SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________________ to ___________________
Commission File Number 000-14510
CEDAR INCOME FUND, LTD.
(Exact Name of Registrant as Specified in its Charter)
MARYLAND
(State or Other Jurisdiction of Incorporation or Organization)
11-3440062
(I.R.S. Employer Identification No.)
44 South Bayles Avenue, Suite 304, Port Washington, New York 10050
(Address of Principal Executive Offices) (Zip)
Registrant's Telephone No., including Area Code (516) 767-6492
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report.
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _______.
<PAGE>
As of August 10, 1998, 542,111 shares of the Registrant's Common Stock,
$.01 par value per share, were outstanding.
<PAGE>
CEDAR INCOME FUND, LTD.
QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
TABLE OF CONTENTS
INDEX PAGE
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements (Unaudited).
Consolidated Balance Sheets of Cedar Income
Fund, Ltd. as of June 30, 1998 and December
31, 1997. 1
Consolidated Statements of Operations of Cedar
Income Fund, Ltd. for the Three and Six
Months Ended June 30, 1998 and 1997. 2
Consolidated Statements of Cash Flows of Cedar
Income Fund, Ltd. for the Six Months Ended
June 30, 1998 and 1997. 3
Notes to the Consolidated Financial Statements
of Cedar Income Fund, Ltd. 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities 10
Holders.
Item 6. Exhibits and Reports on Form 8-K. 11
SIGNATURES 11
INDEX TO EXHIBITS 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CEDAR INCOME FUND, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, December 31,
1998 1997
(Unaudited)
--------------------------------------
<S> <C> <C>
ASSETS:
Real estate:
Land $4,146,572 $ 4,126,044
Buildings and improvements 14,717,257 14,636,843
---------------------------------------
Less accumulated depreciation 18,863,829 18,762,887
(4,457,543) (4,217,699)
----------------------------------------
14,406,286 14,545,188
Mortgage note receivable --- 564,437
----------------------------------------
Cash and cash equivalents 14,406,286 15,109,625
Rent and other receivable 932,201 407,216
Interest receivable 75,609 130,615
Prepaid expenses --------- 3,881
141,160 109,624
Deferred lease commissions 159,901 164,826
Taxes held in escrow 39,823 15,891
----------------------------------------
Total assets $15,754,980 $15,941,683
========================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Mortgage loan payable $ 1,387,803 $1,400,259
Accounts payable and accrued expenses 246,350 162,320
Escrow payable 32,497 ---------
Amounts due to affiliates 4,543 62,570
Security deposits 82,006 80,085
Advance rents 27,347 9,347
----------------------------------------
Total liabilities 1,780,546 1,714,581
----------------------------------------
Limited Partner's minority interest in
consolidated Operating Partnership 10,056,942 ---------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 5,000,000 and 0 shares
authorized, none issued or outstanding ----------- ----------
Common Stock, $.01 and $1.00 par value, 50,000,000 and 5,020,000 542,111 2,245,411
shares authorized, 542,111 and
2,245,411 shares issued and
outstanding, respectively
Additional paid in capital 3,375,381 11,981,691
----------------------------------------
Total stockholders' equity 3,917,492 14,227,102
----------------------------------------
Total liabilities and stockholders' equity $15,754,980 $15,941,683
========================================
SEE ACCOMPANYING NOTES.
</TABLE>
<PAGE>
CEDAR INCOME FUND, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 632,324 $ 603,699 $ 1,272,394 $ 1,142,318
Interest income 10,922 19,923 42,208 41,219
---------------------------------------------------------------------------------
Total Revenues 643,246 623,622 1,314,602 1,184,537
---------------------------------------------------------------------------------
Expenses:
Property expenses:
Wages and salaries --------- 5,436 -------- 10,154
Real estate taxes 59,609 64,070 119,218 128,493
Repairs and maintenance 46,887 87,338 118,346 162,873
Utilities 36,101 35,735 71,766 67,546
Management fee 31,758 30,185 63,710 57,166
Insurance 3,504 4,835 8,413 9,748
Other 25,342 26,621 26,621 51,724
---------------------------------------------------------------------------------
Property expenses,
excluding depreciation 203,201 254,220 430,231 488,134
Depreciation 118,826 105,575 239,844 217,934
---------------------------------------------------------------------------------
Total property expenses 322,027 359,795 670,075 706,068
---------------------------------------------------------------------------------
Interest 32,625 34,103 65,396 68,340
Administrative fees 24,468 25,266 50,244 50,619
Directors' fees and
expenses 12,733 10,034 33,738 21,899
Other administrative expenses 230,707 12,003 289,739 30,983
---------------------------------------------------------------------------------
Total expenses 622,560 441,201 1,118,192 877,909
---------------------------------------------------------------------------------
Net income $ 20,686 $ 182,421 $ 196,410 $ 306,628
=================================================================================
Net income per share $ 0.01 $ 0.08 $ 0.09 $ 0.14
=================================================================================
Dividends to stockholders $ 224,541 $ 224,541 $ 449,082 $ 449,082
=================================================================================
Dividends to stockholders per share $ 0.10 $ 0.10 $ 0.20 $ 0.20
=================================================================================
Average number of shares outstanding 2,245,411 2,245,411 2,245,411 2,245,411
================== ================ ============== =============
SEE ACCOMPANYING NOTES.
</TABLE>
<PAGE>
CEDAR INCOME FUND, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX Six
MONTHS Months
ENDED Ended
JUNE 30, June 30,
1998 1997
----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Rents collected $1,368,054 $1,158,002
Interest received 42,208 41,251
Payments for operating expenses (823,599) (601,774)
Interest paid (63,396) (66,507)
------------- ------------
Net cash provided by operating activities 521,267 530,972
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (100,951) (298,001)
Principal portion of scheduled mortgage loan collections 2,517 4,676
Principal repayment on mortgage loan receivable 561,920 ---------
Security deposits collected, net 1,770 15,825
------------- ------------
Net cash provided by (used in) by investing activities 465,256 (277,500)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal portion of scheduled mortgage loan payments (12,456) (11,345)
Dividends paid to stockholders (449,082) (449,082)
Net cash provided by (used in) financing activities (461,538) (460,427)
------------- ------------
Net increase (decrease) in cash and cash equivalents 524,985 (206,955)
Cash and cash equivalents at beginning of period 407,216 670,306
Cash and cash equivalents at end of period $932,201 $463,351
============= ============
RECONCILIATION OF NET EARNINGS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net earnings $196,410 $306,628
Add (deduct) reconciling adjustments:
Depreciation 239,844 217,934
Amortization 1,834 1,833
Increase (decrease) in rent and other receivables 54,706 (16,075)
Decrease in interest receivable 3,881 32
Decrease (increase) in prepaid expenses (56,983) 8,500
Increase (decrease) in deferred lease commissions 4,925 (59,271)
Increase in operating accounts payable and accrued expenses 116,677 73,220
Decrease in amounts due to affiliates (58,027) (4,907)
Increase in advance rents 18,000 3,078
------------- ------------
Net cash provided by operating activities $ 521,267 530,972
============= =============
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Cedar Income Fund, Ltd. Notes
to Consolidated Financial
Statements (Unaudited)
1. REORGANIZATION OF THE COMPANY
Pursuant to a Memorandum of Understanding dated as of December 5, 1997 (the
"Memorandum of Understanding"), between Cedar Income Fund, Ltd., an Iowa
corporation ("Old Cedar"), and SKR Management Corp. ("SKR"), Cedar Bay Company
("Cedar Bay"), an affiliate of SKR, purchased 1,893,038.335 shares of Old
Cedar's outstanding Common Stock, $1.00 par value per share ("Old Common
Stock"), on April 2, 1998 through a tender offer (the "Tender Offer") for a
purchase price of $7.00 per share in cash.
On June 26, 1998, Old Cedar merged (the "Merger") with and into Cedar Income
Fund, Ltd., a newly-formed Maryland corporation and a wholly-owned subsidiary of
Old Cedar ("New Cedar"). Immediately thereafter, New Cedar assigned
substantially all of its assets and liabilities to a newly-formed Delaware
limited partnership, Cedar Income Fund Partnership, L.P. (the "Operating
Partnership"), in exchange for an aggregate of 2,245,411 units of the Operating
Partnership ("Units"), which constituted the sole general partner interest and
all of the limited partnership interests in the Operating Partnership.
Immediately after such assignment, Cedar Bay exchanged 1,703,300 shares of New
Cedar's Common Stock, $.01 par value per share ("New Common Stock"), for
1,703,300 limited partner Units in the Operating Partnership owned by New Cedar.
The shares of New Common Stock were cancelled upon their exchange by Cedar Bay.
Following these transactions, Cedar Bay owned 189,737 shares of New Common
Stock, aggregating approximately 35% of the issued and outstanding shares of New
Common Stock.
As used herein, the term "Company" refers to Old Cedar prior to the Merger and
New Cedar subsequent to the Merger and the term "Common Stock" refers to Old
Common Stock prior to the Merger and New Common Stock subsequent to the Merger.
As of June 30, 1998, the Company owned and operated three office properties
aggregating approximately 224,000 square feet located in Jacksonville, Florida,
Salt Lake City, Utah and Bloomington, Illinois and a 50% undivided interest in a
74,000 square foot retail property located in Louisville, Kentucky.
In March 1998, Life Investors Insurance Company of America, an affiliate of the
Company's former management company and advisor, exercised its right to
repurchase the mortgage receivable balance from the Company. The Company
invested the proceeds of this sale of the mortgage receivable balance in the
Company's money market fund.
2. BASIS OF PRESENTATION
The accompanying interim financial statements have been prepared by the
Company's management in accordance with generally accepted accounting principles
for interim financial information and in conjunction with the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, the interim financial statements presented herein reflect all
adjustments of a normal and recurring nature which are necessary to fairly state
the interim financial statements. The results of operations for the interim
period are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998. These financial statements should be read in
conjunction with the Company's audited financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
The accompanying consolidated financial statements include the consolidated
financial position of the Company and the Operating Partnership as of June 30,
1998. All significant intercompany balances and transactions have been
eliminated in consolidation.
Since the Company owns the sole general partner interest in the Operating
Partnership, which provides the Company with effective control over all
significant activities of the Operating Partnership, the Operating Partnership
is consolidated with the Company in the accompanying financial
statements as of June 30, 1998.
The minority interest as of June 30, 1998 (currently owned entirely by Cedar
Bay) represents approximately a 76% limited partner interest in the equity of
the Operating Partnership.
The Company intends to continue to qualify as a real estate investment trust
("REIT") under Sections 856 through 869 of the Internal Revenue Code of 1986, as
amended (the "Code"). As a REIT, the Company will not generally be subject to
Federal corporate income taxes as long as it satisfies certain technical
requirements of the Code relating to composition of its income and assets and
certain requirements relating to distributions of taxable income to
stockholders.
3. MORTGAGE NOTES PAYABLE
As of June 30, 1998, the Company had one fixed-rate mortgage loan obligation
which had a principal amount of $1,387,803 and which will mature on November 1,
2002. The loan is collateralized by the office property located in Salt Lake
City, Utah has an interest rate per annum of 9.375% and requires annual
principal and interest payments of $155,704.
4. STOCKHOLDERS' EQUITY
Currently, a Unit in the Operating Partnership and a share of Common Stock of
the Company have essentially the same economic characteristics as they
effectively share equally in the net income or loss and distributions of the
Operating Partnership.
<PAGE>
Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
(Unaudited)
4. STOCKHOLDERS' EQUITY (CONTINUED)
The Company established a stock option plan (the "Plan") for the purpose of
attracting and retaining executive officers, directors and other key employees.
As of June 30, 1998, 500,000 of the Company's authorized shares of Common Stock
have been reserved for issuance under the Plan. The Plan is administered by a
committee of the Board of Directors, which committee will, among other things,
select the number of shares subject to each grant, the vesting period for each
grant and the exercise price (subject to applicable regulations with respect to
incentive stock options) for the options. As of June 30, 1998, no options have
been granted under the Plan.
5. RELATED PARTY TRANSACTIONS
Pursuant to the Memorandum of Understanding (discussed in Note 1), the Company
terminated the Administrative and Advisory Agreement between the Company and
AEGON USA Realty Advisors, Inc., and the Management Agreement between the
Company and AEGON USA Realty Management, Inc. effective upon the consummation of
the Tender Offer.
The Company entered into an Administrative and Advisory Agreement (the "Advisory
Agreement") with Cedar Bay Realty Advisors, Inc. ("Cedar Bay Realty") to provide
the Company with administrative, advisory, acquisition, divestiture, property
management, leasing and stockholder services. Cedar Bay Realty is wholly-owned
by Leo S. Ullman who is Chairman of the Board of Directors and President of the
Company. The term of the Advisory Agreement is for one (1) year and is
automatically renewed annually for an additional year subject to the right of
either party to cancel the Advisory Agreement upon 60 days written notice. Cedar
Bay Realty receives fees for its administrative and advisory services as
follows: (a) an administrative and advisory fee equal to 3/4 of 1% of the
estimated current value of real estate assets of the Company, plus 1/4 of 1% of
the estimated current value of all other assets of the Company; (b) an
acquisition fee equal to 5% of the gross purchase price of any real property
acquired during the term of the Advisory Agreement subject to a maximum amount
as defined; and (c) a disposition fee equal to 3% of the gross sales price, as
defined, of any real property disposed of during the term of the Advisory
Agreement; provided that no disposition fee shall be paid unless and until the
stockholders have received certain distributions from the Company. In addition,
Cedar Bay Realty may receive one-half of the brokerage commission on such a
disposition but only up to 3% of the price actually paid for the property,
subject to certain limitations. Furthermore, if the Advisory Agreement is
terminated prior to the liquidation of the Company, Cedar Bay Realty will be
entitled to payment for dispositions, as defined.
<PAGE>
Cedar Income Fund, Ltd.
Notes to Consolidated Financial Statements
(Unaudited)
5. RELATED PARTY TRANSACTION (CONTINUED)
The Company entered into a Management Agreement (the "Management Agreement")
with Brentway Management LLC ("Brentway") to provide the Company with property
management and leasing services. Brentway is owned by Leo S. Ullman and Brenda
J. Walker who is Vice President and Treasurer of the Company. The term of the
Management Agreement is for one (1) year and is automatically renewed annually
for an additional year subject to the right of either party to cancel the
Management Agreement upon 60 days written notice. Brentway receives fees for its
property management services as follows: a management fee equal to 5% of the
gross income from properties managed and leasing fees of up to 6% of the rent to
be paid during the term of the lease procured. Brentway provides similar
services for other properties owned by partnerships in which Mr. Ullman has
interests.
On June 1, 1998, the Company entered into a Financial Advisory Agreement (the
"BVC Agreement") with B.V. Capital Markets, Inc. ("BVC") of which Jean-Bernard
Wurm, a director of the Company, serves as a director. Pursuant to the BVC
Agreement, BVC has agreed to perform the following services as financial advisor
to the Company: (a) advise on acquisition financing and/or line of credit for
future acquisitions; (b) advise on acquisitions of United States real property
interests and the consideration to be paid therefor; (c) advise on private
placements of the shares of the Company; (d) assist the Board of Directors in
developing suitable investment parameters for the Company; (e) develop and
maintain contacts on behalf of the Company with institutions with substantial
interests in real estate and capital markets; (f) advise the Board with respect
to additional private or public offerings of equity securities of the Company;
(g) review certain financial policy matters with consultants, accountants,
lenders, attorneys and other agents of the Company; and (h) prepare periodic
reports of its performance of the foregoing services. As compensation for the
foregoing services, the Company is required to pay BVC: (i) .25% of the
Company's net asset value, less any indebtedness affecting such net value, but
in any event, not less than $100,000 per year; (ii) a one-time payment of 1.5%
of 90% of the agreed value of properties contributed to the Company or its
affiliates by persons introduced to the Company by BVC; and (iii) upon the
Company becoming self-administered, a one-time payment equal to five times the
annual fee income attributable to fee receipts from clients or contacts of BVC
that have contributed property to the Company. The term of the BVC Agreement is
for a period of one (1) year and is automatically renewed annually for an
additional year subject to the right of either party to cancel at the end of any
year upon 60 days written notice.
6. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Exchange of limited partner interests in the Operating Partnership held by the
Company for Common Stock of the Company held by Cedar Bay and cancellation of
exchanged shares:
Common Stock 1,703,300
Capital in excess of $8,353,642
par value
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements of Cedar Income Fund, Ltd. (the "Company") and
related notes thereto.
OVERVIEW AND BACKGROUND
The Company operates as an equity-based real estate investment trust. It is
managed and advised by two entities that are affiliates of Leo S. Ullman, the
Chairman of the Board of Directors and President of the Company.
On June 26, 1998, Cedar Income Fund, Ltd., an Iowa corporation ("Old Cedar"),
merged (the "Merger") with and into Cedar Income Fund, Ltd., a newly-formed
Maryland corporation and a wholly-owned subsidiary of Old Cedar ("New Cedar").
Immediately thereafter, New Cedar assigned substantially all of its assets and
liabilities to a newly-formed Delaware limited partnership, Cedar Income Fund
Partnership, L.P. (the "Operating Partnership") in exchange for an aggregate of
2,245,411 units of the Operating Partnership ("Units"), which constituted the
sole general partner interest and all of the limited partnership interests in
the Operating Partnership. Immediately after such assignment, Cedar Bay
exchanged 1,703,300 shares of New Cedar's Common Stock, $.01 par value per share
("New Common Stock"), for 1,703,300 limited partner Units in the Operating
Partnership owned by New Cedar. The shares of New Common Stock were cancelled
upon their exchange by Cedar Bay. Following these transactions, Cedar Bay owned
189,737 shares of New Common Stock, aggregating approximately 35% of the issued
and outstanding shares of New Common Stock.
The Company has no employees and has contracted with Cedar Bay Realty Advisors,
Inc. ("Cedar Bay Realty") to provide the Company with administrative, advisory,
acquisition, divestiture, property management, leasing and stockholder services
pursuant to an Administrative and Advisory Agreement. Brentway Management LLC
("Brentway") provides property management and leasing services to the Company
pursuant to a Management Agreement. The Company has also entered into a
Financial Advisory Agreement with BVC Capital Markets, Inc. ("BVC") pursuant to
which BVC will perform certain services as a financial advisor to the Company.
As of June 30, 1998, the Company owned and operated (i) three office properties:
Southpoint Parkway Center, located in Jacksonville, Florida; Broadbent Business
Center, located in Salt Lake City, Utah; and Corporate Center East, located in
Bloomington, Illinois; and (ii) a 50% undivided interest in a retail property,
Germantown Square Shopping Center, located in Louisville, Kentucky.
RESULTS OF OPERATIONS
Net income for the three months and six months ended June 30, 1998 were $20,686
($.01 per share) and $196,410 ($.09 per share) compared to $182,421 ($.08 per
share) and $306,628 ($.14 per share), respectively, for the same periods in
1997. (All per share amounts are on a fully diluted basis.)
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
Cash from operations (net income plus depreciation) for the three months and six
months ended June 30, 1998 were $139,512 and $436,254 compared to $287,996 and
$524,562 for the same periods a year ago. Net income and cash from operations
were significantly lower in the second quarter of 1998, compared to 1997,
primarily due to an increase in other administrative expenses as a result of the
Company's reorganization: changing its domicile to Maryland from Iowa, creating
the Operating Partnership and transferring substantially all of the assets of
the Company to the Operating Partnership.
Rental income for the three months and six months ended June 30, 1998 was
$632,324 and $1,272,394, compared to $603,699 and $1,142,318 for the same
periods in 1997, an increase of 4.7% and 11.4%, respectively. The increase in
rental income is primarily due to the lease of vacant space at Corporate Center
East in 1997 and increased base rent from a large tenant in Southpoint Parkway
Center in 1997.
Total property expenses, excluding depreciation, for the three months and six
months ended June 30, 1998 decreased to 32% and 34% of rental income from 42%
and 43% of rental income, respectively, for the same periods in 1997. For the
three months and six months ended June 30, 1998, repairs and maintenance
decreased $40,000 and $44,500 over the same periods in 1997, primarily due to
reduced costs at Broadbent Business Center and Corporate Center East.
LIQUIDITY AND CAPITAL RESOURCES
In March 1998, Life Investors Insurance Company of America, an affiliate of the
Company's former management company and advisor, exercised its right to
repurchase the mortgage receivable balance from the Company. The Company
invested the proceeds of this sale of the mortgage receivable balance in the
Company's money market fund.
The Company's liquidity at June 30, 1998 represented by cash and cash
equivalents was $932,201 compared to $407,216 at December 31, 1997, an increase
of $524,985. Cash flow from operating activities, for the six month period ended
June 30, 1998 was $521,267 compared with $530,972 over the same period in 1997,
a decrease of $9,705. The Company considers this liquidity sufficient to meet
current operating needs, including dividend requirements.
The Company is seeking line of credit and equity capital to be used for future
growth and acquisitions. There is no assurance that these will be obtained.
INFLATION
Low to moderate levels of inflation during the past few years have favorably
impacted the Company's operations by stabilizing operating expenses. At the same
time, low inflation has the indirect effect of reducing the Company's ability to
increase tenant rents. Many of the leases of the Company's properties include
provisions requiring the tenants to reimburse the Company for the amounts spent
by the Company on property operating expenses and other provisions the result of
which is to minimize the effect of inflation.
<PAGE>
YEAR 2000 ISSUE
Although the Company does not employ any computer systems in its business, Cedar
Bay Realty, the Company's advisor, and Brentway, the Company's property manager,
do employ computer systems in managing the Company's business. The Company could
be adversely affected if the computer systems used by Cedar Bay Realty, Brentway
or other service providers do not properly process and calculate date related
information from and after January 1, 2000. Cedar Bay Realty and Brentway have
advised the Company that they are taking steps which they believe are reasonably
designed to address this issue with respect to computer systems that they use.
These steps include an upgrade of their computer software to a version that will
properly process and calculate date related information from and after January
1, 2000. In addition, Cedar Bay Realty and Brentway have advised the Company
that they will endeavor to obtain reasonable assurances that comparable steps
are being taken by the Company's other major service providers. Cedar Bay Realty
and Brentway have informed the Company that they currently anticipate the
upgrade of their computer software prior to January 1, 1999. While the Company
believes that the planning efforts of Cedar Bay Realty and Brentway are adequate
to address the Company's Year 2000 concerns, there can be no assurance that the
systems of other companies on which the Company's systems and operations rely
will be converted on a timely basis and will not have a material effect on the
Company. The cost of Cedar Bay Realty and Brentway's Year 2000 initiatives will
be borne entirely by Cedar Bay and Brentway, respectively, and not by the
Company.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The Company held its Annual Meeting of Stockholders on June 25, 1998,
at which the following matters were voted upon:
1. Approval of change in state of incorporation.
2. Approval of transfer of assets to the Operating
Partnership.
3. Election of five directors, divided and classified into three
classes.
4. Approval of Ernst & Young LLP as independent auditors for the
fiscal year ending December 31, 1998.
5. Approval of 1998 Stock Option Plan.
The results of the meeting were as follows:
FOR AGAINST ABSTAIN
--- ------- -------
Proposal 1 1,914,190.571 1,212.312 2,784.00
Proposal 2 1,914,190.571 1,412.312 2,584.00
<PAGE>
Proposal 4 1,970,162.571 512.312 1,762.00
Proposal 5 1,914,390.571 1,412.312 2,384.00
The results with respect to the election of directors were as follows:
FOR WITHHELD AUTHORITY
--- ------------------
Leo S. Ullman 1,971,102.571 1,334.312
J.A.M.H. der Kinderen 1,971,102.571 1,334.312
Everett B Miller III 1,971,102.571 1,334.312
Brenda J. Walker 1,971,102.571 1,334.312
Jean-Bernard Wurm 1,971,102.571 1,334.312
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit 3(i) Articles of Incorporation
Exhibit 3(ii) By-laws (Incorporated by
Reference to Appendix D to the Registrant's
Definitive Schedule 14A filed on June 9, 1998)
Exhibit 10.1 Administrative and Advisory Agreement
Exhibit 10.2 Management Agreement
Exhibit 10.3 Financial Advisory Agreement
Exhibit 27 Financial Data Schedule
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CEDAR INCOME FUND, LTD.
Date: August 14, 1998 By: /s/ Brenda J. Walker
-----------------------------
Brenda J. Walker
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
<PAGE>
CEDAR INCOME FUND, LTD.
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------- ------------ -------------
3(i) Articles of Incorporation 13
10.1 Administrative and Advisory Agreement 27
10.2 Management Agreement 36
10.3 Financial Advisory Agreement 46
27 Financial Data Schedule 57
EXHIBIT 3(I) ARTICLES OF INCORPORATION
CORRECTED ARTICLES OF INCORPORATION
OF
CEDAR INCOME FUND, LTD.
----------------------
I, THE UNDERSIGNED, JAMES T. CUNNINGHAM, whose post-office address is
c/o Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038,
being at least eighteen years of age, do hereby form a corporation, under and by
virtue of the General Laws of the State of Maryland authorizing the formation of
corporations.
ARTICLE I
NAME
The name of the Corporation shall be Cedar Income Fund, Ltd. (the
"Corporation").
ARTICLE II
PRINCIPAL OFFICE, REGISTERED OFFICE AND AGENT
The address of the Corporation's principal office in Maryland is c/o
The Corporation Trust, Incorporated, 300 East Lombard Street, Baltimore,
Maryland 21202. The address of the Corporation's principal office and registered
office in the State of Maryland is 300 East Lombard Street, Baltimore, Maryland
21202. The name of its registered agent at that office is The Corporation Trust,
Incorporated, a Maryland corporation.
ARTICLE III
PURPOSES
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Maryland as now or hereafter in force.
ARTICLE IV
CAPITAL STOCK
A. AUTHORIZED SHARES. The total number of shares of all classes of
capital stock that the Corporation shall have authority to issue is 55 million
shares, consisting of 50 million shares of Common Stock with a par value of $.01
per share (the "Common Stock"), amounting in the aggregate to par value of
$500,000, and 5 million shares of Preferred Stock with a par value of $.01 per
share (the "Preferred Stock"), amounting in the aggregate to par value of
$50,000.
B. COMMON STOCK
1. DIVIDEND RIGHTS. Subject to the preferential dividend rights
of the Preferred Stock, if any, as may be determined by the Board of Directors
of the Corporation pursuant to paragraph C of this Article IV, Holders (as
defined below) shall be entitled to receive such dividends as may be declared by
the Board of Directors of the Corporation. Upon the declaration of dividends
hereunder, Holders shall be entitled to share in all such dividends, pro rata,
in accordance with the relative number of shares of Common Stock held by each
such Holder.
2. RIGHTS UPON LIQUIDATION. Subject to the preferential rights
of the Preferred Stock, if any, as may be determined by the Board of Directors
of the Corporation pursuant to paragraph C of this Article IV, in the event of
any voluntary or involuntary liquidation, dissolution or winding up of, or any
distribution of the assets of, the Corporation, each Holder shall be entitled to
receive, ratably with each other Holder, that portion of the assets of the
Corporation available for distribution to its stockholders as the number of
shares of the Common Stock held by such Holder bears to the total number of
shares of Common Stock then outstanding.
3. VOTING RIGHTS. Each Holder shall be entitled to vote on all
matters (on which a holder of Common Stock shall be entitled to vote), and shall
be entitled to one vote for each share of the Common Stock held by such Holder.
4. RESTRICTIONS ON OWNERSHIP AND TRANSFER TO PRESERVE TAX
BENEFIT.
(a) DEFINITIONS
For the purposes of this Article IV, the following terms shall have the
following meanings:
"Act" shall mean the General Corporation Law of
Maryland.
"Beneficial Ownership" shall mean ownership of Common Stock by
a Person who would be treated as an owner of such shares of Common
Stock either directly or constructively through the application of
Section 544 of the Code, as modified by Section 856(h) of the Code. The
terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned"
shall have the correlative meanings.
"Charitable Trust" shall mean the trust created pursuant to
subparagraph B(4)(c)(i) of this Article IV.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Constructive Ownership" shall mean ownership of Common Stock
by a Person who would be treated as an owner of such shares of Common
Stock either directly or constructively through the application of
Section 318 of the Code, as modified by Section 856(d)(5) of the Code.
The terms "Constructive Owner," "Constructively Owns" and
"Constructively Owned" shall have the correlative meanings.
"Date of the Merger" shall mean the latter of the Merger and
the redemption of shares of Common Stock held by Cedar Bay Company in
exchange for Units.
"Existing Holder" shall mean (i) Cedar Bay Company and (ii)
any Person (other than another Existing Holder) to whom an Existing
Holder transfers Beneficial Ownership of Common Stock causing such
transferee to Beneficially Own Common Stock in excess of the Ownership
Limit.
"Existing Holder Limit" (i) for any Existing Holder who is an
Existing Holder by virtue of clause (i) of the definition thereof,
shall mean, initially, the percentage of Common Stock Beneficially
Owned by such Person immediately after the Merger, and after any
adjustment pursuant to subparagraph B(4)(i) of this Article IV, shall
mean such percentage of the outstanding Common Stock as so adjusted;
and (ii) for any Existing Holder who becomes an Existing Holder by
virtue of clause (ii) of the definition thereof, shall mean, initially,
the percentage of the outstanding Common Stock Beneficially Owned by
such Existing Holder at the time that such Existing Holder becomes an
Existing Holder, and after any adjustment pursuant to subparagraph
B(4)(i) of this Article IV, shall mean such percentage of the
outstanding Common Stock as so adjusted; provided, however, that the
Existing Holder Limits for all Existing Holders when combined shall not
exceed 35% of the Corporation's Common Stock. For purposes of
determining the Existing Holder Limit, the amount of Common Stock
outstanding at the time of the determination shall be deemed to include
the maximum number of shares that Existing Holders may beneficially own
with respect to options and rights to convert Units into Common Stock
pursuant to Section 8.6 of the Partnership Agreement and shall not
include shares that may be Beneficially Owned solely by other persons
upon exercise of options or rights to convert into Common Stock. From
the Date of the Merger and prior to the Restriction Termination Date,
the Secretary of the Corporation shall maintain and, upon request, make
available to each Existing Holder, a schedule which sets forth the then
current Existing Holder Limits for each Existing Holder.
"Holder" shall mean the record holder of shares of Common
Stock, or in the case of shares held by a Purported Record Transferee,
the Charitable Trust.
"IRS" shall mean the United States Internal Revenue
Service.
"Market Price" shall mean the last reported sales price
reported on the New York Stock Exchange of Common Stock on the trading
day immediately preceding the relevant date, or if the Common Stock is
not then traded on the New York Stock Exchange, the last reported sales
price of the Common Stock on the trading day immediately preceding the
relevant date as reported on any exchange or quotation system over
which the Common Stock may be traded, or if the Common Stock is not
then traded over any exchange or quotation system, then the market
price of the Common Stock on the relevant date as determined in good
faith by the Board of Directors of the Corporation.
"Merger" shall mean the merger of Cedar Income Fund, Ltd., an
Iowa corporation, with and into the Corporation, its wholly-owned
subsidiary.
"Ownership Limit" shall initially mean 3.5% of the outstanding
Common Stock of the Corporation, and after any adjustment as set forth
in subparagraph B(4)(i) of this Article IV, shall mean such greater
percentage.
"Partner" shall mean any Person owning Units.
"Partnership" shall mean Cedar Income Fund Partnership, L.P.,
a Delaware limited partnership.
"Partnership Agreement" shall mean the Agreement of Limited
Partnership of the Partnership, of which the Corporation is the sole
general partner, as such agreement may be amended from time to time.
"Person" shall mean an individual, corporation, partnership,
estate, trust, a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the
Code, association, private foundation within the meaning of Section
509(a) of the Code, joint stock company or other entity and also
includes a group as that term is used for purposes of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended; but does not
include (i) Cedar Bay Company, and (ii) an underwriter which
participates in a public offering of the Common Stock provided that the
ownership of Common Stock by such underwriter would not result in the
Corporation failing to qualify as a REIT.
"Purported Transferee" shall mean, with respect to any
purported Transfer which results in a violation of subparagraph B(4)(b)
of this Article IV, the purported beneficial transferee or owner for
whom the Purported Record Transferee would have acquired or owned
shares of Common Stock, if such Transfer had been valid under such
subparagraph.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in a violation of subparagraph B(4)(b)
of this Article IV, the record holder of the Common Stock if such
Transfer had been valid under such subparagraph.
"REIT" shall mean a Real Estate Investment Trust under Section
856 of the Code.
"Restriction Termination Date" shall mean the first day after
the Date of the Merger on which the Board of Directors of the
Corporation determines that it is no longer in the best interests of
the Corporation to attempt to, or continue to, qualify as a REIT.
"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Common Stock (including (i) the granting
of any option or entering into any agreement for the sale, transfer or
other disposition of Common Stock or (ii) the sale, transfer,
assignment or other disposition of any securities or rights convertible
into or exchangeable for Common Stock), whether voluntary or
involuntary, whether of record or beneficially or Beneficially or
Constructively (including but not limited to transfers of interests in
other entities which result in changes in Beneficial or Constructive
Ownership of Common Stock), and whether by operation of law or
otherwise.
"Trustee" shall mean the Corporation as trustee for the
Charitable Trust, and any successor trustee appointed by the
Corporation.
"Units" shall mean the units into which partnership interests
of the Partnership are divided, and as the same may be adjusted, as
provided in the Partnership Agreement.
(b) RESTRICTION ON OWNERSHIP AND TRANSFERS.
(i) Except as provided in subparagraph B(4)(k) of
this Article IV, from the Date of the Merger and prior to the
Restriction Termination Date, no Person (other than an Existing Holder)
shall Beneficially Own shares of Common Stock in excess of the
Ownership Limit, and no Existing Holder shall Beneficially Own shares
of Common Stock in excess of the Existing Holder Limit for such
Existing Holder.
(ii) Except as provided in subparagraph B(4)(k) of
this Article IV, from the Date of the Merger and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in any Person (other than an Existing Holder) Beneficially
Owning Common Stock in excess of the Ownership Limit shall be void AB
INITIO as to the Transfer of such shares of Common Stock which would be
otherwise Beneficially Owned by such Person in excess of the Ownership
Limit; and the Purported Transferee shall acquire no rights in such
shares of Common Stock.
(iii) Except as provided in subparagraph B(4)(k) of
this Article IV, from the Date of the Merger and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in any Existing Holder Beneficially Owning Common Stock in
excess of the applicable Existing Holder Limit shall be void AB INITIO
as to the Transfer of such shares of Common Stock which would be
otherwise Beneficially Owned by such Existing Holder in excess of the
applicable Existing Holder Limit; and such Existing Holder shall
acquire no rights in such shares of Common Stock.
(iv) Except as provided in subparagraph B(4)(k) of
this Article IV, from the Date of the Merger and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in the Common Stock being beneficially owned by less than 100
Persons (determined without reference to any rules of attribution)
shall be void AB INITIO as to the Transfer of such shares of Common
Stock which would be otherwise beneficially owned by the transferee;
and the intended transferee shall acquire no rights in such shares of
Common Stock.
(v) Notwithstanding any other provisions contained in
this Article IV, from the Date of the Merger and prior to the
Restriction Termination Date, any Transfer or other event that, if
effective, would result in the Corporation being "closely held" within
the meaning of Section 856(h) of the Code, or would otherwise result
in the Corporation failing to qualify as a REIT (including, but not
limited to, a Transfer or other event that would result in the
Corporation owning (directly or Constructively) an interest in a tenant
that is described in Section 856(d)(2)(B) of the Code if the income
derived by the Corporation from such tenant would cause the Corporation
to fail to satisfy any of the gross income requirements of Section
856(c) of the Code), shall be void AB INITIO as to the Transfer of the
shares of Common Stock which would cause the Corporation to be
"closely held" within the meaning of Section 856(h) of the Code or
would otherwise result in the Corporation failing to qualify as a REIT;
and the intended transferee or owner or Constructive or Beneficial
Owner shall acquire or retain no rights in such shares of Common Stock.
(c) EFFECT OF TRANSFER IN VIOLATION OF SUBPARAGRAPH (B)(4)(B).
(i) If, notwithstanding the other provisions
contained in this Article IV, at any time after the Date of the Merger
and prior to the Restriction Termination Date, there is a purported
Transfer, change in the capital structure of the Corporation, or other
event such that one or more of the restrictions on ownership and
transfers described in subparagraph B(4)(b) above has been violated,
then the shares of Common Stock being Transferred (or in the case of an
event other than a Transfer, the shares owned or Constructively Owned
or Beneficially Owned) which would cause one or more of the
restrictions on ownership or transfer to be violated (rounded up to the
nearest whole share) (the "Trust Shares"), shall automatically
be transferred to the Corporation, as Trustee of a trust
(the "Charitable Trust") for the exclusive benefit of The American
Cancer Society (the "Designated Charity"), an organization described in
Section 170(b)(1)(A) and 170(c) of the Code. The Purported Transferee
shall have no rights in such Trust Shares.
(ii) The Corporation, as Trustee of the Charitable
Trust, may transfer the shares held in such trust to a Person whose
ownership of the shares will not result in a violation of the ownership
restrictions (a "Permitted Transferee"). If such a transfer is made,
the interest of the Designated Charity will terminate and proceeds of
the sale will be payable to the Purported Transferee and to the
Designated Charity. The Purported Transferee will receive the lesser of
(1) the price paid by the Purported Transferee for the shares or, if
the Purported Transferee did not give value for the shares, the Market
Price of the shares on the day of the event causing the shares to be
held in trust, and (2) the price per share received by the Corporation,
as Trustee, from the sale or other disposition of the shares held in
trust. The Designated Charity will receive any proceeds in excess of
the amount payable to the Purported Transferee. The Purported
Transferee will not be entitled to designate a Permitted Transferee.
(iii) All stock held in the Charitable Trust will be
deemed to have been offered for sale to the Corporation or its designee
for a 90-day period, at the lesser of the price paid for that stock by
the Purported Transferee and the Market Price on the date that the
Corporation accepts the offer. This period will commence on the date of
the violative transfer, if the Purported Transferee gives notice to the
Corporation of the transfer, or the date that the Board of Directors of
the Corporation determines that a violative transfer occurred, if no
such notice is provided.
(iv) Any dividend or distribution paid prior to the
discovery by the Corporation that shares of Common Stock have been
transferred in violation of subparagraph B(4)(b) of this Article IV,
shall be repaid to the Corporation upon demand and shall be held in
trust for the Designated Charity. Any dividend or distribution declared
but unpaid shall be rescinded as void AB INITIO with respect to such
shares of stock.
(v) Subject to the preferential rights of the
Preferred Stock, if any, as may be determined by the Board of Directors
of the Corporation pursuant to paragraph C of this Article IV, in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of, or any distribution of the assets of, the Corporation,
the Designated Charity shall be entitled to receive, ratably with each
other holder of Common Stock, that portion of the assets of the
Corporation available for distribution to its stockholders as the
number of Trust Shares bears to the total number of shares of Common
Stock then outstanding (including the Trust Shares). The Corporation,
as Trustee, or if the Corporation shall have been dissolved, any
trustee appointed by the Corporation prior to its dissolution, shall
distribute to the Designated Charity, when determined (or if not
determined, or only partially determined, ratably to the other holders
of Common Stock who have been determined and the Designated Charity),
any such assets received in respect of the Trust Shares in any
liquidation, dissolution or winding up of, or any distribution of the
assets of, the Corporation.
(vi) The Purported Transferee will not be entitled to
vote any Common Stock it attempts to acquire, and any stockholder vote
will be rescinded if a Purported Transferee votes and the stockholder
vote would have been decided differently if such Purported Transferee's
vote was not counted.
(d) REMEDIES FOR BREACH. If the Board of Directors or its
designees shall at any time determine in good faith that a Transfer or other
event has taken place in violation of subparagraph B(4)(b) of this Article IV or
that a Person intends to acquire or has attempted to acquire beneficial
ownership (determined without reference to any rules of attribution), Beneficial
Ownership or Constructive Ownership of any shares of the Corporation in
violation of subparagraph B(4)(b) of this Article IV, the Corporation shall
inform the Purported Transferee of its obligations pursuant to this Article IV,
including such Purported Transferee's obligations to pay over to the Charitable
Trust any and all dividends received with respect to the Trust Shares. In
addition, the Board of Directors or its designees shall take such action as it
deems advisable to refuse to give effect or to prevent such Transfer, including,
but not limited to, refusing to give effect to such Transfer on the books of the
Corporation or instituting proceedings to enjoin such Transfer and to recover
any dividend erroneously paid and declaring any votes erroneously cast to be
retroactively invalid; provided, however, that any Transfers (or, in the case of
events other than a Transfer, ownership or Constructive Ownership or Beneficial
Ownership) in violation of subparagraph B(4)(b) of this Article IV shall
automatically result in a transfer to the Charitable Trust as described in
subparagraph B(4)(c), irrespective of any action (or non-action) by the Board of
Directors.
(e) NOTICE OF RESTRICTED TRANSFER. Any Person who acquires or
attempts to acquire shares in violation of subparagraph B(4)(b) of this Article
IV, or any Person who is a Purported Transferee, shall immediately give written
notice to the Corporation of such event and shall provide to the Corporation
such other information as the Corporation may request in order to determine the
effect, if any, of such Transfer or attempted Transfer on the Corporation's
status as a REIT.
(f) OWNERS REQUIRED TO PROVIDE INFORMATION. From the Date of
the Merger and prior to the Restriction Termination Date each Person who is a
beneficial owner or Beneficial Owner or Constructive Owner of Common Stock and
each Person (including the stockholder of record) who is holding Common Stock
for a Beneficial Owner or Constructive Owner shall provide to the Corporation
such information that the Corporation may request, in good faith, in order to
determine the Corporation's status as a REIT.
(g) REMEDIES NOT LIMITED. Nothing contained in this Article IV
shall limit the authority of the Board of Directors to take such other action as
it deems necessary or advisable to protect the Corporation and the interests of
its stockholders by preservation of the Corporation's status as a REIT.
(h) AMBIGUITY. In the case of an ambiguity in the application
of any of the provisions of subparagraph B(4) of this Article IV, including any
definition contained in subparagraph B(4)(a), the Board of Directors shall have
the power to determine the application of the provisions of this subparagraph
B(4) with respect to any situation based on the facts known to it.
(i) MODIFICATION OF OWNERSHIP LIMIT OR EXISTING HOLDER LIMIT.
Subject to the limitations provided in subparagraph B(4)(j), the Board of
Directors may from time to time increase the Ownership Limit or the Existing
Holder Limit and shall file Articles Supplementary with the State Department of
Assessment and Taxation of Maryland to evidence such increase.
(j) LIMITATIONS ON MODIFICATIONS.
(i) From the Date of the Merger and prior to the
Restriction Termination Date, neither the Ownership Limit nor any
Existing Holder Limit may be increased (nor may any additional Existing
Holder Limit be created) if, after giving effect to such increase (or
creation), five Persons who are Beneficial Owners of Common Stock
(including all of the then Existing Holders) could (taking into account
the Ownership Limit and the Existing Holder Limit) Beneficially Own, in
the aggregate, more than 49% of the outstanding Common Stock.
(ii) Prior to the modification of any Existing Holder
Limit or Ownership Limit pursuant to subparagraph B(4)(i) of this
Article IV, the Board of Directors of the Corporation may require such
opinions of counsel, affidavits, undertakings or agreements as it may
deem necessary or advisable in order to determine or ensure the
Corporation's status as a REIT.
(iii) No Existing Holder Limit shall be reduced to a
percentage which is less than the Ownership Limit.
(iv) The Ownership Limit may not be increased to a
percentage which is greater than 9.9%.
(k) EXCEPTIONS.
(i) The Board of Directors, in its sole discretion,
may exempt a Person from the Ownership Limit or the Existing Holder
Limit, as the case may be, if such Person is not an individual for
purposes of Section 542(a)(2) of the Code and the Board of Directors
obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain that no individual's Beneficial
Ownership of such shares of Common Stock will violate the Ownership
Limit or the applicable Existing Holder Limit, as the case may be, and
agrees that any violation of such representations or undertaking (or
other action which is contrary to the restrictions contained in this
subparagraph B(4) of this Article IV) or attempted violation will
result in such shares of Common Stock automatically being transferred
to the Charitable Trust.
(ii) Prior to granting any exception pursuant to
subparagraph B(4)(k)(i) of this Article IV, the Board of Directors may
require a ruling from the IRS, or an opinion of counsel, in either case
in form and substance satisfactory to the Board of Directors in its
sole discretion, as it may deem necessary or advisable in order to
determine or ensure the Corporation's status as a REIT.
5. LEGEND. Each certificate for shares of Common Stock
shall bear legends substantially to the effect of the following:
"The Corporation is authorized to issue two classes of capital
stock which are designated as Common Stock and Preferred Stock. The Board of
Directors is authorized to determine the preferences, limitations and relative
rights of the Preferred Stock before the issuance of any Preferred Stock. The
Corporation will furnish, without charge, to any stockholder making a written
request therefor, a copy of the Corporation's charter and a written statement of
the designations, relative rights, preferences and limitations applicable to
each such class of stock. Requests for the Corporation's charter and such
written statement may be directed to Cedar Income Fund, Ltd., 44 South Bayles
Avenue, Port Washington, New York 11050, Attention: Secretary.
The shares of Common Stock represented by this certificate are
subject to restrictions on ownership and Transfer for the purpose of the
Corporation's maintenance of its status as a Real Estate Investment Trust under
the Code. No Person may Beneficially Own shares of Common Stock in excess of
3.5% (or such greater percentage as may be determined by the Board of Directors
of the Corporation) of the outstanding Common Stock of the Corporation (unless
such Person is an Existing Holder) with certain exceptions set forth in the
Corporation's charter. Any Person who attempts to Beneficially Own shares of
Common Stock in excess of the above limitations must immediately notify the
Corporation. All capitalized terms in this legend have the meanings defined in
the Corporation's charter. Transfers in violation of the restrictions described
above may be void AB INITIO.
In addition, upon the occurrence of certain events, if the
restrictions on ownership are violated, the shares of Common Stock represented
hereby may be automatically exchanged for Trust Shares which will be held in
trust by the Corporation. The Corporation has an option to acquire Trust Shares
under certain circumstances. The Corporation will furnish to the holder hereof
upon request and without charge a complete written statement of the terms and
conditions of the Trust Shares. Requests for such statement may be directed to
Cedar Income Fund, Ltd., 44 South Bayles Avenue, Port Washington, New York
11050, Attention: Secretary."
6. SEVERABILITY. If any provision of this Article IV or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provisions shall
be affected only to the extent necessary to comply with the determination of
such court.
C. PREFERRED STOCK. The Board of Directors of the Corporation, by
resolution, is hereby expressly vested with authority to provide for the
issuance of the shares of Preferred Stock in one or more classes or one or more
series, with such voting powers, full or limited, or no voting powers, and with
such designations, preferences and relative, participating, optional and other
special rights, and qualifications, limitations or restrictions thereof, if any,
as shall be stated and expressed in the resolution or resolutions providing for
such issue adopted by the Board of Directors. Except as otherwise provided by
law, the holders of the Preferred Stock of the Corporation shall only have such
voting rights as are provided for or expressed in the resolutions of the Board
of Directors relating to such Preferred Stock adopted pursuant to the authority
contained in the Articles of Incorporation. Before issuance of any such shares
of Preferred Stock, the Corporation shall file Articles Supplementary with the
State Department of Assessment and Taxation of Maryland in accordance with the
provision of Section 2-208 of the Act.
D. RESERVATION OF SHARES. Pursuant to the obligations of the
Corporation under the Partnership Agreement to issue shares of Common Stock in
exchange for Units, the Board of Directors is hereby required to reserve a
sufficient number of authorized but unissued shares of Common Stock to permit
the Corporation to issue shares of Common Stock in exchange for Units that may
be exchanged for shares of Common Stock pursuant to the Partnership Agreement.
E. PREEMPTIVE RIGHTS. No holder of shares of capital stock of the
Corporation shall, as such holder, have any preemptive or other right to
purchase or subscribe for any shares of Common Stock or any class of capital
stock of the Corporation which the Corporation may issue or sell.
F. CONTROL SHARES. Pursuant to Section 3-702(b) of the Act, the terms
of Subtitle 7 of Title 3 of the Act shall be inapplicable to any acquisition of
a Control Share (as defined in the Act) that is not prohibited by the terms of
Article IV.
G. BUSINESS COMBINATIONS. Pursuant to Section 3-603(e)(1)(iii) of the
Act, the terms of Section 3-602 of such law shall be inapplicable to the
Corporation.
ARTICLE V
BOARD OF DIRECTORS
A. MANAGEMENT. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors.
B. NUMBER. The number of directors which will constitute the entire
Board of Directors shall be fixed by, or in the manner provided in, the By-Laws
but shall in no event be less than three. The names of the directors who shall
act until the first annual meeting or until their successors are duly chosen and
qualified are Leo S. Ullman, J.A.M.H. der Kinderen and Everett B. Miller III.
C. CLASSIFICATION. The directors shall be classified, with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as possible, as shall be provided in the By-Laws of the
Corporation, one class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1999, another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 2000, and another class to be originally elected for a term expiring
at the annual meeting of stockholders to be held in 2001, with each class to
hold office until its successors are elected and qualified. At each annual
meeting of the stockholders of the Corporation, the date of which shall be fixed
by or pursuant to the By-Laws of the Corporation, the successors of the class of
directors whose terms expire at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election. No election of directors need be by
written ballot. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
D. VACANCIES. Newly created directorships resulting from any increase
in the number of directors may be filled by the Board of Directors, or as
otherwise provided in the By-Laws, and any vacancies on the Board of Directors
resulting from death, resignation, removal or other cause shall only be filled
by the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole remaining
director, or as otherwise provided in the By-Laws. Any director elected in
accordance with the preceding sentence shall hold office until the next annual
meeting of the Corporation, at which time a successor shall be elected to fill
the remaining term of the position filled by such director.
E. REMOVAL. Any director may be removed from office only for cause and
only by the affirmative vote of the holders of a majority of the combined voting
power of the then outstanding shares entitled to vote in the election of
directors. For purposes of this subparagraph E of Article V "cause" shall mean
the willful and continuous failure of a director to substantially perform such
director's duties to the Corporation (other than any such failure resulting from
temporary incapacity due to physical or mental illness) or the willful engaging
by a director in gross misconduct materially and demonstrably injurious to the
Corporation.
F. BY-LAWS. The power to adopt, alter and/or repeal the By-Laws of the
Corporation is vested exclusively in the Board of Directors.
G. POWERS. The enumeration and definition of particular powers of the
Board of Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other clause of
this or any other Article of the charter of the Corporation, or construed as or
deemed by inference or otherwise in any manner to exclude or limit the powers
conferred upon the Board of Directors under the General Corporation Law of
Maryland as now or hereafter in force.
ARTICLE VI
LIABILITY
The liability of the directors and officers of the Corporation
to the Corporation and its stockholders for money damages is hereby limited to
the fullest extent permitted by Section 5-349 of the Courts and Judicial
Proceedings Code of Maryland (or its successor) as such provisions may be
amended from time to time.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify (A) its directors and
officers, whether serving the Corporation or at its request any other entity, to
the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law and (B) other employees and
agents to such extent as shall be authorized by the Board of Directors or the
Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such By-Laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
charter of the Corporation shall limit or eliminate the right to indemnification
provided hereunder with respect to acts or omissions occurring prior to such
amendment or repeal.
ARTICLE VIII
EXISTENCE
The Corporation is to have perpetual existence.
IN WITNESS WHEREOF, the undersigned incorporator of Cedar
Income Fund, Ltd. who executed the foregoing Articles of Incorporation hereby
acknowledges the same to be his act and further acknowledges that, to the best
of his knowledge the matters and facts set forth therein are true in all
material respects under the penalties of perjury.
Dated the 24th day of July, 1998.
/s/ James T. Cunningham
-----------------------------------
JAMES T. CUNNINGHAM
EXHIBIT 10.1 ADMINISTRATIVE AND
ADVISORY AGREEMENT
ADMINISTRATIVE AND ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of this 2nd day of
April, 1998, by and between CEDAR INCOME FUND, LTD., an Iowa corporation
(hereinafter referred to as the "Company" and CEDAR BAY REALTY ADVISORS, INC., a
New York corporation with its principal place of business at 44 South Bayles
Avenue, Port Washington, NY 11050 (hereinafter referred to as "the Advisor"). In
consideration of the mutual covenants, promises and agreements herein contained,
the Company and the Advisor do hereby covenant, promise and agree to and with
each other as follows:
W I T N E S S E T H:
1. PARTIES AND INTEREST:
The Company intends to operate as a Real Estate Investment Trust under
the provisions of Section 856 ET SEQ. of the Internal Revenue Code of 1954, as
amended. The Company has no employees and, therefore, must hire an administrator
to perform the day-to-day administrative functions of the Company. The Advisor
has the experience and employees necessary and suitable for the administration
of the Company's business and desires to undertake the administration of the
Company's day-to-day operations. The Advisor is an independent contractor and
the Company shall have no voice in the selection or discharge of the Advisor's
employees, representatives or subcontractors, and no control over the specific
manner in which the work shall be done, but the Advisor are not, and shall not
be deemed to be, partners or joint venturers with each other.
2. TERM:
The Company does hereby designate the Advisor, and the Advisor hereby
accepts such designation, as the administrator and advisor for the Company's
operations for the term of one (1) year commencing on the effective date hereof.
This designation shall be automatically renewed annually on each anniversary of
such commencement date for an additional one (1) year period. This Agreement
may, however, be terminated by either party at any time, with or without cause,
upon not less than sixty (60) days prior written notice given by the Company by
a majority of the Independent Directors (as defined in the Articles of
Incorporation of the Company) or by the Advisor by its duly authorized
representatives, to the other party of its intention to so terminate. In the
event of termination of this Agreement, neither party shall have any further
rights, obligations or liabilities under this Agreement except those which are
accrued through the effective date of such termination; provided, however, the
Advisor shall cooperate with the Company and take all reasonable steps requested
to assist the Company in making an orderly transition of the advisory function.
3. DUTIES OF THE ADVISOR:
Subject to the ultimate supervision, direction and control of the
Board of Directors of the Company and consistent with the Articles of
Incorporation of the Company, the Advisor shall administer the day-to-day
operations of the Company, which shall include the following services:
<PAGE>
(1) Provide office space and equipment, personnel and general
office services necessary to conduct the day-to-day operations of the
Company;
(2) Select and conduct relations with accountants, attorneys,
brokers, banks and other lenders, and such other parties as may be
considered necessary in connection with the Company's business and
investment activities, including, but not limited to, obtaining
services required in the acquisition, management and disposition of
investments, collection and disbursement of funds, payment of debts
and fulfillment of obligations of the Company, and prosecuting,
handling and settling any claims of the Company;
(3) Provide property acquisition and disposition services,
research, economic and statistical data, and investment and financial
advice to the Company, and
(4) Maintain appropriate legal, financial, tax, accounting and
general business records of activities of the Company and render
appropriate periodic reports to the Directors and shareholders of the
Company and to regulatory agencies, including the Internal Revenue
Service, Securities and Exchange Commission, and similar state
agencies.
The Advisor may perform additional services which are of an
extraordinary nature requiring time, resources and expertise beyond
that reasonably expected of the Advisor for a separately negotiated
fee or expense reimbursement on such other terms and conditions as are
agreed to between the Advisor and the Company. Any such additional
fees shall be approved by a majority of the Independent Directors of
the Company. The Advisor may subcontract to affiliated and
unaffiliated entities, firms and organizations for those services
necessary to accomplish the duties specified above; provided, however,
any agreement with an affiliated entity performing services for a
separate fee shall be approved by a majority of the Independent
Directors.
Nothing herein contained shall prevent the Advisor from engaging
in other activities, including without limitation, the rendering of
advisory to other investors and the management of other investments,
including investors and investments advised, sponsored, or organized
by the Advisor, nor shall this Agreement limit or restrict the right
of any director, officer, employee, affiliate or shareholder of the
Advisor to engage in any other business or to render services of any
kind to any other partnership, corporation, firm, individual, trust or
association.
4. COMPANY EXPENSES:
The Company shall bear the cost of the following expenditures:
(1) Audit, legal, appraisal and other professional services provided
by third parties to the extent such services are not considered duties of the
Advisor;
(2) Supplies, printing, postage and related expenses incurred in the
preparation, filing and mailing of regulatory reports and reports to
shareholders and Directors of the Company;
(3) Fees and other compensation of Directors and officers of the
Company;
<PAGE>
(4) Expenses of meetings and travel of Directors and officers of the
Company; and
(5) All such other expenses related to Company activities considered
to be appropriate or advisable by the Directors.
5. COMPENSATION OF THE ADVISOR:
A. Subject to the provisions of paragraph 5B hereof, for the services
provided hereunder, the Advisor shall be paid the following fees:
(1) An administrative and advisory fee, payable monthly, equal to 1/12
of 3/4 of 1% of the Estimated Current Value (as hereinafter defined) of the real
estate assets of the Company, plus 1/12 of 1/4 of 1% of the Estimated Current
Value of all other assets of the Company. The monthly base fee shall be based on
the daily average of the Estimated Current Value of the assets during the month
for which the fee is payable and shall be payable in arrears on the last day of
each month. The base fee for any partial month at the beginning or end of the
term of this Agreement shall be prorated.
(2) An acquisition fee equal to 5% of the gross purchase price (before
expenses of purchase, including the acquisition fee, but without deducting any
indebtedness against the property) for any real property acquired by the Company
during the term of this Agreement, such fee to be paid at the closing of the
acquisition; provided, however, that the total of all Acquisition Fees (as
hereinafter defined) and Acquisition Expenses (as hereinafter defined) paid in
connection with the purchase of any real property by the Company shall be
reasonable and in no event exceed an amount equal to 6% of the Contract Price
for the Property (as hereinafter defined).
(3) A subordinated disposition fee equal to 3% of the gross sales
price (before expenses of sale, including the subordinated disposition fee, but
without deducting any indebtedness against the property) of any real property
sold by the Company during the term of this Agreement, limited to the amount by
which the sales price, less all expenses of sale other than the subordinated
disposition fee, exceeds the original purchase price of the property, including
the acquisition fee and all expenses of purchase; provided, however, no
subordinated disposition fee shall be payable unless and until cumulative cash
distributions have been made to shareholders representing the "Amount Available
for Investment" (as hereinafter defined), plus an annual 10% cumulative (but not
compounded) return on the Amount Available for Investment commencing with the
date hereof. The subordinated disposition fee shall be paid at the closing of
any sale, provided, however, the Advisor may only receive up to one-half of the
brokerage commission paid but in no event to exceed 3% of the Contract Price for
the Property and such fee when added to the sums paid to unaffiliated third
parties in a similar capacity shall not exceed the lesser of the Competitive
Real Estate Commission (as hereinafter defined) or an amount equal to 6% of the
Contract Price for the Property. If this Agreement is terminated before the
Company is completely liquidated, the subordinated disposition fee will continue
to be payable in an amount computed as follows: the subordinated disposition fee
as provided above multiplied by a fraction, the numerator of which is the number
of years that this Agreement was operative and the denominator of which is the
number of years from the date this Agreement became operative to the date the
fee becomes payable.
<PAGE>
B. Notwithstanding anything in this Agreement to the contrary, in the
event Total Operating Expenses (as defined in the Articles of Incorporation of
the Company) exceed the limitations contained in Section 7.2 of the Articles of
Incorporation of the Company, the Advisor shall reimburse the Company at or
within a reasonable time after the end of the applicable twelve (12) month
period, the amount by which Total Operating Expenses paid or incurred by the
Company exceed such limitations. The compensation of the Advisor shall be
audited by the Company's independent certified public accountant in connection
with the annual audit of the Company's financial statements after the end of
each year and any necessary adjustments by the parties made between the
compensation so computed and that already paid.
C. For purposes of this paragraph 5, the following definitions shall
apply:
(1) "Estimated Current Value" of real estate assets shall mean the
fair market value of such real estate as determined by yearly appraisals
certified by independent appraisers. Until the first appraisals are made
(as the end of the first fiscal year of the Company), the Estimated Current
Value shall equal the cost of the Company's properties, including the
acquisition fees and acquisition expenses. The Estimated Current Value of
the assets of the Company other than real estate shall be their fair market
value as determined by industry standards.
(2) "Acquisition Expenses" means expenses, including, but not limited
to, legal fees and expenses, travel and communications expenses, costs of
appraisals, non-refundable option payments on property not acquired,
accounting fees and expenses, title insurance, and miscellaneous expenses
related to selection and acquisition of properties, whether or not
acquired.
(3) "Acquisition Fee" means the total of all fees and commissions paid
by any party in connection with the making or investing in mortgage loans
or the purchase or development of property by the Company, except a
development fee paid to a person not affiliated with the Sponsor (as
hereinafter defined) in connection with the actual development of a project
after acquisition of the land by the Company. Included in the computation
of such fees or commissions are any real estate commission, selection fee,
development fee, nonrecurring management fee, or any fee of a similar
nature, however designated.
(4) "Contract Price for the Property" means the amount actually paid
or allocated to the purchase, development, construction or improvement of a
property exclusive of Acquisition Fees and Acquisition Expenses.
(5) "Competitive Real Estate Commission" means that real estate or
brokerage commission paid for the purchase or sale of a property which is
reasonable, customary and competitive in light of the size, type and
location of such property.
(6) "Sponsor" means any person directly or indirectly instrumental in
organizing, wholly or in part, the Company or any person who will manage or
participate in the management of the Company and any affiliate of any such
person but would not include a person whose only relationship with the
Company is as that of an independent property manager, whose only
compensation is as such. Sponsor also does not include wholly independent
third parties such as attorneys, accountants and underwriters whose only
compensation is for professional services.
<PAGE>
6. AMENDMENTS:
This Agreement may be amended only in writing with the mutual consent
of the parties. However, no amendment shall become effective unless it
specifically refers to this Agreement and is signed by the parties.
7. LIABILITY OF THE ADVISOR:
The Advisor shall provide the Company the benefit of its best judgment
and efforts in rendering services hereunder and shall be considered in a
fiduciary relationship with the Company. The Advisor and its officers,
directors, shareholders, affiliates, agents and employees shall not be liable to
the Company or to any other person for any act or omission except for any act or
omission resulting from willful misfeasance, gross negligence or reckless
disregard of duty or not having acted in good faith in the reasonable belief
that the act or omission was in the best interests of the Company. The Company
shall defend, indemnify and save harmless the Advisor and its officers,
directors, shareholders, affiliates, agents and employees from and against any
and all liabilities, claims, damages, costs and expenses (including reasonable
attorneys' fees and amounts reasonably paid in settlement) incurred by reason of
or arising out of the performance or nonperformance of their duties under or by
reason of this Agreement; provided, however, there shall be no such
indemnification for liabilities, claims, damages, costs or expenses incurred by
any such person or entity by reason of their willful misfeasance, gross
negligence, reckless disregard of duty or bad faith. Notwithstanding the
foregoing provisions of this paragraph 7, the Advisor may only be indemnified by
the Company for losses arising from the operation of the Company if all of the
following conditions are met:
(a) The Advisor has determined, in good faith, that the course of
conduct which caused the loss or liability was in the best interests
of the Company, and
(b) Such liability or loss was not the result of negligence or
misconduct by the Advisor, and
(c) Such indemnification or agreement to hold harmless is
recoverable only out of the assets of the Company and not from the
shareholders of the Company, and
(d) Indemnification will not be allowed for any liability imposed
by judgment, and costs associated therewith, including attorneys'
fees, arising from or out of a violation of state or federal
securities laws associated with the offer and sale of shares of the
Company, and
(e) Indemnification will be allowed for settlements and related
expenses of lawsuits alleging securities law violations, and for
expenses incurred in successfully defending such lawsuits, provided
that a court either (1) approves the settlement and finds that
indemnification of the settlement and related costs should be made, or
(2) approves indemnification of litigation costs if a successful
defense is made.
<PAGE>
The provisions of this paragraph 7 shall survive the termination of
this Agreement.
8. STATUS OF THE COMPANY:
In the event the terms of this Agreement at any time shall, in the
opinion of counsel for the Company, impair the status of the Company as a "real
estate investment trust" within the meaning of Part II, subchapter M of the
Internal Revenue Code of 1954, as amended, the parties shall, within 30 days
after the Company shall have given to the Advisor written notice of such
impairment, negotiate such amendments as may be necessary to restore, in the
opinion of counsel for the Company, such status of the Company.
9. DEFAULT:
If either party shall default under this Agreement, the other party
shall be reimbursed by the defaulting party for all costs and expenses incurred
in the enforcement of the provisions of this Agreement, including reasonable
attorney's fees.
10. NOTICE:
Whenever, under the terms of this Agreement, any notice is required or
permitted to be served upon the other party, said notice may be served upon the
other party by personal service or certified mail. Any such notice shall be
deemed given when personally received by the party to whom the notice is
directed; provided, however, in the event notice is mailed, such notice shall be
deemed given when deposited in the United States Mail with postage prepaid.
Notices shall be in writing and until further notification in writing, shall be
delivered to the following addresses:
To the Company:
Cedar Income Fund, Ltd.
c/o Cedar Bay Realty Advisors, Inc.
44 South Bayles Avenue
Port Washington, NY 11050
To the Advisor:
Cedar Bay Realty Advisors, Inc.
SKR Management Corp.
44 South Bayles Avenue
Port Washington, NY 11050
<PAGE>
11. CUMULATIVE RIGHTS:
The various rights and remedies of the Company and the Advisor
provided in this Agreement shall be construed as cumulative and no one of them
is exclusive of the other or exclusive of any rights or remedies allowed the
Company or the Advisor by law.
12. CONSENT:
Neither the Company nor the Advisor shall unreasonably withhold its
consent whenever such consent shall be required under the terms of this
Agreement.
13. PARAGRAPH HEADINGS:
The paragraph headings contained herein are inserted only as a matter
of convenience and for reference and in no way define, limit or describe the
scope or intent of this Agreement or in any way affect the terms and provisions
hereof.
14. RULES OF CONSTRUCTION:
Words and phrases herein shall be construed as in the singular or
plural number and as masculine, feminine or neuter gender according to the
context.
15. SUCCESSORS AND ASSIGNS:
The provisions of this agreement shall be binding upon and inure to
the benefit of the immediate parties hereto and their respective legal
representatives, successors and assigns. Neither party may assign this Agreement
without the prior written consent of the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CEDAR INCOME FUND, LTD. CEDAR BAY REALTY ADVISORS, INC.
By /s/ Brenda J. Walker By /s/ Brenda J. Walker
------------------- -------------------
Title: Vice President Title: Vice President
EXHIBIT 10.2 MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 2nd day of
April, 1998, by and between CEDAR INCOME FUND, LTD., an Iowa
corporation, (hereinafter referred to as "OWNER") and BRENTWAY
MANAGEMENT LLC, with its principal place of business at 44 South
Bayles Avenue, Port Washington, NY 11050 (hereinafter referred to as
"MANAGER"). In consideration of the mutual covenants, promises and
agreements herein contained, OWNER and MANAGER do hereby covenant,
promise and agree to and with each other as follows:
W I T N E S S E T H:
1. PARTIES AND INTEREST: OWNER is or will be the owner of certain real
property which may be located the continental United States and will continue to
acquire additional property during the term of this Agreement. MANAGER has the
experience and staff necessary and suitable for the management and operation of
real estate properties in the United States and desires to undertake the
management and operation of the real estate properties of OWNER. MANAGER is an
independent contractor and OWNER shall have no voice in the selection or
discharge of MANAGER'S employees, representatives, or subcontractors, or in
their number or in the compensation to be received by them or in the period of
hours of their employment, and no control over the specific manner in which the
work shall be done, but MANAGER shall be responsible for the quality of work
done and of the materials furnished, and warrants that they shall conform to the
terms of this Agreement. OWNER and MANAGER are not, and shall not be deemed to
be, partners or joint venturers with each other.
2. TERM: OWNER does hereby designate MANAGER, and MANAGER hereby
accepts such designation, as the manager of the real estate interests of OWNER
which are from time to time included in a schedule of such properties mutually
agreed upon by OWNER and MANAGER (hereinafter referred to collectively as the
"Premises"), for a term of one (1) year commencing on the effective date hereof.
Thereafter, this Agreement shall be renewed automatically for one year periods.
This Agreement may, however, be terminated by either party at any time, with or
without cause, upon not less than sixty (60) days prior written notice given by
the OWNER by a majority of the Independent Directors (as defined in the Articles
of Incorporation of OWNER) or by MANAGER by its duly authorized representatives,
to the other party of its intention to so terminate. In the event of termination
of this Agreement, neither party shall have any further rights, obligations or
liabilities under this Agreement except those which are accrued through the
effective date of such termination; provided, however, MANAGER shall cooperate
with OWNER and take all reasonable steps requested to assist OWNER in making an
orderly transition of the property management function. OWNER AND MANAGER agree,
upon request of either party at any time during the term of this Agreement, to
acknowledge a schedule of properties covered hereby, including the legal
<PAGE>
descriptions thereof. Nothing herein contained shall prevent the
MANAGER from engaging in other activities, including without limitation, the
management of other properties; nor shall this Agreement limit or restrict the
right of any director, officer, employee, affiliate or shareholder of the
MANAGER to engage in any other business or to render services of any kind to any
other partnership, corporation, firm, individual, trust or association.
3. SERVICES OF MANAGER: Subject to such express restrictions or
limitations on its authority and to such written instructions as may from time
to time be imposed or given by the OWNER, MANAGER shall, on behalf of and for
the account of the OWNER:
A. LEASING: Use its best efforts to lease and keep leased to
desirable tenants all space held for lease at no less than the
prevailing rental rates for similar properties in the community
in which the property is located and calculated to provide a
reasonable return an investment to OWNER, unless otherwise
approved in writing by OWNER. MANAGER shall lease the Premises
with each lease identifying the OWNER (or the trade name of the
Premises) as the titleholder of the Premises and owner of the
lease. No lease shall be for a term of sixty (60) months or
longer, including options, if any. In the event that a lease
contract contemplated to be entered into by MANAGER in the name
of OWNER is not within the limitations set forth in this sub-
paragraph 3A, such lease contract shall first be subject to the
written approval of OWNER, which approval shall not be
unreasonably withheld. MANAGER shall advise OWNER personally or
by certified mail of any such proposed lease or amendment
thereto. If OWNER fails to advise MANAGER within four (4) days
after receipt of such notice, it shall be presumed that OWNER
granted OWNER'S written approval thereto and, accordingly,
MANAGER shall be authorized to execute such lease contract in the
name of OWNER without being in violation of MANAGER'S duties
hereunder. All leases of the Premises shall remain the property
of OWNER and copies shall be promptly provided to OWNER. MANAGER
shall have the right, without prior consent, at OWNER'S expense,
to repair, alter, modify and improve (as distinguished from
expand) the existing structures, in connection with any such
lease; prior approval, however, of OWNER to be secured by MANAGER
on all such matters involving costs in excess of Twenty Thousand
Dollars ($20,000) for any one item. MANAGER may collect from
lessees, security deposits as security for the performance under
the leases, the amount of such security deposits to be for such
sum as is customary in the locality of said real estate. Failure
by MANAGER to obtain any security deposit shall not constitute
any nature of default by MANAGER hereunder. The security
deposits, as collected, shall be paid over each month to the
OWNER following the month of collection by MANAGER. Without the
specific prior written approval of OWNER, no lease with respect
to the Premises shall provide for rents the determination of
which depends in whole or in part on the net income or net
profits
<PAGE>
derived by any person from such property and no tenant shall be
permitted to sublease any property wherein the determination of
rent depends in whole or in part on the net income or net profits
derived by any person from such property; provided, however,
leases and subleases may, except as otherwise directed by OWNER
or as otherwise provided in this Agreement, provide for rental
payments based upon a fixed percentage or percentages of
receipts or sales.
B. BOOKS AND RECORDS: The term "Agreement Year" as used herein shall
mean the calendar year ending December 31st of each year. The
first Agreement Year shall be the period beginning on the date
hereof and ending December 31, 1998, and the last Agreement Year
shall be the period beginning January 1st of the last year of the
term of this Agreement and ending with the last day of the term
of this Agreement.
MANAGER shall maintain in manner and form consistent with
generally accepted methods of accounting at its office, during
each Agreement Year and retain such for a period of three (3)
consecutive years thereafter, complete and accurate general books
of account, which will reflect all receipts derived from the
operation of the Premises by MANAGER during such Agreement Year,
including but not limited to, original invoices, sales and other
records provided by lessees, sales and occupation tax returns, if
any, relating to MANAGER'S operation of the Premises, and all
other original records pertaining to the business of operating
the Premises and other pertinent papers and documents which will
enable the OWNER to determine the gross receipts derived by the
MANAGER from the Premises. All of the aforementioned records
shall be open to the inspection and audit by the OWNER or its
agents at all reasonable times during ordinary business hours. On
termination of this Agreement, all records shall be delivered to
the OWNER at the Premises. OWNER and MANAGER recognize that
OWNER, itself, may have records pertaining to the Premises as to
which MANAGER does not have actual knowledge, and nothing in this
paragraph shall be interpreted to impose any duty on MANAGER with
respect to such records or any other records of a type which
would not be kept by a reasonably prudent property manager.
MANAGER shall establish a bank account into which receipts
relating to the Premises of the OWNER transmitted to MANAGER or
collected by MANAGER shall be deposited. From the funds in such
bank account, MANAGER shall pay the following types of expenses
associated with operation of the Premises (it being understood
that nothing herein shall be interpreted to impose on MANAGER
liability for the payment of any of such expenses from MANAGER'S
own funds): on-site salary expenses of every kind and nature,
utility charges, custodial service, management fees hereunder to
MANAGER and all other recurring-type charges relating to the
operation of the Premises (all of the aforesaid being herein
<PAGE>
sometimes referred to as "Premises Operating Expenses"). MANAGER
shall submit to OWNER on or before the tenth (10th) day of each
month during the term hereof (including the tenth (10th) day of
the month following the end of the term) at the place then fixed
for the payments hereunder, a check in a sum equal to all funds,
if any, in the bank account for the Premises except a nominal sum
to pay obligations due prior to receipt of additional rentals,
and a written statement, certified by MANAGER to be true and
correct to the best of his knowledge and belief, showing in
reasonably accurate detail, the amount of aforesaid receipts and
the amount of Premises Operating Expenses disbursed from such
bank account and the resulting difference for the preceding
month. MANAGER shall submit to the OWNER on or before the
thirtieth (30th) day following the end of each Agreement Year, at
all places then fixed for payments, a complete statement of the
aforesaid annual figures for the preceding Agreement Year in
reasonable detail certified by MANAGER. Relative to the authority
of MANAGER to pay from the bank account Premises Operation
Expenses (as hereinabove referred to), such authority of MANAGER
shall be limited as stated in subparagraph 3D hereof.
C. MAINTENANCE:
MANAGER shall use its best efforts, at OWNER'S expense (but
subject to the limitations hereinafter set forth), at all times
during the term of this Agreement, to keep the Premises, both
exterior and interior, structural and otherwise, in good repair,
subject to ordinary wear and tear or casualty occurring without
the fault of MANAGER, and make all repairs and replacements, both
exterior and interior, structural and otherwise; and MANAGER
shall use its best efforts, at OWNER'S expense (subject however,
to the limitations hereinafter set forth) to satisfy each and
every obligation, duty or payment required of the lessor on the
leases or any substitute leases entered into during the term of
this Agreement except in the event of a default by the tenant
under any such lease. MANAGER shall also use its best efforts, at
OWNER'S expense (subject, however, to the limitations hereinafter
set forth), to keep the Premises in a clean condition, and not
permit or allow any refuse or debris to accumulate thereon, or
upon the sidewalks, alleys or streets adjoining the same, and
remove any obstruction from the sidewalks adjoining the Premises.
MANAGER shall exercise reasonable efforts to see that no article
deemed extra-hazardous on account of fire or other dangerous
properties, nor any explosive, shall be brought on or into the
Premises, except that this provision shall not apply to articles
usually held for storage in substantially similar building.
<PAGE>
D. AUTHORITY:
All of the duties of MANAGER pursuant to this Agreement shall be
fulfilled at OWNER'S expense and the funds of OWNER shall be
utilized by MANAGER for the purpose of fulfilling such
responsibilities subject, however, to the following limitations:
(i) MANAGER is authorized to enter into any agreement, verbal
or written, for performance of its responsibilities if the
consideration payable by OWNER pursuant to such agreement
is Twenty Thousand One Hundred and 00/100 Dollars
($20,100.00) or less; however, MANAGER may enter into such
agreements where the consideration payable pursuant
thereto is more than Twenty Thousand and 00/100 Dollars
($20,000.00), if in MANAGER'S opinion such repairs are
emergency repairs necessary to protect the Premises,
fulfill obligations to OWNER under leases or rental
agreements or prevent bodily injury.
(ii) If any written contract for the performance of such
responsibility is in the name of OWNER (other than any
lease authorized herein to be executed by MANAGER on
behalf of OWNER), then irrespective of the amount payable
pursuant thereto, only an authorized agent of OWNER shall
be authorized to execute any such contract (and for these
purposes MANAGER shall not be deemed to be an authorized
agent of OWNER).
(iii) If any contract for performance of the aforesaid duties is
not cancellable by MANAGER on sixty (60) days' notice or
less, then MANAGER shall not enter into such contract
without the prior written approval of OWNER,
notwithstanding that the consideration payable thereunder
may be Twenty Thousand Dollars ($20,000.00) or less. The
preceding provisions do not relate to the contractual
authority of MANAGER as to signing leases of building
space in the Premises.
(iv) If any contract for performance of the aforesaid duties is
cancellable by MANAGER on sixty (60) days' notice or less,
then MANAGER may enter into such contract without the
prior written approval of Owner, subject, however, to the
limitations contained in subparagraph 3(D) (i).
E. EMPLOYEES: MANAGER shall engage and discharge such employees as
it deems necessary for the operation and maintenance of the
Premises. Such employees shall be deemed employees of the
MANAGER, or such local agent or agents as may be retained by the
MANAGER and not in the employ of the OWNER. The MANAGER at its
expense shall retain adequate fidelity insurance on those of its
employees who handle funds or assets of the OWNER. The OWNER
shall reimburse MANAGER for all salary expenses, benefits and
moving and traveling expenses, except for those personnel of
MANAGER performing property management functions operating out of
the home office of the MANAGER.
<PAGE>
F. WORKER'S COMPENSATION: MANAGER agrees to provide and OWNER agrees
to reimburse MANAGER for all premiums, contributions and taxes
for Worker's Compensation insurance, unemployment insurance, and
for old age pensions, annuities and retirement benefits, now or
hereafter imposed by or pursuant to federal or state laws, which
are measured by the wages, salaries or other remuneration paid to
persons employed by MANAGER in connection with the performance of
the Management Agreement except as it relates to personnel of
MANAGER performing property management functions operating out of
the home office of MANAGER. MANAGER agrees to carry Worker's
Compensation insurance and Employer's Liability insurance in
accordance with the laws of the states in which the OWNER owns
real estate to be at all times in force and OWNER agrees to
reimburse MANAGER for the cost thereof.
G. CODE REQUIREMENTS: MANAGER, at OWNER'S expense, shall use its
best efforts to comply in all material respects with all building
codes, zoning and licensing requirements, and other requirements
of the duly constituted federal, state and local governmental
authorities with respect to the Premises. MANAGER may, in its
discretion, appeal from any requirement it deems unwarranted and
it may compromise or settle any dispute regarding such
requirements.
H. REAL ESTATE EXPERTS. MANAGER may enlist the services of other
real estate brokers or agents in the performance of its duties
hereunder to the extent deemed necessary or appropriate. The
expense of the services will be paid by the OWNER.
I. RENT COLLECTION: MANAGER will use its best efforts to collect
rent and other income from the real estate interests of the
OWNER. MANAGER may in its discretion compromise claims for such
rent and other income and, at the expense of the OWNER, institute
legal proceedings in its own name or in the name of the OWNER to
collect the same, to oust or dispossess tenants or others
occupying such real estate interests, and otherwise to enforce
the rights of the OWNER with respect thereto and in its
discretion may compromise or settle such proceedings.
J. INSURANCE: MANAGER, at OWNER'S expense, shall at all times during
the term of this Agreement, carry such (i) general liability,
accident and property damage insurance, (with OWNER and MANAGER
as named insureds), (ii) fire, extended coverage and malicious
mischief insurance, (iii) rental insurance and (iv) such other
insurance for the protection of OWNER and MANAGER, as shall be
directed from time to time by OWNER. All such policies shall be
in the name of and made payable to OWNER.
<PAGE>
5. COMPENSATION: OWNER hereby agrees to pay the MANAGER a monthly
management fee in the amount of five percent (5%) of Gross Income (as
hereinafter defined) derived from the operation of the Premises during the
preceding month. "Gross Income" shall mean any and all receipts from the
Premises Including: rents, percentage rents, overage rents, expense
participation rents and all rents or payments from tenants of any nature, income
from services rendered to tenants (i.e., maid service, janitorial or cleaning
service, telephone answering service, watchman or guard service, trash
collection, elevator service and similar services customarily furnished or
rendered in connection with the rental of real property), and all income from
concessions of any kind, including all coin-operated facilities on the Premises.
Also Included in Gross Income shall be any amounts collected in lieu of the
above-enumerated items such as forfeited security deposits and judgments or
awards collected in the enforcement of any lease or rental agreement.
6. LEASING COMMISSIONS: OWNER shall also pay MANAGER a leasing fee in
conjunction with leases of space in OWNER'S commercial (as opposed to
residential) properties which are procured by MANAGER. The leasing fee shall be
at the prevailing rate for similar services performed by independent qualified
persons regularly performing such services in the community in which the
property is located; provided, however, in no event shall such leasing fee
exceed six percent (6%) of the rent to be paid during the term (including any
renewals) of the lease procured. The amount and timing of payment of such
leasing fees shall be agreed to by OWNER and MANAGER prior to execution of the
lease with respect to which the leasing fee is payable. MANAGER may divide its
leasing fee with outside leasing agents or other third parties. Any division of
the leasing fee payable pursuant to this Agreement shall be disclosed to OWNER
at the time the fee is negotiated.
7. STATUS OF OWNER: In the event the terms of this Agreement at any
time shall, in the opinion of the counsel for the OWNER, impair the status of
the OWNER as a "real estate investment trust" within the meaning of Part II,
subchapter M of the Internal Revenue Code of 1954, as amended, OWNER and MANAGER
shall, within 30 days after the OWNER shall have given to the MANAGER written
notice of such impairment, negotiate such amendments as may be necessary to
restore, In the opinion of counsel for the OWNER, such status of the OWNER.
8. CONFORMITY WITH LAW: MANAGER covenants, with respect to the
Premises, and the fixtures and appurtenances thereto, that at OWNER'S expense
(subject to the limitations on MANAGER'S contractual authority as herein set
forth), MANAGER shall use due diligence to cause them to conform in all material
respects to applicable requirements of law or duly constituted authority, and to
the applicable requirements of all carriers of insurance on the Premises, and
Board of Underwriters, Rating Bureau, or similar organizations including, but
not limited to, requirements pertaining to the health, welfare, or safety of
employees or the public, such as adequate toilet facilities, fire exits, exit
signs, safe electric wiring and elevators. MANAGER shall, at OWNER'S cost and
<PAGE>
expense (but subject to the herein set forth limitations on MANAGER'S
contractual authority), use its best efforts to make such improvements or
installations as may be necessary to satisfy this requirement and shall, at all
times during the term, promptly comply in all material respects with such
requirements whether now or hereafter in effect and whether now or hereafter
applicable for any reason whatsoever. Manager shall use due diligence to prevent
the Premises from being used for any unlawful purpose.
9. INSURANCE CLAIMS: MANAGER shall settle and adjust any claims
against any insurance company under the fire or extended coverage policies of
insurance as described in paragraph 3J hereof, but before making final
settlement of any claim over Fifty Thousand Dollars ($50,000.00), the written
approval of OWNER shall be obtained.
10. SUBORDINATION: OWNER and MANAGER agree that this Agreement is and
shall be subordinated to any mortgages or trust deeds held by or for any bank,
insurance company, seller or accredited lending institution that may be now on
or hereafter placed upon the Premises, and to any and all advances to be made
thereunder, and to the interests thereon and all renewals, replacements and
extensions thereof.
11. CONDEMNATION: In the event of any condemnation or taking of all or
any part of the Premises, all damages shall be the exclusive property of OWNER;
provided, however, MANAGER shall be entitled to any proceeds recovered by
MANAGER in its own right on account of any damage to MANAGER'S business by
reason of such condemnation.
12. DEFAULT: If either party shall default under this Agreement, the
successful party shall be reimbursed by the other for all costs and expenses
incurred in the enforcement of any of the provisions of this Agreement,
including reasonable attorney's fees.
13. LIABILITY OF MANAGER: MANAGER and its officers, directors,
shareholders, affiliates, agents and employees shall not be liable to OWNER or
to any other person for any act or omission in the course of performance of
their duties hereunder except for their willful misfeasance, gross negligence or
reckless disregard of duty or their not having acted in good faith in the
reasonable belief that their action was in the best interests of OWNER. The
OWNER shall defend, indemnify and save harmless MANAGER and its officers,
directors, shareholders, affiliates, agents and employees from and against any
and all liabilities, claims, damages, costs and expenses (including reasonable
attorneys fees and amounts reasonably paid in settlement) incurred by reason of
or arising out of the performance or nonperformance of their duties under or by
reason of this Agreement; provided, however, there shall be no such
indemnification for liabilities, claims, damages, costs or expenses incurred by
any such person or entity by reason of their willful misfeasance, gross
negligence, reckless disregard of duty or bad faith in the conduct of their
duties under or by reason of this Agreement. This paragraph 13 shall survive the
termination of this Agreement.
14. NOTICE: Whenever, under the terms of this Agreement, any notice is
required or permitted to be served upon the other party, said notice shall be
served upon the other party by personal service or by certified mail.
<PAGE>
Any such notice shall be deemed given when personally received by the party to
whom the notice is directed; provided, however, in the event notice is mailed,
such notice shall be deemed given when deposited in the United States Mail with
postage prepaid. Notices to each party shall be until further notification in
writing, shall be delivered to the following addresses:
To OWNER:
Cedar Income Fund, Ltd.
c/o Cedar Bay Realty Advisors, Inc.
44 South Bayles Avenue
Port Washington, NY 11050
To MANAGER:
Brentway Management LLC
44 South Bayles Avenue
Port Washington, NY 11050
15. CUMULATIVE RIGHTS: The various rights and remedies of OWNER and
MANAGER provided in this Agreement shall be construed as cumulative and no one
of them is exclusive of the others or exclusive of any rights or remedies
allowed OWNER or MANAGER by law.
16. CONSENT: Neither OWNER nor MANAGER shall unreasonably withhold its
consent whenever such consent shall be required under the terms of this
Agreement.
17. PARAGRAPH HEADINGS: The paragraph headings contained herein are
inserted only as a matter of convenience and for reference and in no way define,
limit or describe the scope or intent of this Agreement or in any way affect the
terms and provisions hereof.
18. RULES OF CONSTRUCTION: Words and phrases herein shall be construed
as in the singular or plural number and as masculine, feminine or neuter gender
according to the context.
19. AMENDMENTS: This Agreement may be amended only by the mutual
consent of the parties. However, no such amendment shall become effective unless
it be reduced to an instrument in writing specifically referring to this
Agreement and signed by both parties.
20. SUCCESSORS AND ASSIGNS: The provisions of this Agreement shall be
binding upon and inure to the benefit of the immediate parties hereto and their
respective legal representatives, successors and assigns. Neither party may
assign this Agreement without the prior written consent of the other party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
OWNER MANAGER
CEDAR INCOME FUND, LTD. BRENTWAY MANAGEMENT LLC
BY /s/ Brenda J. Walker BY /s/ Brenda J. Walker
- ----------------------- -----------------------
TITLE: Vice President TITLE: President
EXHIBIT 10.3 FINANCIAL ADVISORY AGREEMENT
FINANCIAL ADVISORY AGREEMENT
AGREEMENT made as of June 1, 1998 by and between Cedar Income Fund,
Ltd. (the "Company"), a real estate investment trust organized under the laws of
the State of Iowa, with offices at 44 South Bayles Avenue, Port Washington, New
York and B.V. Capital Markets Inc. ("B.V.C."), a New York corporation, an
affiliate of Bayerische Vereinsbank AG, a German banking institution, with
offices at 150 East 42nd Street, New York, New York.
WHEREAS the Company wishes to avail itself of the experience, sources
of information, advice, and assistance of B.V.C. and to have B.V.C. perform
certain services on behalf of, and subject to the supervision of, the board of
directors of the Company (the "Board"), as provided herein;
WHEREAS B.V.C. is willing to undertake to render such services,
subject to the approval of the Board, on the terms and conditions hereinafter
set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. SERVICES OF FINANCIAL ADVISOR. Subject to acceptance of this
Agreement by the Company, B.V.C., under the direction and supervision of, and
subject to the approval of, the Board, shall serve as the Company's financial
advisor and consultant in connection with financial policy decisions to be made
by the Company. In this regard, B.V.C. shall:
<PAGE>
- - advise on acquisition financing and/or a line of credit for future
acquisitions by the Company;
- - advise on contributions, sales, assignments or other transfers to or for
the benefit of the Company by U.S. and foreign clients or contacts of
B.V.C. of U.S. real property interests appropriate to or consistent with
the desired investment parameters of the Company in exchange for cash,
shares of the Company interests in an Upreit partnership of which the
Company is general partner and/or other consideration;
- - advise on a private placement of Company shares;
- - assist the Board in developing suitable investment parameters for the
Company;
- - develop and maintain contacts on behalf of the Company with U.S. and
foreign commercial and investment banking firms, non-bank financial
institutions, and others with substantial interests in real estate and
capital securities markets, other REITS, and national and regional
associations of such persons and entities;
<PAGE>
- - advise the Board as to issues relevant to additional private placements or
public issues of shares and various alternate debt financing opportunities;
- - review certain financial policy matters with consultants, accountants,
lenders, attorneys, and persons acting in any other capacity deemed by the
Board to be necessary or desirable; and
- - prepare periodic (generally quarterly) reports of its performance of the
foregoing services to the Company.
Notwithstanding any other provision in this agreement to the contrary, B.V.C.
shall not furnish or render services to tenants of the Company's properties, or
manage or operate property of the Company, or do any other act which would
adversely affect the status of the Company as a real estate investment trust as
defined and limited in Section 856 et. seq. of the Internal Revenue Code of
1986, as amended, or Regulations promulgated thereunder. The Board does not have
any obligation to accept or approve any proposal made by B.V.C.
<PAGE>
It is specifically contemplated that Roland Palm would continue to serve as a
consultant or employee to B.V.C. in performing its services hereunder and that
Mr. Palm would be compensated by B.V.C. for his services in helping B.V.C.
discharge its duties hereunder.
2. FURNISHING INFORMATION TO ADVISOR. Subject to the acceptance of
this Agreement by the Company, the Company shall at all times keep B.V.C. fully
informed with regard to the investments which it owns, its funds available or to
become available for investment, and generally as to the condition of its
affairs. In particular, the Company shall notify B.V.C. promptly of any proposal
or offer for sale or other disposition of any of the Company's investments, or
for any new investment. B.V.C. shall enter into such confidentiality and
non-competition agreements with respect to such disclosed information as counsel
for the Company may reasonably require. 3. RECOMMENDATION BY ADVISOR. Subject to
acceptance of this Agreement by the Company, B.V.C. shall consult with the Board
and the officers of the Company and furnish them with advice and recommendations
with respect to the acquisition, by purchase, exchange, or otherwise, the
holding and the disposal, through sale, exchange, or otherwise, of investments
of, or investments considered by, the Company. B.V.C. shall at the request of
the Board or the officers of the Company furnish advice and recommendations with
<PAGE>
respect to other aspects of the business and affairs of the Company. In the
absence of a director designated by B.V.C., and unless otherwise notified by the
Board, a duly authorized representative of B.V.C., may attend all regular and
special meetings of the Board. The Company shall notify B.V.C. of all such
meetings.
4. BOOKS. B.V.C. shall maintain appropriate records of all its
activities hereunder.
5. POSITION OF DIRECTORS AND RELATIONSHIP WITH THE COMPANY. Officers
and employees of B.V.C. may serve as Directors and as officers of the Company.
Subject to approval by the Bayerische Vereinsbank AG of his election as Director
of the Company, Cedar Bay Company will cause its shares to be voted in favor of
Jean-Bernard Wurm as director of the Company.
6. COMPENSATION. (a) For services rendered by it, B.V.C. shall be
entitled to the following compensation commencing as of the date hereof, as
determined by, and subject to the approval of the Board:
(i) 0.25% (25 basis points) of the Fund's net asset value ("Net
Asset Value") as defined in the Agreement of Limited Partnership of Cedar Income
Fund Partnership, L.P. (the "Upreit") less any indebtedness of the Company,
affecting the net value of the Company's assets, the Upreit or the properties,
but in any event no less than $100,000 per annum, payable in equal quarterly
installments on the last business day of each calendar quarter;
<PAGE>
(ii) A one-time payment of 1.5% (150 basis points) of the "Agreed
Value", as defined in the Agreement of Limited Partnership of Cedar Income
Partnership, L.P. of properties contributed to the Company or its affiliates,
including the "Upreit" partnership(s) by entities or persons introduced by
B.V.C. to the Company. The fee shall be payable only after the property has been
contributed to the Company;
(iii) As soon as the Company becomes self administered, B.V.C.
shall have the option, in its sole discretion to convert its claim to received
its financial advisory fees payable under (ii) above into an ownership interest
in the company or cash, equal to 5x those fees.
(b) B.V.C. shall promptly furnish to the Company a statement for any
fees payable hereunder for each quarter annual period during which B.V.C.
performed services hereunder. Such statement shall include the calculation by
which such fee was determined.
(c) In the absence of a bona fide dispute between the parties as to
such payment, the Company shall pay to B.V.C. the amount payable pursuant to any
such statement not later than the 20th day of the month following the quarter
during which the services for the payment of which the fee is payable were
rendered.
<PAGE>
(d) If the Company shall request B.V.C., or any director, officer, or
employee thereof, to render services for the Company other than those to be
rendered by B.V.C. hereunder, such additional services shall be compensated
separately on terms to be agreed upon between B.V.C. and the Company from time
to time.
7. RESPONSIBILITY OF ADVISOR. B.V.C. assumes no responsibility
hereunder other than to render the services required hereunder in good faith and
shall not be responsible for any action of the Board or officers of the Company
in following or declining to follow any advice or recommendations of B.V.C..
B.V.C., its officers, and employees shall not be liable to the Company, the
Company's shareholders, or others except for acts constituting bad faith,
willful misfeasance, gross negligence, or reckless disregard of its or his
duties. The Company and B.V.C. are not partners or joint venturers, and nothing
herein shall be construed so as to make them partners or joint venturers or
impose any liability as such on either of them. B.V.C. agrees to devote
appropriate time and personnel to performing its obligations under this
Agreement.
8. FREEDOM OF OFFICERS OF ADVISOR. Nothing herein shall limit or
restrict the right of any director, officer, or employee of B.V.C. who may also
be a Director, officer, or employee of the Company to engage in any other
business or to render services of any kind to any other corporation, firm,
individual, or association, except that such person shall not engage in any
activity which shall be competitive with, or otherwise in the reasonable
judgment of the Board, be adverse to the interests of the Company.
<PAGE>
9. TERM OF CONTRACT. This contract shall be in force for a period of
12 months commencing on the effective date hereof. It shall continue thereafter
from year to year unless cancelled by either party at the end of any year, upon
60 days' prior written notice. The Company may cancel this agreement only by
affirmative vote of a majority of the independent Directors then in office at a
meeting called for such purpose. For purposes of the preceding sentence
"independent Trustee" means a Director who is not a director, officer, affiliate
or shareholder of B.V.C.
10. NONASSIGNABILITY. This contract shall terminate automatically if
B.V.C. shall assign it without the written consent of the Company. The Company
shall not assign this contract without B.V.C.'s consent. No consent shall be
necessary, however, where the assignment is to a corporation or other
organization that is a successor to the Company, in which case the other
corporation shall be bound hereunder and by the terms of such assignment in the
same manner as is the Company.
11. TERMINATION. This agreement shall terminate immediately upon
written notice of termination from the Company to B.V.C. if any of the following
events shall happen:
<PAGE>
(a) If B.V.C. shall violate any provision of the contract, and after
notice of such violation, shall not cure such default within 30 days; or
(b) If, B.V.C. shall be adjudged bankrupt or insolvent by a court of
competent jurisdiction, or an order shall be made by a court of competent
jurisdiction for the appointment of a receiver, liquidator, or trustee of the
Corporation, or of all or substantially all of its property by reason of the
foregoing, or approving any petition filed against B.V.C. for its
reorganization, and such adjudication or order shall remain in force or unstayed
for period of 30 days; or
(c) If B.V.C. shall institute proceedings for voluntary bankruptcy, or
shall file a petition seeking reorganization under the federal bankruptcy laws,
or for relief under any law for the relief of debtors, or shall consent to the
appointment of a receiver of B.V.C. or of all or substantially all of its
property, or shall make a general assignment for the benefit of its creditors,
or shall admit in writing its inability to pay its debts generally as they
become due.
If any event specified in subparagraphs (b) and (c) of this paragraph
11 shall occur, B.V.C. shall give written notice thereof to the Company within
seven days thereof.
Should Agreement be terminated at the end of year 1, B.V.C. will
receive from company a cancelation fee equal to 50% of the advisory fee to which
it would have been entitled for the first 32 months but no less than $50,000 if
Agreement is terminated by Company and not more than $50,000 if Agreement is
terminated by B.V.C.
<PAGE>
12. NOTICES. Any notice, report, or other communication required or
permitted to be given hereunder shall be in writing and shall, unless some other
method of giving such notice, report, or other communication is accepted by the
party to whom it is given, be mailed by certified mail to the following
addresses parties thereto:
<PAGE>
Cedar Bay:
Cedar Bay Company
c/o SKR Management Corp.
44 South Bayles Avenue
Port Washington, NY 11050
Attn.: Leo S. Ullman
The Company:
Cedar Income Fund, Ltd.
c/o SKR Management Corp.
44 South Bayles Avenue
Port Washington, NY 11050
Attn.: Brenda J. Walker
B.V.C.:
B.V. Capital Markets Inc.
150 East 42 Street
New York, NY 10017
<PAGE>
Attn.: Mr. Jean-Bernard Wurm
with a copy to Mr. Roland Palm
c/o B.V. Capital Markets Inc.
150 East 42 Street, 39th Floor
New York, NY 10017
Any party may at any time give notice to the other party that it wishes to
change its address for the purpose of this paragraph.
14. MODIFICATION. This agreement shall not be changed, modified,
terminated, or discharged in whole or in part, except by an instrument signed by
both parties hereto, or their respective successors or assigns.
15. BINDING EFFECT. This agreement shall bind all of the parties'
successors and all of the Company's assigns.
16. APPLICABLE LAW. The provisions of this agreement shall be
construed and interpreted in accordance with the law of the State of New York.
17. EFFECT ON COMPANY. No director, officer, agent, or shareholder of
the Company shall be bound or held to any personal liability in connection with
the Company's obligations hereunder.
<PAGE>
18. HEADINGS FOR REFERENCE ONLY. Headings preceding the text and
sections of this agreement have been inserted solely for convenience and
reference, and shall not be construed to affect its meaning, construction, or
effect.
19. ENTIRE AGREEMENT. This agreement supersedes all agreements
previously made between the parties relating to its subject matter. There are no
other understandings or agreements between them.
20. NON-WAIVER. No delay or failure by either party to exercise any
right under this agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right, unless otherwise expressly
provided herein.
21. COUNTERPARTS. This agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
22. EFFECTIVE DATE. This Agreement shall only become effective after
formal approval by the Board of the Company.
IN WITNESS WHEREOF the parties hereto have caused this contract to be executed
by their officers thereunto duly authorized as of the day and year first above
written.
<PAGE>
B.V. Capital Markets Inc.
By:_______________________
By: _______________________
Attest: BV Capital Markets Inc.
___________________________ By: _______________________
Secretary President
Cedar Income Fund, Ltd.
By: _______________________
<PAGE>
Section 5 is agreed to
Cedar Bay Company
By:________________________
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 932,201
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<RECEIVABLES> 75,609
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<CURRENT-ASSETS> 1,348,694
<PP&E> 18,863,829
<DEPRECIATION> (4,457,543)
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0
0
<COMMON> 542,111
<OTHER-SE> 3,375,381
<TOTAL-LIABILITY-AND-EQUITY> 15,754,980
<SALES> 0
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<TOTAL-COSTS> 670,075
<OTHER-EXPENSES> 382,721
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