareholders of the Company approve an agreement to merge, consolidate, liquidate, or sell all or substantially all
of the assets of the Company; or (d) two or more directors are elected to the Board without having previously been nominated and approved by the members of the Board incumbent on the day immediately preceding such election.
3.7.2 Upon the happening of a Change in Control:
(a) notwithstanding any other provision of this Plan, any option or stock appreciation right then outstanding whose date of grant was at least six months prior to the date of the Change in Control shall become fully vested and immediately exercisable;
(b) to the extent permitted by law, the Committee may, in its sole discretion, amend any Plan Agreement in such manner as it deems appropriate, including, without limitation, by amendments that advance the dates upon which any or all outstanding shares of restricted stock shall become free of restrictions or upon which any or all outstanding performance share awards shall become payable, or that advance the dates upon which any or all outstanding awards of any type shall terminate.
3.7.3 Whenever deemed appropriate by the Committee, any action referred to in Section 3.7.2(b) may be made conditional upon the consummation of the applicable Change in Control transaction.
3.8 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon any grantee the right to continue in the employ of the Company or affect any right which the Company may have to terminate such employment.
3.9 Nature of Payments
3.9.1 Any and all grants of awards and issuances of shares of Common Stock under the Plan shall be in consideration of services performed for the Company by the grantee.
3.9.2 All such grants and issuances shall constitute a special incentive payment to the grantee and shall not be taken into account in computing the amount of salary or compensation of the grantee for the purpose of determining any benefits under any pension, retirement, profit-sharing, bonus, life insurance or other benefit plan of the Company or under any agreement between the Company and the grantee, unless such plan or agreement specifically provides otherwise.
3.10 Non-Uniform Determinations
The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Plan agreements, as to (a) the persons to receive awards under the Plan, (b) the terms and provisions of awards under the Plan, and (c) the treatment of leaves of absence pursuant to Section 1.6.4.
3.11 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.
3.12 Section Headings
The section headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of said sections.
3.13 Effective Date and Term of Plan
3.13.1 The Plan was adopted by the Board on April 6, 1994, subject to approval by the Company's shareholders. All awards under the Plan prior to such shareholder approval are subject in their entirety to such approval. If such approval is not obtained prior to the first anniversary of the date of adoption of the Plan, the Plan and all awards thereunder shall terminate on that date.
3.13.2 Unless sooner terminated by the Board, the provisions of the Plan respecting the grant of incentive stock options shall terminate on the tenth anniversary of the adoption of the Plan by the Board, and no incentive stock option awards shall thereafter be made under the Plan. All such awards made under the Plan prior to its termination shall remain in effect until such awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Plan Agreements.
3.14 Governing Law
All rights and obligations under the Plan shall be construed and interpreted in accordance with the laws of the State of New York, without giving effect to principles of conflict of laws.
EXHIBIT 10.9
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") made this 22nd day of April, 1994, between Mt. Pleasant Shopping Center, Angola Plaza and Shiloh Plaza, each a Michigan co-partnership (collectively, the "Owner"), and AGREE REALTY CORPORATION (the "Agent").
W I T N E S S E T H:
WHEREAS, Owner owns certain commercial properties in various areas which are not being transferred to Agent pursuant to the transactions to be entered into concurrently with Agent's initial public offering (the "Formation");
WHEREAS, Owner is transferring to Agent as part of the Formation all of the assets of the entity which prior to the Formation had provided management services with respect to such properties; and
WHEREAS, Owner desires that Agent shall act as the management agent for the Properties (as hereinafter defined), upon the terms and conditions herein set forth, and Agent is willing to so act,
NOW, THEREFORE, in consideration of the mutual covenants and conditions set forth herein, the parties agree as follows:
1. Appointment as Agent. Owner hereby appoints Agent as the sole and exclusive management agent for the commercial properties identified on Exhibit "A" attached hereto (the "Properties") for the term of this Agreement.
2. Term. This Agreement shall remain in full force and effect until the first to occur of the following events:
(a) Five (5) years from the date of the execution of this Agreement, such agreement shall be automatically renewed for an additional five-year term unless Agent or Owner gives 90 days advance written notice to terminate this Agreement.
(b) Owner sells or otherwise disposes of all of the Properties.
(c) Agent, upon 30 days advance written notice to Owner, elects to terminate this Agreement.
3. Management Functions. During the term of this Agreement, Agent will provide the following services:
(a) Collect rents, including percentage rents and other similar amounts to be paid by tenants of the Properties, and Agent may give receipts for all amounts collected. Agent shall examine any records of gross sales and any other reports submitted by tenants for the purpose of computing the amounts of any percentage rents. Agent shall have the right, in its own name or in the name of the Owner and at the expense of Owner, to take any and all actions, which
Agent deems advisable and which Owner might take, in the event of breach by any tenant of any covenant, provision, or condition under its lease with Owner. Agent shall not be required to institute legal action against any tenant.
(b) Cause to be maintained (or cause the tenants to maintain) the Properties and common areas thereof in good repair and in a clean and orderly condition. Agent shall inform Owner in advance of all anticipated, extraordinary expenditures in excess of $5,000 for any one item. Owner shall reimburse to Agent, pursuant to the provisions of Section 5 hereof, all costs incurred by Agent in performing its functions under this part (b) and Owner shall receive credit for all rebates, commissions, discounts and allowances.
(c) Assist Owner in filling vacancies with new tenants and obtain extensions and renewals of the leases of existing tenants. The obligations of Agent and Owner under this part (c) shall extend to the leasing of new space created by further improvement or development of the Properties. Owner shall reimburse to Agent the costs incurred by Agent in performing its functions under this part (c).
(d) Maintain and prepare books and records showing all items of income and expense in such detail and accuracy as will allow Owner to prepare financial statements and tax returns in accordance with generally accepted accounting principles consistently applied.
(e) Delegate its duties under this Agreement to such employees or other agents as Agent may select, but no such delegation shall relieve Agent of its obligation to perform such duties.
(f) Perform such other services as are necessary or customary for proper management and maintenance supervision of the Properties.
4. Agent's Fees. For the services rendered by Agent, Owner shall pay to Agent an annual sum equal to three and one-half percent (3-1/2%) of the fixed monthly rent (plus percentage rent becoming due and payable under the leases of all of the Properties). Such fees shall be deductible by Agent, pursuant to the provisions of Section 5 hereof, from the rents collected.
5. Remittances to Owner. All funds collected by Agent in its management of the Properties shall be deposited in a separate bank account. After deduction of all costs, expenses and payments chargeable to Owner pursuant to this Agreement (including the fees or other amounts owed or otherwise payable to Agent pursuant to Sections 3(b), 4 or 7 herein), Agent shall remit any balance to Owner within 10 calendar days following each month during the terms of this Agreement.
6. Notice to Owner. Agent shall promptly advise Owner in writing of the service upon Agent of any summons, subpoena or
other similar documents setting forth any claimed liability of Owner or the Properties.
7. Professional Fees. The Owner shall pay all legal and other professional fees reasonably incurred by Agent in the management and operation of the Properties.
8. Right of First Refusal.
(a) If the Owner receives and is willing to accept an arms-length, bona fide, written offer (the "Third Party Offer") from an unaffiliated third party (the "Third Party") to purchase all or any part of the Properties (the "Subject Properties"), Agent shall have a right of first refusal to buy the Subject Properties on the same terms and conditions as the Third Party Offer. Owner shall send a written notice of such Third Party Offer to the Agent, to which notice a copy of the Third Party Offer shall be attached (the date of receipt of such notice by Agent is referred to herein as the "Notice Date"). Such right shall be exercised, if at all, by the Agent sending a written notice to the Owner within 30 days of the Notice Date (the "Exercise Period").
(b) If the right of first refusal provided for in paragraph 8(a) above is not exercised within the Exercise Period or the Agent does not consummate the transaction with respect to the Subject Properties within 120 days from and including the Notice Date, then the Owner may, at any time during the 120 day period following the later of (i) the Exercise Period or (ii) the
120 day period following the Notice Date, transfer all or any part of the Subject Properties to the Third Party in accordance with the Third Party Offer; provided, however, such transfer shall be made to the Third Party only on the terms and conditions of the Third Party Offer.
9. Indemnification. Owner shall indemnify and hold harmless Agent from and against any and all claims, losses, fees and expenses (including reasonable attorneys' fees and expenses) and liabilities arising from the performance of its functions under this Agreement or arising out of damage to property or injury to or death of persons at the Properties; provided, however, this indemnification shall not apply to acts of willful misconduct or gross negligence of Agent. Owner agrees to cause Agent to be named as an additional insured under all public liability and Workmen's Compensation Insurance maintained in connection with the Properties.
10. Assignment and Binding Effect. Agent shall have the right to assign its rights under this Agreement with the written consent of Owner, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective legal representatives, heirs, successors and permitted assigns.
11. Notices. All notices relating to this Agreement shall be in writing and shall be deemed to have been given at the time
when delivered personally or sent in the United States by registered or certified mail, return receipt requested, in a postpaid envelope, addressed to the other party at the address set forth below, or to such changed address as the other party may have fixed by notice; provided, however, that any notice of change of address shall be effective only upon receipt:
To Owner:
c/o Agree Realty Corporation
31850 Northwestern Highway
Farmington Hills, Michigan 48334
-copy to-
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, New York 10022
Attn: David P. Levin
To Agent:
31850 Northwestern Highway
Farmington Hills, Michigan 48334
12. Severability; Survival. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law.
13. Governing Law. This Agreement shall be governed and construed in accordance with the internal laws of the State of Michigan without regard to conflict of laws provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement.
Mt. Pleasant Shopping Center Angola Plaza Shiloh Plaza, each a Michigan co-partnership
By: its General Partner
/s/ Richard Agree
------------------------------
Richard Agree
|
AGENT:
AGREE REALTY CORPORATION
By: /s/ Kenneth Howe
-------------------------
Its Secretary
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EXHIBIT 10.10
CONTRIBUTION AGREEMENT
by and between
Edward Rosenberg and Richard Agree, as to property known as Borman Center, Roseville, Michigan; Capital Plaza Shopping Center, a Michigan Co-Partnership, as to property known as Capital Plaza, Frankfort, Kentucky; Charlevoix Commons, a Michigan Co-Partnership, as to property known as Charlevoix Commons, Charlevoix, Michigan; Chippewa Commons, a Michigan Co-Partnership, as to property known as Chippewa Commons, Chippewa, Wisconsin; Grayling Plaza, a Michigan Co-Partnership, as to property known as Grayling Plaza, Grayling, Michigan; Iron Mountain Plaza, a Michigan Co-Partnership, as to property known as Iron Mountain Plaza, Iron Mountain, Michigan; Ironwood Commons, a Michigan Co-Partnership, as to property known as Ironwood Commons, Ironwood, Michigan; Marshall Plaza Phase Two, a Michigan Co-Partnership, as to property known as Marshall Plaza Phase Two, Marshall, Michigan; North Lakeland Plaza, a Michigan Co-Partnership, as to property known as North Lakeland Plaza, Lakeland, Florida; Oscoda Plaza, a Michigan Co-Partnership, as to property known as Oscoda Plaza, Oscoda, Michigan; Perrysburg Plaza, an Ohio Partnership, as to property known as Perrysburg Plaza, Perrysburg, Ohio; Petoskey Town Center, a Michigan Co-Partnership, as to property known as Petoskey Town Center, Petoskey, Michigan; Plymouth Commons, a Michigan Co-Partnership, as to property known as Plymouth Commons, Plymouth, Wisconsin; Rapids Associates, a Michigan Co-Partnership, as to property known as Rapids Associates, Big Rapids, Michigan; Shawano Plaza, a Michigan Co-Partnership, as to property known as Shawano Plaza, Shawano, Wisconsin; West Frankfort Plaza, an Illinois Partnership, as to property known as West Frankfort Plaza, West Frankfort, Illinois; Winter Garden Plaza, a Michigan Co-Partnership, as to property known as Winter Garden Plaza, Winter Garden, Florida
as Transferor
and
AGREE LIMITED PARTNERSHIP,
as Transferee
TABLE OF CONTENTS
Section Page
- ------- ----
1. Conveyance of Property........................................... 2
2. Contribution Terms............................................... 2
3. Title............................................................ 2
4. Representations and Warranties of Transferor..................... 3
5. Assumption by Transferee......................................... 6
6. The Closing...................................................... 7
7. Notices.......................................................... 11
8. Miscellaneous.................................................... 11
EXHIBITS
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EXHIBIT A - Legal Description
EXHIBIT B - Schedule of Permitted Exceptions
EXHIBIT C - Schedule of Legal Proceedings
EXHIBIT D - Schedule of Leases
EXHIBIT E - Schedule of Security Deposits
EXHIBIT F - Schedule of overnmental Notices
EXHIBIT G - Schedule of Environmental Reports
EXHIBIT H - Schedule of Service Contracts
EXHIBIT I - Schedule of Insurance and Insurance Certificates
EXHIBIT J - Schedule of Limited Partnership Interests
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT is made and entered into as of April 21, 1994, by and between Edward Rosenberg and Richard Agree, as to property known as Borman Center, Roseville, Michigan; Capital Plaza Shopping Center, a Michigan Co-Partnership, as to property known as Capital Plaza, Frankfort, Kentucky; Charlevoix Commons, a Michigan Co-Partnership, as to property known as Charlevoix Commons, Charlevoix, Michigan; Chippewa Commons, a Michigan Co-Partnership, as to property known as Chippewa Commons, Chippewa, Wisconsin; Grayling Plaza, a Michigan Co-Partnership, as to property known as Grayling Plaza, Grayling, Michigan; Iron Mountain Plaza, a Michigan Co-Partnership, as to property known as Iron Mountain Plaza, Iron Mountain, Michigan; Ironwood Commons, a Michigan Co-Partnership, as to property known as Ironwood Commons, Ironwood, Michigan; Marshall Plaza Phase Two, a Michigan Co-Partnership, as to property known as Marshall Plaza Phase Two, Marshall, Michigan; North Lakeland Plaza, a Michigan Co-Partnership, as to property known as North Lakeland Plaza, Lakeland, Florida; Oscoda Plaza, a Michigan Co-Partnership, as to property known as Oscoda Plaza, Oscoda, Michigan; Perrysburg Plaza, an Ohio Partnership, as to property known as Perrysburg Plaza, Perrysburg, Ohio; Petoskey Town Center, a Michigan Co-Partnership, as to property known as Petoskey Town Center, Petoskey, Michigan; Plymouth Commons, a Michigan Co-Partnership, as to property known as Plymouth Commons, Plymouth, Wisconsin; Rapids Associates, a Michigan Co-Partnership, as to property known as Rapids Associates, Big Rapids, Michigan; Shawano Plaza, a Michigan Co-Partnership, as to property known as Shawano Plaza, Shawano, Wisconsin; West Frankfort Plaza, an Illinois Partnership, as to property known as West Frankfort Plaza, West Frankfort, Illinois; Winter Garden Plaza, a Michigan Co-Partnership, as to property known as Winter Garden Plaza, Winter Garden, Florida (collectively, "Transferors" and each, a "Transferor"), and AGREE LIMITED PARTNERSHIP, a Delaware limited partnership ("Transferee").
WITNESSETH:
WHEREAS, Transferors desire to convey to Transferee, and Transferee desires to acquire from Transferors, certain land and improvements located thereon as set forth above and as more particularly described in the legal descriptions attached hereto as Exhibit A, together with all personal property owned by any Transferor and located at and used in connection with the operation of such real property as more fully described below (such properties are sometimes hereinafter referred to collectively as the "Portfolio Properties");
WHEREAS, the conveyance contemplated hereunder is in connection with a proposed public offering by Agree Realty Corporation, a Maryland corporation ("Agree Corp."), the sole general partner of Transferee. Agree Corp. intends to qualify as a real estate investment trust for Federal income tax purposes and will control the Portfolio Properties through its general partnership interest in Transferee. The formation of Agree Corp. and Transferee, the conveyance of the Portfolio Properties and the public offering by Agree Corp., all as more particularly described in the Registration Statement on Form S-11 for Agree Corp. (Registration. No. 33-73858), as amended and supplemented (the "S-11"), are hereinafter referred to collectively as the "REIT Transaction." The consummation of the contribution
hereunder and all of the other elements of the REIT Transaction are referred to herein as the "Closing"; and
WHEREAS, Transferors desire to contribute the Property (as defined below) to Transferee in exchange for the consideration stated herein, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Conveyance of Property. Upon the terms and conditions set forth herein, each Transferor agrees to grant and convey to Transferee, and Transferee agrees to acquire from such Transferor, such Transferor's interest in the real property described in the legal description attached hereto as Exhibit A applicable to such Transferor, together with the appurtenances thereto, including, but not limited to, any appurtenances, easements, rights of way, licenses and privileges belonging or appurtenant to such real property; all mineral, oil and gas rights, water rights, sewer rights and other utility rights allocated to such real property and belonging to each such Transferor; all right, title and interest of each such Transferor in and to any roads, streets and ways, public and private, serving such real property, including all rights to the development of such real property granted by governmental entities having jurisdiction over such real property (collectively, the "Real Property"); together with all improvements, buildings and structures located on or attached to the Real Property (collectively, the "Improvements"); together with all fixtures, equipment, systems, machinery and other items of personal property owned by each such Transferor and located at and used in connection with the operation of the Real Property and Improvements (collectively, the "Personal Property"); together with all rights, title and interest of each such Transferor under the Leases (as hereinafter defined); and together with all intangible property related to or used in connection with the Real Property, Improvements or Personal Property, including, without limitation, all trademarks, trade and business names, service contracts, guarantees, licenses, permits, certificates, approvals, authorizations, variances, consents, warranties, and goodwill (the "Intangibles"). The Real Property, the Improvements, the Personal Property, the Intangibles and all other rights and interests described above are collectively referred to herein as the "Property."
2. Contribution Terms. In exchange for the conveyance of the Property by Transferors to Transferee hereunder, Transferee will issue limited partnership interests in Transferee (the "Partnership Interests"), or the right to receive such Partnership Interests, which at the direction of Transferors shall be issued to, or for the benefit of, Richard Agree, Edward Rosenberg and Joel Weiner as set forth on Exhibit J. Such Partnership Interests and the covenants and agreements of Transferee contained herein shall be the sole consideration for the contribution of the Property.
3. Title. Title to the Property shall be good and marketable and shall be conveyed in fee simple, by covenant deed (or such comparable form of deed as may be the customary means of conveyance in the jurisdiction in which the Property is located), except for the Real Property known as Borman Center and Perrysburg Plaza, which shall be
conveyed by an assignment of a leasehold interest, in each case free and clear of any and all liens, mortgages, security interests, leases, restrictions, easements, options, claims, unrecorded agreements or other encumbrances of any kind whatsoever, except for (i) the deed(s) of trust, mortgage(s) and other security instruments, if any, identified on Exhibit B attached hereto (the "Security Instruments"); (ii) the Leases (as hereinafter defined); and (iii) those other exceptions to title identified on Exhibit B attached hereto or as approved by Transferee and listed on any title insurance policy or "marked up" title commitment to be delivered to Transferee at Closing (the Security Instruments and such other exceptions shown on Exhibit B being hereinafter referred to collectively as the "Permitted Exceptions").
4. Representations and Warranties of Transferor. Each Transferor hereby makes the following representations and warranties to Transferee, as to itself and the Property to be conveyed by such Transferor hereunder only, all of which are made and shall be true as of the date of the Closing:
(a) Transferor is the owner and holder of good and marketable fee simple title to the Property, or in the case of the Real Property known as Borman Center and Perrysburg Plaza, a valid leasehold interest, in each case free and clear of any and all liens, mortgages, security interests, leases, restrictions, easements, options, claims, unrecorded agreements and other encumbrances of any kind whatsoever, except for the Leases (as hereinafter defined) and the Permitted Exceptions.
(b) Transferor is not a "foreign person" as that term is used in the federal Foreign Investment in Real Property Tax Act of 1980 and the 1981 Tax Reform Act, as amended.
(c) The execution, delivery and performance of this Contribution Agreement by Transferor (i) does not require any further action, consent, order, registration, filing, declaration or approval in order to make this Contribution Agreement a binding and enforceable obligation of Transferor or for Transferor to consummate the transaction contemplated hereby, except as otherwise disclosed in the S-11 and (ii) does not, and will not with notice or the passage of time, conflict with or breach, in any manner which would have a material and adverse effect upon Transferor or the Property, any agreement or instrument to which Transferor is a party or by which Transferor or the Property is bound or to which Transferor or the Property is subject, or any applicable regulation of any governmental agency, or any judgment, order or decree of any court having jurisdiction over Transferor or the Property.
(d) The persons executing this Contribution Agreement on behalf of Transferor have been duly authorized to do so by all necessary partnership action, and this Contribution Agreement has been duly executed by Transferor and constitutes a legal, valid and binding obligation of Transferor and is enforceable against Transferor in accordance with its terms, subject to principles of equity and applicable bankruptcy, insolvency and other laws affecting the rights of creditors generally.
(e) In each case except for the Real Property known as Borman Center, Transferor is a general partnership, duly formed, validly existing, and in good standing under
the laws of the state set forth in the preamble to this Agreement, and is duly qualified to transact business in the jurisdiction in which the Property is located, except where the failure to be so qualified does not have a material adverse effect on the Transferor.
(f) There are no lawsuits nor any other legal or governmental proceedings pending or, to the best of Transferor's actual knowledge, threatened that concern, involve, affect or are brought in connection with Transferor's interest in the Property, the Leases (as hereinafter defined) or the Property, except as identified on Exhibit C attached hereto.
(g) The Property shall be conveyed subject to existing tenancies, leaseholds and rights of occupancy affecting the Property pursuant to the leases identified on the rent roll attached hereto as Exhibit D (collectively, the "Leases"). Exhibit D contains a true, correct and complete list of all Leases, including any and all amendments or supplements thereto, and all information regarding the Leases which is included in such Exhibit D is accurate in all material respects. Except as may otherwise be expressly provided in the Leases, disclosed on Exhibit D or disclosed in the S-11, (i) no portion of the Property is occupied or used in any manner by any person or entity other than pursuant to the Leases; (ii) neither Transferor's interest in the Leases nor the rents payable thereunder are currently assigned, pledged or encumbered in any manner, except as collateral pursuant to the Security Instruments; (iii) the Leases are in full force and effect; (iv) no tenant under any of the Leases is in material default; (v) Transferor has not received notice from any tenant under any of the Leases of any alleged default or breach by Transferor under any such Leases and no such assertion has been made to Transferor by any tenant under any of the Leases, nor has any right to offset been exercised under any of the Leases; (vi) all obligations of the landlord required to be performed under the Leases have been fully performed and there are no agreements with any tenant under the Leases for the performance of any work by Transferor, which work has not been performed and/or paid for; (vii) no tenant has given Transferor notice of its intention to vacate its demised premises prior to the end of the term, of its lease; (viii) no tenant under any of the Leases is entitled to, nor has any tenant claimed to Transferor that it is entitled to, any purchase option, concession, allowance, set-off, rebate or refund or has prepaid rents or other charges for more than the current month; and (ix) all security deposits and letters of credit required under the Leases (collectively, the "Security Deposits") have been paid to and are being held by Transferor in compliance with the Leases and, to the best of Transferor's actual knowledge, applicable law. Attached hereto as Exhibit E is a true, correct and complete list of the Security Deposits.
(h) To the best of Transferor's actual knowledge, no Hazardous Materials (as hereinafter defined) are located on or about the Property, except (i) as may be described in the reports listed in or attached as Exhibit G hereto, (ii) as may be used in connection with the operation and maintenance of the Property in compliance with applicable law, and (iii) as may be brought onto the Property, sold by tenants of the Property or used by tenants of the Property in a manner customary with such tenant's business and in compliance with applicable law. In addition, Transferor has not used the Property for the storage, manufacture, treatment or disposal of Hazardous Materials. As used in this Contribution Agreement, "Hazardous Materials" shall mean and include all hazardous or toxic substances, wastes, or materials, any pollutants or contaminants (including, without limitation, asbestos and materials which include hazardous constituents), or any other similar substances or materials which are
included under or regulated by any local, state or federal laws, rules, orders and regulations pertaining to environmental regulation, or the use, processing, storage, disposal, generation or transportation of Hazardous Materials, or any contamination, cleanup or disclosure related thereto including, but not limited to, any "hazardous substances," "hazardous waste" and "hazardous materials," as defined in the Comprehensive Environmental Response Compensation and Liability Act of 1984, 42 U.S.C. Section 9601 et seq., as amended, the Resource Conservation and Recovery Act of 1976, as amended, and the Hazardous and Solid Waste Amendment of 1984, as amended, and the regulations adopted pursuant thereto.
(i) No bankruptcy, receivership, insolvency, rearrangement or similar action involving the Property, Transferor, whether voluntary or involuntary, is pending and Transferor has no present intention of filing any bankruptcy, insolvency, rearrangement or any similar action or proceeding.
(j) (i) All material consents, authorizations, variances, certificates of occupancy for occupied space, waivers, licenses, permits and approvals required for the occupancy, operation, maintenance and management of the Property (collectively, the "Approvals") have been validly obtained and are in full force and effect; and (ii) the Property is operated in accordance with all applicable zoning, land use, environmental, building code, fire code and other applicable laws and regulations, except where the failure to do so would not have a material adverse effect on Transferor, the Property or the Leases. Transferor has not received from any governmental authority written notice of any revocation, suspension or violation of any of the Approvals or violation of or non-compliance with any laws, ordinances, regulations or orders relating to the Property that have not been fully corrected and remedied, except as described in Exhibit F attached hereto.
(k) No governmental body has served upon Transferor or, to the best of Transferor's knowledge, any of the tenants under the Leases any notice (which notice remains, or relates to a proceeding which remains, pending) of any condemnation, annexation or eminent domain proceeding with respect to all or any portion of the Property. Transferor has no knowledge of any pending, threatened, proposed or contemplated proceeding of the type described in the immediately preceding sentence against the Property or any part thereof.
(l) All brokerage, service, equipment, supply, management or leasing agreements relating to the Property to which Transferor is a party (collectively, "Service Contracts") are identified on Exhibit H attached hereto. True and correct copies of the Service Contracts have been exhibited to Transferee. There are no brokerage, service, management, supply or other leasing commissions due or payable in connection with any of the Leases or any new or renewal leases or amendments of the Leases or any other agreements to which Transferor is subject, and there are no defaults by Transferor or the other parties to such contracts thereunder, except as set forth on Exhibit H.
(m) Exhibit I contains a correct and complete description of the insurance policies currently maintained by Transferor with respect to the Property. Transferor has not received any notices of non-renewal or cancellation of any such policies or notice of any
material increase in the cost of current insurance or of any defects or inadequacies which, if not corrected, would result in termination of any insurance coverage or a material increase in the cost thereof. Exhibit I also contains a correct and complete list of all insurance maintained by tenants under the Leases under which Transferor is a named insured.
(n) There is ingress and egress to and from the Property either by easement or direct access from a duly opened and dedicated public road. Transferor has no knowledge of any pending or threatened restriction or denial of such access, governmental or otherwise, and Transferor has no knowledge of any federal, state or local plans to change the highway or road system in the immediate vicinity of the Property in any manner which would have a material adverse effect on the Property.
(o) To the best of Transferor's actual knowledge, the Property and the present use and condition thereof do not violate any applicable easement, deed restrictions or other covenants, restrictions or agreements, in any manner which would have a material adverse effect on the Property. The Property and the present use and condition thereof do not violate any site plan approvals, zoning or subdivision regulations or urban redevelopment plans applicable to the Property, as modified by any duly issued variances, in any manner which would have a material adverse effect on the Property.
(p) Except for real and personal property taxes and assessments for the current year which are not yet due and payable, all real and personal property taxes and assessments relating to the Property have been paid. There are no special assessments affecting the Property and Transferor has no notice of any threatened special assessments affecting the Property or any contemplated improvements to the Property which may result in special assessments affecting the Property. Transferor has no notice of any proposed change in the assessed value of all or any portion of the Property.
(q) (i) The roofs of the buildings comprising the Improvements are water tight and free of leaks; (ii) the foundations of the buildings compromising the Improvements are free of defects; (iii) all mechanical systems, including air conditioning, plumbing, heating, ventilating, sewage, drainage and electrical systems are free of material defects and in good repair and condition, and are adequate to service the requirements of the Improvements and the Property; and (iv) the Improvements are free of any structural defect.
(r) Transferor is not in default under any of the Security Instruments, all required payments thereunder have been made, and the transfer of the Property as contemplated in this Contribution Agreement will not cause a default under any of the Security Instruments.
5. Assumption by Transferee. Transferee acknowledges and agrees that Transferee shall take title to the Property subject to and assume the obligations of Transferors in, to, under or with respect to the Leases, the Security Deposits and the Service Contracts which accrue from and after the Closing. In addition, Transferee shall take title to the Property subject to, and, if required, assume the obligations of Transferors under, the Security Instruments from and after the Closing. The foregoing shall be evidenced by such other documents as may be necessary or appropriate to implement the terms hereof.
6. The Closing.
(a) At Closing, Transferee shall execute such documents as may be necessary or appropriate to evidence the contribution of the Property to Transferee and the granting of the Partnership Interests.
(b) At Closing, Transferors shall execute, acknowledge and deliver to Transferee covenant or similar deeds or assignments of leasehold interest, as appropriate, an assignment of Transferors' interest as lessor in the Leases, a bill of sale and other documents necessary or appropriate to convey all of Transferors' right, title and interest in and to the Property and all of Transferors' interests therein to Transferee, in form and substance reasonably satisfactory to Transferee.
(c) Possession of the Property shall be delivered to Transferee immediately upon consummation of the Closing, subject to the rights of the tenants under the Leases.
(d) Transferors shall also deliver to Transferee at the Closing:
(i) the original or copies, as appropriate, of all licenses, permits, applications, and the like pertaining to the occupation and operation of the Property;
(ii) the originals or copies, as appropriate, of all guaranties or warranties relating to the Property or any part thereof;
(iii) the originals or copies, as appropriate, of all Leases (including all addenda, amendments and modifications thereto) and the Security Deposits and any guaranties relating to the Leases;
(iv) a certificate of insurance evidencing coverage in favor of Transferee and Agree Corp. for all insurance policies maintained by Transferors with respect to the Property as described in Exhibit I, together with copies of all such policies, all insurance certificates or other evidence in Transferors' possession of insurance or self-insurance maintained by tenants with respect to the Property for the benefit of Transferors, and Service Contracts;
(v) all plans, specifications, soil reports, drawings, surveys, parking covenants, common area maintenance agreements, reciprocal operating agreements, and all other agreements of any kind affecting the Property and all engineering, inspection and structural reports that were prepared for Transferors or are in Transferors' possession relating to the Property;
(vi) copies of all other documents, materials, books and records in Transferors' possession relating to the Property;
(vii) a written certificate in form reasonably satisfactory to Transferee certifying that each Transferor is not a person or entity subject to withholding under the
Foreign Investment in Real Property Tax Act and containing such Transferor's tax identification number and address;
(viii) to the extent the Property is subject to an existing lien which is to be paid following Closing as identified in the S-11, a pay-off letter dated not earlier than 30 days prior to the date of Closing indicating the total amount required to satisfy such lien as of the date of the letter and reflecting the additional amount for each day after the date of such letter necessary to satisfy all obligations secured by such lien together with the appropriate release of lien;
(ix) to the extent the Property is subject to an existing lien which is to be modified or otherwise to remain in place following Closing as identified in the S-ll, copies of all loan modification documents and consents to the transfer of the Property by the lender to the extent required by the Security Instruments affecting the Property;
(x) an owner policy of title insurance (the "Title Policy") issued as of the date of Closing or title commitment "marked-up" as of the date of closing by a title insurer reasonably acceptable to Transferee containing no exceptions to title except the Permitted Exceptions and such exceptions as Transferee has agreed to and with such endorsements as Transferors and Transferee may agree and insuring Transferee in the amount allocated to the Property by Transferors and Transferee.
(e) Transferee shall pay all recording and transfer taxes, closing costs, costs and fees for title examination and title insurance and endorsements, recording charges and attorneys' fees in connection with the Closing, except that Transferors shall pay any recording and transfer taxes, costs and fees for title examination and title insurance and endorsements, and recording charges to the extent the same exceed in the aggregate for all of the Portfolio Properties the amount of $500,000.
(f) Rents, interest, operating expense escalations, utility charges, real estate taxes, common area maintenance costs, merchants' association dues and promotion fees, if any, security charges and all other costs and expenses relating to the ownership, operation or maintenance of the Property shall be prorated or apportioned as set forth below or as otherwise set forth in the closing statement executed by Transferors and Transferee at Closing.
(i) Rents.
(a) Minimum Rents - Minimum rents for the month of closing shall be treated as received on the date due. The rent receivable, if any, on the date of closing shall belong to Transferors. Monthly rent shall be prorated on the actual number of days in the month of closing. Transferee shall receive a credit for the number of days from and including the day of transfer.
With respect to April 1994 rents paid in arrears (i.e., percentage rents paid in lieu of minimum rent), a post-closing adjustment will be made with a payment to Transferee for the pro rata portion of such rent to but not including the day of transfer.
(b) Percentage Rents - Percentage rents, except as set forth in (a) above, will be a post-closing adjustment to be made at the end of the lease year of each tenant paying percentage rents or from time to time as may otherwise be agreed by the parties. Transferee shall pay to Transferors the pro rata share of percentage rents for the lease year of the tenant using a 365 day year and the actual number of days to but not including the day of transfer.
(ii) Common Area Maintenance ("CAM")
CAM expense shall have an April 1, 1994 cutoff date. All CAM expense for work done prior to April 1, 1994 shall be paid by the Transferors. CAM expense for work done after April 1, 1994 shall be paid for by Transferee. Accounts receivable or collections made for CAM billings to tenants for work done prior to April 1, 1994 shall belong to Transferors. Collections made for CAM billings after April 1, 1994 shall be credited to Transferee.
(iii) Insurance - Property and casualty insurance has been paid in advance through October 31, 1994. The amount of premiums allocated to each project shall be pro rated for the period of coverage (November 1, 1993 - October 31, 1994) and Transferors shall receive a credit for the portion of the premium from and after the date of Closing.
Tenant reimbursements and accounts receivable for tenant reimbursements shall belong to Transferors. Transferee shall receive a credit for the pro rata portion of the tenant billing of the premium from and after the date of Closing to October 31, 1994.
(iv) Interest Expense.
(a) Transferors shall pay the interest to the day of payoff as set forth in the payoff statements for all loans being discharged following Closing. Transferors shall pay the interest on the Nationwide loans to the date of Closing directly to Nationwide.
(b) Bonds being paid off on May 1, 1994 with respect to the Real Property known as Grayling Plaza and Oscoda Plaza:
The applicable Transferors shall pay the interest on the bond through but not including the date of closing. Transferee shall pay the interest from and after the date of Closing until May 1, 1994 or the date the bonds are paid off.
The current amounts in the bond funds as of the date of Closing prior to any funding with respect to each bond shall be used to pay the applicable Transferor's share of the interest and the balance thereof shall belong to the applicable Transferor.
(c) AUL, Traveler's and Michigan National Bank with respect to the Real Property known as Perrysburg Plaza: interest shall be prorated to but not including the date of Closing.
(d) With respect to the Real Property known as North Lakeland Plaza: Transferee shall pay Michigan National Bank $1,570,000.00 in payment of the bridge loan from Michigan National Bank to Perrysburg Plaza used to pay down the Travelers loan prior to Closing. Perrysburg Plaza shall pay the interest on the bridge loan for the period from the date of paydown to the date of Closing
(v) Taxes
(a) Amounts collected by Transferors in advance will be credited to Transferee.
(b) Where Transferors have paid the tax and billed the tenants in arrears, Transferors will retain the account receivable.
(c) Short fall - Where the tenants have not reimbursed 100% of the tax, the net short fall shall be based on the 1993 net property tax expense amount. Transferee shall receive a credit using the net property tax expenses for 1993 and prorating over the calendar year 1994 to the day of closing. A post-closing adjustment based on 1994 actual expense will be made prior to April 30, 1995.
(g) Each Transferor shall execute and deliver to the title company that will be issuing an owner's title insurance policy to Transferee affidavits and indemnity agreements in the form customary in the jurisdiction in which the applicable Property is located certifying (i) the absence of claims which would give rise to mechanics' and materialmen's liens, (ii) that such Transferor and the tenants under the Leases are the only parties in possession of the Property, (iii) that there are no outstanding judgments against the Property, and (iv) such other matters as the title company may reasonably require. Transferors shall deliver to such title company such evidence as it may require with respect to the authority of the person executing the deeds of conveyance and assignments of leasehold interest.
7. Notices. Whenever any notice is required or permitted hereunder, such notice shall be in writing and either (i) sent by certified mail, postage prepaid, return receipt requested, or (ii) hand delivered, at the addresses set forth below:
As to Transferor: Addressed to the applicable
Transferor at:
31850 Northwestern Highway
Farmington Hills, MI 48334
As to Transferee:
Agree Limited Partnership
c/o Agree Realty Corporation
31850 Northwestern Highway
Farmington Hills, MI 48334
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Notices which are mailed shall be deemed effective upon deposit into the U.S. Postal Service. Notices which are hand-delivered (which shall include delivery by Federal Express or other overnight courier service) shall be deemed effective upon delivery.
8. Miscellaneous.
(a) The terms and conditions of this Contribution Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective heirs, successors, legal representatives and assigns.
(b) No amendment to this Contribution Agreement shall be binding on either of the parties to this Contribution Agreement unless such amendment is in writing and executed by each of the parties hereto.
(c) Except with respect to issues relating to the conveyance of the Property, which shall be governed by the laws of the jurisdiction in which the Property is located, this Contribution Agreement and all transactions hereunder shall be governed by the laws of the State of Michigan.
(d) Subject to the limitations set forth in that certain Indemnity Agreement among Richard Agree, Edward Rosenberg, Agree Realty Corp., Agree Limited Partnership and others dated as of April 22, 1994, all representations, warranties, covenants and indemnities contained in this Contribution Agreement shall survive the Closing for a period of one (1) year.
(e) If any term, covenant or condition of this Contribution Agreement is held to be invalid or unenforceable in any respect, such invalidity or unenforceability shall not affect any other provision hereof, and this Contribution Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein.
(f) The exhibits and schedules attached hereto are made a part hereof as if fully set forth herein.
(g) This Contribution Agreement may be executed in any number of counterparts, each of which counterpart shall be deemed an original, and all of which counterparts taken together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Contribution Agreement to be duly executed as of the date first above written.
WITNESS: TRANSFEROR:
By: /s/ Kenneth Howe
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Name: Kenneth Howe /s/ Richard Agree
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RICHARD AGREE
/s/ Edward Rosenberg
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EDWARD ROSENBERG
CAPITAL PLAZA SHOPPING CENTER
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
CHARLEVOIX COMMONS
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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CHIPPEWA COMMONS
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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GRAYLING PLAZA
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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IRON MOUNTAIN PLAZA
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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IRONWOOD COMMONS
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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MARSHALL PLAZA PHASE TWO
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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NORTH LAKELAND PLAZA
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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OSCODA PLAZA
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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PERRYSBURG PLAZA
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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PETOSKEY TOWN CENTER
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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PLYMOUTH COMMONS
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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RAPIDS ASSOCIATES
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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SHAWANO PLAZA
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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WEST FRANKFORT PLAZA
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
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WINTER GARDEN PLAZA
By: /s/ Richard Agree
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Name: Richard Agree, partner
By: /s/ Edward Rosenberg
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Name: Edward Rosenberg, partner
ATTEST: TRANSFEREE:
By: AGREE REALTY CORPORATION,
its General Partner
By: /s/ Kenneth Howe By: /s/ Richard Agree
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Name: Kenneth Howe Name: Richard Agree
Title: Secretary Title: President
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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT made this 22nd day of April, 1994, by and between AGREE REALTY CORPORATION, a Maryland corporation (the "Company"), and RICHARD AGREE (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is expected to make certain contributions to the financial strength of the Company;
WHEREAS, the Company desires to assure itself of the continuity of management and desires to establish certain compensation rights of certain of its key senior executive officers, including the Executive; and
WHEREAS, the Company desires to employ the Executive and the Executive desires to accept such employment on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto hereby agree as follows:
1. Employment; Term. The Company hereby employs the Executive as Chairman of the Board of Directors and President of the Company and the Executive agrees to serve the Company in such capacity for the period commencing the date hereof (the "Effective Date") and ending on the fifth anniversary of the Effective Date (the "Initial Term").
2. Termination. Subject to the terms and conditions set forth herein, the Executive's employment may be terminated by either party hereto upon thirty (30) days' written notice to the other party hereto.
3. Duties. The Executive shall be responsible for the supervision, control and conduct of all the business and affairs of the Company and shall have such additional duties and any additional responsibilities as are normally assigned to a Chief Executive Officer and President which may from time to time be reasonably designated by the Board of Directors of the Company (the "Board"), provided that in no event shall the scope of his duties and the extent of his responsibilities be substantially different from the duties and responsibilities usually associated with those positions in a corporation similar in size and function to the Company. At all times, the Executive shall be subject to the direction of the Board. During the period the Executive is employed by the Company (the "Employment Period"), the Executive shall devote his full business time and best efforts to the business and affairs of the Company and its subsidiaries, except for any business activities rendered by the Executive in connection with the partnerships listed on Schedule A.
4. Compensation. The Company shall pay the Executive a salary at the rate of one hundred thousand dollars ($100,000.00) per annum during the Employment Period, subject to the last sentence of this Section 4. Such compensation shall be payable in accordance with the usual payroll practices of the Company, as compensation to the Executive for the services rendered by the Executive hereunder, including, but not limited to, all services rendered by the Executive as an officer or director of the Company and its subsidiaries. The Board shall review the Executive's salary immediately prior to the end of each fiscal year during the Employment Period to determine whether the Executive's salary shall be increased based on such criteria as the Board or any committee thereof shall from time to
time establish (for purposes of this Employment Agreement, the term "salary" shall mean the amount established and adjusted from time to time pursuant to this Section 4).
5. Benefits.
(a) The Company agrees to reimburse the Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred by the Executive in connection with the performance of his duties under this Employment Agreement. Such reimbursements shall be made by the Company on a timely basis upon submission by the Executive of vouchers, in accordance with the Company's standard procedures. All such reimbursements shall be subject to limitations which may from time to time be prescribed by the Board.
(b) The Executive shall be entitled to participate in any and all life insurance, medical insurance, group health, disability insurance, and other benefit plans which are made generally available during the Employment Period by the Company to executives of the Company, including, but not limited to, the Company's Stock Incentive Plan, Profit Sharing Plan and Performance Bonus Plan (to the extent that the Executive qualifies under the eligibility provisions of such plan or plans). Additionally, the Executive shall be entitled to receive annual paid vacation and paid holidays made available pursuant to Company policy to all of the senior executives of the Company.
(c) In the event of the death or disability of the Executive, the Executive's employment hereunder shall terminate and in addition to any amounts payable at such time and in accordance with the terms of Paragraph 4 hereof (appropriately pro-rated), the Company shall, for the longer of (i) the remainder of the calendar year in which the
Executive dies or becomes disabled or (ii) six (6) months, but in no event longer than the remainder of the Initial Term, pay to the Executive or the Executive's personal representative, as the case may be, the Executive's salary at the date of such death or disability. For the purposes hereof, the term "disability" shall mean the absence of the Executive, due to physical or mental illness, on a full-time basis for one hundred twenty (120) consecutive business days or for shorter periods which aggregate more than four months during any consecutive twelve (12) month period.
(d) In the event the employment of the Executive is terminated by the Company for any reason other than for cause (as defined below), the Executive shall be entitled to all amounts payable during the Initial Term (including, but not limited to, salary at the then applicable rate) within ten (10) days of such termination and the Executive shall have the right to continue to participate in all benefits plans made generally available by the Company to its executives during the Initial Term. For purposes of this Section 5(d) the term "cause" shall mean: (i) the Executive's willful failure or refusal to perform specific reasonable written directives of the Board, which directives are consistent with the scope and nature of the Executive's duties and responsibilities under this Employment Agreement, and which are not remedied by the Executive within sixty (60) days after being notified, in writing, of his failure by the Board; (ii) the Executive's conviction of a felony; (iii) any act of dishonesty involving the Company which results in an unjust gain or enrichment to the Executive at the expense of the Company; (iv) any act involving moral turpitude of the Executive which adversely affects the business of the Company; or (v) a material breach by the Executive of his obligations under Section 6 hereof.
(e) In the event this Employment Agreement is terminated by the Company for "cause," the Executive shall forfeit his right to any and all benefits (other than any previously vested benefits, including, without limitation, the Executive's salary through the date of termination) which the Executive would otherwise have been entitled to receive pursuant to the terms of this Employment Agreement.
6. Non-Competition. The Executive agrees that (a) at all times during the Initial Term, if the Executive is terminated for "cause" or voluntarily terminates his employment hereunder and (b) at all times during the Employment Period, the Executive shall not engage in any business which is competitive with the then current business of the Company or any of its subsidiaries. For the purposes of this Paragraph 6, a business shall be deemed competitive if it consists of or includes any type or line of business engaged in by the Company or any of its subsidiaries at the time of such termination and which is conducted, in whole or in part, within those states where the Company then conducts business. The Executive shall be deemed, directly or indirectly, to engage in a business if he participates in such business as a director, officer, stockholder, employee, salesman, partner or individual proprietor, or if he participates in such business as an investor who has made advances on loan, contributions to capital or expenditures for the purchase of stock, permits his name to be used by, acts as a paid consultant or paid advisor to, or if the Executive exerts a controlling influence over such business, provided that nothing herein contained shall be deemed to preclude the purchase of securities of publicly owned companies which securities are listed on a national securities exchange, but the total holding of any such securities so listed shall be limited to five percent (5%) of the amount of such securities outstanding.
7. Confidentiality. The Executive shall not at any time use or divulge, furnish or make accessible to anyone (other than in the regular course of the business of the Company or any of its subsidiaries) any knowledge or information of trade secrets and proprietary information which has not otherwise become publicly available (including, but not limited to, any information concerning customers or accounts) with respect to the business affairs of the Company or any of its subsidiaries.
8. Notices. All notices relating to this Employment Agreement shall be in writing and shall be deemed to have been given at the time when delivered personally or sent in the United States by registered or certified mail, return receipt requested, in a postpaid envelope, addressed to the other party at the address set forth below, or to such changed address as the other party may have fixed by notice; provided, however, that any notice of change of address shall be effective only upon receipt:
To the Company: 31850 Northwestern Highway
Farmington Hills, Michigan 48334
-copy to-
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, New York 10022
Attn: David P. Levin
To the Executive: 2455 Wendrick Court
West Bloomfield, Michigan 48322
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9. Assignability, Binding Effect and Survival. This Employment Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, including without limitation any corporation which may acquire all or substantially all of the Company's assets and business or with or into which the Company may be
consolidated or merged, and shall inure to the benefit of and be binding upon the Executive, his heirs, executors, administrators and legal representatives, provided that the obligations of the Executive hereunder may not be delegated.
10. Complete Understanding; Amendment; Waiver. This Employment Agreement constitutes the complete understanding between the parties with respect to the employment of the Executive hereunder, and no statement, representation, warranty or covenant has been made by either party with respect thereto except as expressly set forth herein. This Employment Agreement shall not be altered, modified, amended or terminated except by written instrument signed by each of the parties hereto. Waiver by either party hereto of any breach hereunder by the other party shall not operate as a waiver of any other breach, whether similar to or different from the breach waived. No delay on the part of the Company or the Executive in the exercise of any of their respective rights or remedies shall operate as a waiver thereof, and no single or partial exercise by the Company or the Executive of any such right or remedy shall preclude other or further exercise thereof.
11. Severability. If any provision of this Employment Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Employment Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law.
12. Governing Law. This Employment Agreement shall be governed and construed in accordance with the internal laws of the State of Michigan without regard to conflict of laws provisions.
13. Indemnification. The Company shall indemnify the Executive against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees actually and necessarily incurred, in any action or proceeding to which the Executive is made a party by reason of the fact that he is or was an officer or director of the Company, to the fullest extent permitted by law, the By-laws of the Company and the Articles of Incorporation of the Company.
14. Counterparts. This Employment Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all parties hereto.
15. Titles and Captions. All paragraph, article or section titles or captions in this Employment Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any provisions hereof.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this Employment Agreement as of the date first above written.
AGREE REALTY CORPORATION
By: /s/ Richard Agree
-----------------------------
Name: Richard Agree
Title: President
/s/ Richard Agree
-----------------------------
Richard Agree
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EXHIBIT 10.12
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT made this 22nd day of April, 1994, by and between AGREE REALTY CORPORATION, a Maryland corporation (the "Company"), and EDWARD ROSENBERG (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is expected to make certain contributions to the financial strength of the Company;
WHEREAS, the Company desires to assure itself of the continuity of management and desires to establish certain compensation rights of certain of its key senior executive officers, including the Executive; and
WHEREAS, the Company desires to employ the Executive and the Executive desires to accept such employment on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto hereby agree as follows:
1. Employment; Term. The Company hereby employs the Executive as Senior Vice President of the Company and the Executive agrees to serve the Company in such capacity for the period commencing the date hereof (the "Effective Date") and ending on the third anniversary of the Effective Date (the "Initial Term").
2. Termination. Subject to the terms and conditions set forth herein, the Executive's employment may be terminated by either party hereto upon thirty (30) days' written notice to the other party hereto.
3. Duties. The Executive shall be responsible for the supervision, control and conduct of all the business and affairs of the Company and shall have such additional duties and any additional responsibilities as are normally assigned to a Senior Vice President which may from time to time be reasonably designated by the Board of Directors of the Company (the "Board"), provided that in no event shall the scope of his duties and the extent of his responsibilities be substantially different from the duties and responsibilities usually associated with those positions in a corporation similar in size and function to the Company. At all times, the Executive shall be subject to the direction of the Board. During the period the Executive is employed by the Company (the "Employment Period"), the Executive shall devote his full business time and best efforts to the business and affairs of the Company and its subsidiaries, except for any business activities rendered by the Executive in connection with the partnerships listed on Schedule A.
4. Compensation. The Company shall pay the Executive a salary at the rate of seventy five thousand dollars ($75,000.00) per annum during the Employment Period, subject to the last sentence of this Section 4. Such compensation shall be payable in accordance with the usual payroll practices of the Company, as compensation to the Executive for the services rendered by the Executive hereunder, including, but not limited to, all services rendered by the Executive as an officer or director of the Company and its subsidiaries. The Board shall review the Executive's salary immediately prior to the end of each fiscal year during the Employment Period to determine whether the Executive's salary shall be increased
based on such criteria as the Board or any committee thereof shall from time to time establish (for purposes of this Employment Agreement, the term "salary" shall mean the amount established and adjusted from time to time pursuant to this Section 4).
5. Benefits.
(a) The Company agrees to reimburse the Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred by the Executive in connection with the performance of his duties under this Employment Agreement. Such reimbursements shall be made by the Company on a timely basis upon submission by the Executive of vouchers, in accordance with the Company's standard procedures. All such reimbursements shall be subject to limitations which may from time to time be prescribed by the Board.
(b) The Executive shall be entitled to participate in any and all life insurance, medical insurance, group health, disability insurance, and other benefit plans which are made generally available during the Employment Period by the Company to executives of the Company, including, but not limited to, the Company's Stock Incentive Plan, Profit Sharing Plan and Performance Bonus Plan (to the extent that the Executive qualifies under the eligibility provisions of such plan or plans). Additionally, the Executive shall be entitled to receive annual paid vacation and paid holidays made available pursuant to Company policy to all of the senior executives of the Company.
(c) In the event of the death or disability of the Executive, the Executive's employment hereunder shall terminate and in addition to any amounts payable at such time and in accordance with the terms of Paragraph 4 hereof (appropriately pro-rated),
the Company shall, for the longer of (i) the remainder of the calendar year in which the Executive dies or becomes disabled or (ii) six (6) months, but in no event longer than the remainder of the Initial Term, pay to the Executive or the Executive's personal representative, as the case may be, the Executive's salary at the date of such death or disability. For the purposes hereof, the term "disability" shall mean the absence of the Executive, due to physical or mental illness, on a full-time basis for one hundred twenty (120) consecutive business days or for shorter periods which aggregate more than four months during any consecutive twelve (12) month period.
(d) In the event the employment of the Executive is terminated by the Company for any reason other than for cause (as defined below), the Executive shall be entitled to all amounts payable during the Initial Term (including, but not limited to, salary at the then applicable rate) within ten (10) days of such termination and the Executive shall have the right to continue to participate in all benefits plans made generally available by the Company to its executives during the Initial Term. For purposes of this Section 5(d) the term "cause" shall mean: (i) the Executive's willful failure or refusal to perform specific reasonable written directives of the Board, which directives are consistent with the scope and nature of the Executive's duties and responsibilities under this Employment Agreement, and which are not remedied by the Executive within sixty (60) days after being notified, in writing, of his failure by the Board; (ii) the Executive's conviction of a felony; (iii) any act of dishonesty involving the Company which results in an unjust gain or enrichment to the Executive at the expense of the Company; (iv) any act involving moral turpitude of the Executive which adversely affects the business of the Company; or (v) a material breach by the Executive of his obligations under Section 6 hereof.
(e) In the event this Employment Agreement is terminated by the Company for "cause," the Executive shall forfeit his right to any and all benefits (other than any previously vested benefits, including, without limitation, the Executive's salary through the date of termination) which the Executive would otherwise have been entitled to receive pursuant to the terms of this Employment Agreement.
6. Non-Competition. The Executive agrees that (a) at all times during the Initial Term, if the Executive is terminated for "cause" or voluntarily terminates his employment hereunder and (b) at all times during the Employment Period, the Executive shall not engage in any business which is competitive with the then current business of the Company or any of its subsidiaries. For the purposes of this Paragraph 6, a business shall be deemed competitive if it consists of or includes any type or line of business engaged in by the Company or any of its subsidiaries at the time of such termination and which is conducted, in whole or in part, within those states where the Company then conducts business. The Executive shall be deemed, directly or indirectly, to engage in a business if he participates in such business as a director, officer, stockholder, employee, salesman, partner or individual proprietor, or if he participates in such business as an investor who has made advances on loan, contributions to capital or expenditures for the purchase of stock, permits his name to be used by, acts as a paid consultant or paid advisor to, or if the Executive exerts a controlling influence over such business, provided that nothing herein contained shall be deemed to preclude the purchase of securities of publicly owned companies which securities are listed on a national securities exchange, but the total holding of any such securities so listed shall be limited to five percent (5%) of the amount of such securities outstanding.
7. Confidentiality. The Executive shall not at any time use or divulge, furnish or make accessible to anyone (other than in the regular course of the business of the Company or any of its subsidiaries) any knowledge or information of trade secrets and proprietary information which has not otherwise become publicly available (including, but not limited to, any information concerning customers or accounts) with respect to the business affairs of the Company or any of its subsidiaries.
8. Notices. All notices relating to this Employment Agreement shall be in writing and shall be deemed to have been given at the time when delivered personally or sent in the United States by registered or certified mail, return receipt requested, in a postpaid envelope, addressed to the other party at the address set forth below, or to such changed address as the other party may have fixed by notice; provided, however, that any notice of change of address shall be effective only upon receipt:
To the Company: 31850 Northwestern Highway
Farmington Hills, Michigan 48334
-copy to-
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, New York 10022
Attn: David P. Levin
To the Executive: 6986 Pebble Creek Woods
West Bloomfield, Michigan 48033
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9. Assignability, Binding Effect and Survival. This Employment Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, including without limitation any corporation which may acquire all or substantially all of the Company's assets and business or with or into which the Company may be
consolidated or merged, and shall inure to the benefit of and be binding upon the Executive, his heirs, executors, administrators and legal representatives, provided that the obligations of the Executive hereunder may not be delegated.
10. Complete Understanding; Amendment; Waiver. This Employment Agreement constitutes the complete understanding between the parties with respect to the employment of the Executive hereunder, and no statement, representation, warranty or covenant has been made by either party with respect thereto except as expressly set forth herein. This Employment Agreement shall not be altered, modified, amended or terminated except by written instrument signed by each of the parties hereto. Waiver by either party hereto of any breach hereunder by the other party shall not operate as a waiver of any other breach, whether similar to or different from the breach waived. No delay on the part of the Company or the Executive in the exercise of any of their respective rights or remedies shall operate as a waiver thereof, and no single or partial exercise by the Company or the Executive of any such right or remedy shall preclude other or further exercise thereof.
11. Severability. If any provision of this Employment Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Employment Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law.
12. Governing Law. This Employment Agreement shall be governed and construed in accordance with the internal laws of the State of Michigan without regard to conflict of laws provisions.
13. Indemnification. The Company shall indemnify the Executive against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees actually and necessarily incurred, in any action or proceeding to which the Executive is made a party by reason of the fact that he is or was an officer or director of the Company, to the fullest extent permitted by law, the By-laws of the Company and the Articles of Incorporation of the Company.
14. Counterparts. This Employment Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all parties hereto.
15. Titles and Captions. All paragraph, article or section titles or captions in this Employment Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any provisions hereof.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this Employment Agreement as of the date first above written.
AGREE REALTY CORPORATION
By: /s/ Richard Agree
----------------------------
Name: Richard Agree
Title: President
/s/ Edward Rosenberg
----------------------------
Edward Rosenberg
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EXHIBIT 10.13
AGREE REALTY CORPORATION PROFIT-SHARING PLAN
Effective April 22, 1994
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS
1.1 Account.............................................. I-1
1.2 Administrator........................................ I-1
1.3 Affiliate............................................ I-1
1.4 Appropriate Form..................................... I-2
1.5 Beneficiary.......................................... I-2
1.6 Board of Directors................................... I-2
1.7 Break in Service..................................... I-2
1.8 Company.............................................. I-3
1.9 Compensation......................................... I-3
1.10 Date of Hire......................................... I-4
1.11 Disability........................................... I-4
1.12 Eligible Employee.................................... I-4
1.13 Employee............................................. I-4
1.14 Employer............................................. I-4
1.15 Entry Date........................................... I-5
1.16 Fund................................................. I-5
1.17 Hour of Service...................................... I-5
1.18 Investment Adjustments............................... I-5
1.19 Investment Fund...................................... I-5
1.20 Member............................................... I-5
1.21 Normal Retirement Date............................... I-5
1.22 Plan................................................. I-5
1.23 Plan Year............................................ I-6
1.24 Reemployment Date.................................... I-6
1.25 Service.............................................. I-6
1.26 Severance Date....................................... I-6
1.27 Severance Period..................................... I-7
1.28 Spouse............................................... I-7
1.29 Spousal Consent...................................... I-7
1.30 Termination of Employment............................ I-8
1.31 Trust Agreement...................................... I-8
1.32 Trustee.............................................. I-8
1.33 Valuation Date....................................... I-8
1.34 Vested Percentage.................................... I-9
1.35 Year of Service...................................... I-9
1
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Page
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ARTICLE II MEMBERSHIP
2.1 In General........................................... II-1
2.2 Transfers............................................ II-2
2.3 Reemployment......................................... II-3
ARTICLE III CONTRIBUTIONS
3.1 Source of Contributions.............................. III-1
3.2 Amount of Contributions.............................. III-1
3.3 Contributions Conditional............................ III-1
3.4 Maximum Limitation................................... III-1
3.5 Application.......................................... III-3
3.6 Limitation Year...................................... III-5
ARTICLE IV ACCOUNTS
4.1 Account.............................................. IV-1
4.2 Eligibility to Share in
Contributions and Forfeitures...................... IV-1
4.3 Allocation of Contributions and
Forfeitures........................................ IV-1
4.4 Investment of Account Balances....................... IV-1
4.5 Designation of Investment Funds
for Future Contributions........................... IV-2
4.6 Designation of Investment Funds
for Existing Account Balances...................... IV-2
4.7 Valuation of Investment Funds........................ IV-3
4.8 Correction of Error.................................. IV-3
4.9 Allocation Shall Not Vest Title...................... IV-4
4.10 Statement of Accounts................................ IV-4
ARTICLE V VESTING AND DISTRIBUTION OF BENEFITS
5.1 Vesting.............................................. V-1
5.2 Distribution on Termination of
Employment......................................... V-2
5.3 Payment of Benefits in General....................... V-2
5.4 Forfeitures.......................................... V-3
5.5 Payment of Death Benefits............................ V-4
5.6 Distribution at Age 70-1/2........................... V-7
5.7 Delay of Payment..................................... V-7
5.8 Qualified Domestic Relations Orders.................. V-8
5.9 Direct Rollover of Eligible
Rollover Distributions............................. V-10
ARTICLE VI ADMINISTRATION OF THE PLAN
6.1 Fiduciary............................................ VI-1
6.2 The Administrator.................................... VI-1
6.3 Advisers............................................. VI-3
2
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Page
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6.4 Service in Multiple Capacities....................... VI-3
6.5 Limitation of Liability; Indemnity................... VI-3
6.6 Reliance on Information.............................. VI-4
6.7 Funding Policy....................................... VI-5
6.8 Proper Proof......................................... VI-5
6.9 Genuineness of Documents............................. VI-5
ARTICLE VII THE TRUST AGREEMENT
7.1 The Trust Agreement.................................. VII-1
7.2 Rights of the Company................................ VII-1
7.3 Duties and Responsibilities of
the Trustee........................................ VII-2
7.4 Company as Agent..................................... VII-2
ARTICLE VIII AMENDMENT
8.1 Right of the Company to Amend
the Plan........................................... VIII-1
8.2 Plan Merger.......................................... VIII-1
8.3 Amendments Required by Law........................... VIII-1
ARTICLE IX DISCONTINUANCE OF CONTRIBUTIONS
AND TERMINATION OF THE PLAN
9.1 Right to Terminate the Plan or
Discontinue Contributions.......................... IX-1
9.2 Manner of Termination................................ IX-1
9.3 Effect of Termination................................ IX-1
9.4 Distribution of the Fund............................. IX-2
9.5 Expenses of Termination.............................. IX-2
ARTICLE X MISCELLANEOUS PROVISIONS
10.1 Plan Not a Contract of
Employment......................................... X-1
10.2 Source of Benefits................................... X-1
10.3 Spendthrift Clause................................... X-1
10.4 Merger............................................... X-2
10.5 Claims Procedure..................................... X-2
10.6 Inability to Locate Distributee...................... X-2
10.7 Payment to a Minor or
Incompetent........................................ X-3
10.8 Doubt as to Right to Payment......................... X-4
10.9 Estoppel of Members and
Beneficiaries...................................... X-4
10.10 Separability......................................... X-5
10.11 Captions............................................. X-5
10.12 Usage................................................ X-6
3
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Page
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ARTICLE XI LEASED EMPLOYEES
11.1 Definitions.......................................... XI-1
11.2 Treatment of Leased Employees........................ XI-1
11.3 Exception for Employees Covered
by Plans of Leasing Organization................... XI-2
11.4 Construction......................................... XI-2
ARTICLE XII "TOP-HEAVY" PROVISIONS
12.1 Determination of "Top-Heavy"
Status............................................. XII-1
12.2 Provisions Applicable in
"Top-Heavy" Years.................................. XII-5
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AGREE REALTY CORPORATION PROFIT-SHARING PLAN
ARTICLE I
Definitions
1.1 Account. An Account maintained for a Member pursuant to Section 4.1.
1.2 Administrator. The Administrator appointed by the Board of Directors to administer the Plan pursuant to Article VIII.
1.3 Affiliate.
1.3.1 Controlled Group Affiliate. Any corporation or other trade or business (other than an Employer) which, at the time of reference, controls, is controlled by or under common control with an Employer within the meaning of section 414(b) or 414(c) of the Code, including any division of an Employer not participating in the Plan; provided, however, that for purposes of Sections 3.4 and 3.5, the provisions of section 415(h) of the Code shall also apply.
1.3.2 Affiliated Service Groups, etc. Any (a) member of an affiliated service group, within the meaning of section 414(m) of the Code, that includes an Employer, or (b) organization aggregated with an Employer pursuant to section 414(o) of the Code, to the extent and for the purposes required by such sections and the regulations thereunder (e.g., for purposes of Articles XI and XII).
1.4 Appropriate Form. The form or other means of communication prescribed by the Administrator for a particular purpose specified in the Plan.
1.5 Beneficiary. A person or persons entitled pursuant to the Plan to receive any benefits payable upon or after the death of a Member.
1.6 Board of Directors. The Board of Directors of the Company.
1.7 Break in Service. A Severance Period of not less than twelve (12) consecutive months. The first 12-consec-utive-month period after a Severance Date in the case of an absence from work for maternity or paternity reasons shall not be included in a Break in Service. For purposes of this Section 1.8, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the individual, (b) by reason of the birth of a child of the individual, (c) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement.
1.8 Company. Agree Realty Corporation, a Maryland corporation.
1.9 Compensation. Gross annual cash compensation paid by an Employer in any Year to an Eligible Employee while he is a Member of the Plan. Compensation shall be determined before giving effect to any salary reduction agreement pursuant to any cash or deferred arrangement described in section 401(k) of the Code or any cafeteria
plan within the meaning of section 125 of the Code. Compensation shall not include any expense reimbursements or allowances. Compensation taken into account under the Plan for any Plan Year shall not exceed $150,000 as adjusted from time to time in accordance with section 401(a)(17) of the Code. In determining the Compensation of a Member for purposes of this limitation, the family aggregation rules of section 414(q)(6) of the Code shall apply, except that in applying such rules, the term "family" shall include only the spouse of the Member and any lineal descendants of the Member who have not attained age 19 before the close of the year. If, as a result of the application of such rules, the limitation is exceeded, then (except as may be otherwise required under applicable regulations), the limitation shall be prorated among the affected individuals on the basis of each such individual's Compensation determined under this Section 1.9 prior to the application of the limitation.
1.10 Date of Hire. The date on which an Employee first completes an Hour of Service.
1.11 Disability. A physical or mental condition which would, upon proper application, entitle the Member to disability benefits under the Social Security Act.
1.12 Eligible Employee. Any person employed by the Company or by any other Employer, subject to such terms and conditions as may apply to such other Employer pursuant to Section 1.12; but excluding in each case any employee who is employed primarily to render services within the jurisdiction of a union and whose compensation, hours of work, or conditions of employment are determined by collective bargaining with such union, unless the applicable collective bargaining agreement expressly provides that
such employee shall be eligible to participate in this Plan, in which event, however, he shall be entitled to participate in this Plan only to the extent and on the terms and conditions specified in such collective bargaining agreement.
1.13 Employee. An individual who is an employee of an Employer or Affiliate.
1.14 Employer. The Company and any subsidiary or affiliate of the Company which has adopted the Plan with the approval of the Company, subject to such terms and conditions as may be imposed by the Company upon the participation in the Plan of such adopting Employer.
1.15 Entry Date. April 22, 1994 and each subsequent January 1 and July 1.
1.16 Fund. The Fund created by the Trust Agreement pursuant to Section 9.1.
1.17 Hour of Service. An hour for which an Employee is paid or entitled to payment for the performance of services for an Employer or Affiliate.
1.18 Investment Adjustments. The net realized and unrealized gains, losses, income and expenses attributable to a Member's Account as a result of its investment in one or more Investment Funds.
1.19 Investment Fund. A portion of the Fund which is separately invested as provided in Section 4.4.
1.20 Member. Every individual who shall have become a Member pursuant to Article II hereof and who has an Account under the Plan holding an undistributed balance.
1.21 Normal Retirement Date. The 65th anniversary of a Member's date of birth.
1.22 Plan. The Agree Realty Corporation Profit-Sharing Plan, as from time to time in effect.
1.23 Plan Year. The 12-month period beginning each January 1.
1.24 Reemployment Date. The date on which an Employee first completes an Hour of Service after a Severance Date.
1.25 Service. The aggregate of the following:
1.25.1 Each period from an Employee's Date of Hire (or Reemployment Date) to the Employee's next Severance Date; and
1.25.2 If an Employee has a Reemployment Date within twelve (12) months of a Severance Date, the period from such Severance Date to such Reemployment Date; and
1.25.3 In the case of an Employee who leaves employment to enter service with the armed forces of the United States, the period of such military service, provided that the Employee resumes employment with the Employer or Affiliate within the period during which reemployment rights are protected by applicable law.
1.26 Severance Date. The earliest of:
1.26.1 The date on which an Employee quits, retires,
is discharged or dies;
1.26.2 The first anniversary of the first date of a
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period in which an Employee remains absent from service with an Employer or Affiliate (with or without pay) for any reason (such as vacation, holiday, sickness, disability or layoff) other than resignation, retirement, discharge, death or approved leave of absence; or
1.26.3 The date on which an approved leave of absence without pay began if the Employee fails to return to active employment upon the expiration of such leave.
1.27 Severance Period. Each period from a Severance Date to the next Reemployment Date.
1.28 Spouse. The individual to whom a Member is legally married.
1.29 Spousal Consent. Written consent by a Member's Spouse to an election, beneficiary designation or similar action by the Member. A Spousal Consent shall be ineffective unless it acknowledges the effect of such election, beneficiary designation or
action and is witnessed by a notary public and, with respect to Spousal Consent pertaining to a beneficiary designation, unless such designation specifically identifies the Member's beneficiaries (and alternate beneficiaries, if any) by name or class. If the Administrator is satisfied that such Spousal Consent cannot be obtained because there is no Spouse, because the Spouse cannot be located, because the Member can show by court order that the Spouse has abandoned the Member, or because of other circumstances which may be permitted under applicable law, Spousal Consent shall be deemed to have been given. Any consent or deemed consent with respect to a Spouse which satisfies the foregoing requirements shall be effective only with respect to the Spouse by whom given (or deemed to be given), and may not be revoked by such Spouse with respect to the election, beneficiary designation or other action to which such consent pertains.
1.30 Termination of Employment. A Member's employment shall be treated as terminated when he incurs a Severance Date.
1.31 Trust Agreement. The agreement by and between the Company and the Trustee under which this Plan is funded, as from time to time amended.
1.32 Trustee. The trustee or trustees from time to time designated under the Trust Agreement.
1.33 Valuation Date. The last day of each calendar quarter, and any other date as of which the Administrator determines in his sole discretion that a valuation and adjustment of Accounts is necessary or desirable; provided, that if any portion of an Account is invested in shares of a mutual fund for which the mutual fund sponsor determines a daily
value, the Valuation Date for such portion in the event of a distribution shall be the date as of which the mutual fund sponsor values the shares to be surrendered in respect of such distribution, the Valuation Date in the event of a forfeiture shall be the date as of which the forfeiture occurs, and the Valuation Date for purposes of allocating the Investment Adjustment pursuant to Section 4.7 shall be each day for which the mutual fund sponsor determines a value for such shares.
1.34 Vested Percentage. The percentage of a Member's Account which is nonforfeitable.
1.35 Year of Service. Three hundred sixty-five (365) days of Service.
ARTICLE II
Membership
2.1 In General. An Eligible Employee who has not previously become a Member shall become a Member on the first Entry Date coincident with or next following the later of his reaching age 21 or his completing one Year of Service, provided he is then an Eligible Employee.
2.2 Transfers.
2.2.1 Transfer to Eligible Employment. An Employee who transfers to employment as an Eligible Employee from employment as other than an Eligible Employee shall become a Member on the later of the date of such transfer or the first Entry Date on which he satisfies the requirements of Section 2.1.
2.2.2 Transfer to Affiliate or Ineligible Employment. If a Member transfers to employment as other than an Eligible Employee with an Affiliate or Employer, he shall not be deemed to have thereby terminated employment. Subject to Section 4.2, such a Member shall be eligible to share in the contribution and forfeitures under the Plan for the Plan Year of such transfer, but he shall not be eligible to share in contributions or forfeitures for subsequent Plan Years unless and until he returns to employment as an Eligible Employee.
2.2.3 Eligibility to Share in Contributions and Forfeitures. Notwithstanding any other provision of this Plan, a Member shall be eligible to share in contributions and forfeitures under the Plan only with respect to Compensation paid
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by an Employer for service as an Eligible Employee (as distinguished from service for any Affiliate or for an Employer in a position other than as an Eligible Employee).
2.3 Reemployment. If a Member whose Vested Percentage is zero terminates employment and is subsequently rehired as an Eligible Employee after a Break in Service of five or more years, he shall upon rehire be treated as a new Employee for all purposes of this Plan. In all other cases, a Member who terminates employment and is subsequently rehired as an Eligible Employee shall resume membership in this Plan immediately upon rehire.
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ARTICLE III
Contributions
3.1 Source of Contributions. All contributions to the Fund shall be made by the Employers. There shall be no contributions by Members. The Company may, in its discretion, make the contribution to the Fund required of any other Employer hereunder, as agent for such Employer.
3.2 Amount of Contributions. For each Plan Year that the Plan is in effect, each Employer shall contribute to the Fund such amount (if any) as the board of directors of such Employer shall determine in its sole discretion, subject to the limitations set forth in sections 404 and 415 of the Code. Such amounts shall be transferred by each Employer to the Trustee in cash no later than the due date (including extensions) for filing the Employer's federal income tax return for such Year.
3.3 Contributions Conditional. Notwithstanding any other provisions of the Plan or the Trust Agreement, all contributions under the Plan are conditioned on the deductibility of such contributions under section 404(a) of the Code for the taxable year for which contributed, and on initial qualification of the Plan under section 401(a) of the Code.
3.4 Maximum Limitation.
3.4.1 Annual Addition. For purposes of this
Section 3.4, "Annual Addition" means the sum for any Plan Year of (a)
employer contributions and forfeitures allocable to a Member under
all plans (or portions thereof) subject to
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section 415(c) of the Code maintained by an Employer or an Affiliate,
(b) the Member's employee contributions under all such plans (or
portions thereof), and (c) amounts described in section 419A(d)(2) of
the Code (relating to post-retirement medical benefits of key
employees) or allocated to a pension plan individual medical account
described in section 415(1) of the Code to the extent includible for
purposes of section 415(c)(2) of the Code. The employee contributions
described in clause (b) shall be determined without regard to (i) any
rollover contributions, (ii) any repayments of loans, or (iii) any
prior distributions repaid upon the exercise of buyback rights.
Employer and employee contributions taken into account as Annual
Additions shall include "excess contributions" as defined in section
401(k)(8)(B) of the Code, "excess aggregate contributions" as defined
in section 401(m)(6)(B) of the Code, and "excess deferrals" as
described in section 402(g) of the Code (to the extent such "excess
deferrals" are not distributed to the Member before the end of his
taxable year in which they were made), regardless of whether such
amounts are distributed or forfeited.
3.4.2 Earnings. "Earnings" for any Plan Year means compensation (as defined in Section 415(c)(3) of the Code) actually paid or made available by all Employers and Affiliates, but determined after giving effect to any salary reduction agreement under any cash or deferred arrangement within the meaning of section 401(k) of the Code or to any similar reduction agreement pursuant to any cafeteria plan within the meaning of section 125 of the Code.
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3.4.3 Limitation on Annual Additions. The aggregate Annual Addition in respect of any Member, to this Plan and all other defined contribution plans maintained by all Employers and Affiliates for any Plan Year, shall not exceed the lesser of (a) $30,000 (or, if greater, 25 percent of the amount in effect under section 415(b)(1)(A) of the Code pursuant to applicable regulations), or (b) 25 percent of the Member's Earnings for such Year.
3.4.4 Coverage by Defined Benefit Plan. If a Member
has at any time been covered by a defined benefit plan maintained by
an Employer or an Affiliate, the limitations set forth in this
Section 3.4 shall be further reduced if and to the extent necessary
to comply with section 415(e) of the Code.
3.5 Application. If the allocations to a Member's Account otherwise required under this Plan for any Plan Year would cause the limitations set forth in Section 3.4 to be exceeded for that Plan Year, contributions otherwise required with respect to such Member under this Article III shall be reduced to the extent necessary to comply with those limitations. If such reduction is not effected in time to prevent such allocations for any Limitation Year (as defined in Section 3.6) from exceeding such limitations, such excess shall be used to reduce contributions for such Member in the next Limitation Year and each succeeding Limitation Year if necessary; provided, that if the Member is not covered by the Plan at the end of the current Limitation Year, the portion exceeding the limitations set forth in Section 3.4 shall be held unallocated in a suspense account for such Limitation Year and shall be allocated and reallocated to the Accounts of all Members in the next Limitation Year before any other Annual Additions are allocated to the Accounts of such Members. The
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suspense account will reduce future contributions for all remaining Members in the next Limitation Year, and each succeeding Limitation Year if necessary. If a suspense account is in existence at any time during the Limitation Year pursuant to this Section 3.5, it will participate in the allocation of the Fund's investment gains and losses. In the event of a termination of the Plan, unallocated amounts held in such suspense account shall be allocated to the extent possible under this Article III for the Limitation Year of termination. Any amount remaining in such suspense account upon termination of the Plan shall then be returned to the Employer, notwithstanding any other provision of the Plan or Trust Agreement. Reductions in benefits under this Article III arising by reason of a Member's participation in multiple plans shall be effected as follows: (a) benefits and Annual Additions under continuing plans shall be reduced before benefits under any terminated plan, and (b) benefits and Annual Additions under continuing plans shall be reduced in the reverse order in which benefits or Annual Additions would otherwise accrue, except as any such plan may otherwise expressly provide.
3.6 Limitation Year. All determinations under Sections 3.4 and 3.5 shall be made by reference to the Plan Year.
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ARTICLE IV
Accounts
4.1 Account. The Administrator shall maintain an Account for each Member, to which shall be credited contributions and forfeitures allocated to the Member pursuant to Section 4.3.
4.2 Eligibility to Share in Contributions and Forfeitures. Notwithstanding any other provision of this Plan, a Member shall be eligible to share in contributions or forfeitures for a Plan Year (a "Participating Member") only if he is an employee of an Employer or a Controlled Group Affiliate as of the last day of such Year, or ceased to be so employed during such Plan Year by reason of death or Disability or on or after attainment of his Normal Retirement Date.
4.3 Allocation of Contributions and Forfeitures. As of the last day of each Plan Year, the contribution and forfeitures for that Plan Year shall be allocated to the Accounts of Participating Members. Such contribution and forfeitures shall be allocated to the Account of each Participating Member in the same ratio that the Compensation of the Participating Member bears to the total Compensation of all Participating Members for such Plan Year.
4.4 Investment of Account Balances. The Fund shall be divided into such three or more Investment Funds as the Trustee may from time to time establish, in which each Member's Account shall be invested according to such Member's instructions
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pursuant to Sections 4.5 through 4.7. Notwithstanding its stated primary investment objectives, any Investment Fund may make or retain investments of such nature, or such cash balances, as may be necessary or appropriate in order to effect distributions or to meet other administrative requirements of the Plan.
4.5 Designation of Investment Funds for Future Contributions. Each Member may, by giving notice to the Administrator on the Appropriate Form, designate the proportion of his share of the Employer contribution and forfeitures for each Plan Year that is to be allocated to each Investment Fund. Such designation shall be made at such time as the Administrator shall prescribe, and shall be effective on the first day for which it can be given effect under the Administrator's procedures. If a Member fails to make such a designation, all contributions and forfeitures allocated to such Member's Account shall be invested in the Investment Fund expected to have the least volatility of principal value. Any designation under this Section 4.5 shall continue in effect until changed by the filing of a new designation under this Section 4.5.
4.6 Designation of Investment Funds for Existing Account Balances. A Member may designate the proportion of the then existing balance of his Account to be invested in each Investment Fund by giving notice to the Administrator on the Appropriate Form at such time as the Administrator shall prescribe. Following a Member's death and pending distribution of his Account, his Beneficiary may exercise the rights provided under this Section 4.6 with respect to the portion of the Account from which such Beneficiary will
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receive a distribution. Such designation shall be effective on the first day for which it can be given effect under the Administrator's procedures.
4.7 Valuation of Investment Funds. As of each Valuation Date, the Administrator shall determine the net fair market value of the assets of each Investment Fund, and shall allocate the Investment Adjustment among the Members' Accounts in proportion to the value of their Accounts as of the preceding Valuation Date; provided, however, that no Account shall share in such allocation after the Valuation Date established for distribution thereof. A Member's interest in each Investment Fund shall be reduced by the amount of distributions or withdrawals therefrom (including transfers to any other Investment Fund) and shall be increased by the amount of any transfers thereto from any other Investment Fund, in such manner as the Administrator may deem appropriate.
4.8 Correction of Error. The Administrator may adjust any or all Accounts in order to correct errors or rectify omissions, in such manner as he believes will best result in the equitable and nondiscriminatory administration of the Plan.
4.9 Allocation Shall Not Vest Title. The fact that allocation is made and amounts credited to a Member's Account shall not vest in such Member any right, title or interest in and to any assets except at the time or times and upon the terms and conditions expressly set forth in this Plan, nor shall the Trustee be required to segregate physically the assets of the Fund by reason thereof.
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4.10 Statement of Accounts. The Administrator shall distribute to each Member a statement showing his interest in the Fund at least annually.
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ARTICLE V
Vesting and Distribution of Benefits
5.1 Vesting.
5.1.1 Full Vesting. Upon a Member's Termination of Employment on account of death or Disability, or upon his attainment of his Normal Retirement Date (or any higher age) while employed by an Employer or an Affiliate, his Account shall have a Vested Percentage of 100%.
5.1.2 Vesting Schedule. Upon a Member's Termination of Employment for a reason other than death, Disability or retirement on or after his Normal Retirement Date, he shall be entitled to receive the Vested Percentage of the balance in his Account, determined on the basis of the Member's Years of Service, as follows:
Years of Service Vested Percentage ---------------- ----------------- Less than 2 0% 2 but less than 3 20% 3 but less than 4 40% 4 but less than 5 60% 5 but less than 6 80% 6 or more 100% |
5.2 Distribution on Termination of Employment.
5.2.1 When a Member's employment terminates for any reason, the Vested Percentage of the balance of his Account shall be distributed to him or, if distribution is being made by reason of death (or after his death following Termination of Employment), to his Beneficiary. Such distribution shall be made in accordance with the further provisions of this Article V.
5.2.2 The amount to be distributed pursuant to this
Section 5.2 shall be determined by a valuation of the Member's
Account on the Valuation Date coinciding with or immediately
preceding the date of distribution.
5.3 Payment of Benefits in General. Any amount distributable with respect to a Member whose employment terminates for any reason other than death shall be paid in cash in a single sum as soon as administratively practicable following Termination of Employment. Any amount allocated as of the last day of a Plan Year to the Account of a Member who terminated employment during such Year on account of death or Disability or on or after attainment of his Normal Retirement Date shall be paid to the Member or his Beneficiary as soon as administratively practicable after such allocation. Notwithstanding the foregoing, if the nonforfeitable balance of the Member's Account on the Valuation Date referred to in Section 5.2.2 exceeds $3,500 (or if it exceeded $3,500 at the time of any prior distribution), (a) such Member's benefit shall not be so distributed prior to his Normal
Retirement Date without the Member's written consent, and (b) if such consent is not given within such time as the Administrator shall prescribe, such benefit shall instead be distributed after the Member's Normal Retirement Date, as if he had terminated employment on that date. Distribution shall in all events commence no later than 60 days after the close of the Plan Year in which occurs the later of the Member's Normal Retirement Date or most recent Termination of Employment. If distribution is deferred until the Member's Normal Retirement Date, he shall have the right to give investment directions pursuant to Section 4.6 and his Account shall be credited or charged with applicable Investment Adjustments through the Valuation Date preceding or coinciding with his Normal Retirement Date. For purposes of the Plan, if the nonforfeitable balance of a Member's Account is zero, the Member shall be deemed to have received a single-sum distribution of such nonforfeitable balance upon his Termination of Employment. The nonvested portion of the Account of a Member who is deemed to have received a single-sum distribution of his nonforfeitable balance under this Section 5.4 shall be forfeited pursuant to Section 5.4.
5.4 Forfeitures.
5.4.1 Forfeitures. The nonvested portion of a terminated Member's Account shall be valued and forfeited as of the Valuation Date coincident with or next following his Termination of Employment. All amounts forfeited pursuant to this Section 5.4 shall be reallocated to the Accounts of Participating Members as of the last day of each Plan Year as provided in Section 4.3; provided, that if a Member is reemployed by the Company or an Affiliate prior to the last day of the
Plan Year in which he incurs a Termination of Employment, no portion of his Account shall be forfeited or reallocated.
5.4.2 Reemployment. The forfeited portion of a Member's Account shall be restored if he is reemployed by the Company, another Employer or an Affiliate before he incurs a Break in Service of five years or more.
5.5 Payment of Death Benefits.
5.5.1 In General. In the event of the death of a Member prior to his Termination of Employment, the balance in his Account shall be distributed to his Beneficiary in a single payment as soon as administratively practicable after the date of death. If the Beneficiary is the Member's Spouse, such distribution shall be made or begin as soon as practicable and, if the Member had attained Normal Retirement Age prior to death, not later than 60 days following the close of the Plan Year in which death occurs. Any amounts allocated to the deceased Member's Account as of the last day of the Plan Year in which he dies shall be distributed to his Beneficiary as soon as administratively practicable thereafter.
5.5.2 Designation of a Beneficiary. A Member's sole Beneficiary shall be his Spouse (if the Member has a surviving Spouse) unless the Member has designated another Beneficiary with Spousal Consent. A Beneficiary designation shall be effective when duly executed and delivered to the Administrator. It may be revoked by filing with the Administrator a subsequent designation or a
written instrument of revocation in the form prescribed by him, but any such designation or revocation which has the effect of naming a person other than the Member's Spouse as sole Beneficiary is subject to the Spousal Consent requirement.
5.5.3 Distribution to Minor or Incompetent. Any death benefit distributable to a minor or incompetent shall be distributed pursuant to Section 10.7.
5.5.4 Absence of a Beneficiary. If a Member has failed effectively to designate a Beneficiary, or a Beneficiary previously designated has predeceased the Member and no alternative designation has become effective, benefits payable on the Member's death shall be distributed to his surviving Spouse, if any, or if no Spouse survives, to the Member's estate.
5.5.5 Proof of Death. The Administrator may require such proof of death and such evidence of the right of any person to receive all or part of the death benefit of a deceased Member as the Administrator may deem desirable. The Administrator's determination of the fact of death of a Member and of the right of any person to receive a distribution as a result thereof shall be conclusive upon such Member and all persons having or claiming any right in the Fund on account of such Member.
5.5.6 Undistributed Balance of Terminated Member. In the event that a Member shall terminate employment with a vested balance in his Account and shall die prior to the complete distribution of such vested balance, the undistribut-
ed portion of such vested balance shall be distributed to his Beneficiary in the manner provided for in this Section 5.5. Notwithstanding the foregoing, the Administrator and Trustee shall be fully protected in making distribution in the name of any such Member prior to the Trustee's receiving actual notice of the death of such Member, and no Beneficiary of a deceased Member shall have any interest in such Member's vested Account balance to the extent that any such distribution shall have been made.
5.5.7 Discharge of Liability. If distribution in respect of a Member's Account is made to a person reasonably believed by the Administrator (taking into account any document purporting to be a valid Spousal Consent or any representation by the Member that he is not married) to properly qualify as the Member's Beneficiary under the provisions of this Section 5.5, the Plan shall have no further liability with respect to such Account (or the portion thereof so distributed).
5.6 Distribution at Age 70-1/2. The Account balance of a Member who attains age 70-1/2 shall be distributed to him in a single sum no later than the first day of April following the calendar year in which such Member attains age 70-1/2, even if he is still employed. Any amount subsequently allocated to the Member's Account under the Plan shall be distributed to the Member as soon as practicable following the date of such allocation (or, in the event the Member is still employed, as soon as practicable after the end of the Plan Year in respect of which the allocation is made).
5.7 Delay of Payment. Notwithstanding any provisions to the contrary contained in this Plan, in the event that the amount of a payment required to commence on
the date otherwise determined under this Plan cannot be ascertained by such date, or if it is not possible to make such payment on such date because the Administrator has been unable to locate the Member (or, in the case of a deceased Member, his Beneficiary) after making reasonable efforts to do so, a payment retroactive to such date may be made no later than 60 days after the earliest date on which the amount of such payment can be ascertained under this Plan or the date on which the Member (or Beneficiary) is located, whichever is applicable.
5.8 Qualified Domestic Relations Orders.
5.8.1 Definition. For purposes of this Section 5.8.1, "Qualified Domestic Relations Order" means any judgment, decree or order (including approval of a property settlement) made pursuant to a state domestic relations law (including a community property law) which relates to the provision of child support, alimony payments or marital property rights to a Spouse, former Spouse, child or other dependent of a Member and which creates or recognizes the existence of a right of (or assigns a right to) such Spouse, former Spouse, child or other dependent (the "Alternate Payee") to receive all or a portion of the benefits payable with respect to a Member under the Plan. A Qualified Domestic Relations Order must clearly specify the amount or percentage of the Member's benefits to be paid to such Alternate Payee by the Plan (or the manner in which such amount or percentage is to be determined) and the number of payments or period to which such order applies. A Qualified Domestic Relations Order may not require the Plan (a) to provide any form or type of
benefits or any option not otherwise provided under the Plan, (b) to pay benefits to an Alternate Payee under such order which are required to be paid to another Alternate Payee under another such order previously filed with the Plan, or (c) to provide increased benefits (determined on the basis of actuarial equivalents); provided, however, that if the Participant has reached age 50, or the Alternate Payee and the Administrator have entered into an agreement providing for distribution, payment of benefits to the Alternate Payee under the order may be made (x) at any time after the date of the order, (y) as if the Member had retired on the date on which such payment is to begin under such order (taking into account only the benefits in which the Participant is then vested) and (z) in any form in which such benefits may be paid to the Member.
5.8.2 Distributions. The Administrator shall
recognize and honor any judgment, decree or order entered on or after
January 1, 1985 under a state domestic relations law which the
Administrator determines to be a Qualified Domestic Relations Order
in accordance with such reasonable procedures to determine such
status as the Administrator shall establish. Without limitation of
the foregoing, the Administrator shall notify a Member and the person
entitled to benefits under a judgment, decree or order which purports
to be a Qualified Domestic Relations Order of (a) the receipt
thereof, (b) the Plan's procedures for determining whether such
judgment, decree or order is a Qualified Domestic Relations Order and
(c) any determination made with respect to such status. During any
period during which the Administrator is determining whether any
judgment, decree or order is a Qualified
Domestic Relations Order, any amount which would have been payable to any person pursuant to such order shall be separately accounted for (and adjusted to reflect its appropriate share of the Investment Adjustments as of each Valuation Date pursuant to Article IV) pending payment to the proper recipient thereof. Any such amount, as so adjusted, shall be paid to the person entitled to such payment under any such judgment, decree or order if the Administrator determines such judgment, decree or order to be a Qualified Domestic Relations Order within 18 full calendar months commencing with the date on which the first payment would be required to be made under such judgment, decree or order. If the Administrator is unable to make such a determination within such time period, payment under the Plan shall be as if such judgment, decree or order did not exist and any such determination made after such time period shall be applied prospectively only.
5.9 Direct Rollover of Eligible Rollover Distributions. Notwithstanding any provisions of this Plan that would otherwise limit a Distributee's election under this Section 5.9, a Distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an Eligible Rollover Distribution paid in a Direct Rollover directly to an Eligible Retirement Plan specified by the Distributee.
5.9.1 Definitions. For purposes of this
Section 5.9, the following terms shall have the meanings specified
below.
5.9.1.1 Eligible Rollover Distribution. Any distribution of all or any portion of the balance to the credit of a Distributee under the Plan,
except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequent than annual) made for the life (or life expectancy) of the Distributee or the joint lives (or life expectancies) of the Distributee and the Distributee's Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income.
5.9.1.2 Eligible Retirement Plan. An individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or another employer's qualified trust described in section 401(a) of the Code, that accepts a Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving Spouse, an Eligible Retirement Plan is only an individual retirement account or individual retirement annuity.
5.9.1.3 Distributee. A Member, a Member's surviving Spouse or a Member's Spouse or former Spouse who is the Alternate Payee under a Qualified Domestic Relations Order (as defined in section 414(p) of the Code).
5.9.1.4 Direct Rollover. A payment by the Plan to an Eligible Retirement Plan specified by a Distributee, in the manner prescribed by the Administrator.
5.9.2 Limitation. No more than one Direct Rollover may be elected by a Distributee for each Eligible Rollover Distribution.
5.9.3 Default Procedure. If, upon Termination of
Employment, the value of a Members Account does not exceed $3,500
(and did not exceed $3,500 at the time of any prior distribution
under the Plan), and such Member does not make a timely election
under this Section 5.9 to make a Direct Rollover, the Member's
Accounts shall be distributed to the Member in accordance with
Section 5.3.
ARTICLE VI
Administration of the Plan
6.1 Fiduciary. The named fiduciary under the Plan shall be the Administrator, who shall have authority to control and manage the operation and administration of the Plan, except that he shall have no authority or responsibility with respect to those matters which under any applicable trust agreement, insurance policy or similar contract are the responsibility, or subject to the authority, of the Trustee, any insurance company or similar organization. The named fiduciary under the Plan shall have the right, by written instrument executed by him, to designate persons other than the named fiduciary to carry out fiduciary responsibilities under the Plan.
6.2 The Administrator.
6.2.1 Appointment of Administrator. The Board of Directors shall appoint an Administrator to administer the Plan, without regard to whether or not he is an officer or employee of an Employer or a Member of the Plan, or whether or not he is serving as a Trustee of the Plan, and he shall serve at the pleasure of the Board of Directors. The Administrator may resign by delivering his written resignation to the Board of Directors. Any vacancy in the position of Administrator, arising for any reason whatsoever, shall be filled by the Board of Directors. If the Administrator is also a Member of this Plan, he shall not exercise discretion in any matter relating solely to himself. In the event no Administrator is then serving, or if the Administrator is incapable of taking action with respect to any matter (because the
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matter relates solely to himself, or for any other reason), the Board of Directors shall administer the Plan as if it were the Administrator.
6.2.2 Duties. The Administrator shall administer the Plan and may make such rules as he may deem necessary in order to effectuate its provisions, and with the approval of the Board of Directors may employ such persons as he shall deem necessary or desirable to assist in the administration of the Plan. The Administrator shall have the power and discretion to determine any question arising in the administration, interpretation, and application of the Plan, and shall have the power to correct defects, supply omissions and reconcile inconsistencies to the extent necessary to effectuate the Plan. The determination of the Administrator shall be conclusive and binding on all persons. All distributions of the assets of the Fund shall be made by the Trustee at the written direction of the Administrator. All expenses of the Administrator shall be paid by the Company, and such expenses shall include any expenses authorized by the Board of Directors as necessary or desirable in the administration of the Plan.
6.3 Advisers. Any named fiduciary under the Plan, and any fiduciary designated by a named fiduciary to whom such power is granted by a named fiduciary under the Plan, may employ one or more persons to render advice with regard to any responsibility such fiduciary has under the Plan.
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6.4 Service in Multiple Capacities. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan.
6.5 Limitation of Liability; Indemnity.
6.5.1 Delegation of Duty. Except as otherwise provided by law, if any duty or responsibility of a named fiduciary has been allocated or delegated to any other person in accordance with any provision of this Plan, then such named fiduciary shall not be liable for any act or omission of such person in carrying out such duty or responsibility.
6.5.2 Limitation of Liability. Except as otherwise provided by law, no person who is a named fiduciary, or any employee, director or officer of any Employer or Affiliate, shall incur any liability whatsoever on account of any matter connected with or related to the Plan or the administration of the Plan, unless such person shall have acted in bad faith or been guilty of willful misconduct or gross negligence in respect of his duties, actions or omissions in respect of the Plan. The allocation of a Member's (or Beneficiary's) Account, and contributions allocable thereto, among Investment Funds shall be the responsibility of the Member or Beneficiary in accordance with Article IV and the Administrator shall not be deemed a fiduciary with respect to such allocation.
6.5.3 Indemnity. The Company shall indemnify and save harmless each employee, director or officer of any Employer or Affiliate who serves
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in a fiduciary or any other capacity under or with respect to the Plan, from and against any and all loss, liability, claim, damage, cost and expense which may arise by reason of, or be based upon, any matter connected with or related to the Plan or the administration of the Plan (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or in settlement of any such claim whatsoever) to the fullest extent permitted under the Company's Certificate of Incorporation and By-Laws, unless such person shall have acted in bad faith or been guilty of willful misconduct or gross negligence in respect of his duties, actions or omissions in respect of the Plan.
6.6 Reliance on Information. The Administrator and any Employer and its officers, directors and employees shall be entitled to rely upon all tables, valuations, certificates, opinions and reports furnished by any accountant, trustee, insurance company, counsel or other expert who shall be engaged by an Employer or the Administrator, and the Administrator and any Employer and its officers, directors and employees shall be fully protected in respect of any action taken or suffered by them in good faith in reliance thereon, and all action so taken or suffered shall be conclusive upon all persons affected thereby.
6.7 Funding Policy. The funding policy and method of the Plan shall consist of the receipt of contributions and the investment thereof pursuant to the provisions of the Plan.
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6.8 Proper Proof. In any case in which an Employer or the Administrator shall be required under the Plan to take action upon the occurrence of any event, they shall be under no obligation to take such action unless and until proper and satisfactory evidence of such occurrence shall have been received by them.
6.9 Genuineness of Documents. The Administrator, and any Employer and its respective officers, directors and employees, shall be entitled to rely upon any notice, request, consent, letter, telegram or other paper or document believed by them or any of them to be genuine, and to have been signed or sent by the proper person, and shall be fully protected in respect of any action taken or suffered by them in good faith in reliance thereon.
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ARTICLE VII
The Trust Agreement
7.1 The Trust Agreement. The Company, on behalf of itself and each other Employer, shall enter into a Trust Agreement with the Trustee providing for the establishment of a Fund hereunder consisting of all contributions to the Plan and earnings and profits thereon. The Trust Agreement shall be deemed to form a part of this Plan, and any and all rights which may accrue to any person under this Plan shall be subject to all the terms and provisions of such Trust Agreement. Copies of the Trust Agreement shall be filed with the Administrator and, upon reasonable application and notice, shall be made available for inspection by any Member.
7.2 Rights of the Company. Except as otherwise expressly provided in the Trust Agreement, upon the transfer by an Employer of any money or assets to the Fund, all interest of the Employer therein shall cease and terminate, legal title to such Fund shall be vested absolutely in the Trustee and no part of the Fund or income therefrom shall be used for or diverted to purposes other than the exclusive benefit of the Members and their Beneficiaries as provided herein; provided, however, that:
(a) A contribution that is made by an Employer by a mistake of fact may be returned to the Employer upon its request within one year after the payment of the contribution;
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(b) A contribution that is conditioned upon its deductibility under section 404(a) of the Code may be returned to the Employer upon its request, to the extent that the contribution is disallowed as a deduction, within one year after such disallowance; and
(c) A contribution that is conditioned on initial qualification of the Plan under section 401(a) of the Code may, if the Plan does not so qualify, be returned (together with any earnings thereon) to the contributing Employer within one year after the date of denial of qualification of the Plan.
7.3 Duties and Responsibilities of the Trustee. The Trustee will hold and invest all funds as provided herein and in the Trust Agreement. The Trustee will make, at the written direction of the Administrator, all payments to Members and their Beneficiaries.
7.4 Company as Agent. The Company is authorized to act as agent for all other Employers in dealings with the Trustee under the Plan.
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ARTICLE VIII
Amendment
8.1 Right of the Company to Amend the Plan. The Company shall have the right at any time and from time to time to amend any or all of the provisions of this Plan, by resolution of the Board of Directors. Except as provided in Section 8.3, no such amendment shall authorize or permit any part of the Fund to be used for or diverted to purposes other than the exclusive benefit of the Members and their Beneficiaries, nor shall any amendment reduce any amount then credited to the Account of any Member, reduce any Member's vested interest in his Account, or affect the rights, duties and responsibilities of the Trustee without the Trustee's written consent.
8.2 Plan Merger. In the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each Member shall be entitled to a benefit immediately after the merger, consolidation, or transfer (if such other plan then terminated) which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then been terminated).
8.3 Amendments Required by Law. All provisions of this Plan, and all benefits and rights granted hereunder, are subject to any amendments, modifications or alterations which are necessary from time to time, (a) to qualify the Plan under section 40l(a) of the Code and the regulations and rulings thereunder, (b) to continue the Plan as so qualified, or (c) to comply with any other provision of law. Accordingly, notwithstanding any other provision of this Plan, the Company may, by resolution of the Board of Directors,
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amend, modify or alter the Plan, with or without retroactive effect, in any respect or manner necessary to qualify the Plan under section 40l(a) of the Code, to continue the Plan as so qualified, to meet the aforementioned statutory requirements or to comply with any other provision of applicable law.
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ARTICLE IX
Discontinuance of Contributions
and Termination of the Plan
9.1 Right to Terminate the Plan or Discontinue Con- tributions. The Employers have established the Plan with the bona fide intention and expectation that from year to year they will be able to and will deem it advisable to make contributions as herein provided. However, the board of directors of an Employer may determine that circumstances make it impossible or inadvisable for such Employer to make a contribution in respect of a given Plan Year. The failure of such board of directors to authorize a contribution in respect of a Plan Year shall not constitute a termination of the Plan. However, the Company reserves the right in its discretion to terminate the Plan or completely discontinue contributions thereto at any time, with respect to any or all Employers.
9.2 Manner of Termination. The Board of Directors shall have the power in its discretion to terminate the Plan by appropriate resolution. A certified copy of such resolution or resolutions shall be delivered to the Administrator, and as soon as possible thereafter the Administrator shall deliver to the Trustee a copy of the resolution or resolutions and shall give appropriate notice to the Members.
9.3 Effect of Termination. In the event of the complete or partial termination (within the meaning of section 4ll(d)(3) of the Code) of the Plan or a complete discontinuance of contributions by the Employers, the rights of all affected Members to their Accounts as of the date of such termination or such complete discontinuance of contributions
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shall be fully vested and nonforfeitable (within the meaning of section 4ll of the Code and regulations thereunder). After the date of a complete termination specified in the resolution or resolutions adopted by the Board of Directors, the Employers shall make no further contributions under the Plan. In the event of a complete discontinuance of contributions without a termination of the Plan, all provisions of the Plan and of the Trust Agreement shall remain in force which are necessary in the opinion of the Administrator, other than the provisions for contributions.
9.4 Distribution of the Fund. In the event of a termination of the Plan, the Trustee shall apply each Member's Account to the benefit of such Member (or his Beneficiary) in accordance with the instructions of the Administrator.
9.5 Expenses of Termination. In the event of the complete or partial termination of the Plan, the expenses incident thereto shall be a prior claim and lien upon the assets of the Trust Fund, and shall be paid or provided for prior to the distribution of any benefits pursuant to such termination.
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ARTICLE X
Miscellaneous Provisions
10.1 Plan Not a Contract of Employment. Neither the establishment of the Plan, nor any amendment thereof, nor the creation of the Fund or any Account, nor the payment of any benefits thereunder, shall be construed as giving to any Member or other person any legal or equitable right against any Employer, any officer or employee thereof, the Board of Directors or any member thereof, the Administrator, or any Trustee, except as provided herein, and under no circumstances shall the terms of employment of any Member be in any way affected hereby.
10.2 Source of Benefits. All benefits payable under the Plan shall be paid or provided for solely from the Fund and the Employers assume no liability or responsibility therefor. The Employers are under no legal obligation to make any contributions to the Fund. No action or suit shall be brought by any Member or Beneficiary, or by any Trustee, against any Employer for any such contribution.
10.3 Spendthrift Clause. Except as may be otherwise required by a Qualified Domestic Relations Order (as defined in section 5.8.1) or other applicable law, no benefit or payment under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, whether voluntary or involuntary, and no attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be valid, nor shall any such benefit or payment be in any way liable for or subject to the debts, contracts, liabilities, engagements or torts of any person entitled to such
benefit or payment, or subject to attachment, garnishment, levy, execution or other legal or equitable process.
10.4 Merger. The merger or consolidation of the Company with any other company or the transfer of the assets of the Company to any other company by sale, exchange, liquidation or otherwise or the merger of this Plan with any other retirement plan shall not in and of itself result in the termination of the Plan or be deemed a Termination of Employment of any Employee.
10.5 Claims Procedure. The Administrator shall establish a claims procedure in accordance with applicable law, under which any Member or Beneficiary whose claim for benefits has been denied shall have a reasonable opportunity for a full and fair review of the decision denying such claim.
10.6 Inability to Locate Distributee. Notwithstanding any other provision of the Plan, in the event that the Administrator cannot locate any person to whom a payment or distribution is due under the Plan, and no other payee has become entitled thereto pursuant to any provision of the Plan, the Account in respect of which such payment or distribution is to be made shall be forfeited at the close of the third Plan Year following the Plan Year in which such payment or distribution first became due (but in all events prior to the time such Account would otherwise escheat under any applicable state law); provided, that any Account so forfeited shall be reinstated if such person subsequently makes a valid claim for such benefit.
10.7 Payment to a Minor or Incompetent. If any amount is payable to a minor or other legally incompetent person, such amount may be paid in any of the following ways, as the Administrator in his sole discretion shall determine:
(a) To the legal representatives of such minor or other incompetent person;
(b) Directly to such minor or other incompetent person;
(c) To a parent or guardian of such minor, or to a custodian for such minor under the Uniform Gifts to Minors Act (or similar statute) of any jurisdiction or to the person with whom such minor shall reside.
Payment to such minor or incompetent person, or to such other person as may be determined by the Administrator, as above provided, shall discharge all Employers, the Administrator, the Trustees and any insurance company or other person or corporation making such payment pursuant to the direction of the Administrator, and none of the foregoing shall be required to see to the proper application of any such payment to such person pursuant to the provisions of this Section 10.7.
10.8 Doubt as to Right to Payment. If at any time any doubt exists as to the right of any person to any payment hereunder or as to the amount or time of such payment (including, without limitation, any doubt as to identity, or any case in which any notice has been received from any other person claiming any interest in amounts payable hereunder, or any case in which a claim from other persons may exist by reason of commu-
nity property or similar laws) the Administrator shall be entitled, in its discretion, to direct the Trustee (or any insurance company) to hold such sum as a segregated amount in trust until such right or amount or time is determined or until order of a court of competent jurisdiction, or to pay such sum into court in accordance with appropriate rules of law in such case then provided, or to make payment only upon receipt of a bond or similar indemnification (in such amount and in such form as is satisfactory to the Administrator).
10.9 Estoppel of Members and Beneficiaries. The Employers, Administrator and Trustee may rely upon any certificate, statement or other representation made to them by any Employee, Member or Beneficiary with respect to age, length of service, leave of absence, date of cessation of employment or other fact required to be determined under any of the provisions of the Plan, and shall not be liable on account of the payment of any benefits or the doing of any act in reliance upon any such certificate, statement or other representation. Any such certificate, statement or other representation made by an Employee or Member shall be conclusively binding upon such Employee or Member and his Beneficiary and estate, and such Employee, Member, Beneficiary and estate shall thereafter and forever be estopped from disputing the truth and correctness of such certificate, statement or other representation. Any such certificate, statement or other representation made by a Beneficiary shall be conclusively binding upon such Beneficiary, and such Beneficiary shall thereafter and forever be estopped from disputing the truth and correctness of such certificate, statement or other representation.
10.10 Separability. If any provision of the Plan or the Trust Agreement is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provisions of the Plan and/or the Trust Agreement, and the Plan and Trust Agreement shall be construed and enforced as if such provision had not been included therein.
10.11 Captions. The captions contained herein are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of the Plan nor in any way shall affect the Plan or the construction of any provision thereof.
10.12 Usage. Whenever applicable, the masculine gender, when used in the Plan, shall include the feminine or neuter gender, and the singular shall include the plural.
ARTICLE XI
Leased Employees
11.1 Definitions. For purposes of this Article XI, the term "Leased Employee" means any person (a) who performs or performed services for an Employer or Affiliate (hereinafter referred to as the "Recipient") pursuant to an agreement between the Recipient and any other person (hereinafter referred to as the "Leasing Organization"), (b) who has performed such services for the Recipient or for the Recipient and related persons (within the meaning of section 144(a)(3) of the Code) on a substantially full-time basis for a period of at least one year, and (c) whose services are of a type historically performed by employees in the business field of the Recipient.
11.2 Treatment of Leased Employees. For purposes of this Plan, a Leased Employee shall be treated as an employee of an Affiliate whose service for the Recipient (including service during the one-year period referred to in Section 11.1) is to be taken into account in determining compliance with the service requirements of the Plan relating to participation. However, the Leased Employee shall not be entitled to share in contributions or forfeitures under the Plan with respect to any service or compensation attributable to the period during which he is a Leased Employee, and shall not be eligible to become a Member eligible to accrue benefits under the Plan unless and except to the extent that he shall at some time, either before or after his service as a Leased Employee, qualify as an Eligible Employee without regard to the provisions of this Article XI (in which event, status as a Leased Employee shall be determined without regard to clause (b) of Section 11.1, to the extent required by applicable law).
XI-1
11.3 Exception for Employees Covered by Plans of Leasing Organization. Section 11.2 shall not apply to any Leased Employee if such employee is covered by a money purchase pension plan of the Leasing Organization meeting the requirements of section 414(n)(5)(B) of the Code and Leased Employees do not constitute more than 20% of the aggregate "nonhighly compensated work force" (as defined in Section 414(n)(5)(C)(ii) of the Code) of all Employers and Affiliates.
11.4 Construction. The purpose of this Article XVI is to comply with the provisions of section 4l4(n) of the Code. All provisions of this Article shall be construed consistently therewith, and, without limiting the generality of the foregoing, no individual shall be treated as a Leased Employee except as required under such section.
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ARTICLE XII
"Top-Heavy" Provisions
12.1 Determination of "Top-Heavy" Status.
12.1.1 Applicable Plans. For purposes of this
Article XII, "Applicable Plans" shall include (a) each plan of an
Employer or Affiliate in which a Key Employee (as defined in Section
12.1.2 for this Plan, and as defined in section 416(i) of the Code
for each other Applicable Plan) participates during the five-year
period ending on such plan's "determination date" (as described in
Section 12.1.4) and (b) each other plan of an Employer or Affiliate
which, during such period, enables any plan in clause (a) of this
sentence to meet the requirements of sections 401(a)(4) and 410 of
the Code. Any plan not required to be included under the preceding
sentence may also be included, at the option of the Company, provided
that the requirements of sections 401(a)(4) and 410 of the Code
continue to be satisfied for the group of Applicable Plans after such
inclusion. Applicable Plans shall include terminated plans, frozen
plans, and to the extent that benefits are provided with respect to
service with an Employer or an Affiliate, multiemployer plans
(described in section 414(f) of the Code) and multiple employer plans
(described in section 413(c) of the Code) to which an Employer or an
Affiliate makes contributions.
12.1.2 Key Employee. For purposes of this Article XII, "Key Employee" shall mean an employee (including a former employee, whether or not
XII-1
deceased) of an Employer or Affiliate who, at any time during a given Year or any of the four preceding Plan Years, is one or more of the following:
(a) An officer of an Employer or Affiliate having compensation within the meaning of section 414(q)(7) of the Code ("Top-Heavy Earnings") of more than 50% of the dollar amount in effect under section 415(b)(1)(A) of the Code for any such Plan Year; provided, that the number of employees treated as officers shall be no more than 50 or, if fewer, the greater of three employees or 10% of the employees (including Leased Employees as described in Section 11.1 and excluding employees described in section 414(q)(8) of the Code).
(b) One of the 10 employees (i) having Top-Heavy Earnings from the Employer or Affiliate of more than the dollar amount described in Section 3.4 and (ii) owning (or considered as owning, within the meaning of section 416(i) of the Code), the largest percentage interests in value of an Employer or Affiliate, provided that such percentage interest exceeds 0.5% in value. If two employees have the same interest in the Employer or Affiliate, the employee having greater Top-Heavy Earnings shall be treated as having a larger interest.
(c) A person owning (or considered as owning, within the meaning of section 416(i) of the Code), more than 5% of the outstanding stock of an Employer or Affiliate, or stock possessing more than 5% of the
XII-2
total combined voting power of all stock of the Employer or Affiliate (or having more than 5% of the capital or profits interest in any Employer or Affiliate that is not a corporation, determined under similar principles).
(d) A 1% owner of an Employer or Affiliate having Top-Heavy Earnings of more than $150,000. A "1% owner" means any person who would be described in Section 12.1.2(c) if "1%" were substituted for "5%" in each place where it appears in Section 12.1.2(c).
12.1.3 "Top-Heavy" Condition. In any Year during which the sum, for all Key Employees (as defined in Section 12.1.2 for this Plan and in section 416(i) of the Code for each other Applicable Plan), of the present value of the cumulative accrued benefits under all Applicable Plans which are defined benefit plans (determined based on the actuarial assumptions set forth in the "top-heavy" provisions of such plans) and the aggregate of their accounts under all Applicable Plans which are defined contribution plans, exceeds 60% of a similar sum determined for all members in such plans (but excluding members who are former Key Employees), the Plan shall be deemed "Top-Heavy."
12.1.4 Determination Date. The determination as to whether this Plan is "Top-Heavy" for a given Plan Year shall be made on the last day of the preceding Plan Year (the "Determination Date"); and other plans shall be included in determining whether this Plan is "Top-Heavy" based on the determination date as
XII-3
defined in Code section 416(g)(4)(c) for each such plan which occurs in the same calendar year as such Determination Date for this Plan.
12.1.5 Valuation. The value of account balances and the present value of accrued benefits for each Applicable Plan will be determined, subject to Code section 416 and the regulations thereunder, as of the most recent Valuation Date occurring within the 12-month period ending on the applicable determination date for such plan.
12.1.6 Distributions within Five Years. Subject to
Section 12.1.7, distributions from the Plan or any other Applicable
Plan during the five-year period ending on the applicable
Determination Date shall be taken into account in determining whether
the Plan is "Top-Heavy."
12.1.7 No Services within Five Years. Benefits and distributions shall not be taken into account with respect to any individual who has not rendered any services to any Employer or Affiliate at any time during the five-year period ending on the applicable determination date.
12.1.8 Compliance with Code Section 416. The calculation of the "Top-Heavy" ratio, and the extent to which distributions, rollovers and transfers from this Plan or any other Applicable Plan are taken into account, shall be made in accordance with Code section 416 and applicable regulations thereunder.
XII-4
12.1.9 Beneficiaries. The terms "Key Employee," "Member" and member include their beneficiaries.
12.1.10 Accrued Benefit Under Defined Benefit Plans. Solely for purposes of determining whether this Plan or any other Applicable Plan is "Top-Heavy" for a given Plan Year, the accrued benefit under any defined benefit plan of a Member other than a Key Employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer or an Affiliate, or (b) if there is no such method, as if such benefit accrued not more rapidly than at the slowest accrual rate permitted under the fractional accrual rule of section 411(b)(1)(C) of the Code.
12.2 Provisions Applicable in "Top-Heavy" Years. For any Plan Year in which the Plan is deemed to be "Top-Heavy," the following provisions shall apply to any Member who has not terminated employment before such Plan Year.
12.2.1 Required Allocation. The amount of Employer contributions and forfeitures which shall be allocated to the account of any Member who (a) is employed by an Employer or Affiliate on the last day of the Year and (b) is not a Key Employee shall be (i) at least 3% of such Member's "total compensation" (as that term is defined in section 415(c)(3) of the Code) for such Year, or, (ii) if less, an amount equal to such total compensation multiplied by the highest allocation rate for any Key Employee. For purposes of the preceding sentence, the allocation rate for each individual Key Employee shall be determined by dividing the Employer
XII-5
contributions and forfeitures allocated to such Key Employee's
account under all Applicable Plans considered together, by his total
compensation; provided, however, that clause (ii) does not apply if
this Plan enables a defined benefit plan required to be aggregated
with this Plan under Section 12.1.1 to meet the requirements of
section 401(a)(4) or 410 of the Code. The minimum-allocation
provisions of this Section 12.2.1 shall, to the extent necessary, be
satisfied by special Employer contributions made by the Employer for
that purpose. Notwithstanding the foregoing, the minimum allocations
otherwise required by this Section 12.2.1 shall not be required to be
made for any Member if such Member is covered under a defined benefit
plan maintained by an Employer or an Affiliate which provides the
minimum benefit required under section 416(c)(1) of the Code, and/or
to the extent that the minimum allocation otherwise required by this
Section 12.2.1 is made under another defined contribution plan
maintained by an Employer or an Affiliate. In addition, any minimum
allocation required to be made for a Member who is not a Key Employee
shall be deemed satisfied to the extent of the benefits provided by
any other qualified plan maintained by an Employer or an Affiliate.
12.2.2 Multiplier. Except as otherwise provided by law, "1.00" shall be substituted for the multiplier "1.25" required by section 415(e)(2)(B)(i) and (3)(B)(i) of the Code, unless the following conditions are met:
(a) the percentage described in Section 12.1.3 does not exceed 90%; and
XII-6
(b) "4%" is substituted for "3%" in Section 12.2.1.
Notwithstanding any other provision of this Plan, if the sum of the combined limitation fractions described in section 415(e)(2) and (3) of the Code as applied to this Plan, calculated by substituting "1.00" for "1.25" in applying section 415(e)(2)(B)(i) and (3)(B)(i) of the Code, for any Member exceeds 100% for the last Plan Year before the Plan becomes "Top-Heavy," such fractions shall be adjusted, in accordance with applicable regulations, so that their sum does not exceed 100% for such Year.
12.2.3 Vesting. Any Member shall be vested in his account on a basis at least as favorable as is provided under the following schedule:
Years of Service Vested Percentage ---------------- ----------------- Less than 2 0% 2 but less than 3 20% 3 but less than 4 40% 4 but less than 5 60% 5 but less than 6 80% 6 or more 100% |
In any Plan Year in which the Plan is not deemed to be "Top-Heavy," the minimum Vested Percentage of any Account shall be no less than that which was determined as of the last day of the last Plan Year in which the Plan was deemed to be "Top-Heavy." The minimum vesting schedule set out above shall apply to all benefits
XII-7
within the meaning of Code section 411(a)(7) except those attributable to employee contributions, including benefits accrued before the effective date of this Article XII and benefits accrued before the Plan became "Top-Heavy." Any vesting schedule change caused by alterations in the Plan's "Top-Heavy" status shall be deemed to result from a Plan amendment giving rise to the right of election required by Code section 411(a)(10)(B).
12.2.4 Bargaining Unit Employees. The provisions of Sections 12.2.1 and 12.2.3 shall not apply to any employee included in a unit of employees covered by a collective bargaining agreement if, within the meaning of section 416(i)(4) of the Code, retirement benefits were the subject of good faith bargaining.
XII-8
IN WITNESS WHEREOF, AGREE REALTY CORPORATION has caused this instrument to be executed by its duly authorized officer, and its corporate seal to be hereunto affixed, this 22nd day of April, 1994.
AGREE REALTY CORPORATION
By /s/ Richard Agree
---------------------
Title: President
ATTEST:
/s/ Kenneth Howe
- ----------------------
Secretary
|
XII-9
| ARTICLE 5 |
| PERIOD TYPE | 12 Mos | |
| FISCAL YEAR END | DEC 31 1996 | |
| PERIOD END | DEC 31 1996 | |
| CASH | $ | 294,389 |
| SECURITIES | 0 | |
| RECEIVABLES | 638,735 | |
| ALLOWANCES | 0 | |
| INVENTORY | 0 | |
| CURRENT ASSETS | 0 | |
| PP&E | 132,474,243 | |
| DEPRECIATION | 17,339,353 | |
| TOTAL ASSETS | 121,381,870 | |
| CURRENT LIABILITIES | 0 | |
| BONDS | 87,897,317 | |
| COMMON | 265 | |
| PREFERRED MANDATORY | 0 | |
| PREFERRED | 0 | |
| OTHER SE | 24,441,772 | |
| TOTAL LIABILITY AND EQUITY | 121,381,870 | |
| SALES | 0 | |
| TOTAL REVENUES | 16,291,468 | |
| CGS | 0 | |
| TOTAL COSTS | 6,210,132 | |
| OTHER EXPENSES | 0 | |
| LOSS PROVISION | 0 | |
| INTEREST EXPENSE | 6,101,106 | |
| INCOME PRETAX | 0 | |
| INCOME TAX | 0 | |
| INCOME CONTINUING | 0 | |
| DISCONTINUED | 0 | |
| EXTRAORDINARY | 0 | |
| CHANGES | 0 | |
| NET INCOME | 3,733,972 | |
| EPS PRIMARY | 1.41 | |
| EPS DILUTED | 0.00 |