<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
HRE Properties
----------------------------------------------
(Name of Issuer)
Common Stock, no par value
----------------------------------------------
(Title of Class of Securities)
404265 10 0
----------------------------------------------
(CUSIP Number)
HRE Properties
Attn: Mr. Charles J. Urstadt
321 Railroad Avenue, Greenwich, Connecticut 06830
(203) 863-8200
----------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 22, 1996
----------------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter disclosure
provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of ___ Pages
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CUSIP No. 404265 10 0
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1 Name of Reporting Person(1)
S.S. or I.R.S. Identification No. of Above Person
Countryside Square Limited Partnership
- -------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. / /
b. / /
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3 SEC Use Only
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4 Source of Funds
OO
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5 Check If Disclosure of Legal Proceedings Is Required Pursuant to
Item 2(d) or 2(e) / /
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6 Citizenship or Place of Organization
Delaware
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7 Sole Voting Power
Number of
Shares 600,000
Beneficially ------------------------------------
Owned By
8 Shared Voting Power
Each ------------------------------------
Reporting
Person 9 Sole Dispositive Power
With 600,000
------------------------------------
10 Shared Dispositive Power
------------------------------------
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11 Aggregate Amount Beneficially Owned by Each Reporting Person
600,000
- -------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares / /
- -------------------------------------------------------------------------------
- ------------------
(1) Filing jointly pursuant to Rule 13d-1(f)(1) under the Act with
HRE Properties.
Page 2 of ___ Pages
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13 Percent of Class Represented By Amount in Row (11)
11.2%
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14 Type of Reporting Person
PN
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Page 3 of ___ Pages
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CUSIP No. 404265 10 0
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1 Name of Reporting Person(2)
S.S. or I.R.S. Identification No. of Above Person
HRE Properties
- -------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. / /
b. / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
OO
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5 Check If Disclosure of Legal Proceedings Is Required Pursuant to
Item 2(d) or 2(e) / /
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6 Citizenship or Place of Organization
Massachusetts
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7 Sole Voting Power
Number of
Shares 600,000
Beneficially ------------------------------------
Owned By
8 Shared Voting Power
Each ------------------------------------
Reporting
Person 9 Sole Dispositive Power
With 600,000
------------------------------------
10 Shared Dispositive Power
------------------------------------
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11 Aggregate Amount Beneficially Owned by Each Reporting Person
600,000
- -------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares / /
- -------------------------------------------------------------------------------
- ------------------
(2) Filing jointly pursuant to Rule 13d-1(f)(1) under the Act with
Countryside Square Limited Partnership.
Page 4 of ___ Pages
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13 Percent of Class Represented By Amount in Row (11)
11.2%
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14 Type of Reporting Person
OO
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Page 5 of ___ Pages
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Item 1. Security and Issuer.
This Statement on Schedule 13D (the "Schedule 13D") relates to the
Common Stock, no par value (the "Common Stock"), of HRE Properties, a
Massachusetts business trust ("HRE"). The address of the principal
executive offices of HRE is 321 Railroad Avenue, Greenwich, Connecticut
06830.
Item 2. Identity and Background.
This Schedule 13D is filed jointly on behalf of Countryside Square
Limited Partnership, a Delaware limited partnership ("Countryside"),
and HRE, as the sole general partner of Countryside, pursuant to Rule
13d-1(f)(1) under the Act.
Pursuant to the terms of the Limited Partnership Agreement of
Countryside dated as of November 22, 1996, by and among HRE, as general
partner, and the limited partners signatory thereto, a copy of which is
attached hereto as Exhibit 2 and incorporated herein by reference in
its entirety (the "Partnership Agreement"), HRE, as the sole general
partner of Countryside, may be deemed to be the indirect beneficial
owner of the 600,000 shares of Common Stock of HRE beneficially owned
by Countryside (the "Countryside Common Shares").
Countryside's principal business is (a) the ownership and management of
certain commercial real estate acquired by Countryside from HRE as a
capital contribution to Countryside in connection with the organization
of Countryside (the "Commercial Property") and (b) the ownership of the
Countryside Common Shares. HRE's principal business is the ownership of
real estate investments which consist principally of equity investments
in income-producing properties, with primary emphasis on properties in
the eastern part of the United States. The principal business address
and the principal office address of each of Countryside and HRE is 321
Railroad Avenue, Greenwich, Connecticut 06830.
The name, business address, citizenship and present principal
occupation of each director and executive officer of HRE are set forth
on Schedule I hereto.
None of Countryside, HRE or, to the best knowledge of such parties, any
of the persons listed on Schedule I hereto has, during the last five
years, (i) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to the terms of the Partnership Agreement, Countryside
acquired the Countryside Common Shares from the limited partners of
Countryside as a capital contribution to Countryside in connection with
the organization of Countryside and Countryside acquired the Commercial
Property from HRE as a capital contribution to Countryside in
connection with the organization of Countryside.
Page 6 of ___ Pages
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Item 4. Purpose of Transaction.
Pursuant to the terms of the Partnership Agreement, Countryside
acquired the Countryside Common Shares from the limited partners of
Countryside as a capital contribution to Countryside in connection with
the organization of Countryside. Countryside currently intends to hold
the Countryside Common Shares for investment. Pursuant to the terms of
the Partnership Agreement, Countryside is required to make certain
distributions to the limited partners and the general partner of
Countryside on a monthly basis and upon liquidation of Countryside. In
the event that Countryside does not have sufficient cash to make the
required distributions to the limited partners of Countryside, HRE, as
the general partner of Countryside, will have the option to sell all or
a portion of the Countryside Common Shares in order to provide
Countryside with sufficient cash to make such distributions. While
Countryside does not currently anticipate selling any of the
Countryside Common Shares, it may elect to do so if Countryside does
not have sufficient cash to make the required distributions to the
limited partners of Countryside. If HRE shall elect to sell all or a
portion of the Countryside Common Shares, it may do so in the open
market or in privately negotiated transactions. In no event, however,
will HRE be entitled to sell more Countryside Common Shares than are
necessary to provide Countryside with sufficient cash to make such
distributions to the limited partners of Countryside. Under the terms
of the Partnership Agreement, the limited partners or the general
partner of Countryside may require the dissolution of Countryside on or
after the third anniversary of the date of the Partnership Agreement.
Upon any dissolution of Countryside, it is currently anticipated that
any Countryside Common Shares then held by Countryside after all
required cash distributions are made to the limited partners of
Countryside will be distributed to HRE. Reference is hereby made to the
Partnership Agreement for a more complete description of the terms and
conditions of the Partnership Agreement.
On March 23, 1996, HRE announced a share repurchase program pursuant to
which HRE would repurchase up to 1,000,000 shares of the Common Stock
of HRE over a ten-year period. Subject to its obligations under the
federal securities laws, HRE may, from time to time, repurchase shares
of HRE Common Stock pursuant to such share repurchase program.
As noted in Item 2 above, the information set forth herein respecting
HRE and the persons named in Schedule I hereto is being provided solely
as a result of the fact that HRE, as the sole general partner of the
Partnership, may be deemed to beneficially own the Countryside Common
Shares held by Countryside. While the information set forth herein
respecting HRE and the persons named in Schedule I hereto is believed
to be accurate in all material respects, reference is hereby made to
the periodic reports, proxy statements and other information filed by
HRE and the persons named in Schedule I hereto with the Securities and
Exchange Commission for changes in such information and other
developments that may occur subsequent to the date of the information
contained herein.
Except as specifically set forth in this Item 4, none of Countryside,
HRE or, to the best knowledge of such parties, any of the persons named
in Schedule I hereto has any plans or proposals which relate to or
would result in any of the actions or effects set forth in items (a)
through (j) of Item 4 of Schedule 13D, although such persons may
develop such plans or proposals.
Page 7 of ___ Pages
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Item 5. Interest in Securities of the Issuer.
(a)(i) Countryside directly owns the 600,000 Countryside Common Shares.
As the sole general partner of Countryside, HRE may be deemed to be the
indirect beneficial owner of the 600,000 Common Shares. The 600,000
Countryside Common Shares represent 11.2% of the 5,346,081 shares of
Common Stock of HRE outstanding on the date hereof, based upon
information provided by HRE and calculated in accordance with Rule
13d-3(d)(1) under the Act.
(ii) For information concerning the ownership of Common Stock of HRE by
the persons listed on Schedule I hereto, see the portions of HRE's
Proxy Statement dated January 29, 1996 attached hereto as Exhibit 3 and
incorporated herein by reference. As noted above, while the information
set forth herein respecting HRE and the persons named in Schedule I
hereto is believed to be accurate in all material respects, reference
is hereby made to the periodic reports, proxy statements and other
information filed by HRE and the persons named in Schedule I hereto
with the Securities and Exchange Commission for changes in such
information and other developments that may occur subsequent to the
date of the information contained herein.
(b) Subject to the terms of the Partnership Agreement, HRE, as the sole
general partner of Countryside, has the power to vote or direct the
voting and the power to dispose or direct the disposition of the
Countryside Common Shares.
(c) Except as set forth in this Schedule 13D, none of Countryside, HRE
or, to the best knowledge of such parties, any of the persons named on
Schedule I hereto owns any shares of the capital stock of HRE or has
purchased or sold any shares of the capital stock of HRE during the
past 60 days.
(d) Except as set forth in this Schedule 13D and except as may be
provided in the Partnership Agreement, no person is known by
Countryside or HRE to have the right to receive, or the power to direct
the receipt of, dividends from, or the proceeds from the sale of, the
Countryside Common Shares.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
(a) For information concerning the terms of the Partnership Agreement,
see Item 4 above.
(b) Pursuant to the Partnership Agreement, each of the limited partners
of Countryside has granted a proxy to Countryside to vote the
Countryside Common Shares at any meeting of the shareholders of HRE or
in connection with any action by written consent.
Except as set forth in this Schedule 13D, there are no contracts,
arrangements, understandings or relationships (legal or otherwise)
among the persons referred to in Item 2 of this Schedule 13D or between
such persons and any other person with respect to any of the securities
of HRE, including, but not limited to, any relating to the transfer or
voting of any of such securities, finder's fees, joint ventures, loan
or option arrangements, puts or calls, guarantees of profits, division
of profits or loss or the giving or withholding of proxies.
Page 8 of ___ Pages
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Item 7. Materials to Be Filed as Exhibits.
1. Joint Filing Agreement, dated November 27, 1996.
2. Limited Partnership Agreement, dated November 22, 1996, by and among
HRE Properties, as general partner, and the persons set forth on
Exhibit A attached thereto, as limited partners.
3. Certain Extracts from HRE's Proxy Statement dated January 29, 1996.
Page 9 of ___ Pages
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SIGNATURE
After reasonable inquiry and to the best of their respective knowledge
and belief, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Dated: November 27, 1996
COUNTRYSIDE SQUARE LIMITED PARTNERSHIP
By: HRE PROPERTIES,
as General Partner
By:/s/Charles J. Urstadt
--------------------------------------
Name: Charles J. Urstadt
Title: Chairman of the Board and Chief Executive Officer
HRE PROPERTIES
By:/s/Charles J. Urstadt
----------------------------------------
Name: Charles J. Urstadt
Title: Chairman of the Board and Chief Executive Officer
Page 10 of ___ Pages
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SCHEDULE I
Reporting Person:............... HRE Properties ("HRE")
321 Railroad Avenue
Greenwich, Connecticut 06830
Executive Officers, Directors and Controlling Persons:
Name ....................... Charles J. Urstadt
Positions....................... Chairman of the Board and Chief Executive
Officer, HRE
Principal Occupation
and Employment;
Business Address................ Chairman of the Board and Chief Executive
Officer, HRE; Chairman, President and
Director, Urstadt Property Company, Inc.;
Trustee, Pace University; Trustee, Teacher's
Insurance and Annuity Association; the
business address of Mr. Urstadt is: 321
Railroad Avenue, Greenwich, Connecticut
06830
Citizenship..................... U.S.A.
Name ....................... Willing L. Biddle
Positions ..................... President and Chief Operating Officer, HRE
Principal Occupation
and Employment;
Business Address ................ President, HRE; the business address of
Mr. Biddle is: 321 Railroad Avenue,
Greenwich, Connecticut 06830
Citizenship ..................... U.S.A.
Name: ......................... James R. Moore
Position:....................... Executive Vice President, Chief Financial
Officer, Treasurer and Secretary, HRE
Principal Occupation
and Employment;
Business Address:............... Executive Vice President, Chief Financial
Officer, Treasurer and Secretary, HRE; the
business address of Mr. Moore is: 321
Railroad Avenue, Greenwich, CT 06830
Citizenship:.................... U.S.A.
Name: ...................... Raymond P. Argila
Position: ...................... Senior Vice President, Chief Legal Officer
and Assistant Secretary, HRE
Principal Occupation
and Employment;
Business Address:............... Senior Vice President, Chief Legal Officer
and Assistant Secretary, HRE; the business
address of Mr. Argila is: 321 Railroad
Avenue, Greenwich, CT 06830
Citizenship..................... U.S.A.
Page 11 of ___ Pages
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Name: ....................... Peter Herrick
Position: ..................... Trustee
Principal Occupation
and Employment;
Business Address:............... Director, BNY Hamilton Funds; the business
address of Mr. Herrick is: 42 Sunnybrook
Road; Bronxville, N.Y. 10708
Citizenship:.................... U.S.A.
Name: .......................... Paul D. Paganucci
Position: .................... Trustee
Principal Occupation
and Employment;
Business Address:............... Chairman, Ledyard National Bank; Director,
Filene's Basement, Inc.; Director, State
Mutual Securities Inc.; Director, The Grace
Institute; the business address of Mr.
Paganucci is: P.O. Box 799; 38 Main Street;
Hanover, New Hampshire 03755
Citizenship:.................... U.S.A.
Name: ....................... James O. York
Position: ................... Trustee
Principal Occupation
and Employment;
Business Address:............... Real Estate Counselor; Trustee, The
International Council of Shopping Centers
Education and Research Foundation; Trustee,
Corporate Property Investors; the business
address of Mr. York is: 4 Riverstone; Laguna
Niguel, California 92677
Citizenship:.................... U.S.A.
Name: ....................... Robert R. Douglass
Position: .................... Trustee
Principal Occupation
and Employment:
Business Address:............... Of Counsel, Milbank, Tweed Hadley and
McCloy; Chairman and Director, Cedel;
Chairman, Downtown Lower Manhattan
Association; Chairman, Alliance for Downtown
New York; Director, Business Council for the
United Nations; Member, Council on Foreign
Relations; Director, Gryphon Holdings, Inc.;
Trustee, Managed Accounts Services Portfolio
Trust; the business address of Mr. Douglass
is: One Chase Manhattan Plaza, 46th Fl.; New
York, New York 10005
Citizenship:.................... U.S.A.
Name: ....................... George H. C. Lawrence
Position: .................... Trustee
Principal Occupation
and Employment;
Business Address:............... Chairman, Chief Executive Officer and
President, Lawrence Investing Company, Inc.;
Director, Urstadt Property Company, Inc.;
Trustee, Sarah Lawrence College; Director,
CLX Energy; the business address of Mr.
Lawrence is: 3507 Ocean Drive; Vero Beach,
Florida 32963
Citizenship:.................... U.S.A.
Page 12 of ___ Pages
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Name: ....................... E. Virgil Conway
Position: .................... Trustee
Principal Occupation
and Employment;
Business Address:............... Chairman, Metropolitan Transportation
Authority; Financial Consultant and
Corporate Director; Trustee, Consolidated
Edison Company of New York, Inc.; Director,
Union Pacific Corporation; Trustee, Phoenix
Home Life Mutual Funds; Trustee, Atlantic
Mutual Insurance Company; Director,
Centennial Insurance Company; Director,
Trism, Inc.; Director, AccuHealth, Inc.;
Chairman, New York Housing Partnership
Development Corporation; Vice Chairman,
Academy of Political Science; Trustee, Pace
University; the business address of Mr.
Conway is: 101 Park Ave., 30th Fl.; New
York, New York 10178
Citizenship:.................... U.S.A.
Page 13 of ___ Pages
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EXHIBIT INDEX
Page
Exhibit Number
1. Joint Filing Agreement, dated November 27, 1996.
2. Limited Partnership Agreement, by and among HRE Properties, as general
partner, and the persons set forth on Exhibit A attached thereto, as
limited partners.
3. Certain Extracts from HRE's Proxy Statement dated January 29, 1996.
Page 14 of ___ Pages
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EXHIBIT 1
Page 15 of ___ Pages
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Exhibit 1
AGREEMENT
The undersigned hereby agree that this statement on Schedule
13D with respect to the beneficial ownership of shares of Common Stock of HRE
Properties is filed jointly, on behalf of each of them.
Dated: November 27, 1996
COUNTRYSIDE SQUARE LIMITED PARTNERSHIP
By: HRE PROPERTIES,
as General Partner
By: /s/ Charles J. Urstadt
--------------------------------
Name: Charles J. Urstadt
Title: Chairman of the Board and
Chief Executive Officer
HRE PROPERTIES
By: /s/ Charles J. Urstadt
---------------------------------------
Name: Charles J. Urstadt
Title: Chairman of the Board and
Chief Executive Officer
Page 16 of ___ Pages
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EXHIBIT 2
Page 17 of ___ Pages
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[Execution Copy]
COUNTRYSIDE SQUARE LIMITED PARTNERSHIP
AGREEMENT OF
LIMITED PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINED TERMS.......................................... 1
ARTICLE 2 ORGANIZATIONAL MATTERS................................. 9
Section 2.1 Organization........................................... 9
Section 2.2 Name................................................... 9
Section 2.3 Registered Office and Agent; Principal Office.......... 9
Section 2.4 Power of Attorney...................................... 9
Section 2.5 Term................................................... 10
ARTICLE 3 PURPOSE................................................ 10
Section 3.1 Purpose................................................ 10
Section 3.2 Powers................................................. 10
Section 3.3 Limitations............................................ 11
ARTICLE 4 CAPITAL CONTRIBUTIONS.................................. 11
Section 4.1 Capital Contributions of the Partners.................. 11
ARTICLE 5 DISTRIBUTIONS.......................................... 11
Section 5.1 Distributions.......................................... 12
Section 5.2 Amounts Withheld....................................... 14
ARTICLE 6 ALLOCATIONS............................................ 14
Section 6.1 Allocations For Capital Account Purposes............... 14
ARTICLE 7 MANAGEMENT AND OPERATION OF BUSINESS................... 15
Section 7.1 Management............................................. 15
Section 7.2 Partnership Expenses................................... 16
Section 7.3 Liability of the General Partner....................... 16
Section 7.4 Other Matters Concerning the General Partner........... 17
Section 7.5 Title to Partnership Assets............................ 17
Section 7.6 Certain Environmental Matters.......................... 18
Section 7.7 Title to Contributed HRE Common Shares................. 18
Section 7.8 Partnership Borrowing.................................. 19
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS............. 19
Section 8.1 Limitation of Liability................................ 19
Section 8.2 Management of Business................................. 19
Section 8.3 Outside Activities of Partners......................... 19
Section 8.4 Return of Capital ..................................... 20
Section 8.5 Rights of Limited Partners Relating to the
Partnership............................................ 20
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Page
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS................. 20
Section 9.1 Records and Accounting................................. 20
Section 9.2 Reports................................................ 20
ARTICLE 10 TAX MATTERS............................................ 21
Section 10.1 Preparation of Tax Returns............................. 21
Section 10.2 Tax Elections.......................................... 21
Section 10.3 Tax Matters Partner.................................... 21
Section 10.4 Organizational Expenses................................ 21
Section 10.5 Withholding............................................ 22
ARTICLE 11 TRANSFERS AND WITHDRAWALS.............................. 23
Section 11.1 Transfer............................................... 23
Section 11.2 Transfers of Interest of the General Partner.......... 23
Section 11.3 Limited Partner's Rights to Transfer................... 23
Section 11.4 Substituted Limited Partners........................... 24
Section 11.5 Assignees.............................................. 24
Section 11.6 General Provisions..................................... 24
ARTICLE 12 ADMISSION OF PARTNERS.................................. 25
Section 12.1 Admission of Successor General Partners................ 25
Section 12.2 Amendment of Agreement and Certificate of Limited
Partnership............................................ 25
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION............... 26
Section 13.1 Dissolution............................................ 26
Section 13.2 Winding Up............................................. 27
Section 13.3 Requested Sale; General Partner Right of First
Refusal................................................ 28
Section 13.5 Deemed Distribution and Contribution................... 29
Section 13.6 Rights of Limited Partners............................. 29
Section 13.7 Notice of Dissolution.................................. 30
Section 13.8 Termination of Partnership and Cancellation of Limited
Partnership............................................ 30
Section 13.9 Reasonable Time for Winding-Up......................... 30
Section 13.10 Waiver of Partition.................................... 30
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT..................... 30
Section 14.1 Amendments............................................. 30
ARTICLE 15 GENERAL PROVISIONS..................................... 31
Section 15.1 Addresses and Notices.................................. 31
Section 15.2 Titles and Captions.................................... 31
Section 15.3 Pronouns and Plurals................................... 31
Section 15.4 Further Action......................................... 32
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Page
Section 15.5 Binding Effect......................................... 32
Section 15.6 Waiver................................................. 32
Section 15.7 Consent of Limited Partners............................ 32
Section 15.8 Counterparts........................................... 32
Section 15.9 Applicable Law......................................... 32
Section 15.10 Invalidity of Provisions............................... 33
Section 15.11 Entire Agreement....................................... 33
Exhibit A - Partner Contributions
Exhibit B - Capital Account Maintenance
Exhibit C - Special Allocation Rules
Exhibit D - Value of Contributed Property
Exhibit E - Description of Clearwater Property
Exhibit F - Irrevocable Proxy
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<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
COUNTRYSIDE SQUARE LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of November 22, 1996,
is entered into by and among HRE Properties, a Massachusetts business trust
("HRE"), as General Partner, and the Persons whose names are set forth on
Exhibit A attached hereto, as Limited Partners, together with any other Persons
who become Partners in the Partnership as provided herein.
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act
(Chapter 17 of Title 6 of the Delaware Code), as amended from time to time, and
any successor to such statute.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership Year (i) increased by any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5)
and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704- 1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant Partnership Year.
"Adjusted Property" means any Property the Carrying Value of which has
been adjusted pursuant to Exhibit B. Once an Adjusted Property is deemed
distributed by, and recontributed to, the Partnership for federal income tax
purposes upon a termination thereof pursuant to Section 708 of the Code, such
Property shall thereafter constitute a Contributed Property until the Carrying
Value of such Property is further adjusted pursuant to Exhibit B.
"Affiliate" means, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, (ii) any Person owning or controlling more than 50% of the outstanding
voting interests of such Person, (iii) any Person of which such Person owns or
controls more than 50% of the voting interests or (iv) any officer, director,
general partner or trustee of such Person or of any Person referred to in
clause (i), (ii) or (iii) above.
<PAGE>
"Agreed Value" means (i) in the case of any Contributed Property set
forth in Exhibit D and as of the time of its contribution to the Partnership,
the Agreed Value of such Property as set forth in Exhibit D, (ii) in the case
of any Contributed Property not set forth in Exhibit D and as of the time of
its contribution to the Partnership, the 704(c) Value of such Property or other
consideration, reduced by any liabilities either assumed by the Partnership
upon such contribution or to which such Property is subject when contributed,
and (iii) in the case of any Property distributed to a Partner by the
Partnership, the Partnership's Carrying Value of such Property at the time such
Property is distributed, reduced by any indebtedness either assumed by such
Partner upon such distribution or to which such Property is subject at the time
of distribution as determined under Section 752 of the Code and the Regulations
thereunder.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Assignee" means a Person to whom any interest in the Partnership has
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made:
(i) the sum of:
(a) the Partnership's Net Income or Net Loss (being a
negative number), as the case may be, for such period (without regard to
adjustments resulting from special allocations described in Exhibit C or
Section 6.1C),
(b) depreciation and all other non-cash charges deducted
in determining Net Income or Net Loss for such period,
(c) the amount of any reduction during such period in the
reserves of the Partnership (including without limitation, reductions resulting
from the General Partner's reasonable determination that such amounts need no
longer be reserved),
(d) all other cash received by the Partnership during such
period which was not included in determining Net Income or Net Loss for such
period other than cash proceeds received from (1) the sale, casualty,
condemnation or other disposition of the Clearwater Property or any other
Partnership property or assets, and (2) the sale or other disposition of the
Contributed HRE Common Shares, and
(e) any amount included in determining Net Income or Net Loss
for such period that was not actually expended by the Partnership during such
period.
(ii) less the sum of:
(a) all principal debt payments made by the Partnership
during such period,
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<PAGE>
(b) capital expenditures made by the Partnership during such
period,
(c) investments in any entity (including loans made thereto)
made by the Partnership during such period to the extent that such investments
are not otherwise described in clause (ii)(a) or (ii)(b),
(d) all other expenditures and payments made by the
Partnership during such period not deducted in determining Net Income or Net
Loss for such period,
(e) any amount included in determining Net Income or Net
Loss for such period that was not actually received by the Partnership during
such period,
(f) the amount of any increase in the reserves of the
Partnership during such period which the General Partner reasonably determines
to be necessary or appropriate,
(g) the amount of any working capital accounts and other cash
or similar balances at the end of such period which the General Partner
reasonably determines to be necessary or appropriate, and
(h) the gains, if any, realized by the Partnership from (1)
the sale, casualty, condemnation or other disposition of the Clearwater
Property or any other Partnership property or assets or (2) the sale or other
disposition of the Contributed HRE Common Shares during such period.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all
of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained
pursuant to Exhibit B and the hypothetical balance of such Partner's Capital
Account computed as if it had been maintained strictly in accordance with
federal income tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any
property or assets which such Partner contributes to the Partnership pursuant
to Article 4.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property reduced (but not below
zero) by all Depreciation with respect to such Property charged to the
Partners' Capital Accounts and (ii) with respect to any other Partnership
property, the adjusted basis of such property for federal income tax purposes,
all as
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of the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Exhibit B and otherwise to
reflect changes, additions or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties as deemed appropriate
by the General Partner.
"Certificate" means the Certificate of Limited Partnership relating to
the Partnership filed in the office of the Delaware Secretary of State, as
amended from time to time in accordance with the terms hereof and the Act.
"Clearwater Property" means the Property contributed by the General
Partner to the Partnership and described in Exhibit D.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable Regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provisions of
future law.
"Contributed HRE Common Shares" means the common shares, without par
value, of HRE contributed to the Partnership by the Limited Partners as a
Capital Contribution pursuant to Article 4 and described in Exhibit D.
"Contributed Property" means each Property or other asset (including
Contributed HRE Common Shares), in such form as may be permitted by the Act,
but excluding cash, contributed or deemed contributed to the Partnership
(including any deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying
Value of a Contributed Property is adjusted pursuant to Exhibit B, such
property shall no longer constitute a Contributed Property for purposes of
Exhibit B, but shall be deemed an Adjusted Property for such purposes.
"Depreciation" means, for each fiscal year, an amount equal to the
federal income tax depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year, except that, if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year, Depreciation shall be an amount which
bears the same ratio to such beginning Carrying Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such year bears
to such beginning adjusted tax basis; provided, however, that, if the federal
income tax depreciation, amortization or other cost recovery deduction for such
year is zero, Depreciation shall be determined with reference to such beginning
Carrying Value using any reasonable method selected by the General Partner.
"General Partner" means HRE, in its capacity as such.
"General Partner Interest" means any Partnership Interest held by a
General Partner in its capacity as such.
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"Incapacity" or "Incapacitated" means (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction of an order adjudicating him incompetent to manage his person or
his estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership; (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership; (v) as to any trustee of a trust which is a
Partner, the termination of the trust (but not the substitution of a new
trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For
purposes of this definition, bankruptcy of a Partner shall be deemed to have
occurred when (a) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (b) the Partner is adjudged as
bankrupt or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Partner, (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors, (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner or against all or any
substantial part of the Partner's properties, (e) any proceeding seeking
liquidation, reorganization or other relief of or against such Partner under
any bankruptcy, insolvency or other similar law now or hereafter in effect is
commenced and has not been dismissed within one hundred twenty (120) days after
the commencement thereof, (f) there is appointed without the Partner's consent
or acquiescence a trustee, receiver or liquidator, which appointment has not
been vacated or stayed within ninety (90) days of such appointment, or (g) an
appointment referred to in clause (f) is not vacated within ninety (90) days
after the expiration of any such stay.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Limited Partner" means any Person named as a Limited Partner in
Exhibit A, as such Exhibit may be amended from time to time, or any Substituted
Limited Partner, in such Person's capacity as a Limited Partner of the
Partnership.
"Limited Partner Interest" means any Partnership Interest held by a
Limited Partner in its capacity as such.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.
"Manager" means the Manager under the Management Contract.
"Management Contract" means the Management Contract, dated November 7,
1996, by and between the Partnership and Kimco Realty Corporation, as Manager,
as the same may be amended, supplemented or otherwise modified from time to
time.
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"Monthly Distribution Amount" means (i) $100,000 with respect to the
partial calendar month commencing November 12, 1996 and ending on November 30,
1996 (pro rated on a daily basis for such partial calendar month) and each
calendar month thereafter through and including the calendar month ending
October 31, 1999, (ii) $112,500 for the calendar month commencing November 1,
1999 and each calendar month thereafter through and including the calendar
month ending April 30, 2000 and (iii) $125,000 for each calendar month
commencing after April 30, 2000.
"Monthly Distribution Shortfall" means for any calendar month the
amount, if any, by which the Monthly Distribution Amount for such calendar
month exceeds the actual amount of Available Cash distributed to the Limited
Partners for such calendar month pursuant to Section 5.1A(1).
"Net Income" means, for any period, the excess, if any, of the
Partnership's items of income and gain for such period over the Partnership's
items of loss and deduction for such period. The items included in the
calculation of Net Income shall be determined in accordance with Exhibit B.
Once an item of income, gain, loss or deduction that has been included in the
initial computation of Net Income is subjected to the special allocation rules
in Exhibit C or Section 6.1C, Net Income or the resulting Net Loss, whichever
the case may be, shall be recomputed without regard to such item.
"Net Loss" means, for any period, the excess, if any, of the
Partnership's items of loss and deduction for such period over the
Partnership's items of income and gain for such period. The items included in
the calculation of Net Loss shall be determined in accordance with Exhibit B.
Once an item of income, gain, loss or deduction that has been included in the
initial computation of Net Loss is subjected to the special allocation rules in
Exhibit C or Section 6.1C, Net Loss or the resulting Net Income, whichever the
case may be, shall be recomputed without regard to such item.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
Properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704- 2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Partner" means any General Partner or a Limited Partner, and
"Partners" means the General Partners and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse
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Debt were treated as a Nonrecourse Liability, determined in accordance with
Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor thereto.
"Partnership Interest" means an ownership interest in the Partnership
representing the Capital Contributions by either any Limited Partner or the
General Partner and includes any and all benefits to which such Limited Partner
or General Partner may be entitled as provided in this Agreement, together with
all obligations of such Limited Partner or General Partner to comply with the
terms and provisions of this Agreement.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704- 2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in Partnership Minimum Gain, for a Partnership
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year; provided, however, that, if the calendar year shall
not be a permissible fiscal year under the Code, the General Partner shall
select another fiscal year permissible under the Code.
"Percentage Interest" means for each Partner the number expressed as a
percentage calculated by dividing the amount of the Agreed Value of the actual
Capital Contributions made by such Partner by the aggregate amount of the
Agreed Value of the actual Capital Contributions of all Partners. The
Percentage Interest of a Partner shall be adjusted as required under the terms
of this Agreement.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Prime Rate" means the per annum rate of interest publicly announced
from time to time by The Bank of New York as its prime rate.
"Property" means any real property which is owned or acquired by the
Partnership, beneficially or otherwise.
"Recapture Income" means any gain recognized by the Partnership upon
the disposition of any property or asset of the Partnership (as computed for
tax purposes), which gain is
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characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Regulations" means the income tax regulations promulgated under the
Code as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Requested Sale" has the meaning set forth in Section 13.3.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B1(a) or 2.B2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"704(c) Value" of any Contributed Property means the value of such
property as set forth in Exhibit D, or if no value is set forth in Exhibit D,
the fair market value of such property or other consideration at the time of
contribution as determined by the General Partner using such reasonable method
of valuation as it may adopt; provided, however, that the 704(c) Value of any
property deemed contributed to the Partnership for federal income tax purposes
upon termination and reconstitution thereof pursuant to Section 708 of the Code
shall be determined in accordance with Exhibit B. Subject to Exhibit B, the
General Partner shall, in its sole and absolute discretion, use such method as
it deems reasonable and appropriate to allocate the aggregate of the 704(c)
Values of Contributed Properties contributed in a single or integrated
transaction among the separate properties on a basis proportional to their
respective fair market values.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any contribution, sale,
exchange or other disposition of all or substantially all of the assets of the
Partnership in one transaction or a series of related transactions that, taken
together, result in the disposition of all or substantially all of the assets
of the Partnership.
"Transfer" means, with respect to any Partnership Interest, any
transaction by which any Partner purports to pledge, assign or transfer all or
any part of its Partnership Interest to another Person and includes a sale,
assignment, exchange, transfer, pledge, gift, hypothecation/mortgage or any
other disposition, whether occurring by operation of law or otherwise.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit B) as of such date
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to Exhibit B) as of such date.
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the Carrying
Value of such property (prior to any
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adjustment to be made pursuant to Exhibit B) as of such date over (ii) the fair
market value of such property (as determined under Exhibit B) as of such date.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization
The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth in the
Certificate and in this Agreement. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
Section 2.2 Name
The name of the Partnership is Countryside Square Limited Partnership.
The Partnership's business may be conducted under any other name or names
deemed advisable by the General Partner. The words "Limited Partnership,"
"L.P." or similar words or letters shall be included in the Partnership's name
where necessary for the purposes of complying with the laws of any jurisdiction
that so requires.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County
of New Castle, Delaware 19801, and the registered agent for service of process
on the Partnership in the State of Delaware at such registered office is The
Corporation Trust Company. The principal office of the Partnership is located
at 321 Railroad Avenue, Greenwich, Connecticut 06830, and may be changed to
such other place as the General Partner may from time to time designate by
notice to all other Partners. The Partnership may maintain other offices at
such other place or places as the General Partner deems advisable.
Section 2.4 Power of Attorney
A. Each Partner and each Assignee hereby constitutes and appoints the
General Partner, any Liquidator and the respective authorized officers,
partners, officers of partners and attorneys-in-fact of each, each acting
singly in each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place
and stead to:
(1) execute, swear to, seal, acknowledge, deliver, file
and record in the appropriate public offices (a) all
certificates, documents and other instruments (including,
without limitation, this Agreement and the
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Certificate and all amendments or restatements
thereof) that the General Partner or the Liquidator
deems appropriate or necessary to form, qualify or
continue the existence or qualification of the
Partnership as a limited partnership (or a
partnership in which the limited partners have
limited liability to the extent provided by
applicable law) in the State of Delaware and in all
other jurisdictions in which the Partnership may, or
plans to, conduct business or own property; and (b)
all instruments relating to the admission,
withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Article
11, 12 or 13 or relating to the Capital Contribution
of any Partner.
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 14.
Section 2.5 Term
The term of the Partnership commenced on November 6, 1996, the date
the Certificate was filed in the office of the Secretary of State of Delaware
in accordance with the Act, and shall continue until December 31, 2011, unless
the Partnership is dissolved sooner pursuant to the provisions of Article 13 or
as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose
The purpose of the Partnership is to acquire, own, manage, operate,
sell, exchange, lease, and dispose of the Clearwater Property and the
Contributed HRE Common Shares together with such other activities as may be
ancillary or related to, or otherwise necessary or advisable in connection
with, the foregoing, including without limitation, taking any such action with
respect to the Contributed HRE Common Shares as any holder of HRE Common Shares
shall be entitled to take.
Section 3.2 Powers
Subject to the specific limitations set forth in this Article 3, the
Partnership shall be empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, provided that the Partnership shall
take, or shall refrain from taking, any action if, in the judgment of the
General Partner in its sole and absolute discretion, the failure to take, or
the taking of, such action, as applicable, could violate any law or regulation
of any governmental body or agency having jurisdiction over the General Partner
or the Partnership.
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Section 3.3 Limitations
Notwithstanding anything in this Agreement to the contrary, unless
otherwise consented to in writing by all of the Partners:
A. The Partnership shall not engage in any business unrelated to the
Clearwater Property and the Contributed HRE Common Shares and shall not own any
assets other than those related to the Clearwater Property or the Contributed
HRE Common Shares or otherwise acquired in furtherance of the purposes of the
Partnership.
B. The Partners shall not take any action:
(i) to elect any additional or substitute General Partner; or
(ii) to cause the Partnership to file any voluntary
petition or consent to the filing of any petition in
or institute any bankruptcy, reorganization,
insolvency or liquidation proceeding or any other
proceeding under any federal or state bankruptcy or
similar law.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
The General Partner shall contribute to the capital of the
Partnership the Clearwater Property with an Agreed Value set forth opposite the
name of the General Partner on Exhibit D and shall be allocated a Partnership
Interest as set forth opposite the name of the General Partner on Exhibit A.
Each Limited Partner shall contribute to the capital of the Partnership the
number of Contributed HRE Common Shares with an Agreed Value set forth opposite
the name of such Limited Partner on Exhibit D and shall be entitled to a
Partnership Interest as set forth opposite the name of such Limited Partner on
Exhibit A. Except to the extent otherwise elected by of the General Partner
pursuant to Section 5.1C, neither the General Partner nor any of the Limited
Partners shall have any obligation to make any additional capital contributions
to the Partnership.
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ARTICLE 5
DISTRIBUTIONS
Section 5.1 Distributions
A. The General Partner shall cause the Partnership to make monthly
distributions of Available Cash to the Partners (i) with respect to any
calendar month prior to February 1, 1997, in arrears on the last business day
of such calendar month, and (ii) with respect to each calendar month commencing
on February 1, 1997 and each calendar month thereafter, in advance on the first
business day of such calendar month in the following order and priority:
(1) first, to the Limited Partners (in proportion to their
respective Percentage Interests), an amount equal to the
Monthly Distribution Amount for such calendar month; and
(2) second, to the Limited Partners in proportion to their
respective Percentage Interests, the cumulative amount, if
any, of each Monthly Distribution Shortfall for any prior
calendar month or months to the extent not previously
distributed to the Limited Partners pursuant to this Section
5.1A(2), plus a non-compounded return on the amount of each
Monthly Distribution Shortfall at the Prime Rate for the
period commencing on the date on which the amount of such
Monthly Distribution Shortfall was otherwise required to have
been paid pursuant to Section 5.1A(1) through the date of
payment thereof;
(3) third, to the General Partner in an amount equal to the
positive difference, if any, between (a) Available Cash
remaining after the distribution to the Limited Partners
provided for in Sections 5.1A(1) and 5.1A(2) and (b) the sum
of (x) all cash dividends received by the Partnership in
respect of the Contributed HRE Common Shares on or prior to
the first anniversary of the date of this Agreement and (y)
50% of all cash dividends received by the Partnership in
respect of the Contributed HRE Common Shares after the first
anniversary of the date of this Agreement.
The foregoing amounts shall be prorated on a daily basis for any
partial calendar month.
B. If a Liquidating Event occurs, the General Partner shall distribute
all of the assets of the Partnership (after first paying or providing for all
Partnership obligations in accordance with Section 13.2) in the following order
and priority:
(1) first, any amounts distributable to the Limited
Partners pursuant to Sections 5.1A(1) and 5.1A(2) in
respect of the calendar month or months (or partial
calendar month or months) ending on the date on
which the
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Clearwater Property is sold by the Partnership in
connection with such Liquidating Event shall be
distributed to the Limited Partners in accordance
with Section 5.1A;
(2) second, $12,000,000, less any amounts previously
distributed to the Limited Partners pursuant to
Section 5.1D, shall be distributed to the Limited
Partners in proportion to their respective Limited
Partnership Interests;
(3) third, $25,000,000, in the form of the Contributed
HRE Common Shares, cash proceeds or any other
Partnership property or assets (to be valued as
determined by the General Partner in its reasonable
discretion), shall be distributed to the General
Partner;
(4) fourth, an amount equal to the sum of all cash
contributions made by the General Partner pursuant
to clause (y) of Section 5.1C hereof shall be
distributed to the General Partner; and
(5) fifth, the remaining assets of the Partnership shall
be distributed to the Partners in proportion to
their respective Partnership Interests.
C. If (i) Available Cash shall be insufficient in any calendar quarter
to effect the distribution to the Limited Partners provided for in Section
5.1A(1), 5.1A(2) or 5.1B(1) or (ii) upon dissolution of the Partnership upon
the occurrence of a Liquidating Event as provided in Section 13.2 the
Partnership shall have insufficient funds to effect the distribution to the
Limited Partners provided for in Section 5.1B(1) or 5.1B(2), the General
Partner shall be required to elect to (x) sell such portion of the Contributed
HRE Common Shares so that the Partnership shall then be able to effect the
distributions provided for in Sections 5.1A(1), 5.1A(2), 5.1B(1) or 5.1B(2), as
the case may be, or (y) make additional cash contributions to the Partnership
so that the Partnership shall then be able to effect the distributions provided
for in Sections 5.1A(1), 5.1A(2), 5.1B(1) or 5.1B(2), as the case may be;
provided, that the General Partner shall not sell any Contributed HRE Common
Shares in connection with any distribution to the Limited Partners provided for
in Section 5.1A(1) or 5.1A(2) if such sale shall produce any income or gain for
any Limited Partner for federal, state or local income tax purposes, unless
such affected Limited Partner(s) shall consent thereto; and provided further
that the General Partner shall be authorized to sell only such portion of the
Contributed HRE Common Shares as may be necessary to provide the Partnership
with sufficient proceeds from such sale so as to enable the Partnership to make
the distributions provided for in Sections 5.1A(1), 5.1A(2), 5.1B(1) or
5.1B(2), as the case may be.
D. If there shall be a public condemnation of less than all of the
Clearwater Property, the General Partner shall distribute to the Limited
Partners all cash proceeds paid to the Partnership in respect of such public
condemnation up to a maximum amount equal to $12,000,000.
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Section 5.2 Amounts Withheld
All amounts withheld in accordance with Section 10.5 with respect to
any allocation, payment or distribution to the General Partner, the Limited
Partners or Assignees and treated as amounts distributed to such General
Partner, Limited Partners or Assignees, as applicable, pursuant to Section
10.5, shall be treated as distributed in accordance with Section 5.1 for all
purposes under this Agreement.
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts, the Partnership's
items of income, gain, loss and deduction (computed in accordance with Exhibit
B) shall be allocated among the Partners in each taxable year as provided
herein.
A. Subject to, and after giving effect to, the special allocations set
forth in Section 1 of Exhibit C, Net Income for each taxable year shall be
allocated to and among the Partners in the following order and priority:
(1) first, to the Limited Partners (in proportion to
their respective Percentage Interests) in an amount
equal to the excess, if any, of (a) the cumulative
Net Loss allocated to the Limited Partners pursuant
to Sections 6.1B(2) and 6.1B(3) hereof for all prior
fiscal years, over (b) the cumulative Net Income
allocated pursuant to this Section 6.1A(1) for all
prior fiscal years;
(2) second, to the Limited Partners (in proportion to
their respective Percentage Interests) in an amount
equal to the excess of (a) the cumulative amount of
distributions for such fiscal year and all prior
fiscal years made pursuant to Sections 5.1A(1) and
5.1A(2), over (b) the cumulative amount of Net
Income allocated pursuant to this Section 6.1A(2)
for all prior fiscal years;
(3) the balance, if any, to the General Partner.
B. Subject to, and after giving effect to, the special allocations set
forth in Section 1 of Exhibit C, Net Loss shall be allocated to and among the
Partners in the following order and priority:
(1) first, to the General Partner until its Adjusted Capital
Account balance is equal to zero;
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(2) second, to the Limited Partners (in proportion to
their respective Percentage Interests) until the
Adjusted Capital Account balance of each Limited
Partner is equal to zero;
(3) the balance, if any, among the Partners in proportion to
their respective Percentage Interests.
C. Subject to, and after giving effect to, the special allocations set
forth in Section 1 of Exhibit C, upon the occurrence of a Liquidating Event all
Net Income and Net Loss (or items thereof) shall thereafter be allocated (after
taking into account all allocations of Net Income and Net Loss and all
distributions for all prior periods, but before taking into account
distributions of proceeds under Section 5.1B) in accordance with the following
principles:
(1) Net Income (or items thereof) shall be allocated to
Partners with deficit Capital Account balances (in
proportion to such balances) until no Partner shall
have a deficit Capital Account balance;
(2) allocations of Net Income shall be made under Sections
6.1A(1) and 6.1A(2) for the portion of the fiscal year
preceding the Liquidating Event;
(3) Net Income (or items thereof) shall be allocated
among the Partners so as to reduce, proportionately,
the differences between their respective Capital
Account balances and the amount which will actually
be distributed to each such Partner pursuant to
Section 5.1B hereof;
(4) Net Loss (or items thereof) shall be allocated among
the Partners so as to reduce, proportionately, the
differences between their respective Capital Account
balances and the amount which will actually be
distributed to each such Partner pursuant to Section
5.1B hereof.
ARTICLE 7
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management
A. No Limited Partner, as such, shall participate in the management or
control of the business of, or have any rights or powers with respect to, the
Partnership except those expressly granted by the terms of this Agreement or
those conferred upon a Limited Partner by law.
B. Subject to the specific limitations on the activities of the
Partnership set forth in Article 3 and on the authority of the General Partner
set forth in this Article 7, Article 13 or elsewhere in this Agreement, the
General Partner shall have full power and authority to do all things deemed
necessary or desirable by it to conduct the business of the Partnership on a
day to day basis in order to effectuate the purposes of the Partnership as set
forth herein.
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Section 7.2 Partnership Expenses
The Partnership shall pay or reimburse the General Partner (or any of
its Affiliates incurring the same) for all reasonable administrative costs,
expenses and fees of or related to (and, therefore, properly allocated to) the
Partnership, the Clearwater Property or the Contributed HRE Common Shares not
to exceed $2,000 per month. Except as otherwise provided in this Agreement, the
General Partner shall not be entitled to reimbursement by the Partnership for
any fees or expenses incurred by it relating to the Partnership.
Section 7.3 Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable to the Partnership, any
other Partner or any Assignee for monetary damages, for losses sustained,
liabilities incurred or benefits not derived, as a result of errors in judgment
or any act or omission, if the General Partner has acted in good faith. The
Partners acknowledge that the Declaration of Trust establishing HRE, dated July
7, 1969, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of The Commonwealth
of Massachusetts, provides that the name "HRE Properties" refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personality, and no trustee, shareholder, officer or agent of HRE shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said HRE, but the trust estate only shall be
liable.
B. The Partners expressly acknowledge that the General Partner is
acting on behalf of the Partnership, that the General Partner is under no
obligation to consider the separate interests of the Partners (including
without limitation the tax consequences to individual Partners or Assignees) in
deciding whether to cause the Partnership to take (or decline to take) any
action, and that the General Partner shall not be liable to the Partnership,
any other Partner or any Assignee, for monetary damages, for losses sustained,
liabilities incurred or benefits not derived by any Partner in connection with
such decisions, provided that the General Partner has acted in good faith;
provided, however, that the General Partner may take no action which would
cause Kimco Realty Corporation or HRE to fail to qualify as a real estate
investment trust under Section 856 of the Code.
C. Subject to its obligations and duties as General Partner hereunder,
the General Partner may exercise any of the powers granted to it by this
Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.3 or any
provision of this Section 7.3 shall be prospective only and shall not in any
way affect the limitations on the liability of the General Partner to the
Partnership and the Partners under this Section 7.3, as in effect immediately
prior to such amendment, modification or repeal with respect to claims
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arising from or relating to matters occurring, in whole or in part, prior to
such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.4 Other Matters Concerning the General Partner
A. The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. Subject to Section 7.1C, the General Partner may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisers selected by it, and any action taken or omitted to be taken in
reliance upon the opinion of any such Person as to matters which the General
Partner reasonably believes to be within such Person's professional or expert
competence shall be conclusively presumed to have been taken or omitted in good
faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, including the voting of the Contributed HRE
Common Shares, to act through any of the duly authorized officers of its
general partner and any duly appointed attorney or attorneys-in-fact. Each of
the Limited Partners shall execute a proxy (the "Proxy") in the form of Exhibit
F hereto appointing Charles J. Urstadt and Willing Biddle, or either of them,
as proxies to vote the Contributed HRE Common Shares contributed by such
Limited Partner to the Partnership as set forth in the Proxy and each Limited
Partner agrees to take such action as may be necessary in connection with any
Annual or Special Meeting of Shareholders or any Action by Written Consent in
Lieu of any Meeting of Shareholders to cause any such Contributed HRE Common
Shares to be voted in accordance within the discretion of the proxies named in
the Proxy, including providing appropriate instructions to nominees or brokers
who may hold such shares as nominee for any Limited Partner.
Section 7.5 Title to Partnership Assets
A. Title to Partnership assets, whether real, personal or mixed, and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. The
General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in the name of the General Partner, or any nominee or
Affiliate of the General Partner acting solely as nominee on behalf of the
Partnership, shall be held by the General Partner or such nominee or Affiliate
for the use and benefit of the Partnership in accordance with the provisions of
this Agreement; provided, however, that the General Partner shall be entitled
to retain record title to the Clearwater Property, solely as nominee on behalf
of the Partnership. All Partnership assets shall be recorded as the property of
the Partnership in its books and records, irrespective of the name in which
legal title to such Partnership assets is held.
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B. The General Partner represents and warrants to the Limited Partners
that, to its knowledge, it owns such marketable title to the Clearwater
Property as is reflected by the title report prepared by Commonwealth Land
Title Insurance Company dated October 4, 1996 (the "Title Report") and that, to
the knowledge of the General Partner, there are no liens, claims, interests or
encumbrances (collectively, "Encumbrances") on or against the Clearwater
Property other than the Permitted Encumbrances (as defined below). The General
Partner agrees that it shall not take any action that would impair the title to
the Clearwater Property. If any Encumbrance other than Permitted Encumbrances
is asserted against the Clearwater Property which would impair in any material
respect title to the Clearwater Property or the interest of the General Partner
or the Partnership in the Clearwater Property, the General Partner shall, at
its expense, (a) give the Limited Partners written notice of such Encumbrance
and (b) either cause such Encumbrance to be discharged or released or, subject
to the reasonable consent of the Limited Partners, contest the same, if the
General Partner determines in its discretion to do so, provided that the
General Partner diligently pursues such contest to its completion, at the
General Partner's sole cost. For purposes of this Section 7.5B, Permitted
Encumbrances shall mean (i) mechanics', carriers', workers', repairmen's or
other like liens arising or incurred in the ordinary course of business in
respect of obligations which are not overdue or which are adequately bonded or
are being contested in good faith or which a title company shall insure against
enforcement or collection; (ii) zoning ordinances and other land use
regulations; (iii) liens for taxes which are not yet due and payable or are
being contested in good faith by appropriate proceedings, which contest will
not result in loss of title to the Clearwater Property; (iv) any state of facts
an accurate survey may show as of the date of this Agreement provided the same
do not render title to the Clearwater Property unmarketable or have a material
adverse effect on the use thereof; (v) Encumbrances set forth in the Title
Report; (vi) Encumbrances which do not materially detract from or impair the
value of the Clearwater Property or which a title company shall insure against
enforcement or collection out of the Clearwater Property; (vii) liens
reflecting capitalized leases arising with respect to financing the purchase of
equipment so long as the lien is limited to the specific equipment so acquired;
(viii) leases, subleases and other matters expressly disclosed in the Title
Report; and (ix) any lien caused or created by the Limited Partners.
Section 7.6 Certain Environmental Matters. The General Partner
represents and warrants to the Limited Partners that, to its knowledge and
except as otherwise previously disclosed to the Limited Partners in writing by
the General Partner, the Clearwater Property is not in violation of any laws
relating to the environment. If the General Partner shall receive notice in
writing of any violation of laws relating to the environment with respect to
the Clearwater Property which would impair in any material respect the value of
the Clearwater Property or the interest of the General Partner or the
Partnership in the Clearwater Property, the General Partner shall, at its
expense, (a) give the Limited Partners written notice of such violation and (b)
either (x) take such action as may be reasonably necessary to cure such
violation or (y) cause the dissolution of the Partnership in accordance with
Article 13.
Section 7.7 Title to Contributed HRE Common Shares. Each of the
Limited Partners, severally and not jointly, represents and warrants to the
General Partner that it has valid and marketable title to the Contributed HRE
Common Shares to be contributed to the Partnership pursuant to this Agreement
and that such shares are owned free and clear of all liens, mortgages,
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charges, security interests, encumbrances (including, but not limited to,
adverse claims), options or other restrictions or limitations of any kind
whatsoever.
Section 7.8 Partnership Borrowing. Without the consent of the Limited
Partners holding a majority of the Limited Partnership Interests, the General
Partner shall not, and shall not cause the Partnership to, borrow money from
any Person (including the General Partner) or pledge or encumber the Clearwater
Property or the Contributed HRE Common Shares.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners, as such, shall have no liability under this
Agreement except as expressly provided in Section 10.5 or under the Act.
Section 8.2 Management of Business
No Limited Partner, as such, or Assignee (other than the General
Partner, any of its Affiliates or any officer, director, employee, partner (or
officer, director or employee of a partner), agent or trustee of the General
Partner) shall take part in the operation, management or control of the
Partnership's business, transact any business in the Partnership's name or have
the power to sign documents or otherwise bind the Partnership, except to the
extent contemplated by the Management Contract. The transaction of any such
business by the General Partner, any of its Affiliates or any officer,
director, employee, partner, (or officer, director or employee of a partner),
agent or trustee of the General Partner, in their capacity as such, shall not
affect, impair or eliminate the limitations on the liability of the Limited
Partners, as such, or Assignees under this Agreement.
Section 8.3 Outside Activities of Partners
Any Partner and any officer, director, employee, agent, trustee or
shareholder of any Partner shall be entitled to and may have business interests
and activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partner shall have any other rights by virtue of this Agreement in any other
business venture of any Partner or Assignee. None of the Partners nor any other
Person shall have any right by virtue of this Agreement or the partnership
relationship established hereby in any other business venture of any other
Person and neither such Partner nor any other Person shall have any obligation
pursuant to this Agreement to offer any interest in any such other business
venture to the Partnership, any Partner or any such other Person, even if such
opportunity is of a character which, if presented to the Partnership, any
Partner or such other Person, could be taken by such Person.
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Section 8.4 Return of Capital
No Limited Partner shall be entitled to the return of his Capital
Contribution, except to the extent of distributions required to be made
pursuant to this Agreement or upon termination of the Partnership as provided
herein.
Section 8.5 Rights of Limited Partners Relating to the
Partnership
In addition to the other rights provided by this Agreement or by the
Act, each Limited Partner shall have the right, for a purpose reasonably
related to such Limited Partner's interest as a partner in the Partnership,
upon written request with a statement of the purpose of such request to obtain
from the Partnership or the General Partner such records or information as each
Limited Partner may reasonably request relative to the operations of the
Partnership.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the principal
office of the Partnership those records and documents required to be maintained
by the Act and such other books and records deemed by the General Partner to be
appropriate with respect to the Partnership's business, including without
limitation all books and records necessary to provide to the Partners any
information, lists and copies of documents required to be provided pursuant to
Section 9.3. The books of the Partnership shall be maintained, for financial
and tax reporting purposes, on an accrual basis in accordance with federal
income tax accounting principles, or on such other basis as the General Partner
determines to be necessary or appropriate.
Section 9.2 Reports
A. As soon as practicable, but in no event later than sixty (60) days
after the close of each Partnership Year, the General Partner shall cause to be
mailed to each Partner as of the close of the Partnership Year an annual report
containing financial statements of the Partnership for such Partnership Year.
B. As soon as practicable, but in no event later than thirty (30)
Business Days after the close of each calendar quarter (except the last
calendar quarter) of each Partnership Year, the General Partner shall cause to
be mailed to each Partner a report containing unaudited financial statements of
the Partnership as of the last day of the calendar quarter.
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ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and
other items required of the Partnership for federal, state and local tax
purposes and shall use all reasonable efforts to furnish, within ninety (90)
days of the close of each Partnership Year, the tax information reasonably
required by all Partners for federal, state and local income tax report
purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code; provided, however, that any election under Section 754 of
the Code shall require the consent of the Limited Partners. The General Partner
shall have the right to seek to revoke any such election (including without
limitation any election under Section 754 of the Code) upon the General
Partner's determination in its sole and absolute discretion that such
revocation is in the best interests of the Partners; provided, however, that
any revocation of an election under Section 754 of the Code shall require the
consent of the Limited Partners.
Section 10.3 Tax Matters Partner
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6223(c)(3) of
the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address and profit interest of
each Partner and each Assignee; provided, however, that such information has
been provided to the Partnership by such Partner or Assignee.
B. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such shall be borne by the Partnership.
Nothing herein shall be construed to restrict the Partnership from engaging an
accounting and/or law firm to assist the tax matters partner in discharging its
duties hereunder.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60) month period as
provided in Section 709 of the Code.
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Section 10.5 Withholding
A. Each Partner hereby authorizes the Partnership to withhold from, or
pay on behalf of or with respect to, such Partner any amount of federal, state,
local or foreign taxes that the General Partner determines the Partnership is
required to withhold or pay with respect to any amount distributable or
allocable to such Partner pursuant to this Agreement, including without
limitation any taxes required to be withheld or paid by the Partnership
pursuant to Section 1441, 1442, 1445 or 1446 of the Code.
B. Any amount paid on behalf of or with respect to a Partner shall
constitute a loan by the Partnership to such Partner, which loan shall be
repaid by such Partner within fifteen (15) days after notice from the General
Partner that such payment must be made, unless (i) the Partnership withholds
such payment from a distribution which would otherwise be made to the Partner
or (ii) the General Partner determines, in its sole and absolute discretion,
that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Partner
pursuant to Section 5.1. Any amounts withheld pursuant to the foregoing clause
(i) or (ii) shall be treated as having been distributed to such Partner in
accordance with Section 5.1. Each Partner hereby unconditionally and
irrevocably grants to the Partnership a security interest in such Partner's
Partnership Interest to secure such Partner's obligation to pay to the
Partnership any amounts required to be paid pursuant to this Section 10.5.
C. In the event that a Partner fails to pay any amounts owed to the
Partnership pursuant to this Section 10.5 when due, the General Partner may, in
its sole and absolute discretion, elect to make the payment to the Partnership
on behalf of such defaulting Partner, in which event the General Partner shall
be deemed to have loaned such amount to such defaulting Partner and shall
succeed to all rights and remedies of the Partnership as against such
defaulting Partner. Without limitation, in such event the General Partner shall
have the right to receive distributions that would otherwise be distributable
to such defaulting Partner until such time as such loan, together with all
interest thereon, has been paid in full, and any such distributions so received
by the General Partner shall be treated as having been distributed to the
defaulting Partner and immediately paid by the defaulting Partner to the
General Partner in repayment of such loan. Any amounts payable by a Partner
hereunder shall bear interest (payable on demand) at the lesser of (i) the base
rate on corporate loans at large United States money center commercial banks,
as published from time to time in The Wall Street Journal, plus four hundred
(400) basis points and (ii) the maximum lawful rate of interest on such
obligation, such interest to accrue from the date such amount is due (i.e.,
fifteen (15) days after demand) until such amount is paid in full. Each Partner
shall take such actions as the Partnership or the General Partner shall request
in order to perfect or enforce the security interest created hereunder.
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ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
No Transfer of any Partnership Interest shall be made or attempted, in
whole or in part, except in accordance with the terms and conditions set forth
in this Article 11. Any Transfer or purported Transfer of a Partnership
Interest not made in accordance with this Article 11 shall be null and void ab
initio and shall not be given effect for any purpose by the Partnership.
Section 11.2 Transfers of Interest of the General Partner
The General Partner may not make or attempt to make a Transfer of any
of its General Partner Interest to any Person other than an Affiliate without
the written consent of a majority in interest of the Limited Partners, which
consent may be granted or withheld in the sole and absolute discretion of the
Limited Partners. The failure or refusal of the Limited Partners to permit such
a transfer shall not give rise to any cause of action against any Limited
Partner.
Section 11.3 Limited Partner's Rights to Transfer
A. No Limited Partner shall have the right to make or attempt to make
a Transfer of all or any portion of its Partnership Interest, or any such
Limited Partner's rights as a Limited Partner without the prior written consent
of the General Partner, which consent may be given or withheld by the General
Partner in its sole and absolute discretion; provided, however, that a Limited
Partner may make a transfer of all or any portion of its Partnership Interest
to an Affiliate or another Partner (a "Permitted Transfer") subject to the
reasonable determination of the General Partner that the proposed transfer
would satisfy the conditions of Section 11.3C. The General Partner shall have
no obligation to admit the transferee in a Permitted Transfer as a Substituted
Limited Partner under Section 11.4. Any purported Transfer of a Partnership
Interest by a Limited Partner in violation of this Section 11.3A shall be void
ab initio and shall not be given effect for any purpose by the Partnership.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose
of settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to make or attempt to make a Transfer of all or any part of
his interest in the Partnership. The Incapacity of a Limited Partner, in and of
itself, shall not dissolve or terminate the Partnership.
C. Without limiting the generality of Section 11.3A, no Transfer by a
Limited Partner of its Partnership Interest (including a Permitted Transfer)
may be made to any Person unless (i) in the opinion of legal counsel for the
transferring Limited Partner, reasonably acceptable to the General Partner, it
would not result in the Partnership being treated as an association taxable as
a corporation, (ii) such Transfer would not be effectuated through an
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"established securities market" or a "secondary market or the substantial
equivalent thereof" within the meaning of Section 7704(b) of the Code and (iii)
such transfer would not cause a termination of the Partnership with the meaning
of Section 708 of the Code.
Section 11.4 Substituted Limited Partners
A. No Limited Partner shall have the right to substitute a transferee
as a Limited Partner in his place. The admission of any transferee of the
interest of a Limited Partner as a Substituted Limited Partner shall only be
made with the prior written consent of the General Partner, which consent may
be granted or withheld in its sole and absolute discretion and, if given, may
be on such terms and conditions as determined by the General Partner, which
shall include requiring the transferee to agree to the terms and conditions of
this Agreement in writing. The failure or refusal of the General Partner to
permit a transferee of any such interest to become a Substituted Limited
Partner shall not give rise to any cause of action against the Partnership or
any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner
in accordance with this Section 11.4 shall have all the rights and powers and
be subject to all the restrictions and liabilities of a Limited Partner under
this Agreement.
Section 11.5 Assignees
If the General Partner does not consent to the admission of any
transferee under Section 11.3 as a Substituted Limited Partner, as described in
Section 11.4, such transferee shall be considered an Assignee for purposes of
this Agreement. An Assignee shall be deemed to have had assigned to it, and
shall be entitled to receive, distributions from the Partnership and the share
of Net Income, Net Losses, Recapture Income and any other items of income,
gain, loss, deduction and credit attributable to the transferred Partnership
Interest, but shall not be considered as a Limited Partner under this Agreement
for any other purpose. In the event any such transferee desires to make a
further assignment of any such Partnership Interest, such transferee shall be
subject to all the provisions of this Article 11 to the same extent and in the
same manner as any Limited Partner desiring to make an assignment of a
Partnership Interest.
Section 11.6 General Provisions
A. No Partner may withdraw from the Partnership other than as a result
of a permitted transfer of all of such Partner's General and/or Limited
Partnership Interest in accordance with this Article 11.
B. Any Limited Partner who shall transfer all of his Partnership
Interest in a transfer permitted pursuant to this Article 11 shall cease to be
a Limited Partner upon the admission of all Assignees of such Partnership
Interest as Substituted Limited Partners.
C. Transfers pursuant to this Article 11 may only be made on the first
day of a fiscal quarter of the Partnership, unless the General Partner
otherwise agrees.
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D. If any Partnership Interest is transferred in compliance with the
provisions of this Article 11 on any day other than the first day of a
Partnership Year, then Net Income, Net Losses, each item thereof and all other
items attributable to such Partnership Interest for such Partnership Year shall
be allocated between the transferring Partner or Assignee and the transferee
Substituted Limited Partner or Assignee, by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for the purposes of
making such allocations, each of such items for the calendar month in which a
transfer or assignment occurs shall be allocated to the transferee Substitute
Limited Partner or Assignee, and none of such items for the calendar month in
which a transfer occurs shall be allocated to the transferring Partner or
Assignee. All distributions attributable to such Partnership Interest actually
made before the date of such transfer or assignment shall be made solely to the
transferring Partner or Assignee, and all distributions thereafter attributable
to such Partnership Interest shall be made to the transferee Substitute Limited
Partner or Assignee.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partners
A successor to all of the General Partner Interest of a General
Partner pursuant to Section 11.2 who is proposed to be admitted as a successor
General Partner shall be admitted to the Partnership as a General Partner,
effective upon such transfer. The admission of a successor General Partner
shall not cause a dissolution of the Partnership. In each case, the admission
shall be subject to such successor General Partner executing and delivering to
the Partnership an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required to effect
the admission. In the case of such admission on any day other than the first
day of a Partnership Year, all items attributable to a General Partner Interest
for such Partnership Year shall be allocated between the transferring General
Partner and such successor as provided in Section 11.6D.
Section 12.2 Amendment of Agreement and Certificate of Limited
Partnership
For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4.
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ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or a successor General Partner, provided in such case that
such action is in accordance with the terms of this Agreement. The Partnership
shall dissolve, and its affairs shall be wound up, upon the first to occur of
any of the following (each, a "Liquidating Event"):
A. the expiration of its term as provided in Section 2.5;
B. an event of withdrawal of a General Partner, as defined in the Act,
unless, at the time of any such event of withdrawal there is at least one other
General Partner who agrees to carry on the business of the Partnership or, if
no General Partner remains who agrees to carry on the business of the
Partnership, all of the Limited Partners agree in writing within ninety (90)
days after such event of withdrawal to continue the business of the Partnership
and to the appointment, effective as of the date of withdrawal, of a successor
General Partner;
C. the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
D. a Terminating Capital Transaction;
E. a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that a General Partner is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against a General Partner, in each case under any
federal or state bankruptcy or insolvency laws as now or hereafter in effect,
unless, prior to the entry of such order or judgment, the remaining General
Partner(s) agrees to continue the business of the Partnership or, if no General
Partner remains, all of the Limited Partners agree in writing to continue the
business of the Partnership and to the appointment, effective as of a date
prior to the date of such order or judgment, of a successor General Partner;
F. the disposition of the Clearwater Property, whether by sale,
exchange, casualty or public condemnation of substantially all of the
Clearwater Property, whether or not any such event constitutes a Terminating
Capital Transaction;
G. the sale, exchange or other disposition of any of the Contributed
HRE Common Shares (other than a sale thereof effected solely to provide
sufficient cash proceeds necessary to effect the distribution to the Limited
Partners pursuant to Section 5.1C), whether or not any such event constitutes a
Terminating Capital Transaction; or
H. at the election of the Limited Partners holding a majority of the
Limited Partnership Interests, the failure of the General Partner to cause the
Partnership to make any
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distribution to the Limited Partners required under Section 5.1A(1) or 5.1A(2)
within 90 days of the date on which such distribution was required to be made.
Section 13.2 Winding Up
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets and satisfying the claims of its creditors and
Partners. No Partner shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Partnership's business
and affairs. The General Partner or, in the event there is no remaining General
Partner, any Person elected by the unanimous vote or consent of the Limited
Partners (the General Partner, or such other Person being referred to herein as
the "Liquidator") shall be responsible for overseeing the winding up and
dissolution of the Partnership and shall take full account of the Partnership's
liabilities and property, and the Partnership property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof and the
proceeds therefrom applied and distributed in the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other
than the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Limited
Partners;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the General
Partner; and
(4) The balance, if any, to the Partners in accordance with
the distribution provisions of Section 5.1B.
The Liquidator shall be reimbursed by the Partnership for such reasonable
costs, expenses and fees related to the liquidation and dissolution of the
Partnership as may be incurred by the General Partner in connection therewith,
including, without limitation, costs, expenses and fees of the nature described
in Section 7.2
B. Notwithstanding the provisions of Section 13.2A which require
liquidation of the assets of the Partnership, the Liquidator shall not sell the
Contributed HRE Common Shares, provided that the General Partner shall take
such action as it may elect, in its sole and absolute discretion, under Section
5.1C so that the Partnership, upon liquidation of all of the other assets of
the Partnership, shall then be able to make the payments required under
Sections 13.2A(1), (2) and (3) and to effect the distributions provided for in
Sections 5.1B(1) and 5.1B(2), in which event the Contributed HRE Common Shares
shall be distributed in-kind to the General Partner in accordance with Section
5.2B(3).
- 27 -
<PAGE>
Section 13.3 Requested Sale; General Partner Right of First
Refusal.
A. Upon the request in writing of either (i) the General Partner, or
(ii) the Limited Partners holding a majority of the Limited Partnership
Interests, that the Partnership sell the Clearwater Property (a "Requested
Sale"), the General Partner shall take such action to effect the sale of the
Clearwater Property as may be necessary or appropriate to consummate such sale
as promptly as reasonably practicable and for cash on commercially reasonable
terms then available; provided, however, that (i) any such written notice must
be given at least sixty (60) days prior to the proposed date of the Requested
Sale, (ii) the General Partner shall be under no obligation to effect a
Requested Sale prior to the third anniversary of the date of this Agreement and
(iii) the General Partner may not otherwise sell the Clearwater Property
without the consent of the Limited Partners prior to the third anniversary of
the date of this Agreement.
B. Except as otherwise provided herein, the Partnership may not
convey, sell, assign, or otherwise transfer the Clearwater Property to any
Partner or third party, except in accordance with the provisions of this
Section 13.3.
C. If, at any time, the Partnership shall attempt to sell the
Clearwater Property, the Partnership, upon the receipt of a bona fide written
offer from any Person, including without limitation any Limited Partner (the
"Bona Fide Offer"), will first offer to sell the Clearwater Property to the
General Partner upon the same terms and conditions as set forth in the Bona
Fide Offer. Such offer shall be made to the General Partner by delivering to
the General Partner a duplicate copy of a contract of sale setting forth such
Bona Fide Offer (the "Contract of Sale"); provided, however, that the closing
date set forth in the Contract of Sale shall not be sooner than ninety (90)
days after delivery thereof by the General Partner. If the General Partner
determines that such offer is bona fide and to accept such offer it shall do so
by executing and delivering to the Partnership within thirty (30) days after
receipt of such duplicate copy of the Contract of Sale one copy thereof
executed by the General Partner and by paying to the Partnership on the
execution and delivery of the Contract of Sale the downpayment or deposit, if
any, specified therein, which shall not exceed five percent (5%) of the
purchase price set forth in the Contract of Sale.
D. If the General Partner fails to accept the Partnership's offer, the
Partnership may sell the Clearwater Property for a price equal to or greater
than the price set forth in the Contract of Sale delivered to the General
Partner and on terms no more favorable to the purchaser than those set forth
therein, and upon the sale of the Clearwater Property pursuant to the Contract
of Sale and the receipt by the General Partner of the General Partner's
interest in the proceeds of such sale pursuant to the terms of Section 5.1B,
the General Partner's rights under this Section 13.3 with respect to the
Clearwater Property shall terminate and be of no further force and effect.
E. If the General Partner has declined to purchase the Clearwater
Property pursuant to the Bona Fide Offer and such sale is not completed within
six (6) months of the date of the Contract of Sale for the Bona Fide Offer, or
if the Bona Fide Offer is rejected, terminated or fails for any reason between
the Partnership and the proposed third-party buyer, the General Partner's
rights under this Section 13.3 shall be automatically reinstated and the
Partnership may
- 28 -
<PAGE>
not sell the Clearwater Property to any other person without first complying
with the terms of this Section 13.3.
F. Notwithstanding anything to the contrary contained herein, the
General Partner may not convey, sell, assign or otherwise transfer the
Clearwater Property or exercise its rights under Section 13.3C without first
giving each of the Limited Partners 30 days' prior written notice of such
proposed conveyance, sale, assignment or other transfer which written notice
shall provide the Limited Partners with the opportunity to make a proposal to
the Partnership to purchase the Clearwater Property; provided, however, that
the General Partner shall have the right, in its sole discretion, to accept or
reject any such proposal; provided, further, that the General Partner complies
with its obligations under Section 13.3A to effect any Requested Sale as
promptly as reasonably practicable.
Section 13.4 Negative Capital Accounts
Except to the extent required under the Act or this Agreement, no
Limited Partner shall be liable to the Partnership or to any other Partner for
any negative balance outstanding in such Partner's Capital Account, whether
such negative Capital Account results from the allocation of Net Losses or
other items of deduction and loss to such Partner or from distributions to such
Partner.
Section 13.5 Deemed Distribution and Contribution
Notwithstanding any other provision of this Article 13, in the event
the Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes and for purposes of maintaining
Capital Accounts pursuant to Exhibit B hereof, the Partnership shall be deemed
to have distributed the property in-kind to the General Partner and Limited
Partners, who shall be deemed to have assumed and taken such property subject
to all Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the General Partner and Limited Partners
shall be deemed to have recontributed the Partnership property in-kind to the
Partnership, which shall be deemed to have assumed and taken such property
subject to all such liabilities.
Section 13.6 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of his
Capital Contributions and shall have no right or power to demand or receive
property other than cash from the Partnership. Except as otherwise provided in
this Agreement, no Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee as to the return of his Capital
Contributions, distributions or allocations.
- 29 -
<PAGE>
Section 13.7 Notice of Dissolution
In the event a Liquidating Event occurs that would, but for an
election by one or more Partners pursuant to Section 13.1, result in a
dissolution of the Partnership, the General Partner shall, within thirty (30)
days thereafter, provide written notice thereof to each of the Partners.
Section 13.8 Termination of Partnership and Cancellation of
Limited Partnership
Upon the completion of the liquidation of the Partnership's cash and
property as provided in Section 13.2, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
Section 13.9 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2, in order to minimize any losses otherwise attendant
upon such winding-up, and the provisions of this Agreement shall remain in
effect between the Partners during the period of liquidation; provided, that
the dissolution of the Partnership and the distributions described in Section
13.2 shall occur during the same or any prior tax year as the sale, if any, of
the Contributed HRE Common Shares or the Clearwater Property.
Section 13.10 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership's
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT
Section 14.1 Amendments
A. This Agreement may be amended with the written consent of the
General Partner and each Limited Partner.
B. Notwithstanding Section 14.1A, the General Partner shall have the
power, without the consent of any other Partner, to amend this Agreement as may
be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner
or any Affiliate of the General Partner for the benefit of
the Partners;
- 30 -
<PAGE>
(2) to reflect the admission, substitution, termination or
withdrawal of Partners in accordance with this Agreement;
(3) to reflect a change that is of an inconsequential
nature and does not adversely affect any other
Partner in any material respect, or to cure any
ambiguity or correct or supplement any provision in
this Agreement not inconsistent with law or with
other provisions or to make other changes with
respect to matters arising under this Agreement that
will not be inconsistent with law or with the
provisions of this Agreement; or
(4) to satisfy any requirements, conditions or
guidelines contained in any order, directive,
opinion, ruling or regulation of a federal or state
agency or contained in federal or state law.
The General Partner shall provide notice to all Partners in the manner provided
in Section 15.1 when any action under this Section 14.1B is taken.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notices
Any notice, demand, request or report required or permitted to be
given or made to a Partner or Assignee under this Agreement shall be in writing
and shall be deemed given or made when delivered in person or by facsimile or
two business days after being sent by first class United States certified mail,
return receipt requested, to the Partner or Assignee at the address or
addresses set forth in Exhibit A or such other address or addresses of which
the Partner or Assignee shall notify the General Partner in writing.
Section 15.2 Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
- 31 -
<PAGE>
Section 15.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.7 Consent of Limited Partners
With respect to any action, decision or other matter arising under
this Agreement which requires that the General Partner obtain the prior
approval or consent of a Limited Partner or which is subject to the
satisfaction of a Limited Partner, such approval, consent or satisfaction will
be deemed to have been obtained for all purposes with respect to a Limited
Partner if such Limited Partner does not inform the General Partner in writing
of its objection to the proposed action, decision or other matter requiring an
approval, consent or satisfaction within five (5) Business Days after the date
on which the General Partner advises the Limited Partner in writing of the
proposed action, decision or other matter.
Section 15.8 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or
the same counterpart.
Section 15.9 Applicable Law
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law.
- 32 -
<PAGE>
Section 15.10 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.11 Entire Agreement
This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes the Prior
Agreement and any other prior written or oral understandings or agreements
among them with respect hereto.
- 33 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
HRE PROPERTIES
By: /s/ Charles J. Urstadt
---------------------------
Name: Charles J. Urstadt
Title: Chairman
LIMITED PARTNERS:
KIMCO REALTY CORPORATION
By: /s/ Louis J. Petra
-------------------------
Name: Louis J. Petra
Title: CFO/VP
CLS GENERAL PARTNERSHIP CORP.
By: /s/ Leo Liebowitz
--------------------------
Name: Leo Liebowitz
Title: President and Treasurer
K.O. ASSOCIATES
By: Kimco Realty Corporation, G.P.
By: /s/ Louis J. Petra
--------------------------
Name: Louis J. Petra
Title: CFO/VP
ORENTREICH COOPER JOINT VENTURE
By: /s/ Milton Cooper
--------------------------
Name: Milton Cooper
Title: G.P.
/s/ Norman Orentreich
-----------------------------
Dr. Norman Orentreich
- 34 -
<PAGE>
/s/ Roslyn Orentreich
-------------------------------
Ms. Roslyn Orentreich
/s/ Milton Cooper
-------------------------------
Mr. Milton Cooper
- 35 -
<PAGE>
EXHIBIT A
PARTNER CONTRIBUTIONS
(As of November 22, 1996)
<TABLE>
<CAPTION>
Name and Address Capital Percentage
of Partner Contribution Interest
- ---------------- ------------ ---------
General Partner
<S> <C> <C>
HRE PROPERTIES Clearwater Property with 57.906%
321 Railroad Avenue Agreed Value of $13,000,000
Greenwich, Connecticut 06830
Limited Partners
KIMCO REALTY CORPORATION 443,600 HRE Common Shares with 31.121%
3333 New Hyde Park Road Agreed Value of $6,986,700
New Hyde Park, New York 11042
CLS GENERAL PARTNERSHIP CORP. 21,000 HRE Common Shares with 1.473%
c/o Getty Agreed Value of $330,750
125 Jericho Turnpike
Jericho, New York 11753
K.O. ASSOCIATES 2,000 HRE Common Shares with 0.140%
3333 New Hyde Park Road Agreed Value of $31,500
New Hyde Park, New York 11042
ORENTREICH COOPER JOINT VENTURE 400 HRE Common Shares with 0.028%
c/o Orentreich Medical Grp. Agreed Value of $6,300
909 Fifth Avenue
New York, New York 10021
DR. NORMAN ORENTREICH 58,900 HRE Common Shares with 4.132%
Orentreich Medical Grp. Agreed Value of $927,675
909 Fifth Avenue
New York, New York 10021
Ms. Roslyn Orentreich 62,600 HRE Common Shares with 4.392%
Orentreich Medical Grp. Agreed Value of $985,950
909 Fifth Avenue
New York, New York 10021
Mr. Milton Cooper 11,500 HRE Common Shares with 0.807%
3333 New Hyde Park Road Agreed Value of $181,125
New Hyde Park, New York 11042
</TABLE>
<PAGE>
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other contributions or deemed contributions made by such
Partner to the Partnership pursuant to the Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax)
computed in accordance with Section 1.B hereof and allocated to such Partner
pursuant to Section 6.1 of the Agreement and Exhibit C hereof, and decreased by
(x) the amount of cash or Agreed Value of all actual and deemed distributions
of cash or property made to such Partner pursuant to this Agreement and (y) all
items of Partnership deduction and loss computed in accordance with Section 1.B
hereof and allocated to such Partner pursuant to Section 6.1 of the Agreement
and Exhibit C hereof.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss),
with the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704(b)(2)(iv)(m), the computation of all items of
income, gain, loss and deduction shall be made
without regard to any election under Section 754 of
the Code which may be made by the Partnership;
provided, however, that the amounts of any
adjustments to the adjusted basis of the assets of
the Partnership made pursuant to Section 734 of the
Code as a result of the distribution of property by
the Partnership to a Partner (to the extent that
such adjustments have not previously been reflected
in the Partners' Capital Accounts) shall be
reflected in the Capital Accounts of the Partners in
the manner and subject to the limitations prescribed
in Regulations Section 1.704-1(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, loss
and deduction shall be made without regard to the
fact that items described in Sections 705(a)(1)(B)
or 705(a)(2)(B) of the Code are not includable in
gross income or are neither currently deductible nor
capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be
determined as if the adjusted basis of such property
as of such date of disposition were equal in amount
to the
<PAGE>
Partnership's Carrying Value with respect to such
property as of such date.
(4) In lieu of the depreciation, amortization and other
cash recovery deductions taken into account in
computing such taxable income or loss, there shall
be taken into account Depreciation for such fiscal
year.
(5) In the event the Carrying Value of any Partnership
property is adjusted pursuant to Section 1.D hereof,
the amount of any such adjustment shall be taken
into account as gain or loss from the disposition of
such property.
(6) Any items specially allocated under Section 2 of Exhibit
C hereof shall not be taken into account.
C. Generally a transferee (including any Assignee) of a Partnership
Interest shall succeed to a pro rata portion of the Capital Account of the
transferor; provided, however, that, if the transfer causes a termination of
the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's
properties shall be deemed, solely for federal income tax purposes, to have
been distributed in liquidation of the Partnership to the holders of
Partnership Interests (including such transferee) and recontributed by such
Persons in reconstitution of the Partnership. In such event, the Carrying
Values of the Partnership properties shall be adjusted immediately prior to
such deemed distribution pursuant to Section 1.D(2) hereof. The Capital
Accounts of such reconstituted Partnership shall be maintained in accordance
with the principles of this Exhibit B.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2),
the Carrying Values of all Partnership property shall be
adjusted upward or downward to reflect any Unrealized Gain
or Unrealized Loss attributable to such Partnership
property, as of the times of the adjustments provided in
Section 1.D(2) hereof, as if such Unrealized Gain or
Unrealized Loss had been recognized on an actual sale of
each such property and allocated pursuant to Section 6.1 of
the Agreement.
(2) Such adjustments shall be made as of the following
times: (a) immediately prior to the acquisition of an
additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis
Capital Contribution; (b) immediately prior to the
distribution by the Partnership to a Partner of more than a
de minimis amount of property as consideration for an
interest in the Partnership; and (c) immediately prior to
the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided,
however, that adjustments pursuant to clauses (a) and (b)
above shall be made only if the General Partner reasonably
determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of
the Partners in the Partnership.
(ii)
<PAGE>
(3) In accordance with Regulations Section
1.704-1(b)(2)(iv)(e), the Carrying Value of Partnership
property distributed in-kind shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the time
any such property is distributed.
(4) In determining Unrealized Gain or Unrealized Loss
for purposes of this Exhibit B, the aggregate cash amount
and fair market value of all Partnership assets (including
cash or cash equivalents) shall be determined by the
General Partner using such reasonable method of valuation
as it may adopt, or in the case of a liquidating
distribution pursuant to Article 13 of the Agreement, be
determined and allocated by the Liquidator using such
reasonable methods of valuation as it may adopt. The
General Partner or the Liquidator, as the case may be,
shall allocate such aggregate value among the assets of the
Partnership in such manner as it determines in its
reasonable discretion, to arrive at a fair market value for
individual properties.
E. The provisions of the Agreement (including this Exhibit B and the
other Exhibits to this Agreement) relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-1(b) and shall
be interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including without limitation debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner or the Limited Partners), are computed in
order to comply with such Regulation, the General Partner may make such
modification, provided that it will not have a material effect on the amounts
distributable to any Person pursuant to Article 13 of the Agreement upon the
dissolution of the Partnership. The General Partner also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Partners and the amount of Partnership capital
reflected on the Partnership's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-(1)(b).
2. No Interest
No interest shall be paid by the Partnership on Capital Contributions
or on balances in Partners' Capital Accounts.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, and 13 of the Agreement.
(iii)
<PAGE>
EXHIBIT C
SPECIAL ALLOCATION RULES
1. Special Allocation Rules
Notwithstanding any other provision of the Agreement or this Exhibit
C, the following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section
6.1 of the Agreement or any other provisions of this Exhibit C, if there is a
net decrease in Partnership Minimum Gain during any Partnership Year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This
Section 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Sections 1.704-2(f) and, for purposes of this Section 1.A only,
each Partner's Adjusted Capital Account Deficit shall be determined prior to
any other allocations pursuant to Section 6.1 of the Agreement with respect to
such Partnership Year and without regard to any decrease in Partner Minimum
Gain during such Partnership Year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Section 6.1 of the Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
Year, each Partner who has a share of the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an amount equal
to such Partner's share of the net decrease in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Sections 1.704-2(i)(5). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(i)(4). This
Section 1.B is intended to comply with the minimum gain chargeback requirement
in such Section of the Regulations and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.B, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement or this Exhibit C with respect to such
Partnership Year, other than allocations pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d) (4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations required
under Sections 1.A and 1.B hereof, such Partner has an Adjusted Capital Account
(i)
<PAGE>
Deficit, items of Partnership income and gain shall be specifically allocated
to such Partner in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, its Adjusted Capital Account Deficit created by
such adjustments, allocations or distributions as quickly as possible. An item
of loss or deduction for any period shall not be allocated to a Limited Partner
to the extent that as of the end of any taxable year such Limited Partner would
have an Adjusted Capital Account Deficit. Any amount that cannot be allocated
to a Limited Partner by reason of the foregoing sentence shall be allocated to
other Limited Partners (except to the extent that such allocation to any other
Limited Partner would also be limited under the foregoing sentence). Amounts
that cannot be allocated to any Limited Partner by reason of the first sentence
of this paragraph shall be allocated to the General Partner.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
Year shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the General Partner determines in its good faith
discretion that Nonrecourse Deductions for any Partnership Year must be
allocated in a different ratio to satisfy the safe harbor requirements of the
Regulations promulgated under Section 704(b) of the Code, the General Partner
is authorized upon notice to all other Partners, to revise the prescribed ratio
for such Partnership Year to the numerically closest ratio which does satisfy
such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
for any Partnership Year shall be specially allocated to the Partner who bears
the economic risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(2).
F. Curative Allocations. (1) Subject to the other provisions of this
Section 1 of Exhibit C, any allocations made under paragraph C hereof shall be
taken into account in allocating other items of income, gain, loss and deduction
among the Partners so that, to the extent possible, the net amount of such
allocations of other items and the allocations under paragraph C hereof to each
Partner shall be equal to the net amount that would have been allocated to each
such Partner if the allocations under paragraph C had not occurred.
(2) Over the term of the Partnership, allocations under paragraph A
hereof are intended to offset allocations under paragraph D hereof, and
allocations under paragraph B hereof are intended to offset allocations under
paragraph E hereof. In the event that such offsets will not occur for any
reason, the General Partners shall have reasonable discretion to make such
additional allocations (including allocations of gross income) so that (i) the
net effect of all allocations under paragraphs A, D and this F(2) will (as of
the dissolution of the Partnership) be as though no allocations under any of
such paragraphs (including this paragraph F(2)) were made and (ii) the net
effect of all allocations under paragraphs B, E and this F(2) will (as of the
dissolution of the Partnership) be as though no allocations under any of such
paragraphs (including this paragraph F(2)) were made.
G. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustments to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment
(ii)
<PAGE>
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
H. Certain Depreciation. All Depreciation attributable to the
Clearwater Property shall be specially allocated to the General Partner.
2. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 2, for federal, state
and local income tax purposes, each item of income, gain, loss and deduction
shall be allocated among the Partners in the same manner as its correlative
item of "book" income, gain, loss or deduction is allocated pursuant to Section
6.1 of the Agreement and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:
(1) (a) In the case of a Contributed Property,
such items attributable thereto shall be
allocated among the Partners consistent
with the principles of Section 704(c) of
the Code to take into account the variation
between the 704(c) Value of such property
and its adjusted basis at the time of
contribution; and
(b) any item of Residual Gain or Residual Loss
attributable to a Contributed Property
shall be allocated among the Partners in
the same manner as its correlative item of
"book" gain or loss is allocated pursuant
to Section 6.1 of the Agreement and Section
1 of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners
in a manner consistent with the principles
of Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized
Loss attributable to such property and the
allocations thereof pursuant to Exhibit B and
(2) second, in the event such property was
originally a Contributed Property, be
allocated among the Partners in a manner
consistent with Section 2.B(1) of this
Exhibit C; and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall
be allocated among the Partners in the same
manner as its correlative item of "book"
gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1
or this Exhibit C.
(iii)
<PAGE>
(3) all other items of income, gain, loss and deduction
shall be allocated among the Partners in the same
manner as their correlative item of "book" gain or
loss is allocated pursuant to Section 6.1 of the
Agreement and Section 1 of this Exhibit C.
C. To the extent Regulations promulgated pursuant to Section 704(c) of
the Code permit a partnership to utilize alternative methods to eliminate the
disparities between the agreed value of property and its adjusted basis
(including, without limitation, the implementation of curative allocations),
the General Partner shall have the authority to elect the method to be used by
the Partnership and such election shall be binding on all Partners.
D. Subject to paragraphs B and C of this Section 2, if any gain (as
computed for tax purposes) on the sale or other disposition of Partnership
property shall constitute Recapture Income, such gain shall (to the extent
possible) be divided among the Partners in proportion to the depreciation
deductions previously claimed by them giving rise to such recapture, provided
that this Section 2.D shall not affect the amount of gain otherwise allocable
to a Partner.
E. Any elections or other decisions relating to allocations shall be
made by the General Partner in any manner that reasonably reflects the purpose
and intention of this Exhibit C and the Agreement. Allocations pursuant to this
Section 2 are solely for purposes of U.S. federal, state and local income taxes
and shall not affect any Partner's Capital Account or share of Net Income or
Net Loss.
3. Other Allocation Rules
A. For purposes of Regulations Section 1.752-3(a), the Partners agree
that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the
amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective Percentage Interests.
B. To the extent permitted by Treasury Regulations Section
1.704-2(h)(3), the General Partner may endeavor to treat distributions as
having been made from the proceeds of a Nonrecourse Liability or a Partner
Nonrecourse Debt only to the extent that such distributions would otherwise
cause or increase an Adjusted Capital Account Deficit for any Partner.
C. The Partners are aware of the income tax consequences of the
allocations made by this Exhibit C and hereby agree to be bound by the
provisions of this Exhibit C in reporting their shares of Partnership income
and loss for federal, state and local income tax purposes.
(iv)
<PAGE>
EXHIBIT D
VALUE OF CONTRIBUTED PROPERTY
<TABLE>
<CAPTION>
Underlying Property 704(c) Value Agreed Value
- ------------------- ------------ ------------
<S> <C> <C>
Clearwater Property ________ $13,000,000
443,600 HRE Common Shares
contributed by Kimco Realty
Corporation ________ $6,986,700
21,000 HRE Common Shares
contributed by CLS General
Partnership Corp. ________ $330,750
2,000 HRE Common Shares
contributed by K.O. Associates ________ $31,500
400 HRE Common Shares
contributed by Orentreich Cooper
Joint Venture ________ $6,300
58,900 HRE Common Shares
contributed by Dr. Norman
Orentreich ________ $927,675
62,600 HRE Common Shares
contributed by Ms. Roslyn
Orentreich ________ $985,950
11,500 HRE Common Shares
contributed by Mr. Milton
Cooper ________ $181,125
</TABLE>
<PAGE>
EXHIBIT F
IRREVOCABLE PROXY
Attached are the clean and marked final versions of the
Countryside Square Limited Partnership Agreement reflecting all parties
agreement reached last week.
The undersigned hereby appoints COUNTRYSIDE SQUARE LIMITED
PARTNERSHIP, with full power of substitution, proxy to vote and act at any
Meeting of Shareholders of HRE Properties, annual or special, and at any
adjournments thereof, and in connection with any Action by Written Consent in
lieu of any Meeting of Shareholders, upon and with respect to the number of
Common Shares of HRE Properties as to which the undersigned may be entitled to
vote or act. The undersigned instructs such proxy, or its substitutes, to vote
in such manner as they deem may be in the best interests of HRE Properties on
any matters which may come before the meeting or in connection with any written
consent. The undersigned hereby revokes any other proxy previously granted to
vote the Common Shares.
The general proxy granted hereby is coupled with an interest,
shall be irrevocable for five years from the date hereof, shall survive the
death, disability or incapacity of the undersigned and shall be deemed given by
each and every assignee and successor of the undersigned.
(When signing as attorney, executor,
administrator, trustee or guardian, please
sign your full title as such. If signer is a
corporation, please sign in full corporation
name by authorized officer. If signer is a
partnership, please sign the partnership name
by authorized person. Each joint owner should
sign.)
Dated:_______________________________________
_____________________________________________
Signature of Shareholder
_____________________________________________
Signature if held jointly
<PAGE>
EXHIBIT 3
Page 18 of ___ Pages
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following tables set forth certain information as of January 16,
1996 available to the Trust with respect to the shares of the Trust (i)
held by those persons known to the Trust to be the beneficial owners (as
determined under the rules of the Securities and Exchange Commission) of
more than 5% of the Trust's Common Shares then outstanding and (ii) held
by each of the Trustees, each of the executive officers named in the
Summary Compensation Table below, and by all of the Trustees and
executive officers as a group:
5
<PAGE>
5% BENEFICIAL OWNERS
Name and Address Common Shares Percent
of Beneficial Owner Beneficially Owned of Class
------------------- ------------------ --------
Charles J. Urstadt(1)............ 1,100,800 19.7%
HRE Properties
321 Railroad Avenue
Greenwich, Connecticut 06830
The Kimco Group(2)............... 601,050 10.8%
1044 Northern Boulevard
Roslyn, New York 11576
- --------------
(1) Of these shares, 15,000 are owned by Urstadt Property Company, Inc.,
a company of which Mr. Urstadt is the president, a director and a
principal stockholder, 900,000 shares are owned by two irrevocable
trusts established for Mr. Urstadt's children and 40,000 shares are
owned by Elinor Urstadt, Mr. Urstadt's wife. The figure excludes
98,750 shares issuable upon exercise of options which are not
currently exercisable and will not become exercisable within 60
days, and includes 145,000 shares issuable upon exercise of options
exercisable within 60 days. See "Compensation and Transactions with
Management and Others" below. Also excludes 25,000 cash appreciation
rights, all of which are exercisable within 60 days.
(2) Based on information contained in Amendment No. 10 to a Schedule 13D
filed with the Securities and Exchange Commission on December 11,
1989 by a group of persons and entities (the "Kimco Group")
comprised principally of Milton Cooper, Kimco Corporation, Kimco
Development Corporation, CLS General Partnership Corp., K.O.
Associates, Orentreich Cooper Joint Venture and Dr. Norman
Orentreich.
TRUSTEES AND OFFICERS
Common Shares Percent
Name Beneficially Owned of Class
---- ------------------ --------
Charles J. Urstadt................ 1,100,800(1) 19.7%
E. Virgil Conway.................. 10,500(2)(3) *
Robert R. Douglass................ 5,600(3)(8) *
Peter Herrick..................... 16,000(2)(3) *
George H.C. Lawrence.............. 23,400(2)(3) *
Paul D. Paganucci................. 6,000(2)(3) *
James O. York..................... 5,100(2)(3) *
James R. Moore.................... 27,916(4)(6) *
Raymond P. Argila................. 14,416(4)(5) *
Willing L. Biddle................. 14,950(7) *
Trustees and executive officers
as a group (10 persons)......... 1,224,682(9) 21.9%
- --------------
* Less than 1%
(1) Includes 15,000 shares owned by Urstadt Property Company, Inc.,
900,000 Common Shares owned by two irrevocable trusts established
for Mr. Urstadt's adult children, 40,000 Common Shares owned by
Elinor Urstadt, Mr. Urstadt's wife. Excludes 98,750 Common Shares
issuable upon exercise of options which are not currently
exercisable and will not become exercisable within 60 days, and
includes 145,000 Common Shares issuable upon exercise of options
exercisable within 60 days. Also excludes 25,000 cash appreciation
rights all of which are exercisable within 60 days. See
"Compensation and Transactions with Management and Others" below.
(2) Includes 4,000 Common Shares issuable upon exercise of options which
are currently exercisable or which will become exercisable within
60 days. See "Compensation and Transactions with Management and
Others" below.
(3) Excludes 1,000 shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60
days.
(footnotes continued on following page)
6
<PAGE>
(footnotes continued from preceding page)
(4) Represents Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days. See
"Compensation and Transactions with Management and Others" below.
(5) Excludes 11,250 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days.
(6) Excludes 12,750 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days.
(7) Includes 2,250 Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days.
Excludes 7,250 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days.
Mr. Biddle is the son-in-law of Mr. Urstadt.
(8) Includes 3,000 Common Shares issuable upon exercise of options which are
currently exercisable or will become exercisable within 60 days. See
"Compensation and Transactions with Management and Others" below.
(9) Excludes 136,000 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days,
but includes 212,582 Common Shares issuable upon exercise of options which
are exercisable within 60 days. Also excludes 25,000 cash apppreciation
rights all of which are exercisable within 60 days.
7
<PAGE>
Stock Options
Under the Trust's Stock Option Plan ("Plan"), 453,665 shares of the
Trust's authorized but unissued Common Shares are reserved for issuance upon the
exercise of options or stock appreciation rights which have been or may be
granted under the Plan. The persons eligible to participate in the Plan are such
key employees of the Trust as may be selected from time to time by the
Compensation Committee in its discretion, as well as non-employee Trustees. The
Plan provides that each Trustee who is not a full-time employee or former
full-time employee of the Trust will automatically be awarded options covering
1,000 shares on April 1 of each year. The Plan is administered by the
Compensation Committee.
The following table sets forth, for the executive officers named in the
Summary Compensation Table, information regarding individual grants of stock
options and stock appreciation rights ("SARs") made under the Plan in the fiscal
year ended October 31, 1995.
<TABLE>
<CAPTION> OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Grant Date Value
--------------------------------------------------------- ----------------
% of Total
Options/
SARs
Options/ Granted to
SARs Employees Exercise or
Granted* in Fiscal Base Price Expiration Grant Date
Name (#) Year ($/sh) Date Present Value($)**
- ---- --- ---- ------ ---- ------------------
<S> <C> <C> <C> <C> <C>
Charles J . Urstadt .......... 25,000 34.01% $14.13 11/10/04 $32,500
25,000 34.01% $14.00 06/10/05 $32,250
James R. Moore ............... 3,500 4.76% $14.13 11/10/04 $ 4,550
3,500 4.76% $14.00 06/10/05 $ 4,515
Raymond P. Argila ............ 3,000 4.08% $14.13 11/10/04 $ 3,900
3,000 4.08% $14.00 06/10/05 $ 3,870
Willing L. Biddle ............ 2,000 2.72% $14.13 11/10/04 $ 2,600
3,000 4.08% $14.00 06/10/05 $ 3,870
</TABLE>
- --------------
* All options granted during the past fiscal year vest over four years. No
options granted during the past fiscal year were granted with related stock
appreciation rights.
** Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. The estimated values under that model are based on
arbitrary assumptions as to variables such as interest rates, stock price
volatility and future dividend yield.
8
<PAGE>
The Compensation Committee has authorized loans to finance the exercise
of incentive stock options granted to executive officers. The loans have a
five-year term, subject to extension at the discretion of the Compensation
Committee, bear interest at the Base Rate of The First National Bank of Boston
and are secured by a pledge of the related shares. The loans become due on
termination of employment by the Trust, but are automatically extended for seven
months following termination of employment other than for cause, and for 13
months following termination of employment occurring after a Change of Control
of the Trust.
The following table sets forth, for the executive officers named in the
Summary Compensation Table, information concerning the fiscal year-end value of
unexercised options and SARs. No Common Shares of the Trust were acquired by
such executive officers through the exercise of options in fiscal 1995.
Aggregated Options/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values.
Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
------------- -------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ---- -------------- -------------
Charles J. Urstadt ........... 145,000/98,750 $235,469/$42,344
James R. Moore ............... 27,916/12,750 $ 29,378/$ 4,953
Raymond P. Argila ............ 14,416/11,250 $ 29,363/$ 4,781
Willing L. Biddle ............ 2,250/ 7,250 $ 141/$ 1,016
9
