UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
For Annual and Transition
Reports Pursuant to Sections 13 or
15(d) of the Securities Exchange
Act of 1934
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
COMMISSION FILE NUMBER 0-26215
PROPERTY CAPITAL TRUST, INC.
(Exact name of Registrant as specified in its charter)
Maryland 04-2452367
- ------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
177 Milk St., Boston, Massachusetts 02109
- ----------------------------------- ----------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 451-2100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
- -----------------------------
(title of class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of March 28, 2000, 479,226 shares of common stock, $.01 par value, of
the Registrant were outstanding. The aggregate market value of the voting stock
held by non-affiliates of the Registrant based upon the closing price of $0.625
per share for the Registrant's common stock, as reported on NASDAQ's
Over-the-Counter Bulletin Board as of March 28, 2000, was 186,331.
<PAGE>
PART I
Certain information required in response to Items 10, 11, 12 and 13 of Part
III are hereby incorporated by reference from PCT's Proxy Statement for the 2000
Annual Meeting of Stockholders. Such Proxy Statement shall not be deemed filed
as part of this Annual Report on Form 10-K except for the parts therein which
have been specifically incorporated by reference herein.
ITEM 1. BUSINESS
General
Maryland Property Capital Trust, Inc. ("PCT"), a Maryland corporation was
formed on June 15, 1998. In May 1999, PCT merged with Property Capital Trust
(the "Trust"), a publicly traded Massachusetts business trust. PCT changed its
name to "Property Capital Trust, Inc." and intends to continue to qualify as a
Real Estate Investment Trust ("REIT") under the Internal Revenue Code of 1986,
as amended. At the time of the merger, each shareholder of the Trust received
one-sixtieth of a share of common stock of PCT for each share they owned of the
Trust. A total of 159,737 shares were issued to these shareholders. Immediately
following the merger, Property Capital Trust Limited Partnership ("PCT LP")
(formerly Framingham York Associates Limited Partnership) purchased 319,489
shares of common stock of PCT for an aggregate price of $1,000,000, which stock
was distributed to the partners of PCT LP. PCT LP borrowed $1,000,000, secured
by the property located at 51 New York Avenue, Framingham, Massachusetts, as a
source of funding this purchase. In connection with these transactions, the
partnership agreement of PCT LP was amended and restated and PCT contributed
$1,000,000 to the capital of PCT LP and became the general partner of PCT LP.
PCT LP incurred $1,252,941 of costs related to these transactions which have
been charged to expense.
Due to the approved merger by the shareholders of the Trust and the related
transactions as described in the preceding paragraph that transpired during
1999, the limited partners of PCT LP owned approximately 67% of the common stock
of PCT. In addition, PCT is the sole general partner of PCT LP. Because PCT LP's
partners currently own the larger portion of the voting rights of PCT, this
transaction has been accounted for in accordance with Securities and Exchange
Commission Staff Accounting Bulletin Topic 2-A2, pursuant to which PCT LP has
been treated as the "accounting acquirer". Accordingly, the historical financial
information of PCT solely reflects the financial information of PCT LP for
periods prior to May 28, 1999, the date on which the merger was consummated.
PCT does not own directly any real estate. PCT's sole asset is its
approximate 1% general partnership interest and approximate 32.3% common limited
partnership interest in PCT LP.
PCT relies heavily on the services of The Beal Companies LLP, Beal &
Company, Inc. and Bruce A. Beal, Robert L. Beal and Michael A. Manzo, executive
officers of The Beal Companies, to manage its business. The Beal Companies,
founded in 1888, is a privately held real estate company located in Boston,
Massachusetts. It provides a full compliment of real estate services, including
development, property management, consulting, appraisal, assessment, brokerage
and construction services. The Beal Companies and its principals currently
control and/or manage a portfolio of commercial and residential real estate,
which they have either developed or acquired. Bruce A. Beal, Robert L. Beal and
Michael A. Manzo are employees of PCT, each of whom acts as an officer and
director of PCT, and will continue as principals and officers of The Beal
Companies.
PCT relies on the experience and knowledge of its officers and directors to
manage its growth, if any. PCT believes that its executive officers have
long-standing relationships with institutional owners, lenders, bankers and
other real estate operators and developers which PCT anticipates may provide PCT
with access to transaction activity and investment opportunities. As part of its
strategy, PCT anticipates that it may position itself to produce portfolio
growth if and when the capital markets for REIT's recover from the downturn that
began in mid-1998 and as funding for real estate activities of publicly held
entities becomes more readily available. Until PCT is satisfied that the
financial markets are sufficiently stabilized to allow growth of PCT, PCT LP
will be operated with the existing single property and with all operating
expenses maintained at the lowest levels, consistent with regulatory
requirements and other needs. Given appropriate market conditions, PCT believes
that its REIT structure will allow PCT to make tax efficient acquisitions
through the issuance of units of partnership interest of PCT LP. PCT also may
issue equity securities of PCT that may be senior to the shares of common stock
of PCT.
Current Real Estate Investments
PCT LP was formed pursuant to the provisions of the Uniform Limited
Partnership Act of Massachusetts on September 27, 1984. Currently, PCT LP owns
17,250 square feet of laboratory and office space, which is situated on 1.1
acres of land, located at 51 New York Avenue in Framingham, Massachusetts. This
property is managed by Beal & Company, Inc. Currently, Genzyme Corporation is
the sole tenant of the property. Any failure by Genzyme Corporation to pay its
rent will have a material adverse effect on PCT LP's revenues and ability to
meet operating expenses.
ITEM 2. PROPERTIES
PCT LP owns 17,250 square feet of real estate located at 51 New York
Avenue, Framingham, MA. This property is comprised of 1.1 acres of land improved
by a one-story combined office and research development building. Framingham
York Associates Limited Partnership the predecessor of PCT LP, acquired this
property in 1985. Currently, Genzyme Corporation is the sole tenant of the
property. The lease, as amended, is for a term of twenty years that expires in
September 2005. As of December 31, 1999, PCT LP had an outstanding mortgage of
$991,377 that is secured by the real estate and assignment of rents under the
operating lease.
ITEM 3. Legal Proceedings
PCT is not subject to any material litigation, and to PCT's knowledge no
litigation is threatened against PCT, other than routine actions for negligence
or other claims and administrative proceedings arising under the ordinary course
of business, some of which are expected to be covered by liability insurance and
all of which are not expected to have a material adverse effect on the business
or financial condition or results of operation of PCT.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matter was submitted for a vote by the shareholders during the fourth
quarter of the fiscal year ended December 31, 1999.
<PAGE>
PART II
ITEM 5. Market For Registrant's Common Equity and Related Stockholders Matters
PCT's shares are traded on the NASDAQ's Over-the-Counter Bulletin Board
(symbol PCTGE). The high and low bid prices for each quarter subsequent to the
merger, are shown below.
Fiscal Year 1999
Period High Low
Second Quarter $ .50 $ .15625
Third Quar $ .5625 $ .040625
Fourth Quarter $ .5625 $ .5625
PCT has never paid cash dividends on its common stock. PCT has elected to
be taxed as a REIT. Pursuant to the Internal Revenue Code provisions relating to
REITs, PCT must distribute annualy at least 95% of its net taxable income,
excluding any net capital gain, to avoid corporate income taxation of the
earnings it distributes. Pursuant to the terms of the partnership agreement of
PCT LP, each of the limited partners of PCT LP, other than PCT, is entitled to
priority distribution from the cash available from the operations of PCT LP.
In connection with the merger of PCT with the Trust, the predecessor of PCT
LP contributed $1,000,000 in cash to PCT in exchange for 319,489 shares of newly
issued common stock of PCT, and these shares of common stock were then
distributed to the partners of PCT LP's predecessor based on their pro rata
percentage interests in PCT LP's predecessor. The sale of these shares was not
registered. PCT relied on the exemption to registration as provided by Section
4(2) of the Securities Act of 1933, as amended.
As of March 28, 2000, there were 415 record holders of PCT's common stock.
ITEM 6. SELECTED FINANCIAL DATA
Years Ended December 31,
(in thousands except per share amounts)
1999 1998 1997 1996 1995
Statement of Income Data
Revenues $ 321 $ 315 $ 315 $ 315 $ 314
Costs and Operating
Expenses 1,481 73 60 67 101
-------- ------ ----- ------ ------
Income (Loss) from
Continuing Operations $ (1,160) $ 242 $ 255 $ 248 $ 213
Limited partners interest
in operating partnership
income (149) - - - -
--------- ------ ----- ------ --------
Net (Loss) Income $ (1,309) $ 242 $ 255 $ 248 $ 213
========= ====== ======= ======== ========
Loss per Share $ (2.73) N/A N/A N/A N/A
<PAGE>
Balance Sheet Data
Total Assets $ 1,496 $1,507 $ 1,552 $ 1,587 $ 1,629
Long Term Debt $ 978 $ - $ - $ - $ -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-looking Statements
This Management's Discussion and Analysis of Financial Condition and
Results of Operations, including, "Year 2000 Disclosure" and other sections of
this Annual Report, contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements that are based on current
expectations, estimates and projections about the industries in which PCT
operates, management's beliefs and assumptions made by management. Words such as
"expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates",
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which are
difficult to predict. These risks, among others, that could affect PCT's future
performance include: (I) changes in business strategy and development places;
(ii) the business abilities and judgment of PCT's officers and directors; (iii)
failure of PCT to qualify as a REIT; (iv) real estate investment considerations,
such as the effect of economic and other conditions in PCT's market area in cash
flows and values; and (v) PCT's ability to generate revenues sufficient to meet
debt service payments and other operating expenses that are not otherwise paid
by the existing tenant. Therefore, actual outcomes and results may differ
materially from those in such forward-looking statements. PCT undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
RESULTS OF OPERATIONS
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Rental income totaled $310,550 for the years ended December 31, 1999 and
1998. Total income for the year ended December 31, 1999 totaled $320,892, as
compared to $315,102 for the year ended December 31, 1998. Other income consists
of interest earned from working capital reserves. The $5,790 increase in total
income from last year is related primarily to the interest earned on the
$1,000,000 mortgage proceeds that were invested until the costs of the
transactions discussed below were paid.
Transaction costs for the year ended December 31, 1999 totaled $1,252,941.
These costs included, but were not limited to, legal, accounting, printing,
insurance and other costs related to the issuance of the common stock
certificates to the shareholders of PCT in May 1999.
Administrative and financial expenses increased $29,280 as compared to
1998. In 1999 PCT incurred certain costs related to its merger with the Trust
that included the hiring of a transfer agent, obtaining directors and officers
insurance, offsite storage fees and overhead reimbursement to a related party
totaling $18,143.
Professional services increased $50,727 from $24,000 in 1998 to $74,727 in
1999. This increase is primarily due to the additional reporting and compliance
requirements set forth by the government agencies overseeing public entities.
Interest expense of $72,033 for the year ended December 31, 1999 includes
interest of $54,422 related to the $1,000,000 mortgage that was placed on the
property in May 1999 and interest of $17,611 that was incurred for advances made
by officers, directors and related affiliates.
Net loss for the year-end December 31, 1999 totaled $1,309,786 as compared
to net income totaling $241,973 for the year end December 31, 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Rental income for the years ended December 31, 1998 and 1997 totaled
$310,550 and $311,338, respectively. Total income for the year ended December
31, 1998 totaled $315,102, as compared to $315,117 for the year ended December
31, 1997. In addition to rental income, PCT earned other income consisting
primarily of interest from working capital reserves.
Property operating expenses not paid directly by the tenant were $42,037
for the year ended December 31, 1998, as compared to $29,380 for the year ended
December 31, 1997. The increase in operating expenses is due primarily to
amounts incurred in fiscal 1998 for the preparation of the audited financial
statements for the years ended 1998 and 1997.
In addition to the audit and tax preparation fees referenced above, PCT
also incurred other expenses, including, but not limited to, travel
reimbursement, dues to real estate organizations and liability insurance.
Inflation
The tenant has executed a long term lease that expires in September 2005.
In addition the tenant has two five year options to extend the term of the
lease. The tenant is also responsible for paying substantially all of the
operating costs, including the real estate taxes. PCT believes these factors
reduce the risk of inflation on the current business and operations.
Financial Condition, Liquidity and Capital Resources
In April 1999, PCT LP obtained a $1,000,000 mortgage. The mortgage requires
monthly principal and interest payments of $7,881. The interest rate on the
mortgage is fixed at 8.13% through maturity at May 1, 2004, at which time the
remaining balance of approximately $926,000 is due. The mortgage is
collateralized by PCT LP's property and an assignment of rents.
In connection with the merger of PCT with the Trust, the officers,
directors and affiliates of PCT funded $561,352 of transaction costs. In May
1999, PCT LP executed unsecured, demand promissory notes, with interest accruing
at the prime rate for the entire outstanding balance. These notes were with
Messrs. Beal & The Beal Companies LLP. In July, a principal payment of $245,442
was made to the holders of the notes.
In connection with the merger of PCT with the Trust, PCT LP contributed
$1,000,000 of cash to PCT in exchange for a 319,489 shares of common stock of
PCT. Immediately thereafter, PCT LP distributed these shares to its partners as
described above in Part I, Item I, "Business - General".
Cash and cash equivalents were $180,931 at December 31, 1999 as compared to
$153,094 at December 31, 1998. Management has considered the liquidity needs of
PCT and the adequacy of expected liquidity sources to meet these needs. As long
as the tenant continues to pay the rent obligation to PCT LP and substantially
all of the operating costs, as provided for under the existing lease agreement,
management believes the level of working capital provided by operating
activities will be sufficient to pay the monthly debt service, operating
expenses not paid directly by the tenant, the minimum distributions required to
maintain PCT's REIT qualification under the Internal Revenue Code and the
quarterly distributions as required under the partnership agreement of PCT LP.
For the year ended December 31, 1999 cash distributed to the partners of
PCT LP totaled $218,273, as compared to $290,000 for the year ended December 31,
1998. In addition PCT LP distributed the $1,000,000 of common stock of PCT to
its partners in May 1999. In January of 2000, PCT LP distributed an additional
$36,636 to its limited partners.
Year 2000 Disclosure
The "Year 2000 Issue" became a concern because existing computer programs
used only the last two digits to refer to a year, rather than four digits. If
not corrected, many computer applications could fail or create erroneous
results.
Because PCT's business is not substantially dependent upon its data
processing and software and hardware systems, PCT anticipated that it would not
incur more than $10,000 of costs to address the Year 2000 problem. As of March
21, 2000, PCT spent approximately $1,000 on Year 2000 related expenses. As a
contingency plan, in the event of any Year 2000 related problems, PCT has other
software that it can use until the main financial systems are operating
properly.
Although at this point PCT has not identified any specific business
functions that have suffered any material disruptions as a result of any Year
2000 related computer problems, PCT cannot give assurances that such disruptions
will not occur in the future. Any Year 2000 related problems could have a
material adverse affect on us.
The preceding "Year 2000 Disclosure" contains various forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934 and the Section 27A Securities Act of 1933. These forward-looking
statements represent PCT's beliefs or expectations regarding future events. When
used in the "Year 2000 Disclosure", the words "believes," "expects," "estimates"
and similar expressions are intended to identify forward looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
<PAGE>
<TABLE>
ITEM 8. FINANCIAL STATEMENTS
<CAPTION>
Pages
<S> <C>
Report of Independent Public Accountants 9
Consolidated Balance Sheets as of December 31, 1999 and 1998 10
Consolidated Statements of Operations for each of the three
years ended December 31, 1999, 1998 and 1997 11
Consolidated Statements of Shareholders' Equity (Deficit)/Partners'
Capital for each of the three years ended December 31, 1999 (Note 1) 12
Consolidated Statements of Cash Flows for each of the three
years ended December 31, 1999, 1998 and 1997 13
Notes to Consolidated Financial Statements 14 - 19
</TABLE>
<PAGE>
Report of Independent Public Accountants
To the Shareholders of Property Capital Trust:
We have audited the accompanying consolidated balance sheets of Property
Capital Trust, Inc. (a Real Estate Investment Trust) and subsidiary as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, shareholders' equity (deficit)/partners' capital and cash flows for
the three years then ended. These financial statements are the responsibility of
the Company's 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 auditing
standards. Those standards require that we plan and perform the audit 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 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.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Property Capital Trust, Inc. and subsidiary as of December 31, 1999 and 1998,
and the consolidated results of their operations and their cash flows for the
three years then ended in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
January 28, 2000
<PAGE>
<TABLE>
PROPERTY CAPITAL TRUST, INC.
Consolidated Balance Sheets
December 31, 1999 and 1998
<CAPTION>
1999 1998
------------ -----------
Assets
<S> <C> <C>
Rental Property, at cost (Note 2(e))
Land $ 202,500 $ 202,500
Building & Fixtures 1,243,600 1,235,600
Tenant improvements 402,114 402,114
--------------- --------------
1,848,214 1,840,214
Less Accumulated depreciation 858,757 827,866
--------------- --------------
989,457 1,012,348
Cash and Cash Equivalents (Note 2(d)) 180,931 153,094
Prepaid Expense 5,000 -
Deferred Charges, Net of
Accumulated Amortization of
$35,195 in 1999 and $31,657
in 1998 (Note 2(g)) 53,377 28,313
Deferred Rent (Note 2(f)) 267,088 313,538
--------------- --------------
$ 1,495,853 $ 1,507,293
=============== ==============
Liabilities and Shareholders' Equity (Deficit)/Partners' Capital
Liabilities:
Current portion of mortgage
payable (Note 3) $ 13,125 $ -
Notes payable-other (Note 4) 315,910 -
Accounts payable
and accrued expenses 74,101 14,000
Tenant security deposits 11,453 11,453
-------------- --------------
414,589 25,453
Mortgage Payable, Net of current
Portion (Note 3) 978,252 -
Commitments and Contingencies (Note 5)
Limited Partners' Interest
in Operating Partnership 412,798 -
Shareholders' Equity (Deficit)/
Partners' Capital:
Common stock, $.01 par value
Authorized - 30,000,000 shares
Issued and outstanding - 479,226 4,792 -
Additional paid in capital 995,208 -
Accumulated deficit (1,309,786) -
Partners' Capital - 1,481,840
-------------- --------------
(309,786) 1,481,840
-------------- --------------
$ 1,495,853 $ 1,507,293
============== ==============
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
PROPERTY CAPITAL TRUST, INC.
Consolidated Statements of Operations
For the Years End December 31, 1999, 1998 and 1997
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental Income (Note 2(f)) $ 310,550 $ 310,550 $ 311,338
Other Income - 761 -
Interest Income 10,342 3,791 3,779
----------- ----------- -----------
320,892 315,102 315,117
----------- ----------- -----------
Expenses:
Transaction Costs (Note 1) 1,252,941 - -
Administrative and
financial expenses 47,317 18,037 18,380
Professional services
expenses 74,727 24,000 11,000
Interest expense 72,033 - -
Depreciation &
Amortization (Note 2(e)) 34,429 31,092 31,091
----------- ----------- -----------
1,481,447 73,129 60,471
----------- ----------- -----------
(Loss) Income before
limited partners' interest
in operating partnership
income (1,160,555) 241,973 254,646
Limited partners'
interest in operating
partnership income (149,231) - -
----------- ----------- -----------
Net (Loss) Income $(1,309,786) $ 241,973 $ 254,646
=========== =========== ===========
Basic and diluted loss per
common share $ (2.73) $ N/A $ N/A
=========== ========== ===========
Dividends per common share $ - $ N/A $ N/A
=========== ========== ===========
Weighted average common
shares outstanding 479,226 N/A N/A
=========== ========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
PROPERTY CAPITAL TRUST, INC.
Consolidated Statements of Shareholders' Equity (Deficit)/Partners' Capital
(Note 1)
For the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
Additional
Paid
Partners Common In Accumulated
Capital Stock Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Partners' Capital
December 31, 1996 $1,565,221 $ - $ - $ - $1,565,221
Distribution to
partners (290,000) - - - (290,000)
Net income 254,646 - - - 254,646
---------- ------- -------- ---------- ----------
Partners' Capital
December 31, 1997 1,529,867 - - - 1,529,867
Distribution to
partners (290,000) - - - (290,000)
Net income 241,973 - - - 241,973
---------- ------- -------- ---------- ----------
Partners' Capital
December 31, 1998 1,481,840 - - - 1,481,840
Distributions to
partners (1,218,273) - - - (1,218,273)
Reclassification to
limited partners
interest in operating
partnership
capital (263,567) - - - (263,567)
Issuance of
common stock - 4,792 995,208 - 1,000,000
Net loss - - - (1,309,786) (1,309,786)
---------- ------- -------- ---------- -----------
Shareholders' Equity
(Deficit)
December 31, 1999 $ - $ 4,792 $995,208 $(1,309,786) $ (309,786)
========== ======= ======== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
PROPERTY CAPITAL TRUST, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
1999 1998 1997
--------- -------- --------
Cash Flows from Operating Activities:
<S> <C> <C> <C>
Net (loss) income $(1,309,786) $ 241,973 $ 254,646
Limited partners' interest in
operating partnership income 149,231
Adjustments to reconcile net
(loss) income to net cash
(used in) provided by
operating activities:
Operating expenses funded by
affiliates 561,352 - -
Depreciation and amortization 34,429 31,092 31,091
Decrease in deferred rent 46,450 22,450 14,450
Increase in accrued expenses 60,101 3,500 500
Increase in prepaid expense (5,000) - -
----------- --------- ----------
Total Adjustments 697,332 57,042 46,041
----------- --------- ----------
Net cash (used in) provided by
operating activities (463,223) 299,015 300,687
----------- --------- ----------
Cash Flows From Investing Activities:
Purchase of furniture and fixtures (8,000) - -
Expenditures for deferred charges (28,602) - -
----------- --------- ----------
Net cash used in investing
activities (36,602) - -
----------- --------- ----------
Cash Flows From Financing Activities:
Proceeds from mortgage payable 1,000,000 - -
Principal paid on mortgage payable (8,623) - -
Principal paid on notes payable (245,442) - -
Distributions to partners (218,273) (290,000) (290,000)
----------- --------- ----------
Net cash provided by (used in)
financing activities 527,662 (290,000) (290,000)
----------- --------- ----------
Net increase in cash 27,837 9,015 10,687
Cash, beginning of year 153,094 144,079 133,392
----------- --------- ----------
Cash, end of year $ 180,931 $ 153,094 $ 144,079
=========== ========= ==========
Supplemental disclosure of cash
paid during the year for:
Interest $ 59,332 $ - $ -
Income Taxes $ 5,000 $ - $ -
Supplemental disclosure of
non-cash items:
Notes payable issued to affiliates
for operating expenses $ 561,352 $ - $ -
Issuance and distribution of
common stock (see Note 1) $ 1,000,000 $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
PROPERTY CAPITAL TRUST, INC.
Notes to Consolidated Financial Statements
December 31, 1999
(1) BUSINESS AND ORGANIZATION
The consolidated financial statements represent the activity of Property
Capital Trust, Inc. (PCT) and Property Capital Trust Limited Partnership (PCT
LP), a Massachusetts limited partnership, of which PCT is the general partner.
PCT LP was formed pursuant to the provisions of the Uniform Limited
Partnership Act of Massachusetts to acquire, hold, develop, operate, and lease
real property. PCT LP owns and operates commercial real estate located at 51 New
York Avenue, Framingham, Massachusetts.
In May 1999, Maryland Property Capital Trust, Inc., a Maryland corporation,
merged with Property Capital Trust (the Trust), a publicly traded Massachusetts
business trust. PCT changed its name to "Property Capital Trust, Inc." and
intends to continue to qualify as a Real Estate Investment Trust (REIT).
Immediately following the merger, PCT LP (formerly Framingham York Associates
Limited Partnership) purchased 319,489 shares of common stock of PCT for an
aggregate price of $1,000,000, which stock was distributed to the partners of
PCT LP. PCT LP borrowed $1,000,000, secured by the property located at 51 New
York Avenue, Framingham, Massachusetts, as a source of funding this purchase. In
connection with these transactions, the partnership agreement of PCT LP was
amended and restated and PCT contributed $1,000,000 to the capital of PCT LP and
became the general partner of the partnership. PCT LP incurred $1,252,941 of
costs related to these transactions which have been charged to expense.
As a result of transactions outlined above, PCT LP's limited partners
control approximately 67% of the voting stock of PCT. Because PCT LP's partners
own the larger portion of the voting rights of PCT, PCT LP has been treated as
the "accounting acquirer" and historical information of PCT solely reflects the
financial information of PCT LP for the periods prior to May 28, 1999, the date
on which the merger was consummated.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of PCT from the
date of the merger and PCT LP. All significant intercompany transactions and
balances have been eliminated in consolidation.
(b) Use of Estimates
The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
(c) Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, tenant security deposits,
accounts payable, accrued expenses and notes payable-other approximate fair
value due to their short-term nature. Reported balances due under mortgages
payable approximate fair value due to the contractual interest rate
approximating current market rates.
(d) Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
original maturities of three months or less.
(e) Rental Property
Rental property, which consists of a commercial building, is stated at
cost. Significant renovations and improvements that improve or extend the useful
life of the assets are capitalized. The building is being depreciated over 40
years using the straight-line method, and tenant improvements are amortized over
the initial term of the related lease, 10 years.
PCT assesses the realizability of intangible and other long-lived assets in
accordance with Statements of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To
Be Disposed Of. SFAS No. 121 requires, among other things, that an entity review
its long-lived assets and certain related intangibles for impairment whenever
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. As a result of its review, PCT does not believe that any
impairment currently exists related to its long-lived assets.
(f) Revenue Recognition
Rental income is recognized on the straight-line basis. This method
normalizes rental income by aggregating annual fixed rents over the term of the
lease and recognizing annual rental income in equal amounts. The difference
between actual rental payments and normalized rental income is capitalized as
deferred rent, on the accompanying consolidated balance sheets, and is amortized
over the term of the lease.
(g) Deferred Charges
Deferred charges consist of capitalized lease acquisition costs and loan
costs which are recorded at cost. The lease acquisition costs are amortized on
the straight-line basis over the life of the lease. Unamortized costs are
charged to expense in the event of any early termination of the lease. The
capitalized loan costs are amortized over the term of the financing on the
straight line basis.
(h) Income Taxes
PCT has elected to be taxed as a Real Estate Investment Trust ("REIT")
under Sections 856 and 860 of the Internal Revenue Code of 1986, as amended.
REITs are subject to a number of organizational and operational requirements,
including a requirement that they currently distribute 95% of their ordinary
taxable income. As a REIT, PCT generally will not be subject to federal income
tax on net income to the extent taxable income is distributed. Accordingly no
provision has been made for federal income taxes in the consolidated financial
statements.
(i) Earnings (Loss) per Common Share
Earnings (loss) per common share amounts were calculated in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share". Basic earnings (loss) per common share ("EPS") was computed by dividing
net income (loss) by the weighted-average number of common shares outstanding.
Basic EPS equals diluted EPS for all periods presented.
Basic and diluted earnings (loss) per common share for three years ended
December 31, 1999 are calculated as follows:
<PAGE>
1999 1998 1997
------ ------ ------
Net (loss) income $ (1,309,786) $ 241,973 $ 254,646
Weighted average
shares outstanding 479,226 N/A N/A
Basic and diluted
Loss per common sha (2.73) N/A N/A
(3) MORTGAGE PAYABLE
On April 29, 1999, PCT LP obtained a mortgage note payable in the amount of
$1,000,000. The note requires monthly principal and interest installments of
$7,881. The interest rate on the note is 8.13% through maturity at May 1, 2004,
at which time the remaining balance of approximately $926,000 is due and
payable. The mortgage is collateralized by PCT LP's property and an assignment
of all leases.
Mortgage payable as of December 31 consists of the following:
1999 1998
Mortgage note payable in monthly
installments of $7,881, including
principal and interest at 8.13%
per annum $ 991,377 $ -
Less - Current maturities 13,125 -
$ 978,252 $ -
<PAGE>
Principal payments to be made over the next five years are as follows:
2000 $ 13,125
2001 14,487
2002 15,727
2003 17,073
2004 930,965
-----------------
$ 991,377
=================
(4) NOTES PAYABLE - OTHER
Officers, directors and affiliates of PCT funded $561,352 of costs related
to the transactions described in Note 1. On May 27, 1999, PCT LP executed
unsecured, demand promissory notes, with interest accruing at the prime rate on
the outstanding balance. On July 6, 1999, a payment of the $250,352 representing
principal and accrued interest was made. Interest expense related to the notes
is $17,611 for the year ended December 31, 1999.
(5) COMMITMENTS AND CONTINGENCIES
(a) Concentration of Credit Risk
PCT maintains its cash and cash equivalents at financial institutions. The
combined account balances at each institution periodically exceed FDIC insurance
coverage, and, as a result, there is a concentration of credit risk related to
amounts on deposit in excess of FDIC insurance coverage. Management of PCT
believes the risk is not significant.
(b) Environmental
PCT, as an owner of real estate, is subject to various environmental laws
of federal and local governments. Compliance by PCT with existing laws has not
had a material adverse effect on PCT's financial condition and results of
operations, and management does not believe it will have such an impact in the
future. However, PCT cannot predict the impact of new or changed laws or
regulations on its current properties or on properties that it may acquire in
the future.
6) LEASES
PCT LP, as a landlord, rents office and laboratory space located in
Framingham, Massachusetts, under an operating lease for the entire facility with
Genzyme Corporation. The lease, as amended, has a term of 20 years (through
September 2005) with two optional five-year extensions.
The tenant is fully responsible for direct payment of all operating
expenses; therefore, those amounts are not included in the table below. The
approximate minimum future rentals to be received under the operating lease at
December 31, 1999 for each of the next five years and thereafter were as
follows:
<PAGE>
Minimum
Future
Year Rentals
2000 $ 357,000
2001 357,000
2002 357,000
2003 357,000
2004 357,000
Thereafter 267,750
---------------
$ 2,052,750
===============
Genzyme Corporation is the sole tenant for the property. Summary financial
information for Genzyme Corporation as of and for the year ended December 31,
1998 is presented below:
Balance Sheet
(Unaudited)
(Amounts in Thousands)
Assets
Current Assets:
Cash and cash equivalents.................................$ 100,012
Short Term Investments.................................... 174,421
Accounts receivable, net.................................. 153,278
Inventories............................................... 107,188
Other current assets...................................... 74,705
--------------------
609,604
Property, plant and equipment, net........................ 378,992
Long-term investments..................................... 281,664
Intangibles, net.......................................... 263,748
Other assets.............................................. 112,299
--------------------
Total assets.........................................$ 1,646,307
====================
Liabilities and Shareholders' Equity
Current Liabilities:
Acounts payable and accrued expenses....................$ 96,562
Other current liabilities............................... 100,331
--------------------
196,893
Long-term debt and capital lease obligations.............. 3,087
Convertible Subordinated Notes and Debentures............. 271,559
Other liabilities ..................................... 7,701
--------------------
Total liabilities ..................................... 479,240
Shareholders' equity...................................... 1,167,067
--------------------
Total liabilities and shareholders' equity .......$ 1,646,307
====================
<PAGE>
Statement of Operations
(Unaudited)
(Amounts in Thousands)
Revenues:
Net product sales..........................................$ 613,685
Net service sales.......................................... 55,445
Other .................................................. 4,147
--------------------
673,277
Operating costs and expenses ............................. 533,900
--------------------
Operating Income ......................................... 139,377
Other income net ......................................... 24,193
--------------------
Income before income taxes................................. 163,570
Provision for income taxes, net... ........................ (42,517)
--------------------
Net income............. .........................$ 121,053
====================
(7) RELATED PARTY TRANSACTIONS
Under a management contract, PCT LP pays an affiliate of certain partners
3% of all receipts for property management services. The amount incurred for
these services was $10,710, $10,013 and $9,774 for 1999, 1998, and 1997
respectively.
(8) SEGMENT INFORMATION
Management of PCT has decided to operate the business with only one
reportable segment. The results of operations for the rental real estate segment
are reflected in the accompanying consolidated financial statements.
(9) QUARTERLY RESULTS (UNAUDITED)
Summarized quarterly financial data for PCT for the year end December 31,
1999 is reflected in the following table. Only the periods subsequent to the
merger in May 1999 are presented:
2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- -----------
Revenue $ 86,786 $ 78,354 $ 77,529
Net Loss (1,243,115) (16,662) (59,810)
Basic and diluted
loss per share $ (2.59) $ (.03) $ (.12)
<PAGE>
ITEM 9 Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure.
None
PART III
ITEMS 10-13
The information called for by Items 10-13 is incorporated herein by
reference to PCT's definitive proxy statement for the 2000 annual meeting of the
stockholders to be filed with the Securities and Exchange Commission, pursuant
to Regulation 14A, no later than 120 days after December 31, 1999.
PART IV
ITEM 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(1) Financial Statements
The financial statements filed as part of the report are listed on the
Index to Consolidated Statements on page 8.
(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not material, and therefore have been omitted.
(c) Exhibits:
(3) Articles of Incorporation and Bylaws
3.1 Articles of Amendment and Restatement of Property Capital Trust, Inc.
are filed herewith as Exhibit 3.1.
3.2 By-Laws of Property Capital Trust, Inc. are filed herewith as Exhibit
3.2.
(4) Instruments Defining Rights of Shareholders
4.1 Form of Second Amended and Restated Agreement of Limited Partnership of
Property Capital Trust Limited Partnership, dated as of May 28, 1999 by and
among Property Capital Trust, Inc. and the persons whose names are set forth on
Exhibit A-1 therein is incorporated by reference to Exhibit 4.1 to PCT's
registration statement on Form S-4 filed with the Securities and Exchange
Commission on November 20, 1998.
(10) Material Contracts
10.1 Investment Agreement, dated June 18, 1998, among Maryland Property
Capital Trust, Inc., Property Capital Trust and Framingham York Associates
Limited Partnership is incorporated herein by reference to Exhibit 10.1 to PCT's
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission on November 20, 1998.
10.2 First Amendment to Investment Agreement, dated August 7, 1998, among
Framingham York Associates Limited Partnership, Property Capital Trust and
Maryland Property Capital Trust, Inc. is incorporated herein by reference to
Exhibit 10.2 to PCT's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on November 20, 1998.
10.3 Second Amendment to Investment Agreement, dated October 16, 1998,
among Framingham York Associates Limited Partnership, Property Capital Trust and
Maryland Property Capital Trust, Inc. is incorporated herein by reference to
Exhibit 10.3 to PCT's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on November 20, 1998.
10.4 Third Amendment to Investment Agreement, dated January 15, 1999, among
Framingham York Associates Limited Partnership, Property Capital Trust and
Maryland Property Capital Trust, Inc. is incorporated herein by reference to
Exhibit 10.6 to Amendment No. 2 to PCT's Registration Statement on Form S-4,
Registration No. 333-67673, filed with the Securities and Exchange Commission on
February 24, 1999 ("Amendment No. 2 to the Form S-4).
10.5 Contribution and Merger Agreement, dated October 16, 1998, between
Property Capital Trust and Maryland Property Capital Trust, Inc. is incorporated
herein by reference to Exhibit 10.4 to PCT's Registration Statement on Form S-4
filed with the Securities and Exchange Commission on November 20, 1998.
10.6 Amendment to Contribution and Merger Agreement, dated January 15,
1999, between Property Capital Trust Limited Partnership and Framingham York
Associates Limited Partnership and Maryland Property Capital Trust, Inc. is
incorporated herein by reference to Exhibit 10.7 to Amendment No. 2 to the Form
S-4.
10.7 Management Agreement between Beal & Company, Inc. and Property Capital
Trust Limited Partnership is filed herewith as Exhibit 10.7.
(27) Financial Data Schedule is filed herewith as Exhibit 27
(b) Report on Form 8-K.
No Current Reports on Form 8-K were filed by PCT during the last quarter of
the period ending December 31, 1999.
<PAGE>
PROPERTY CAPITAL TRUST, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized as of the 29th day of
March 2000.
PROPERTY CAPITAL TRUST, INC.
By: /s/ Bruce A. Beal
Bruce A. Beal, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ Bruce A. Beal President & Director March 29, 2000
Bruce A. Beal (principal executive officer)
/s/ Robert L. Beal Secretary & Director March 29, 2000
Robert L. Beal
/s/ Michael A. Manzo Treasurer & Director March 29, 2000
Michael A. Manzo (principal financial officer)
ARTICLES OF
AMENDMENT AND RESTATEMENT
OF
MARYLAND PROPERTY CAPITAL TRUST, INC.
Dated: May 25, 1999
<PAGE>
ARTICLES OF
AMENDMENT AND RESTATEMENT OF
MARYLAND PROPERTY CAPITAL TRUST, INC.
THIS IS TO CERTIFY THAT:
FIRST: Maryland Property Capital Trust, Inc., a Maryland corporation with
its principal office in the State of Maryland and its resident agent as set
forth below in Articles IV and V, respectively, of these Articles of Amendment
and Restatement, desires to amend and restate its charter as filed with the
State Department of Assessments and Taxation on June 15, 1998, as set forth in
these Articles of Amendment and Restatement.
SECOND: The following provisions are all of the provisions of the charter
currently in effect as hereinafter amended.
ARTICLE I
INCORPORATION
Eugenia B. Bettencourt, whose post office address is 53 State Street,
Boston, Massachusetts 02109, being at least 18 years of age, hereby forms a
corporation under the general corporation laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is:
"Maryland Property Capital Trust, Inc."
ARTICLE III
PURPOSES
Purpose and Powers. The purposes for which the Corporation is formed are to
engage in business as a real estate investment trust (a "REIT") (as that phrase
is defined under Section 856 of the Internal Revenue Code of 1986, as amended
(the "Code")) and to engage in any other lawful act or activity for which
corporations may be organized under the Maryland General Corporation Law, as now
or hereafter in force (the "MGCL"). Without limiting the generality of the this
Article III, the purposes for which the Corporation is formed include
continuation of business heretofore conducted by Property Capital Trust, a
Massachusetts business trust being or to be merged into this Corporation. The
foregoing purposes shall be in no way limited or restricted by reference to, or
inference from, the terms of any other clause of these Articles, as amended from
time to time, and each shall be regarded as independent. The foregoing purposes
are also to be construed as powers of the Corporation, and shall be in addition
to and not in limitation of the general powers of corporations under the laws of
the State of Maryland.
ARTICLE IV
PRINCIPAL OFFICE ADDRESS
The address of the principal office of the Corporation in Maryland is c/o
The Corporation Trust, Inc., 300 East Lombard Street, Baltimore, Maryland 21202.
ARTICLE V
THE RESIDENT AGENT
The resident agent of the Corporation in Maryland is The Corporation Trust,
Inc., whose address is 300 East Lombard Street, Baltimore, Maryland 21202.
ARTICLE VI
BOARD OF DIRECTORS
6.1 General Powers; Action by Committee. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors and,
except as otherwise expressly provided by law, these Articles or the by-laws, as
amended from time to time (the "By-laws"), of the Corporation, all of the powers
of the Corporation shall be vested in such Board. Any action which the Board of
Directors is empowered to take may be taken on behalf of the Board of Directors
by a duly authorized committee thereof except (i) to the extent limited by
Maryland law, these Articles or the By-laws and (ii) for any action which
requires the affirmative vote or approval of a majority of all Directors then in
office (unless, in such case, these Articles or the By-laws specifically provide
that a duly authorized committee can take such action on behalf of the Board of
Directors). A majority of the Board of Directors shall constitute a quorum and,
except as otherwise specifically provided in these Articles, the affirmative
vote of a majority of the Directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
6.2 Number; Classes. The number of Directors of the Corporation shall
initially be 3, which number may thereafter by increased or decreased from time
to time by a resolution duly adopted by the Board of Directors; provided,
however, that the total number of Directors shall be not fewer than the minimum
number required by the MGCL. The Board of Directors shall be divided into 3
classes (Class I, Class II and Class III), the number of Directors of each class
being as nearly equal as practical, with the term of office of one class
expiring each year. No reduction in the number of Directors shall cause the
removal of any Director from office prior to the expiration of his or her term.
Immediately following the effectiveness of these Articles of Incorporation, the
Directors of the Corporation shall be as follows:
Class I Class II Class III
Bruce A. Beal Robert A. Beal Michael A. Manzo
<PAGE>
6.3 Term; Election. The respective terms of the Directors shall continue
until the annual meeting of stockholders held in 1999 in the case of Class I
Directors, in 2000 in the case of Class II Directors and in 2001 in the case of
Class III Directors. The Directors elected at each annual meeting of
stockholders shall hold office until their successors are duly elected and
qualified or until their earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article VII of these Articles, the holders of any one or more series of Stock
shall have the right, voting separately as a series or together with holders of
other such series, to elect Directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of these Articles
and any articles supplementary applicable thereto.
During any period when the holders of any series of Stock have the right to
elect additional Directors as provided for or fixed pursuant to the provisions
of Article VII of these Articles, then upon commencement and for the duration of
the period during which such right continues: (a) the then otherwise total
authorized number of Directors of the Corporation shall automatically be
increased by such specified number of Directors, and the holders of such Stock
shall be entitled to elect the additional Directors so provided for or fixed
pursuant to said provisions and (b) each such additional Director shall serve
until such Director's successor shall have been duly elected and qualified, or
until such Director's right to hold such office terminates pursuant to said
provisions, whichever occurs earlier, subject to such Director's earlier death,
disqualification, resignation or removal. Except as otherwise provided by the
Board of Directors in the resolution or resolutions establishing such series,
whenever the holders of any series of Stock having such right to elect
additional Directors are divested of such right pursuant to the provisions of
such Stock, the terms of office of all such additional Directors elected by the
holders of such Stock, or elected to fill any vacancies resulting from the
death, resignation, disqualification or removal of such additional Directors,
shall forthwith terminate and the total authorized number of Directors of the
Corporation shall be reduced accordingly.
6.4 Resignation or Removal of Directors. Any Director may resign from the
Board of Directors or any committee thereof at any time by written notice to the
Board of Directors, effective upon execution and delivery to the Corporation of
such notice or upon any future date specified in the notice. Subject to the
rights, if any, of the holders of any series of Stock to elect Directors and to
remove any Director whom such holders have the right to elect, any Director
(including persons elected by Directors to fill vacancies in the Board of
Directors) may be removed from office (a) only with cause and (b) only by the
affirmative vote of the holders of at least a majority of the shares then
entitled to vote at a meeting of the stockholders called for that purpose. For
purposes of these Articles, "cause," with respect to the removal of any
Director, shall mean only (i) conviction of a felony, (ii) declaration of
unsound mind by order of a court, (iii) gross dereliction of duty, (iv)
commission of any act involving moral turpitude or (v) commission of an act that
constitutes intentional misconduct or a knowing violation of law if such action
in either event results both in an improper substantial personal benefit to such
Director and a material injury to the Corporation.
<PAGE>
6.5 Vacancies. Subject to the rights, if any, of the holders of any
class or series of Stock to elect Directors and to fill vacancies on the Board
of Directors relating thereto, any vacancy on the Board of Directors which
results from the removal of a Director for cause shall be filled by the
affirmative vote of a majority of votes cast by the stockholders normally
entitled to vote in the election of Directors at a meeting of stockholders. Any
vacancy occurring on the Board of Directors for any other reason, except as a
result of an increase in the number of Directors, may be filled by a majority
vote of the remaining Directors, notwithstanding that such majority is less than
a quorum. Any vacancy occurring on the Board of Directors as a result of an
increase in the number of Directors may be filled by a majority vote of the
entire Board of Directors. A Director elected by the Board of Directors or the
stockholders to fill a vacancy shall hold office until the annual meeting of
stockholders at which Directors of the applicable Class of Directors will be
elected and until his or her successor is elected and qualified. In the event of
a vacancy in the Board of Directors, the remaining Directors, except as
otherwise provided by law, may exercise the powers of the full Board of
Directors until such vacancy is filled.
6.6 Powers. Subject to the express limitations herein or in the By-laws,
the business and affairs of the Corporation shall be managed under the direction
of the Board of Directors. These Articles, as amended or supplemented from time
to time, shall be construed with a presumption in favor of the grant of power
and authority to the Directors. The determination as to any of the following
matters, made in good faith by or pursuant to the direction of the Board of
Directors consistent with these Articles and in the absence of actual receipt of
an improper benefit in money, property or services or active and deliberate
dishonesty established by a court, shall be final and conclusive and shall be
binding upon the Corporation and every holder of shares of its Stock: the amount
of the net income of the Corporation for any period and the amount of assets at
any time legally available for the payment of dividends, redemption of its Stock
or the payment of other distributions on its Stock; the amount of paid-in
surplus, net assets, other surplus, annual or other net profit, net assets in
excess of capital, undivided profits or excess of profits over losses on sales
of assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged); the fair value, or
any sale, bid or asked price to be applied in determining the fair value, of any
asset owned or held by the Corporation; any matter relating to the acquisition,
holding and disposition of any assets by the Corporation; or any other matter
relating to the business and affairs of the Corporation.
ARTICLE VII
STOCK
7.1 Authorized Stock. The total number of shares of Stock which the
Corporation has authority to issue is thirty million (30,000,000) shares,
initially consisting of (i) five million (5,000,000) shares of Preferred Stock,
par value $.01 per share; (ii) ten million (10,000,000) shares of Common Stock,
par value $.01 per share; and (iii) fifteen million (15,000,000) shares of
Excess Stock, par value $.01 per share. The aggregate par value of all the
shares of all classes of Stock is three hundred thousand dollars ($300,000). If
shares of one class of Stock are classified or reclassified into shares of
another class of Stock pursuant to this Article VII, the number of authorized
shares of the former class shall be automatically decreased and the number of
shares of the latter class shall be automatically increased, in each case by the
number of shares so classified or reclassified, so that the aggregate number of
shares of Stock of all classes that the Corporation has authority to issue shall
not be more than the total number of shares of Stock set forth in the first
sentence of this paragraph.
7.2 Preferred Stock. Subject to any limitations prescribed by law, the
Board of Directors is expressly authorized to classify any unissued shares of
Preferred Stock and reclassify any previously classified but unissued shares of
Preferred Stock of any series from time to time, in one or more classes or
series of such Stock and, by filing articles supplementary with the State
Department of Assessments and Taxation of Maryland, to establish or change from
time to time the number of shares to be included in each such class or series,
and to fix the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of each class or series.
Any action by the Board of Directors under this Section 7.2 of Article VII shall
require the affirmative vote of a majority of the Directors then in office;
provided, however, that by the affirmative vote of a majority of the Directors
then in office, the Board of Directors may appoint a committee to act on behalf
of the Board of Directors under this Section 7.2, and in such event the
affirmative vote of a majority of the members of such committee then in office
shall be required for any action under this Section 7.2.
7.3 Common Stock. Except as provided by law or in this Article VII (or in
any articles supplementary regarding any class or series of Preferred Stock):
7.3.1 Voting Rights. The holders of shares of Common Stock shall be
entitled to vote for the election of Directors and on all other matters
requiring stockholder action, and each holder of shares of Common Stock shall be
entitled to one vote for each share of Common Stock held by such stockholder.
7.3.2 Dividend Rights. Holders of Common Stock shall be entitled to receive
such dividends and other distributions in cash, Stock or property of the
Corporation as may be authorized and declared by the Board of Directors upon the
Common Stock and, if any Excess Stock resulting from the conversion of Common
Stock is then outstanding, such Excess Stock out of any assets or funds of the
Corporation legally available therefor, but only when and as authorized by the
Board of Directors or any authorized committee thereof from time to time, and
shall share ratably with the holders of such Excess Stock resulting from the
conversion of Common Stock in any such dividend or distribution.
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 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 purpose 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
created.
7.3.3 Rights Upon Liquidation. Upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, subject to the rights
of holders of any shares of Preferred Stock and Excess Stock resulting from the
conversion of Preferred Stock, the net assets of the Corporation available for
distribution to the holders of Common Stock, and, if any Excess Stock resulting
from the conversion of Common Stock is then outstanding, such Excess Stock,
shall be distributed pro rata to such holders in proportion to the number of
shares of Common Stock and such Excess Stock held by each.
7.4 Excess Stock. For the purposes of this Section 7.4, terms not otherwise
defined shall have the meanings set forth in Article IX.
7.4.1 Conversion into Excess Stock.
(a) If, notwithstanding the other provisions contained in these Articles,
prior to the Restriction Termination Date, there is a purported Transfer or
Non-Transfer Event such that any Person (other than a Look-Through Entity) would
Beneficially Own shares of Equity Stock in excess of the Ownership Limit, or
such that any Person that is a Look-Through Entity would Beneficially Own shares
of Equity Stock in excess of the Look-Through Limit, then, (i) except as
otherwise provided in Section 9.4 of Article IX, the purported transferee shall
be deemed to be a Prohibited Owner and shall acquire no right or interest (or,
in the case of a Non-Transfer Event, the Person holding record title to the
shares of Equity Stock Beneficially Owned by such Beneficial Owner shall cease
to own any right or interest) in such number of shares of Equity Stock which
would cause such Beneficial Owner to Beneficially Own shares of Equity Stock in
excess of the Ownership Limit or the Look-Through Limit, as the case may be,
(ii) such number of shares of Equity Stock in excess of the Ownership Limit or
the Look-Through Limit, as the case may be (rounded up to the nearest whole
share), shall be automatically converted into an equal number of shares of
Excess Stock and transferred to a Trust in accordance with Section 7.4.4 of this
Article VII and (iii) the Prohibited Owner shall submit the certificates
representing such number of shares of Equity Stock to the Corporation,
accompanied by all requisite and duly executed assignments of transfer thereof,
for registration in the name of the Trustee of the Trust. If the shares of
Equity Stock that are converted into Excess Stock are not shares of Common
Stock, then the Excess Stock into which they are converted shall be deemed to be
a separate series of Excess Stock with a designation and title corresponding to
the designation and title of the shares that have been converted into the Excess
Stock. Such conversion into Excess Stock and transfer to a Trust shall be
effective as of the close of trading on the Trading Day prior to the date of the
purported Transfer or Non-Transfer Event, as the case may be, even though the
certificates representing the shares of Equity Stock so converted may be
submitted to the Corporation at a later date.
(b) If, notwithstanding the other provisions contained in these Articles,
prior to the Restriction Termination Date there is a purported Transfer or
Non-Transfer Event that, if effective, would (i) result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code, (ii) cause the
Corporation to Constructively Own 10% or more of the ownership interest in a
tenant of the Corporation's or a Subsidiary's real property within the meaning
of Section 856(d)(2)(B) of the Code or (iii) result in the shares of Equity
Stock being beneficially owned by fewer than 100 persons within the meaning of
Section 856(a)(5) of the Code, then (x) the purported transferee shall be deemed
to be a Prohibited Owner and shall acquire no right or interest (or, in the case
of a Non-Transfer Event, the Person holding record title of the shares of Equity
Stock with respect to which such Non-Transfer Event occurred shall cease to own
any right or interest) in such number of shares of Equity Stock, the ownership
of which by such purported transferee or record holder would (A) result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, (B) cause the Corporation to Constructively Own 10% or more of the
ownership interests in a tenant of the Corporation's or a Subsidiary's real
property within the meaning of Section 856(d)(2)(B) of the Code or (C) result in
the shares of Equity Stock being beneficially owned by fewer than 100 persons
within the meaning of Section 856(a)(5) of the Code, (y) such number of shares
of Equity Stock (rounded up to the nearest whole share) shall be automatically
converted into an equal number of shares of Excess Stock and transferred to a
Trust in accordance with Section 7.4.4 of this Article VII and (z) the
Prohibited Owner shall submit such number of shares of Equity Stock to the
Corporation, accompanied by all requisite and duly executed assignments of
transfer thereof, for registration in the name of the Trustee of the Trust. If
the shares of Equity Stock that are converted into Excess Stock are not shares
of Common Stock, then the Excess Stock into which they are converted shall be
deemed to be a separate series of Excess Stock with a designation and title
corresponding to the designation and title of the shares that have been
converted into the Excess Stock. Such conversion into Excess Stock and transfer
to a Trust shall be effective as of the close of trading on the Trading Day
prior to the date of the purported Transfer or Non-Transfer Event, as the case
may be, even though the certificates representing the shares of Equity Stock so
converted may be submitted to the Corporation at a later date.
(c) Upon the occurrence of such a conversion of shares of Equity Stock into
an equal number of shares of Excess Stock, such shares of Equity Stock shall be
automatically retired and canceled, without any action required by the Board of
Directors of the Corporation, and shall thereupon be restored to the status of
authorized but unissued shares of the particular class or series of Equity Stock
from which such Excess Stock was converted and may be reissued by the
Corporation as that particular class or series of Equity Stock.
7.4.2 Remedies for Breach. If the Corporation, or its designees, shall at
any time determine in good faith that a Transfer has taken place in violation of
Section 9.2 of Article IX or that a Person intends to acquire or has attempted
to acquire Beneficial Ownership or Constructive Ownership of any shares of
Equity Stock in violation of Section 9.2 of Article IX, the Corporation shall
take such action as it deems advisable to refuse to give effect to or to prevent
such Transfer or acquisition, including, but not limited to, refusing to give
effect to such Transfer on the stock transfer books of the Corporation or
instituting proceedings to enjoin such Transfer or acquisition, but the failure
to take any such action shall not affect the automatic conversion of shares of
Equity Stock into Excess Stock and their transfer to a Trust in accordance with
Section 7.4.4.
7.4.3 Notice of Restricted Transfer. Any Person who acquires or attempts to
acquire shares of Equity Stock in violation of Section 9.2 of Article IX, or any
Person who owns shares of Equity Stock that were converted into shares of Excess
Stock and transferred to a Trust pursuant to Sections 7.4.1 and 7.4.4 of this
Article VII, shall immediately give written notice to the Corporation of such
event and shall provide to the Corporation such other information as the
Corporation may request in order to determine the effect, if any, of such
Transfer or Non-Transfer Event, as the case may be, on the Corporation's status
as a REIT.
7.4.4 Ownership in Trust. Upon any purported Transfer or Non-Transfer Event
that results in Excess Stock pursuant to Section 7.4.1 of this Article VII, (i)
the Corporation shall create, or cause to be created, a Trust, and shall
designate a Trustee and name a Beneficiary thereof and (ii) such Excess Stock
shall be automatically transferred to such Trust to be held for the exclusive
benefit of the Beneficiary. Any conversion of shares of Equity Stock into shares
of Excess Stock and transfer to a Trust shall be effective as of the close of
trading on the Trading Day prior to the date of the purported Transfer or
Non-Transfer Event that results in the conversion. Shares of Excess Stock so
held in trust shall remain issued and outstanding shares of Stock of the
Corporation.
7.4.5 Dividend Rights. Each share of Excess Stock shall be entitled to the
same dividends and distributions (as to both timing and amount) as may be
authorized by the Board of Directors with respect to shares of the same class
and series as the shares of Equity Stock that were converted into such Excess
Stock. The Trustee, as record holder of the shares of Excess Stock, shall be
entitled to receive all dividends and distributions and shall hold all such
dividends or distributions in trust for the benefit of the Beneficiary. The
Prohibited Owner with respect to such shares of Excess Stock shall repay to the
Trust the amount of any dividends or distributions received by it that are (i)
attributable to any shares of Equity Stock that have been converted into shares
of Excess Stock and (ii) dividends or distributions which were distributed by
the Corporation to stockholders of record on a record date which was on or after
the date that such shares were converted into shares of Excess Stock. The
Corporation shall take all measures that it determines reasonably necessary to
recover the amount of any such dividend or distribution paid to a Prohibited
Owner, including, if necessary, withholding any portion of future dividends or
distributions payable on shares of Equity Stock Beneficially Owned by the Person
who, but for the provisions of Articles VII and IX, would Constructively Own or
Beneficially Own the shares of Equity Stock that were converted into shares of
Excess Stock; and, as soon as reasonably practicable following the Corporation's
receipt or withholding thereof, shall pay over to the Trust for the benefit of
the Beneficiary the dividends so received or withheld, as the case may be.
7.4.6 Rights upon Liquidation. In the event of any voluntary or involuntary
liquidation of, or winding up of, or any distribution of the assets of, the
Corporation, each holder of shares of Excess Stock shall be entitled to receive,
ratably with each other holder of shares of Equity Stock of the same class and
series as the shares which were converted into such Excess Stock and other
holders of such Excess Stock, that portion of the assets of the Corporation that
is available for distribution to the holders of shares of such class and series
of Equity Stock and such Excess Stock. The Trust shall distribute to the
Prohibited Owner the amounts received upon such liquidation, dissolution, or
winding up, or distribution; provided, however, that the Prohibited Owner shall
not be entitled to receive amounts in excess of, in the case of a purported
Transfer in which the Prohibited Owner gave value for shares of Equity Stock and
which Transfer resulted in the conversion of the shares into shares of Excess
Stock, the product of (x) the price per share, if any, such Prohibited Owner
paid for the shares of Equity Stock and (y) the number of shares of Equity Stock
which were so converted into Excess Stock, and, in the case of a Non-Transfer
Event or purported Transfer in which the Prohibited Owner did not give value for
such shares (e.g., if the shares were received through a gift or devise) and
which Non-Transfer Event or purported Transfer, as the case may be, resulted in
the conversion of the shares into shares of Excess Stock, the product of (x) the
price per share equal to the Market Price on the date of such Non-Transfer Event
or purported Transfer and (y) the number of shares of Equity Stock which were so
converted into Excess Stock. Any remaining amount in such Trust shall be
distributed to the Beneficiary.
7.4.7 Voting Rights. Each share of Excess Stock shall entitle the holder to
no voting rights other than those voting rights which must accompany a class of
Stock under Maryland law. The Trustee, as record holder of the Excess Stock,
shall be entitled to vote all shares of Excess Stock in the event voting rights
are mandated by Maryland law. Any vote by a Prohibited Owner as a purported
holder of shares of Equity Stock prior to the discovery by the Corporation that
such shares of Equity Stock have been converted into shares of Excess Stock
shall, subject to applicable law, (i) be rescinded and shall be void ab initio
with respect to such shares of Excess Stock and (ii) be recast in accordance
with the desires of the Trustee acting for the benefit of the Beneficiary;
provided, however, that if the Corporation has already taken irreversible
corporate action, then the Trustee shall not have the authority to rescind and
recast such vote.
7.4.8 Designation of Permitted Transferee.
(a) As soon as practicable after the Trustee acquires Excess Stock, but in
an orderly fashion so as not to materially adversely affect the trading price of
Common Stock, the Trustee shall designate one or more Persons as Permitted
Transferees and sell to such Permitted Transferees any shares of Excess Stock
held by the Trustee; provided, however, that (i) any Permitted Transferee so
designated purchases for valuable consideration (whether in a public or private
sale) the shares of Excess Stock and (ii) any Permitted Transferee so designated
may acquire such shares of Excess Stock without violating any of the
restrictions set forth in Section 9.2 of Article IX and without such acquisition
resulting in the conversion of the shares of Equity Stock so acquired into
shares of Excess Stock and the transfer of such shares to a Trust pursuant to
Sections 7.4.1 and 7.4.4 of this Article VII. The Trustee shall have the
exclusive and absolute right to designate Permitted Transferees of any and all
shares of Excess Stock. Prior to any transfer by the Trustee of shares of Excess
Stock to a Permitted Transferee, the Trustee shall give not less than five
Trading Days' prior written notice to the Corporation of such intended transfer
and the Corporation must have waived in writing its purchase rights, if any,
under Section 7.4.10 of this Article VII.
(b) Subject to Section 7.4.8, upon the designation by the Trustee of a
Permitted Transferee in accordance with the provisions of this Section 7.4.8,
the Trustee shall cause to be transferred to the Permitted Transferee shares of
Excess Stock acquired by the Trustee pursuant to Section 7.4.4 of this Article
VII. Upon such transfer of shares of Excess Stock to the Permitted Transferee,
such shares of Excess Stock shall be automatically converted into an equal
number of shares of Equity Stock of the same class and series which was
converted into such Excess Stock. Upon the occurrence of such a conversion of
shares of Excess Stock into an equal number of shares of Equity Stock, such
shares of Excess Stock shall be automatically retired and canceled, without any
action required by the Board of Directors of the Corporation, and shall
thereupon be restored to the status of authorized but unissued shares of Excess
Stock and may be reissued by the Corporation as Excess Stock. The Trustee shall
(i) cause to be recorded on the stock transfer books of the Corporation that the
Permitted Transferee is the holder of record of such number of shares of Equity
Stock, and (ii) distribute to the Beneficiary any and all amounts held with
respect to such shares of Excess Stock after making payment to the Prohibited
Owner pursuant to Section 7.4.9 of this Article VII.
(c) If the Transfer of shares of Excess Stock to a purported Permitted
Transferee would or does violate any of the transfer restrictions set forth in
Section 9.2 of Article IX, such Transfer shall be void ab initio as to that
number of shares of Excess Stock that cause the violation of any such
restriction when such shares are converted into shares of Equity Stock (as
described in clause (b) above) and the purported Permitted Transferee shall be
deemed to be a Prohibited Owner and shall acquire no rights in such shares of
Excess Stock or Equity Stock. Such shares of Equity Stock shall be automatically
re-converted into Excess Stock and transferred to the Trust from which they were
originally Transferred. Such conversion and transfer to the Trust shall be
effective as of the close of trading on the Trading Day prior to the date of the
Transfer to the purported Permitted Transferee and the provisions of this
Article VII shall apply to such shares, including, without limitation, the
provisions of Sections 7.4.8 through 7.4.10 with respect to any future Transfer
of such shares by the Trust.
7.4.9 Compensation to Record Holder of Shares of Equity Stock That Are
Converted into Shares of Excess Stock. Any Prohibited Owner shall be entitled
(following acquisition of the shares of Excess Stock and subsequent designation
of and sale of Excess Stock to a Permitted Transferee in accordance with Section
7.4.8 of this Article VII or following the purchase of such shares in accordance
with Section 7.4.10 of this Article VII) to receive from the Trustee following
the sale or other disposition of such shares of Excess Stock the lesser of (i)
(a) in the case of a purported Transfer in which the Prohibited Owner gave value
for shares of Equity Stock and which Transfer resulted in the conversion of such
shares into shares of Excess Stock, the product of (x) the price per share, if
any, such Prohibited Owner paid for the shares of Equity Stock and (y) the
number of shares of Equity Stock which were so converted into Excess Stock and
(b) in the case of a Non-Transfer Event or purported Transfer in which the
Prohibited Owner did not give value for such shares (e.g., if the shares were
received through a gift or devise) and which Non-Transfer Event or purported
Transfer, as the case may be, resulted in the conversion of such shares into
shares of Excess Stock, the product of (x) the price per share equal to the
Market Price on the date of such Non-Transfer Event or purported Transfer and
(y) the number of shares of Equity Stock which were so converted into Excess
Stock or (ii) the proceeds received by the Trustee from the sale or other
disposition of such shares of Excess Stock in accordance with Section 7.4.8 or
Section 7.4.10 of this Article VII. Any amounts received by the Trustee in
respect of such shares of Excess Stock and in excess of such amounts to be paid
to the Prohibited Owner pursuant to this Section 7.4.9 shall be distributed to
the Beneficiary in accordance with the provisions of Section 7.4.8 of this
Article VII. Each Beneficiary and Prohibited Owner shall be deemed to have
waived any and all claims that it may have against the Trustee and the Trust
arising out of the disposition of shares of Excess Stock, except for claims
arising out of the gross negligence or willful misconduct of, or any failure to
make payments in accordance with this Section 7.4 of this Article VII, by such
Trustee.
7.4.10 Purchase Right in Excess Stock. Shares of Excess Stock shall be
deemed to have been offered for sale to the Corporation or its designee, at a
price per share equal to the lesser of (i) the price per share in the
transaction that created such shares of Excess Stock (or, in the case of a
Non-Transfer Event or Transfer in which the Prohibited Owner did not give value
for the shares (e.g., if the shares were received through a gift or devise), the
Market Price on the date of such Non-Transfer Event or Transfer in which the
Prohibited Owner did not give value for the shares) or (ii) the Market Price on
the date the Corporation, or its designee, accepts such offer. The Corporation
shall have the right to accept such offer for a period of 90 days following the
later of (a) the date of the Non-Transfer Event or purported Transfer which
results in such shares of Excess Stock or (b) the date the Board of Directors
first determines that a Transfer or Non-Transfer Event resulting in shares of
Excess Stock has occurred, if the Corporation does not receive a notice of such
Transfer or Non-Transfer Event pursuant to Section 7.4.3 of this Article VII.
7.5 Classification of Stock. The Board of Directors may classify or
reclassify any unissued shares of Stock from time to time by setting or changing
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, and terms
and conditions of redemption for each class or series, including, but not
limited to, the reclassification of unissued shares of Common Stock to shares of
Preferred Stock or unissued shares of Preferred Stock to shares of Common Stock
or the issuance of any rights plan or similar plan.
7.6 Issuance of Stock. The Board of Directors may authorize the issuance
from time to time of shares of Stock of any class or series, whether now or
hereafter authorized, or securities or rights convertible into shares of Stock,
for such consideration as the Board of Directors may deem advisable (or without
consideration in the case of a share split or dividend), subject to such
restrictions or limitations, if any, as may be set forth in these Articles or
the By-laws of the Corporation.
7.7 Dividends or Distributions. The Directors may from time to time
authorize and declare and pay to stockholders such dividends or distributions in
cash, property or other assets of the Corporation or in securities of the
Corporation or from any other source as the Directors in their discretion shall
determine.
7.8 Ambiguity. In the case of an ambiguity in the application of any of the
provisions of this Article VII, the Board of Directors shall have the power to
determine the application of the provisions of this Article VII with respect to
any situation based on the facts known to it.
7.9 Legend. Except as otherwise determined by the Board of Directors, each
certificate for shares of Equity Stock shall bear substantially the following
legend:
"The shares of Maryland Property Capital Trust, Inc. (the "Corporation")
represented by this certificate are subject to restrictions set forth in the
Corporation's charter, as the same may be amended from time to time, which
prohibit in general (a) any Person (other than a Look-Through Entity) from
Beneficially Owning shares of Equity Stock in excess of the Ownership Limit, (b)
any Look-Through Entity from Beneficially Owning shares of Equity Stock in
excess of the Look-Through Ownership Limit and (c) any Person from acquiring or
maintaining any ownership interest in the stock of the Corporation that is
inconsistent with (i) the requirements of the Internal Revenue Code of 1986, as
amended, pertaining to real estate investment trusts or (ii) the charter of the
Corporation, and the holder of this certificate by his, her or its acceptance
hereof consents to be bound by such restrictions. Capitalized terms used in this
paragraph and not defined herein are defined in the Corporation's charter, as
the same may be amended from time to time.
The Corporation will furnish without charge, to each stockholder who so
requests, a copy of the relevant provisions of the charter and the by-laws, each
as amended, of the Corporation, a copy of the provisions setting forth the
designations, preferences, privileges and rights of each class of stock or
series thereof that the Corporation is authorized to issue and the
qualifications, limitations and restrictions of such preferences and/or rights.
Any such request may be addressed to the Secretary of the Corporation or to the
transfer agent named on the face hereof."
7.10 Severability. Each provision of this Article VII shall be severable
and an adverse determination as to any such provision shall in no way affect the
validity of any other provision.
7.11 Articles and By-laws. All persons who shall acquire Stock in the
Corporation shall acquire the same subject to the provisions of these Articles
and the By-laws.
ARTICLE VIII
LIMITATION ON PREEMPTIVE RIGHTS
No holder of any Stock or any other securities of the Corporation, whether
now or hereafter authorized, shall have any preferential or preemptive rights to
subscribe for or purchase any Stock or any other securities of the Corporation
other than such rights, if any, as the Board of Directors, in its sole
discretion, may fix by articles supplementary, by contract or otherwise; and any
Stock or other securities which the Board of Directors may determine to offer
for subscription may, within the Board of Directors' sole discretion, be offered
to the holders of any class, series or type of Stock or other securities at the
time outstanding to the exclusion of holders of any or all other classes, series
or types of Stock or other securities at the time outstanding.
ARTICLE IX
LIMITATIONS ON TRANSFER AND OWNERSHIP OF EQUITY STOCK
9.1 Definitions. For purposes of this Article IX, the following terms shall
have the meanings set forth below:
"Beneficial Ownership," when used with respect to ownership of shares of
Equity Stock by any Person, shall mean all shares of Equity Stock which are (i)
directly owned by such Person, (ii) indirectly owned by such Person (if such
Person is an "individual" as defined in Section 542(a)(2) of the Code) taking
into account the constructive ownership rules of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code, or (iii) beneficially owned by
such Person pursuant to Rule 13d-3 under the Exchange Act of 1934; provided,
however, that in determining the number of shares Beneficially Owned by a Person
or group, no share shall be counted more than once although applicable to two or
more of clauses (i), (ii) and (iii) of this definition or (in the case of a
group) although Beneficially Owned by more than one Person in such group. (If a
Person Beneficially Owns shares of Equity Stock that are not actually
outstanding (e.g., shares issuable upon the exercise of an option or convertible
security) ("Option Shares"), then, whenever these Articles require a
determination of the percentage of outstanding shares of a class of Equity Stock
Beneficially Owned by that Person, the Option Shares Beneficially Owned by that
Person shall also be deemed to be outstanding.)
"Beneficiary" shall mean, with respect to any Trust, one or more
organizations described in each of Section 170(b)(1)(A) (other than clauses
(vii) and (viii) thereof) and Section 170(c)(2) of the Code that are named by
the Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 7.4.4 of Article VII.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Constructive Ownership" shall mean ownership of shares of Equity Stock by
a Person who is or would be treated as a direct or indirect owner of such shares
of Equity Stock through the application of Section 318 of the Code, as modified
by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have correlative
meanings.
"Equity Stock" shall mean a particular class (other than Excess Stock) or
series of stock of the Corporation. The use of the term "Equity Stock" or any
term defined by reference to the term "Equity Stock" shall refer to the
particular class or series of stock which is appropriate under the context.
"Look-Through Entity" shall mean a Person that is either (i) a trust
described in Section 401(a) of the Code and exempt from tax under Section 501(a)
of the Code as modified by Section 856(h)(3) of the Code or (ii) registered
under the Investment Company Act of 1940.
"Look-Through Ownership Limit" shall mean, with respect to a class or
series of Equity Stock, 15% of the number of outstanding shares of such Equity
Stock.
"Market Price" of Equity Stock on any date shall mean the average of the
Closing Price for shares of such Equity Stock for the five consecutive Trading
Days ending on such date. The "Closing Price" on any date shall mean (A) where
there exists a public market for the Corporation's Equity Stock, the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the American Stock Exchange or,
if the shares of Equity Stock are not listed or admitted to trading on the
American Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of Equity Stock are listed or admitted
to trading or, if the shares of Equity Stock are not listed or admitted to
trading on any national securities exchange, the last quoted price, or if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the Nasdaq Stock Market, Inc. or, if such system is no
longer in use, the principal other automated quotation system that may then be
in use or (B) if no public market for the Equity Stock exists, the Closing Price
will be determined by a single, independent appraiser selected by a committee
composed of Directors who are not officers or employees of the Corporation or
any affiliate thereof which appraiser shall appraise the Market Price for such
Equity Stock within such guidelines as shall be determined by such committee.
"Non-Transfer Event" shall mean an event other than a purported Transfer
that would cause (a) any Person (other than a Look-Through Entity) to
Beneficially Own shares of Equity Stock in excess of the Ownership Limit or (b)
any Look-Through Entity to Beneficially Own shares of Equity Stock in excess of
the Look-Through Ownership Limit. Non-Transfer Events include but are not
limited to (i) the granting of any option or entering into any agreement for the
sale, transfer or other disposition of shares (or of Beneficial Ownership of
shares) of Equity Stock or (ii) the sale, transfer, assignment or other
disposition of interests in any Person or of any securities or rights
convertible into or exchangeable for shares of Equity Stock or for interests in
any Person that results in changes in Beneficial Ownership of shares of Equity
Stock.
"Ownership Limit" shall mean, with respect to a class or series of Equity
Stock, 4.3% of the number of outstanding shares of such Equity Stock.
"Permitted Transferee" shall mean any Person designated as a Permitted
Transferee in accordance with the provisions of Section 7.4.8 of Article VII.
"Person" shall mean (a) an individual or any corporation, partnership,
estate, trust, association, private foundation, joint stock company or any other
entity and (b) a "group" as that term is used for purposes of Section 13(d)(3)
of the Exchange Act; but shall not include an underwriter that participates in a
public offering of Equity Stock for a period of 90 days following purchase by
such underwriter of such Equity Stock.
"Prohibited Owner" shall mean, with respect to any purported Transfer or
Non-Transfer Event, any Person who is prevented from becoming or remaining the
owner of record title to shares of Equity Stock by the provisions of Section
7.4.1 of Article VII.
"Restriction Termination Date" shall mean the first day on which the Board
of Directors, in accordance with Article VI hereof, determines that it is no
longer in the best interests of the Corporation to attempt to, or continue to,
qualify under the Code as a REIT.
"Trading Day" shall mean a day on which the principal national securities
exchange on which any of the shares of Equity Stock are listed or admitted to
trading is open for the transaction of business or, if none of the shares of
Equity Stock are listed or admitted to trading on any national securities
exchange, any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
"Transfer" (as a noun) shall mean any sale, transfer, gift, assignment,
devise or other disposition of shares (or of Beneficial Ownership of shares) of
Equity Stock, whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law or otherwise.
"Transfer" (as a verb) shall have the correlative meaning.
"Trust" shall mean any separate trust created and administered in
accordance with the terms of Section 7.4 of Article VII, for the exclusive
benefit of any Beneficiary.
"Trustee" shall mean any Person or entity, unaffiliated with both the
Corporation and any Prohibited Owner (and, if different than the Prohibited
Owner, the Person who would have had Beneficial Ownership of the Shares that
would have been owned of record by the Prohibited Owner), designated by the
Corporation to act as trustee of any Trust, or any successor trustee thereof.
9.2 Restriction on Ownership and Transfer.
(a) (I) Except as provided in Section 9.4 of this Article IX, until the
Restriction Termination Date, (i) no Person (other than a Look-Through Entity)
shall Beneficially Own shares of Equity Stock in excess of the Ownership Limit
and (ii) no Look-Through Entity shall Beneficially Own shares of Equity Stock in
excess of the Look-Through Ownership Limit.
(II) Except as provided in Section 9.4 of this Article IX, until the
Restriction Termination Date, any purported Transfer (whether or not the result
of a transaction entered into through the facilities of the American Stock
Exchange or any other national securities exchange or the Nasdaq Stock Market,
Inc. or any other automated quotation system) that, if effective, would result
in any Person (other than a Look-Through Entity) Beneficially Owning shares of
Equity Stock in excess of the Ownership Limit shall be void ab initio as to the
Transfer of that number of shares of Equity Stock which would be otherwise
Beneficially Owned by such Person in excess of the Ownership Limit, and the
intended transferee shall acquire no rights in such shares of Equity Stock.
(III) Except as provided in Section 9.4 of this Article IX, until the
Restriction Termination Date, any purported Transfer (whether or not the result
of a transaction entered into through the facilities of the American Stock
Exchange or any other national securities exchange or the Nasdaq Stock Market,
Inc. or any other automated quotation system) that, if effective, would result
in any Look-Through Entity Beneficially Owning shares of Equity Stock in excess
of the Look-Through Ownership Limit shall be void ab initio as to the Transfer
of that number of shares of Equity Stock which would be otherwise Beneficially
Owned by such Look-Through Ownership Entity in excess of the Look-Through
Ownership Limit, and the intended transferee Look-Through Entity shall acquire
no rights in such shares of Equity Stock.
(b) Until the Restriction Termination Date, any purported Transfer (whether
or not the result of a transaction entered into through the facilities of the
American Stock Exchange or any other national securities exchange or the Nasdaq
Stock Market, Inc. or any other automated quotation system) of shares of Equity
Stock that, if effective, would result in the Corporation being "closely held"
within the meaning of Section 856(h) of the Code shall be void ab initio as to
the Transfer of that number of shares of Equity Stock that would cause the
Corporation to be "closely held" within the meaning of Section 856(h) of the
Code, and the intended transferee shall acquire no rights in such shares of
Equity Stock.
(c) Until the Restriction Termination Date, any purported Transfer (whether
or not the result of a transaction entered into through the facilities of the
American Stock Exchange or any other national securities exchange or the Nasdaq
Stock Market, Inc. or any other automated quotation system) of shares of Equity
Stock that, if effective, would cause the Corporation to Constructively Own 10%
or more of the ownership interests in a tenant of the real property of the
Corporation or any direct or indirect subsidiary (whether a corporation,
partnership, limited liability company or other entity) of the Corporation (a
"Subsidiary"), within the meaning of Section 856(d)(2)(B) of the Code, shall be
void ab initio as to the Transfer of that number of shares of Equity Stock that
would cause the Corporation to Constructively Own 10% or more of the ownership
interests in a tenant of the real property of the Corporation or a Subsidiary
within the meaning of Section 856(d)(2)(B) of the Code, and the intended
transferee shall acquire no rights in such shares of Equity Stock.
(d) Until the Restriction Termination Date, any purported Transfer (whether
or not the result of a transaction entered into through the facilities of the
American Stock Exchange or any other national securities exchange or the Nasdaq
Stock Market, Inc. or any other automated quotation system) that, if effective,
would result in shares of Equity Stock being beneficially owned by fewer than
100 persons within the meaning of Section 856(a)(5) of the Code shall be void ab
initio and the intended transferee shall acquire no rights in such shares of
Equity Stock.
9.3 Owners Required to Provide Information. Until the Restriction
Termination Date:
(a) Every Beneficial Owner of more than 5%, or such lower percentages as
are then required pursuant to regulations under the Code, of the outstanding
shares of any class or series of Equity Stock of the Corporation as of any
dividend record date on the Corporation's Equity Stock shall, within 30 days
after January 1 of each year, provide to the Corporation a written statement or
affidavit stating the name and address of such Beneficial Owner, the number of
shares of Equity Stock Beneficially Owned by such Beneficial Owner as of each
such dividend record date, and a description of how such shares are held. Each
such Beneficial Owner shall provide to the Corporation such additional
information as the Corporation may request in order to determine the effect, if
any, of such Beneficial Ownership on the Corporation's status as a REIT and to
ensure compliance with the Ownership Limit.
(b) Each Person who is a Beneficial Owner of shares of Equity Stock and
each Person (including the stockholder of record) who is holding shares of
Equity Stock for a Beneficial Owner shall provide to the Corporation a written
statement or affidavit stating such information as the Corporation may request
in order to determine the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit.
9.4. Exception.
(a) The Ownership Limit is hereby waived for the following persons: Robert
L. Beal Bruce A. Beal Molly Ann Special Limited Partnership Bruce A. Beal 1990
Trust Robert L. Beal 1994 Revocable Trust DFI Limited Partnership DNB
Corporation Norman S. Rabb Trust The Hope Trust
The Board of Directors, in its sole discretion, may at any time revoke any
exception pursuant to this Section 9.4 in the case of any Person, and upon such
revocation, the provisions of Section 9.2 of this Article IX shall immediately
become applicable to such Person and all Equity Stock of which such Person may
Beneficially Own. A decision to exempt or refuse to exempt from the Ownership
Limit the ownership of certain designated shares of Equity Stock, or to revoke
an exemption previously granted, shall be made by the Board of Directors in its
sole discretion, based on any reason whatsoever, including, but not limited to,
the preservation of the Corporation's qualification as a REIT.
(b) The Board of Directors, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence or undertakings
acceptable to it, may, in its sole discretion, waive the application of the
Ownership Limit or the Look-Through Ownership Limit to a Person subject, as the
case may be, to any such limit, provided that (A) the Board of Directors obtains
such representations and undertakings from such Person as are reasonably
necessary to ascertain that such Person's Beneficial Ownership or Constructive
Ownership of shares of Equity Stock will now and in the future (i) not result in
the Corporation being "closely held" within the meaning of Section 856(h) of the
Code, (ii) not cause the Corporation to Constructively Own 10% or more of the
ownership interests of a tenant of the Corporation or a Subsidiary within the
meaning of Section 856(d)(2)(B) of the Code and to violate the 95% gross income
test of Section 856(c)(2) of the Code, and (iii) not result in the shares of
Equity Stock of the Corporation being beneficially owned by fewer than 100
persons within the meaning of Section 856(a)(5) of the Code, and (B) such Person
agrees in writing that any violation or attempted violation of (x) such other
limitation as the Board of Directors may establish at the time of such waiver
with respect to such Person or (y) such other restrictions and conditions as the
Board of Directors may in its sole discretion impose at the time of such waiver
with respect to such Person, will result, as of the time of such violation even
if discovered after such violation, in the conversion of such shares in excess
of the original limit applicable to such Person into shares of Excess Stock
pursuant to Section 7.4.1 of Article VII.
(c) Nothing in the exception granted in Section 9.4 of this Article IX
shall grant any Person, other than the named Person, including, but not limited
to, a transferee of the named Person, the right to own Equity Stock in excess of
the Ownership Limit.
9.5 American Stock Exchange Transactions. Notwithstanding any provision
contained herein to the contrary, nothing in these Articles shall preclude the
settlement of any transaction entered into through the facilities of the
American Stock Exchange or any other national securities exchange or the Nasdaq
Stock Market, Inc. or any other automated quotation system. In no event shall
the existence or application of the preceding sentence have the effect of
deterring or preventing the conversion of Equity Stock into Excess Stock as
contemplated herein.
9.6 Ambiguity. In the case of an ambiguity in the application of any of the
provisions of this Article IX, including any definition contained in Section 9.1
of this Article IX, the Board of Directors shall have the power to determine the
application of the provisions of this Article IX with respect to any situation
based on the facts known to it.
9.7 Remedies Not Limited. Except as set forth in Section 9.5 of this
Article IX, nothing contained in this Article IX or Article VII shall limit the
authority of the Corporation to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its stockholders by
preservation of the Corporation's status as a REIT and to ensure compliance with
the Ownership Limit or the Look-Through Ownership Limit.
ARTICLE X
RIGHTS AND POWERS OF CORPORATION,
BOARD OF DIRECTORS AND OFFICERS
In carrying on its business, or for the purpose of attaining or furthering
any of its objects, the Corporation shall have all of the rights, powers and
privileges granted to corporations by the laws of the State of Maryland, as well
as the power to do any and all acts and things that a natural person or
partnership could do as now or hereafter authorized by law, either alone or in
partnership or conjunction with others. In furtherance and not in limitation of
the powers conferred by statute, the powers of the Corporation and of the
Directors and stockholders shall include the following:
10.1 Conflicts of Interest. Any Director or officer individually, or any
firm of which any Director or officer may be a member, or any corporation or
association of which any Director or officer may be a director or officer or in
which any Director or officer may be interested as the holder of any amount of
its Stock or otherwise, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the Corporation, and, in the
absence of fraud, no contract or other transaction shall be thereby affected or
invalidated; provided, however, that (a) such fact shall have been disclosed or
shall have been known to the Board of Directors or the committee thereof that
approved such contract or transaction and such contract or transaction shall
have been approved or ratified by the affirmative vote of a majority of the
disinterested Directors, or (b) such fact shall have been disclosed or shall
have been known to the stockholders entitled to vote, and such contract or
transaction shall have been approved or ratified by a majority of the votes cast
by the stockholders entitled to vote, other than the votes of shares owned of
record or beneficially by the interested Director or corporation, firm or other
entity, or (c) the contract or transaction is fair and reasonable to the
Corporation. Any Director of the Corporation who is also a director or officer
of or interested in such other corporation or association, or who, or the firm
of which he is a member, is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of the
Corporation which shall authorize any such contract or transaction, with like
force and effect as if he were not such director or officer of such other
corporation or association or were not so interested or were not a member of a
firm so interested.
10.2 Amendment of Articles. The Corporation reserves the right, from time
to time, to make any amendment of its Articles, now or hereafter authorized by
law, including any amendment which alters the contract rights, as expressly set
forth in its Articles, of any outstanding Stock.
No amendment or repeal of these Articles shall be made unless the same is
first approved by the Board of Directors pursuant to a resolution adopted by the
Board of Directors in accordance with the MGCL, and, except as otherwise
provided by law, thereafter approved by the stockholders.
Whenever any vote of the holders of voting stock is required to amend or
repeal any provision of these Articles, then in addition to any other vote of
the holders of voting stock that is required by these Articles, the affirmative
vote of the holders of a majority of the outstanding shares of Stock of the
Corporation entitled to vote on such amendment or repeal, voting together as a
single class, and the affirmative vote of the holders of a majority of the
outstanding shares of each class entitled to vote thereon as a class, shall be
required to amend or repeal any provision of these Articles; provided, however,
that the affirmative vote of the holders of not less than two-thirds of the
outstanding shares entitled to vote on such amendment or repeal, voting together
as a single class, and the affirmative vote of the holders of not less than
two-thirds of the outstanding shares of each class entitled to vote thereon as a
class, shall be required to amend or repeal any of the provisions of Sections
6.4 or 6.5 of Article VI, Article X or Article XII of these Articles.
ARTICLE XI
INDEMNIFICATION
The Corporation (which for the purpose of this Article XI shall include
predecessor entities of the Corporation as set forth in Section 2-418 of the
MGCL) shall have the power to the maximum extent permitted by Maryland law in
effect from time to time, to obligate itself to indemnify, and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to, (a) any individual who is a present or former Director, trustee or officer
of the Corporation or (b) any individual who, while a Director of the
Corporation and at the request of the Corporation, serves or has served as a
director, officer, partner or trustee of another corporation, real estate
investment trust, partnership, joint venture, trust, employee benefit plan or
any other enterprise from and against any claim or liability to which such
person may become subject or which such person may incur by reason of his status
as a present or former Director or officer of the Corporation. The Corporation
shall provide such indemnification and advancement of 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 or shareholder (in connection
with the affairs of such entity) of the Corporation or a predecessor of the
Corporation.
ARTICLE XII
LIMITATION OF LIABILITY
To the fullest extent permitted under the MGCL as in effect on the date of
filing these Articles or as the MGCL is thereafter amended from time to time, no
Director or officer shall be liable to the Corporation or its stockholders for
money damages. Neither the amendment or the repeal of this Article, nor the
adoption of any other provision in the Corporation's Articles inconsistent with
this Article, shall eliminate or reduce the protection afforded by this Article
to a Director or officer of the Corporation with respect to any matter which
occurred, or any cause of action, suit or claim which but for this Article would
have accrued or arisen, prior to such amendment, repeal or adoption.
ARTICLE XIII
EXEMPTION FROM BUSINESS COMBINATION STATUTE
Pursuant to Section 3-603(e)(1)(iii) of the MGCL, the Corporation expressly
elects not to be governed by the provisions of Section 3-602 of the MGCL with
respect to any business combination (as defined in Section 3-601 of the MGCL)
involving the Corporation.
ARTICLE XIV
EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE.
The provisions of Title 3, Subtitle 7 of the MGCL shall not apply to any
share of Stock of the Corporation now or hereafter held by any current or future
Stockholders. All shares of Stock currently outstanding or issued in the future
are exempted from such provisions of the MGCL to the fullest extent permitted by
Maryland law.
ARTICLE XV
MISCELLANEOUS
13.1 Provisions in Conflict with Law or Regulations.
(a) The provisions of these Articles are severable, and if the Directors
shall determine that any one or more of such provisions are in conflict with the
REIT provisions of the Code, or other applicable federal or state laws, the
conflicting provisions shall be deemed never to have constituted a part of these
Articles, even without any amendment of these Articles pursuant to Section 10.2
hereof; provided, however, that such determination by the Directors shall not
affect or impair any of the remaining provisions of these Articles or render
invalid or improper any action taken or omitted prior to such determination. No
Director shall be liable for making or failing to make such a determination.
(b) If any provision of these Articles or any application of such provision
shall be held invalid or unenforceable by any federal or state court having
jurisdiction, such holding shall not in any manner affect or render invalid or
unenforceable such provision in any other jurisdiction, and the validity of the
remaining provisions of these Articles shall not be affected. Other applications
of such provision shall be affected only to the extent necessary to comply with
the determination of such court.
THIRD: The amendment to and restatement of the Charter as hereinabove set
forth as been duly advised by the Board of Directors and approved by the
stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the Corporation is
as set forth in Article IV of the foregoing amendment and restatement of the
charter.
FIFTH: The name and address of the Corporation's current resident agent is
as set forth in Article V of the foregoing amendment and restatement of the
charter.
SIXTH: The number of directors of the Corporation and the names of those
currently in office are as set forth in Article VI of the foregoing amendment
and restatement of the charter.
SEVENTH: The total number of shares of stock which the Corporation had
authority to issue immediately prior to this amendment and restatement was one
hundred (100) shares of Common Stock, par value $.01 per share. The aggregate
par value of all shares of stock was one dollar ($1).
EIGHTH: The total number of shares of Stock which the Corporation has
authority to issue pursuant to the foregoing amendment and restatement of the
charter is thirty million (30,000,000) shares, consisting of (i) five million
(5,000,000) shares of Preferred Stock, par value $.01 per share; (ii) ten
million (10,000,000) shares of Common Stock, par value $.01 per share; and (iii)
fifteen million (15,000,000) shares of Excess Stock, par value $.01 per share.
The aggregate par value of all the shares of stock is three hundred thousand
dollars ($300,000).
NINTH: The undersigned President acknowledges these Articles of Amendment
and Restatement 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.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
and Restatement to be signed in its name and on its behalf by its President and
attested to by its Secretary on this 25th day of May, 1999.
ATTEST: MARYLAND PROPERTY CAPITAL
TRUST, INC.
/s/ Robert L. Beal By: /s/ Bruce A. Beal
Robert L. Beal, Corporate Secretary Bruce A. Beal, President
BY-LAWS
OF
PROPERTY CAPITAL TRUST, INC.
ARTICLE I
Definitions and Offices
1.1 Definitions For purposes of these By-laws, the following words shall
have themeanings set forth below:
(a) "Articles" shall mean the Articles of Incorporation of the Corporation,
as amended from time to time.
(b) "Affiliate" of a Person shall mean (i) any Person that, directly or
indirectly, controls or is controlled by or is under common control with such
other Person, (ii) any Person that owns, beneficially, directly or indirectly,
5% or more of the outstanding capital stock, shares or equity interests of such
other Person or (iii) any officer, director, employee, partner or trustee of
such other Person or any Person controlling, controlled by or under common
control with such Person (excluding directors and Persons serving in similar
capacities who are not otherwise Affiliates of such Person). For the purposes of
this definition, the term "Person" shall mean, and includes, any natural person,
corporation, partnership, association, trust, limited liability company or any
other legal entity. For the purposes of this definition, "control" (including
the correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, through the ownership of voting securities,
partnership interests or other equity interests.
(c) "Corporation" shall mean Property Capital Trust, Inc.
(d) "Equity Stock" shall mean the common stock, par value $.01 per share,
and the preferred stock, par value $.01 per share, of the Corporation.
(e) "Public Announcement" shall mean: (i) disclosure in a press release
reported by the Dow Jones News Service, Associated Press or other similar
national news service, (ii) a report or other document filed publicly with the
Securities and Exchange Commission (including, without limitation, a Form 8-K)
or (iii) a letter or report sent to stockholders of record of the Corporation at
the time of the mailing of such letter or report.
(f) "MGCL" shall mean the Maryland General Corporation Law, as amended from
time to time.
1.2 Principal Office. The principal office of the Corporation shall be
located at such place or places as the Board of Directors may designate.
1.3 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.
<PAGE>
ARTICLE II
Meetings of Stockholders
2.1 Places of Meetings. All meetings of the stockholders shall be held at
such place, either within or without the State of Maryland but within the United
States, as from time to time may be fixed by the majority of the Board of
Directors, the Chairman of the Board, if one is elected, or the President, which
place may subsequently be changed at any time by vote of the Board of Directors.
2.2 Annual Meetings. The annual meeting of the stockholders, for the
election of Directors and transaction of such other business as may come
properly before the meeting, shall be held at such date and time as shall be
determined by a majority of the Board of Directors, the Chairman of the Board,
if one is elected, or the President, which date and time may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
At any annual meeting of stockholders or any special meeting in lieu of
annual meeting of stockholders, only such business shall be conducted, and only
such proposals shall be acted upon, as shall have been properly brought before
such annual meeting. To be considered as properly brought before an annual
meeting, business must be: (a) specified in the notice of meeting, (b) otherwise
properly brought before the meeting by, or at the direction of, the Board of
Directors, or (c) otherwise properly brought before the meeting by any holder of
record (both as of the time notice of such proposal is given by the stockholder
as set forth below and as of the record date for the annual meeting in question)
of any shares of stock of the Corporation entitled to vote at such annual
meeting who complies with the requirements set forth in Section 2.9.
2.3 Special Meetings. Except as otherwise required by law and subject to
the rights, if any, of the holders of any series of preferred stock of the
Corporation, special meetings of the stockholders may be called only by the
President or the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the Directors then in office. Only those
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law. 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. Such request shall state the purpose of such meeting and
the matters proposed to be acted on at such meeting. The secretary shall inform
such stockholders of the reasonably estimated cost of preparing and mailing
notice of the meeting and, upon payment to the Corporation by such stockholders
of such costs, the secretary shall give notice to each stockholder entitled to
notice of the meeting.
2.4 Notice of Meetings; Adjournments. A written notice of each annual
meeting stating the hour, date and place of such annual meeting shall be given
by the Secretary or an Assistant Secretary of the Corporation (or other person
authorized by these By-laws or by law) not less than 10 days nor more than 90
days before the annual meeting, to each stockholder entitled to vote thereat and
to each stockholder who, by law or under the Articles or under these By-laws, is
entitled to such notice, by personally delivering such notice to him or her, by
leaving such notice at his or her residence or usual place of business or by
mailing it, postage prepaid, addressed to such stockholder at the address of
such stockholder as it appears on the stock transfer books of the Corporation.
Such notice shall be deemed to be delivered when hand-delivered to such address
or deposited in the mail so addressed, with postage prepaid.
Notice of all special meetings of stockholders shall be given in the same
manner as provided for annual meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an annual meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any annual meeting or special meeting of stockholders need be
specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously scheduled
annual meeting or special meeting of stockholders and any record date with
respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to this Section 2.4
or otherwise. In no event shall the Public Announcement of an adjournment,
postponement or rescheduling of any previously scheduled meeting of stockholders
commence a new time period for the giving of a stockholder's notice under
Section 2.9 of these By-laws.
When any meeting is convened, the presiding officer of the meeting may
adjourn the meeting if (a) no quorum is present for the transaction of business,
(b) the Board of Directors determines that adjournment is necessary or
appropriate to enable the stockholders to consider fully information that the
Board of Directors determines has not been made sufficiently or timely available
to stockholders or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When any annual meeting or
special meeting of stockholders is adjourned to another hour, date or place,
notice need not be given of the adjourned meeting, other than an announcement at
the meeting at which the adjournment is taken, of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat and each stockholder who, by
law or under the Articles or under these By-laws, is entitled to such notice.
2.5 Quorum. Except as otherwise required by the Articles or law, any number
of stockholders together holding at least a majority of the outstanding shares
of capital stock entitled to vote with respect to the business to be transacted,
who shall be present in person or represented by proxy at any meeting duly
called, shall constitute a quorum for the transaction of business. Where a
separate vote by a class or classes is required, a majority of the outstanding
shares of such class or classes, present in person or represented by proxy,
shall constitute a quorum entitled to take action with respect to that matter.
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 is present, any business may be transacted which might have been
transacted at the meeting as originally noticed. The stockholders present at a
duly constituted meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
2.6 Voting and Proxies. Stockholders shall have one vote for each share of
stock entitled to vote owned by them of record according to the stock transfer
books of the Corporation, unless otherwise provided by law or by the Articles. A
stockholder may cast the votes entitled to be cast by the shares of stock owned
of record by him either in person or by proxy executed in writing by the
stockholder or by his duly authorized agent. 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. Proxies shall be filed with the Secretary of
the meeting before being voted. Except as otherwise limited therein or as
otherwise provided by law, proxies authorizing a person to vote at a specific
meeting shall entitle the persons authorized thereby to vote at any adjournment
of such meeting, but they shall not be valid after final adjournment of such
meeting. A proxy with respect to stock held in the name of two or more persons
shall be valid if executed by or on behalf of any one of them unless at or prior
to the exercise of the proxy the Corporation receives a specific written notice
to the contrary from any one of them. A proxy purporting to be executed by or on
behalf of a stockholder shall be deemed valid, and the burden of proving
invalidity shall rest on the challenger.
2.7 Action at Meeting. When a quorum is present, any matter before any
meeting of stockholders shall be decided by the affirmative vote of the majority
of shares present in person or represented by proxy at such meeting and entitled
to vote on such matter, except where a larger vote is required by law, by the
Articles or by these By-laws. Where a separate vote by a class or classes is
required, the affirmative vote of the majority of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class. Any election by stockholders shall be determined by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of Directors, except where a
larger vote is required by law, by the Articles or by these By-laws. The
Corporation shall not directly or indirectly vote any shares of its own stock;
provided, however, that the Corporation may vote shares which it holds in a
fiduciary capacity to the extent permitted by law.
2.8 Stockholder List. The officer or agent having charge of the stock
transfer books of the Corporation shall make, at least 10 days before every
annual meeting or special meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting or any adjournment thereof, in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the hour, date and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
2.9 Stockholder Proposals. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
stockholder of record (both as of the time notice of such proposal is given by
the stockholder as set forth below and as of the record date for the annual
meeting in question) of any shares of capital stock entitled to vote at such
annual meeting, such stockholder shall: (i) give timely written notice as
required by this Section 2.9 to the Secretary of the Corporation and (ii) be
present at such meeting, either in person or by a representative. For an annual
meeting, a stockholder's notice shall be timely if delivered to, or mailed to
and received by, the Corporation at its principal executive office not less than
75 days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting (the "Anniversary Date"); provided, however, that in
the event the annual meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (1) the 75th day prior to the scheduled date of such
annual meeting or (2) the 15th day following the day on which Public
Announcement of the date of such annual meeting is first made by the
Corporation.
A stockholder's notice to the Secretary of the Corporation shall set forth
as to each matter proposed to be brought before an annual meeting: (i) a brief
description of the business the stockholder desires to bring before such annual
meeting and the reasons for conducting such business at such annual meeting,
(ii) the name and address, as they appear on the stock transfer books of the
Corporation, of the stockholder proposing such business, (iii) the class and
number of shares of the capital stock of the Corporation beneficially owned by
the stockholder proposing such business, (iv) the names and addresses of the
beneficial owners, if any, of any capital stock of the Corporation registered in
such stockholder's name on such books, and the class and number of shares of the
capital stock of the Corporation beneficially owned by such beneficial owners,
(v) the names and addresses of other stockholders known by the stockholder
proposing such business to support such proposal, and the class and number of
shares of the capital stock of the Corporation beneficially owned by such other
stockholders and (vi) any material interest of the stockholder proposing to
bring such business before such meeting (or any other stockholders known to be
supporting such proposal) in such proposal.
If the Board of Directors or a designated committee thereof determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2.9 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2.9 in any material respect, such proposal shall not be presented for
action at the annual meeting in question. If neither the Board of Directors nor
such committee makes a determination as to the validity of any stockholder
proposal in the manner set forth above, the presiding officer of the annual
meeting shall determine whether the stockholder proposal was made in accordance
with the terms of this Section 2.9. If the presiding officer determines that any
stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2.9 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2.9 in any material respect, such proposal shall not be presented for
action at the annual meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
stockholder proposal was made in accordance with the requirements of this
Section 2.9, the presiding officer shall so declare at the annual meeting and
ballots shall be provided for use at the meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this Section 2.9, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Section 2.9, and
nothing in this Section 2.9 shall be deemed to affect any rights of stockholders
to request inclusion of proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Exchange Act (or any successor provision thereof).
2.10 Voting Procedures and Inspectors of Elections. The Corporation shall,
in advance of any meeting of stockholders, appoint one or more inspectors to act
at the meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the presiding officer shall appoint one or more inspectors to act
at the meeting. Any inspector may, but need not, be an officer, employee or
agent of the Corporation. Each inspector, before entering upon the discharge of
his or her duties, shall take and sign an oath faithfully to execute the duties
of inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall perform such duties as are required by the MGCL,
including the counting of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors. The presiding officer may review all
determinations made by the inspectors, and in so doing the presiding officer
shall be entitled to exercise his or her sole judgment and discretion and he or
she shall not be bound by any determinations made by the inspectors. All
determinations by the inspectors and, if applicable, the presiding officer,
shall be subject to further review by any court of competent jurisdiction.
2.11 Presiding Officer. The Chairman of the Board, if one is elected, or if
not elected or in his or her absence, one of the following officers shall
preside at any annual meeting or special meeting of stockholders in the order
stated: the President, the vice presidents in their order of rank and seniority,
the Secretary, an Assistant Secretary or a person 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. Such presiding officer shall have the
power, among other things, to adjourn such meeting at any time and from time to
time, subject to Sections 2.4 and 2.5 of this Article II. The order of business
and all other matters of procedure at any meeting of the stockholders shall be
determined by the presiding officer.
ARTICLE III
Directors
3.1 General Powers. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors and, except as otherwise
expressly provided by law, the Articles or these By-laws, all of the powers of
the Corporation shall be vested in such Board.
3.2 Number of Directors. The number of Directors shall be as provided in
Article VI of the Articles. The Directors shall hold office in the manner
provided in the Articles.
3.3 Election and Removal of Directors; Quorum.
(a) Directors shall be elected and removed in the manner provided for in
Article VI of the Articles.
(b) Vacancies in the Board of Directors shall be filled in the manner
provided for in Article VI of the Articles.
(c) At any meeting of the Board of Directors, a majority of the number of
Directors then in office shall constitute a quorum for the transaction of
business. However, if less than a quorum is present at a meeting, a majority of
the Directors present may adjourn the meeting from time to time, and the meeting
may be held as adjourned without further notice, except as provided in Section
3.6 of this Article III. Any business which might have been transacted at the
meeting as originally noticed may be transacted at such adjourned meeting at
which a quorum is present.
(d) No Director need be a stockholder of the Corporation.
(e) A Director may resign at any time by giving written notice to the
Chairman of the Board, if one is elected, the President or the Secretary. A
resignation shall be effective upon receipt, unless the resignation otherwise
provides.
3.4 Regular Meetings. The regular annual meeting of the Board of Directors
shall be held, without notice other than this Section 3.4, on the same date and
at the same place as the annual meeting following the close of such meeting of
stockholders. Other regular meetings of the Board of Directors may be held at
such hour, date and place as the Board of Directors may by resolution from time
to time determine without notice other than such resolution.
3.5 Special Meetings. Special meetings of the Board of Directors may be
called, orally or in writing, by or at the request of a majority of the
Directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
3.6 Notice of Meetings. Notice of the hour, date and place of all special
meetings of the Board of Directors shall be given to each Director by the
Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting of
the Board of Directors shall be given to each Director in person, by telephone,
or by facsimile, telex, telecopy, telegram, or other written form of electronic
communication, sent to his or her business or home address, at least 24 hours in
advance of the meeting, or by written notice mailed to his or her business or
home address, at least 48 hours in advance of the meeting. Such notice shall be
deemed to be delivered when hand delivered to such address, read to such
Director by telephone, deposited in the mail so addressed, with postage thereon
prepaid if mailed, dispatched or transmitted if faxed, telexed or telecopied, or
when delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any notice
of the hour, date or place of any meeting adjourned for less than 30 days or of
the business to be transacted thereat, other than an announcement at the meeting
at which such adjournment is taken of the hour, date and place to which the
meeting is adjourned.
A written waiver of notice signed before or after a meeting by a Director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Articles or by these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
3.7 Nominations. Nominations of candidates for election as Directors of the
Corporation at any annual meeting may be made only (a) by, or at the direction
of, a majority of the Board of Directors or (b) by any stockholder of record
(both as of the time notice of such nomination is given by the stockholder as
set forth below and as of the record date for the annual meeting in question) of
any shares of the stock of the Corporation entitled to vote at such annual
meeting who complies with the timing, informational and other requirements set
forth in this Section 3.7. Any stockholder who has complied with the timing,
informational and other requirements set forth in this Section 3.7 and who seeks
to make such a nomination must be, or his, her or its representative must be,
present in person at the annual meeting. Only persons nominated in accordance
with the procedures set forth in this Section 3.7 shall be eligible for election
as Directors at an annual meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors shall be made pursuant to timely notice in writing to the Secretary of
the Corporation as set forth in this Section 3.7. For an annual meeting, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not less than 75 days nor
more than 120 days prior to the Anniversary Date; provided, however, that in the
event the annual meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (x) the 75th day prior to the scheduled date of such
annual meeting or (y) the 15th day following the day on which Public
Announcement of the date of such annual meeting is first made by the
Corporation.
A stockholder's notice to the Secretary of the Corporation shall set forth
as to each person whom the stockholder proposes to nominate for election or
re-election as a Director: (1) the name, age, business address and residence
address of such person; (2) the principal occupation or employment of such
person; (3) the class and number of shares of the capital stock of the
Corporation which are beneficially owned by such person on the date of such
stockholder notice; and (4) the consent of each nominee to serve as a Director
if elected. A stockholder's notice to the Secretary of the Corporation shall
further set forth as to the stockholder giving such notice: (a) the name and
address, as they appear on the stock transfer books of the Corporation, of such
stockholder and of the beneficial owners (if any) of the capital stock of the
Corporation registered in such stockholder's name and the name and address of
other stockholders known by such stockholder to be supporting such nominee(s);
(b) the class and number of shares of the capital stock of the Corporation which
are held of record, beneficially owned or represented by proxy by such
stockholder and by any other stockholders known by such stockholder to be
supporting such nominee(s) on the record date for the annual meeting in question
(if such date shall then have been made publicly available and shall be earlier
than the date of such stockholder notice) and on the date of such stockholder's
notice; and (c) a description of all arrangements or understandings between such
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
such stockholder.
If the Board of Directors or a designated committee thereof determines
that any stockholder nomination was not made in accordance with the terms of
this Section 3.7 or that the information provided in a stockholder's notice does
not satisfy the informational requirements of this Section 3.7 in any material
respect, then such nomination shall not be considered at the annual meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3.7, the presiding officer of the annual meeting
shall determine whether a nomination was made in accordance with such
provisions. If the presiding officer determines that any stockholder nomination
was not made in accordance with the terms of this Section 3.7 or that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Section 3.7 in any material respect, then
such nomination shall not be considered at the annual meeting in question. If
the Board of Directors, a designated committee thereof or the presiding officer
determines that a nomination was made in accordance with the terms of this
Section 3.7, the presiding officer shall so declare at the annual meeting and
ballots shall be provided for use at the meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second paragraph of
this Section 3.7, in the event that the number of Directors to be elected to the
Board of Directors is increased and there is no Public Announcement by the
Corporation naming all of the nominees for Director or specifying the size of
the increased Board of Directors at least 75 days prior to the Anniversary Date,
a stockholder's notice required by this Section 3.7 shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if such notice shall be delivered to, or mailed to and received by,
the Corporation at its principal executive office not later than the close of
business on the 15th day following the day on which such Public Announcement is
first made by the Corporation.
No person shall be elected by the stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3.7. Election of Directors at an annual meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such annual meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as Directors at
the annual meeting in accordance with the procedures set forth in this Section
3.7 shall be provided for use at the annual meeting.
3.8 Action at Meeting and by Consent. (a) At any meeting of the Board
of Directors at which a quorum is present, a majority of the Directors present
may take any action on behalf of the Board of Directors, unless otherwise
required by law, by the Articles or by these By-laws.
(b) Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if all members of the Board of
Directors consent thereto in writing. Such written consent shall be filed with
the records of the meetings of the Board of Directors and shall be treated for
all purposes as a vote at a meeting of the Board of Directors.
3.9 Manner of Participation. Directors may participate in meetings of
the Board of Directors by means of conference telephone or similar
communications equipment by means of which all Directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-laws.
3.10 Compensation of Directors. By resolution of the Board of
Directors, Directors may be allowed a fee for serving as a Director and a fee
and expenses for attendance at a meeting of the Board, but nothing herein shall
preclude Directors from serving the Corporation in other capacities and
receiving compensation for such other services.
3.11 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.
3.12 Certain Rights of Directors, Officers, Employees or Agents. The
directors shall have no responsibility to devote their full time to the affairs
of the Corporation. Any directors 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 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
4.1 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 standing or special committees of the Board of
Directors as it may deem advisable, composed of one two or more Directors, to
serve at the pleasure of the Board of Directors. The members, terms and
authority of such committees shall be as set forth in the resolutions
establishing the same.
4.2 Powers. The Board of Directors may delegate to committees appointed
under Section 4.1 of this Article any of the powers of the Board of Directors,
except as prohibited by law.
4.3 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.
4.4 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.
4.5 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.
4.6 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.
ARTICLE V
Officers
5.1 Enumeration. The officers of the Corporation shall consist of a
President, a Treasurer, a Secretary and such other officers, including, without
limitation, a Chairman of the Board of Directors, a Chief Executive Officer, a
Chief Operating Officer and one or more Vice Presidents (including Executive
Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant
Treasurers and Assistant Secretaries, and such other officers as the Board of
Directors may determine.
5.2 Election. At the regular annual meeting of the Board following the
annual meeting of stockholders, the Board of Directors shall elect the
President, the Treasurer and the Secretary. Other officers may be elected by the
Board of Directors at such regular annual meeting of the Board of Directors or
at any other regular or special meeting.
5.3 Qualification. No officer need be a stockholder or a Director. Any
person may occupy more than one office of the Corporation at any time; provided,
that such officer does not serve concurrently as both President and Vice
President. Any officer may be required by the Board of Directors to give bond
for the faithful performance of his or her duties in such amount and with such
sureties as the Board of Directors may determine.
5.4 Tenure. Except as otherwise provided by the Articles or by these
By-laws, each of the officers of the Corporation shall hold office until the
regular annual meeting of the Board of Directors following the next annual
meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
5.5 Resignation. Any officer may resign by delivering his or her
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event; provided however, that such resignation shall be without prejudice to the
contract rights, if any, of the Corporation.
5.6 Removal. Except as otherwise provided by law, if the Board of
Directors in its judgement finds that the best interests of the Corporation will
be served, it may remove any officer by the affirmative vote of a majority of
the Directors then in office; provided however, that such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
5.7 Absence or Disability. In the event of the absence or disability of
any officer, the Board of Directors may designate another officer to act
temporarily in place of such absent or disabled officer.
5.8 Vacancies. Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors.
5.9 President. The President shall, subject to the direction of the
Board of Directors, have general supervision and control of the Corporation's
business. If there is no Chairman of the Board or if he or she is absent, the
President shall preside, when present, at all meetings of stockholders and of
the Board of Directors. The President shall have such other powers and perform
such other duties as the Board of Directors may from time to time designate.
5.10 Chairman of the Board. The Chairman of the Board, if one is
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
5.11 Chief Executive Officer. The Chief Executive Officer, if one is
elected, shall have such powers and shall perform such duties as the Board of
Directors may from time to time designate. If there shall be a Chief Executive
Officer at any time, such officer shall have authority to take any action that
the President is authorized to take.
5.12 Vice Presidents and Assistant Vice Presidents. Any Vice President
(including any Executive Vice President or Senior Vice President) and any
Assistant Vice President shall have such powers and shall perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
5.13 Treasurer and Assistant Treasurers. The Treasurer shall, subject
to the direction of the Board of Directors and except as the Board of Directors
or the President may otherwise provide, have general charge of the financial
affairs of the Corporation and shall cause to be kept accurate books of account.
The Treasurer shall have custody of all funds, securities, and valuable
documents of the Corporation. He or she shall have such other duties and powers
as may be designated from time to time by the Board of Directors or the Chief
Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties
as the Board of Directors or the Chief Executive Officer may from time to time
designate.
5.14 Secretary and Assistant Secretaries. The Secretary shall record
all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose. In
his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties
as the Board of Directors or the Chief Executive Officer may from time to time
designate.
5.15 Other Powers and Duties. Subject to these By-laws and to such
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors, the Chairman of the
Board or the President.
ARTICLE VI
Stock
6.1 Certificates. Each stockholder shall be entitled to a certificate
of the stock of the Corporation, which shall represent and certify the number of
shares of each class held by such stockholder in the Corporation, in such form
as may from time to time be prescribed by the Board of Directors. Such
certificate shall be signed by the Chairman of the Board, the President or a
Vice President and countersigned by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary. The Corporation seal and the signatures
by the Corporation's officers, the transfer agent or the registrar may be either
manual or facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed on such certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, the certificate may be issued by the Corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the time of its issue. 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 on 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. Every certificate
for shares of stock which are subject to a restriction on transfer (as provided
in Article IX of the Articles) and every certificate issued when the Corporation
is authorized to issue more than one class or series of stock shall contain such
legend (as provided in Article VII of the Articles) with respect thereto as is
required by law.
6.2 Lost, Destroyed and Mutilated Certificates. Holders of the shares
of the stock of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board of
Directors may in its discretion cause one or more new certificates for the same
number of shares in the aggregate to be issued to such stockholder upon the
surrender of the mutilated certificate or upon satisfactory proof of such loss
or destruction, and the deposit of a bond in such form and amount and with such
surety as the Board of Directors may require.
6.3 Transfer of Stock. Subject to the restrictions on transfer of stock
described in Article IX of the Articles, shares of stock of the Corporation
shall be transferable or assignable only on the stock transfer books of the
Corporation by the holder in person or by attorney upon surrender to the
Corporation or its transfer agent of the certificate theretofore properly
endorsed or, if sought to be transferred by attorney, accompanied by a written
assignment or power of attorney properly executed, with transfer stamps (if
necessary) affixed, and with such proof of the authenticity of signatures as the
Corporation or its transfer agent may reasonably require.
6.4 Record Holders. Except as may otherwise be required by law, by the
Articles or by these By-laws, the Corporation shall be entitled to treat the
record holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
thereto, regardless of any transfer, pledge or other disposition of such stock,
until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of
his or her postal address and any changes thereto.
6.5 Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date: (a) in the case of
determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than ninety nor less than
ten days before the date of such meeting and (b) in the case of any other
action, shall not be more than ninety days prior to such other action. If no
record date is fixed: (i) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (ii) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
ARTICLE VII
Indemnification
7.1 Indemnification. To the maximum extent permitted by Maryland law in
effect from time to time, the Corporation (which, for the purpose of this
Article VII, shall include predecessor entities of the Corporation) shall
indemnify and, without requiring a preliminary determination of the ultimate
entitlement to indemnification, 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, trustee or officer, employee, agent or shareholder
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, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, 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.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the By-laws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect any act
or failure to act which occurred prior to such amendment, repeal or adoption.
7.2 Contractual Nature of Rights. The foregoing provision of this
Article VII shall be deemed to be a contract between the Corporation and each
Director and officer entitled to the benefits hereof at any time while this
Article VII is in effect, and any repeal or modification thereof shall not
affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any proceeding theretofore or thereafter
brought based in whole or in part upon any such state of facts. If a claim for
indemnification or advancement of expenses hereunder by a Director or officer is
not paid in full by the Corporation within (a) 60 days after the receipt by the
Corporation of a written claim for indemnification or (b) in the case of a
Director, 10 days after the receipt by the Corporation of documentation of
expenses and the required undertaking, such Director or officer may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Director or officer shall
also be entitled to be paid the expenses of prosecuting such claim. The failure
of the Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such indemnification or, in the case of a Director,
advancement of expenses, under this Article VII shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible. It is the parties' intention that if the
Corporation contests any Director's, officer's or employee's right to
indemnification, the question of such Director's, officer's or employee's right
to indemnification shall be for the court to decide, and neither the failure of
the Corporation (including its Board of Directors, any committee or subgroup of
the Board of Directors, independent legal counsel, or its stockholders) to have
made a determination that indemnification of such Director, officer or employee
is proper in the circumstances because the Director, officer or employee has met
the applicable standard of conduct required by applicable law, nor an actual
determination by the Corporation (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) that the Director, officer or employee has not met such
applicable standard of conduct, shall create a presumption that such Director,
officer or employee has or has not met the applicable standard of conduct.
7.3 Non-Exclusivity of Rights. The rights to indemnification and
advancement of expenses set forth in this Article VII shall not be exclusive of
any other right which any Director, officer or employee may have or hereafter
acquire under any statute, provision of the Articles or these By-laws,
agreement, vote of stockholders or disinterested Directors or otherwise.
7.4 Partial Indemnification. If any Director, officer or employee is
entitled under any provision of these By-laws to indemnification by the
Corporation for some or a portion of the expenses, judgments, fines or penalties
actually or reasonably incurred by him in the investigation, defense, appeal or
settlement of any civil or criminal action or proceeding, but not, however, for
the total amount thereof, the Corporation shall nevertheless indemnify such
Director, officer or employee for the portion of such expenses, judgments, fines
or penalties to which such Director, officer or employee is entitled.
7.5 Mutual Acknowledgment. By accepting any potential benefits under
this Article VII each Director, officer or employee acknowledges that in certain
instances, Federal law or applicable public policy may prohibit the Corporation
from indemnifying its Directors, officers and employees under these By-laws or
otherwise. The Director, officer or employee understands and acknowledges that
the Corporation has undertaken and may be required in the future to undertake
with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Corporation's right under public policy to indemnify Director, officer or
employee.
7.6 Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any Director, officer or employee against any liability of
any character asserted against or incurred by the Corporation or any such
Director, officer or employee, or arising out of any such person's corporate
status, whether or not the Corporation would have the power to indemnify such
person against such liability under the MGCL or the provisions of this Article
VII.
<PAGE>
ARTICLE VIII
Miscellaneous Provisions
8.1 Seal. The seal of the Corporation shall consist of a flat-faced
circular die, of which there may be any number of counterparts, on which there
shall be engraved the word "Seal" and the name of the Corporation. The Board of
Directors shall have the power to adopt and alter the seal of the Corporation.
8.2 Fiscal Year. The fiscal year of the Corporation shall be a calendar
year or as may otherwise be fixed by the Board of Directors.
8.3 Checks, Notes and Drafts. Checks, notes, drafts and other orders
for the payment of money shall be signed by such persons as the Board of
Directors from time to time may authorize. When the Board of Directors so
authorizes, however, the signature of any such person may be a facsimile.
8.4 Execution of Instruments. All deeds, leases, transfers, contracts,
bonds, notes and other obligations to be entered into by the Corporation in the
ordinary course of its business without Director action may be executed on
behalf of the Corporation by the Chairman of the Board, if one is elected, the
President or the Treasurer or any other officer, employee or agent of the
Corporation as the Board of Directors or Executive Committee may authorize.
8.5 Resident Agent. The Board of Directors may appoint a resident agent
upon whom legal process may be served in any action or proceeding against the
Corporation.
8.6 Corporate Records. The original or attested copies of the Articles,
By-laws and records of all meetings of the incorporators, stockholders and the
Board of Directors and the stock transfer books, which shall contain the names
of all stockholders, their record addresses and the amount of stock held by
each, may be kept outside the State of Maryland and shall be kept at the
principal office of the Corporation, at the office of its counsel or at an
office of its transfer agent or at such other place or places as may be
designated from time to time by the Board of Directors.
8.7 Amendment of By-laws. Except as provided otherwise by law, these
By-laws may be amended or repealed solely by the Board of Directors by the
affirmative vote of a majority of the Directors then in office.
8.8 Voting of Stock Held. Unless otherwise provided by resolution of
the Board of Directors or of the Executive Committee, if any, the Chairman of
the Board, if one is elected, the President or the Treasurer may from time to
time waive notice of and act on behalf of this Corporation, or appoint an
attorney or attorneys or agent or agents of the Corporation, in the name and on
behalf of the Corporation, to cast the vote that the Corporation may be entitled
to cast as a stockholder or otherwise in any other corporation, any of whose
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation, or to consent in writing
to any action by any such other corporation; and the Chairman of the Board, if
one is elected, the President or the Treasurer shall instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent and may execute or cause to be executed on behalf of the Corporation,
and under its corporate seal or otherwise, such written proxies, consents,
waivers or other instruments as may be necessary or proper in the premises. In
lieu of such appointment, the Chairman of the Board, if one is elected, the
President or the Treasurer may himself or herself attend any meetings of the
holders of shares or other securities of any such other corporation and there
vote or exercise any or all power of the Corporation as the holder of such
shares or other securities of such other corporation.
Adopted and effective as of June 15, 1998.
MANAGEMENT AGREEMENT
PROPERTY NAME: Property Capital Trust
Limited Partnership
Located at: 51 New York Avenue
Framingham, Massachusetts
OWNER: Property Capital Trust
Limited Partnership
CONTRACTOR: Beal & Company, Inc.
DATE: May 28, 1999
<PAGE>
MANAGEMENT AGREEMENT
Owner and Contractor act and agree as follows:
PART I
REFERENCE DATA
Each reference in this Agreement to any of the following defined terms
will be deemed to incorporate all of the following information:
"Commencement Date" May 28, 1999
"Contractor" Beal & Company, Inc., a Massachusetts
corporation
"Owner" Property Capital Trust Limited Partnership
"Property" or "Project" Property Capital Trust Limited Partnership
51 New York Avenue
Framingham, Massachusetts
as more particularly described in Exhibit A, together with all personal property
of Owner attached to or used in connection with the above-named property.
Parts II through V of this Agreement and the Exhibits hereto are made a part of
this Agreement as effectively as if set forth above the signature lines.
Executed, as an instrument under seal, as of May 28, 1999.
OWNER:
PROPERTY CAPITAL TRUST LIMITED
PARTNERSHIP
By: Property Capital Trust, Inc., its general
partner
By: /s/ Bruce A. Beal
Name: Bruce A. Beal
Title: President
CONTRACTOR:
BEAL & COMPANY, Inc.
By: /s/ Robert L. Beal
Name: Robert L. Beal
Title: President
<PAGE>
PART II
ENGAGEMENT AND TERM
1. Engagement of Contractor. Except as otherwise provided herein, the Owner
hereby engages the Contractor as its sole and exclusive management and leasing
agent for the term hereof, to rent, operate, maintain and manage the Property,
together with any expansions thereof and additions thereto and the Contractor
hereby accepts such engagement, all upon and subject to the terms and provisions
hereinafter set forth.
2. Term of Agreement. This Agreement shall be for an initial term
commencing on the Commencement Date and ending on December 31, 1999. Thereafter,
the term of this Agreement shall be automatically renewed for successive renewal
terms of one (1) year each unless terminated by either party by written notice
delivered to the other party at least thirty (30) days prior to the expiration
of the initial term or then current renewal term, subject to earlier termination
as hereinafter provided. Any and all such renewal terms shall be upon and
subject to all of the same terms and provisions as the initial term hereof (the
initial term and any and all such renewal terms of this Agreement are
hereinafter sometimes referred to as the "Term").
PART III
MANAGEMENT OF THE PROJECT
3. Duties and Authorities of Contractor. Contractor shall manage, operate
and maintain the Project in an efficient and satisfactory manner, utilizing
trained, experienced personnel, in conformance with an annual budget (the
"Annual Budget") to be prepared by Contractor (in consultation with Owner) prior
to January 10 of each calendar year. The Contractor agrees to perform the
following services, and the Owner hereby authorizes the Contractor, subject to
the terms and provisions of this Agreement, to take such reasonable action as
may be necessary or desirable in connection therewith, to-wit:
a. Collections. The Contractor shall collect all rents and other income from the
Project and shall use reasonable efforts to ensure tenants' compliance with
their respective leases, and when necessary, as directed by the Owner, shall
institute any and all legal actions or proceedings (using counsel approved in
writing by Owner) to effect such collections and to evict delinquent tenants;
and Contractor agrees to employ reasonable efforts to attempt to collect such
income, although Contractor shall not be liable for any failure so to collect;
b. Bank Accounts: Transfer of Funds. The Contractor shall deposit all monies
received by Contractor for or on behalf of Owner in a segregated account in the
name of Owner for the Project in a bank or other institution approved by Owner
(the "Depository Account"), which funds shall not be mingled with other funds of
Contractor. Contractor shall payout of the Depository Account all ordinary and
necessary operating expenses of the Project and any other payments relating to
the Project required by the terms of this Agreement or the applicable Annual
Budget. Owner may direct Contractor to change any depository bank or depository
arrangement. Without the prior written consent of Owner, however, Contractor
will not change any depository bank or arrangement or other banking relationship
or procedure;
c. Employees. Contract shall, subject to the provisions of the then applicable
Annual Budget, select, retain and employ qualified and experienced persons or
contractors to perform all necessary maintenance, security (if requested by
Owner or contained in the Annual Budget) and custodial labor in connection with
the Project, whether part time or full time, and shall provide necessary
workman's compensation payments, income tax withholding and other similar
payments, which personnel at all times shall be the employees of Contractor and
shall not be deemed to be the employees of Owner for any purpose whatsoever. All
costs incurred with respect to the foregoing, including without limitation, all
costs and expenses relating to on-site employees, shall be at Owner's expense
provided that such costs are in accordance with the then applicable Annual
Budget or are otherwise approved by Owner. Contractor will attempt to use
independent contractors where possible and prudent. Contractor shall select,
retain and employ sufficient home office personnel to perform the management
activities required under this Agreement, the costs of which shall be paid by
Contractor, except to the extent otherwise expressly stated herein.
d. Standard of Care. The Contractor shall exercise diligence and care, in
accordance with appropriate industry standards, in the management of the
project, and shall furnish the Owner with its advice, experience and judgment in
such management.
e. Insurance. The Contractor shall maintain insurance coverage pursuant to
Section 8 Below.
f. Payment of Expenses. To the extent that funds of Owner are in accounts of
Owner on which Contractor is authorized to draw and available therefore, the
Contractor shall pay from such funds all taxes, assessments, other impositions
applicable to the Project, and all operating expenses of the Project, including
but not limited to the payment of: (i) utility costs; (ii) on-site personnel
costs; (iii) repairs, replacement and maintenance costs; (iv) security, if
desired by the Owner; (v) insurance costs; and (vi) debt service, if applicable.
g. Service Contracts. Unless and until the Owner directs Contractor to the
contrary, the Contractor, acting for and on behalf of and in the name of the
Owner, shall enter into and supervise the performance of any and all contracts
and remnants which the Contractor may reasonably deem necessary or desirable to
provide any repairs, alterations, maintenance, utilities and other services to
or for the buildings and improvements of the Project, subject to the approved
Annual Budget; provided, however, that Contractor shall not without prior
written consent of Owner, enter into any one contract or agreement that requires
annual payments in excess of $5,000.00 unless contemplated by the approved
Annual Budget.
h. Financial Information. Within ten (10) days after the end of each month, the
Contractor shall cause to be submitted to the Owner at such place or places as
may be designated by Owner, all accounting and financial information and
services expressly required pursuant to Section 18 below;
i. Compliance With Laws and Contracts. Contractor will use reasonable commercial
efforts to comply with federal, state and municipal laws, ordinances,
regulations and orders relative to the leasing, use, operating, repair and
maintenance of the Project and with the regulations of the local Board of Fire
Underwriters or other similar bodies. Contractor will promptly remedy any
violation of any such law, ordinance, rule regulation or order which comes to
its attention and simultaneously will notify Owner of same. In addition, expect
as otherwise specifically directed by Owner, Contractor will use reasonable
commercial efforts to comply with all contracts and agreements relating to the
Project. In each instance such compliance will be an expense of the Project and
Contractor will not be required to make any payment from its own funds or incur
any individual liability. Except as otherwise specifically directed by Owner,
Contractor will be responsible for paying, from the income of the Project, all
real estate taxes, personal property taxes, betterment assessments and similar
governmental charges property due with respect to the Project:
j. Utility Contracts. Contractor will maintain, on behalf of Owner and at
Owner's expense, contracts for all necessary utility services for the Project.
k. Repairs, Decorations and Alterations. Contractor will, at Owner's expense,
make all ordinary and extraordinary repairs, decorations and alterations,
subject to the limits of the approved Annual Budget.
Not withstanding anything to the contrary provided herein, the
obligation of Contractor to manage, operate and maintain the Project in
accordance with this Agreement and the Annual Budget shall not except as
otherwise expressly provided in this Agreement, require Contractor to expend its
own funds to meet Project expenses, and Contractor shall not have any liability
for any failure to meet the performance standards in this Agreement and in the
Annual Budget to the extent such failure is due to the unavailability of funds
to meet expenses required to be paid for the project revenue.
4. Compensation to Contractor.
a. Management Fee. As compensation for the management services to be rendered by
Contractor hereunder, the Owner agrees to pay to the Contractor a management fee
(the "Management Fee") equal to three percent (3.0%) of the total monthly gross
receipts, from the Project. Payable by the 5th day of the month for the duration
of this Agreement. Payments due Contractor for periods of less than a calendar
month shall be pro-rated over the number of days for which compensation is due.
The percentage amount set forth in 4(a) shall be based upon the total gross
receipts from the Property during the preceding month.
b. Leasing Fee. In addition to the Management Fee, the Owner agrees to pay
Contractor a leasing fee (the "Leasing Fee") in the amounts calculated as
hereinafter set forth for each Tenant Lease entered into during the Term of this
Agreement. The amount of the Leasing Fee will be based upon the annual base rent
payable pursuant to a Tenant Lease. The Leasing Fee shall be due and payable to
Contractor when such Tenant Lease has been executed and delivered by or on
behalf of both the Owner and the Tenant thereunder. The Leasing Fee for Tenant
Leases shall be calculated based on the following schedule:
5% of the annual base rent for the first year of the term;
4% of the annual base rent for the second and third years;
3% of the annual base rent for the fourth year;
2% of the annual base rent for the fifth year; and
1.5% of the annual base rent for any balance of the term up to
a maximum of ten (10) years.
If a Tenant Lease is executed with the participation of an independent
broker to whom a commission is payable, the Leasing Fee payable hereunder with
respect to such Tenant Lease shall equal twenty-five percent (25%) of the
commission payable pursuant to the foregoing schedule.
If an existing Tenant at the Project extends its Tenant Lease pursuant
to an extension right in its existing Tenant Lease (whether or not an amendment
to such Tenant Lease is executed to acknowledge such extension) or if an
existing Tenant at the Project extends its Tenant Lease for an additional term
of less than two years by means of an amendment to such Tenant Lease at a time
when such Tenant has no remaining extension right under the terms of its Tenant
Lease, the Leasing Fee payable hereunder with respect to such extension shall
equal fifty percent of the commission payable pursuant to the foregoing
schedule. If an existing Tenant at the Project extends its Tenant Lease for an
additional term of two years or more by means of an amendment to such Tenant
Lease at a time when such Tenant has no remaining extension rights under the
terms of its Tenant Lease, the full Leasing Fee shall be payable hereunder with
respect to such extension.
Leasing Fees shall be deemed to have been fully earned at the time
paid, except as hereinabove provided, and the Owner's obligation to pay
Contractor said Leasing Fee with respect to any such Tenant Leases shall survive
the expiration or termination of this Agreement.
The Leasing Fees payable hereunder are intended to be gross
compensation to Contractor in consideration for Contractor's leasing and
marketing services hereunder, and Contractor shall therefore not be entitled to
any additional payment hereunder with respect to such services, except as
specifically set forth in this Agreement.
c. Payment of Fees. The Contractor is hereby authorized to deduct any and all
fees and reimbursable expenses payable to it under the terms of this Agreement
from rentals and other income received by it on behalf of Owner as contemplated
by this Agreement.
5. Expenses of Operation.
a. Reimbursable Costs. Provided that the same is in accordance with the Annual
Budget. Owner will, at its own cost and expense, in addition to payment of and
for the on-site management personnel as set forth in Paragraph 3(c) hereof and
any other reimbursable expenses provided for in this Agreement, pay or reimburse
the Contractor for the following expenses of operation, which shall not be borne
by Contractor:
i. Fees and expenses of independent auditors and accountants, and reasonable
fees of outside legal counsel.
ii. Advertising, promotional, public relations, brochures and printing fees,
costs and expenses.
iii. Costs of preparation, reproduction, transportation and storage of
display boards, layouts and similar items used or needed by Contractor to
negotiate Tenant Leases.
iv. Any fees or commissions payable to independent brokers for leasing any space
situated in the Project or any part thereof.
v. Reasonable Federal Express, UPS or other overnight courier charges incurred
by Contractor in connection with performance of its duties hereunder.
vi.Costs of data processing.
PART IV
LEASING OF THE PROJECT
6. Leasing Services. With respect to the leasing of space in the Project,
Contractor agrees to furnish leasing and marketing services throughout the Term
as aforesaid, including without limitation the negotiation of all Tenant Leases
(as defined below). All such Tenant Leases shall be on a standard form approved
by Owner, in the name of Owner, and executed by Owner. Upon the execution by all
parties of any Tenant Lease, Contractor shall immediately provide to Owner a
copy of the executed Tenant Lease.
7. Leasing Definitions. For purposes of this Agreement, the Owner and
Contractor agree that (I) the term "Tenant Leases" shall mean and refer to any
and all existing leases and any and all future leases and other agreements for
the lease or occupancy of any space in the Project which are entered into during
the term of this Agreement, and any and all amendments thereto and modifications
thereof; (ii) the term "Tenant Lease" shall mean and refer to any one of the
Tenant Leases; (iii) the term "Tenants" shall mean and refer to any and all
tenants of any space in the Project; (iv) the term "Tenant" shall mean and refer
to any one of the Tenants.
PART V
GENERAL PROVISIONS
8. Insurance.
a. Owner's Insurance. At Owner's election, Contractor will on behalf of Owner
and at Owner's expense (I) obtain and will keep in full force and effect during
the Term, adequate property and liability insurance with respect to the Project,
but in no event less that (x) in the case of property insurance, the full
insurable value of the improvements at the Project together with loss of rents
or business interruption coverage and (y) in the case of liability insurance,
the amounts specified by Owner, and ()ii) comply with all requirements affecting
the insurance provisions included in any mortgagees, if applicable, encumbering
the Project. All of said insurance shall be written on an occurrence basis and
shall be maintained in full force and effect during the Term. All of said
liability insurance required hereunder, or otherwise maintained by Owner with
respect to the Project, shall name the Owner, the Contractor and any of Owner's
mortgagees, if applicable, as named insured thereunder and shall be primary to
any other coverage which may be in effect. Contractor is hereby authorized to
procure all of said insurance on behalf of the Owner. Notwithstanding the
foregoing, at Owner's election such property and liability insurance maybe
blanketed with other insurance carried by Owner or any affiliate of Owner, in
which case a pro rata share of the premiums will be chargeable to the Project as
an operating expense. Owner or Owner's insurer will have the exclusive right, at
its option (chargeable as an operating expense of the Project), to conduct the
defense of any claim, demand or suite arising out of the ownership, operation or
management of the Project. Contractor will furnish whatever information is
requested by Owner for the purpose of placement of insurance coverages and will
aid and cooperate in every reasonable way with respect to such insurance and any
claim or loss thereunder. Contractor will notify Owner and Owner's insurance
carrier promptly upon becoming aware of any casualty, loss, injury, claim or
other event which may result in a claim under any insurance policy maintained by
owner.
b. Adverse Impacts on Insurance. Contractor shall not knowingly permit the use
of the Project for any purpose which might (I) void any policy of insurance
relating to the Project, (ii) render any loss thereunder uncollectable, or (iii)
increase the premium otherwise payable thereunder except in connection with
prudent actions designed to increase the economic benefits from the Project.
9. Indemnity.
a. Owner's Indemnity of Contractor. The Contractor shall perform its obligations
and duties under this Agreement as an independent contractor of the Owner, and
any and all obligations incurred by the Contractor on behalf of Owner hereunder
as expressly provided herein shall be for the account and at the expense of
Owner to the extent provided herein. As a material part of the consideration for
this Agreement, and as an inducement for the Contractor to enter into this
Agreement, the Owner agrees that, to the fullest extent permitted by law, the
Owner has indemnified and does hereby indemnify and hold harmless the
Contractor, its officers, directors, agents, servants, and employees, from and
against any and all liability, claims of liability, suits, actions, judgments,
damages, losses, costs and expenses, including but not limited to costs of
defense and reasonable attorneys' fees, paid or incurred by Contractor or by any
of its officers, directors, agents, servants or employees, arising from or as
the result of the performance by Contractor of its obligations and agreements
hereunder in accordance with the terms and provisions hereof, or arising out of
or as the result of any bodily or personal injury to or death of any person or
persons whomsoever (including but not limited to any agent, servant or employee
of Owner or Contractor, or of any of their respective contractors or
subcontractors, or any lessee, tenant, licensee, guest, invitee or any other
person who enters the Project), or any loss, theft or destruction of or damage
to any property of the Owner or of others, arising out of or in connection with
the ownership of the Project by Owner or the operation, leasing or management of
the Project by the Contractor, or the exercise of any of the duties, obligations
or powers herein or hereafter granted to, or conferred upon or assumed by
Contractor, or liability therefore imputed as a matter of law to the Contractor
or any of its officers, directors, agents, servants or employees.
Notwithstanding the provisions of the foregoing paragraph, Owner shall
not be required to indemnify, defend or hold the Contractor harmless against any
loss, cost, liability or expense which arises as a result (I) of any gross
negligence or willful misconduct on the part of the Contractor or its home
office employees, (ii) any breach or default by Contractor hereunder which
remains uncured following notice thereof from Owner and the expiration of any
applicable cure periods.
b. Contractor's Indemnity of Owner. The Contractor agrees to indemnify, defend
(with counsel reasonably approved by Owner) and hold harmless Owner from any
loss, cost, liability or expense (including without limitation reasonable
attorneys' fees) which arises as a result of any gross negligence or willful
misconduct on the part of the Contractor, its agents or employees. The foregoing
shall not be construed as a limitation upon any other rights or remedies
provided at law for a breach of this Agreement by Contractor continuing beyond
any notice or cure period. Notwithstanding anything to the contrary provided
herein, the Contractor shall not have any liability for any loss, cost,
liability or expense paid or incurred by Owner which is paid or reimbursed by
any casualty, loss of rents, business interruptions, liability or other
insurance maintained by or on behalf of the Project.
c. Survival of Indemnities. Owner and Contractor agree that the indemnities set
forth above shall survive the expiration or termination (whether with or without
cause) of this Agreement.
10. Termination of Agreement.
a. Termination of Owner. The Owner shall have the right to terminate this
Agreement with or without cause by giving Contractor at least thirty (30) days
prior written notice and, in such event, contractor shall be entitled to receive
all fees and reimbursable expenses payable to Contractor hereunder as provided
in clause (c) below. In the event of termination by Owner with cause, Owner
shall have such rights land remedies against Contractor as provided under
applicable law.
b. Termination by Contractor. The Contractor shall have the right to terminate
this Agreement at any time with or without cause by written notice delivered to
the Owner at least sixty (60) days prior to the effective date of such
termination. In the event of termination by Contractor, all fees and
reimbursable expenses payable to Contractor hereunder shall be paid as set forth
in clause (c) below.
c. Termination Payments. Upon termination of this Agreement by either party (or
by the Lender pursuant to clause (d) below), the Management Fee shall be
prorated to the effective date of such termination and paid to Contractor. In
addition, termination shall not affect or impair the Owner's obligation to pay
Contractor any Leasing Fees, reimbursable expenses and other sums due and
payable by Owner to Contractor to which the Contractor is entitle hereunder, all
of which shall be and remain due and payable in full in accordance with the
terms and provisions of this Agreement
11. Notices. Any notices respecting provisions of this Agreement shall be
in writing and shall be considered to have been given if hand delivered or if
sent by registered or certified mail, return receipt requested, or by private
overnight carrier, in each instance properly addressed and with postage or other
charges prepaid, in the case of the Owner to ("Owner's Notice Address"):
177 Milk Street
Boston, Massachusetts 02109
And in the case of the Contractor to ("Contractor's Notice Address"):
177 Milk Street
Boston, Massachusetts 02109
All notices shall be considered to have been given on the earlier of
receipt or three days after the date of mailing or delivery to an overnight
carrier as provided herein. Any party to this Agreement desiring to make a
change in its address for the purpose of notices under this Section shall notify
the other party of the change of address in the same manner as provided for in
this Section for notices.
12. Binding Effect. The provisions hereof shall be binding upon and inure
to the benefit of the parties hereto, their respective heirs, personal
representatives, successors and assigns.
13. Gender and Number. As used in this Agreement, words of any gender shall
be construed to include any other gender, word in the singular number shall be
construed to include the plural, and words in the plural number shall be
construed to include the singular, when the context or sense of this Agreement
requires.
14. Severability. If any provision or any part of any provision of this
Agreement or the application thereof to any person or circumstances shall be
held illegal, invalid or unenforceable to any extent by any court of competent
jurisdiction, such hold shall not affect the remaining provisions or parts of
provisions of this Agreement or the application thereof to any other persons or
circumstances, and all of the provisions of this Agreement shall be enforced to
the fullest extent permitted by law.
15. Governing Law. This Agreement shall construed in accordance with the
laws of The Commonwealth of Massachusetts.
16. Paragraph Headings. All captions and paragraph headings contained in
this Agreement are for convenience of reference only, and shall not be construed
to enlarge, diminish or otherwise affect the meaning or interpretation of any of
the terms or provisions hereof.
17. Independent Contractor. This Agreement is not one of general agency by
Contractor for Owner, but one with Contractor for Owner, but one with Contractor
engaged independently in the business of managing properties, as an independent
contractor, and in that respect having only limited agency as specifically set
forth in this Agreement.
18. Accounting and Financial Services.
a. Books and Accounts. Contractor will maintain adequate and separate books and
records for the Project, the entries on which shall be supported by sufficient
documentation to ascertain that all entries are accurate. Such books and records
will be maintained at Contractor's Notice Address or at such other location as
may be mutually agreed upon by Contractor and Owner in writing. Contractor will
attempt in good faith to maintain such control over accounting and financial
transaction as is reasonably required to protect Owner's assets from theft,
negligence or fraudulent activity on the part of Contractor's employees or other
agents. Uninsured losses arising from theft, gross negligence or fraud by
Contractor are to be borne by Contractor in its individual capacity and not as
an operating expense of the Project.
b. Monthly Statements - Financial Reports. Contractor will furnish to Owner, no
later than 10 days after the end of each month, a report (the "Monthly
Statement") of all transaction occurring during such month. The purpose of said
Monthly Statement will be to inform and appraise Owner of Project status and
condition. Contractor is responsible to review and comment on Project financial
and physical condition to assist Owner so that Owner is fully knowledgeable
regarding same.
c. Owner's Property. All books, records, computer disks, invoices and other
documents received and/or maintained by Contractor pursuant to this Agreement
are and will remain the property of Owner.
19. Subordination. This Agreement, if applicable, is subject and
subordinate in all respects and inferior to any and all mortgages, security
agreements, assignments of leases, rights of first offer, or UCC financing
statements affecting or encumbering the Project and held by and entity unrelated
to Owner, as well as to any modification, increase, amendment or consolidation
thereto, as the case may be.
20. No Assignment; Further Assurances. This Agreement and all rights
hereunder are not assignable to Contractor or by Owner.
21. Consent and Approvals. Owner's consents or approvals may be given only
in writing or by facsimile of a written consent or approval transmitted by
telecopy or other electronic means, and only by representatives of Owner from
time to time designated in writing by Owner.
22. Amendments. This Agreement cannot be amended or modified except by
written instrument signed by both Owner and Contractor.
23. Complete Agreement. This Agreement supersedes any previous management,
leasing or consulting agreement between the parties relating to the Property.
24. Exculpation. Contractor agrees that Contractor shall look solely to
Owner's interest in the Project for the satisfaction of any claim now existing
or hereafter arising or accruing against Owner, its trustees, beneficiaries,
officers, agents and employees. It is expressly agreed that neither Owner, any
partner of Owner, nor any partner, officer, director, shareholder, trustee,
beneficiary, employee, agent or representative of any of them, shall in any way
be held personally liable hereunder.
<PAGE>
EXHIBIT A
The land in the Framingham Industrial Park, Framingham, Middlesex
County, Massachusetts, situated on the northerly side of New York Avenue, and
bounded and described as follows:
NORTHERLY by land of Paramount Development Associates, Inc., two hundred
forty-seven and 73/100 (247.73) feet;
EASTERLY by land of Electric Product Sales, Inc. one hundred ninety-seven
and 02/100 (197.02) feet;
SOUTHERLY by New York Avenue (a private way) two hundred fifty-five and
13/100 (255.13) feet;
WESTERLY by land of Paramount Development Associates, Inc. one hundred
ninety-seven and 15/100 (197.15) feet.
Containing approximately 49,535 square feet all as more fully shown on Lot
#24 on plan entitled "Plan of Land in Framingham, Mass. Owned by: Paramount
Development Associates, Inc." Scale 1" = 40' dated September 17, 1968. Plan by:
MacCarthy Engineering Service, Inc. Natick, Mass. Recorded with Middlesex South
District Registry of Deeds, Book 11613, Page 494.
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