<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 15, 1999
Philips International Realty Corp.
(Exact name of registrant as specified in its charter)
Maryland 000-23463 13-3963667
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
417 Fifth Avenue, New York, N.Y. 10016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-545-1100
Not Applicable
(Former name or former address, if changed since last report)
-1-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
Current Report
on
Form 8-K
----------------------
Item 2. Acquisition and Disposition of Assets
On July 15, 1999, Philips International Realty Corp. (the "Company" or
the "Registrant") acquired nine shopping center properties (the
"Properties") anchored by Kmart and comprising approximately 1.1
million square feet of leasable space located in the states of Florida,
California, Washington, Minnesota, Illinois and Kentucky. Prior to
these acquisitions, the Company had purchased, through a series of
unrelated transactions since July 1998, limited partnership interests
in the Properties. The amount invested by the Company since July 1998
and to acquire the Properties, totaling approximately $49.5 million,
was funded with borrowings under the Company's revolving line of
credit. Future reporting of financial position and results of
operations for the Company pertaining to these Properties will reflect
a change from the equity to consolidation method of accounting.
Historical and pro forma financial information pertaining to the
operations of the Properties and as required pursuant to Rule 3-14 are
provided herein as set forth in Item 7 below.
Item 5. Other Events
On July 27, 1999, the Board of Directors of the Company amended and
restated the Company's Bylaws to incorporate recent Maryland
legislation and for other general corporate purposes. Also on such
date, the Board of Directors of the Company elected to subject the
Company to the provisions of Section 3-804 of the Maryland General
Corporation Law and made certain changes to its shareholder
rights agreement to incorporate language permitted under recent
Maryland legislation. Lastly, the Company recently appointed Carl
Kraus as Chief Financial Officer.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) (b) Financial Statements and Pro Forma Financial
Information
The financial statements and pro forma financial information
filed herewith is as follows:
Page
----
Report of Independent Auditors 5
Statements of Revenues and Certain
Operating Expenses of the Properties for
Years Ended December 31, 1998, 1997 and 1996 6
Notes to Statements of Revenues
and Certain Operating Expenses of the Properties 7
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<PAGE>
Page
----
Estimates of Net Income and Funds from
Operations of the Properties (Unaudited) 10
Notes to Estimates of Net Income and Funds
from Operations of the Properties (Unaudited) 11
Pro Forma Condensed Consolidated Balance
Sheet as of March 31, 1999 (Unaudited) 14
Pro Forma Condensed Consolidated Statement
of Income for the Year Ended December 31, 1998 15
(Unaudited)
Pro Forma Condensed Consolidated Statement of
Income for the Three Months Ended March 31, 1999 16
(Unaudited)
Notes to Pro Forma Condensed Consolidated
Financial Statements (Unaudited) 17
(c) Exhibits
The Company hereby files the documents listed below:
Exhibit Document
------- --------
3.1 Articles Supplementary to the Charter of the
Company dated July 27, 1999.
3.2 Third Amended and Restated Bylaws of the Company
adopted July 27, 1999.
4.1 Amendment No. 1, dated July 27, 1999, to
Shareholder Rights Agreement dated as of March 31,
1999, between the Company and BankBoston, N.A., as
Rights Agent.
10.1 Employment Agreement for Carl Kraus dated as of
July 12, 1999.
-3-
<PAGE>
PHILIPS SHOPPING CENTER FUND
STATEMENTS OF REVENUES AND
CERTAIN OPERATING EXPENSES OF THE PROPERTIES
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
-4-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Philips International Realty Corp.
We have audited the statements of revenues and certain operating expenses of the
nine Kmart anchored shopping center properties (the "Properties"), as described
in Note 1, for the years ended December 31, 1998, 1997 and 1996. These financial
statements are the responsiblity of management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted accounting
standards. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying statements of revenues and certain operating expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K of Philips
International Realty Corp. (the "Company") and are not intended to be a complete
presentation of the revenues and expenses of the Properties.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the revenue and certain operating expenses of the
Properties, as described in Note 1, for the years ended December 31, 1998, 1997
and 1996 in conformity with generally accepted accounting principles.
New York, NY Ernst & Young LLP
March 1, 1999
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<PAGE>
PHILIPS SHOPPING CENTER FUND
STATEMENTS OF REVENUES AND
CERTAIN OPERATING EXPENSES OF THE PROPERTIES
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
(Dollars in thousands)
1998 1997 1996
---- ---- ----
Revenues from rental property $8,645 $7,909 $7,902
------ ------ ------
Certain operating expenses:
Real estate taxes 920 902 885
Repairs and maintenance 781 729 451
Utilities 94 79 77
Insurance 79 71 64
Management fees 138 129 142
Professional fees 79 121 58
------ ------ ------
2,091 2,031 1,677
------ ------ ------
Revenues in excess of
certain operating expenses $6,554 $5,878 $6,225
====== ====== ======
See accompanying notes.
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<PAGE>
PHILIPS SHOPPING CENTER FUND
NOTES TO STATEMENTS OF REVENUES AND
CERTAIN OPERATING EXPENSES OF THE PROPERTIES
(Dollars in thousands)
1. Basis of Presentation
Presented herein are the Statements of Revenues and Certain Operating
Expenses related to the operations of nine Kmart anchored shopping
center properties (the "Properties"), which comprise approximately 1.1
million square feet of leasable space located in the states of Florida,
California, Washington, Minnesota, Illinois and Kentucky. The Company
acquired these Properties effective July 15, 1999. Prior to these
acquisitions, the Company had purchased, through a series of unrelated
transactions since July 1998, limited partnership interests in the
Properties. The accompanying financial statements present the revenues
and certain operating expenses of the Properties for the years ended
December 31, 1998, 1997 and 1996.
The accompanying financial statements have been prepared in accordance
with the applicable rules and regulations of the Securities and
Exchange Commission for the acquisition of real estate properties.
Accordingly, the financial statements exclude certain operating
expenses that may not be comparable to those expected to be incurred in
the future operations of the Properties. Expenses excluded consist of
interest, depreciation and certain general and administrative expenses.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the accompanying
financial statements and notes. Actual results could differ from those
estimates.
3. Revenue Recognition
The Properties are leased to tenants under operating leases. Minimum
rental revenue is recognized on a straight-line basis over the terms of
the respective leases. Percentage rents, representing the Company's
participation in tenants' gross sales in excess of predetermined
thresholds, are recognized upon verification that such rents are due
for any given lease year.
4. Management Agreements
Management services for certain of the Properties were provided by
Philips Property Management Corporation ("PPMC"), an affiliate of the
Company. Fees paid to PPMC for such services totaled $31, $21 and $23
during calendar years 1998, 1997 and 1996.
5. Lease Agreements
The Properties are leased to tenants under operating leases. The
minimum rental amounts due under certain leases are subject to
scheduled fixed increases. Certain leases also require that the tenants
reimburse increases in certain operating costs and real estate taxes.
-7-
<PAGE>
PHILIPS SHOPPING CENTER FUND
NOTES TO STATEMENTS OF REVENUES AND
CERTAIN OPERATING EXPENSES OF THE PROPERTIES
(Dollars in thousands)
5. Lease Agreements (cont'd)
Minimum rents and expense reimbursements represented approximately 98%
of revenues from rental property for the years ended December 31, 1998,
1997 and 1996.
Approximate future minimum rents to be received over the next five
years and thereafter for leases in effect as of December 31, 1998,
assuming that there are no renewals or extensions
of leases, are as follows (in thousands):
1999 $ 6,058
2000 5,652
2001 5,525
2002 5,098
2003 4,715
Thereafter 46,082
-------
$73,130
6. Concentration of Revenues
Each of the Properties is anchored by Kmart which is obligated under
long-term leases that expire in 2014. The rents from Kmart accounted
for approximately 60% of total revenues from rental property during
each of calendar years 1998, 1997 and 1996. Any adverse change in the
operating profitability of Kmart may have a material adverse effect on
the Properties.
-8-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
ESTIMATES OF NET INCOME AND FUNDS FROM OPERATIONS OF THE
PROPERTIES
-9-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
ESTIMATES OF NET INCOME AND
FUNDS FROM OPERATIONS
OF
THE PROPERTIES
-------------------
(UNAUDITED)
The following estimates of Net Income and Funds from Operations expected to be
generated from the operation of the Properties acquired on July 15, 1999 are
based upon the Statement of Revenues and Certain Operating Expenses for the Year
Ended December 31, 1998. These estimated results do not purport to represent
results of operations for the Properties in the future and were prepared on the
basis described in the accompanying notes which should be read in conjunction
herewith.
Estimated Net Income
Excess of revenues over
certain operating expenses $6,554
Less: Depreciation (Note 1) ( 1,003)
Interest (Note 1) ( 3,465)
Incremental management fees (Note 1) ( 121)
Minority interests (Note 1) ( 495)
---------
Estimated Net Income $ 1,470
=========
Estimated Funds from Operations
Estimated net income $ 1,470
Add: Depreciation 1,003
Minority interests 495
---------
Estimated Funds from Operations $ 2,968
=========
See accompanying notes.
-10-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
NOTES TO ESTIMATES OF NET INCOME AND
FUNDS FROM OPERATIONS
OF
THE PROPERTIES
---------------------
1. Basis of Presentation
Depreciation has been estimated based upon an allocation of the
acquisition cost of the Properties to land (20%) and building (80%) and
assuming a 39.5 year useful life applied on a straight line
method.
Interest represents estimated interest expense on borrowings under the
Company's revolving line of credit to fund acquisition of the
Properties.
Property management services for the Company's shopping centers are
provided pursuant to a Management Agreement by Philips International
Holding Corp., an affiliated entity, for a fee based
upon 3% of gross rental collections.
Minority interests represent the approximate 25% interest held by
minority partners (i.e. Unit holders) in Philips International Realty,
L.P., the Operating Partnership.
No income taxes have been provided because the Company operates so as
to qualify as a real estate investment trust under the provisions of
the Internal Revenue Code. Accordingly, the Company does not pay
Federal income tax providing income distributed to its stockholders
equals at least the amount of its real estate investment trust taxable
income and certain other conditions are met.
2. Acquisition Considerations
In assessing purchase of the Properties, the Company's management
considered the existing tenant base, which is the primary revenue
source, historic occupancy rates, the competitive nature of the market
and comparative rental rates. Furthermore, current and anticipated
maintenance and repair costs, real estate taxes and capital improvement
requirements were evaluated. Management is not aware of any material
factors that would cause the reported financial information in the
accompanying Statements of Revenues and Certain Operating Expenses and
Estimates of Net Income and Funds from Operations of the Properties to
be misleading or not necessarily indicative of future operating
results.
-11-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-12-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------
The accompanying Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1999 assumes the acquisition of the Properties had occurred as of such
date. The accompanying Pro Forma Condensed Consolidated Statements of Income for
the Year Ended December 31, 1998 and the Three Months Ended March 31, 1999
assume such acquisition had occurred as of January 1, 1998. The pro forma
information is based on the historical operating results for the Company, as
adjusted to give effect to (i) the Offering and (ii) the acquisition of the
Properties.
The Pro Forma Condensed Consolidated Financial Statements have been
prepared by the management of Philips International Realty Corp. These pro forma
statements may not be indicative of the financial position at March 31, 1999 or
the results of operations that would have actually occurred if the Offering and
the acquisition of the Properties had occurred as of January 1, 1998. Also, they
may not be indicative of the results that may be achieved in the future. The Pro
Forma Condensed Consolidated Financial Statements should be read in conjunction
with the financial information contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1998 and quarterly report on Form 10-Q for
the period ended March 31, 1999 and the accompanying notes thereto.
-13-
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
ACQUISITION
OF THE
HISTORIC PROPERTIES PROFORMA
--------------- -------------- --------------
ASSETS
<S> <C> <C> <C>
Rental properties - net $ 217,009 $ 49,500 $ 266,509
Investments in real estate joint ventures 56,205 (36,900) 19,305
Cash and cash equivalents 886 - 886
Accounts receivable 6,250 - 6,250
Deferred charges and prepaid expenses 4,799 - 4,799
Other assets 4,230 - 4,230
-------------- ------------- -------------
Total Assets $ 289,379 $ 12,600 $ 301,979
============== ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages and notes payable $ 161,714 $ 12,600 $ 174,314
Accounts payable and accrued expenses 3,780 - 3,780
Dividends payable 2,771 - 2,771
Other liabilities 1,917 - 1,917
-------------- ------------- -------------
Total Liabilities 170,182 12,600 182,782
-------------- ------------- -------------
Minority Interests in Operating Partnership 30,698 - 30,698
-------------- ------------- -------------
Shareholders' Equity
Preferred Stock, $.01 par value; 30,000,000 shares
authorized; no shares issued and outstanding - - -
Common Stock, $.01 par value; 150,000,000 shares
authorized; 7,340,474 shares issued and outstanding 73 - 73
Additional paid in capital 92,668 - 92,668
Cumulative distributions in excess of net income (3,385) - (3,385)
-------------- ------------- -------------
89,356 - 89,356
Stock purchase loans receivable (857) - (857)
-------------- ------------- -------------
Total Shareholders' Equity 88,499 - 88,499
-------------- ------------- -------------
Total Liabilities and Shareholders' Equity $ 289,379 $ 12,600 $ 301,979
============== ============= =============
</TABLE>
See accompanying notes.
- 14 -
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
AS
OFFERING ADJUSTED
HISTORIC ADJUSTMENTS (UNAUDITED)
-------- ----------- -----------
<S> <C> <C> <C>
Revenues from rental property $ 22,625 $ 12,224 $ 34,849
Expenses:
Operating expenses 3,213 1,505 4,718
Real estate taxes 3,259 1,748 5,007
Management fees to affiliates 688 363 1,051
Interest expense 4,243 2,205 6,448
Depreciation and amortization 3,809 2,021 5,830
General and administrative expenses 1,608 925 2,533
------------- --------------- -----------
16,820 8,767 25,587
------------- --------------- -----------
Operating income 5,805 3,457 9,262
Equity in net income of real estate joint ventures 683 - 683
Minority Interests in income of Operating Partnership (1,506) (865) (2,371)
Preferred units income allocation from Operating 63 (63) -
Partnership
Equity in net income of Operating Partnership, as
adjusted for the allocation of income to
preferred units 7 (7) -
Other income(expense), net (531) - (531)
------------- --------------- -----------
Income before extraordinary items $ 4,521 $ 2,522 $ 7,043
============= =============== ===========
Income per share
Basic $ 0.96
===========
Diluted $ 0.96
===========
<CAPTION>
ACQUISITION
OF THE PRO FORMA
PROPERTIES (UNAUDITED)
---------- -----------
<S> <C> <C>
Revenues from rental property $ 8,645 $ 43,494
Expenses:
Operating expenses 1,033 5,751
Real estate taxes 920 5,927
Management fees to affiliates 259 1,310
Interest expense 3,465 9,913
Depreciation and amortization 1,003 6,833
General and administrative expenses - 2,533
------------- ------------
6,680 32,267
------------- ------------
Operating income 1,965 11,227
Equity in net income of real estate joint ventures (719) (36)
Minority Interests in income of Operating Partnership (430) (2,801)
Preferred units income allocation from Operating - -
Partnership
Equity in net income of Operating Partnership, as
adjusted for the allocation of income to
preferred units - -
Other income(expense), net 462 (69)
------------- ------------
Income before extraordinary items $ 1,278 $ 8,321
============= ============
Income per share
Basic $ 1.13
============
Diluted $ 1.13
============
</TABLE>
See accompanying notes.
- 15 -
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
ACQUISITION
OF THE PRO FORMA
HISTORIC PROPERTIES (UNAUDITED)
-------- ---------- -----------
<S> <C> <C> <C>
Revenues from rental property $ 9,212 $ 2,104 $ 11,316
Expenses:
Operating expenses 1,157 222 1,379
Real estate taxes 1,419 223 1,642
Management fees to affiliates 276 63 339
Interest expense 1,807 866 2,673
Depreciation and amortization 1,611 251 1,862
General and administrative expenses 614 - 614
-------------- ------------ ------------
6,884 1,625 8,509
-------------- ------------ ------------
Operating income 2,328 479 2,807
Equity in net income of real estate joint ventures 613 (631) (18)
Minority Interests in income of Operating Partnership (613) (61) (674)
Other income(expense), net (507) 394 (113)
-------------- ------------ ------------
Net income $ 1,821 $ 181 $ 2,002
============== ============ ============
Income per share
Basic $ 0.25 $ 0.27
============== ============
Diluted $ 0.25 $ 0.27
============== ============
See accompanying notes.
- 16 -
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
As Adjusted amounts in the accompanying Pro Forma Condensed
Consolidated Statement of Income for the year ended December 31, 1998
reflect the historical operating results for the Company after giving
effect to the Offering. The Pro Forma amounts further adjust the
operating results for the year ended December 31, 1998 and the three
months ended March 31, 1999 to give effect to the July 1999 acquisition
of the Properties, as if this purchase had been completed as of January
1, 1998. The accompanying Pro Forma Condensed Consolidated Balance
Sheet assumes the acquisition of the Properties had been completed as
of March 31, 1999.
2. Adjustments
The adjustments are based on the Statement of Revenues and Certain
Operating Expenses for the Year Ended December 31, 1998 included
elsewhere in this current report on Form 8- K, and the unaudited
interim operating results for the Properties for the three month period
ended March 31, 1999.
Depreciation has been estimated based upon an allocation of the
acquisition cost of the Properties to land (20%) and building (80%) and
assuming a 39.5 year useful life applied on
a straight line method.
Interest represents estimated interest expense on borrowings under the
Company's line of credit to fund the acquisition of the Properties.
Property management services for the Company's shopping centers are
provided pursuant to a Management Agreement by Philips International
Holding Corp., an affiliated entity, for
a fee based upon 3% of gross rental collections.
Minority interests represent the approximate 25% interest held by
minority partners (i.e. Unit holders) in Philips International Realty,
LP, the Operating Partnership.
No income taxes have been provided because the Company operates so as
to qualify as a real estate investment trust under the provisions of
the Internal Revenue Code. Accordingly, the Company does not pay
Federal income tax providing income distributed to its stockholders
equals at least the amount of its real estate investment trust taxable
income and certain other conditions are met.
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Philips International Realty Corp.
---------------------------------------
(Registrant)
Date:July 30, 1999
By: /s/ Carl Kraus
---------------------------------------
Chief Financial Officer
-18-
</TABLE>
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
----------------------------------
ARTICLES SUPPLEMENTARY
Philips International Realty Corp., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that :
FIRST: Pursuant to Title 3, Subtitle 8 of the Maryland General
Corporation Law (the "MGCL"), the Board of Directors of the Corporation (the
"Board of Directors"), by resolution duly adopted at a duly called meeting held
on July 27, 1999, amended and restated the Second Amended and Restated Bylaws of
the Corporation to provide that the Corporation elects to be subject to the
provisions of Section 3-804 of the MGCL.
SECOND: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
THIRD: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to all
matters or facts required to be verified under oath, the undersigned President
acknowledges that, to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
President and attested to by its Secretary on this 27th day of July, 1999.
PHILIPS INTERNATIONAL REALTY CORP.
By: /s/ Louis J. Petra (SEAL)
------------------------
Louis J. Petra
President
ATTEST:
/s/ Sheila Levine
- --------------------------
Sheila Levine
Secretary
<PAGE>
THIRD AMENDED AND RESTATED
BYLAWS OF
PHILIPS INTERNATIONAL REALTY CORP.
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place or places as the Board of Directors may
designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders for
the election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May in each year. Failure to hold an annual
meeting does not invalidate the Corporation's existence or affect any otherwise
valid acts of the Corporation..
Section 3. SPECIAL MEETINGS.
(a) GENERAL. The president, chief executive officer or Board of
Directors may call special meetings of the stockholders. Subject to subsection
(b) of this Section 3, special meetings of stockholders shall also be called by
the secretary of the Corporation upon the written request of the holders of
shares entitled to cast not less than a majority of all the votes entitled to be
cast at such meeting.
(b) STOCKHOLDER REQUESTED SPECIAL MEETINGS. (1) Any stockholder
of record seeking to have stockholders request a special meeting shall, by
sending written notice to the secretary (the "Record Date Request Notice") by
registered mail, return receipt requested, request the Board of Directors to fix
a record date to determine the stockholders entitled to request a special
meeting (the "Request Record Date"). The Record Date
<PAGE>
Request Notice shall set forth the purpose of the meeting and the matters
proposed to be acted on at it, shall be signed by one or more stockholders of
record as of the date of signature (or their duly authorized proxies or other
agents), shall bear the date of signature of each such stockholder (or proxy or
other agent) and shall set forth all information relating to each such
stockholder that must be disclosed in solicitations of proxies for election of
directors in an election contest (even if an election contest is not involved),
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14a-11 thereunder. Upon receiving the Record Date Request Notice, the Board of
Directors may fix a Request Record Date. The Request Record Date shall not
precede and shall not be more than ten days after the close of business on the
date on which the resolution fixing the Request Record Date is adopted by the
Board of Directors. If the Board of Directors, within ten days after the date on
which a valid Record Date Request Notice is received, fails to adopt a
resolution fixing the Request Record Date and make a public announcement of such
Request Record Date, the Request Record Date shall be the close of business on
the tenth day after the first date on which the Record Date Request Notice is
received by the secretary.
(2) In order for any stockholder to request a special
meeting, one or more written requests for a special meeting signed by
stockholders of record (or their duly authorized proxies or other agents) as of
the Request Record Date entitled to cast not less than a majority (the "Special
Meeting Percentage") of all of the votes entitled to be cast at such meeting
(the "Special Meeting Request") shall be delivered to the secretary. In
addition, the Special Meeting Request shall set forth the purpose of the meeting
and the matters proposed to be acted on at it (which shall be limited to the
matters set forth in the Record Date Request Notice received by the secretary),
shall bear the date of signature of each such stockholder (or proxy or other
agent) signing the Special Meeting Request, shall set forth the name and
address, as they appear in the Corporation's books, of each stockholder signing
such request (or on whose behalf the Special Meeting Request is signed) and the
class and number of shares of stock of the Corporation which are owned of record
and beneficially by each such stockholder, shall be sent to the secretary by
registered mail, return receipt requested, and shall be received by the
secretary within 60 days after the Request Record Date. Any requesting
stockholder may revoke his, her or its request for a special meeting at any time
by written revocation delivered to the secretary.
(3) The secretary shall inform the requesting stockholders
of the reasonably estimated cost of preparing and mailing the notice of meeting
(including the Corporation's proxy materials). The secretary shall not be
required to call a special meeting upon stockholder request and such meeting
shall not be held unless, in addition to the documents required by paragraph (2)
of this Section 3(b), the secretary receives payment of such reasonably
estimated cost prior to the mailing of any notice of the meeting.
(4) Except as provided in the next sentence, any special
meeting shall be held at such place, date and time as may be designated by the
president, chief executive officer or Board of Directors, whoever has called the
meeting. In the case of any special meeting called by the secretary upon the
request of stockholders (a "Stockholder Requested Meeting"), such meeting shall
be held at such place, date and time as may be designated by the Board of
Directors; provided, however, that the date of any Stockholder Requested Meeting
shall be not
2
<PAGE>
more than 90 days after the record date for such meeting (the "Meeting Record
Date"); and provided further that if the Board of Directors fails to designate,
within ten days after the date that a valid Special Meeting Request is actually
received by the secretary (the "Delivery Date"), a date and time for a
Stockholder Requested Meeting, then such meeting shall be held at 2:00 p.m.
local time on the 90th day after the Meeting Record Date or, if such 90th day is
not a Business Day (as defined below), on the first preceding Business Day; and
provided further that in the event that the Board of Directors fails to
designate a place for a Stockholder Requested Meeting within ten days after the
Delivery Date, then such meeting shall be held at the principal executive
offices of the Corporation. In fixing a date for any special meeting, the
president, chief executive officer or Board of Directors may consider such
factors as he, she or it deems relevant within the good faith exercise of
business judgment, including, without limitation, the nature of the matters to
be considered, the facts and circumstances surrounding any request for meeting
and any plan of the Board of Directors to call an annual meeting or a special
meeting. In the case of any Stockholder Requested Meeting, if the Board of
Directors fails to fix a Meeting Record Date that is a date within 30 days after
the Delivery Date, then the close of business on the 30th day after the Delivery
Date shall be the Meeting Record Date.
(5) If at any time as a result of written revocations of
requests for the special meeting, stockholders of record (or their duly
authorized proxies or other agents) as of the Request Record Date entitled to
cast less than the Special Meeting Percentage shall have delivered and not
revoked requests for a special meeting, the secretary may refrain from mailing
the notice of the meeting or, if the notice of the meeting has been mailed, the
secretary may revoke the notice of the meeting at any time before ten days
before the meeting if the secretary has first sent to all other requesting
stockholders written notice of such revocation and of intention to revoke the
notice of the meeting. Any request for a special meeting received after a
revocation by the secretary of a notice of a meeting shall be considered a
request for a new special meeting.
(6) The chief executive officer, the president or the Board
of Directors may appoint regionally or nationally recognized independent
inspectors of elections to act as the agent of the Corporation for the purpose
of promptly performing a ministerial review of the validity of any purported
Special Meeting Request received by the secretary. For the purpose of permitting
the inspectors to perform such review, no such purported request shall be deemed
to have been delivered to the secretary until the earlier of (i) five Business
Days after receipt by the secretary of such purported request and (ii) such date
as the independent inspectors certify to the Corporation that the valid requests
received by the secretary represent at least a majority of the issued and
outstanding shares of stock that would be entitled to vote at such meeting.
Nothing contained in this paragraph (6) shall in any way be construed to suggest
or imply that the Corporation or any stockholder shall not be entitled to
contest the validity of any request, whether during or after such five Business
Day period, or to take any other action (including, without limitation, the
commencement, prosecution or defense of any litigation with respect thereto, and
the seeking of injunctive relief in such litigation).
(7) For purposes of these Bylaws, "Business Day" shall mean
any day other than a Saturday, a Sunday or a day on which banking institutions
in the State of New York
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are authorized or obligated by law or executive order to close.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such stockholder personally or by leaving it at
his residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail addressed to the
stockholder at his post office address as it appears on the records of the
Corporation, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of stockholders, the chairman
of the Board, if there be one, shall conduct the meeting or, in the case of
vacancy in office or absence of the chairman of the board, one of the following
officers present shall conduct the meeting in the order stated: the vice
chairman of the board, if there be one, the president, the vice presidents in
their order of rank and seniority, or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman, and the
secretary, or, in his absence, an assistant secretary, or in the absence of both
the secretary and assistant secretaries, a person appointed by the chairman
shall act as secretary.
Section 7. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation (the "Charter") for the vote necessary for the adoption of any
measure. If, however, such quorum shall not be present at any meeting of the
stockholders, the stockholders entitled to vote at such meeting, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at the meeting. At such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called and
at which a quorum is present shall be sufficient to approve any other matter
which may properly come before the meeting, unless more than a majority of the
votes cast is required by statute or by the Charter. Unless otherwise provided
in the Charter, each outstanding share,
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regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of stockholders.
Section 9. PROXIES. A stockholder may cast the votes entitled to be
cast by shares of stock owned of record by the stockholder, either in person or
by proxy executed by the stockholder or by the stockholder's duly authorized
agent in any manner permitted by law. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
Corporation registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee thereof, as the case may be, or a proxy
appointed by any of the foregoing individuals, unless some other person who has
been appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such fiduciary, either in
person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding shares
at any given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Section 11. INSPECTORS. At any meeting of stockholders, the chairman of
the meeting may, or upon the request of any stockholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of shares represented at the meeting based upon their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the stockholders.
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Each report of an inspector shall be in writing and signed by him or by
a majority of them if there is more than one inspector acting at such meeting.
If there is more than one inspector, the report of a majority of the inspectors
shall be the report of the inspectors. The report of the inspector or inspectors
on the number of shares represented at the meeting and the results of the voting
shall be prima facie evidence thereof.
Section 12. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS
(a) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of persons
for election to the Board of Directors and the proposal of business to be
considered by the stockholders (except for stockholder proposals included in the
proxy materials pursuant to Rule 14a-8 under the Exchange Act) may be made at an
annual meeting of stockholders (i) pursuant to the Corporation's notice of
meeting, (ii) by or at the direction of the Board of Directors or (iii) by any
stockholder of the Corporation who was a stockholder of record both at the time
of giving of notice provided for in this Section 12(a) and at the time of the
annual meeting, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 12(a)
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a)(1) of this Section 12, the stockholder must have given timely notice thereof
in writing to the secretary of the Corporation and such other business must
otherwise be a proper matter for action by stockholders. To be timely, a
stockholder's notice shall be delivered to the secretary at the principal
executive offices of the Corporation not less than 90 days nor more than 120
days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 30 calendar days or delayed by more than 60 days from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the 120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to such annual meeting
or the tenth day following the day on which public announcement of the date of
such meeting is first made by the Corporation. In no event shall the public
announcement of a postponement or adjournment of an annual meeting to a later
date or time commence a new time period for the giving of a stockholder's notice
as described above. Such stockholder's notice shall set forth (i) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Exchange Act (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected) ; (ii) as
to any other business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and of the beneficial owner, if
any, on whose behalf the proposal is made; and (iii) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made, (x) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (y) the
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number of shares of each class of stock of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a) (2) of this Section 12 to the contrary, in the event that the
number of directors to be elected to the Board of Directors is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the Corporation
at least 100 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 12(a) shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting. Nominations
of persons for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time of giving of notice
provided for in this Section 12(b) and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 12(b) . In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be) for election to such position as specified in the Corporation's
notice of meeting, if the stockholder's notice containing the information
required by paragraph (a)(2) of this Section 12 shall be delivered to the
secretary at the principal executive offices of the Corporation not earlier than
the 120th day prior to such special meeting and not later than the close of
business on the later of the 90th day prior to such special meeting or the tenth
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of a
postponement or adjournment of a special meeting to a later date or time
commence a new time period for the giving of a stockholder's notice as described
above.
(c) GENERAL. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Section 12 shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 12. The presiding officer of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made or proposed, as the
case may be, in accordance with the procedures set forth in this Section 12 and,
if any proposed nomination or business is not in compliance with this Section
12, to declare that such defective nomination or proposal be disregarded.
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(2) For purposes of this Section 12, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Sections
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
12, a stockholder shall also comply with all applicable requirements of state
law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 12. Nothing in this Section 12
shall be deemed to affect any right of a stockholder to request inclusion of a
proposal in, nor the right of the Corporation to omit a proposal from, the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 13. VOTING BY BALLOT. Voting on any question or in any election
may be viva voce unless the presiding officer shall order or any stockholder
shall demand that voting be by ballot.
Section 14. CONTROL SHARES. Notwithstanding any other provision of the
Charter or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation
Law (the "MGCL"), or any successor statute, shall not apply to any acquisition
by any person of shares of stock of the Corporation. This section may be
repealed, in whole or in part, at any time, whether before or after an
acquisition of control shares and, upon such repeal, may, to the extent provided
by any successor bylaw, apply to any prior or subsequent control share
acquisition; provided, however, that such repeal may not be effected by the
Board of Directors without the approval by the stockholders of the Corporation
by the affirmative vote of a majority of the issued and outstanding shares of
Common Stock entitled to vote on such matter.
ARTICLE III
DIRECTORS
Section 1. GENERAL. The business and affairs of the Corporation shall
be managed under the direction of its Board of Directors. The Corporation elects
to be subject to the provisions of Section 3-804 of Title 3, Subtitle 8 of the
MGCL.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or
at any special meeting called for that purpose, a majority of the entire Board
of Directors may establish, increase or decrease the number of directors,
provided that the number thereof shall never be less than the minimum number
required by the MGCL nor more than fifteen. Pursuant to the Charter, the
directors have been divided into classes with terms of three years. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly as equal as possible, provided that the tenure of office of a director
shall not be affected by any decrease in the number of directors.
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Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board
of Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Maryland, for the holding of regular meetings of the
Board of Directors without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the board (or any
co-chairman of the board if more than one) , president or by a majority of the
directors then in office. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the State of Maryland, as the place for holding any special meeting of the Board
of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile transmission,
United States mail or courier to each director at his business or residence
address. Notice by personal delivery, by telephone or a facsimile transmission
shall be given at least two days prior to the meeting. Notice by mail shall be
given at least five days prior to the meeting and shall be deemed to be given
when deposited in the United States mail properly addressed, with postage
thereon prepaid. Telephone notice shall be deemed be given when the director is
personally given such notice in a telephone call to which he is a party.
Facsimile transmission notice shall be deemed be given upon completion of the
transmission of the message to the number given to the Corporation by the
director and receipt of a completed answer-back indicating receipt. Neither the
business to be transacted at, nor the purpose of, any annual, regular or special
meeting of the Board of Directors need be stated in the notice, unless
specifically required by statute or these Bylaws.
Section 6. QUORUM. A majority of the directors shall constitute a
quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a majority of such directors are present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice, and provided further that if, pursuant to the
Charter or these Bylaws, the vote of a majority of a particular group of
directors is required for action, a quorum must also include a majority of such
group.
The directors present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.
Section 7. VOTING. The action of the majority of the directors present
at a meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute.
Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
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Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.
Section 10. VACANCIES. If for any reason any or all the directors cease
to be directors, such event shall not terminate the Corporation or affect these
Bylaws or the powers of the remaining directors hereunder (even if fewer than
three directors remain) . Any vacancy on the Board of Directors for any cause
other than an increase in the number of directors shall be filled by a majority
of the remaining directors, although such majority is less than a quorum. Any
vacancy in the number of directors created by an increase in the number of
directors may be filled by a majority vote of the entire Board of Directors. Any
individual so elected as director shall hold office for the remainder of the
full term of the class of directors in which the vacancy occurred and until his
successor is elected and qualifies.
Section 11. COMPENSATION. Directors shall not receive any stated salary
for their services as directors but, by resolution of the Board of Directors,
may receive fixed sums per year and/or per meeting and/or per visit to real
property owned or to be acquired by the Corporation and for any service or
activity they performed or engaged in as directors. Directors may be reimbursed
for expenses of attendance, if any, at each annual, regular or special meeting
of the Board of Directors or of any committee thereof and for their expenses, if
any, in connection with each property visit and any other service or activity
they performed or engaged in as directors; but nothing herein contained shall be
construed to preclude any directors from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 12. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.
Section 13. SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 14. RELIANCE. Each director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.
Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time to
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may
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have business interests and engage in business activities similar to or in
addition to or in competition with those of or relating to the Corporation.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors
may appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees, composed of one or more directors,
to serve at the pleasure of the Board of Directors.
Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board of Directors. A majority
of the members of the committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The act of a majority of the committee
members present at a meeting shall be the act of such committee. The Board of
Directors may designate a chairman of any committee, and such chairman or any
two members of any committee (if there are at least two members of the
committee) may fix the time and place of its meeting unless the Board shall
otherwise provide. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint another director to act in the place of such absent member. Each
committee shall keep minutes of its proceedings.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
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ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a chief executive officer, a president, a secretary and a treasurer and
may include a chairman of the board (or one or more co-chairmen of the board), a
vice chairman of the board, one or more executive vice presidents, one or more
senior vice presidents, one or more vice presidents, a chief operating officer,
a chief financial officer, one or more assistant secretaries and one or more
assistant treasurers. In addition, the Board of Directors may from time to time
appoint such other officers with such powers and duties as they shall deem
necessary or desirable. The officers of the Corporation shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of stockholders, except that the chief
executive officer may appoint one or more vice presidents, assistant secretaries
and assistant treasurers. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as may be convenient.
Each officer shall hold office until his successor is elected and qualifies or
until his death, resignation or removal in the manner hereinafter provided. Any
two or more offices except president and vice president may be held by the same
person. In its discretion, the Board of Directors may leave unfilled any office
except that of president, treasurer and secretary. Election of an officer or
agent shall not of itself create contract rights between the Corporation and
such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the chairman of the board (or any
co-chairman of the board if more than one), the president or the secretary. Any
resignation shall take effect at any time subsequent to the time specified
therein or, if the time when it shall become effective is not specified therein,
immediately upon its receipt. The acceptance of a resignation shall not be
necessary to make it effective unless otherwise stated in the resignation. Such
resignation shall be without prejudice to the contract rights, if any, of the
Corporation.
Section 3. VACANCIES. A vacancy in any office may be filled by the
Board of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may
designate a chief executive officer. In the absence of such designation, the
chairman of the board (or, if more than one, the co-chairmen of the board in the
order designated at the time of their election or, in the absence of any
designation, then in the order of their election) shall be the chief executive
officer of the Corporation. The chief executive officer shall have general
responsibility for implementation of the policies of the Corporation, as
determined by the Board of Directors, and for the management of the business and
affairs of the Corporation.
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Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may
designate a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board (or one or more co-chairmen of the board) The
chairman of the board shall preside over the meetings of the Board of Directors
and of the stockholders at which he shall be present. If there be more than one,
the co-chairmen designated by the Board of Directors will perform such duties.
The chairman of the board shall perform such other duties as may be assigned to
him or them by the Board of Directors.
Section 8. CHAIRMAN OF THE BOARD EMERITUS. The directors may elect by a
majority vote, from time to time, a chairman of the board emeritus (or one or
more co-chairmen of the board emeritus) . The chairman of the board emeritus
shall be an honorary position and shall have no vote on any matter considered by
the directors. The chairman of the board emeritus shall serve for such term as
determined by the Board of Directors and may be removed by a majority vote of
the Board of Directors with or without cause.
Section 9. PRESIDENT. The president or chief executive officer, as the
case may be, shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of a designation of a chief operating
officer by the Board of Directors, the president shall be the chief operating
officer. He may execute any deed, mortgage, bond, contract or other instrument,
except in cases where the execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
Corporation or shall be required by law to be otherwise executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.
Section 10. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or more vice presidents as executive vice president
or as vice president for particular areas of responsibility.
Section 11. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the
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<PAGE>
corporate records and of the seal of the Corporation; (d) keep a register of the
post office address of each stockholder which shall be furnished to the
secretary by such stockholder; (e) have general charge of the share transfer
books of the Corporation; and (f) in general perform such other duties as from
time to time may be assigned to him by the chief executive officer, the
president or by the Board of Directors.
Section 12. TREASURER. The treasurer shall have the custody of the
funds and securities of the Corporation and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. In the absence of a designation of a chief financial officer by
the Board of Directors, the treasurer shall be the chief financial officer of
the Corporation.
The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account of all his transactions as treasurer and of the financial condition of
the Corporation.
If required by the Board of Directors, the treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 13. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president or the Board of Directors. The assistant treasurers shall,
if required by the Board of Directors, give bonds for the faithful performance
of their duties in such sums and with such surety or sureties as shall be
satisfactory to the Board of Directors.
Section 14. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a director.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer
or agent to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be general
or confined to specific instances. Any agreement, deed, mortgage, lease or other
document executed by one or more of the directors or
14
<PAGE>
by an authorized person shall be valid and binding upon the Board of Directors
and upon the Corporation when authorized or ratified by action of the Board of
Directors.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or agent of the
Corporation in such manner as shall from time to time be determined by the Board
of Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.
ARTICLE VII
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile. Certificates
shall be consecutively numbered; and if the Corporation shall, from time to
time, issue several classes of stock, each class may have its own number series.
A certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been set and the
authority of the Board of Directors to set the relative rights and preferences
of subsequent series. In lieu of such statement or summary, the certificate may
state that the Corporation will furnish a full statement of such information to
any stockholder upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the certificate shall
contain a full statement of the restriction or state that the Corporation will
furnish information about the restrictions to the stockholder on request and
without charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or the transfer
agent of the Corporation of a stock certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to
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<PAGE>
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of any class of
stock will be subject in all respects to the Charter and all of the terms and
conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board
of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or the owner's
legal representative to advertise the same in such manner as he shall require
and/or to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise as a result of the issuance of a new
certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the record date is
fixed and shall be not more than 90 days and, in the case of a meeting of
stockholders, not less than ten days, before the date on which the meeting or
particular action requiring such determination of stockholders of record is to
be held or taken.
In lieu of fixing a record date, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not longer
than 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the stock transfer books are not closed
for the determination of stockholders, (a) the record date for the determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of stockholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the directors,
declaring the dividend or allotment of rights, is adopted.
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When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors
may issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any other
provision of the Charter or these Bylaws, the Board of Directors may issue units
consisting of different securities of the Corporation. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Corporation, except that the Board of Directors may provide that for a
specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the Charter. Dividends and other
distributions may be paid in cash, property or stock of the Corporation, subject
to the provisions of law and the Charter.
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purposes as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was
17
<PAGE>
created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the Charter, the Board of Directors may
from time to time adopt, amend, revise or terminate any policy or policies with
respect to investments by the Corporation as it shall deem appropriate in its
sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption of a
seal by the Corporation. The seal shall contain the name of the Corporation and
the year of its incorporation and the words "Corporate Seal Maryland." The Board
of Directors may authorize one or more duplicate seals and provide for the
custody thereof.
Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf of the Corporation.
ARTICLE XII
INDEMNIFICATION AND ADVANCES FOR EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation, without requiring a preliminary determination of the
ultimate entitlement to indemnification, shall indemnify and shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity or (b) any individual who, while a director of the Corporation
and at the request of the Corporation, serves or has served another corporation,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a director, officer, partner or trustee of such corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is made
a party to the proceeding by reason of his service in that capacity. The
Corporation may, with the approval of its Board of Directors, provide such
indemnification and advance for expenses to a person who served a predecessor of
the Corporation in any of the capacities described in (a) or (b) above and to
any employee or agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any
18
<PAGE>
other provision of the Bylaws or Charter inconsistent with this Article, shall
apply to or affect in any respect the applicability of the preceding paragraph
with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption.
ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the Charter or
these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
Neither the business to be transacted at nor the purpose of any meeting need be
set forth in the waiver of notice, unless specifically required by statute. The
attendance of any person at any meeting shall constitute a waiver of notice of
such meeting, except where such person attends a meeting for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
Subject to the rights of stockholders provided in Section 14 of Article
II of these Bylaws, the Board of Directors shall have the exclusive power to
adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.
Adopted: July 27, 1999
19
AMENDMENT NO. 1 TO SHAREHOLDER RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO THE SHAREHOLDER RIGHTS AGREEMENT (the "Rights
Agreement"), dated as of March 31, 1999, between Philips International Realty
Corp., a Maryland corporation (the "Company"), and BankBoston, N.A., a
Massachusetts corporation, as Rights Agent (the "Rights Agent") is made as of
this 27th day of July, 1999.
W I T N E S S E T H
WHEREAS, the Company and the Rights Agent previously have entered into
the Shareholder Rights Agreement; and
WHEREAS, the Company desires to amend the Rights Agreement as set forth
in this Amendment to incorporate recent Maryland legislative changes and to
otherwise continue to operate under the terms and conditions of the Rights
Agreement;
NOW, THEREFORE, pursuant to Section 27 of the Rights Agreement and in
consideration of the mutual promises hereinafter set forth and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, do
hereby agree to amend the Rights Agreement as follows:
FIRST Section 1 is hereby amended to add a new paragraph (l) as
follows, and all subsequent paragraphs shall be relettered:
"(l) "Continuing Director" shall mean any member of the
Board of Directors of the Company, while such Person is a member
of the Board of Directors, who (i) is not (A) an Acquiring Person
or an Affiliate or Associate of an Acquiring Person or (B) a
representative or nominee of an Acquiring Person or of any such
Affiliate or Associate or (C) any Person elected to the Board of
Directors as a result of a proxy solicitation or initiative
referred to in Section 23(b); and (ii) either (A) was a member of
the Board of Directors immediately prior to the time any Person
becomes an Acquiring Person or (B) subsequently becomes a member
of the Board of Directors, if such Person's nomination for
election or election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors."
SECOND Section 23 shall be amended and restated as follows:
"Section 23. Redemption and Termination. (a) Subject to the
provisions of paragraph (b) below, the Board of Directors of the
Company may, at its option, at any time prior to the earlier of
(i) the close of business on the tenth calendar day following the
Shares Acquisition Date (or if the Shares Acquisition Date shall
have occurred prior to the Record Date, the close of business on
the tenth day following the Record Date) or (ii) close of
business on the Final Expiration Date,
<PAGE>
redeem all but not less than all of the then outstanding Rights
at a redemption price of $.0l per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). Subject to
the terms hereof and to the immediately preceding sentence, the
redemption of the Rights by the Board of Directors may be made
effective at such time, on such basis and on such conditions as
the Board of Directors in its sole discretion may establish. The
Company may, at its option, pay the Redemption Price either in
shares of its Common Stock (valued at their then current per
share market price as defined in Section 11(d)(i) on the date of
the redemption), other securities, cash or other assets.
Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable after the first
occurrence of an event specified in Section 11(a)(ii) hereof
until such time as the Company's right of redemption under this
Section 23(a) has expired.
(b) If the Board of Directors of the Company, pursuant to
paragraph (a) above, authorizes redemption of the Rights in the
circumstances set forth below, then there must be Continuing
Directors in office and such authorization shall require the
approval of at least a majority of the Continuing Directors: such
authorization occurs within one hundred eighty (180) days after
the earlier to occur of (i) the Share Acquisition Date or (ii)
the date of a change (resulting from a proxy or consent
solicitation or similar shareholder initiative) in a majority of
the directors of the Company in office at the commencement of
such solicitation or initiative if any Person who is a
participant in such solicitation or initiative has stated (or if
upon the commencement of such solicitation or initiative a
majority of the directors of the Company has determined in good
faith) that such Person (or any of its Affiliates or Associates)
intends to take, or may consider taking, any action which would
result in such Person becoming an Acquiring Person or which would
cause the occurrence of a Trigger Event.
(c) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights pursuant to
paragraph (a) of this Section 23, and without any further action
and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right held. The
Company shall promptly give public notice of any such redemption;
provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such redemption. The
Company shall give notice of such redemption to the holders of
the then outstanding Rights by mailing such notice to the Rights
Agent and to all such holders at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to
the Distribution Date, on the registry books of the transfer
agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will
state the method by which the payment of the Redemption Price
will be made. Neither the
2
<PAGE>
Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in this Section 23
or in Section 24 hereof, and other than in connection with the
repurchase of Common Stock prior to the Distribution Date."
THIRD The third sentence of Section 27 shall be amended and restated as
follows:
"From and after the Distribution Date, the Company may, and
the Rights Agent shall, if the Company so directs, from time to
time supplement or amend any provision of this Agreement without
the approval any holder of Right Certificates in order (a) to
cure any ambiguity, (b) to correct or supplement any provision
contained herein which may be defective or inconsistent with any
of other provisions herein, (c) to shorten or lengthen any time
period hereunder (provided that any shortening of the time
periods set forth in Section 23 hereof shall be effective only if
there are Continuing Directors and shall require a majority of
such Continuing Directors), or (d) to change or supplement the
provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the
interests of the holders of Right Certificates (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, however, that from and after the Distribution
Date, this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (c) of this sentence, (i) a time
period relating to when the Rights may be redeemed at such time
as the Rights are not then redeemable or (ii) any other time
period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and the benefits to, the
holders of Rights (other than an Acquiring Person or any
Affiliate or Associate of an Acquiring Person)."
FOURTH The Section of Exhibit C entitled "Redemption and Exchange of
Rights" shall be amended and restated as follows:
"Redemption and Exchange of Rights
At any time after any person or group becomes an Acquiring
Person, the Board of Directors may cause the Company to exchange
the Rights (other than Rights owned by the Acquiring Person which
shall have become void), in whole or in part, at an exchange
ratio of one Common Share per Right (subject to adjustment).
At any time prior to the earlier of (i) the close of
business on the tenth calendar day following the Shares
Acquisition Date (or if the Shares Acquisition Date shall have
occurred prior to the Record Date, the close of business on the
tenth day following the Record Date) or (ii) the Final Expiration
Date, the Board of Directors of the Company may cause the Company
to redeem the Rights in whole, but not in part, at a price of
$.0l per Right (the "Redemption Price"). Under certain
circumstances set forth in the Rights Agreement, the decision to
3
<PAGE>
redeem shall require that there be Continuing Directors (as
defined below) in office and that a majority of the Continuing
Directors approve such decision. Immediately upon the action of
the Board of Directors of the Company electing to redeem the
Rights, with, if required, the concurrence of the Continuing
Directors, the Company shall make announcement thereof, and upon
such action, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the
Redemption Price.
Until a Right is exercised or exchanged, the holder thereof,
as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive
dividends.
"Continuing Director" shall mean any member of the Board of
Directors of the Company, while such Person is a member of the
Board of Directors, who (i) is not (A) an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or (B) a
representative or nominee of an Acquiring Person or of any such
Affiliate or Associate or (C) any Person elected to the Board of
Directors as a result of a proxy solicitation or initiative
referred to in Section 23(b); and (ii) either (A) was a member of
the Board of Directors immediately prior to the time any Person
becomes an Acquiring Person or (B) subsequently becomes a member
of the Board of Directors, if such Person's nomination for
election or election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors."
FIFTH Except for the terms, conditions and provisions modified by this
Amendment, the Rights Agreement shall remain in full force and affect pursuant
to the terms thereof.
SIXTH This Amendment and the rights and obligations of the parties
hereunder shall be governed by and construed and interpreted in accordance with
the substantive laws of the State of Maryland, without regard to its conflict of
laws principles.
SEVENTH This Amendment may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one in the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the Company and the Rights Agent have caused this
Agreement to be duly executed and attested, all as of the day and year first
above written.
PHILIPS INTERNATIONAL REALTY CORP.
By: /s/ Louis J. Petra
------------------------
Name: Louis J. Petra
Title: President
Attest:
By: /s/ Sheila Levine
--------------------------
Name: Sheila Levine
Title: Secretary
BANKBOSTON, N.A.
By: /s/ Carol Mulvy Eori
------------------------
Name: Carol Mulvy Eori
Title: Administration Manager
Attest:
By: /s/ Kelly J. Corvelo
--------------------------
Name: Kelly J. Corvelo
Title: Paralegal
<PAGE>
================================================================================
EMPLOYMENT AGREEMENT
FOR
CARL KRAUS
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Employment. 1
2. Services. 2
3. Compensation and Benefits. 2
4. Termination of Employment / Change in Control. 8
5. Confidential Information / Return of Documents / Noncompete / Remedies. 13
6. Successors and Assigns. 15
7. Timing of and No Duplication of Payments. 18
8. Modification or Waiver. 18
9. Notices. 18
10. Governing Law and Resolution of Disputes. 19
11. Severability. 19
12. Counterparts. 20
13. Headings. 20
14. Entire Agreement. 20
15. Survival of Agreements. 20
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of and
is effective as of July 12, 1999 by and between Carl Kraus, an individual
residing at 25 Post Run, Newton Square, Pennsylvania 19073 ("Executive"), and
Philips International Realty Corp., a Maryland corporation with offices at c/o
Philips International, 417 Fifth Avenue, New York, New York 10016 ("Reit").
RECITALS
WHEREAS, Reit desires to employ Executive, and Executive desires to be
employed by Reit, pursuant to the terms set forth herein
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
1. Employment.
Reit hereby agrees to employ Executive, and Executive hereby agrees
to be employed by Reit, on a full-time basis for a term commencing on the date
hereof and expiring on January 1, 2002, unless this Agreement shall be
terminated earlier pursuant to the terms hereof, provided, however, that
effective January 1, 2002, the term of this Agreement shall be extended
automatically until June 30, 2004 unless at least two hundred forty (240) days
prior to January 1, 2002 either Reit or Executive shall have given written
notice to the other party that such party does not wish to extend this Agreement
("Notice of Non-Extension"). The term of this Agreement during which
<PAGE>
Executive shall be employed on a full-time basis is referred to herein as the
"Employment Period."
2. Services.
(a) Executive shall serve as Chief Financial Officer of Reit.
Executive shall devote his best efforts and substantially all of his business
time, skill and attention to the business of Reit, and shall perform such duties
as are customarily performed by a Chief Financial Officer of a Reit and as may
be more specifically enumerated from time to time by the Board of Directors of
Reit (the "Board"), the Executive Committee of the Board, if any, the Chief
Executive Officer, President or Chief Operating Officer of Reit.
(b) Executive shall be based in New York, New York, subject to
reasonable travel requirements.
3. Compensation and Benefits.
(a) During the Employment Period, Reit shall pay Executive a minimum
annual base salary in the amount of $150,000 ("Annual Base Salary") which shall
be increased by a minimum of four (4%) percent on each anniversary of the date
of this Agreement during the Employment Period and shall be payable in
accordance with Reit's normal payroll practices. Any increase which may be
granted in excess of the four (4%) percent minimum shall be in the sole
discretion of the Board.
(b) Commencing with calendar year 2000 and for each calendar year
thereafter during the Employment Period, Executive shall be eligible to receive
an incentive bonus based on the growth in funds from operations ("FFO") per
share in excess of the FFO per share of Reit for the immediately preceding
calendar year which
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shall constitute the base year (the "Base Year") or with respect to the year in
which Executive's employment with Reit terminates the quarterly period(s)
described in sub-paragraph 3(b)(ii) below for purposes of the incentive bonus
calculation (the "Formula Bonus").
(i) For each calendar year during the Employment Period
(commencing with the year 2000) in which Executive's employment with Reit has
not terminated, Executive shall be entitled to receive a Formula Bonus in the
event the FFO per share for the applicable calendar year of Reit exceeds the FFO
per share for the Base Year by more than fifteen (15%) percent (the "Threshold
Percentage"). Once the Threshold Percentage has been exceeded, Executive's
Formula Bonus shall be calculated as a percentage of Annual Base Salary, not to
exceed an annual maximum of fifty (50%) percent of Annual Base Salary. The
Formula Bonus amount shall be determined by (i) dividing (a) the amount by which
the percent increase in FFO per share for the applicable year exceeds the
Threshold Percentage by (b) .15, and (ii) multiplying the result by Annual Base
Salary. For example,
Year 2000 FFO per share = 2.35
Base Year (1999) FFO per share = 1.95
Percentage Increase
((2.35 - 1.95) divided by 1.95) = 20.5%
Percent Increase above
Threshold Percentage = 5.5%
Divided by .15 = 36.67% (not to exceed 50%)
Annual Base Salary = $156,000
Formula Bonus = $57,205
The Formula Bonus calculation shall be performed as soon as
practicable after the FFO per share for a particular year of Reit has been
determined. In the event it is determined that Executive is entitled to a
Formula Bonus, it shall be paid to Executive in a single sum cash payment within
ten (10) business days of the
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date such determination is made. Except as otherwise provided for herein,
Executive must be employed by Reit on the last day of the calendar year of Reit
as to which a Formula Bonus is payable to receive a Formula Bonus for that year.
For purposes of this Agreement, FFO shall be calculated on a consistent basis in
accordance with the National Association of Real Estate Investment Trusts White
Paper definition published in March 1995, and in accordance with the accounting
practices and policies of Reit in effect from time to time applied on a
consistent basis to the entire Employment Period. Shares outstanding for
purposes of the calculation shall be the diluted weighted average number of
outstanding shares of Common Stock and weighted average number of outstanding
limited partnership units for the applicable period.
(ii) In the event Executive's employment with Reit terminates
during the Employment Period, Executive's eligibility for a Formula Bonus for
the calendar year in which Executive's employment terminates shall be determined
on the same basis as set forth in sub-paragraph 3(b)(i) above (i.e., the
Threshold Percentage must be exceeded) with the following adjustments:
(A) Executive must be employed for one (1) full calendar
quarter or more to be eligible for a Formula Bonus;
(B) the percent increase in FFO per share shall be
determined by comparing the FFO per share for the
completed calendar quarter(s) that have elapsed in the
year of termination prior to Executive's termination
of employment to the corresponding calendar quarter(s)
for the most recently completed calendar year of Reit;
and
(C) the Formula Bonus so determined, as well as the fifty
(50%) percent of Annual Base Salary maximum bonus
shall be multiplied by a fraction; the numerator is
the number of completed days during the calendar year
ending with Executive's termination of employment and
the denominator is three hundred sixty-five (365),
with the result being the Formula
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Bonus so determined and the maximum bonus for the year
of termination.
(c) Reit shall provide Executive with a cash advance at the rate of
$25,000 per year for each of the first three years of the Employment Period,
advanced ratably at such time as Annual Base Salary payments are made to
Executive. Interest shall accrue at the rate of six (6%) percent compounded
annually on the outstanding balance of the cash advance until repayment in full.
Any prepayments by Executive (through the earning of a Formula Bonus or
otherwise) shall be applied first to interest, then principal. The cash advance
balance plus interest shall reduce the amount of the Formula Bonus payable to
Executive. In the event that the Formula Bonuses which are earned are
insufficient to satisfy the cash advances plus interest, the cash advance
balance plus interest shall be due and owing in full on the fifth (5th)
anniversary of the date hereof. In the event of Executive's earlier termination
of employment, the entire balance of the cash advance plus interest shall become
immediately due and owing. Executive shall execute any documents which may be
required by Reit to evidence his obligation with respect to the cash advance.
Cash advances paid pursuant to this paragraph 3(c) shall represent a recourse
obligation to the Executive.
(d) Reit shall deduct and withhold from all compensation payments
all social security and other federal, state and local taxes and charges in the
minimum amounts (or such greater amounts as Executive may from time to time
request) which currently are or which hereafter may be required by law to be so
deducted and withheld, including withholding pursuant to bonus withholding
rates, as applicable. In addition to the compensation specified above, Executive
shall be entitled to the following benefits:
(i) health and hospitalization (family), life insurance,
disability, business travel accident, and any compensated
absences and any
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other plans made generally available to other executive
officers of Reit;
(ii) a $400 monthly allowance which is intended to cover local
business-related travel expenses;
(iii) three (3) weeks paid vacation;
(iv) a $3,000 monthly housing allowance (the "Housing
Allowance"); and
(v) reimbursement for substantiated reasonable business
expenses including out-of-town travel expenses incurred by
Executive in furtherance of the interests of Reit.
(e) As further consideration for Executive agreeing to serve as
an Executive officer of Reit and entering into this Agreement upon the terms set
forth herein, including, without limitation, the terms relating to
non-competition set forth in Paragraph 5(e) below, Reit shall:
(i) on the effective date of this Agreement, issue to Executive
options to purchase 50,000 shares of common stock par value
$.01 per share ("Common Stock" or "Reit Common Stock")
pursuant to the Reit 1997 Stock Option and Long-Term
Incentive Plan (the "Plan"), at an exercise price equal to
the fair market value per share of Common Stock on date of
grant, and issue options to purchase an additional 10,000
shares of Common Stock at then current fair market value on
each of the first three anniversaries of the date of this
Agreement. Executive's options shall be evidenced by option
grant agreements dated as of each applicable anniversary
thereof which agreements shall include, but not be limited
to, the following provisions: vesting (and subsequent
grants), subject to Executive's continued employment with
Reit (including continued employment after the issuance of
a Notice of Non-Extension, if applicable) and the
provisions of Paragraphs 4(a), 4(b), 4(d) and 4(e) below,
over a three (3) year period from each respective date of
grant with one-third (1/3) of the Options vesting on each
successive anniversary (unless vesting is otherwise
accelerated pursuant to the terms and conditions of this
Agreement or the option grant agreement) and
non-transferability; and
(ii) as of the effective date of this Agreement loan on a
non-recourse basis to Executive $200,000 (the "Stock
Acquisition Loan"), with the loan proceeds to be used by
Executive simultaneously to purchase as many shares of Reit
Common Stock, at the market
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price, as such Stock Acquisition Loan amount will permit.
Interest shall accrue on the Stock Acquisition Loan at six
(6%) percent per annum and shall be payable, on the
outstanding balance thereof from time to time, quarterly in
arrears. Dividends on the Reit Common Stock acquired by
Executive, subject to reduction for interest repayment
(interest payments shall first be made by the withholding
of dividends), shall be payable to Executive at such times
and in such amounts as may generally be declared by the
Board with respect to all shares of Reit Common Stock then
outstanding without regard to whether the Stock Acquisition
Loan has been repaid or forgiven. The Stock Acquisition
Loan is being granted and secured pursuant to the terms and
conditions of this Agreement. The Reit Common Stock
purchased with the proceeds of the Stock Acquisition Loan,
which shall serve as the sole security for the Stock
Acquisition Loan, shall be delivered to and held by Reit
and a Secured Non-Recourse Promissory Note and Stock Pledge
Agreement evidencing and securing such Stock Acquisition
Loan shall be executed by Reit and Executive. In the event
of a conflict between the aforementioned documents and this
Agreement, the terms of this Agreement shall control.
The Stock Acquisition Loan shall be forgiven as follows:
subject to the provisions of Paragraphs 4(a), 4(b), 4(d)
and 4(e) below, $100,000 of the principal shall be forgiven
on the second (2nd) anniversary of the date of this
Agreement and $100,000 of the principal shall be forgiven
on the third (3rd) anniversary of the date of this
Agreement, provided Executive is employed by Reit on each
applicable forgiveness date.
The Stock Acquisition Loan shall be initially secured by
the shares of Reit Common Stock purchased by Executive with
the proceeds of the Stock Acquisition Loan. On the second
(2nd) anniversary of the date of this Agreement, the
outstanding balance of the Stock Acquisition Loan shall be
secured only by shares of Reit Common Stock having a fair
market value of one hundred twenty-five (125%) percent of
the outstanding principal amount of the Stock Acquisition
Loan. If on the second (2nd) anniversary of the date of
this Agreement the Collateral Value exceeds one hundred
twenty-five (125%) percent of the outstanding balance of
the Stock Acquisition Loan after giving effect to any loan
forgiveness, as applicable (the "Secured Loan Amount "),
Reit shall automatically release to Executive such portion
of the collateral the aggregate fair market value of which
equals the Collateral Value less the Secured Loan Amount,
free and clear of any and all encumbrances under the Stock
Pledge Agreement.
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4. Termination of Employment / Change in Control.
(a) In the event Executive terminates his employment with Reit
for Good Reason (as hereinafter defined), or subject to the provisions of
Paragraphs 4(b), 4(d), 4(e) and 4(h) below as applicable, in the event Reit
terminates Executive's employment during the Employment Period, (i) Reit shall
pay Executive any unpaid salary accrued through and including the date of
termination plus any unpaid Formula Bonus due Executive for any prior year
and/or the year of termination (the "Accrued Amount"); (ii) if such termination
occurs on or prior to January 1, 2002 Reit shall pay Executive's salary at the
rate of his Annual Base Salary then in effect on date of termination through
January 1, 2002 in a single sum payment as soon as practicable following
termination of employment ("Initial Period Severance"), plus $100,000 of
principal under the Stock Acquisition Loan on date of termination of Executive's
employment pursuant to this Paragraph shall be forgiven as of the date of
Executive's termination and the number of shares of Reit Common Stock held as
collateral for the Stock Acquisition Loan which are not needed to satisfy the
balance of the Stock Acquisition Loan shall be released to Executive as soon as
practicable after Executive's date of termination ("Initial Period Stock
Acquisition Loan Forgiveness and Collateral Release"); (iii) if such termination
occurs after January 1, 2002 but prior to June 30, 2004, Reit shall pay
Executive's salary at the rate of his Annual Base Salary then in effect on date
of termination through June 30, 2004 in a single sum payment as soon as
practicable following termination of employment ("Second Period Severance"),
plus the remaining $100,000 principal balance of the Stock Acquisition Loan
shall be forgiven and shares of Reit Common Stock held as collateral shall be
released
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("Second Period Stock Acquisition Loan Forgiveness and Collateral Release");
(iv) any options previously granted to Executive shall be vested as of
Executive's termination of employment "Accelerated Vesting," and Executive shall
be entitled to exercise any options within ninety (90) days of the date of
Executive's termination of employment and (v) continuation of the Housing
Allowance for the lesser of an additional twelve (12) month period following
employment termination or for the remaining term of Executive's lease
("Continued Housing Allowance"). Executive shall furnish the lease to Reit upon
request. Except for any rights which Executive may have to the Accrued Amount,
Initial Period Severance or Second Period Severance, Initial Period or Second
Period Stock Acquisition Loan Forgiveness and Collateral Release, Accelerated
Vesting, the Continued Housing Allowance and/or as otherwise required by law,
Reit shall have no further obligations hereunder following such termination.
(b) (i) In the event of a Change in Control (as hereinafter
defined) during the Employment Period, Executive shall be entitled to
Accelerated Vesting forgiveness of the outstanding balance of the Stock
Acquisition Loan (both principal and interest), immediate delivery to Executive
of all shares held by Reit as collateral for the Stock Acquisition Loan and, in
the event of termination of Executive's employment on or after the occurrence of
the Change in Control, Reit shall pay Executive and Executive shall be entitled
to the Accrued Amount, plus the greater of (i) Initial Period Severance or
Second Period Severance, as applicable or (ii) a payment of twelve (12) months
of salary at the rate of his Annual Base Salary in effect on date of termination
plus the Continued Housing Allowance. Executive must exercise any options which
have vested pursuant to this Section 4(c) within ninety (90) days of his actual
termination of employment.
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(c) For purposes of this Agreement:
(i) "Fair Market Value" shall mean the average of the
closing price on the New York Stock Exchange of the
Common Stock on each of the trading days within the
thirty (30) days immediately preceding the date of
termination of Executive's employment;
(ii) "Change in Control" shall mean, that any of the
following events has occurred: (a) any "person" or
"group" of persons, as such terms are used in Sections
13 and 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than any employee
benefit plan sponsored by Reit, becomes the
"beneficial owner", as such term is used in Section 13
of the Exchange Act, (irrespective of any vesting or
waiting periods); of (I) Common Stock or any class of
stock convertible into Common Stock and/or (II) the
units of limited partnership interests in PRLP
("Common OP Units") or preferred units or any other
class of units convertible into Common OP Units, in an
amount equal to thirty (30%) percent or more of the
sum total of the Common Stock and the Common OP Units
(treating all classes of outstanding stock, units or
other securities convertible into stock and/or units
as if they were converted into Common Stock or Common
OP Units as the case may be and then treating Common
Stock and Common OP Units as if they were a single
class) issued and outstanding immediately prior to
such acquisition as if they were a single class; (b)
any Common Stock is purchased pursuant to a tender or
exchange offer other than an offer by Reit; (c) the
dissolution or liquidation of Reit or the consummation
of any merger or consolidation of Reit or any sale or
other disposition of all or substantially all of its
assets, if the shareholders of Reit immediately before
such transaction own, immediately after consummation
of such transaction, equity securities (other than
options and other rights to acquire equity securities)
possessing less than thirty (30%) percent of the
voting power of the surviving or acquiring company; or
(d) both Philip Pilevsky and Sheila Levine are no
longer executive officers or members of the Board of
Directors of the Company and together they no longer
own at least ten (10%) percent of the Common Stock or
Common OP Units;
(iii) "Good Reason" shall mean (A) any assignment to
Executive of any duties different from those
contemplated by Paragraph 2 hereof which would result
in a diminution of duties so that Executive would not
have an appropriate title,
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position, and function as an executive officer of
Reit, (B) any material breach of this Agreement by
Reit, (C) a reduction in Executive's Annual Base
Salary as in effect at the time in question, or any
other material failure by Reit to comply with
Paragraph 3 hereof, (D) failure of Reit to obtain the
assumption of the obligation to perform this Agreement
by any successor as contemplated in Paragraph 6(a)
hereof, or (E) the relocation of Executive's own
office more than fifty (50) miles away from New York,
New York.
(d) In the event Executive's employment with Reit terminates
for reasons other than as set forth in Paragraphs 4(a) and 4(b) above or 4(e)
and 4(h) below, including without limitation, in the event Executive elects to
terminate his employment at any time during the Employment Period with Reit,
(other than following issuance of a Notice of Non-Extension by Reit), Executive
shall be entitled to payment of the Accrued Amount. Executive shall have ninety
(90) days following his termination of employment to exercise any options which
have vested. The Stock Acquisition Loan shall be accelerated and disposition of
the same shall be governed by the provisions of Paragraph 4(h) below. In the
event Executive issues a Notice of Non-Extension to Reit, Executive shall be
entitled to continue to work and receive his salary at the rate of his Annual
Base Salary through the expiration of the two hundred forty (240) day notice
period.
(e) In the event Executive terminates his employment with Reit
following Reit's issuance of a Notice of Non-Extension to Executive, but prior
to expiration of the two hundred forty (240) day notice period, Executive shall
be entitled to the Accrued Amount, Accelerated Vesting, the Initial Period Stock
Acquisition Loan Forgiveness and Collateral Release. Executive shall have ninety
(90) days following his termination of employment to exercise any options which
have vested. Except for any rights which Executive may have to the Accrued
Amount, the Initial Period Stock
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Acquisition Loan Forgiveness and Collateral Release, and Accelerated Vesting,
Reit shall have no further obligation hereunder following such termination.
(f) Any termination of Executive's employment by Reit or any
such termination by Executive (other than on account of death) shall be
communicated by written Notice of Termination to the other party hereto.
(g) Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against cash amounts due Executive under this Agreement on
account of subsequent employment.
(h) In the event Reit terminates Executive's employment for
Just Cause (as hereinafter defined), Reit shall pay Executive the Accrued Amount
immediately upon termination of employment. In addition, in such event,
Executive shall have ninety (90) days following his termination of employment to
exercise any options granted hereunder which have vested. The Stock Acquisition
Loan shall be accelerated and all amounts outstanding thereunder (both principal
and interest) shall become due and owing on Executive's date of termination. In
the event Executive does not pay the full balance due under the Stock
Acquisition Loan on date of termination of this Agreement, and the Collateral
Value equals or exceed the unpaid balance due, that portion of the collateral
necessary to pay the Stock Acquisition Loan shall be sold by Reit and the
proceeds of such sales shall be used to satisfy the balance due thereon. Any
excess collateral shall be released to Executive as soon as practicable
following the Executive's date of termination and such sales. Except for any
rights which Executive may have under this Paragraph (h) or as otherwise
required by law, Reit shall have no further obligations hereunder following such
termination. For purposes of this
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Agreement, "Just Cause" shall mean (A) the willful and continued failure by
Executive to substantially perform his duties in good faith hereunder (other
than any such failure resulting from Executive's incapacity due to physical or
mental illness) for a period of thirty (30) days after written demand for
substantial performance is delivered by Reit specifically identifying the manner
in which Reit believes Executive has not substantially performed his duties, or
(B) willful misconduct by Executive which is materially injurious to Reit,
monetarily or otherwise, or (C) the willful violation by Executive of the
provisions of Paragraph 5 hereof. For purposes of this Paragraph 4(h), no act,
or failure to act, on Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in furtherance of the interests of Reit.
5. Confidential Information / Return of Documents / Noncompete /
Remedies.
(a) Executive understands and acknowledges that during his
employment with Reit, he will be exposed to Confidential Information (as defined
below), all of which is proprietary and which will rightfully belong to Reit.
Executive shall hold in a fiduciary capacity for the benefit of Reit such
Confidential Information obtained by Executive during his employment with Reit
and shall not, directly or indirectly, at any time, either during or after his
employment with Reit, without Reit's prior written consent, use any of such
Confidential Information or disclose any of such Confidential Information to any
individual or entity other than Reit or its employees, except as required in the
performance of his duties for Reit or as otherwise required by law. Executive
shall take all reasonable steps to safeguard such Confidential Information and
to protect such Confidential Information against disclosure, misuse, loss or
theft.
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(b) The term "Confidential Information" shall mean any
information not generally known in the relevant trade or industry or otherwise
not generally available to the public, which was obtained by Executive from
Reit. For purposes of this Paragraph 5, Reit shall be deemed to include any
entity which is controlled, directly or indirectly, by Reit and any entity of
which a majority of the economic interest is owned, directly or indirectly, by
Reit.
(c) Executive agrees that for a period of two (2) years
following his termination of employment with Reit, Executive will not directly
or indirectly, solicit, recruit, hire or cause to be hired for employment, any
individual or individuals who are employed by Reit or its
subsidiaries/affiliates on or after his date of termination. The foregoing shall
not prohibit the Executive from giving an unsolicited reference upon request.
(d) Except for such items which are of a personal nature to
Executive (e.g., daily business planner and roll-o-dex), all writings, records,
and other documents and things containing any Confidential Information shall be
the exclusive property of Reit, shall not be copied, summarized, extracted from,
or removed from the premises of Reit, except in pursuit of the business of Reit
or at the direction of Reit, and shall be delivered to Reit, without retaining
any copies, upon the termination of Executive's employment or at any time as
requested by Reit.
(e) Executive agrees that:
(A) During the Employment Period Executive shall not,
directly or indirectly, engage in, or own, invest in, manage, control, derive
any compensation, or provide consulting services either directly or indirectly
with respect to any venture or enterprise engaged in any development,
acquisition or management activities with
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respect to retail shopping center properties, without regard to whether or not
such activities compete with Reit. Nothing herein shall prohibit Executive from
being a passive owner of not more than one (1%) percent of the outstanding stock
of any class of securities of a corporation or other entity engaged in such
business which is publicly traded, so long as he has no active participation in
the business of such corporation or other entity.
(B) If, at the time of enforcement of this Paragraph
5(e), a court shall hold that the duration, scope, area or other restrictions
placed on Executive herein are unreasonable, the parties agree that without
further action on their parts reasonable maximum duration, scope, area or other
restrictions shall be substituted by such court for the stated duration, scope,
area or other restrictions.
(C) For purposes of this Paragraph 5(e), Reit shall be
deemed to include any entity which is controlled, directly or indirectly, by
Reit and any entity of which a majority of the economic interest is owned,
directly or indirectly, by Reit.
(f) The parties hereto agree that Reit would suffer
irreparable harm from a breach by Executive of any of the covenants or
agreements contained in Paragraph 5 of this Agreement. Therefore, in the event
of the actual or threatened breach by Executive of any of the provisions of
Paragraph 5 of this Agreement, Reit may, in addition and supplementary to other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions thereof.
6. Successors and Assigns.
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(a) Reit shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Reit, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
Reit would be required to perform it if no such succession had taken place.
Failure of Reit to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from Reit and such successor in the same amount and on the same
terms as he would be entitled to pursuant to Paragraphs 4(a) and 4(b) above.
Except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date of termination. In
the event of such a breach of this Agreement, the Notice of Termination shall
specify such date as the date of termination. As used in this Paragraph, "Reit"
shall mean Reit as hereinbefore defined and any successor to all or
substantially all of its business and/or its assets as aforesaid which executes
and delivers the agreement provided for in this Paragraph 6 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law. Any cash payments owed to Executive pursuant to this Paragraph 6 shall be
paid to Executive in a single sum immediately prior to the consummation of the
transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall
inure to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid
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in accordance with the terms of this Agreement to Executive's devisee, legatee,
or other designee or, if there be no such designee, to Executive's estate.
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7. Timing of and No Duplication of Payments.
All payments payable to Executive pursuant to this Agreement
shall be paid as soon as practicable after such amounts have become fully vested
and determinable. In the event any amount becomes vested or payable under more
than one provision of this Agreement, Executive shall not be entitled to receive
a duplicate payment of any such amount.
8. Modification or Waiver.
No amendment, modification, waiver, termination or
cancellation of this Agreement shall be binding or effective for any purpose
unless it is made in a writing signed by the party against whom enforcement of
such amendment, modification, waiver, termination or cancellation is sought. No
course of dealing between or among the parties to this Agreement shall be deemed
to affect or to modify, amend or discharge any provision or term of this
Agreement. No delay on the part of Reit or 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 Reit or Executive of any such right or remedy
shall preclude other or further exercise thereof. A waiver of right or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right
or remedy on any other occasion.
9. Notices.
All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or delivered by a recognized delivery service or mailed,
postage prepaid, by express,
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certified or registered mail, return receipt requested, and addressed to Reit or
Executive, as applicable, at the address set forth above (or to such other
address as shall have been previously provided in accordance with this Paragraph
9).
10. Governing Law and Resolution of Disputes.
This agreement will be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of laws thereunder. Any claim for damages arising out of or related to
this Agreement except for any claims arising out of or related to Paragraph 5
hereof shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, before one (1)
arbitrator provided, however, that the arbitration shall take place in New York
and the arbitrator shall apply New York law. The decision of the arbitrator
shall be final and binding on the parties, and judgment upon the award rendered
by the arbitrator may be entered by any court having jurisdiction thereof. This
Paragraph shall not be construed to prevent Reit from seeking injunctive relief
with respect to any and all disputes arising out of or related to Paragraph 5
hereof which shall be adjudicated by a court of competent jurisdiction.
11. Severability.
Whenever possible, each provision and term of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision or term of this Agreement shall be held to
be prohibited by or invalid under such applicable law, then, subject to the
provisions of Paragraph 5(e)(B), such provision or term shall be ineffective
only to the extent of such prohibition or invalidity, without
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invalidating or affecting in any manner whatsoever the remainder of such
provisions or term or the remaining provisions or terms of this Agreement.
12. Counterparts.
This Agreement may be executed in separate counterparts, each
of which is deemed to be an original and both of which taken together shall
constitute one and the same agreement.
13. Headings.
The headings of the Paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part hereof and
shall not affect the construction or interpretation of this Agreement.
14. Entire Agreement.
This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and undertakings, both written and oral, among the parties with
respect to the subject matter hereof.
15. Survival of Agreements.
The covenants made in Paragraph 4 and Paragraph 5 shall
survive the termination of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
PHILIPS INTERNATIONAL REALTY CORP.
By: /s/ Louis J. Petra
------------------
Name: Louis J. Petra
Title: President
EXECUTIVE
/s/ Carl Kraus
--------------
Carl Kraus
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